<PAGE>
As filed with the Securities and Exchange Commission on November 19, 1996
Registration No. 333-4711
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
--------------------
COMMUNICATION INTELLIGENCE CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 275 Shoreline 94-2790442
(State or other Drive, Suite 520 (I.R.S.
jurisdiction of Redwood Shores, CA employer
incorporation or 94065 identificati
organization) (415) 802-7888 on number)
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
--------------------
James Dao
Chairman
Communication Intelligence Corporation
275 Shoreline Drive, Suite 520
Redwood Shores, CA 94065
(415) 802-7888
(Name, address, including zip code, and telephone number, including area code,
of Registrant's agent for service)
-------------------
Copies of all communications, including communications sent to agent for
service, should be sent to:
James M. Coughlin, Esq.
Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
(212) 702-5700
- --------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
- -------------------
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.[X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
- -------------------
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Amount Maximum Maximum Amount of
Title of Shares to be Aggregate Price Aggregate Registration
to be Registered Per Share Offering Price Fee
Registered
Common Stock, 5,737,500 $4.94(1) $28,343,250 $9,774(2)
$.01 par value
Common Stock, 630,000 4.32(3) 2,721,600 939(2)
$0.01 par value
(1)For purposes of calculating the registration fee pursuant to Rule 457(c),
such amount is based upon the average of the high and low sale price of the
Registrant's Common Stock on May 21, 1996.
(2)Previously paid.
(3)For purposes of calculating the registration fee pursuant to Rule 457(c),
such amount is based upon the average of the high and low sale price of the
Registrant's Common Stock on July 8, 1996.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until this Registration Statement shall become effective
on such date as the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
Subject to completion, dated November 19, 1996
PROSPECTUS
6,367,500 Shares of Common Stock
COMMUNICATION INTELLIGENCE CORPORATION
This prospectus (the "Prospectus") relates to the offer and sale (the
"Offering") by certain securityholders (the "Selling Securityholders") of
Communication Intelligence Corporation, a Delaware corporation (together with
its consolidated subsidiaries, the "Company" or "CIC"), of 6,367,500 shares (the
"Shares") of the Company's Common Stock, $.01 par value (the "Common Stock").
The Company will not receive any proceeds from the sale of the Shares offered
hereby. In addition, the Company is bearing all costs relating to the
registration of the Shares, except that the Selling Securityholders shall bear
all selling commissions or discounts incurred by them in connection with the
offer and sale of the Shares and all of their legal fees and expenses. This
Registration Statement has been prepared in accordance with certain agreements
between the Company and the Selling Securityholders.
The Common Stock is quoted on The Nasdaq SmallCap Market under the symbol
"CICI." On November 11, 1996, the last reported sale price of the Common Stock
as reported on The Nasdaq SmallCap Market was $2 1/4 per share.
The Shares offered hereby involve a high degree of risk. See "Risk Factors"
beginning on page 2.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
___________________________
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR
A SOLICITATION OF AN OFFER TO BUY, THE SECURITIES
IN ANY STATE TO ANY PERSON TO WHOM IT IS
UNLAWFUL FOR THE SELLING SECURITY-
HOLDERS TO MAKE SUCH OFFER OR
SOLICITATION
The Selling Securityholders and any other person participating in the
distribution of the Shares offered hereby will be subject to applicable
provisions of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations thereunder, including Rules 10b-6 and
10b-7, which provisions may limit the timing of purchases and sales of the
Shares.
The Shares offered hereby may be offered and sold from time to time
pursuant to Rule 415 under the Securities Act of 1933, as amended (the
"Securities Act") by the Selling Securityholders in one or more transactions on
The Nasdaq SmallCap Market, in negotiated transactions, or a combination of such
transactions. The Shares may be sold at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. The Selling Securityholders may effect such transactions by selling the
Shares directly to purchasers or through underwriters or broker-dealers who may
act as agents or principals. Such underwriters and broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
Selling Securityholders or the purchasers of the Shares for whom such
underwriters or broker-dealers may act as agent or to whom they sell as
principal or both. The compensation received by a particular underwriter or
broker-dealer may be in excess of customary compensation.
The date of this Prospectus is November , 1996.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
<PAGE>
RISK FACTORS
The Shares offered hereby involve a high degree of risk. Prior to making
an investment decision, prospective investors should carefully consider the
following risk factors in addition to the other information contained elsewhere
or incorporated by reference in this Prospectus relating to the business of the
Company and this Offering.
Continuing Losses; Prior Bankruptcy
In each year since its inception the Company has incurred losses. In the
three-year period ended December 31, 1995, these losses aggregated
approximately $25 million, and the Company's accumulated deficit at that date
was approximately $48 million. During the nine months ended September 30,
1996, the Company incurred a loss of approximately $4.4 million. In 1994,
the Company filed a voluntary petition for reorganization and protection
under the federal bankruptcy code and later that year emerged from bankruptcy
proceedings. Revenues from sales or licensing of the Company's products
to date have not been significant. The Company is likely to incur additional
losses, which could be substantial, unless it is successful in achieving
significant commercial acceptance of its products. In view of the emerging
nature of the markets for pen-based computing and the uncertainties that exist
concerning the ability of the Company to achieve such commercial acceptance,
there can be no assurance that the Company will be able to achieve or sustain
significant revenues or any level of profitability.
