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        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 18pt; FONT-FAMILY: Times New Roman">SECURITIES
  AND EXCHANGE COMMISSION</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Washington,
  DC 20549</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 18pt; FONT-FAMILY: Times New Roman">FORM
  8-K</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">CURRENT
  REPORT</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">PURSUANT
  TO SECTION 13 OR 15(D) OF THE</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">SECURITIES
  EXCHANGE ACT OF 1934</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Date
  of Report (Date of earliest event reported)&#160;&#160;May 28, 2009</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 18pt; FONT-FAMILY: Times New Roman">Communication
  Intelligence Corporation</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Exact
  Name of Registrant as Specified in its Charter)</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div>
          <table cellpadding="0" cellspacing="0" width="100%">
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                <td valign="top" width="24%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Delaware</font></div>
                </td>
                <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
                <td valign="top" width="24%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">0-19301</font></div>
                </td>
                <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
                <td valign="top" width="24%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">94-2790442</font></div>
                </td>
              </tr>
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                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(State
        or Other Jurisdiction</font></div>
                </td>
                <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
                <td valign="top" width="24%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(Commission
        File Number)</font></div>
                </td>
                <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
                <td valign="top" width="24%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(I.R.S.
        Employer</font></div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="24%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">of
        Incorporation)</font></div>
                </td>
                <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
                <td valign="top" width="24%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
                <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
                <td valign="top" width="24%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Identification
        No.)</font></div>
                </td>
              </tr>
          </table>
        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">275
  Shoreline Drive, Suite 500</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Redwood
  Shores, CA 94065</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Address
  of Principal Executive Offices)</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Zip
  Code)</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(650)
  802-7888</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Registrant&#8217;s
  Telephone Number, Including Area Code)</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Not
  Applicable</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Former
  name or former address, if changed from last report)</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;&#160;&#160;&#160;&#160;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 (<font style="DISPLAY: inline; FONT-STYLE: italic">see </font>General
  Instruction A.2. below):</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline;" face="Wingdings">o</font> Written communication
  pursuant to Rule&#160;425 under the Securities Act (17 CFR 230.425)</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline;" face="Wingdings">o</font> Soliciting material
  pursuant to Rule&#160;14a-12 under the Exchange Act (17 CFR
  240.14a-12)</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline;" face="Wingdings">o</font> Pre-commencement
  communications pursuant to Rule&#160;14d-2(b) under the Exchange Act (17 CFR
  240.14d-2(b))</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline;" face="Wingdings">o</font> Pre-commencement
  communications pursuant to Rule&#160;13e-4(c) under the Exchange Act (17 CFR
  240.13e-4c))</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Item
  1.01&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Entry
  into a Material Definitive Agreement</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Item
  2.03&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Creation
  of a Direct Financial Obligation or an Obligation under an Off- Balance Sheet
  Arrangement of a Registrant</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Item
  3.02&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Unregistered
  Sales of Equity Securities</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Item
  5.02(e)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Compensatory
  Arrangements of Certain Officers</font></div>
