29


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

                                    FORM 10-Q



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

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003

                                       or

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


                          COMMISSION FILE NUMBER 29947

                      INTEGRATED INFORMATION SYSTEMS, INC.
             (Exact name of registrant as specified in its charter)

                     DELAWARE                    86-0624332
              (State of Incorporation)     (IRS Employer I.D. No.)





                              2250 WEST 14TH STREET
                              TEMPE, ARIZONA 85281
                    (Address of principal executive offices)

                                 (480) 752-5000
                         (Registrant's telephone number)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding  12  months  (or  for such shorter period that the registrant was
required  to  file  such  reports),  and  (2)  has  been  subject to such filing
requirements  for  the  past  90  days.


     YES   X   NO  ___
          ---


The registrant has not been subject to the filing requirements of Sections 13 or
15(d)  of  the  Securities  Exchange  Act  of  1934  for  the  past  90  days.

Indicate  the  number  of  shares outstanding of each of the issuer's classes of
common  stock,  not  including  shares  held  in  treasury:


  AS OF AUGUST 12, 2003, THERE WERE 3,580,151 SHARES OF COMMON STOCK, $0.001 PAR
                               VALUE, OUTSTANDING.


<PAGE>

               INTEGRATED INFORMATION SYSTEMS, INC. AND SUBSIDIARY




                                TABLE OF CONTENTS

<TABLE>
<CAPTION>



<S>                                                                     <C>

                                                                        PAGE
                                                                        ----

PART I  FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . .     3

   ITEM 1  UNAUDITED FINANCIAL STATEMENTS. . . . . . . . . . . . . . .     3

           Condensed Consolidated Balance Sheets as of June 30, 2003
           and December 31, 2002 . . . . . . . . . . . . . . . . . . .     3
`
           Condensed Consolidated Statements of Operations for the
           Three and Six Months Ended June 30, 2003 and 2002 . . . . .     4

           Condensed Consolidated Statements of Cash Flows for the Six
           Months Ended June 30, 2003 and 2002 . . . . . . . . . . . . . . 5

           Notes to Condensed Consolidated Financial Statements. . . .     6

   ITEM 2  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
           CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . .    12

   ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
           MARKET RISK . . . . . . . . . . . . . . . . . . . . . . . .    18

   ITEM 4  CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . .    24


PART II  OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . .    24

   ITEM 1  LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . .    24

   ITEM 2  CHANGES IN SECURITIES AND USE OF PROCEEDS . . . . . . . . .    25

   ITEM 4  SUBMISSSION OF MATTERS TO A VOTE OF SECURITY HOLDERS           25

   ITEM 6  EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . . . . . . . .    26


SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    27


</TABLE>







<PAGE>
                         PART I.   FINANCIAL INFORMATION

ITEM  1.   FINANCIAL  STATEMENTS


               INTEGRATED INFORMATION SYSTEMS, INC. AND SUBSIDIARY
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      (In thousands, except share amounts)
<TABLE>
<CAPTION>



<S>                                                                              <C>         <C>
                                                                                 JUNE 30,      DECEMBER 31,
                                                                                  2003            2002
                                                                               ------------   ------------
                                                                                       (Unaudited)
ASSETS
Current assets:
 Cash and cash equivalents                                                       $      10   $       1,145
 Restricted cash                                                                       266             835
 Accounts receivable, net factored with recourse                                     1,355           2,153
 Unbilled revenues on contracts                                                         21             105
 Prepaid expenses and other current assets                                             150             177
                                                                                 ---------        --------
   Total current assets                                                              1,802           4,415
 Property and equipment, net                                                         1,406           3,055
 Goodwill                                                                            5,240           5,080
 Other assets                                                                          468             730
                                                                                 ---------        --------
                                                                                 $   8,916   $      13,280
                                                                                 =========        ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
 Accounts payable and accrued expenses                                           $   2,761   $       3,523
 Amounts due under accounts receivable financing                                     1,177           2,898
 Current installments of note payable                                                   92             253
 Current installments of capital lease obligations                                      25              43
 Deferred revenues on contracts                                                        177             270
 Other current liabilities                                                             228             216
                                                                                 ---------        --------
   Total current liabilities                                                         4,460           7,203
 Capital lease obligations, less current installments                                    -              16
 Note payable to bank                                                                5,138           4,481
 Other liabilities                                                                     188             979
                                                                                 ---------        --------
   Total liabilities                                                                 9,786          12,679
                                                                                 ---------        --------
Commitments and contingencies (notes 2, 10, 16)
Stockholders' equity:
 Preferred stock, $.001 par value 5,000,000 shares authorized and
   100,000 issued and outstanding at June 30, 2003                                       -               -
 Common Stock, $.001 par value; authorized 15,000,000 shares; issued and
   outstanding 3,580,151 and 3,480,151 shares at June 30, 2003 and December 31,
   2002                                                                                  4               3
 Additional paid-in capital                                                         95,758          94,561
 Accumulated deficit                                                               (91,319)        (88,650)
 Accumulated other comprehensive loss                                                  (31)            (31)
                                                                                 ---------        --------
                                                                                     4,412           5,883
Treasury stock, at cost, 990,360 shares at June 30, 2003 and December 31, 2002      (5,282)         (5,282)
                                                                                 ---------        --------
   Total stockholders' equity (Deficit)                                               (870)            601
                                                                                 ---------        --------
                                                                                 $   8,916   $      13,280
                                                                                 =========        ========

</TABLE>






      See accompanying notes to condensed consolidated financial statements

<PAGE>
               INTEGRATED INFORMATION SYSTEMS, INC. AND SUBSIDIARY
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>



<S>                                                       <C>          <C>         <C>        <C>
                                                            THREE MONTHS ENDED          SIX MONTHS ENDED
                                                                 JUNE 30,                  JUNE 30,
                                                           ====================      ==================
                                                             2003         2002        2003         2002
                                                           ---------    --------    --------     --------
                                                                (Unaudited)              (Unaudited)
Revenues . . . . . . . . . . . . . . . . . . . . . . . .  $   2,118    $   7,129   $  5,039   $  15,396
Cost of revenues                                             (1,642)      (5,409)    (3,687)    (11,641)
                                                           --------     --------    -------     --------
        Gross profit                                            476        1,720      1,352       3,755
                                                           --------     --------    --------    ---------
Operating expenses:
   Selling and marketing                                        507          716       1,164      1,770
   General and administrative                                   844        3,247       3,427      8,892
   Asset impairments and restructuring charges                  (31)         133         (31)     2,884
   Gain on settlement of lease termination agreement
     and other liabilities                                      (79)           -        (862)         -
                                                          ---------    ---------    --------    --------
       Total operating expenses                               1,241        4,096       3,698      13,546
                                                          ---------    ---------    --------    --------
       Loss from operations                                    (765)      (2,376)     (2,346)     (9,791)
Interest and other income                                         -            6           2          55
Interest expense                                               (159)        (112)       (325)       (231)
                                                          ---------    ---------    --------    --------
       Loss before cumulative effect of a change in
        accounting principle                                   (924)      (2,482)     (2,669)     (9,967)
Cumulative effect of a change in accounting principle             -            -           -      (3,187)
                                                          ---------    ---------    --------    --------
       Net loss . .  . . . . . . . . . . . . . . . . . .  $    (924)   $  (2,482)    $(2,669)   $(13,154)
                                                          =========    =========    ========    ========
Loss per share:
Loss before cumulative effect of a change in accounting
 principle . . . . . . . . . . . . . . . . . . . . . . .  $    (.26)   $    (.75)    $  (.76)   $  (3.01)
Cumulative effect of a change in accounting principle. .          -            -           -        (.96)
                                                          ---------    ---------    --------    --------
  Loss per share, basic and diluted. . . . . . . . . . .  $    (.26)   $    (.75)    $  (.76)   $  (3.97)
                                                          =========    =========    ========    ========
Weighted average common shares outstanding . . . . . . .      3,571        3,310       3,526       3,310
                                                          =========    =========    ========    ========
</TABLE>























     See accompanying notes to condensed consolidated financial statements
<PAGE>

               INTEGRATED INFORMATION SYSTEMS, INC. AND SUBSIDIARY
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>



<S>                                                                                          <C>         <C>
                                                                                           SIX MONTHS ENDED JUNE 30,
                                                                                            -----------------------
                                                                                               2003         2002
                                                                                            ---------    ----------
                                                                                                  (Unaudited)

Cash flows from operating activities:
      Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           $ (2,669)   $ (13,154)
      Adjustments to reconcile net loss to net cash used in operating activities:
            Cumulative effect of a change in accounting principle. . . . . . . . .                  -        3,187
            Depreciation and amortization. . . . . . . . . . . . . . . . . . . . .                795        2,480
            Asset impairment and restructuring . . . . . . . . . . . . . . . . . .                  -        2,884
            Loss on sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . .                544            -
            Provision for doubtful accounts. . . . . . . . . . . . . . . . . . . .                (89)         332
            Gain on settlement of debt obligations . . . . . . . . . . . . . . . .               (862)           -
           Change in assets and liabilities, net of acquisitions:
                   Accounts receivable . . . . . . . . . . . . . . . . . . . . . .                890        1,206
                   Unbilled revenues on contracts. . . . . . . . . . . . . . . . .                 84           69
                   Prepaid expenses and other assets . . . . . . . . . . . . . . .                172         (208)
                   Other assets. . . . . . . . . . . . . . . . . . . . . . . . . .                 92          (48)
                   Accounts payable and accrued expenses . . . . . . . . . . . . .               (182)         (69)
                   Deferred revenues on contracts. . . . . . . . . . . . . . . . .                (71)        (589)
                   Other current liabilities . . . . . . . . . . . . . . . . . . .                 23            -
                                                                                             --------      -------
         Net cash used in operating activities. . . . . . . . .  . . . . . . . . .             (1,273)      (3,910)
                                                                                             --------      -------
Cash flows from investing activities:
     Capital expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . .                (15)        (162)
     Proceeds from disposition of assets . . . . . . . . . . . . . . . . . . . . .                346           73
     Acquisitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  -         (400)
                                                                                             --------      -------
         Net cash provided by (used in) investing activities. .  . . . . . . . . .                331         (489)
                                                                                             --------      -------
Cash flows from financing activities:
     Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                288          692
     Net borrowings (repayments) . . . . . . . . . . . . . . . . . . . . . . . . .             (1,451)           -
     Repayments of capital lease obligations . . . . . . . . . . . . . . . . . . .                (30)        (902)
     Issuance of redeemable convertible preferred stock. . . . . . . . . . . . . .              1,000            -
                                                                                             --------      -------
         Net cash used in financing activities. .. . . . . . . . . . . . . . . . .               (193)        (210)
                                                                                             --------      -------
Effect of exchange rate on cash. . . . . . . . . . . . . . . . . . . . . . . . . .                  -            3
Decrease in cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . .             (1,135)      (4,606)
Cash and cash equivalents, at beginning of period. . . . . . . . . . . . . . . . .              1,145        5,235
                                                                                             --------      -------
Cash and cash equivalents, at end of period. . . . . . . . . . . . . . . . . . . .           $     10     $    629
                                                                                             ========     ========
</TABLE>











See accompanying notes to condensed consolidated financial statements.

<PAGE>
               INTEGRATED INFORMATION SYSTEMS, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

(1)     NATURE  OF  BUSINESS  AND  BASIS  OF  PRESENTATION

     Integrated  Information  Systems,  Inc.  and  its  wholly  owned subsidiary
provides information technology related professional services to businesses.  We
help companies implement new technology to improve productivity. In this report,
"IIS",  "we" or "the Company" means Integrated Information Systems, Inc. and its
wholly  owned  subsidiary.

     We  operate  in a highly competitive, consolidating market. The information
technology  services industry has experienced rapid growth followed by rapid and
significant contraction over a relatively short economic cycle. In past periods,
our  rapid  growth phase had required significant investments in infrastructure,
facilities,  computer  and office equipment, human resources and working capital
in  order to meet the perceived demand. The increased demand did not materialize
and since the third quarter of 2000, the market for our services has changed and
declined  significantly.

     We  have  prepared  the  accompanying  unaudited  condensed  consolidated
financial statements pursuant to the rules and regulations of the Securities and
Exchange  Commission regarding interim financial reporting. Accordingly, they do
not  include  all of the information and notes required by accounting principles
generally  accepted  in  the  United  States  of  America for complete financial
statements  and  should  be  read in conjunction with the condensed consolidated
financial  statements  and notes thereto included in the Company's Annual Report
on  Form  10-K  for the year ended December 31, 2002. The accompanying condensed
consolidated  financial statements reflect all adjustments (consisting solely of
normal,  recurring  adjustments),  which  are,  in  the  opinion  of management,
necessary  for a fair presentation of results for the interim periods presented.
The  results  of  operations  for the three and six month periods ended June 30,
2003 are not necessarily indicative of the results to be expected for any future
period  or  the  full  fiscal  year.


(2)     LIQUIDITY  AND  CONTINUED  OPERATIONS

     We  have  incurred  significant  losses from operations over the past three
years  and have a substantial working capital deficit and an accumulated deficit
of  $91,319,000  as  of  June  30, 2003. As a result of these and other factors,
there  are  concerns  about  our  liquidity  at  June  30,  2003.

     The  continuation  of  the Company is  dependent  upon our efforts to raise
additional  capital,  increase  revenues,  reduce  expenses,  and ultimately, to
achieve  profitable  operations.  We  have  reduced our obligations and expenses
through  settlements  with  creditors,  landlords  and lessors, reduced our work
force,  and  made  substantial reductions to general and administrative expenses
throughout  2002  and  through  the  second  quarter  of  2003.

     During  the  six  months  ended  June  30, 2003, we obtained the following:
     -     A  $500,000  increase  to  our  term  loan;
     -     A  $1,000,000  Line  of  Credit  with  our  primary  lender;  and
     -     $1,000,000  proceeds from sales of preferred stock to an individual
           who is our  majority  stockholder  and  chief  executive  officer
           and  director of the Company.

     During  the  six months ended June 30, 2003, we consummated new settlements
with  creditors  resulting  in  the  settlement of $1,697,000 of obligations for
$750,000 in cash and deposits and the issuance of 100,000 shares of Common Stock
at  $0.85 per share.  Furthermore, we have made our cost structure significantly
more  variable and believe we can continue to reduce expenses if it is required.

