8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

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

Date of Report (Date of earliest event reported):  August 31, 2006

INTELLIGENT SYSTEMS CORPORATION

(Exact name of Registrant as specified in its charter)

Georgia	1-9330	58-1964787
(State or other jurisdiction	Commission file number	(I.R.S. Employer Identification No.)
of incorporation or organization)

4355 Shackleford Road, Norcross, Georgia	30093
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (770) 381-2900

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFP 240.14a-12)

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4 (c))

TABLE OF CONTENTS

EX-2.1 INTEREST PURCHASE AND TRANSFER AGREEMENT

EX-2.2 PROMISSORY NOTE OF HORIZON SOFTWARE HOLDINGS, INC.

EX-2.3 SECURITY AGREEMENT AND ASSIGNMENT INTEREST IN LIMITED LIABILITY COMPANY

EX-2.4 FORM OF GUARANTY OF PAYMENT

EX-99.1 PRESS RELEASE DATED 9-6-06

Item 2.01. Completion of Acquisition or Disposition of Assets.

On August 31, 2006, Intelligent Systems Corporation (the “Company”) completed the sale of its minority ownership position in Horizon Software, LLC (“Horizon”), a privately held software company based in Loganville, Georgia. The Company sold 4,137,579 Series A Preferred Shares of Horizon, representing its entire holdings in Horizon, to Horizon Software Holdings, Inc., an entity comprised of the founder and officers of Horizon (the “Buyer”) for a purchase price of $5,600,000. Simultaneously, the Company also sold its interest in an affiliate company of Horizon for $100,000. At the closing of the transactions, the Company received an aggregate of $2,875,000 in cash and a promissory note of Buyer in the principal amount of $2,875,000.

The promissory note of Buyer bears interest at the prime rate plus 1.5% and principal and interest are due on January 31, 2007, subject to certain conditions for accelerating or extending the maturity date. The promissory note is secured by the individual guarantees of the shareholders of Buyer and the assignment to the Company of 5,818,232 Common Shares of Horizon owned by Buyer.

The Company has held its ownership interest in Horizon since June 2002 and during that time, J. Leland Strange, the CEO and Chairman of the Company, has been a member of the Board of Managers of Horizon as representative of the Company in accordance with the terms of the Company’s original investment. The terms of the sale of the Horizon stock were negotiated on an arm’s length basis.

The Company will furnish pro forma financial information related to the transaction in an amendment to this Form 8-K within 71 calendar days of the date of this Form 8-K.

Item 7.01. Regulation FD Disclosure.

On September 6, 2006, Intelligent Systems Corporation issued a press release disclosing the sale of the Horizon asset. A copy of the September 6, 2006 press release, attached hereto as Exhibit 99.1, is being furnished pursuant to Regulation FD and is incorporated by reference herein.

2

Item 9.01. Financial Statements and Exhibits.

(c) Exhibits

Exhibit 2.1	Interest Purchase and Transfer Agreement by and between Horizon Software Holdings, Inc. and Intelligent Systems Corporation dated August 31, 2006.
Exhibit 2.2	Promissory Note of Horizon Software Holdings, Inc. dated August 31, 2006.
Exhibit 2.3	Security Agreement and Assignment of Interest in Limited Liability Company by and between Horizon Software Holdings, Inc. and Intelligent Systems Corporation dated August 31, 2006.
Exhibit 2.4	Form of Guaranty of Payment of shareholders of Buyer dated August 31, 2006
Exhibit 99.1	Press Release issued by Intelligent Systems Corporation dated September 6, 2006.

The Company will furnish pro forma financial information related to the transaction in an amendment to this Form 8-K within 71 calendar days of the date of this Form 8-K.

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: September 6, 2006		INTELLIGENT SYSTEMS CORPORATION
		(Registrant)
	By:	/s/ Bonnie L. Herron
		Bonnie L. Herron
		Chief Financial Officer

3

Exhibit Index

Exhibit Number	Description
2.1	Interest Purchase and Transfer Agreement by and between Horizon Software Holdings, Inc. and Intelligent Systems Corporation dated August 31, 2006.
2.2	Promissory Note of Horizon Software Holdings, Inc. dated August 31, 2006.
2.3	Security Agreement and Assignment of Interest in Limited Liability Company by and between Horizon Software Holdings, Inc. and Intelligent Systems Corporation dated August 31, 2006.
2.4	Form of Guaranty of Payment of shareholders of Buyer dated August 31, 2006
99.1	Press release issued by Intelligent Systems Corporation on September 6, 2006

4

EX-2.1

Exhibit 2.1

INTEREST PURCHASE AND TRANSFER AGREEMENT

     THIS INTEREST PURCHASE AND TRANSFER AGREEMENT (the “Agreement”) is made and entered into this 31^st day of August, 2006, by and between HORIZON SOFTWARE HOLDINGS, INC., a Georgia corporation (“Purchaser”), and INTELLIGENT SYSTEMS CORPORATION (“Seller”), a Georgia corporation.

Statement of Background

     Purchaser and Seller are Members of Horizon Software International, LLC, a Georgia limited liability company (the “Company”). Effective as of June 1, 2002, Purchaser and Seller entered into, among other agreements, the following: (a) that certain Operating Agreement of Horizon Software International, LLC dated effective as of June 1, 2002 (the “Operating Agreement”) and (b) along with the Company, that certain Restricted Share Agreement (the “Restricted Share Agreement”).

     Seller is the record and beneficial owner of 4,137,579 “Series A Preferred Shares” (as defined in the Operating Agreement) in the Company (such shares together with all rights and interests associated therewith, including without limitation all conversion rights, collectively, the “Membership Interest”). The Purchaser desires to purchase the Membership Interest from the Seller, and the Seller desires to sell the Membership Interest to the Purchaser on the terms and subject to the conditions hereinafter contained.

     The parties hereto desire to resolve all matters between them herein referred to or otherwise relating or pertaining in any manner or way, directly or indirectly, to the Purchaser as herein provided.

     Purchaser and Seller also desire to obtain the approval and consent of the Company, to the transfer and assignment described herein, subject to the terms hereof.

Statement of Agreement

     NOW THEREFORE, in consideration of the premises, the mutual covenants, promises, agreements, representations and warranties contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby covenant, promise, agree, represent and warrant as follows:

     1. Sale of Membership Interest. Contemporaneously with the execution, acknowledgment, sealing and delivery of this Agreement, Purchaser hereby purchases from Seller, and Seller hereby sells, conveys, assigns and transfers to Purchaser, the Membership Interest, and all of Seller’s right, title and interest in and to the Company, including all right, title, and interest in and to all Company assets, liabilities, and rights to future profits.