Uncertainty of Market Acceptance
The markets for pen-based computing are relatively new. Since its
inception, the Company has been primarily engaged in research and development of
its core technology for handwriting recognition and related products, with the
goal of identifying and satisfying the requirements of this emerging market.
The Company's marketing strategy depends significantly on the Company's ability
to establish distribution, licensing, product development and other strategic
relationships with major computer companies, and on the willingness and ability
of these companies to promote the Company's technology and products to address
the requirements of this emerging market. In addition, the Company's
marketing strategy also includes marketing to corporations for their internal
needs. There can be no assurance that the Company's technology and products
will ever achieve significant market acceptance. Moreover, even if the
Company's core technology and current products are accepted and successfully
marketed, new concepts in pen-based or other data input technology may be
introduced by competitors, which could have a material adverse impact on the
Company's business, results of operations and prospects.
Potential Need for Additional Financing
The Company believes that its existing cash, cash equivalents and
short-term investments, aggregating $4.4 million at September 30, 1996, will
be sufficient to fund the Company's operations in the short-term. Thereafter,
unless the Company has significantly increased its revenues, it will require
additional funding. Such additional funds may not be available when needed
or on terms acceptable to the Company. Any future issuance by the Company of
any equity or convertible securities may substantially dilute the interest of
the Company's then-existing shareholders. Insufficient funds may
-2-
<PAGE>
require the Company to delay, scale back or eliminate some or all of its
marketing and development efforts, which would have a material adverse
effect on the Company's business, result of operations and prospects.
Technological Change and Competition
The computer industry is characterized by rapid technological change and
frequent introductions of new products and product enhancements. Because the
market for pen-based computing is relatively new, the Company believes that pen-
based products and underlying technologies will be subject to particularly rapid
change as market demands emerge and evolve. There can be no assurance that the
Company will be able to develop new products and enhance existing products in a
timely manner in response to changing market demands.
The competition to develop technologies and related products in the markets
for pen-based computing is intense. A significant number of companies have
publicly announced the development or commercial introduction of pen-based
computer products and the Company anticipates that additional companies will
enter this market. Many of the Company's competitors and potential competitors
have significantly greater financial, technical and marketing resources than the
Company. In addition, competitors of the Company include certain of the
Company's current and potential strategic partners and customers, who are
developing or acquiring alternative products and technologies to those offered
by the Company. There can be no assurance that the Company will be able to
compete successfully against these competitors. Moreover, there can be no
assurance that the companies with whom the Company establishes distribution,
license, product development or other strategic relationships will not choose to
market technologies and products which they develop internally or acquire from
third parties other than the Company.
Dependence on Key Personnel
The success of the Company is highly dependent on the services of key
members of the Company's management. The loss of the services of one or more
key personnel, in particular James Dao, founder, Chairman and Chief Executive
Officer could have a material adverse effect on the Company. None of the
Company's employees has an employment contract with the Company. The
Company's success will also depend on its ability to attract and retain
additional highly skilled personnel in all areas of its business. The
competition for qualified personnel in the computer industry is intense, and
there can be no assurance that the Company will be successful in attracting
and retaining such key personnel.
Dependence on Distributors and Strategic Relationships
The Company's strategy to commercialize its products and achieve market
acceptance focuses in large part on the development of distribution, licensing,
marketing and other strategic relationships with a limited number of leading
computer companies, including computer manufacturers, operating system software
vendors and independent software vendors. Through these relationships, the
Company seeks to establish its handwriting recognition and related technologies
as industry standards and achieve market acceptance of the Company's products
and technologies. The Company's strategic partners generally have made no
contractual commitments to continue to utilize or sell the Company's
technologies or
-3-
<PAGE>
products. Moreover, certain of the companies with which the Company
has established or may seek to establish a strategic relationship are
concurrently engaged in the development or marketing of competing technologies
and products that they have developed internally or acquired from third parties.
In the event one or more of the Company's strategic partners should terminate
their relationship with the Company, or the Company is unable to establish
strategic relationships with additional companies that offer marketing
opportunities for the Company, there is a significant risk that the Company's
business and operating results will be materially adversely affected.
Intellectual Property and Proprietary Rights
The Company relies on a combination of patent, copyright and trademark
laws, trade secrets and contractual provisions to protect its proprietary rights
in software products. There can be no assurance that these protections will be
adequate or that the Company's competitors will not independently develop
technologies that are substantially equivalent or superior to the Company's
technology. In addition, the laws of certain countries in which the Company's
products are licensed do not protect the Company's products and intellectual
property rights to the same extent as the laws of the United States. The
Company's licensees and distributors have had access to proprietary information
of the Company, and there can be no assurance that the measures taken by the
Company to protect its technology and other proprietary information will
adequately protect against the improper use of such information. Because of the
rapid evolution of technology and uncertainties in intellectual property law in
the United States and internationally, there can be no assurance that the
Company's current or future products will not be subject to third-party claims
of infringement. Any litigation to determine the validity of any third-party
claims could result in significant expense to the Company and divert the efforts
of the Company's technical and management personnel, whether or not such
litigation is resolved in favor of the Company. In the event of an adverse
result in any such litigation, the Company could be required to expend
significant resources to develop non-infringing technology or to obtain licenses
to the technology which is the subject to the litigation. There can be no
assurance that the Company would be successful in such development or that any
such licenses would be available on commercially reasonable terms, if at all.