     While we  cannot  give any  assurances  that  the  above  actions  will be
sufficient to ultimately  alleviate  our  liquidity concerns, or that additional
borrowings or capital  could be obtained under satisfactory terms if they become
required, we do  believe  these actions will enable us  to continue  as  a going
concern through December  31,  2003.

(3)     USE  OF  ESTIMATES

     The preparation of these financial statements requires us to make estimates
and  judgments that affect the reported amounts of assets, liabilities, revenues
and expenses, and related disclosure of contingent assets and liabilities. On an
on-going  basis, we evaluate our estimates, including those related to long-term
service  contracts,  bad  debts, intangible assets, income taxes, restructuring,
and contingencies and litigation. We base our estimates on historical experience
and  on  various  other assumptions that are believed to be reasonable under the
circumstances,  the  results  of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other  sources.  Actual  results may differ from these estimates under different
assumptions  or  conditions.

     We  believe  the  following  critical  accounting  policies affect our more
significant  judgments  and estimates used in the preparation of these condensed
consolidated  financial  statements.  We  recognize  revenue  and profit as work
progresses    on    long-term,    fixed     price    contracts     using     the
percentage-of-completion  method,  which  relies  on estimates of total expected
contract  revenue  and  costs. We follow this method since reasonably dependable
estimates  of  the  revenue and costs applicable to various stages of a contract
can  be  made.  Recognized  revenues  and profit are subject to revisions as the
contract  progresses to completion. Revisions in profit estimates are charged to
income  in  the  period in which the facts that give rise to the revision become
known.  We  maintain  allowances  for  doubtful  accounts  for  estimated losses
resulting  from the inability of our customers to make required payments. If the
financial  condition  of  our  customers  were  to  deteriorate, resulting in an
impairment  of  their  ability  to  make  payments, additional allowances may be
required.  We  recorded  goodwill  and other intangible assets from acquisitions
during  2002  and  2001.  We review our intangible assets on a periodic basis to
determine  if  the  fair value supports the carrying value of goodwill and other
intangible assets. Future adverse changes in market conditions or poor operating
results  could  result  in  an  inability  to  recover the carrying value of the
investments  that  may  not  be  reflected  in the current carrying value of the
intangible assets, thereby possibly requiring material impairment charges in the
future. The determination of reporting units is integral to the intangible asset
impairment  test,  and  requires  significant  judgments to be made. We record a
valuation allowance to reduce the deferred tax assets to the amount that is more
likely  than not to be realized. In the event we were to determine that we would
be  able  to  realize the deferred tax assets in the future in excess of its net
recorded  amount,  an adjustment to the deferred tax asset would increase income
in  the  period  such  determination  was  made. We evaluate the requirement for
future  cash expenditures resulting from contingencies and litigation and record
an  accrual  for  contingencies  and litigation when exposures can be reasonably
estimated and are considered probable. Should the actual results differ from our
estimates, revisions to the estimated liability for contingencies and litigation
would  be  required.

(4)     SUPPLEMENTAL  NON-CASH  DISCLOSURES

     Non-cash  investing  and financing activities for the six months ended June
30,  2003  and  2002 consisted of new capital lease obligations for property and
equipment  of  $0  and  $362,000,  respectively.  In  2002,  as  a  result  of
acquisitions,  we  assumed  capital  lease  obligations totaling $24,000, issued
Common  Stock  totaling  $338,000  and  assumed  a  $4,750,000  note.

(5)     NET  LOSS  PER  SHARE

     At  June  30,  2003 and 2002 there were 921,693 and 1,099,896 stock options
outstanding,  respectively.  Because we incurred a net loss in each quarter, all
of  these options, as well as all warrants, have been excluded from the net loss
per  share  calculation,  because  their  effect  would  be  antidilutive.

     All  options granted had an exercise price equal to the market price on the
date  of  grant. Per share weighted average fair values are based on the date of
grant  using the Black-Scholes Method. Had we determined compensation cost based
on  the  fair  value at the grant date for our stock options under SFAS 123, our
net  loss  would  have  been  increased to the pro forma amounts indicated below
(amounts  in  thousands):
<TABLE>
<CAPTION>




<S>                                               <C>            <C>             <C>          <C>
                                                  THREE MONTHS ENDED JUNE 30,    SIX MONTHS ENDED JUNE 30,
                                                 -----------------------------  --------------------------
                                                     2003            2002            2003          2002
                                                 --------         ---------        --------      --------
Net loss as reported. . . . . . . . . . . . . .  $   (924)        $  (2,482)       $ (2,669)     $(13,154)
Effect of recording stock options at fair value        (8)              (13)            (12)          (28)
                                                 --------         ---------        --------      --------
Pro forma . . . . . . . . . . . . . . . . . . .      (932)           (2,495)         (2,681)      (13,182)
                                                 ========         =========        ========     =========
Net loss per share, as reported . . . . . . . .      (.26)             (.75)           (.76)        (3.97)
Net loss per share, pro forma . . . . . . . . .      (.26)             (.75)           (.76)        (3.98)
</TABLE>



(6)     ACCOUNTS  RECEIVABLE

     In  October  2002,  we  entered  into  a financing agreement with a bank to
provide  a  revolving  loan  facility.  The  agreement  permits  us to sell with
recourse  trade  accounts  receivable  up to $4,200,000, is due on demand and is
subject  to  certain  collateral  limitations and covenants primarily related to
borrowing  issuances.  We  pay a fee of 1.95% of the face amount of the factored
receivables. The agreement is collateralized by substantially all of our assets.
The  agreement  expires  on  October  14, 2003 with automatic one-year renewals,
subject  to  termination rights. At June 30, 2003, we had outstanding borrowings
of  $1,177,000.  For financial presentation purposes, the related receivable and
outstanding  recourse  liability  have  been included as an asset and liability,
respectively,  on  the  balance  sheet.

(7)     ASSET  IMPAIRMENTS,  RESTRUCTURING  AND  OTHER  CHARGES

     During  2001,  we  recorded  asset  impairments  and  restructuring charges
totaling  $14,882,000.  These charges included a charge in the second quarter of
2001 related  to underutilized  computer equipment and leasehold improvements at
our  data  center  used for application outsourcing services and a charge in the
fourth  quarter of 2001 for expenses incurred in connection with the closing and
consolidating of six office locations and abandoned leasehold improvements in an
unoccupied  seventh location. Additionally, we recorded other charges related to
the  impairment  of inventoried software licenses in the second quarter of 2001.

     During  the  first  quarter of 2002, commercial real estate markets in some
areas continued to be weaker than anticipated, and, accordingly, we re-evaluated
our  accrual  for  future  cash  expenditures  for  closed  office locations. In
addition,  we  executed  a  series  of  cost  control  initiatives  to close and
consolidate  three  additional  office  locations.  These activities resulted in
asset  impairment  and  restructuring  charges totaling $2,751,000 for the first
quarter  of  2002.  In  the second quarter of 2002, we recorded additional asset
impairment  charges  totaling  $133,000  relating  to  the closure of an office.

     During  the  third quarter of 2002, negotiations with the landlords of each
of  the  closed  facilities  and  the  remaining  facilities  resulted  in  a
restructuring  of  certain  obligations  and  favorable  settlements  ultimately
consummated  in October 2002. Accordingly, we again re-evaluated our accrual for
closed office locations resulting in a reduction of the restructuring reserve of
$2,773,000.

     During  the  fourth  quarter  of  2002,  we completed a restructuring which
satisfied  the obligations for certain real estate and equipment leases, certain
trade  payables  and  accrued  expenses  for  less than their recorded value. We
agreed to immediately pay $1,995,000 in cash and $1,221,000 in periodic payments
over  the next five years satisfying $2,686,000 of recorded accounts payable and
accrued  expenses, $3,074,000 of capital lease obligations and $229,000 of other
non-current liabilities. As a result of the comprehensive settlement, a total of
approximately  $23.0  million  of  contractual  obligations were satisfied and a
reduction  of  the  restructuring  reserve  of  $2,427,000 was recognized in the
fourth quarter due to the change in estimation of restructuring charges. We also
recognized  a  gain of $1,268,000 from the settlement of trade payables for less
than  the  face  amount.  The  completion  of  the comprehensive settlement with
creditors  was  funded  by a revolving bank credit facility of $4,200,000 funded
through  the  sale  of  accounts  receivable  at  a  discount of 1.95%, of which
$2,481,000  was  used  to fund the settlement, including a $422,000 cash reserve
account  related  to  the  receivables  financing.  To  obtain the financing, we
pledged substantially all of our assets to the bank as collateral. Additionally,
our  key-man  life  insurance policy of $5,000,000 was assigned to the bank, and
the  bank  was  given a warrant to purchase 60,000 shares of our Common Stock at
$5.00  per  share. Our major stockholder and Chief Executive Officer gave a $1.0
million  personal  guaranty to the bank as credit support, and, in consideration
of  his  guaranty, we have agreed to make quarterly payments to him at an annual
rate  of  3%  of the average outstanding balance under the facility and to issue
him,  quarterly,  warrants  to acquire 4,000 shares of our Common Stock for each
$1.0  million  in  average  outstanding  balance  under  the facility during the
quarter.  The  warrants  will have an exercise price of $5.00 per share and will
remain  exercisable  as long as any amount is guaranteed and for a period of one
year  thereafter,  but  for  not  less  than  five  years  from  issuance.

     During  the  first  quarter  of  2003,  in accordance with the terms of the
acquisition  agreement  with  Cunningham  Technology  Group  (CTG), we agreed to
indemnify  the CTG principals against losses related to the early termination of
the  lease  for  their  office  space  estimating  the  loss  to  be  $160,000.
Additionally, we reached a settlement with regard to the escrow account that was
held  as  restricted  cash.  Accordingly,  we again re-evaluated the accrual for
closed  office locations resulting in a reduction of the restructuring charge of
$434,000  in  the  first  quarter  of  2003.

     During  the  second  quarter of 2003, we settled the CTG office space lease
agreeing  to  pay  $58,000  in  cash  and $100,000 in four quarterly payments of
$25,000  each.  We  also  realized actual expenses of $12,000 against the closed
office  leases  that  had been accrued and determined $31,000 to be in excess of
the  closed  office leases which have all been settled or expired.  Accordingly,
we re-evaluated the accrual for closed office locations resulting in a reduction
of  the  restructuring  reserve  of  $203,000.

     As  of  June  30,  2003,  we  no longer had any accrued liabilities for the
future  cash  expenditures  attributable  to  these  restructuring  charges.


<PAGE>
The  activity  for  the  three  months  ended June 30, is summarized as follows:
<TABLE>
<CAPTION>



<S>                             <C>

                                           ACCRUED
                                 CLOSED FACILITIES RESERVES
Balance, March 31, 2003. . . .  $                   203,000
                                ----------------------------
 Changes in previous estimates                     (203,000)
                                ----------------------------
Balance, June 30, 2003 . . . .  $                         0
                                ============================
</TABLE>



(8)     LINE  OF  CREDIT

     During  the  second  quarter  of  2003, we obtained a one-year $1.0 million
revolving  line  of credit.  Our Chief Executive Officer gave a limited guaranty
of  $1.0  million  for amounts drawn under the revolving line of credit, and, in
exchange,  we gave him a warrant for 300,000 shares at market price.  As of June
30,  2003, no amount had been drawn against the line of credit.  However, during
July,  2003  we  received net draw downs of $176,000 against the line of credit.
See  also  note  18.

(9)     NOTE  PAYABLE  TO  BANK

     At  June  30,  2003,  we  owed  $5,241,000  of $5,250,000 available under a
long-term  note  with a bank. The note bears interest at 7.0%, payable quarterly
with  principal  payments  beginning in 2004. This amount is reflected net of an
$11,000  discount  on  our Balance Sheet. The note is collateralized by accounts
receivable,  inventory,  equipment,  furniture and intellectual property. Future
principle  payments  on  the  note  are  (amounts  in  thousands):
<TABLE>
<CAPTION>



<S>            <C>

2003. . . . .  $    -
2004. . . . .     279
2005. . . . .     396
2006. . . . .   4,566
                ------
                 5,241
                ======

</TABLE>


(10)     CAPITAL  LEASE  OBLIGATIONS

     We  are  obligated  under  capital leases primarily for computer and office
equipment  that expire in 2003 and 2004. The leases meet the various criteria of
a  capital  lease  and  are, therefore, classified as capital lease obligations.
Capital  lease  obligations reflect the present value of future rental payments,
discounted  at  the  interest  rate  implicit  in  each  of  the  leases.
The  leased  computer  and  office  equipment  has been included in property and
equipment  at a total cost of $59,000 at June 30, 2003. Accumulated depreciation
related  to  this  furniture  and  equipment  was  $59,000  at  June  30,  2003.
We  acquired  property  and  equipment  and  assumed  capital  lease obligations
totaling  $0  and  $362,000  for  the  six  months ended June 30, 2003 and 2002,
respectively.  Interest  payments  under capital lease obligations are generally
paid  in  the  period  incurred.

(11)     OPERATING  LEASE  COMMITMENTS

     We  have entered into various non-cancelable operating lease agreements for
office  space,  and office equipment. The terms of these agreements range from 6
months  to  5  years  and  all  of  the  leases require monthly payments. We are
generally  responsible for all executory costs including maintenance, insurance,
utilities  and taxes. Total rent expense was $147,000 and $233,000 for the three
months  ended  June  30, 2003 and 2002, respectively and $489,000 and $1,076,000
for  the  six  months  ended  June  30,  2003  and  2002,  respectively.

     A summary of the future minimum lease payments under operating leases after
June 30,  2003  follows  (amounts  in  thousands):
<TABLE>
<CAPTION>



<S>          <C>
2003. . . .  $310
2004. . . .   548
2005. . . .   433
2006. . . .   305
Thereafter.   167
             ----
            1,763
            =====
</TABLE>



     During  2003,  2002  and 2001, we terminated leases for office space in New
York,  Boston,  Denver,  Santa  Monica  and  Irvine,  California;  Jacksonville,
Florida;  Alpharetta,  Georgia;  Tempe, Arizona; and Bangalore, India. The above
future minimum lease payments exclude minimum payment amounts for the terminated
leases.