     2. Purchase Price and Payment.

          (a) In consideration of, and as the sole and exclusive purchase price for, the Membership Interest, Purchaser shall pay to Seller consistent with the terms of Section 2(b) hereof, the amount of FIVE MILLION SIX HUNDRED THOUSAND and NO/100^th DOLLARS ($5,600,000.00) (the “Purchase Price”).

          (b) The Purchase Price shall be paid as follows:

               (i) Concurrently herewith Purchaser shall pay Seller by wire transfer an amount equal to TWO MILLION SEVEN HUNDRED FIFTY THOUSAND ($2,750,000.00) and Seller acknowledges receipt of same;

               (ii) Purchaser shall pay Seller the balance of the Purchase Price pursuant to the terms of a Promissory Note of even date herewith made by Purchaser in favor of Seller with an original principal amount of TWO MILLION EIGHT HUNDRED FIFTY THOUSAND ($2,850,000.00) (the “Note”). Purchaser’s payment of amounts due under the Note shall be secured by: (i) personal guarantees made by Robert Williamson, Teresa Williamson, Michael Williamson and Jon Williamson in favor of Seller; and (ii) an amount of Common Shares (as defined in the Operating Agreement) converted from the Membership Interest on even date herewith pursuant to the terms of that certain Security Agreement and Assignment of Limited Liability Company Interest made by Purchaser in favor of Seller (the “Pledge Agreement”).

     3. Resignations. To the extent the Seller so serves, the Seller hereby resigns as a manager, director and officer of the Company, effective upon the execution, acknowledgment, sealing and delivery of this Agreement. In addition, Seller shall deliver a Letter of Resignation executed by J. Leland Strange (“Strange”) wherein, to the extent he so serves, Strange resigns from any and all positions as a manager, director and officer of the Company.

     4. Tax Liability. The parties hereto agree and acknowledge that any tax liability associated with the Membership Interest accruing prior to the effective date hereof shall be the sole responsibility of Seller. Any tax liability associated with the Membership Interest accruing from and after the effective date hereof shall be the responsibility of Purchaser. On or before April 15, 2007, Purchaser shall cause the Company to distribute to Seller an amount equal to thirty-six percent (36%) of the net taxable income of all categories reflected on the Seller’s 2006 Form K-1 from the Company. If the net result reflected on the Seller’s 2006 Form K-1 is a loss, no amounts will be paid to Seller under this Section 4.

     5. Future Distributions. Seller, for and in consideration of the payment by Purchaser to Seller hereunder, hereby assigns, conveys and transfers to Purchaser all of its right, title and interest in and to any and all distributions associated with its ownership of the Membership Interest and hereby releases any claims or rights it may have to any distributions associated with the Membership Interest.

2

     6. Representations and Warranties of Seller. Seller represents and warrants to the Purchaser that:

          (a) Seller is the record and beneficial owner and has good and valid merchantable title to the Membership Interest free and clear of any and all mortgages, pledges, liens, security interests, conditional sale agreements, charges, restrictions and encumbrances of every nature whatsoever. Seller does not own any interest, rights, options or any other beneficial interest in the Company other than that represented by the Membership Interest.

          (b) Seller is a duly incorporated and organized Georgia corporation validly existing and in good standing under Georgia law. The Seller has the corporate power and authority to execute, acknowledge, seal and deliver this Agreement and all documents delivered pursuant to or in connection with the consummation of the transactions contemplated herein (collectively, the “Transaction Documents”), to consummate the transactions contemplated by this Agreement and all Transaction Documents and to take any and all other actions required to be taken by the Seller pursuant to the provisions of this Agreement and all the Transaction Documents. Neither the execution, acknowledgment, sealing and delivery of this Agreement or any of the Transaction Documents nor the consummation of the transactions contemplated by this Agreement shall constitute any violation of any order, writ, injunction, decree, law, statute, rule or regulation applicable to Seller.

          (c) This Agreement and each of the Transaction Documents have been, and will be, duly executed and delivered by Seller; and this Agreement and all the Transaction Documents are valid and binding upon and fully enforceable against the Seller in accordance with their respective terms.

          (d) Seller has not incurred any liability or obligation for finders’, brokerage or agents’ fees or commissions in connection with this Agreement or the transactions contemplated hereby.

          (e) This Agreement does not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements by Seller contained herein not misleading. There is no fact known to Seller which is not disclosed in this Agreement which affects the accuracy of Seller’s representations and warranties contained in this Agreement.

     7. Representations and Warranties of the Purchaser.

          (a) Purchaser is a duly organized Georgia corporation, validly existing and in good standing under Georgia law. Purchaser has the corporate power and authority to execute, acknowledge, seal and deliver this Agreement and all the Transaction Documents, to consummate the transactions contemplated by this Agreement and all the Transaction Documents and to take any and all other actions required to be taken by Purchaser pursuant to the provisions of this Agreement and all of the Transaction Documents. Neither the execution, acknowledgment, sealing and delivery of this Agreement or any Transaction Documents nor the consummation of the transactions contemplated by this Agreement shall constitute any violation of any order, writ, injunction, decree, law, statute, rule or regulation applicable to Purchaser.

3

This Agreement does not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements by Purchaser contained herein not misleading.

          (b) This Agreement has been, and each Transaction Document will be, duly executed and delivered by Purchaser; and this Agreement and all Exhibits to this Agreement are valid and binding upon and fully enforceable against Purchaser in accordance with their respective terms.

          (c) The Membership Interest will be acquired for investment for Purchaser’s own account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof, and that Purchaser has no present intention of selling, granting participation in, or otherwise distributing the same. By executing this Agreement, Purchaser further represents that it does not have any contract, undertaking, agreement, or arrangement with any person to sell, transfer or grant participations to such person, or to any third person, with respect to any of the Membership Interest.

     8. Attorney In Fact. Seller hereby appoints Purchaser as its attorney-in-fact for the limited purpose of executing any documents, filing and recording any documents, and taking any actions Purchaser may deem necessary to further evidence or publish the transfer of the Membership Interest.

     9. Indemnification by Seller. Seller shall defend, indemnify and hold harmless the Purchaser and its heirs, personal and legal representatives, guardians, successors and assigns, from and against any and all claims, threats, liabilities, taxes, interest, fines, penalties, suits, actions, proceedings, demands, damages, losses, costs and expenses (including attorneys’ and experts’ fees and court costs) of every kind and nature arising out of, resulting from, or in connection with:

          (a) Any misrepresentation or breach by Seller of any representation or warranty contained in this Agreement.