Joint Venture in People's Republic of China
The Company owns 79% of a joint venture (the "Venture") with The Ministry
of Electronics of the Jiangsu Province, a provincial agency of the People's
Republic of China (the "Agency"). Under the provisions of the Venture
agreement, the Company is required to contribute up to $5.4 million in cash to
the Venture, and to provide it with nonexclusive licenses to technology and
certain distribution rights. The Agency is required to contribute certain land
use rights and provide other services to the Venture. As of September 30,
1996, the Company had contributed $900,000 in cash and had provided
nonexclusive licenses to technology and certain distribution rights, while the
Agency had contributed certain land use rights. Certain rights and obligations
with respect to land use rights are yet to be finalized. There can be no
assurance that the Company will be able to fund the balance of its required
cash contribution to the Venture, that the Venture will be successful in
developing or selling integrated computer systems to the Chinese market or
that the Company will ever be able to recover its financial commitment in the
Venture. The Venture is subject to annual licensing requirements from the
Chinese government, and there is no assurance its license will be renewed.
Moreover, because of the legal and political systems in China,
there can be no assurance that the obligations to the Company of the
Chinese parties to the Venture can be enforced. Finally, the Company's
investment in the Venture is subject to risks of doing business abroad,
including fluctuations in the value of currencies, export duties, import
controls and trade barriers (including quotas), restrictions
-4-
<PAGE>
in the transfer of funds, longer payment cycles, greater difficulty in
accounts receivable collection, burdens of complying with foreign law and,
particularly in the case of China, political and economic instability.
See "-- Foreign Exchange."
Dependence on Suppliers
Currently, the Company has one supplier for each of the two
customized digitizer tablets and electronic pens used in its Handwriter
line of products. The Company is currently evaluating additional
suppliers, but has not yet entered into any definitive supply arrangements
with any other manufacturers. Although the Company believes that the
customization and manufacture of the digitizer tablets and pen by other
manufacturers is possible (and one of the current suppliers can supply both
types of customized digitizers and pens) in the event the current suppliers
were unable or unwilling to supply adequate quantities of the Company's
products, such loss would likely have an adverse impact on the Company's
business and results of operations, at least in the short term. See
"The Company".
Loss of Significant Customer
During 1995, one customer, the United States Department of Commerce,
through an Advanced Technology Program Co-operative Agreement accounted
for approximately 25% of the Company's revenues. This program terminated
in 1995 and, accordingly, the Company will not generate any revenue from
this source during 1996. There can be no assurance that the Company will
be able to generate sufficient revenue from other sources to compensate
for the termination of this program.
Foreign Exchange
The Company anticipates that a significant portion of its product sales in
the future could occur in Asia and other foreign markets, and that the Company's
operating results and cash flow will therefore be subject to foreign currency
risks.
Control by Existing Stockholders
At September 30, 1996, the Company's executive officers and directors
beneficially owned approximately 36% of the Company's outstanding Common Stock,
after giving effect to the exercise of outstanding options, warrants and
convertible securities held by such individuals. As a result, in addition to
their influence as members of the Company's management, if such individuals were
to act collectively as stockholders, they would have the ability to
substantially influence the election of directors and other actions by
stockholders with respect to the business and affairs of the Company.
-5-
<PAGE>
Stock Price Volatility
The stock prices of high technology companies have in recent years
experienced particularly high volatility, including at times wide price
fluctuations that are unrelated to the operating performance of these
specific companies. The trading price of the Common Stock could be subject to
wide fluctuations in response to quarter-to-quarter variations in operating
results, announcements of technological innovations or new products by the
Company or its competitors, announcements of new strategic relationships by
the Company or its competitors, general conditions in the computer
industries, or market volatility unrelated to the Company's business and
operating results. The Company's Common Stock to date has had a volatile
trading history.
Future Sales of Common Stock
At September 30, 1996, the Company had approximately 42.0 million shares
outstanding, of which approximately 29.3 million are freely transferable
(subject in certain cases to volume and other limitations under Rule 144
under the Securities Act). The remaining 12.7 million shares (including the
Shares offered hereby) are "restricted securities" within the meaning of that
Rule. The Shares offered hereby, unless sold to persons who are deemed
"affiliates" of the Company (as such term is defined under the Securities
Act), will be freely transferable pursuant to the Registration Statement of
which this Prospectus is a part without restriction or further registration
under the Securities Act. In addition, the Company's principal stockholder
has the right to require the Company to register under the Securities Act
approximately 7.0 million shares of Common Stock. The sale, or the
availability for sale, of substantial amounts of Common Stock in the public
market at any time subsequent to this Offering could adversely affect the
prevailing market price of the Common Stock.