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        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Summary of New Financing
  Transaction</font></font></div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On May
  28, 2009, Communications Intelligence Corporation (the &#8220;Company&#8221;) executed
  documents and closed a financing transaction under which the Company raised
  capital through the issuance of new secured indebtedness and equity and modified
  the terms of certain existing secured indebtedness and equity (collectively, the
  &#8220;New Financing Transaction&#8221;).</font></div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In the
  New Financing Transaction, the Company received an aggregate of $1.1 million
  from Phoenix Venture Fund LLC (&#8220;Phoenix&#8221;), Michael Engmann and certain entities
  controlled by Mr. Engmann (each a &#8220;New Loan&#8221; and collectively, the &#8220;New Loans&#8221;)
  through the issuance of secured promissory notes (each a &#8220;New Note&#8221; and
  collectively, the &#8220;New Notes&#8221;) (Phoenix, Mr. Engmann and certain entities
  controlled by Mr. Engmann are referred to herein individually as a &#8220;New Lender&#8221;
  and collectively as the &#8220;New Lenders&#8221;).&#160;&#160;In conjunction with the New
  Loans, the Company also issued warrants to the New Lenders to purchase an
  aggregate of 18,333,333 shares of Common Stock (these warrants, together with
  warrants issued as replacements for certain existing warrants being canceled in
  the New Financing Transaction as described in greater detail below, each a &#8220;New
  Warrant&#8221; and collectively the &#8220;New Warrants&#8221;).&#160;&#160;Additionally, the
  Company paid $22,000 and issued a warrant to SG Phoenix LLC, an affiliated
  entity of Phoenix, to purchase 3,947,917 shares of Common Stock in connection
  with administrative services provided by SG Phoenix (the &#8220;Administrative Agent
  Warrant&#8221;).&#160;&#160;The Company also modified the maturity date for
  approximately $3.7 million of existing Company secured indebtedness, extending
  the maturity date from June 5, 2010 to December 31, 2010.&#160;&#160;Lastly, the
  Company modified the warrant coverage for the Company&#8217;s indebtedness from its
  previous financing transaction consummated on June 5, 2008, such that warrants
  previously exercisable for an aggregate of 26,494,666 shares of the Company&#8217;s
  Common Stock at an exercise price of fourteen cents ($0.14) per share have been
  canceled, and replaced by warrants now exercisable for an aggregate of
  61,820,884 shares of the Company&#8217;s Common Stock at an exercise price of six
  cents ($0.06) per share (these replacement warrants are also referred to herein
  as &#8220;New Warrants&#8221;).&#160;&#160;The Company may use the proceeds from the New
  Loans to pay the Company&#8217;s indebtedness and accrued interest on that
  indebtedness, for working capital and general corporate purposes, in each case
  in the ordinary course of business, and to pay fees and expenses in connection
  with the New Financing Transaction, which are expected&#160;not to
  exceed&#160;$200,000.</font></div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Summary of Previous
  Financing Transaction</font></font></div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On June
  5, 2008, the Company entered into a Credit Agreement (the &#8220;Credit Agreement&#8221;)
  and a Pledge and Security Agreement (the &#8220;Pledge Agreement&#8221;), with Phoenix,
  Michael Engmann and Ronald Goodman (each a &#8220;Lender&#8221; and collectively the
  &#8220;Lenders&#8221;).&#160;&#160;Under the terms of the Credit Agreement, the Company
  received an aggregate of three million dollars ($3,000,000) and refinanced
  $637,500 of existing indebtedness and accrued interest on that indebtedness
  (individually, a &#8220;Loan&#8221; and collectively, the &#8220;Loans&#8221;).&#160;&#160;The Loans
  were represented by secured promissory notes (each a &#8220;Note&#8221; and collectively,
  the &#8220;Notes&#8221;), which provided for interest at eight percent (8%) per annum and
  which, at the option of the Company, could be paid in cash or in kind and
  matured two (2) years from issue date, or June 5, 2010.&#160;&#160;Under the
  terms of the Pledge Agreement, the Company and its subsidiary, CIC Acquisition
  Corp., granted the Lenders a first priority security interest in and lien upon
  the collateral, as set forth in the Pledge Agreement, and the Company granted to
  Lenders a pledge of all outstanding shares of capital stock of CIC Acquisition
  Corp.</font></div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Under the
  terms of the Credit Agreement and in partial consideration for the Lenders&#8217;
  respective Loans made pursuant to the terms of the Credit Agreement as described
  above, the Company issued to each Lender a warrant to purchase up to the number
  of shares of the Company&#8217;s Common Stock obtained by dividing the amount of such
  Lender&#8217;s Loan by 0.14 (each a &#8220;Warrant&#8221; and collectively, the
  &#8216;Warrants&#8221;).&#160;&#160;A total of 25,982,143 shares of the Company&#8217;s Common
  Stock were issuable upon exercise of the Warrants.&#160;&#160;The Warrants
  issued were exercisable until June 30, 2011, with an exercise price of fourteen