          (b) Nonfulfillment, failure to comply or breach by Seller of or with any covenant, promise or agreement of Seller contained in this Agreement.

          (c) Any act, failure to act or omission by Seller, with respect to the Membership Interest, prior to the date hereof.

          (d) Any and all tax liabilities associated with the Membership Interest prior to the date hereof.

     10. Indemnification by Purchaser. The Purchaser shall defend, indemnify and hold harmless Seller and its heirs, personal and legal representatives, guardians, successors and assigns, from and against any and all claims, threats, liabilities, taxes, interest, fines, penalties, suits, actions, proceedings, demands, damages, losses, costs and expenses (including attorneys’ and experts’ fees and court costs) of every kind and nature arising out of, resulting from, or in connection with:

4

          (a) Any misrepresentation, omission or breach by the Purchaser of any representation or warranty contained in this Agreement.

          (b) Any nonfulfillment, failure to comply or breach by the Purchaser of or with any covenant, promise or agreement of the Purchaser contained in this Agreement.

          (c) Any act, failure to act or omission by the Purchaser, with respect to the Membership Interest, after the date hereof.

          (d) Any and all tax liabilities associated with the Membership Interest after the date hereof, except to the extent that Seller exercises its rights under the Pledge Agreement.

     11. Releases.

          (a) Except as provided in this Agreement and the Transaction Documents, the Seller does hereby remise, release, acquit and forever discharge the Purchaser, the Company, and all of the Purchaser’s employees, agents, shareholders, members, officers and directors (collectively, the “Purchaser Released Parties”) of and from all manner of actions, causes of action, suits, debts, covenants, accounts, trespasses, contracts, agreements, damages, judgments, liabilities, losses, costs, expenses and claims of any nature whatsoever, in law or equity, whether or not now or hereafter known, suspected or claimed, which the Seller ever had, now has, or which it hereafter can, shall or may have or allege against any Purchaser Released Party upon or by reason of any matter, cause or thing from the beginning of the world to the date hereof.

          (b) Except as provided in this Agreement, the Purchaser does hereby remise, release, acquit and forever discharge the Seller and all of Seller’s employees, agents, shareholders, members, officers and directors (collectively, the “Seller Released Parties”) of and from all manner of actions, causes of action, suits, debts, covenants, accounts, trespasses, contracts, agreements of damages, judgments, liabilities, losses, costs, expenses and claims of any nature whatsoever, in law or equity, whether or not now or hereafter known, suspected or claimed, which the Purchaser ever had, now has, or which it hereafter can, shall or may have or allege against any Seller Released Party Seller upon or by reason of any matter, cause or thing from the beginning of the world to the date hereof.

          (c) In consideration of the approval and consent of Company to the transfer and assignment described herein, Seller does hereby remise, release, acquit and forever discharge the Company and Company’s employees, agents, shareholders, members, officers and directors (collectively, the “Company Released Parties”), of and from all manner of actions, causes of action, suits, debts, covenants, accounts, trespasses, contracts, agreements, damages, judgments, liabilities, losses, costs, expenses and claims of any nature whatsoever, in law or equity, whether or not now or hereafter known, suspected or claimed, which the Seller ever had, now has, or which it hereafter can, shall or may have or allege against the Company Released Parties upon or by reason of any matter, cause or thing from the beginning of the world to the date hereof.

     12. Consent by Company; Release; Termination of Agreements.

5

          (a) By its execution below, Company hereby grants its approval and consent to the transfer and assignment described herein, subject to the terms hereof, and agrees that with respect to the Membership Interest, Purchaser may be admitted as a member of the Company upon its execution hereof.

          (b) By its execution below, Company hereby releases the Seller Released Parties from any and all claims with respect to the Company and further specifically waives any and all requirements contained in the Operating Agreement with respect to the transfer of the Membership Interest, including but not limited to the requirements of Article 13 thereof and all of the provisions in the Restricted Share Agreement and that certain Investor Rights Agreement made by and between Company and Seller effective June 1, 2002 (the “Investor Rights Agreement”).

          (c) To the extent any restrictions or other agreement between the Purchaser or Seller or Seller and Company with respect to the transfer of the Membership Interest exist, including without limitation any restrictions contained in the Restricted Share Agreement and Investor Rights Agreement, Company, Seller and Purchaser hereby waive, terminate, rescind and cancel as to one another, effective as of the date hereof, any and all such agreements, whether oral or written, and Seller, Purchaser and Company (as the case may be) shall have no further rights, duties or obligations with respect to one another thereunder.

          (d) Except for this Agreement and the Transaction Documents, to the extent any other agreements between Seller and Purchaser or Seller and Company or between Seller, Purchaser and Company exist, the Purchaser, Seller and Company hereby terminate, rescind and cancel as to one another, effective on the date hereof, any and all such agreements, whether oral or written, and Seller, Purchaser and Company shall have no further rights, duties or obligations with respect to one another thereunder.

     13. Miscellaneous Provisions.

          (a) All of the representations, warranties, covenants, promises and agreements of the parties contained in this Agreement (or in any document delivered or to be delivered pursuant to this Agreement or in connection herewith) shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.

          (b) All covenants, provisions, agreements, representations and warranties provided by this Agreement shall survive the execution, acknowledgment, sealing and delivery of this Agreement, each Exhibit hereto and all of the transactions contemplated hereby.

          (c) This Agreement was made in the State of Georgia and shall be governed by, construed and enforced in all respects in accordance with the laws of the State of Georgia.

          (d) As provided herein and as the context requires, the masculine gender shall be deemed to include the feminine and the neuter genders and vice versa, and the singular shall be deemed to include the plural and vice versa.

6

          (e) This Agreement constitutes the entire agreement between the parties and there are no other commitments or agreements binding the parties other than set forth herein. This Agreement may be amended only by an instrument in writing executed by the parties hereto.

          (f) All notices or other communications required or permitted by this Agreement shall be deemed given only if in writing and mailed first class United States mail, registered or certified mail, postage prepaid, and addressed as follows:

If to the Seller, then:

Intelligent Systems Corporation
4355 Shackleford Road
Norcross, Georgia 30097
Attn: J. Leland Strange

with a copy to:

If to the Purchaser then:

Horizon Software Holdings, Inc.
5835 Highway 20
Loganville, Georgia 30052
Attn: Bob Williamson, President/CEO

with a copy to:

Andersen, Tate & Carr, P.C.
1505 Lakes Parkway, Suite 100
Lawrenceville, Georgia 30043
Attn: Eugene W. Luciani

       or to any such other address as a party to this Agreement shall notify the other parties as provided in this Section.