(12)     INCOME  TAXES

     We  did not record a provision for federal or state income taxes during the
six  months  ended  June 30, 2003 and 2002 due to the net losses reported during
those  periods.  We  also  did not record a benefit for federal and state income
taxes  during  the six months ended June 30, 2003 and 2002 due to limitations on
the  use  of  net  operating  loss  carry  forwards.

     At June 30, 2003, we had net operating loss carry forwards of approximately
$65,000,000  for U.S. federal and state income tax purposes that expire in years
2018  through  2022.  The  difference  between  the  net  operating  loss carry
forwards of approximately $65,000,000 and the accumulated deficit of $91,319,000
at June 30, 2003 is  primarily due to timing differences of recognizing  certain
expenses as required  by the tax  code compared to the requirements of generally
accepted accounting principles.

     We  have  recorded  a valuation allowance for the deferred tax assets as of
June  30, 2003 and December 31, 2002. In assessing the realizability of deferred
tax  assets,  we  have  considered  whether it is more likely than not that some
portion  or  all  of  the deferred tax assets will not be realized. The ultimate
realization  of  deferred  tax  assets  is  dependent  upon generation of future
taxable  income  during  the periods in which those temporary differences become
deductible.  We  considered  the scheduled reversal of deferred tax liabilities,
projected  future  taxable  income,  and  tax  planning strategies in making our
assessment. Based upon the level of historical losses and projections for future
taxable  income/losses  over  the  periods  in which the deferred tax assets are
deductible,  we  believe it is more likely than not that we will not realize the
benefits  of  these  deductible  differences.

(13)     CONVERTIBLE  PREFERRED  STOCK

     In the first and second quarters of 2003, we sold 40,000 shares of Series A
8%  Convertible  Preferred  Stock  ("Series  A 8%") to our majority stockholder,
chief  executive  officer  and director for total proceeds of $400,000.   In the
second  quarter  of  2003,  we  converted  the 40,000 shares of Series A 8% into
40,000  shares  of Series B 12% Convertible Preferred Stock ("Series B 12%") and
we  sold  an additional 60,000 shares of Series B 12% to the same individual for
total  proceeds  of  $600,000.

     Series  A  8%  had  a par value of $.001, a liquidation value of $30.00 per
share,  carried a cumulative quarterly dividend of $.80 per share per annum, was
convertible  into  Common Stock at an initial conversion price of $2.50, subject
to  adjustment  for dilutive issuances, and voted only upon conversion. We could
require  conversion  into Common Stock as soon as the 20-day average of the last
reported  sale  of  Common  Stock  reached  $10.00  per  share  or  higher.

     Series  B  12%  has a par value of $.001, a liquidation value of $30.00 per
share,  carries  a cumulative annual dividend of $1.20 per share, is convertible
into Common Stock at an initial conversion price of $1.10, subject to adjustment
for  dilutive  issuances,  and  votes  only  upon  conversion.  We  may  require
conversion  into Common Stock as soon as the 20-day average of the last reported
sale  of  Common  Stock  is  $4.40  per  share  or  higher.


(14)     GOODWILL

     We  have determined that we have only one reporting unit. The fair value of
our reporting unit and the related implied fair value of its respective goodwill
was established using a market capitalization approach supported by a discounted
cash  flow  approach.

     In June 2002, we completed the transitional goodwill impairment test, which
resulted  in  a  non-cash charge of $3,187,000. All of the charge was related to
our  acquisitions  completed  in  2001. The primary factors that resulted in the
impairment  charge were  due  to the  difficult  economic  environment in the IT
professional services  sector  and  the  liquidity and  continuation concerns of
the Company at that time.

     The  fair  value and carrying value of the goodwill of $5,240,000, relating
to  the acquisitions we completed in the first and fourth quarters of 2002, were
tested  during  our annual measurement date in the fourth quarter of 2002, which
resulted  in  no  impairment  charges.

(15)     SIGNIFICANT  CUSTOMERS

     One  customer  accounted  for  8% of total revenue for the six months ended
June 30, 2003. One customer accounted for 8% of total revenue for the six months
ended  June  30,  2002.

     One  customer accounted for 11% of the total accounts receivable balance at
June 30, 2003. One customer  accounted for 7% of the total  accounts  receivable
Balance at  June  30,  2002.

(16)     CONTINGENCIES  AND  RELATED  PARTY  TRANSACTIONS

     During  July  and  August  2001,  four purported class action lawsuits were
filed  in the United States District Court for the Southern District of New York
against  the  Company,  certain of its current and former officers and directors
(the  "Individual  Defendants")  and  the  members of the underwriting syndicate
involved in our initial public offering (the "Underwriter Defendants"). All four
lawsuits  have  been  consolidated  for  coordination with more than 300 similar
cases. The suits generally allege that: (1) the Underwriter Defendants allocated
shares  of  the Company's initial public offering to their customers in exchange
for  higher  than  standard commissions on transactions in other securities; (2)
the  Underwriter  Defendants  allocated shares of our initial public offering to
their  customers in exchange for the customers' agreement to purchase additional
shares of our Common Stock in the after-market at pre-determined prices; (3) the
Company  and  the Individual Defendants violated section 10(b) of the Securities
Exchange  Act  of  1934 and/or section 11 of the Securities Act of 1933; and (4)
the  Individual Defendants violated section 20 of the Securities Exchange Act of
1934  and/or  section  15  of  the  Securities  Act of 1933. The plaintiffs seek
unspecified   compensatory  damages   and   other   relief.  We   have   sought
indemnification  from  the  underwriters of its initial public offering. In July
2002,  we,  as  part of the group of issuers of shares named in the consolidated
litigation  (the  "Issuer  Defendants")  and  the Individual Defendants, filed a
motion  to  dismiss  the  consolidated  amended  complaints.  The  Underwriter
Defendants  filed  motions to dismiss as well. Also in July 2002, the plaintiffs
offered to dismiss the Individual Defendants, without prejudice, in exchange for
a  Reservation  of  Rights and Tolling Agreement from each Individual Defendant.
All  of the Individual Defendants in our four lawsuits have entered into such an
agreement. On November 1, 2002, the Court heard oral arguments on the motions to
dismiss,  and  in  February  2003,  the Court dismissed the section 10(b) claims
against  the Issuer Defendants, but allowed the plaintiffs to continue to pursue
the remaining claims. We believe that the claims against the Company are without
merit  and  intend  to  vigorously  defend  this  matter  if  it is not settled.

     In  the  second quarter of 2003, counsel for the Issuer Defendants, counsel
for  the  Issuer  Defendants'  insurers,  and  a plaintiffs' executive committee
appointed  by  the Court entered into a memorandum of understanding ("the "MOU")
and  related  agreements  to settle the consolidated class action as against all
Issuer Defendants. The MOU provides, generally, that the insurers for the Issuer
Defendants  will  guarantee a recovery (either by settlement or judgment) to the
plaintiffs  against  the  Underwriter Defendants, against whom the litigation is
still proceeding, of at least $1 billion. Accordingly, if the plaintiffs recover
less  than  $1  billion  from  the  Underwriter Defendants, the insurers for the
Issuer  Defendants  will pay to the plaintiffs the difference between the actual
recovery  and  $1  billion.  The entire guaranteed amount, as well as the Issuer
Defendants'  legal  fees  incurred  since  June  1,  2003,  will  be paid by the
insurers.  Any  settlement  amounts  and  all  legal  fees  paid  by  the Issuer
Defendants  will  be  allocated  among  the  settling Issuer Defendants, and any
allocated amounts that exceed the individual D&O policy limits of the individual
Issuer  Defendants  (taking  into  account  any  other  claims made against such
policies)  will  be  the  responsibility  of  the Issuer Defendants. The Company
believes, based on the information available to it now, that it is unlikely that
the  Company's policy limits will be exhausted by the settlement amounts paid by
its  insurers.  A  special  independent  committee  of  the  Company's  board of
directors  was  previously  formed to consider any settlement of the litigation,
and the special committee has voted to approve the terms of the settlement based
on  the  terms of the MOU and related agreements. The settlement remains subject
to  final  approval  of  individual  settlement  agreements with each individual
Issuer Defendant who has agreed to settle, as well as final approval of the lead
plaintiffs  and  the  insurers,  and  is subject to approval by the Court. It is
anticipated that these approvals will take several months to obtain, if obtained
at all. The Company anticipates that there will be objections to the settlement,
and  individual  plaintiff  class  members  will be able to opt out of the class
action  settlement  and could conceivable pursue individual claims. There can be
no  assurance  that the settlement will be approved on the terms provided in the
MOU,  if  at  all.  The  foregoing  is  a general summary of some of the salient
points  of  the  MOU and related agreements and is not a complete summary of the
specific  terms  of  the  proposed  settlement.


     Additionally,  we are from time to time, party to various legal proceedings
arising  in  the  ordinary  course  of  business.  We  evaluate such claims on a
case-by-case  basis,  and  our  policy  is to vigorously contest any such claims
which  we  believe  are  without  merit.

     Our  majority  stockholder,  chief  executive  officer  and  director  has
personally guaranteed our accounts receivable financing, and we have an ongoing,
quarterly obligation  to  pay him cash and issue him warrants for the continuing
guaranty, based  on  the  amount  of  financing  guaranteed  during the quarter.

     We  sold preferred  stock  to  this same majority stockholder, officer and
Director in  February,  March  and  April  of  2003.

     In  the  second quarter of 2003, we sold certain assets, customer contracts
and intellectual property of one of our small business offerings to our majority
stockholder, chief executive officer and director, and his spouse, and agreed to
provide  related and specified services to them in connection with the sale.  In
exchange,  the  buyers  forgave  $46,000 in debt owed to them by the Company and
assumed  the  obligation for $22,000 in deferred revenue.  We recorded a gain on
the transaction of $25,000.  An independent committee of the Board was appointed
to  consider  this  transaction.  The  operations  that were disposed of were no
longer  in  line with the Company's strategies and offerings, had been partially
discontinued,  was  not  profitable  (and  we  believed  it would be unlikely to
achieve  profitability  in  the  foreseeable  future,  if  at  all). The special
committee  of  the  board concluded that the sale was on terms no less favorable
than  could  have  been obtained in a transaction with an unrelated, third party
buyer and was less disruptive and more favorable to IIS' ongoing business than a
complete  discontinuation  of the remaining operations of this business offering
or  further  investment  in  it  by  the  Company.

(17)     RECENTLY  ISSUED  ACCOUNTING  PRONOUNCEMENTS

     In  June  2002, the FASB issued Statement of Financial Accounting Standards
SFAS  No. 146, "Accounting for Exit or Disposal Activities" (SFAS 146). SFAS 146
addresses  the  recognition,  measurement and reporting of costs associated with
exit  and disposal activities, including restructuring activities. SFAS 146 also
addresses recognition of certain costs related to terminating a contract that is
not  a  capital lease, costs to consolidate facilities or relocate employees and
termination  of benefits provided to employees that are involuntarily terminated
under the terms of a one-time benefit arrangement that is not an ongoing benefit
arrangement  or  an  individual  deferred  compensation  contract.  SFAS  146 is
effective  for exit or disposal activities that are initiated after December 31,
2002.  The  adoption of SFAS 146 did not have a material impact on the financial
position  or  results  of  operations  of  the  Company.

     In  August  2002,  the  FASB  issued  Statements  of  Financial  Accounting
Standards  No. 147, "Acquisitions of Certain Financial Institutions" (SFAS 147).
SFAS  147 requires financial institutions to follow the guidance in SFAS 141 and
SFAS  142  for  business  combinations  and  goodwill  and intangible assets, as
opposed  to  the  previously  applied accounting literature. This statement also
amends  SFAS  144  to  include  in  its  scope  long-term  customer relationship
intangible  assets  of financial institutions. The provisions of SFAS 147 do not
apply  to  the  Company.


(18)     SUBSEQUENT  EVENTS

     During  July  2003,  we  received  net  draw  downs of $176,000 against our
one-year,  $1.0  million  revolving  line  of  credit.

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

FORWARD-LOOKING  STATEMENTS

     The  following  discussion  contains  forward-looking  statements  based on
current  expectations,  and  we  assume no obligation to update these statements
unless  legally  required.  Because  actual  results  may differ materially from
expectations,  we  caution  readers  not  to  place  undue  reliance  on  these
statements.  These  statements are based on our estimates, projections, beliefs,
and  assumptions,  and  are  not  guarantees  of future performance. A number of
factors could cause future results to differ materially from historical results,
or from results or outcomes currently expected by us. These factors include: the
loss  of  one  or  more of our significant clients; an inability to increase our
market  share;  difficulties  in  maintaining  our technology alliances; further
reduced demand for IT services, and a continued downturn in economic conditions.

     These  factors  and  the  other  matters  discussed below under the heading
"Factors  that  May  Affect Future Results and Our Stock Price" may cause future
results  to  differ  materially  from  historical  results,  or  from results or
outcomes  we  currently  expect  or  seek.


OVERVIEW

     Since  the  third  quarter  of 2000, the market for IT services has changed
dramatically and the demand has declined significantly. As part of our effort to
adjust our structure to better address the general economic business climate and
the  slowdown  in  the  IT  professional  services  market,  we  have  closed
underperforming  or vacant regional offices, reduced staff in remaining offices,
recorded material charges related to underutilized data center facility computer
equipment  and  leasehold  improvements  and developed and began implementing an
aggressive  growth strategy through acquiring like-minded peer consultancies. We
completed  four  such  acquisitions  in  2001, two such transactions in 2002 and
anticipate  additional,  similar  transactions,  in  future  periods  if  market
conditions  and  our  resources  permit.