  cents ($0.14) per share. The Company had the ability under the Credit Agreement
  to issue additional Warrants if the Company exercised its option to make
  interest payments on the Loans in kind.</font></div>
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        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
  connection with the closing on June 5, 2008, the Company also entered into a
  Securities Purchase Agreement (the &#8220;Purchase Agreement&#8221;) and a Registration
  Rights Agreement (the &#8220;Registration Rights Agreement&#8221;).&#160;&#160;Under the
  Purchase Agreement, in exchange for the cancellation of another $995,000 in
  principal and $45,000 of interest accrued thereon of the Company&#8217;s then-existing
  indebtedness, the Company issued to the holders of such indebtedness (each an
  &#8220;Investor&#8221; and collectively, the &#8220;Investors&#8221;) an aggregate of<font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font>1,040,000 shares of the
  Company&#8217;s Series A Cumulative Convertible Preferred Stock (the &#8220;Preferred
  Shares&#8221;).&#160;&#160;Under the terms of the Registration Rights Agreement, the
  Company was obligated to prepare and file with the Securities and Exchange
  Commission (the &#8220;Commission&#8221;) a registration statement under the Securities Act
  of 1933, as amended, covering the resale of the shares of Common Stock issuable
  upon conversion of the Preferred Shares and issuable upon exercise of the
  Warrants.</font></div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Amendments to Agreements,
  Notes, and Warrants from Previous Financing Transaction in New Financing
  Transaction</font></font></div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
  connection with the New Financing Transaction, the Credit Agreement from the
  previous financing transaction has been amended, such that the Notes for the
  Loans have been canceled and the New Notes have been issued both to replace the
  canceled Notes and to evidence the New Loans.&#160;&#160;Thus, for those New
  Notes being issued to Lenders from the previous financing transaction, the
  principal amount of the New Note for each such Lender will include both the
  outstanding principal amount for the existing Loan for such Lender and the
  principal amount of any New Loan.&#160;&#160;New Notes were also issued to
  parties who did not participate in the previous financing
  transaction.&#160;&#160;The New Notes bear interest at eight percent (8%) per
  annum which, at the option of the Company, may be paid in cash or in
  kind.&#160;&#160;The canceled Notes had a maturity date of June 5, 2010 and the
  New Notes have a maturity date of December 31, 2010.</font></div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
  described above, in connection with the New Financing Transaction, the Company
  issued to each holder of a New Note a New Warrant to purchase up to the number
  of shares of the Company&#8217;s Common Stock obtained by dividing the principal
  amount of the New Loan by 0.06.&#160;&#160;Based on the Company having received
  $1.1 million in New Loans from Phoenix, Michael Engmann and certain entities
  controlled by Mr. Engmann, the Company issued New Warrants to purchase an
  aggregate of 18,333,333 shares.&#160;&#160;&#160;The New Warrants will be
  exercisable until June 30, 2012.&#160; In addition, as described above, the
  Company issued to each Lender in the previous financing transaction a Warrant to
  purchase the number of shares of the Company&#8217;s Common Stock obtained by dividing
  the amount of such Lender&#8217;s Loan by 0.14.&#160; As provided for under the Credit
  Agreement, the Company also exercised its option to pay an aggregate amount of
  $71,754 in accrued interest on the Loans in kind for the Company&#8217;s fiscal
  quarter ended March 31, 2009, and issued the warrants to purchase an aggregate
  of 512,523 shares at an exercise price of $0.14 per share on such amount (each a
  &#8220;PIK Warrant&#8221; and collectively, the &#8220;PIK Warrants&#8221;).&#160;&#160;In connection
  with the New Financing Transaction, the existing warrant coverage has been
  amended, such that the existing Warrants and PIK Warrants have now been
  canceled, and New Warrants have been issued as replacement for the canceled
  Warrants and PIK Warrants.&#160;&#160;The canceled Warrants and PIK Warrants,
  which were previously exercisable for an aggregate of 26,494,666 shares of the
  Company&#8217;s Common Stock at an exercise price of fourteen cents ($0.14) per share,
  have been canceled and replaced by New Warrants to purchase an aggregate of
  61,820,884 shares of the Company&#8217;s Common Stock at an exercise price of six
  cents ($0.06) per share.&#160;&#160;These New Warrants are partially exercisable
  from May 28, 2009 to June 30, 2009 with respect to an aggregate of 25,982,143
  shares of Common Stock, which is the number of shares represented by the
  original Warrants from the previous financing transaction, and fully exercisable
  from June 30, 2009 until June 30, 2012.&#160;&#160;The aggregate number of
  shares issuable upon exercise of the New Warrants and the Administrative Agent
  Warrant is 84,102,134.</font></div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
  connection with the New Financing Transaction, the Registration Rights Agreement