          (g) The captions or headings provided in this Agreement are for convenience only and shall not be deemed to be a part of this Agreement.

          (h) Should any provision of this Agreement require judicial interpretation, it is agreed that the court interpreting or construing the same shall not apply a presumption that the terms hereof shall be more strictly construed against one party by reason of the rule of

7

construction that a document is to be construed more strictly against the party who itself or through its agent prepared same, it being agreed that all parties or their agents have participated in the preparation hereof. Seller acknowledges that Andersen, Tate & Carr, P.C. has represented Purchaser with respect to the matters described herein and has provided no representation or advice of any nature whatsoever to Seller. Further, it is acknowledged that Seller has been advised and given the opportunity to seek independent legal counsel with respect to the matters described herein.

     IN WITNESS WHEREOF, the parties have executed, acknowledged, sealed and delivered this Agreement the day and year first written above.

THE SELLER:
INTELLIGENT SYSTEMS CORPORATION, a
Georgia corporation
By:	/s/ Leland Strange
	J. Leland Strange, President
THE PURCHASER:
HORIZON SOFTWARE HOLDINGS, INC., a
Georgia corporation
By:	/s/ Robert Williamson
	Robert Williamson, President

8

EX-2.2

Exhibit 2.2

PROMISSORY NOTE

August 31, 2006

$2,850,000.00 Lawrenceville, Georgia

     1. Promise To Pay. FOR VALUE RECEIVED, the undersigned HORIZON SOFTWARE HOLDINGS, INC., a Georgia corporation (hereinafter referred to as the “Maker”), promises to pay to the order of INTELLIGENT SYSTEMS CORPORATION, a Georgia corporation hereinafter referred to as the “Payee”; the Payee, together with any subsequent holder(s) hereof, hereinafter collectively referred to as the “Holder”, without grace, at the office of the Payee at 4355 Shackleford Road, Norcross, Georgia 30097 or at such other place as the Holder may designate to the Maker in writing from time to time, the principal sum of TWO MILLION EIGHT HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($2,850,000.00), together with interest thereon, or on so much thereof as is from time to time outstanding and unpaid, at the rates hereinafter set forth (computed on the basis of a 360 day year), in lawful money of the United States of America, which shall at the time of payment be legal tender in payment of all debts and dues, public and private; such principal and interest to be paid, without offset or reduction whatsoever, in the manner hereinafter provided.

     2. Interest Rates.

          (a) Interest. From and after the date hereof (until January 31, 2007 or any Default (as hereinafter defined) occurring prior thereto), interest on the principal balance hereof outstanding from time to time shall accrue at the rate which is equal to the sum of one hundred fifty (150) basis points plus the “Atlanta Prime” (as hereinafter defined) per annum. If the Maker exercises its rights to extend the Maturity Date (as hereinafter defined) under Section 3(b) hereof, then, from February 1, 2007 until the earlier of the Maturity Date or a Default occurring on or after February 1, 2007, interest on the principal balance hereof outstanding from time to time shall accrue at the rate which is equal to the sum of three hundred basis points plus the Atlanta Prime.

          (b) Atlanta Prime.

               (i) As used herein, the term “Atlanta Prime” shall mean the prime interest rate quoted or published from time to time by the Atlanta office of Wachovia Bank (hereinafter referred to as the “Atlanta Bank”). If, and to the extent and from time to time, the Atlanta Prime increases or decreases, then the interest rate hereunder shall be correspondingly increased or decreased, such increase or decrease hereunder to be effective as of the date on which such increase or decrease of the Atlanta Prime occurs;

               (ii) In the event that the Atlanta Bank, during the term or any renewal or extension hereof, shall abolish or abandon the practice of publishing or quoting its prime interest rate, or should the same in Holder’s judgment become unascertainable, then from and after the date on which the Atlanta Bank abolishes or abandons the practice of publishing or

1

quoting its prime interest rate or on which same become unascertainable, and for the remaining term and any extension or renewal hereof (unless and until the Atlanta Bank should resume publishing or quoting its prime interest rate, whereupon the Atlanta Prime shall, as of the date following such resumption be the interest rate hereunder), the interest rate shall be equal to (i) the mean average of the prime interest rates quoted or published from time to time, as determined in good faith by Holder, by Citibank, N.A., Chase Manhattan Bank, N.A., and Bank of America, N.T. & S.A., and their respective successors (hereinafter collectively referred to as the “New York Banks”), at their respective principal or main office in New York, New York, or (ii) if any one of the New York Banks discontinues quoting or publishing a prime interest rate or if same in Holder’s judgment should become ascertainable, then the average of the prime interest rates quoted or published from time to time by the remaining New York Banks continuing to quote or publish a prime interest rate, or (iii) if two of the aforesaid New York Banks discontinue quoting or publishing a prime interest rate, or if same in Holder’s judgment should become unascertainable, then the prime interest rate quoted or published from time to time by the remaining New York Bank continuing to quote or publish a prime interest rate. If the Atlanta Bank and all of the New York Banks should abolish or abandon the practice of publishing or quoting a prime interest rate, or should the same in Holder’s judgment become unascertainable, then Holder, at its option, may designate an alternative index of interest rates comparable to the prime interest rate; and the rate determined pursuant to such alternative index shall, from and after the date on which the Atlanta Bank and all of the New York Banks abolish or abandon the practice of publishing or quoting a prime interest rate, or on which same become unascertainable, and for the remaining term and any extension or renewal hereof (subject, however, to the resumption of the publication or quotation of the prime interest rate by the Atlanta Bank, in which case such rate shall be the interest rate hereunder, effective as of the date following such resumption), be the interest rate in effect for the remaining term and any extension or renewal hereof, subject to adjustment as aforesaid if and to the extent that the rate of interest determined pursuant to the alternative index of interest rates designed by Holder shall increase or decrease, such adjustment, if any, to be made on the date on which any such increase or decrease occurs.

     3. Maturity Date.

          (a) On the Maturity Date (as defined hereafter), the entire outstanding principal balance of the indebtedness hereby evidenced, together with all accrued but unpaid interest thereon, and all other sums due to Holder hereunder or under the Loan Documents (as hereinafter defined), shall be due and payable in full.