State Registration Required for Sales of Shares
An investor may only purchase the Shares being offered hereby if such
Shares are qualified for sale or are exempt from registration under the
applicable state securities laws of the state in which such prospective
purchaser resides. The Company is contractually obligated to use its best
efforts to register the Shares under applicable state securities laws upon the
request of the Selling Shareholders. As of the date of this Prospectus, no such
request has been made.
No Anticipated Dividends
The Company does not anticipate paying cash dividends in the foreseeable
future. The declaration and payment of any cash dividends in the future will be
determined by the Company's Board of Directors in light of conditions then
existing, including the Company's earnings, if any, financial condition and
cash requirements.
-6-
<PAGE>
Possible Delisting of Securities from Nasdaq
The Common Stock is listed on The Nasdaq SmallCap Market. There are a
number of continuing requirements that must be met in order for the Shares
offered hereby to remain eligible for quotation on The Nasdaq SmallCap Market.
As of the date of this Prospectus, the Company meets all of these continuing
requirements. However, if the Company continues to incur substantial losses
from operations and thus fails to meet these maintenance criteria, the
Common Stock may be delisted from The Nasdaq SmallCap Market. In such event,
trading, if any, in the Common Stock may then continue to be conducted in
the over-the-counter market. As a result, an investor may find it difficult
to dispose of, or to obtain accurate quotations as to the market value of,
the Common Stock. In addition, broker-dealers would be subject to a rule
of the Commission that, if the Company fails to meet certain criteria set
forth in that rule, imposes various sales practice requirements on
broker-dealers who sell securities governed by the rule to persons other than
established customers and accredited investors. For these types of
transactions, the broker-dealer must make a special suitability
determination for the purchaser and must have received the purchaser's written
consent to the transaction prior to sale. If the Common Stock becomes subject
to this rule, the market price and liquidity thereof would be adversely
affected.
-7-
<PAGE>
THE COMPANY
CIC develops and markets natural input, computer interface, handwriting
recognition, and data security technologies and products to satisfy emerging
markets. These emerging markets include all areas of personal computing as well
as electronic commerce and communications.
CIC's strategic vision is to accelerate the worldwide adoption of pen
computing applications through the establishment of a global, strategic business
alliance network. To achieve this objective, CIC is seeking to form a series
of strategic business alliances on a worldwide basis with other corporations
or business entities. The Company believes that if achieved, this vision will
bring the benefits of pen computing to computer users worldwide, while
creating profitable opportunities both for itself and its strategic business
partners. There can be no assurance that the Company will be able to
establish strategic business alliances or, if established, such alliances
will be profitable for the Company.
The Company is pursuing a three-pronged revenue generation strategy for its
products and services. The Company (i) licenses its products to Original
Equipment Manufacturers (OEMs) and Independent Software Vendors (ISVs) who
reproduce and market them in conjunction with their own products, (ii) sells its
end-user products, such as the MacHandwriter and Handwriter for Windows, through
independent sales representatives, distributors, strategic relationships, and
corporate sales, and (iii) provides system integration services and markets
CIC's pen-based business computer systems to Chinese business and government
users through its 79%-owned joint venture in the People's Republic of China.
The digitizer tablets and electronic pens used in the Company's
Handwriter for Windows(R) and MacHandwriter(R) products are manufactured
according to the Company's specification by CalComp, Inc. (CalComp). The
Company's MANTA(TM) Digitizer and electronic pen are produced by another
manufacturer. Other subcontractors manufacture templates, duplicate
software, print documentation and prepare packaging for the products. The
digitizer, pens and other components are packaged by a turnkey software
service and shipped to customers upon the Company's instructions. If CalComp
does not or is unable to meet product volume requirements, it is obligated to
assist the Company in obtaining an adequate supply of digitizers and pens.
Although the Company believes that the digitizer tablets could be
manufactured by another supplier, in the event that either of the Company's
current suppliers were unable or unwilling to supply adequate quantities for
the Company's products, such a lack of supply would likely adversely impact
the Company's business and results of operations, at least in the short term.
In November 1995 and June 1996, the Company completed private placements
(the "Placements") of 5.5 million shares of Common Stock at a price of $2.00
per share and 600,000 shares at a price of $4.50 per share, respectively.
Pursuant to agreements entered into with investors in the Placements, the
Company is registering the Shares under the Securities Act.
-8-
<PAGE>
USE OF PROCEEDS
The Selling Securityholders will receive all of the net proceeds from the
sale of the Shares offered hereby. The Company will not receive any proceeds
from the sale of such Shares.
SELLING SECURITYHOLDERS
The following Selling Securityholders are the holders of the number of
Shares set forth opposite their respective names. The information contained in
this table is presented as of the date of this Prospectus and is provided to the
best knowledge of the Company. Except as described below in the footnotes, no
Selling Securityholder has held any position or office or had any other material
relationships with the Company within the past three years. The Shares offered
pursuant to this Prospectus may be offered from time to time by the Selling
Securityholders named below or their nominees. The Selling Securityholders are
under no obligation to sell all or any portion of such Shares pursuant to this
Prospectus. Because the Selling Securityholders may sell all or a portion of
their Shares pursuant to this Prospectus, no estimate can be provided as to the
amount of Shares that will be held by each Selling Securityholder following the
termination of the Offering.