  from the previous financing transaction has also been amended to provide the New
  Lenders and Lenders certain rights to demand registration of shares issuable
  upon exercise of New Warrants.</font></div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
        <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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            </div>
            <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Solicitation of Stockholder
  Approval for Increase in Number of Authorized Shares of Common Stock Under
  Company&#8217;s Certificate of Incorporation</font></font></div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
  Company is seeking stockholder approval to increase the number of authorized
  shares of Common Stock in order to allow for the exercise of all New Warrants
  and the Administrative Agent Warrant at its annual meeting of stockholders to be
  held on June&#160;30,<font style="DISPLAY: inline; FONT-SIZE: 10pt">&#160;</font>2009.&#160;&#160;The
  Company&#8217;s proxy statement issued in connection with this meeting was mailed to
  stockholders on or about May&#160;28,&#160;2009.&#160;&#160;In the event that
  the stockholders do not approve the increase in the number of authorized shares
  of Common Stock as requested by the Company in the proxy statement, it will
  result in the occurrence of an event of default under the Credit Agreement, as
  amended.</font></div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Transactions With Related
  Persons</font></font></div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Certain
  parties to the Financing Transactions have a pre-existing relationship with the
  Company and, with respect to such parties, the Financing Transactions may be
  considered related party transactions.&#160;&#160;As described above, Phoenix,
  Michael Engmann and certain entities controlled by Mr. Engmann are New Lenders
  in the Company&#8217;s New Financing Transaction.&#160;&#160;Phoenix and Mr. Engmann
  were also Lenders in the Company&#8217;s previous financing transaction.</font></div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Under the
  Credit Agreement, as amended, the Company is prohibited from selling or
  otherwise disposing of material properties, assets or rights of the Company
  without the consent of the Lenders and New Lenders holding a majority of the
  aggregate principal amount of the Loans and New Loans, and Phoenix by itself
  holds such an amount of Loans and New Loans.&#160;&#160;In connection with the
  New Financing Transaction, New Warrants to purchase an aggregate of 55,513,750
  shares of the Company&#8217;s Common Stock have been issued to Phoenix both in
  connection with Phoenix&#8217;s New Loan and as replacements for canceled
  Warrants.&#160;&#160;The Company also issued the Administrative Agent Warrant to
  SG Phoenix LLC, an affiliated entity of Phoenix, to purchase an additional
  3,947,917 shares of Common Stock.&#160;&#160;Phoenix&#8217;s New Warrants and the
  Administrative Agent Warrant are exercisable until June 30,
  2012.&#160;&#160;Lastly, in connection with the New Financing Transaction, SG
  Phoenix received a fee of $22,000 and the Company will pay certain legal fees
  and expenses of Phoenix&#8217;s law firm, not expected to exceed
  $128,000.</font></div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Prior to
  these transactions, in August 2007, the Company entered into a Securities
  Purchase and Registration Rights Agreement (the &#8220;2007 Purchase Agreement&#8221;) and
  related agreements and documents with Phoenix.&#160;&#160;Under the terms of
  that transaction, the Company issued 21,500,000 shares of the Company&#8217;s Common
  Stock at a price per share of approximately $0.14, for an aggregate purchase
  price of $3,000,000. An advisory fee of $250,000 was paid to the managing member
  of Phoenix for services rendered in connection with the transaction. The Company
  was permitted under the terms of the 2007 Purchase Agreement to use up to
  $1,400,000 of the net proceeds to repay outstanding indebtedness.&#160;&#160;As
  of the date hereof, Phoenix, directly or through one or more affiliates, owns
  21,500,000 shares of Common Stock.&#160;&#160;Pursuant to the terms of the 2007
  Purchase Agreement, Phoenix has the right to appoint two Board
  observers.&#160;&#160;Phillip Sassower, a principal of Phoenix, has been
  appointed by Phoenix as an observer.</font></div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Michael
  Engmann and certain entities controlled by Mr. Engmann are holders of the
  Company&#8217;s New Notes.&#160;&#160;In the previous financing transaction, a portion
  of the Company&#8217;s indebtedness held by Mr. Engmann and certain entities
  controlled by Mr. Engmann, including accrued and unpaid interest on such
  indebtedness, was exchanged for Preferred Shares. As described above, the
  remainder of the indebtedness held by Mr. Engmann prior to the previous
  financing transaction, including accrued and unpaid interest through May 31,
  2008 on the portion of such indebtedness not converted to Preferred Shares, was
  refinanced in the previous financing transaction pursuant to the Credit
  Agreement.&#160;&#160;The debt so exchanged or refinanced in the Company&#8217;s