          (b) The “Maturity Date” shall be January 31, 2007; provided that Borrower may, upon notice to Lender and upon paying all accrued and unpaid interest up to the date of such notice, extend the date for the maturity of this Note to any date on or prior to December 31, 2007 and such date shall, for all purposes, then become the “Maturity Date” hereunder.

     4. Prepayment. This Note may be prepaid in whole or in part at any time during the term hereof; provided, however, any such prepayment must be accompanied by all accrued but unpaid interest and Holder shall have no obligation to accept any prepayment unless such payment is made in accordance with the terms of this paragraph.

2

     5. Default And Acceleration. It is hereby expressly agreed that should any default be made in the payment as stipulated above of either principal, interest or other charges, and should such default remain uncured for fifteen (15) days after written notice thereof, or should any default occur under the Security Instrument (as hereinafter defined) or in any other document evidencing, securing or in any way relating to the loan evidenced by this Note (a “Default”), the principal of this obligation or any unpaid part thereof and all unpaid interest accrued thereon, together with all other sums then owing to Holder hereunder or under the Security Instrument, shall, at the option of the Holder, at once become due and payable without notice or demand and may be collected forthwith, regardless of the stipulated date of maturity. Interest shall accrue on the outstanding principal balance of this Note from the date of any Default hereunder (as long as such Default continues), regardless of whether or not there has been an acceleration of the payment of principal as set forth herein, or after maturity, at the rate equal to twelve (12%) percent per annum. All such interest shall be paid at the time of and as a condition precedent to the curing of any Default should Holder, in its sole discretion, allow such Default to be cured. Time is of the essence of this Note. In the event this Note, or any part thereof, is collected by or through an attorney-at-law, the Maker agrees to pay all costs of collection including, but not limited to, actual attorney’s fees calculated on an hourly basis.

     6. Waivers.

          (a) Presentment for payment, demand, protest and notice of demand, protest and non-payment and all other notices are hereby waived by the Maker. Failure to accelerate the debt evidenced hereby by reason of Default shall not be construed as a waiver of any Default, a novation of this Note or a waiver of the right of the Holder thereafter to insist upon strict compliance with the terms of this Note without previous notice of such intention being given to the Maker. This Note may not be changed orally or by any course of conduct or departure from the terms hereof, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.

          (b) The Maker hereby waives and renounces for itself, its heirs, successors and assigns, all rights to the benefits of any appraisement, exemption or homestead now provided, or which may hereafter be provided by the Constitution or laws of the United States of America or of any state thereof to and in all its property, real and personal, against the enforcement and collection of the obligations evidenced by this Note.

          (c) The Maker hereby transfers, conveys and assigns to the Holder a sufficient amount of such homestead or exemption as may be set apart in bankruptcy, to pay this Note in full, with all costs of collection, and does hereby direct any trustee in bankruptcy having possession of such homestead or exemption to deliver to the Holder a sufficient amount of property or money set apart as exempt to pay the indebtedness evidenced hereby, or any renewal thereof, and does hereby irrevocably appoint the Holder the attorney-in-fact for the Maker to claim any and all homestead exemptions allowed by law.

     7. Loan Documents. This Note is secured by a pledge and security agreement of even date herewith executed by the Maker in favor of the Holder pledging to the Holder, and granting a security interest in, certain capital stock of Horizon Software International, LLC owned by the Maker and personal guarantees made by Robert Williamson, Teresa Williamson, Michael

3

Williamson and Jon Williamson to each of which reference is hereby made (collectively the “Security Instrument” and together with this Note, and any other documents evidencing, securing or in any way relating to the loan evidenced by this Note, collectively referred to as the “Loan Documents”).

     8. Governing Law. This Note is made and intended to constitute a contract under, and shall be construed, interpreted and enforced in accordance with, the laws of the State of Georgia; provided, however, that if Georgia conflict or choice of law rules would choose the law of another State, the Maker hereby waives such rules and agrees that Georgia substantive, procedural and constitutional law shall nonetheless govern.

     9. Jurisdiction; Venue. Maker hereby (i) submits to personal jurisdiction in the State of Georgia for the enforcement of this Note, and (ii) waives any and all personal rights under the law of any state to object to jurisdiction within the State of Georgia for the purposes of litigation to enforce this Note, whether on grounds of forum non conveniens or otherwise. Nothing contained herein, however, shall prevent Holder from bringing any action or exercising any rights against any security and against Maker personally, and against any property of Maker, within any other state. Initiating such proceeding or taking such action in any other state shall in no event constitute a waiver of the agreement contained herein that the law of the State of Georgia shall govern the rights and obligations of Maker and Holder hereunder or of the submission herein made by Maker to personal jurisdiction within the State of Georgia. The aforesaid means of obtaining personal jurisdiction and perfecting service of process are not intended to be exclusive but are cumulative and in addition to all other means of obtaining personal jurisdiction and perfecting service of process now or hereafter provided by the law of the State of Georgia or any other state.

     10. Notices. Any notices required or permitted to be given hereunder shall be given in accordance with the notice provisions of the Interest Purchase and Transfer Agreement made between Maker and Payee on even date herewith.

     11. Definitions. As used herein, the terms “Maker” and “Holder” shall be deemed to include their respective heirs, successors, legal representatives and assigns, whether voluntary by action of the parties or involuntary by operation of law.

     12. Limit Of Validity. If from any circumstances whatsoever fulfillment of any provision of this Note or any other Loan Document, at the time performance of such provision shall be due, shall involve transcending the limit of validity presently prescribed by any applicable usury statute or any other applicable law, with regard to obligations of like character and amount, then ipso facto the obligation to be fulfilled shall be reduced to the limit of such validity, so that in no event shall any exaction be possible under this Note or any Loan Document that is in excess of the current limit of such validity, but such obligation shall be fulfilled to the limit of such validity. The provisions of this paragraph shall control every other provision of this Note and the other Loan Documents.

     13. Judicial Interpretation. Should any provision of this Note require judicial interpretation, it is agreed that the court interpreting or construing the same shall not apply a presumption that the terms hereof shall be more strictly construed against one party by reason of

4

the rule of construction that a document is to be construed more strictly against the party who itself or through its agent prepared same, it being agreed that all parties or their agents have participated in the preparation hereof.

     14. Section Headings. Section and other headings contained in this Note are for reference purposes only and are in no way intended to describe, interpret, define or limit the scope, extent or intent of this Note or any provisions hereof.

     IN WITNESS WHEREOF, the Maker has executed this Note under seal on the date first above written.