<TABLE>
<CAPTION>
Name Shares Owned Prior to
---- ---------------------
Offering Shares Offered (1)
----------- ------------------
<S> <C> <C>
St. Claire Option Trading, Ltd. 125,000 125,000
CIC Standby Ventures, L.P.(2) 10,612,857 500,000
Everest Capital Fund, L.P. 454,100 454,100
Everest Capital International, Ltd. 545,900 545,900
Continental Casualty Company 750,000 750,000
Bay Harbour Partners, Ltd. 100,000 100,000
Trophy Hunters, Ltd. 75,000 75,000
JMG Capital Partners, L.P. 113,000 113,000
Libra Investments, Inc. (3) 244,000 244,000
Baxter Living Trust dated 8/21/92 60,000 60,000
Mary Ross Gilbert 40,000 40,000
Kevin Gorman 25,000 25,000
Thomas Koch 25,000 25,000
Robert G. Morrish 25,000 25,000
Ravich Revocable Trust of 1989(3) 170,500 170,500
Stephen Smith 25,000 25,000
Charles and Adele Thurnher Living 25,000 25,000
Trust
Dated 12/7/89
Upchurch Living Trust 75,000 75,000
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
Name Shares Owned Prior to
---- ---------------------
Offering Shares Offered (1)
----------- ------------------
<S> <C> <C>
Robert Winans 50,000 50,000
Mark Zucker 175,000 175,000
BKP Partners, L.P. 1,500,000 1,500,000
George L. Argyros 100,000 100,000
Bradford M. Freeman 125,000 125,000
Romulus Holdings, Corp. 250,000 250,000
Establissment Comfort 250,000 250,000
Merced Partners Limited Partnership 70,000 70,000
Global Bermuda Limited Partnership 150,000 150,000
Anvil Investment Partners, L.P. 22,000 22,000
Bay Harbour 90-1 Limited 60,000 60,000
Cerberus Partners, L.P. 65,000 65,000
Cerberus International Ltd 45,000 45,000
Bruce A. Brown 2,000 2,000
Bruce A. and Judith A. Brown, as Joint Tenant 14,000 14,000
WROS
Judith A. Brown 2,000 2,000
The Copernicus Fund, L.P. 36,700 36,700
DOJ Overseas Corporation 73,300 73,300
__________________
</TABLE>
(1) All of the Shares offered hereby were acquired by the Selling
Securityholders in connection with the Placements. The gross proceeds of
the Placements were $13.7 million. See "The Company."
(2) Amount shown includes approximately 3.6 million shares issuable upon
exercise of warrants. Philip S. Sassower, a director of the Company, is
the general partner of CIC Standby Ventures, L.P.
(3) Amount shown for Libra Investments, Inc. ("Libra") includes 237,500 shares
issuable upon exercise of warrants. Libra acted as the placement agent in
each of the Placements. In connection with the Placements, the Company
issued to Libra warrants to purchase up to an aggregate of 237,500 shares
of Common Stock and paid to Libra aggregate commissions in the amount of
$610,000. In addition, in connection with the Placement in June 1996, the
Company issued to Ravich Revocable Trust of 1989 (the "Trust"), as
designee of Libra, warrants to purchase 30,000 shares of Common Stock.
Jess M. Ravich, who controls the Trust, is an affiliate of Libra. Amount
shown for the Trust includes shares issuable upon exercise of those
warrants.
-10-
<PAGE>
PLAN OF DISTRIBUTION
The Shares offered hereby are being offered on behalf of the Selling
Securityholders. The Company will not receive any proceeds from this Offering.
The Selling Stockholders have advised the Company that the sale or
distribution of the Shares may be effected directly to purchasers by the
Selling Stockholders as principals or through one or more underwriters,
brokers, dealers or agents from time to time in one or more transactions
(which may involve crosses or block transactions) (i) on any stock exchange,
in the Nasdaq SmallCap Market, or in the over-the-counter market, (ii) in
transactions otherwise than on any stock exchange or in the over-the-counter
market, or (iii) through the writing of options (whether such options are
listed on an options exchange or otherwise) on, or settlement of short sales
of, the Common Stock. The Shares may be sold at market prices prevailing at
the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Selling Securityholders may effect such transactions
by selling the Shares directly to purchasers or through underwriters or
broker-dealers who may act as agents or principals. Such underwriters and
broker-dealers may receive compensation in the form of discounts, concessions
or commissions from the Selling Securityholders or the purchasers of the
Shares for whom such underwriters or broker-dealers may act as agent or
to whom they sell as principal or both. The compensation received by a
particular underwriter or broker-dealer may be, but are not presently expected
to be, in excess of customary compensation. Those persons who act as broker-
dealers or underwriters in connection with the sale of the Shares will be
selected by the Selling Securityholders and may have other business
relationships with, and perform services for, the Company in the ordinary course
of business. A Selling Securityholder or any underwriter or broker-dealer who
acts in connection with the sale of the Shares hereunder, may be deemed to be an
"underwriter" within the meaning of Section 2(11) of the Securities Act. Any
commissions received by such underwriter or broker-dealer and any profit on any
resale of the Shares as principal might be deemed to be underwriting discounts
and commissions under the Securities Act.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Shares may not simultaneously engage in market
making activities with respect to such Shares for a period of nine business days
prior to the commencement of such distribution, except under certain limited
circumstances. In addition to, and without limiting the foregoing, the Selling
Securityholders and any other person participating in such distribution will be
subject to applicable provisions of the Exchange Act and rules and regulations
thereunder, including without limitation, Rules 10b-6 and 10b-7, which
provisions may limit the timing of purchases and sales of any of the Shares by
the Selling Securityholders and any other such stockholders.