     We  have  operated  at  a  loss  for  each  of the last four years with the
exception of the third and fourth quarters of 2002 which were favorably impacted
by  revisions  to  our  restructuring  accruals.  The  losses, combined with the
current  market  for  IT  services,  have raised concern about our liquidity and
continued  operations.  We continue to reduce our operating expenses in order to
improve  cash  flow  from operations. During 2002, we were in default of certain
operating  and  capital lease provisions for failure to make timely payment, had
received  several  default notices during 2002 and had been named in a number of
related  lawsuits.  In  May  2002, we implemented a financial restructuring plan
designed  to  settle obligations for vacated facilities, excess equipment leases
and  accounts  payable  related  to  facilities and types of services we were no
longer offering to clients, in a manner which would achieve the highest possible
recoveries for all creditors and stockholders consistent with our ability to pay
and  to  continue  our operations. In October 2002, we completed a restructuring
which satisfied the obligations for the related real estate and equipment leases
and  for certain trade payables for less than their recorded value. We agreed to
pay  $2.0  million in cash at the close of the restructuring and $1.2 million in
periodic  payments over the next five years, satisfying $2.9 million of recorded
accounts payable and accrued expenses, $3.1 million of capital lease obligations
and $229,000 of other non-current liabilities. As a result of the restructuring,
a  total  of  approximately  $23.0  million  of  current  and future contractual
obligations  were  satisfied.  We funded the restructuring by selling all of our
current  accounts  receivable,  totaling $2.5 million, through a new bank credit
facility  at  a  discount of 1.95%, which left us the ability to sell up to $1.7
million  more  in  current  accounts  receivable  under the same arrangement. To
obtain the financing, we pledged substantially all of our assets to the bank and
we issued to the bank a warrant to purchase 60,000 shares of our Common Stock at
$5.00  per  share.  Additionally, the Company's key-man life insurance policy of
$5,000,000 was assigned to the bank. Mr. James Garvey, our majority stockholder,
Chief  Executive  Officer and one of our directors, gave a $1.0 million personal
guaranty  to  the bank as credit support, and, in consideration of his guaranty,
we  have agreed to make quarterly payments to him at an annual rate of 3% of the
average  outstanding  balance  under  the  facility and to issue him, quarterly,
warrants  to  acquire  4,000 shares of our Common Stock for each $1.0 million in
average  outstanding balance under the facility during the quarter. The warrants
will  have  an  exercise price of $5.00 per share and will remain exercisable as
long  as  any  amount is guaranteed and for a period of one year thereafter, but
for  not  less  than  five  years  from  issuance.


     During  March and April 2003, we obtained additional credit from our lender
for  working  capital  purposes.  The bank has loaned us an additional $500,000,
which was added to the existing note, deferred principal payments under the note
for  a  year,  extended  a  one-year  $1.0  million revolving line of credit and
allowed us to retain a greater amount of proceeds from assets sales, with excess
proceeds  to be applied against the note. To obtain this financing, we cancelled
the warrant given in October 2002 and gave the bank a warrant for 300,000 shares
at  market  price and reaffirmed the security interests previously given and the
assignment  of  the  key-man  life  insurance.  Additionally,  Mr. Garvey gave a
limited  guaranty  of $1.0 million for amounts drawn under the revolving line of
credit. In February and April 2003, we sold 100,000 shares of preferred stock to
Mr. Garvey for the total proceeds of $1.0 million. Although no assurances can be
given,  we  believe  that  the  capital  and  financing  arrangements  received
subsequent  to  December 31, 2002 and the restructuring accomplished in 2002 and
2003  will allow us to continue as a going concern. The remaining unused balance
on  the credit facility of $2.4 million is available to fund future acquisitions
and  to  support  working capital needs; however, availability is dependent upon
our ability to generate additional revenues and increase our accounts receivable
base.  Accordingly, notwithstanding the restructuring, if we are unable to raise
additional capital, increase revenues and significantly further reduce operating
losses,  our  business  activities  may  be  significantly  curtailed.

     We  derive  our  revenues  primarily  from  the  delivery  of  professional
services. We offer our services to clients under time and materials contracts or
under  fixed  fee  contracts.  For  time  and  materials  projects, we recognize
revenues  based  on the number of hours worked by consultants at a rate per hour
agreed  upon  with our clients. We recognize revenues from fixed-price contracts
on  a  percentage-of-completion  method  based  on  project  hours  worked.  The
percentage  of our revenues from fixed-price contracts was approximately 16% and
20%  in  the  three  and  six  months  ended  June  30,  2003,  respectively and
approximately  23%  and 29%, respectively, in the corresponding periods of 2002.
We  provide our managed services for a minimum monthly fee and charge extra fees
for  services  that  exceed agreed-upon parameters. Revenues from these services
are  recognized as services are provided. Revenues for services rendered are not
recognized  until  collectibility  is  reasonably  assured.

     Our  cost  of revenues consists primarily of employee compensation, outside
consulting  services  and  benefits.  Selling  and  marketing  expenses  consist
primarily  of  compensation  and  benefits.  General and administrative expenses
consist  primarily of compensation and benefits for our executive management and
our  finance, administration, legal, information technology, and human resources
personnel.  General  and  administrative expenses also include depreciation, bad
debt  expense and operating expenses such as rent, insurance, telephones, office
supplies, travel, outside professional services, training, and facilities costs.

     We  have  historically derived and believe that we may continue to derive a
significant  portion  of  our  revenues from a limited number of clients who may
change  from  period  to  period  (see  related  discussion below in "Results of
Operations").  Any  cancellation,  deferral,  or  significant  reduction in work
performed  for  our  principal  clients  could  harm  our business and cause our
operating  results  to fluctuate significantly from period to period. During the
three and six months ended June 30, 2003, revenues from our five largest clients
represented,  when  added  together,  approximately  35%  and  32%  of revenues,
respectively  compared  with  24%  and  29%,  respectively,  of  revenues in the
corresponding  period  in  2002.

     We  incurred a net loss in the three and six months ended June 30, 2003 and
in  each  of  the  last  five  years as a result of decreases in revenues (after
2000),  investments  in infrastructure, and increases in operating expenses and,
more  recently,  as  a  result  of  revenues  decreasing  at  a faster rate than
operating  expenses.  Our  quarterly  revenue,  cost  of revenues, and operating
results  have  varied  in  the  past  due  to fluctuations in the utilization of
project personnel and are likely to vary significantly in the future. Therefore,
we believe that period-to-period comparisons of our operating results may not be
indicative  of  future  performance  and  should not necessarily be relied upon.



RECENT  ACQUISITIONS

     As  part  of our effort to adjust our structure to better address a rapidly
changing  and  declining IT services market, we developed and began implementing
an  aggressive growth strategy through acquiring like-minded peer consultancies.
The  acquisition  target companies ideally have leading competitive positions in
regional  and  vertical  markets,  a  proven  track  record  of  providing
Microsoft-based  and  Novell  solutions,  a  booked  backlog of project work for
premier  clients,  managers  in  place  who  are  capable  of leading a regional
division for the Company, a working culture and ethic similar to our own and are
owned  by  consultants  who  intend  to  remain  active  in  the  business.

     During 2001, we completed a series of transactions with four companies that
we believed met our acquisition criteria. To complete these acquisitions we used
a  combination  of cash payments, issuance of our Common Stock and assumption of
liabilities  and  in  return  hired  a  total  of  121 management and consulting
personnel,  acquired  certain related assets and acquired lease arrangements for
office  space  in the markets in which these consultancy practices operated.  In
the  purchase  price allocation, a total of $3,064,000 was recorded as goodwill.

     During  2002,  in  connection  with  the  effective  date  of  Statement of
Financial  Accounting  Standard No. 142, "Goodwill and Other Intangible Assets,"
we  were  required to assess the impairment of our recorded goodwill relating to
the  above  acquisitions.  As  discussed in Note 17 of the Notes to Consolidated
Financial  Statements,  all  of  the goodwill recorded through December 31, 2001
totaling  $3,064,000  and related acquisition costs of $123,000 were written off
as  a  non-cash,  cumulative  effect  of  a  change  in  accounting  principle.

     During  2002,  we  completed  a  series of transactions with two additional
companies,  again  using  a combination of cash payments, issuance of our Common
Stock  and  assumption  of  liabilities  and  bank  loans.  Through  these  two
acquisitions  we  hired  98  management  and  consulting  personnel and acquired
certain  related  assets and lease agreements for office space and equipment. In
the  purchase  price allocation, a total of $5,241,000 was recorded as goodwill.

     As  part  of  the  2001  and 2002 acquisitions, intangible assets excluding
goodwill totaling $682,000 were acquired consisting of non-compete agreements of
$325,000  and employee agreements of $357,000. The non-compete intangible assets
will  be amortized over their contractual lives, which are generally five years.
The employee agreements' intangible assets were amortized over their contractual
lives,  which  were less than one year. The total goodwill recorded for the 2002
acquisitions  was $5,240,000. It is estimated that most of this goodwill will be
deductible  for  tax  purposes, subject to the utilization of  our net operating
losses.  See  note  12.

     In  connection  with these acquisitions, we acquired accounts receivable of
$1,773,000  and  fixed  assets of $520,000. The Company issued 214,000 shares of
Common Stock valued at $577,000, of which $43,000 was used to repay a portion of
an  assumed  note  payable.


CRITICAL  ACCOUNTING  POLICIES  AND  ESTIMATES

     The  discussion  and  analysis  of  our  financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared  in  accordance  with  accounting  principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues  and  expenses,  and  related  disclosure  of  contingent  assets  and
liabilities.  On  an  on-going  basis we evaluate our estimates, including those
related  to  intangible  assets,  long-term service contracts, bad debts, income
taxes, restructuring, and contingencies and litigation. We base our estimates on
historical  experience  and on various other assumptions that are believed to be
reasonable  under  the  circumstances,  the  results of which form the basis for
making  judgments  about  the carrying values of assets and liabilities that are
not  readily  apparent  from other sources. Actual results may differ from these
estimates  under  different  assumptions  or  conditions.

     We  believe  the  following  critical  accounting  policies affect the more
significant  judgments and estimates used in the preparation of our consolidated
financial  statements.  We  recognize  revenue  and profit as work progresses on
long-term,  fixed  price  contracts  using  the percentage-of-completion method,
which  relies  on  estimates  of  total  expected contract revenue and costs. We
follow  this  method  because reasonably dependable estimates of the revenue and
costs  applicable  to  various  stages  of  a  contract  can be made. Recognized
revenues  and  profit  are  subject  to  revisions as the contract progresses to
completion. Revisions in profit estimates are charged to income in the period in
which  the  facts  that  give  rise  to  the  revision become known. We maintain
allowances  for  doubtful  accounts  for  estimated  losses  resulting  from the
inability of our customers to make required payments. If the financial condition
of  our  customers  were  to  deteriorate,  resulting  in an impairment of their
ability  to  make  payments,  additional  allowances  may be required. We record
goodwill and other intangible assets from acquisitions. We review our intangible
assets  on a periodic basis to determine if the fair value supports the carrying
value  of goodwill and other intangible assets. Future adverse changes in market
conditions or poor operating results could result in an inability to recover the
carrying  value  of  the  investments  that  may not be reflected in the current
carrying  value  of  the  intangible assets, thereby possibly requiring material
impairment  charges  in  the future. The determination of reporting units needed
for  the  impairment calculation also involves a significant amount of judgment.
We  record a valuation allowance to reduce our deferred tax assets to the amount
that  is  more likely than not to be realized. In the event we were to determine
that  the Company would be able to realize its deferred tax assets in the future
in  excess  of  its net recorded amount, an adjustment to the deferred tax asset
would  increase  income  in  the period such determination was made. We recorded
accruals  for  the  estimated future cash expenditures required from closing our
vacated  offices.  The accruals, through December 31, 2002, include estimates of
future  rent  payments  and settlements until the obligation is canceled. Should
actual  cash  expenditures differ from our estimates, revisions to the estimated
liability  for  closing  vacated  offices  would  be  required.  We evaluate the
requirement  for  future  cash  expenditures  resulting  from  the  Company's
contingencies  and  litigation.  Should  the  actual  results  differ  from  our
estimates, revisions to the estimated liability for contingencies and litigation
would  be  required.



RESULTS  OF  OPERATIONS

     The  following  table  sets  forth  selected financial data for the periods
     indicated  expressed  as  a  percentage  of  revenues:

<TABLE>
<CAPTION>


<S>                                                                <C>        <C>        <C>      <C>
                                                                   THREE MONTHS ENDED    SIX MONTHS ENDED
                                                                        JUNE 30,              JUNE 30,
                                                                   ------------------    -----------------
                                                                     2003      2002        2003       2002
                                                                   -------   --------    --------   -------
Revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . .   100.0%     100.0%      100.0%    100.0%
Cost of revenues. . . . . . . . . . . . . . . . . . . . . . . . .    77.5       75.9        73.2      75.6
                                                                   ------    -------     -------    ------
     Gross profit. .. . . . . . . . . . . . . . . . . . . . . . .    22.5       24.1        26.8      24.4
                                                                   ------    -------     -------    ------

Operating expenses:
   Selling and marketing .  . . . . . . . . . . . . . . . . . . .    23.9       10.0        23.1      11.5
   General and administrative.. . . . . . . . . . . . . . . . . .    39.8       45.5        68.0      57.8
   Asset impairments, restructuring charges and other.  . . . . .    (1.5)       1.9        (0.6)     18.7
   Gain on settlement of lease termination agreement and
    other liabilities.  . . . . . . . . . . . . . . . . . . . . .    (3.7)         -       (17.1)        -
                                                                   ------    -------     -------    ------
     Total operating expenses.  . . . . . . . . . . . . . . . . .    58.5       57.4        73.4      88.0
                                                                   ------    -------     -------    ------
     Loss from operations.  . . . . . . . . . . . . . . . . . . .   (36.0)     (33.3)      (46.6)    (63.6)
Interest and other income (expense), net. . . . . . . . . . . . .    (7.5)      (1.5)       (6.4)     (1.1)
                                                                   ------    -------     -------    ------
     Loss before cumulative effect of a change in
      accounting principle                                          (43.5)%    (34.8)%     (53.0)%   (64.7)%
                                                                   ======    =======     =======    ======
</TABLE>


THREE  AND SIX MONTHS ENDED JUNE 30, 2003 COMPARED TO THREE AND SIX MONTHS ENDED
JUNE  30,  2002

     REVENUES.  For  the  three  months  ended June 30, 2003, revenues decreased
70.4% to $2.1 million from $7.1 million in the corresponding period of 2002. For
the  six  months  ended  June 30, 2003, revenues decreased 67.5% to $5.0 million
from  $15.4  million  in  the  corresponding  period  of  2002.  The decrease is
primarily  due  to  continuing  weakness in demand in the information technology
sector  which  has  resulted  in  the  closure of several of our offices, and to
recent  general  economic  conditions  caused  by  geopolitical  influences.