HORIZON SOFTWARE HOLDINGS, INC.,
a Georgia corporation
By:	/s/ Robert Williamson
	Robert Williamson, President
	[CORPORATE SEAL]

5

EX-2.3

Exhibit 2.3

SECURITY AGREEMENT AND ASSIGNMENT
OF INTEREST IN LIMITED LIABILITY COMPANY

     THIS SECURITY AGREEMENT AND ASSIGNMENT OF INTEREST IN LIMITED LIABILITY COMPANY (this “Assignment”) is made as of August 31, 2006, by HORIZON SOFTWARE HOLDINGS, INC., a Georgia corporation (“Assignor”), in favor of INTELLIGENT SYSTEMS CORPORATION, a Georgia corporation (“Lender”).

Statement of Background

     Assignor owns 5,818,232 Common Shares as a member of Horizon Software International, LLC (the “LLC”), a Georgia limited liability company. Assignor has on even date herewith, executed a Promissory Note of even date herewith in the original principal amount of $2,850,000.00 (the “Note”). In order to secure payment of the Note, Assignor has agreed to pledge 5,818,232 Common Shares, including all rights of Assignor to receive cash and other distributions of assets from the LLC with respect to such 5,818,232 Common Shares as set forth in or provided for in the Amended and Restated Operating Agreement of Horizon Software International, LLC dated on even date herewith (the “Operating Agreement”), and all rights and interests of Assignor with respect to such 5,818,232 Common Shares in and to the assets of the LLC (hereinafter called the “Interest”).

Statement of Agreement

     IN CONSIDERATION of the making of a loan in the amount of $2,850,000 (the “Loan”) by Lender to Assignor, evidenced by the Note, which will benefit the Assignor both directly and indirectly, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor does hereby sell, assign, transfer, convey, and grant unto Lender, its successors, and assigns the Interest, as security for the Note (the “Guaranty”; together with the Note, and any and all documents, instruments or agreements executed and delivered in connection with the Loan, each individually also referred to as a “Loan Document” and collectively as the “Loan Documents”),

     TO HAVE AND TO HOLD UNTO Lender, its successors, and assigns, forever, upon and subject to the following terms and conditions:

     1. Power of Attorney. Assignor hereby constitutes and appoints Lender as its true and lawful attorney, with full power and authority in its name and stead with respect to the Interest only and only after an “Event of Default” (as defined hereafter): (a) to collect any and all cash and other distributions of assets from the LLC; and (b) to use such measures, legal or equitable, as in Lender’s discretion may be deemed necessary or appropriate to enforce the payment or distribution thereof to Lender; and (c) to use and apply said cash and other distributions to the payment of the Loan and to the payment of attorneys’ fees, court costs, labor charges, and expenses incurred in connection with any and all things which Lender may do or cause to be done by virtue hereof, or to pay such other indebtedness with respect to the LLC or the Loan Documents as Lender deems appropriate in its sole discretion including, without limitation, payments on debts presently encumbering the Interests or to any of the foregoing. The power of attorney hereby created is coupled with an interest and is irrevocable. Assignor

hereby (i) gives Lender, as his attorney-in-fact, full power and authority to do and perform each and every act or thing necessary or appropriate to accomplish the foregoing, as fully as Assignor might or could do if Assignor were personally present, and (ii) ratifies and confirms all that Lender, as Assignor’s attorney-in-fact, shall lawfully do or cause to be done by virtue of the hereinabove described power of attorney.

     2. Disclaimer of Responsibility. Lender shall not in any way be responsible for failure to do any or all of the things for which rights, interests, powers, and authorities are herein granted. Lender shall be responsible only for the application of such cash or other property as it actually receives under the terms hereof.

     3. No Liability. Prior to any election by Lender to become a substituted member of the LLC with respect to the Interest, as hereinbelow provided, this Assignment shall not operate to place any responsibility or obligation whatsoever upon Lender and thereafter only if and to the extent assumed in writing by Lender. Lender shall not have assumed any liability, unless specifically provided herein, as a result of this Assignment. Lender does not assume any obligation of Assignor under the Operating Agreement by this Assignment. Assignor agrees to protect, indemnify, and save harmless Lender from and against all liabilities, obligations, claims, damages, penalties, causes of action, costs, and expenses (including, without limitation, attorneys’ fees and expenses) now or hereafter arising by reason of this Assignment or the Operating Agreement and any claim and demand whatsoever which may be asserted against Lender by reason of any alleged obligation or undertaking to be performed or discharged by Lender under this Assignment or the Operating Agreement. In the event Lender incurs any liability, loss, or damage by reason of this Assignment, in curing any default or breach by Assignor of its obligations under the Operating Agreement, or in the defense of any claims or demands arising out of or in connection with this Assignment, the amount of such liability, loss, or damage shall be added to the Loan secured hereby.

     4. Further Assurance. Assignor agrees to execute upon the request of Lender any and all instruments requested by Lender to evidence, perfect, or otherwise carry the purposes of this Assignment into effect or to accomplish any other purpose deemed by Lender to be necessary or appropriate in connection with this Assignment. Assignor shall pay all recording costs and reasonable attorneys’ fees incurred by Lender in connection with any such instruments.

     5. Warranties and Representations. Assignor hereby warrants and represents that the Interest is free and clear of all liens and encumbrances; that neither the Interest nor any portion thereof have been heretofore sold, assigned, transferred, or set over by any instrument now in force (except as hereinafter provided) nor will they at any time during the term of this Assignment be sold, assigned, transferred, or set over by Assignor or by any person or persons whomsoever, without the prior written consent of Lender, which consent may be withheld in Lender’s sole and unfettered discretion; that there is no other claim whatsoever to the interests of Assignor in the LLC, other than ones granted herein; that Assignor has good right to sell, assign, transfer, and set over the LLC Interest and to grant to and confer upon Lender the rights, interests, powers, and authorities herein granted and conferred; and that Lender has all rights and privileges of Assignor with respect to the Interest under the LLC, subject to the provisions of Paragraphs 7 and 8 hereof.

2

     6. Assignor’s Covenants. Assignor hereby agrees that he will not, at any time during the term of this Assignment with respect to the Interest and without the prior written consent of Lender, which consent may be withheld for any reason:

          (a) convey or encumber or vote to convey or encumber the Interest in any manner whatsoever;

          (b) consent to any material modification or amendment to the Operating Agreement;

          (c) admit any additional members to the LLC;

          (d) cause, permit, or allow any assets of the LLC to be leased, sold, conveyed, pledged, hypothecated, transferred, or otherwise encumbered or disposed of except as permitted under the Note; or

          (e) cause, permit, or allow the LLC to issue any additional interests, to be dissolved or liquidated, or to acquire, be acquired by, merged, or consolidated into or with any other person or entity.