The Company has agreed to pay for all of the expenses incident to the
registration, offering and sale of the Shares to the public other than selling
commissions or discounts of underwriters, broker-dealers or agents and legal
fees and expenses incurred by the Selling Securityholders. The Company has
also agreed to indemnify the Selling Securityholders and their controlling
persons against certain liabilities, including liabilities under the Securities
Act. The Company estimates that the expenses of the Offering to be borne by
it will be approximately $65,000.
Libra Investments, Inc. acted as placement agent in connection with the
Placements of the Shares offered hereby and received fees and warrants from the
Company in connection therewith.
-11-
<PAGE>
An investor may only purchase the Shares being offered hereby if such
Shares are qualified for sale or are exempt from registration under the
applicable state securities laws of the state in which such prospective
purchaser resides. In addition, under these laws, Shares may generally be
sold only through registered or licensed brokers or dealers in those states.
The Company has also advised the Selling Stockholders that if a particular
offer of Shares is to be made on terms constituting a material change from the
information set forth above with respect to the Plan of Distribution, then
to the extent required, a Prospectus Supplement must be distributed setting
forth such terms and related information as required.
-12-
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Common Stock
The Company is authorized to issue 80 million shares of Common Stock,
$.01 par value per share and 10 million shares of Preferred Stock. As of
September 30, 1996, approximately 42.0 million shares of Common Stock were
issued and outstanding and approximately 9.8 million shares of Common Stock
were reserved for issuance upon conversion or exercise of outstanding options
and warrants. On September 30, 1996, there were approximately 650
shareholders of record. A high percentage of the Company's Common Stock is
registered in the names of brokerage firms and depositary trusts.
All issued and outstanding shares of Common Stock of the Company are
validly issued, fully paid and non-assessable.
Holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Holders of
Common Stock do not have any cumulative voting rights and holders of more than
50% of the shares of Common Stock are required to elect all of the Company's
directors eligible for election in a given year. The holders of Common Stock
are entitled to receive ratably such dividends, if any, as may be declared by
the Board of Directors from time to time out of funds legally available for such
purpose. Upon any liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, holders of Common Stock are entitled to
receive pro rata all assets available for distribution to its stockholders
after payment or provision for payment of debts and other liabilities of the
Company. Other than pursuant to outstanding options and warrants, there are
no preemptive or other subscription rights, conversion rights, or redemption
or sinking fund provisions with respect to the shares of Common Stock.
Preferred Stock
The Company's authorized capital stock includes 10 million shares of
Preferred Stock, none of which are outstanding. The Preferred Stock may be
issued in series, and shares of each series will have such rights and
preferences as are fixed by the Board of Directors in resolutions authorizing
the issuance of that particular series. In designating any series of Preferred
Stock, the Board of Directors may, without further action by the holders of
Common Stock, fix the number of shares constituting that series and fix the
dividend rights, dividend rate, conversion rights, voting rights (which may be
greater or lesser than the voting rights of the Common Stock), rights and terms
of redemption (including any sinking fund provisions), and the liquidation
preferences of such series of Preferred Stock. Holders of any series of
Preferred Stock, when and if issued, may have priority claims to dividends and
to any distributions upon liquidation of the Company, and other preferences over
the holders of the Common Stock.
Listing
The Company's Common Stock was listed on The Nasdaq SmallCap Market on
September 19, 1991 and thereafter on the Nasdaq National Market until de-listed
therefrom in mid 1994. The Company re-listed its Common Stock on The Nasdaq
SmallCap Market on July 1, 1996, under the symbol "CICI." Prior to such
re-listing, the bid and asked quotations for Common Stock were reported on the
OTC Bulletin Board under the trading symbol "CICI."
-13-
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following information, filed by the Company with the Commission
pursuant to the Exchange Act, is incorporated by reference in this Prospectus:
1. The Company's report on Form 10-K for the year ended December 31,
1995, as amended (the "1995 Annual Report").
2. The Company's reports on Form 10-Q for each of the quarters
ended March 31, June 30, and September 30, 1996.
3. The Company's report on Form 8-K dated June 27, 1996.
4. The Company's report on Form 8-K dated August 8, 1996, as
amended by Form 8-K/A dated August 14, 1996.
In addition, all documents filed by the Company pursuant to Section 13, 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the Offering, shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the respective dates
of filing of such documents. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any subsequently filed document which also is
or is deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of any such
person, a copy of any or all of the documents incorporated by reference (other
than exhibits to such documents). Requests for such copies should be directed
to Communication Intelligence Corporation, 275 Shoreline Drive, Suite 520,
Redwood Shores, CA 94065, Attention: Secretary.