     COST  OF REVENUES. Cost of revenues decreased 70.4% to $1.6 million for the
three months ended June 30, 2003 from  $5.4 million for the corresponding period
of  2002.  Cost  of  revenues decreased 68.1% to $3.7 million for the six months
ended June 30, 2003 from $11.6 million for the corresponding period of 2002. The
decrease is primarily due to a decrease in overall firm staffing. Utilization of
consultants in the three months ended June 30, 2003 decreased 10.8% to 58%, from
65% for the corresponding quarter in 2002. Utilization of consultants in the six
months ended June 30, 2003 decreased 6.5% to 58%, from 62% for the corresponding
period  in  2002  due  to the same economic conditions mentioned above that have
impacted  demand  for  our  services.

     SELLING  AND  MARKETING  EXPENSES. Selling and marketing expenses decreased
28.6%  to $0.5 million in the three months ended June 30, 2003 from $0.7 million
in the corresponding period in 2002 and as a percentage of revenues increased to
23.9% in 2003 from 10.0% in 2002. Selling and marketing expenses decreased 33.3%
to  $1.2  million in the six months ended June 30, 2003 from $1.8 million in the
corresponding  period in 2002 and as a percentage of revenues increased to 23.1%
in  2003  from  11.5% in 2002. The decrease in selling and marketing expenses in
2003  was  due  primarily  to  the  reduction  of  dedicated sales and marketing
personnel  in  2003  compared  to  2002 as a part of management's cost reduction
plan.

     GENERAL  AND  ADMINISTRATIVE  EXPENSES. General and administrative expenses
decreased  75.0%  to  $0.8  million in the three months ended June 30, 2003 from
$3.2 million in the corresponding period in 2002 and as a percentage of revenues
decreased  to  39.8%  in  2003  from  45.5%  in 2002. General and administrative
expenses  decreased  61.8% to $3.4 million in the six months ended June 30, 2003
from  $8.9  million  in  the corresponding period in 2002 and as a percentage of
revenues  increased to 68.0% in 2003 from 57.8% in 2002. The decrease in general
and  administrative  expenses  in  2003  was  primarily  due  to  management's
implementation  of  its  cost  reduction  plan  and  was  also attributable to a
reduction  in  depreciation  and  amortization  expense  of $1,551,000, salary &
benefits  expense of $1,287,000, rent and equipment lease expense of $1,087,000,
legal  &  accounting expense of $464,000, telephone expense of $397,000, general
office expense of $370,000, consulting services of $262,000, a net change in the
provision  for  bad  debt  expense  of $442,000 and other net cost reductions of
$147,000.  Included in general and administrative expenses during the six months
ended  June  30, 2003 is a net loss of $542,000 from disposition of property and
equipment  through sales and the termination of office leases for our Denver and
Boston  operations.

     ASSET  IMPAIRMENTS  AND  RESTRUCTURING  CHARGES  AND LOSS ON DISPOSITION OF
ASSETS.  During  2001,  we  recorded a $9.2 million impairment charge related to
underutilized computer equipment and leasehold improvements from our data center
facility  and  a  $5.7  million  charge for expenses incurred in connection with
closing  and consolidating six office locations. During 2002, in connection with
our  restructuring  efforts  and  the  resulting favorable settlement of certain
obligations  and lease agreements, we re-evaluated our reserve for closed office
locations and recorded a $1.0 million reduction of the restructuring reserve. We
also  recorded  a gain on the settlement of payables of $1.2 million relating to
these  favorable  settlement  agreements.  During  the six months ended June 30,
2003, we again re-evaluated our reserve for closed office locations and recorded
a  $31,000  reduction  of  the  restructuring  reserve.

     During  the  six  months  ended  June  30,  2003, as a result of additional
restructuring  efforts  and  the  resulting  favorable  settlement  of  certain
obligations,  we  recorded  a  gain  on  settlement  of  debt  of  $862,000.

     INTEREST  EXPENSE  NET.  Interest expense, net of interest income increased
42.0%  to  $159,000 in the three months ended June 30, 2003 from $112,000 in the
corresponding period in 2002. Interest expense, net of interest income increased
40.7%  to  $325,000  in  the six months ended June 30, 2003 from $231,000 in the
corresponding  period  in 2002. The change was due to interest on increased bank
borrowing,  which  were used for acquisitions, financing accounts receivable and
debt  restructuring.

LIQUIDITY  AND  CAPITAL  RESOURCES

     Since inception, we have primarily funded our operations and investments in
property  and equipment through cash, capital lease financing arrangements, bank
borrowings,  and  equity  financings.  In January 2000, we raised $20.2 million,
before  expenses  of $800,000, through a private placement of Series C preferred
stock  to institutional and other accredited investors. In March and April 2000,
we  raised  an additional $67.5 million (net of underwriting discounts and other
offering  expenses) through our initial public offering of 989,000 shares of our
Common  Stock.

     At June 30, 2003, we had approximately $10,000 in cash and cash equivalents
and  a $2.7 million working capital deficit, as compared to $1.1 million in cash
and  cash equivalents and a $2.8 million working capital deficit at December 31,
2002.

     Net  cash  used  in  operating activities for the six months ended June 30,
2003  and  2002  was  $1.2  million and $3.9 million, respectively. Cash used in
operating  activities  in  each  of  these periods was the result of net losses,
adjusted  for  non-cash  items  related  to  depreciation,  amortization,  asset
impairment  and  restructuring,  and  fluctuations  in receivables, unbilled and
deferred  revenues  on contracts, prepaid expenses and other current assets, and
accounts  payable  and  accrued  expenses.

     Net cash provided by investing activities for the six months ended June 30,
2003  was  $331,000,  primarily from the sale of excess furniture and equipment.
Net cash used in investing activities for the six months ended June 30, 2002 was
$489,000, primarily for purchases of computer equipment, furniture and leasehold
improvements  and  in  an  acquisition  of  assets  of  another company totaling
$400,000.

     Net  cash  used  in  financing activities for the six months ended June 30,
2003  was  $193,000,  compared  to $210,000 in the corresponding period of 2002.
During  the  six months ended June 30, 2003, we sold 100,000 shares of preferred
stock  for $1,000,000, made payments on our line of credit and capital leases of
$2.0  million,  borrowed  $500,000  from a bank on a long term note and received
$288,000  of  previously restricted cash. In the six months ended June 30, 2002,
we  made  payments  on  capital  leases  of  $902,000  and  received $692,000 of
previously  restricted  cash.

     Non-cash  investing  and financing activities for the six months ended June
30,  2003  and  2002 consisted of new capital lease obligations for property and
equipment  of $0 and $362,000, respectively. In 2002, we also assumed a note for
$4,750,000  in  conjunction  with  an  acquisition.

     A summary of our contractual cash obligations at June 30,  2003 (adjusted
for  settlements  reached  subsequent  to quarter  end)  follows  (amounts  in
thousands):


<TABLE>
<CAPTION>


<S>          <C>          <C>          <C>         <C>          <C>

                            FIXED
                          SETTLEMENT     CAPITAL   OPERATING
              BANK NOTE   AGREEMENTS     LEASES     LEASES      TOTAL
             -----------  -----------  ----------  -------      ------
2003. . . .  $         -  $       133  $       25  $   755      $  913
2004. . . .          279          127           2      639       1,047
2005. . . .          396           37           -      433         866
2006. . . .        4,566           37           -      305       4,908
2007. . . .            -           36           -      167         203
Thereafter.            -            -           -        -           -
             -----------  -----------  ----------  -------     -------
             $     5,241. $       370  $       27  $ 2,299     $ 7,937
             ===========  ===========  ==========  =======     =======
</TABLE>

     We  have  incurred  significant  losses from operations over the past three
years.  We have a substantial working capital deficit and an accumulated deficit
of  $91.3  million  as of June 30, 2003. As a result of these and other factors,
there  are  concerns  about  the  liquidity  of  the  Company  at June 30, 2003.

     Our continuation is dependent upon our efforts to raise additional capital,
increase  revenues,  reduce  expenses,  and  ultimately,  to  achieve profitable
operations.  We  have  reduced  our obligations and expenses through settlements
with  creditors,  landlords  and  lessors,  reduced  our  work  force,  and made
substantial  reductions  to  general and administrative expenses throughout 2002
and  through  the  six  months  ended  June  30,  2003.

     During  the  six  months  ended  June 30,  2003, we obtained the following:

     -     A  $500,000  increase  to  our  term  loan;
     -     A  $1,000,000  Line  of  Credit  with  our  primary  lender;  and
     -     $1,000,000 of proceeds from  sales of preferred  stock to an officer,
           director  and  majority  stockholder  of  the  Company.

     During  July  2003,  we  received  net  draw  downs of $176,000 against the
one-year,  $1.0  million  revolving  line  of  credit.

     During  the  six months ended June 30, 2003, we consummated new settlements
with  creditors  resulting  in  the  settlement of $1,697,000 of obligations for
$750,000 in cash and deposits and the issuance of 100,000 shares of Common Stock
at  $0.85 per share.  Furthermore, we have made our cost structure significantly
more  variable and believe we can continue to reduce expenses if it is required.

     While  we  cannot  give  any  assurances  that  the  above  actions will be
sufficient  to  ultimately  alleviate our liquidity concerns, or that additional
borrowings  or capital could be obtained under satisfactory terms if they become
required,  we  do  believe  these  actions will enable us to continue as a going
concern  through  December  31,  2003.

RECENTLY  ISSUED  ACCOUNTING  PRONOUNCEMENTS

     In  June  2002, the FASB issued Statement of Financial Accounting Standards
SFAS  No. 146, "Accounting for Exit or Disposal Activities" (SFAS 146). SFAS 146
addresses  the  recognition,  measurement and reporting of costs associated with
exit  and disposal activities, including restructuring activities. SFAS 146 also
addresses recognition of certain costs related to terminating a contract that is
not  a  capital lease, costs to consolidate facilities or relocate employees and
termination  of benefits provided to employees that are involuntarily terminated
under the terms of a one-time benefit arrangement that is not an ongoing benefit
arrangement  or  an  individual  deferred  compensation  contract.  SFAS  146 is
effective  for exit or disposal activities that are initiated after December 31,
2002.  The  adoption of SFAS 146 did not have a material impact on our financial
position  or  results  of  operations.

ITEM  3.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURE  ABOUT  MARKET  RISK

     To  date,  we  have  not  utilized  derivative  financial  instruments  or
derivative  commodity  instruments.  We  do  not expect to employ these or other
strategies  to  hedge  market  risk  in 2003. We invest our cash in money market
funds,  which are subject to minimal credit and market risk. We believe that the
market  risks  associated  with  these  financial  instruments  are  immaterial.

     All  of  our  revenues  are realized currently in U.S. dollars and are from
customers  primarily  in the United States. Therefore, we do not believe that we
currently  have  any  significant  direct  foreign  currency exchange rate risk.

FACTORS  THAT  MAY  AFFECT  FUTURE  RESULTS  AND  OUR  STOCK  PRICE

     This  Quarterly  Report  on  Form  10-Q includes forward-looking statements
within  the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of  the  Securities  Act  of  1934.  Forward-looking statements give our current
expectations  or  forecasts  of  future  events.  Words such as "expect," "may,"
"anticipate,"  "intend,"  "would,"  "will,"  "plan,"  "believe,"  "estimate,"
"should,"  and  similar  expressions  identify  forward-looking  statements.
Forward-looking  statements  in  this  Form  10-Q  include  express  or  implied
statements  concerning  our  future  revenues,  expenditures,  capital  or other
funding  requirements,  the  adequacy  of  our  current cash and working capital
balances  to  fund  our  present  and  planned  operations  and financing needs,
expansion  of  and  demand  for  our  service  offerings,  and the growth of our
business  and  operations,  as well as future economic and other conditions both
generally and in our specific geographic and product and services markets. These
statements are based on our estimates, projections, beliefs, and assumptions and
are not guarantees of future performance. From time to time, we also may provide
oral  or written forward-looking statements in other materials we release to the
public.

     We  caution that the following important factors, among others, could cause
our  actual results to differ materially from those expressed in forward-looking
statements  made  by  or  on  behalf  of  us  in filings with the Securities and
Exchange  Commission,  press  releases,  communications with investors, and oral
statements. Any of these factors, among others, could also negatively impact our
operating  results  and  financial  condition and cause the trading price of our
Common  Stock  to decline or fluctuate significantly. We undertake no obligation
to  publicly  update  any forward-looking statements, whether as a result of new
information,  future  events  or otherwise. You are advised, however, to consult
any  further  disclosures  we  make in our reports filed with the Securities and
Exchange  Commission  and  in  future  public  statements  and  press  releases.

WE  HAVE  EXPERIENCED  OPERATING LOSSES AND MAY INCUR OPERATING LOSSES IN FUTURE
PERIODS,  WHICH  COULD  CAUSE  THE PRICE OF OUR COMMON STOCK TO DECLINE FURTHER.

     We  had  a  net loss of approximately $2.7 million for the six months ended
June 30, 2003, a net loss of $11.8 million for the year ended December 31, 2002,
a  net loss of $49.4 million for the year ended December 31, 2001 and a net loss
of  approximately  $25.4  million for the year ended December 31, 2000. If we do
not  achieve  revenue  growth and maintain our current cost structure (or reduce
costs further), we could experience continuing operating losses. These losses or
any  fluctuation  in  our  operating results could cause the market value of our
Common  Stock  to  decline  further.

WE HAVE NOT BEEN ABLE TO MAINTAIN A NASDAQ SMALLCAP LISTING, SO OUR COMMON STOCK
HAS  BECOME  EVEN  MORE  ILLIQUID  AND  THE  VALUE OF OUR SECURITIES MAY DECLINE
FURTHER.

     Nasdaq  has,  effective  April 10, 2003, delisted our Common Stock, and our
Common  Stock  is  currently  trading  on the National Association of Securities
Dealers'  OTC  Bulletin  Board  (OTCBB).  The OTCBB is generally considered less
liquid  and  efficient than Nasdaq, and although trading in our stock is already
relatively  thin  and  sporadic,  the  liquidity of our Common Stock may decline
further  because  smaller  quantities  of shares will likely be bought and sold,
meaning  that transactions could be delayed. These factors could result in lower
prices  and  larger  spreads  in  the  bid  and ask prices for our Common Stock.
Reduced  liquidity  may  reduce the value of our Common Stock and our ability to
generate  additional  funding.

THERE  IS  A  LIMITED  MARKET  FOR  OUR  COMMON  STOCK.