     Assignor agrees that it will do all things necessary to maintain its Interest in full force and effect, prior to any election by Lender to become a substituted member of the LLC with respect to the Interest, as hereinbelow provided. During the term of this Assignment Assignor shall cause the LLC to provide to Lender within 30 days after the end of each month, the balance sheet and income statement of the LLC.

     7. Events of Default. Notwithstanding anything herein to the contrary, it is understood and agreed that although this Assignment shall be effective as of the date hereof, no right or power granted hereunder shall be exercised unless and until an “Event of Default” (as hereinafter defined) shall occur. Any one or more of the following events shall, at the option of Lender, constitute an “Event of Default” hereunder:

          (a) should any default or event of default occur under a Loan Document or any other agreement evidencing or securing all or any portion of the Loan, after giving effect to notice and all rights to cure thereunder;

          (b) should any representation or warranty of Assignor in a Loan Document prove to have been false or misleading in any material respect when made;

          (c) should Assignor fail to observe any covenant or agreement of Assignor herein contained and not cure such within thirty (30) days of its receipt of notice of such failure;

          (d) should any representation or warranty of Assignor herein contained prove to have been false or misleading in any material respect when made;

          (e) should there occur any partition, dissolution, or termination of the LLC;

3

          (f) should Assignor or the LLC make any assignment for the benefit of creditors; or should there be appointed a receiver, liquidator, or trustee of Assignor or of the LLC, or of their respective property or assets and such appointment not be removed or dismissed within ninety (90) days; or should there be filed any petition for bankruptcy, reorganization, liquidation, or arrangement of Assignor or the LLC pursuant to the federal Bankruptcy Code or any similar state statute; or should Assignor or the LLC be adjudicated a bankrupt or insolvent; or should Assignor or the LLC admit its inability to pay its debts as they become due; or

          (g) should the LLC default on any debt owed to a bank and such default not be cured after giving effect to all notice and cure periods allowed thereunder.

     Nothing herein contained shall be deemed to affect or impair any rights which Lender may have under the Loan Documents or under any other instrument now or hereafter evidencing, guarantying the payment of, securing, or otherwise relating to the Loan.

     8. Lender as Substituted Member. If an Event of Default occurs and is then continuing, Lender shall have the right, but no obligation, to elect to become a substituted member with respect to the Interest only and within the provisions of the Operating Agreement, upon the giving of notice of such election to the Manager of the LLC, and Lender shall be substituted for Assignor, with respect to the Interest only, as a member of the LLC as of the date of such notice.

     9. Adequate Consideration. Assignor has recognized and realized adequate and sufficient consideration for the making of this Assignment. Assignor further acknowledges that Lender will rely upon the warranties, representations, and agreements herein contained in making the Loan to the LLC.

     10. Uniform Commercial Code. In addition to the rights and privileges under this Assignment, Lender shall have all of the rights, powers, and privileges of a secured party under the Uniform Commercial Code of Georgia.

     11. Notices. Any notices, instructions, or other communications required or permitted under the terms of this Assignment shall be given pursuant to the notice provisions under the Interest Transfer and Assignment Agreement made by and between Assignor and Lender on even date herewith.

     12. Remedies Cumulative. This Assignment shall in no way operate to prevent Lender from pursuing any remedy which it now or hereafter may have because of any present or future breach of the terms and conditions of any Loan Document secured hereby, or because of the occurrence of any other Event of Default.

     13. Waiver of Defenses. Assignor agrees that Lender may, from time to time, without notice to Assignor, and without affecting, diminishing, or releasing the liability of Assignor hereunder (a) retain or obtain and perfect by possession a security interest in any property to secure the Loan, or any portion thereof, (b) retain or obtain the primary or secondary liability of any party or parties, in addition to Assignor, with respect to Loan, or any portion thereof, (c) extend or renew for any period (whether or not longer than the original period and on more than one occasion), alter, or exchange any of the Loan or increase or decrease the Loan, (d) release or

4

compromise, or any undertaking of any other party or parties primarily or secondarily liable on any of the Loan, (e) release its security interest, if any, in all or any property securing the Loan, or any portion thereof, and permit any substitution or exchange for any such property (but shall not be obligated to obtain or permit any substitution or exchange), and (f) alter, extend, exchange, modify, release, or cancel any covenant, agreement, or provision contained in a Loan Document. Assignor hereby expressly waives: (i) presentment, demand, notice of dishonor, protest, and all other notice whatever, except to the extent expressly provided to the contrary herein, (ii) all diligence on the part of Lender in collection or protection of, or realization upon, any security for the Loan, or any portion thereof, for enforcing any remedy available to it under any Loan Document, and (iii) the provisions of Section 10-7-24 of the Official Code of Georgia Annotated. No right or power of Assignor or anyone else to assert any claim or defense as to the invalidity or unenforceability of any Loan Document or any of the other documents evidencing or securing the Loan, or any portion thereof, shall impair or affect the covenants, agreements, and obligations of Assignor hereunder. Assignor agrees that Assignor shall have no right of subrogation, reimbursement, or indemnity whatsoever and no right of recourse to or with respect to any assets or property of Assignor or to any collateral for the Loan, even upon payment in full of the Loan.

     14. Assignor’s Covenants Absolute. It is fully understood that until this Assignment is terminated in accordance with Paragraph 15 hereof, Assignor’s obligations and agreements hereunder shall not be released, in whole or in part, by any action or thing which might, but for this provision of this Assignment, be deemed a legal or equitable discharge of a surety or guarantor, or by reason of any waiver, extension, modification, forbearance, or delay of other act or omission of Lender or its failure to proceed promptly or otherwise, or by reason of any action taken or omitted by Lender, whether or not such action or failure to act varies or increases the risk of, or affects the rights or remedies of Assignor, or by reason of any further dealings among Assignor, Lender, and any other guarantor or surety or other party, and Assignor hereby expressly waives and surrenders any defense to the performance of its obligations and agreements hereunder based upon any of the foregoing acts, omissions, things, agreements, or waivers of any of them; it being the purpose and intent of the parties hereto that the covenants, agreements, and all obligations hereunder are absolute, unconditional, and irrevocable under any and all circumstances except to the extent otherwise specifically provided herein.