  previous financing transaction was originally issued in four transactions
  between August 2006 and June 2007 pursuant to certain Note and Warrant Purchase
  Agreements. The debt so exchanged, and the related Note and Warrant Purchase
  Agreements, were terminated in connection with the previous financing
  transaction.&#160;&#160;In addition to the New Notes issued to Mr. Engmann and
  certain entities controlled by Mr. Engmann in the New Financing Transaction, Mr.
  Engmann and certain entities controlled by Mr. Engmann have been issued New
  Warrants to acquire up to 12,292,606 shares in the aggregate.&#160;&#160;These
  New Warrants are exercisable until June 30, 2012.</font></div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
        <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
          <div id="FTR">
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            </div>
          </div>
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            <div style="WIDTH: 100%; TEXT-ALIGN: center">
            </div>
            <div style="WIDTH: 100%; TEXT-ALIGN: center">
              <hr style="COLOR: black" noshade size="2">
            </div>
          </div>
          <div id="HDR">
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            </div>
          </div>
        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Salary Reduction for
  Company&#8217;s Executive Officers</font>.</font></div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Under the
  amendment to the Credit Agreement entered into in connection with the New
  Financing Transaction and certain related agreements between SG Phoenix and the
  Company, the Company proposed to the Lenders and the Lenders agreed that the
  Company would reduce the aggregate amount of salaries for the Company&#8217;s
  executive officers and all other employees by at least 13%.&#160;&#160;All
  executive officers and employees volunteered to participate in order to achieve
  that percentage reduction.&#160;&#160;The salary reductions were implemented for
  the pay period&#160;that commenced on June 1, 2009. These reductions will remain
  in effect until the Company has, for two consecutive fiscal quarters, positive
  cash flows from operating activities, as determined by the Company&#8217;s
  consolidated statements of cash flows filed with the Commission in connection
  with the Company&#8217;s quarterly or annual reports, as the case may be. The Company
  may grant to each of its executive officers or employees whose salary has been
  reduced options to purchase Common Stock of the Company with an aggregate value
  equivalent to the amount of the salary reduction for each such executive officer
  or employee, provided that such options have an exercise price equal to the
  closing market price of the Common Stock of the Company on the date of grant and
  are exercisable for not longer than three (3) years from the date of
  grant.</font></div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
  Company has agreed to the following reductions in salaries for its executive
  officers:</font></div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
        <div>
          <table cellpadding="0" cellspacing="0" width="100%">
              <tr>
                <td valign="middle" width="16%" style="BORDER-TOP: black 0.5pt solid; BORDER-BOTTOM: black 2px solid"><font style="FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">NAME
        OF EXECUTIVE OFFICER</font></td>
                <td valign="bottom" width="13%" style="BORDER-TOP: black 0.5pt solid; BORDER-BOTTOM: black 2px solid">
                  <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">CURRENT
        ANNUAL ($)</font></font></div>
                </td>
                <td valign="bottom" width="15%" style="BORDER-TOP: black 0.5pt solid; BORDER-BOTTOM: black 2px solid">
                  <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline">AFTER REDUCTION ($)</font></font></div>
                </td>
                <td valign="middle" width="16%" style="BORDER-TOP: black 0.5pt solid; BORDER-BOTTOM: black 2px solid">
                  <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline">AMOUNT OF</font></font></div>
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline">REDUCTION ($)</font></font></div>
                </td>
                <td valign="middle" width="16%" style="BORDER-TOP: black 0.5pt solid; BORDER-BOTTOM: black 2px solid">
                  <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline">REDUCTION</font></font></div>
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline">PERCENTAGE</font></font></div>
                </td>
              </tr>
              <tr>
                <td align="left" valign="top" width="16%" style="BORDER-BOTTOM: black 2px solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Guido
        DiGregorio</font></div>
                </td>
                <td align="right" valign="top" width="13%" style="BORDER-BOTTOM: black 2px solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">285,000.00</font></div>
                </td>
                <td align="right" valign="top" width="15%" style="BORDER-BOTTOM: black 2px solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">200,000.00</font></div>
                </td>
                <td align="right" valign="top" width="16%" style="BORDER-BOTTOM: black 2px solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">85,000.00</font></div>