LEGAL MATTERS
The validity of the Shares being offered hereby will be passed upon for the
Company by Baer Marks & Upham LLP, New York, New York.
EXPERTS
The consolidated financial statements as of December 31, 1995 and for
the year ended December 31, 1995 incorporated in this Prospectus by reference
to the Annual Report on Form 10-K/A of Communication Intelligence Corporation
for the year ended December 31, 1995 have been so incorporated in reliance
upon the report of Price Waterhouse LLP, independent accountants, given on
the authority of said firm as experts in accounting and auditing.
The consolidated financial statements and schedules of the Communication
Intelligence Corporation for the years ended December 31, 1994 and 1993
appearing in the Company's Annual Report (Form 10-K) for the year ended December
31, 1995, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference.
-14-
<PAGE>
Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on
Form S-3 (the "Registration Statement") under the Securities Act, with respect
to the Shares offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement, certain items of which are contained in the exhibits and
schedules thereto as permitted by the rules and regulations of the Commission.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document referred to are not necessarily complete. With respect to
each such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files certain periodic reports, proxy
statements and other information with the Commission. Reports and other
information filed by the Company may be inspected and copied at the public
reference facilities maintained by the Commission at its principal offices
located at Judiciary Plaza, 450 Fifth Street, Room 1024, Washington, D.C. 20549,
and at the following regional offices of the Commission; offices at Seven World
Trade Center, 13th Floor, New York, New York 10048, and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60601. Copies of such material may be obtained by
mail from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. In addition, material filed
by the Company can be inspected at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20002.
-15-
<PAGE>
======================================== ============================
No dealer, salesperson or any other
person has been authorized to give any
information or to make any
representation not contained or
incorporated by reference in this 6,367,500 Shares of
Prospectus in connection with the offer Common Stock
made hereby, and, if given or made, such
information or representation must not
be relied upon as having been authorized
by the Company. This Prospectus does
not constitute an offer to sell or a
solicitation of an offer to buy any COMMUNICATION INTELLIGENCE
securities other than the securities CORPORATION
specifically offered hereby or an offer
to sell or a solicitation of an offer to
buy in any jurisdiction in which such
offer or solicitation is not authorized
or in which the person making such offer
or solicitation is not qualified to do
so or to any person in any circumstances
---------------------
in which such offer or solicitation is
unlawful. Neither the delivery of this
Prospectus nor any sale made hereunder PROSPECTUS
shall, under any circumstances, create
---------------------
any implication that the information
contained herein is correct as of any
time subsequent to the date hereof, or
that there has been no change in the
affairs of the Company since the date
hereof.
, 1996
TABLE OF CONTENTS
Page
----
Risk Factors . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . 8
Use of Proceeds . . . . . . . . . . . 9
Selling Securityholders . . . . . . . 9
Plan of Distribution . . . . . . . . 11
Description of Capital Stock . . . . 13
Incorporation of Certain Documents by
Reference . . . . . . . . . . . . . 14
Legal Matters . . . . . . . . . . . . 14
Experts . . . . . . . . . . . . . . . 14
Available Information . . . . . . . . 15
___________________________
======================================== ==================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the expenses to be borne by the Company in
connection with the sale and distribution of the Shares offered hereby. None of
the expenses will be borne by the selling shareholders named in the Prospectus,
each of which shall be borne by the Registrant. The amounts shown are
estimates, except for the Securities and Exchange Commission filing fee.
Securities and Exchange Commission
Filing Fee . . . . . . . . . . . $10,713
Legal Fees and Expenses . . . . . . $30,000
Accounting Fees and Expenses. . . . $15,000
------
Miscellaneous . . . . . . . . . . .
$ 9,287
Total fees and expenses . . . $65,000
------
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law, among other things,
and subject to certain conditions, authorizes the Company to indemnify its
officers and directors against certain liabilities and expenses incurred by such
persons in connection with claims made by reason of their being such an officer
or director. The Certificate of Incorporation, as amended, and By-laws of the
Company provide for indemnification of its officers and directors to the full
extent authorized by law.
Except as hereinafter set forth, there is no charter provision, by-law,
contract, arrangement or statute under which any director or officer of the
Company is insured or indemnified in any manner against any liability which he
may incur in his capacity as such.
Article IX and Article X of the Corporation's Articles of Incorporation
provide as follows:
"The Corporation shall, to the fullest extent to which it is empowered to
do so by the Delaware General Corporation Law or any other applicable laws as
may from time to time be in effect, indemnify any present or former director or
officer of the Corporation or any person who may have served at the request of
the Corporation as a director or officer of another corporation in which the
Corporation owns shares of capital stock or of which it is a creditor, against
all expenses or costs actually and necessarily incurred by the director or
officer in connection with the defense of any action, suit or proceeding to
which he or she is made a party by reason of being or having been a director or
officer. The indemnification herein provided shall also cover expenditures
incurred in good faith in anticipation of, or in preparation for, threatened or
proposed litigation. It shall also cover the good-faith settlement of any
action, suit or proceeding, whether formally instituted or not. No
indemnification may be authorized for any officer adjudicated to be liable for
negligence or misconduct in the performance of his or her corporation duties.