     15. Termination. This Assignment and the security title to and security interest created hereby in the Interest shall terminate and be null and void and of no further force and effect on the date on which the Loan has been paid in full. To the extent that Lender holds any collateral or certificates evidencing the Interest, such shall be promptly returned upon termination of this Assignment.

     16. Miscellaneous. This Assignment shall inure to the benefit of Lender and any subsequent holder of the Note, and shall be binding upon Assignor and its legal representatives, successors, and assigns, and any subsequent owner of the Interest. This Assignment has been signed and executed in the State of Georgia, and the nature, validity, and effect of this Assignment shall be governed by and construed and enforced in accordance with the laws of the State of Georgia. This Assignment constitutes the entire agreement between the parties hereto, and can be amended or modified only by a writing executed by all of the parties hereto, or their respective successors, transferees, or assigns. If any portion of this Assignment be legally

5

adjudicated invalid or unenforceable, the parties do hereby covenant and agree that such portion or portions are absolutely and completely severable from all other portions of this Assignment, and such other provisions shall not be affected by the adjudication of invalidity or unenforceability. The headings used herein are for convenience of reference only and shall not be deemed to impart substantive meaning or modify the textual content of this Assignment. As used herein, the singular number shall include the plural, the plural the singular, and the use of the masculine, feminine, or neuter gender shall include all genders, as the context may require, and the term “person” shall include an individual, a corporation, an association, a partnership, a trust, and an organization.

     IN WITNESS WHEREOF, the undersigned Assignor has hereunto set his hand and seal as of the day and year first above written.

HORIZON SOFTWARE HOLDINGS, INC., a Georgia corporation
By:	/s/ Robert Williamson
	Robert Williamson, President

6

EX-2.4

Exhibit 2.4

FORM OF GUARANTY OF PAYMENT

     For value received, the undersigned hereby unconditionally guarantees the payment of the “Note” (as hereafter defined) and all extensions, modifications or renewals thereof, and all expenses (including attorneys’ fees) incurred in the collection and enforcement of the Note, in the enforcement of rights under any security therefor and in the enforcement of this Guaranty of Payment; and the undersigned also hereby waives presentment, demand, notice of dishonor, protest and all other notice whatever, and agrees that the holder of said Note may from time to time (a) extend or renew said Note or (b) grant any release (either partial or total), compromises or indulgences (including, but not limited to, failure or refusal to exercise one or more of the rights or remedies provided by said Note) with respect to said Note or any extension, modification or renewal thereof, with respect to any security therefor or with respect to any party liable thereunder or hereunder, all without notice to, or further consent of, any of the undersigned and without affecting the liability of the undersigned hereunder, any of whom may be sued by the holder hereof with or without joining any of the makers, endorsers or guarantors of said Note or any other party and without first or contemporaneously suing such makers, endorsers, guarantors or other parties, or proving that such makers, endorsers guarantors or other parties are insolvent or unable to respond to a judgment. “Note” shall mean that certain Promissory Note of even date herewith made by Horizon Software Holdings, Inc. in favor of Intelligent Systems Corporation in an original principal amount of $2,850,000.

     IN WITNESS WHEREOF, this Guaranty of Payment has been duly executed and sealed by the undersigned; this 31^st day of August, 2006.

                                                            
Signed By Individual Shareholders of Buyer

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE
For further information, call
Bonnie Herron, 770/564-5504
or email to bherron@intelsys.com

Intelligent Systems Completes Sale of Minority Stake in Horizon Software

***

Norcross, GA – September 6, 2006 — Intelligent Systems Corporation (AMEX: INS) today announced the sale of its minority interest in Horizon Software, Inc., a privately held software company headquartered in Loganville, Georgia. Effective as of August 31, 2006, Intelligent Systems sold its entire holdings of Series A Preferred Shares of Horizon to Horizon Software Holdings, Inc. (the “Buyer”), an entity comprised of Horizon’s founder and other officers of the company. ISC sold the Horizon stock for an aggregate price of $5.7 million, consisting of $2.85 million in cash at the closing and a secured promissory note of Buyer for $2.85 million due January 31, 2007.

J. Leland Strange, President and Chief Executive Officer of Intelligent Systems Corporation, stated, “Our investment in Horizon enabled the company to build on its base in the K-12 education market for Foodservice Management systems and to accelerate its successful expansion into the military, higher education and corporate/resident dining markets. This sale transaction provides a solid return for Intelligent Systems and demonstrates the commitment and optimism of Horizon’s management owners to continue to excel as a privately-held software company.”

As previously reported on August 1, 2006, ISC completed the sale of its QS Technologies business to Netsmart Technologies, Inc. in a transaction consisting of $1.9 million cash, a promissory note of $1.435 million and the assumption by Netsmart of approximately $1.8 million in net liabilities of QS. In addition, ISC retained accounts receivable and cash of QS Technologies aggregating approximately $2.0 million.

ISC intends to file a Form 8-K today with the Securities and Exchange Commission related to the Horizon Software transaction.

About Intelligent Systems Corporation

For over thirty years, Intelligent Systems Corporation [AMEX: INS] has identified, created, operated and grown early stage technology companies. The company’s consolidated subsidiaries include VISaer, Inc. (www.visaer.com) and CoreCard Software, Inc. (www.corecard.com), (both software companies) and ChemFree Corporation (www.chemfree.com) (an industrial products company). Further information is available on the company’s website at www.intelsys.com, or by calling the company at 770/381-2900.

In addition to historical information, this news release may contain forward-looking statements relating to Intelligent Systems and its subsidiary and affiliated companies. These statements include all statements that are not statements of historical fact regarding the intent, belief or expectations of Intelligent Systems and its management with respect to, among other things, results of operations, product plans, and financial condition. The words “may,” “will,” “anticipate,” “believe,” “intend,” “expect,” “estimate,” “plan,” “strategy” and similar expressions are intended to identify forward-looking statements. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those contemplated by such forward-looking statements. The company does not undertake to update or revise any forward-looking statements whether as a result of new developments or otherwise. Among the factors that could cause actual results to differ materially from those indicated by such forward-looking statements are delays in product development, undetected software errors, competitive pressures (including pricing), changes in customers’ requirements or financial condition, market acceptance of products and services, changes in financial markets, changes in the performance, financial condition or valuation of affiliate companies, the risks associated with investments in privately-held early stage companies, and general economic conditions, particularly those that cause business or government to delay or cancel purchase decisions. Factors that affect the company’s performance and financial results are more fully disclosed in the company’s most recent filings with the Securities and Exchange Commission, including its annual report on Form 10-KSB and its subsequent filings.

# # # #