                </td>
                <td align="right" valign="top" width="16%" style="BORDER-BOTTOM: black 2px solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">30%</font></div>
                </td>
              </tr>
              <tr>
                <td align="left" valign="top" width="16%" style="BORDER-BOTTOM: black 2px solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Russel
        Davis</font></div>
                </td>
                <td align="right" valign="top" width="13%" style="BORDER-BOTTOM: black 2px solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">165,000.00</font></div>
                </td>
                <td align="right" valign="top" width="15%" style="BORDER-BOTTOM: black 2px solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">148,500.00</font></div>
                </td>
                <td align="right" valign="top" width="16%" style="BORDER-BOTTOM: black 2px solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">16,500.00</font></div>
                </td>
                <td align="right" valign="top" width="16%" style="BORDER-BOTTOM: black 2px solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">10%</font></div>
                </td>
              </tr>
              <tr>
                <td align="left" valign="top" width="16%" style="BORDER-BOTTOM: black 2px solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Francis
        V. Dane</font></div>
                </td>
                <td align="right" valign="top" width="13%" style="BORDER-BOTTOM: black 2px solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">160,000.00</font></div>
                </td>
                <td align="right" valign="top" width="15%" style="BORDER-BOTTOM: black 2px solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">136,000.00</font></div>
                </td>
                <td align="right" valign="top" width="16%" style="BORDER-BOTTOM: black 2px solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">24,000.00</font></div>
                </td>
                <td align="right" valign="top" width="16%" style="BORDER-BOTTOM: black 2px solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">15%</font></div>
                </td>
              </tr>
              <tr>
                <td align="left" valign="top" width="16%" style="BORDER-BOTTOM: black 2px solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">TOTAL</font></div>
                </td>
                <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black 2px solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">610,000.00</font></div>
                </td>
                <td align="right" valign="top" width="15%" style="BORDER-BOTTOM: black 2px solid">
                  <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;484,500.00</font></div>
                </td>
                <td align="right" valign="bottom" width="16%" style="BORDER-BOTTOM: black 2px solid">
                  <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
                  <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">125,500.00</font></div>
                </td>
                <td align="right" valign="top" width="16%" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
              </tr>
          </table>
        </div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Item
  7.01&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Regulation
  FD Disclosure</font></div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On May
  29, 2009, the Company issued a press release announcing closing of the Financing
  Transaction.&#160;&#160;A copy of the press release is furnished as Exhibit 99.1
  to this Current Report on Form 8-K and incorporated by reference herein. In
  accordance with General Instruction B.2 of Form 8-K, Exhibit 99.1 hereto shall
  not be deemed to be &#8220;filed&#8221; for purposes of Section 18 of the Securities
  Exchange Act of 1934, as amended (the &#8220;Exchange Act&#8221;), or otherwise subject to
  the liabilities of that section, and shall not be incorporated by reference into
  any registration statement or other document filed under the Securities Act or
  the Exchange Act, except as shall be expressly set forth by specific reference
  in such filing.</font></div>
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  9.01&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Financial
  Statements and Exhibits</font></div>
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  Release dated May 29, 2009.</font></div>
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        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">SIGNATURES</font></div>
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  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.</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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        </font></td>
                <td align="left" valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
                <td align="left" valign="top" width="38%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
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                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Date:
        &#160;&#160;&#160;&#160;&#160;June 3, 2009</font></div>