     Currently  only  a  very  limited  trading  market  exists  for  Integrated
Information  Systems  common  stock. Our common stock trades on the OTC Bulletin
Board  under  the  symbol  "IISX."  The  Bulletin  Board is a limited market and
subject  to substantial restrictions and limitations in comparison to the NASDAQ
system.  Any broker/dealer that makes a market in our stock or other person that
buys or sells our stock could have a significant influence over its price at any
given  time.  The  Company intended to pursue the listing of its Common Stock on
the  new  BBX  Exchange  which was under consideration by Nasdaq, but Nasdaq has
recently decided to discontinue it development of the BBX Exchange. As a result,
it  is  unclear how long the OTC Bulletin Board will continue to be available to
the Company for the listing of our Common Stock. If the OTC Bulletin Board is no
longer  available,  then we will be forced to trade solely on the pink sheets, a
market  with  very  limited  liquidity  and minimal listing standards. We cannot
assure  our shareholders that a market for our stock will be sustained. There is
no  assurance  that our shares will have any greater liquidity than shares which
do  not  trade  on  a  public  market.

OUR  COMMON  STOCK  MAY  BE  SUBJECT  TO  PENNY  STOCK  REGULATION.

     Our shares may be subject to the provisions of Section 15(g) and Rule 15g-9
of  the  Securities  Exchange  Act  of  1934,  as  amended (the "Exchange Act"),
commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain
requirements  for transactions in penny stocks and Rule 15g-9(d)(1) incorporates
the  definition  of penny stock as that used in Rule 3a51-1 of the Exchange Act.
The  Commission generally defines penny stock to be any equity security that has
a  market  price  less than $5.00 per share, subject to certain exceptions. Rule
3a51-1  provides that any equity security is considered to be penny stock unless
that  security  is:  registered  and  traded  on  a national securities exchange
meeting  specified  criteria  set by the Commission; authorized for quotation on
The  NASDAQ  Stock  Market;  issued by a registered investment company; excluded
from  the  definition  on  the  basis of price (at least $5.00 per share) or the
registrant's  net  tangible  assets;  or  exempted  from  the  definition by the
Commission.  Since  our  shares  are deemed to be "penny stocks", trading in the
shares  will  be  subject  to  additional  sales  practice  requirements  on
broker-dealers who sell penny stocks to persons other than established customers
and  accredited  investors.

WE  MAY  NEED  ADDITIONAL  CAPITAL  WHICH, IF NOT AVAILABLE TO US, MAY ALTER OUR
BUSINESS  PLAN  OR LIMIT OUR ABILITY TO ACHIEVE GROWTH IN REVENUES AND WHICH, IF
AVAILABLE  AND  RAISED,  WOULD  DILUTE  YOUR  OWNERSHIP  INTEREST  IN  US.

     We  incurred negative cash flows from operations in 2002 and, to date, have
continued  to do so in 2003. Although we believe that we have sufficient cash to
fund existing operations for the balance of the year, we are pursuing sources of
working  capital.  Even  after  consideration  of the additional funds raised in
2003,  we may need to raise additional funds through public or private equity or
debt  financings  in  order  to:

       -     address  working  capital  needs  if  collection  of  accounts
             receivable declines;
       -     take  advantage  of  acquisition  or  expansion  opportunities;
       -     develop  new  services;  or
       -     address  unanticipated  contingencies.

     Our inability to obtain financing on terms acceptable to us, or at all, may
limit  our  ability  to increase revenues or to achieve profitability. Our stock
price,  like  the  stock  price  of  many  competitors in our industry, has been
depressed  in recent periods, which could limit our ability to obtain any needed
financing on favorable or acceptable terms. In addition, if we are able to raise
additional  capital  through  the sale of equity securities or through taking on
debt  with  an  equity  component, your investment in us would be diluted, which
could  cause  our  stock  price  to  further  decline.

WE  ANTICIPATE  ACQUIRING  MORE BUSINESSES, AND WE MAY INCUR INCREASED OPERATING
EXPENSES  WITHOUT  CORRESPONDING INCREASED REVENUES, WHICH MAY LIMIT OUR ABILITY
TO  ACHIEVE OR MAINTAIN PROFITABILITY AND CAUSE THE PRICE OF OUR COMMON STOCK TO
DECLINE.

     A  key  component  of  our business strategy is to acquire like-minded peer
consultancies  in  geographic  areas  where we do not have a strong presence. We
also  look  for  acquisition  opportunities,  without focusing on increasing our
geographic diversity, if there is an opportunity to strengthen a current service
offering  or  add  a  service  offering  which  complements  our current service
offerings.  The  risks  of acquisitions include retaining clients, retaining key
employees,  incurring  higher  than  anticipated  transaction expenses and other
unexpected  expenses  and diverting management's attention from daily operations
of  our  business.  Acquiring businesses, especially in markets in which we have
limited  prior  experience,  is  risky.  If  we  do  not implement this strategy
successfully,  we  may  incur  increased  operating  expenses  without increased
revenues,  which  could  materially  harm our operating results and stock price.

WE  FACE  CHALLENGES  IN  THE  INTEGRATION  OF  THE  BUSINESSES WE HAVE RECENTLY
ACQUIRED  AND  THOSE  WE  MAY  ACQUIRE  IN  THE  FUTURE.

     We  may  not  experience  the  anticipated  results from the integration of
businesses  we  have  acquired.  The  strategies  of   cross-marketing  service
offerings, the opportunities of expanded markets and clients, the development of
additional revenue streams, the enhanced ability  to  raise  capital,  and the
availability of public currency for making strategic acquisitions may not prove
to  be  as  advantageous  as we expect. This could affect  the  results  of our
operations, negatively impact our financial performance and harm  our  business.

BECAUSE  THE  MARKET FOR OUR SERVICES MAY NOT GROW DURING 2003, WE MAY BE UNABLE
TO  BECOME  PROFITABLE.

     We offer services in the IT services market, and that market has contracted
significantly in recent years. We do not anticipate significant growth in the IT
services market in 2003. If demand for our services does not grow in the future,
or  if  we  do not capture sufficient market share for these services, we may be
unable  to  achieve  profitability.

OUR  RESULTS  OF  OPERATIONS  MAY VARY FROM QUARTER TO QUARTER IN FUTURE PERIODS
AND,  AS  A  RESULT,  WE  MAY  NOT  MEET  THE  EXPECTATIONS OF OUR INVESTORS AND
ANALYSTS,  WHICH  COULD  CAUSE  OUR  STOCK  PRICE  TO  FLUCTUATE  OR  DECLINE.

     Our revenues and results of operations have fluctuated significantly in the
past  and could fluctuate significantly in the future. We incurred net losses of
$10.7  million  and  $2.5  million  in  the  first  and second quarters of 2002,
respectively,  and  reported  earnings  of  $0.9 million and $0.5 million in the
third  and fourth quarters of 2002, respectively and incurred a net loss of $1.7
million and $1.0 million in the first and second quarters of 2003, respectively.

     Our  results  may fluctuate due to the factors described in this Form 10-Q,
As well  as:

       -     the  loss  of  or  failure  to  replace  any  significant  clients;
       -     variation  in  demand  for  our  services;
       -     higher  than  expected  bad  debt  write-offs or impairment of our
             assets, including  goodwill;
       -     changes  in  the  mix  of  services  that  we  offer;  and
       -     variation  in  our  operating  expenses.

     A  substantial  portion  of  our  operating expense is related to personnel
costs  and  overhead,  which  cannot  be  adjusted  quickly  and  is, therefore,
relatively  fixed  in  the  short  term.  Our  operating  expenses are based, in
significant part, on our expectations of future revenues. If actual revenues are
below  our  expectations,  we may not achieve our anticipated operating results.
Moreover,  it  is possible that in some future periods our results of operations
may  be  below  the  expectations  of analysts and investors. In this event, the
market  price  of  our  Common  Stock  is  likely  to  decline.

IF  WE  FAIL TO KEEP PACE WITH THE RAPID TECHNOLOGICAL CHANGES THAT CHARACTERIZE
OUR  INDUSTRY,  OUR COMPETITIVENESS WOULD SUFFER, CAUSING US TO LOSE PROJECTS OR
CLIENTS  AND  CONSEQUENTLY  REDUCING  OUR  REVENUES  AND THE PRICE OF OUR COMMON
STOCK.

     Our  market  and  the  enabling  technologies  used  by  our  clients  are
characterized  by  rapid, frequent, and significant technological changes. If we
fail  to  respond  in  a  timely  or  cost-effective  way to these technological
developments, we may not be able to meet the demands of our clients, which would
affect  our  ability  to  generate  revenues  and achieve profitability. We have
derived,  and expect to continue to derive, a large portion of our revenues from
creating  solutions  that  are  based  upon  today's  leading  and  developing
technologies  and  which  are  capable  of  adapting to future technologies. Our
historical  results  of operations may not reflect our new service offerings and
may  not give you an accurate indication of our ability to adapt to these future
technologies.

OUR  FAILURE  TO  MEET  CLIENT EXPECTATIONS OR DELIVER ERROR-FREE SERVICES COULD
DAMAGE OUR REPUTATION AND HARM OUR ABILITY TO COMPETE FOR NEW BUSINESS OR RETAIN
OUR  EXISTING  CLIENTS,  WHICH  MAY  LIMIT  OUR ABILITY TO GENERATE REVENUES AND
ACHIEVE  OR  MAINTAIN  PROFITABILITY.

     Many  of  our  engagements  involve  the delivery of information technology
services  that are critical to our clients' businesses. Any defects or errors in
these  services or failure to meet clients' specifications or expectations could
result  in:

       -     delayed  or  lost  revenues  due  to  adverse  client  reaction;
       -     requirements to provide additional services to a client at no or
             a limited charge;
       -     refunds  of  fees  for  failure  to  meet  obligations;
       -     negative  publicity  about  us  and  our  services;  and
       -     claims  for  substantial  damages  against  us.

     In  addition,  we  sometimes  implement critical functions for high profile
clients  or  for  projects that have high visibility and widespread usage in the
marketplace.  If  these  functions  experience difficulties, whether or not as a
result  of  errors  in  our  services,  our  name could be associated with these
difficulties and our reputation could be damaged, which would harm our business.

WE  MAY  LOSE  MONEY  ON FIXED-PRICE CONTRACTS BECAUSE WE MAY FAIL TO ACCURATELY
ESTIMATE AT THE BEGINNING OF PROJECTS THE TIME AND RESOURCES REQUIRED TO FULFILL
OUR  OBLIGATIONS  UNDER  OUR CONTRACTS; THE ADDITIONAL EXPENDITURES THAT WE MUST
MAKE  TO  FULFILL  THESE  CONTRACT  OBLIGATIONS  MAY  CAUSE OUR PROFITABILITY TO
DECLINE OR PREVENT US FROM ACHIEVING PROFITABILITY AND COULD REDUCE THE PRICE OF
OUR  COMMON  STOCK.

     Although  we  provide consulting services primarily on a time and materials
compensation basis, approximately 20% of our consulting revenue was derived from
fixed-price,  fixed-time  engagements  in the six months ended June 30, 2003 and
approximately  27% and 14% of revenues were derived from fixed-price, fixed-time
engagements  in  2002  and  2001,  respectively.  The percentage of our revenues
derived  from fixed-price, fixed time engagements may increase in the future, as
influenced by changes in demand and market conditions. Our failure to accurately
estimate  the resources required for a fixed-price, fixed-time engagement or our
failure  to complete our contractual obligations in a manner consistent with our
projections  or contractual commitments could harm our overall profitability and
our  business.  From time to time, we have been required to commit unanticipated
additional  resources  to  complete  some  fixed-price,  fixed-time engagements,
resulting  in  losses  on  these  engagements. We believe that we may experience
similar  situations  in  the future. In addition, we may negotiate a fixed price
for some projects before the design specifications are finalized, resulting in a
fixed  price  that  is  too  low and causing a decline in our operating results.

OUR  LACK  OF  LONG-TERM  CONTRACTS  WITH  CLIENTS  AND  OUR CLIENTS' ABILITY TO
TERMINATE  CONTRACTS  WITH LITTLE OR NO NOTICE REDUCES THE PREDICTABILITY OF OUR
REVENUES  AND  INCREASES  THE  POTENTIAL  VOLATILITY  OF  OUR  STOCK  PRICE.

     Our  clients  generally  retain  us  on  an engagement-by-engagement basis,
rather  than  under  long-term  contracts.  In addition, our current clients can
generally  reduce  the  scope  of  or  cancel  their use of our services without
penalty and with little or no notice. As a result, our revenues are difficult to
predict.  Because  we  incur costs based on our expectations of future revenues,
our  failure to predict our revenues accurately may cause our expenses to exceed
our revenues, which could cause us to incur increased operating losses. Although
we  try  to  design  and  build  complete integrated information systems for our
clients,  we are sometimes retained to design and build discrete segments of the
overall  system  on an engagement-by-engagement basis. Since the projects of our
large clients can involve multiple engagements or stages, there is a risk that a
client  may  choose  not to retain us for additional stages of a project or that
the client will cancel or delay additional planned projects. These cancellations
or  delays could result from factors related or unrelated to our work product or
the progress of the project, including changing client objectives or strategies,
as  well  as  general  business  or financial considerations of the client. If a
client  defers,  modifies,  or cancels an engagement or chooses not to retain us
for  additional phases of a project, we may not be able to rapidly re-deploy our
employees  to other engagements and may suffer underutilization of employees and
the  resulting  harm  to  our  operating  results.  Our  operating  expenses are
relatively  fixed  and  cannot  be  reduced  on  short  notice to compensate for
unanticipated  variations  in the number or size of engagements in progress. The
slowing  in spending on business and IT consulting initiatives that began in the
second  half  of  2000  continues, and if current or potential clients cancel or
delay  their  IT  initiatives,  our  business and results of operations could be
materially  adversely  affected.

WE  MAY  NOT  BE  SUCCESSFUL  IN  RETAINING  OUR CURRENT TECHNOLOGY ALLIANCES OR
ENTERING INTO NEW ALLIANCES, WHICH COULD HAMPER OUR ABILITY TO MARKET OR DELIVER
SOLUTIONS  NEEDED OR DESIRED BY OUR CLIENTS AND LIMIT OUR ABILITY TO INCREASE OR
SUSTAIN  OUR  REVENUES  AND  ACHIEVE  OR  MAINTAIN  PROFITABILITY.