No indemnification may be authorized for any director adjudicated to be liable
for misconduct in the performance of his or her corporate duties. The
indemnification herein provided shall not be deemed exclusive of any other
rights to which a director or officer may be entitled under any by-
II-1
<PAGE>
law, agreement, vote of stockholders, or otherwise. Further, if any provision
of this Article shall be held to be invalid or unenforceable, the validity and
enforceability of the remaining provisions shall not in any way be affected or
impaired."
"Notwithstanding any provision of the Articles of Incorporation or By-Laws
of this Corporation to the contrary, no director of the Corporation shall be
liable to the Corporation or its stockholders for monetary damages for an act or
omission in the director's capacity as a director, except for liability for
(i) any breach of a director's duty of loyalty to the Corporation or its
stockholders, (ii) an act or omission not in good faith or which involves
intentional misconduct or a knowing violation of law, (iii) any transaction from
which a director received an improper benefit, whether or not the benefit
resulted from an action taken within the scope of the director's office, (iv) an
act or omission for which the liability of a director is expressly provided for
by statute, or (v) an act related to an unlawful stock repurchase or payment of
a dividend.
If the Delaware General Corporation Law is hereafter amended to authorize
the further elimination or limitation of the liability of directors, then the
liability of a director of the Corporation, in addition to the limitation of
personal liability provided herein, shall be limited to the fullest extent
permitted by the amended Delaware General Corporation Law. Any repeal or
modification of this paragraph by the stockholders of the Corporation shall be
prospective only, and shall not adversely affect any limitation on the personal
liability of a director of the Corporation existing at the time of such repeal
or modification. Further, if any provision of this Article shall be held to be
invalid or unenforceable, the validity and enforceability of the remaining
provisions shall not in any way be affected or impaired."
Item 16. Exhibits
The following exhibits are being filed herewith:
Exhibits
*5.1 Opinion of Baer Marks & Upham LLP.
*23.1 Consent of Baer Marks & Upham LLP (contained in their
opinion constituting Exhibit 5.1).
23.2 Consent of Price Waterhouse LLP, Independent Accountants
23.3 Consent of Ernst & Young LLP, Independent Auditors
*24.1 Power of Attorney
________________________
* Previously filed.
II-2
<PAGE>
Item 17. Undertakings
The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to include any material
information with respect to the plan of distribution not previously disclosed in
this Registration Statement or any material change to such information in this
Registration Statement.
(2) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(3) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(4) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the Offering.
(5) That for purposes of determining any liability under the Securities
Act each filing of the Company's annual report pursuant to Section 13(a) or
15(d) of the Exchange Act that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against the public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in New York, State of New York, November 18, 1996.
COMMUNICATION INTELLIGENCE
CORPORATION
By:/s/ James Dao
---------------------------------------
James Dao, Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
Signature Title Date
--------- ----- ----
* Director November 18, 1996
- ------------------------------
George P. Clayson III
* Vice President, November 18, 1996
- ------------------------------
Francis V. Dane Secretary and
Treasurer
(Principal
Financial and
Accounting
Officer)
* Chairman of the November 18, 1996
- ------------------------------
James Dao Board and Chief
Executive Officer
(Principal
Executive Officer)
* Director, November 18, 1996
- ------------------------------
Michael McFarland President and
Chief Operating
Officer
* Director November 18, 1996
- ------------------------------
Philip Sassower
II-4
<PAGE>
* Director November 18, 1996
- ------------------------------
Donald R. Scheuch
* Director November 18, 1996
- ------------------------------
Chien-Bor Sung
*By /s/ Francis V. Dane
--------------------------
Attorney-in-Fact
II-5
<PAGE>
Index to Exhibits filed with
Form S-3 Registration Statement
Exhibit Page
------- ----
Number Description Number
------ ----------- ------
* 5.1 Opinion of Baer Marks & Upham LLP
* 23.1 Consent of Baer Marks & Upham LLP
(contained in their opinion
constituting Exhibit 5.1).
23.2 Consent of Price Waterhouse LLP,
Independent Accountants
23.3 Consent of Ernst & Young LLP,
Independent Auditors
* 24.1 Power of Attorney
____________________
* Previously filed
II-6
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report
dated November 1, 1996, appearing on page 22 of Communiction Intelligence
Corporation's Annual Report on Form 10-K/A for the year ended December 31,
1995. We also consent to the reference to us under the heading "Experts" in
such Prospectus.
PRICE WATERHOUSE LLP
San Jose, California
November 12, 1996
<PAGE>
EXHIBIT 23.3
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 2 of Registration Statement (Form S-3 No.333-4711) and related
Prospectus of Communication Intelligence Corporation for the registration of
6,367,500 shares of its common stock and to the incorporation by reference
therein of our report dated February 28, 1995, with respect to the consolidated
financial statements and schedule of Communication Intelligence Corporation
(for the years ended December 31, 1994 and 1993) included in its Annual Report
(Form 10-K/A) for the year ended December 31, 1995, filed with the Securities
and Exchange Commission.
ERNST & YOUNG LLP
Palo Alto, California
November 12, 1996