     We  rely  on  vendor  alliances  for  client  referral  and  marketing
opportunities,  access  to  advanced  technology  and  training as well as other
important  benefits.  These  relationships are non-exclusive and the vendors are
free to enter into similar or more favorable relationships with our competitors.
Whether written or oral, many of the agreements underlying our relationships are
general  in  nature,  do  not legally bind the parties to transact business with
each  other  or  to  provide  specific  client  referrals,  cross-marketing
opportunities,  or other intended benefits to each other, have indefinite terms,
and may be ended at the will of either party. We may not be able to maintain our
existing  strategic  relationships and may fail to enter into new relationships.
If  we  are  unable to maintain these relationships, the benefits that we derive
from  these  relationships,  including  the  receipt  of  important sales leads,
cross-marketing  opportunities,  access  to  emerging  technology  training  and
certifications,  and  other  benefits,  may be lost. Consequently, we may not be
able  to  offer  desired  solutions  to clients, which would result in a loss of
revenues  and  our inability to effectively compete for clients seeking emerging
or  leading  technologies  offered  by  these  vendors.

BECAUSE  WE  OPERATE  IN  A  HIGHLY  COMPETITIVE  AND RAPIDLY CHANGING INDUSTRY,
COMPETITORS  COULD CAUSE US TO LOSE BUSINESS OPPORTUNITIES AND LIMIT OUR ABILITY
TO  INCREASE  OR  SUSTAIN  REVENUE  LEVELS.

     Although  our  industry  is  experiencing  significant  consolidation,  the
business  areas  in which we compete remain intensely competitive and subject to
rapid  change.  We  expect  competition  to  continue  and  to  intensify.  Our
competitors  currently  fall  into  several  categories  and  include a range of
entities providing both general management and information technology consulting
services  and  internet  services. Many of our competitors have longer operating
histories,  larger  client bases, and greater brand or name recognition, as well
as  greater financial, technical, marketing, and public relations resources. Our
competitors  may  be  able to respond more quickly to technological developments
and  changes  in  clients'  needs.  Further,  as a result of the low barriers to
entry, we may face additional competition from new entrants into our markets. We
do  not  own any technologies that preclude or inhibit competitors from entering
the  general  business areas in which we compete. Existing or future competitors
may independently develop and patent or copyright technologies that are superior
or  substantially  similar  to  our  technologies,  which  may  place  us  at  a
competitive disadvantage. All of these factors could lead to competitors winning
new  client  engagements  that  we  compete  for. If this occurs, our ability to
generate increased revenues may be limited and we may not achieve profitability.

WE MAY NOT BE ABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS AND, AS A RESULT,
WE  COULD  LOSE COMPETITIVE ADVANTAGES WHICH DIFFERENTIATE OUR SOLUTIONS AND OUR
ABILITY  TO  ATTRACT  AND  RETAIN  CLIENTS.

     Our  success  is dependent, in part, upon our intellectual property rights.
We  rely  upon  a combination of trade secret, confidentiality and nondisclosure
agreements,  and  other  contractual  arrangements,  as  well  as  copyright and
trademark  laws to protect our proprietary rights. We have no patents or pending
patent  applications.  We  enter  into  confidentiality  agreements  with  our
employees,  we  generally  require  that  our consultants and clients enter into
these  agreements,  and  we  attempt  to limit access to and distribution of our
proprietary  information.  Nevertheless,  we  may  be  unable  to  deter
misappropriation  of  our  proprietary information or to detect unauthorized use
and  take  appropriate  steps  to  enforce  our  intellectual property rights or
proprietary  information.

     We  attempt to retain significant ownership or rights to use our internally
developed  software  applications  which we can market and adapt through further
customization for other client projects. Under some of our client contracts, all
of  our project developments are the property of the client and we have no right
or  only  limited  rights to reuse or provide these developments in other client
projects.  To  the extent that we are unable to negotiate contracts which permit
us to reuse code and methodologies, or to the extent that we have conflicts with
our clients regarding our ability to do so, we may be unable to provide services
to  some of our clients within price and timeframes acceptable to these clients.

     Although we believe that our services, trade or service names, and products
do not infringe upon the intellectual property rights of others, claims could be
asserted against us in the future. If asserted, we may be unable to successfully
defend  these  claims,  which could cause us to cease providing some services or
products  and  limit  any competitive advantage we derive from our trademarks or
names.

     If  any  of  these events occur, our ability to differentiate ourselves and
compete  effectively  could  be  limited  and we may lose revenue opportunities.

WE  OCCASIONALLY  AGREE  NOT  TO  PERFORM SERVICES FOR OUR CLIENTS' COMPETITORS,
WHICH MAY LIMIT OUR ABILITY TO GENERATE FUTURE REVENUES AND INHIBIT OUR BUSINESS
STRATEGY.

     In  order  to  secure  particularly  large  engagements or engagements with
industry  leading  clients,  we  have agreed on limited occasions not to perform
services,  or  not to utilize some of our intellectual property rights developed
for  clients,  for  competitors  of  those  clients  for limited periods of time
ranging  from  one  to  three years. In our agreement with American Express, our
largest  client  in  2001  and 2000 and a continuing client in 2003 and 2002, we
have  agreed not to perform services for competitors of American Express for one
year  after  each project completion date and not to assign consultants who have
worked  on  American Express projects to other clients' competitive projects for
nine  months  after  completing  work  for  American  Express. These non-compete
provisions  reduce  the  number  of  our  prospective  clients and our potential
sources  of  revenue.  These  agreements also may limit our ability to execute a
part  of  our business strategy of leveraging our business expertise in discreet
industry  segments by attracting multiple clients competing in those industries.

OUR  LONG SALES CYCLES MAKE OUR REVENUES DIFFICULT TO PREDICT, WHICH COULD CAUSE
OUR  REVENUES  OR  PROFITABILITY  TO  BE BELOW ANALYST OR INVESTOR EXPECTATIONS,
CAUSING  OUR  STOCK  PRICE  TO  FLUCTUATE  AND  DECLINE  SIGNIFICANTLY.

     The  timing  of  our revenues is difficult to predict because of the length
and  variance of the time required to complete a sale. Our sales cycle typically
ranges in length from three months to nine months and is sometimes longer. Prior
to  retaining  us for a project, our clients often undertake an extensive review
of  their systems, needs, and budgets and may require approval at various levels
within  their  organization.  The  length or unpredictability of our sales cycle
could  cause  our  revenues  or  profitability  to  be below the expectations of
analysts  or  investors  and  our  stock  price  to  fluctuate  significantly.

THE LOSS OF MR. JAMES G. GARVEY, JR., OUR FOUNDER, CHAIRMAN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, MAY HARM OUR ABILITY TO OBTAIN AND RETAIN CLIENT ENGAGEMENTS,
MAINTAIN  A  COHESIVE  CULTURE,  OR  COMPETE  EFFECTIVELY.

     Our  success will depend in large part upon the continued services of James
G.  Garvey,  Jr., our founder, Chairman, President, Chief Executive Officer, and
our  majority  stockholder.  We have an employment contract with Mr. Garvey. Mr.
Garvey  is  precluded under his agreement from competing against us for one year
should  he leave us. The loss of Mr. Garvey's services could harm us and cause a
loss of investor confidence in our business, which could cause the trading price
of our stock to decline. In addition, if Mr. Garvey resigns to join a competitor
or to form a competing company, the loss of Mr. Garvey and any resulting loss of
existing  or  potential clients to any competitor could harm our business. If we
lose  Mr. Garvey, we may be unable to prevent the unauthorized disclosure or use
by  other  companies  of  our  technical knowledge, practices, or procedures. In
addition,  due  to the substantial number of shares of our Common Stock owned by
Mr.  Garvey,  the  loss of Mr. Garvey's services could cause investor or analyst
concern  that  Mr.  Garvey  may  sell a large portion of his shares, which could
cause  a rapid and substantial decline in the trading price of our Common Stock.

THE  HOLDINGS  OF  MR. GARVEY MAY LIMIT YOUR ABILITY TO INFLUENCE THE OUTCOME OF
DIRECTOR  ELECTIONS AND OTHER MATTERS SUBJECT TO A STOCKHOLDER VOTE, INCLUDING A
SALE  OF  OUR  COMPANY  ON  TERMS  THAT  MAY  BE  ATTRACTIVE  TO  YOU.

     James  G. Garvey, Jr., our founder, Chairman, President and Chief Executive
Officer,  currently  owns approximately 58% of our outstanding Common Stock. Mr.
Garvey's  stock  ownership  and  management  positions  enable  him  to  exert
considerable  influence over our Company, including in the election of directors
and  the  approval  of other actions submitted to our stockholders. In addition,
without  the  consent  of  Mr.  Garvey,  we  may be prevented from entering into
transactions that could be viewed as beneficial to other stockholders, including
a  sale  of  the  Company.  This  could prevent you from selling your stock to a
potential acquirer at prices that exceed the market price of our stock, or could
cause  the  market  price  of  our  Common  Stock  to  decline.

OUR  CHARTER DOCUMENTS COULD MAKE IT MORE DIFFICULT FOR A THIRD PARTY TO ACQUIRE
US,  WHICH  COULD  LIMIT  YOUR  ABILITY  TO  SELL YOUR STOCK TO AN ACQUIRER AT A
PREMIUM  PRICE  OR  COULD  CAUSE  OUR  STOCK  PRICE  TO  DECLINE.

     Our  certificate  of  incorporation and by-laws may make it difficult for a
third  party  to  acquire  control  of  us, even if a change in control would be
beneficial  to  stockholders.  Our  certificate  of incorporation authorizes our
board  of  directors  to issue up to 5,000,000 shares of "blank check" preferred
stock. Without stockholder approval, the board of directors has the authority to
attach  special  rights, including voting and dividend rights, to this preferred
stock.  With  these  rights, preferred stockholders could make it more difficult
for  a  third  party  to  acquire  our  Company.

     Our  by-laws  do not permit any person other than at least three members of
our  board of directors, our President, the Chairman of the Board, or holders of
at  least  a majority of our stock to call special meetings of the stockholders.
In  addition,  a  stockholder's  proposal for an annual meeting must be received
within  a  specified  period  in  order  to  be  placed  on  the agenda. Because
stockholders  have  limited  power  to  call  meetings and are subject to timing
requirements  in submitting stockholder proposals for consideration at meetings,
any  third-party takeover or other matter that stockholders wish to vote on that
is  not  supported  by  the  board  of directors could be subject to significant
delays  and  difficulties.

     If  a  third  party  finds it more difficult to acquire us because of these
provisions,  you  may not be able to sell your stock at a premium price that may
have  been  offered  by  the acquirer, and the trading price of our stock may be
lower  than  it  otherwise  would  be  if  these  provisions were not in effect.

THE VALUATION MODEL FOR COMPANIES SUCH AS OURS HAS CHANGED, AND OUR INABILITY TO
ACHIEVE  PROFITABILITY  MAY  CONTINUE  TO  MATERIALLY ADVERSELY AFFECT OUR STOCK
PRICE.

     When our stock became publicly traded in 2000, companies in our sector were
valued  generally  upon  revenue  growth,  with little regard for profitability.
Companies in our sector are now generally measured on cash flows and profits. If
we  are  unable to achieve profitability and positive cash flow, our stock price
will  continue  to  suffer  and could further decline, and the liquidity for our
stock  could  deteriorate  further  as  well.

OUR  STOCK REPURCHASE PLAN MAY ADVERSELY AFFECT THE TRADING VOLUME AND LIQUIDITY
OF  OUR  COMMON  STOCK  AND  COULD  CAUSE  OUR  STOCK  PRICE  TO  DECLINE.

     In  December  2000,  our  board  authorized  a  stock repurchase plan which
authorized  us  to  purchase  up  to  $2 million of our Common Stock on the open
market  in compliance with applicable SEC regulations. In August 2001, our board
authorized  an  increase  in  the  maximum amount from $2 million to $7 million.
During  2001,  we  repurchased  990,360  shares of our Common Stock at a cost of
approximately  $5.3  million. We currently have no plan to repurchase additional
shares  of  our  Common  Stock.  However, if we do repurchase more shares of our
Common  Stock  under  this  plan,  the  number  of  shares  of  our Common Stock
outstanding  will decrease. This decrease would likely reduce the trading volume
of  our  Common Stock, adversely impacting the liquidity and value of our Common
Stock.

ITEM  4.  CONTROLS  AND  PROCEDURES

     Within the 90 days prior to the date of this quarterly report on Form 10-Q,
we continued our evaluation, under the supervision and with the participation of
our  management,  including  our  Chief  Executive  Officer  and Chief Financial
Officer,  of  the  effectiveness  of  the design and operation of our disclosure
controls  and  procedures  pursuant  to Exchange Act Rule 13a-15. Based upon the
results  of  that  evaluation,  to  date,  our Chief Executive Officer and Chief
Financial  Officer  concluded  that  our  disclosure controls and procedures are
effective  in  timely  alerting  them  to  material  information  required to be
disclosed  by  us  in  our  periodic  reports  to  the  Securities  and Exchange
Commission.  There  have been no significant changes in our internal controls or
in  other  facts  that  could  significantly  affect  our  disclosure  controls
subsequent  to  the  date  of  their  evaluation.  Our overall evaluation is not
complete  and  we  anticipate  that  it  will  take  several months to complete.

     Disclosure  controls  and procedures are controls and other procedures that
are  designed  to  ensure  that  information required to be disclosed in Company
reports  filed  or  submitted  under  the  Exchange  Act is recorded, processed,
summarized  and reported within the time periods specified in the Securities and
Exchange  Commission's  rules  and  forms.  Disclosure  controls  and procedures
include  controls and procedures designed to ensure that information required to
be  disclosed in Company reports filed under the Exchange Act is accumulated and
communicated  to  management,  including  our  Chief Executive Officer and Chief
Financial  Officer  as appropriate, to allow timely decisions regarding required
disclosure.

                           PART II. OTHER INFORMATION

ITEM  1.  LEGAL  PROCEEDINGS

     During  July  and  August  2001,  four purported class action lawsuits were
filed  in the United States District Court for the Southern District of New York
against  the  Company,  certain of its current and former officers and directors
(the  "Individual  Defendants")  and  the  members of the underwriting syndicate
involved in our initial public offering (the "Underwriter Defendants"). All four
lawsuits  have  been  consolidated  for  coordination with more than 300 similar
cases. The suits generally allege that: (1) the Underwriter Defendants allocated
shares  of  the Company's initial public offering to their customers in exchange
for  higher  than  standard commissions on transactions in other securities; (2)
the  Underwriter  Defendants  allocated shares of our initial public offering to
their  customers in exchange for the customers' agreement to purchase additional
shares of our Common Stock in the after-market at pre-determined prices; (3) the
Company  and  the Individual Defendants violated section 10(b) of the Securities
Exchange  Act  of  1934 and/or section 11 of the Securities Act of 1933; and (4)
the  Individual Defendants violated section 20 of the Securities Exchange Act of
1934  and/or  section  15  of  the  Securities  Act of 1933. The plaintiffs seek
unspecified  compensatory  damages  and  other  relief.  We  have  sought
indemnification  from  the  underwriters of its initial public offering. In July
2002,  we,  as  part of the group of issuers of shares named in the consolidated
litigation  (the  "Issuer  Defendants")  and  the Individual Defendants, filed a
motion  to  dismiss  the  consolidated  amended  complaints.  The  Underwriter
Defendants  filed  motions to dismiss as well. Also in July 2002, the plaintiffs
offered to dismiss the Individual Defendants, without prejudice, in exchange for
a  Reservation  of  Rights and Tolling Agreement from each Individual Defendant.
All  of the Individual Defendants in our four lawsuits have entered into such an
agreement. On November 1, 2002, the Court heard oral arguments on the motions to
dismiss,  and  in  February  2003,  the Court dismissed the section 10(b) claims
against  the Issuer Defendants, but allowed the plaintiffs to continue to pursue
the remaining claims. We believe that the claims against the Company are without
merit  and  intend  to  vigorously  defend  this  matter  if  it is not settled.

     In  the  second quarter of 2003, counsel for the Issuer Defendants, counsel
for  the  Issuer  Defendants'  insurers,  and  a plaintiffs' executive committee
appointed  by  the Court entered into a memorandum of understanding ("the "MOU")
and  related  agreements  to settle the consolidated class action as against all
Issuer Defendants. The MOU provides, generally, that the insurers for the Issuer
Defendants  will  guarantee a recovery (either by settlement or judgment) to the
plaintiffs  against the  Underwriter  Defendants, against whom the litigation is
still proceeding, of at least $1 billion. Accordingly, if the plaintiffs recover
less  than  $1  billion  from  the  Underwriter Defendants, the insurers for the
Issuer  Defendants  will pay to the plaintiffs the difference between the actual
recovery  and  $1  billion.  The entire guaranteed amount, as well as the Issuer
Defendants'  legal  fees  incurred  since  June  1,  2003,  will  be paid by the
insurers.  Any  settlement  amounts  and  all  legal  fees  paid  by  the Issuer
Defendants  will  be  allocated  among  the  settling Issuer Defendants, and any
allocated amounts that exceed the individual D&O policy limits of the individual
Issuer  Defendants  (taking  into  account  any  other  claims made against such
policies)  will  be  the  responsibility  of  the Issuer Defendants. The Company
believes, based on the information available to it now, that it is unlikely that
the  Company's policy limits will be exhausted by the settlement amounts paid by
its  insurers.  A  special  independent  committee  of  the  Company's  board of
directors  was  previously  formed to consider any settlement of the litigation,
and the special committee has voted to approve the terms of the settlement based
on  the  terms of the MOU and related agreements. The settlement remains subject
to  final  approval  of  individual  settlement  agreements with each individual
Issuer Defendant who has agreed to settle, as well as final approval of the lead
plaintiffs  and  the  insurers,  and  is subject to approval by the Court. It is
anticipated that these approvals will take several months to obtain, if obtained
at all. The Company anticipates that there will be objections to the settlement,
and  individual  plaintiff  class  members  will be able to opt out of the class
action  settlement  and could conceivable pursue individual claims. There can be
no  assurance  that the settlement will be approved on the terms provided in the
MOU,  if  at  all.  The  foregoing  is  a general summary of some of the salient
points  of  the  MOU and related agreements and is not a complete summary of the
specific  terms  of  the  proposed  settlement.

     Additionally, we are, from time to time, party to various legal proceedings
arising  in  the  ordinary  course  of  business.  We  evaluate such claims on a
case-by-case  basis,  and  our  policy  is to vigorously contest any such claims
which  we  believe  are  without  merit.

ITEM  2.  CHANGES  IN  SECURITIES  AND  USE  OF  PROCEEDS

     On  February 26, 2003 and April 2, 2003, we issued to James G. Garvey, Jr.,
our  major  shareholder,  Chairman,  Chief  Executive  Officer and President, an
aggregate  of  40,000  shares  of  Series  A  8% Convertible Preferred Stock for
aggregate proceeds of $400,000. On April 4, 2003, we issued to Mr. Garvey 40,000
shares of Series B 12% Convertible Preferred Stock in exchange for a like number
of  shares  of  the  Series  A  8% Convertible Preferred Stock and an additional
60,000 shares of Series B 12% Convertible Preferred Stock for aggregate proceeds
of  $600,000.  The  aggregate  purchase  price  for the Series B 12% Convertible
Preferred  Stock  issued  to  Mr. Garvey, including the $400,000 invested in the
Series  A  8%  Convertible  Preferred  Stock,  was  $1,000,000.  There  were  no
underwriters,  and  we  received proceeds of $1,000,000. In consideration of Mr.
Garvey's  guarantee  of the Company's new $1.0 million revolving line of credit,
we issued Mr. Garvey a warrant to purchase 300,000 shares of our Common Stock at
the  market  price  on  April 4, 2003. The warrant expires thirty days after the
guarantee  has been extinguished. The shares of preferred stock that were issued
on  February  26,  2003  were  issued  by  us  in reliance on the exemption from
registration  provided  by Section 4(2) or Regulation D of the Securities Act of
1933. The shares and warrant that were issued on April 2 and 4, 2003 were issued
by us in reliance on the exemption from registration provided by Section 4(2) of
the  Securities  Act  of  1933.  Use of proceeds was for general working capital
needs.

     In April 2002, we reached a settlement with a primary creditor resulting in
the settlement of $901,000 of obligations for a one-time payment of $200,000 and
the  issuance  of 100,000 shares of Common Stock at $0.95 per share.  The shares
that  were  issued  were issued by the Company in reliance on the exemption from
registration  provided  by  Section  4(2)  of the Securities Act of 1933. Use of
proceeds  was  for  general  working  capital  needs.

ITEM  4.  SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS

     On  June  5,  2003, the Company held its annual meeting of stockholders. At
the  annual  meeting,  the  Company's stockholders elected James G. Garvey, Jr.,
John  M.  Blair,  Stephen  W. Brown, R. Nicholas Loope and Richard M. Gardner as
directors  of  the  Company  approved  an  amendment  to  our  certificate  of
incorporation  to  reduce  the  authorized  shares  of  our  Common  Stock  from
100,000,000 to 15,000,000, and ratified the appointment of Hein + Associates LLP
as  the  Company's  independent  public  accountants  for the fiscal year ending
December  31,  2003. With respect to the approval of our reduction in authorized
shares  and the ratification of Hein's appointment, 3,018,171 votes were cast in
favor,  1,860  were  cast  against and 16,620 were withheld. With respect to the
election  of  Directors,  votes  were  cast  as  follows:
<TABLE>
<CAPTION>



<S>                   <C>        <C>            <C>


NOMINEE. . . . . . .  VOTES FOR  VOTES AGAINST  VOTES WITHHELD
James G. Garvey, Jr.  3,012,662             --          23,989
--------------------  ---------  -------------  --------------
John M. Blair. . . .  3,006,003             --          30,648
--------------------  ---------  -------------  --------------
Stephen W. Brown . .  3,006,086             --          30,565
--------------------  ---------  -------------  --------------
R. Nicholas Loope. .  3,012,425             --          24,226
--------------------  ---------  -------------  --------------
Richard M. Gardner .  3,012,657             --          23,994
--------------------  ---------  -------------  --------------
</TABLE>


ITEM  6.  EXHIBITS  AND  REPORTS  ON  FORM  8-K

(a)  Exhibits

     10.63     Payment  and Tolling  Agreement  with  Phoenix  24th Place, Inc.
     10.64     Settlement  Agreement  and  Mutual  Release  with  Cunningham
               Enterprises,  Inc.
     10.65     Asset  Purchase and  Sale Agreement between James G. Garvey, Jr.
               and  Julie  Garvey  and  Integrated  Information  Systems,  Inc.
     99.1      Certification of James G. Garvey, Jr., Chairman, Chief Executive
               Officer  and  President.
     99.2      Certification of Donald H. Megrath, SVP, Chief Financial Officer
               and  Secretary.

(b)          Reports  on  Form  8-K


-     Form  8-K  filed  May  13,  2003,  to file as exhibit 99.1 a press release
titled  "Integrated  Information  Systems  Issues  Letter  to  Shareholders".


                                   SIGNATURES

     Pursuant  to  the  requirements  of  Section  13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its  behalf  by  the  undersigned,  thereunto  duly  authorized.

                              INTEGRATED  INFORMATION  SYSTEMS,  INC.

Date:  August  13,  2003          /s/  James  G.  Garvey,  Jr.
                                  ----------------------------
                                       James  G.  Garvey,  Jr.
                                       Chairman  of  the  Board  of  Directors,
                                       Chief  Executive Officer  and  President


<PAGE>


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

I,  James  G.  Garvey,  Jr.,  hereby  certify  that:

     1.     I  have  reviewed  this  quarterly report on Form 10-Q of Integrated
Information  Systems,  Inc.  (the  Registrant);

     2.     Based  on  my  knowledge, this quarterly report does not contain any
untrue  statement  of a material fact or omit to state a material fact necessary
to  make  the  statements  made,  in light of the circumstances under which such
statements  were made, not misleading with respect to the period covered by this
quarterly  report;

     3.     Based on my knowledge, the financial statements, and other financial
information  included  in  this quarterly report, fairly present in all material
respects  the  financial  condition, results of operations and cash flows of the
Registrant  as  of,  and  for,  the  periods presented in this quarterly report;

     4.     The Registrant's other certifying officers and I are responsible for
establishing  and  maintaining disclosure controls and procedures (as defined in
Exchange  Act  Rules  13a-15(e)  and  15d-15(e))  for  the  Registrant and have:

          a.     designed  such  disclosure  controls  and procedures, or caused
such disclosure controls and procedures to be designed under our supervision, to
ensure  that  material  information  relating  to  the Registrant, including its
consolidated  subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being prepared;

          b.     evaluated  the  effectiveness  of  the  Registrant's disclosure
controls  and  procedures and presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end
of  the  period  covered  by this quarterly report based on such evaluation; and

          c.     disclosed  in  this  quarterly  report  any  change  in  the
Registrant's  internal control over financial reporting that occurred during the
Registant's  most  recent  fiscal  quarter  that  has materially affected, or is
reasonably  likely  to materially affect, the Registrant's internal control over
financial  reporting;  and;

     5.     The  Registrant's  other  certifying  officer  and I have disclosed,
based  on  our  most  recent  evaluation  of  internal  control  over  financial
reporting,  to the Registrant's auditors and the audit committee of Registrant's
board  of  directors:

          a.     all  significant  deficiencies  and  material weaknesses in the
design  or  operation  of  internal  controls over financial reporting which are
reasonably  likely  to  adversely  affect  the  Registrant's  ability to record,
process,  summarize  and  report  financial  data;  and

          b.     any fraud, whether or not material, that involves management or
other  employees  who  have  a  significant  role  in  the Registrant's internal
controls  over  financial  reporting.



Date:  August  13,  2003

     /s/  James  G.  Garvey,  Jr.
     ----------------------------
     James  G.  Garvey,  Jr.
     Chairman,  Chief  Executive  Officer  and  President
     (Principal  Executive  Officer)


<PAGE>


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

I,  Donald  H.  Megrath,  hereby  certify  that:

     1.     I  have  reviewed  this  quarterly report on Form 10-Q of Integrated
Information  Systems,  Inc.  (the  Registrant);

     2.     Based  on  my  knowledge, this quarterly report does not contain any
untrue  statement  of a material fact or omit to state a material fact necessary
to  make  the  statements  made,  in light of the circumstances under which such
statements  were made, not misleading with respect to the period covered by this
quarterly  report;

     3.     Based on my knowledge, the financial statements, and other financial
information  included  in  this quarterly report, fairly present in all material
respects  the  financial  condition, results of operations and cash flows of the
Registrant  as  of,  and  for,  the  periods presented in this quarterly report;

     4.     The Registrant's other certifying officers and I are responsible for
establishing  and  maintaining disclosure controls and procedures (as defined in
Exchange  Act  Rules  13a-15(e)  and  15d-15(e))  for  the  Registrant and have:

          a.     designed  such  disclosure  controls  and procedures, or caused
such disclosure controls and procedures to be designed under our supervision, to
ensure  that  material  information  relating  to  the Registrant, including its
consolidated  subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being prepared;

          b.     evaluated  the  effectiveness  of  the  Registrant's disclosure
controls  and  procedures and presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end
of  the  period  covered  by this quarterly report based on such evaluation; and

          c.     disclosed  in  this  quarterly  report  any  change  in  the
Registrant's  internal control over financial reporting that occurred during the
Registant's  most  recent  fiscal  quarter  that  has materially affected, or is
reasonably  likely  to materially affect, the Registrant's internal control over
financial  reporting;  and;

     5.     The  Registrant's  other  certifying  officer  and I have disclosed,
based  on  our  most  recent  evaluation  of  internal  control  over  financial
reporting,  to the Registrant's auditors and the audit committee of Registrant's
board  of  directors:

          a.     all  significant  deficiencies  and  material weaknesses in the
design  or  operation  of  internal  controls over financial reporting which are
reasonably  likely  to  adversely  affect  the  Registrant's  ability to record,
process,  summarize  and  report  financial  data;  and

          b.     any fraud, whether or not material, that involves management or
other  employees  who  have  a  significant  role  in  the Registrant's internal
controls  over  financial  reporting.



Date:  August  13,  2003     /s/  Donald  H.  Megrath
                             ------------------------
                             Donald  H.  Megrath
                             Senior  Vice  President,
                             Chief  Financial  Officer  and  Secretary


<PAGE>