                </td>
                <td align="left" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
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        Intelligence Corporation</font></div>
                </td>
              </tr>
              <tr>
                <td align="left" valign="top" width="51%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
                <td align="left" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
                <td align="left" valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
                <td align="left" valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
                <td align="left" valign="top" width="38%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
              </tr>
              <tr>
                <td valign="top" width="51%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
                <td align="left" valign="bottom" width="5%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
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                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">By:</font></div>
                </td>
                <td align="left" valign="bottom" width="3%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
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                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">/s/
        Francis V. Dane</font></div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="51%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
                <td align="left" valign="middle" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
                <td align="left" valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
                <td align="left" valign="middle" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
                <td align="left" valign="top" width="38%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
              </tr>
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        </font></td>
                <td align="left" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
                <td align="left" valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
                <td align="left" valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
                <td align="left" valign="top" width="38%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Francis
        V. Dane</font></div>
                </td>
              </tr>
              <tr>
                <td valign="top" width="51%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
                <td align="left" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
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        </font></td>
                <td align="left" valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
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        Financial Officer</font></div>
                </td>
              </tr>
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        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        </font></td>
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        </font></td>
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                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
                </td>
                <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;
        </font></td>
                <td valign="top" width="56%">
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                </td>
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        99.1</font></div>
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        Release dated May 29, 2009</font></div>
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metadata_documents: [{"type": "8-K", "sequence": "1", "filename": "phoenixfinancing_8-k.htm", "description": "FINANCING TRANSACTION", "secsgml_size_bytes": 64585}]
metadata_filer: {"company-data": {"conformed-name": "COMMUNICATION INTELLIGENCE CORP", "cik": "0000727634", "assigned-sic": "3577", "irs-number": "942790442", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-19301", "film-number": "09871701"}, "business-address": {"street1": "275 SHORELINE DR", "street2": "STE 500", "city": "REDWOOD SHORES", "state": "CA", "zip": "94065", "phone": "6508027888"}, "mail-address": {"street1": "275 SHORELINE DR", "street2": "STE 500", "city": "REDWOOD SHORES", "state": "CA", "zip": "94065"}}
text: phoenixfinancing_8-k.htm
  SECURITIES
  AND EXCHANGE COMMISSION
  Washington,
  DC 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)  May 28, 2009
  Communication
  Intelligence Corporation
  (Exact
  Name of Registrant as Specified in its Charter)
  Delaware
  0-19301
  94-2790442
  (State
        or Other Jurisdiction
  (Commission
        File Number)
  (I.R.S.
        Employer
  of
        Incorporation)
  Identification
        No.)
  275
  Shoreline Drive, Suite 500
  Redwood
  Shores, CA 94065
  (Address
  of Principal Executive Offices)
  (Zip
  Code)
  (650)
  802-7888
  (Registrant's
  Telephone Number, Including Area Code)
  Not
  Applicable
  (Former
  name or former address, if changed from last report)
  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 communication
  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 CFR
  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-4c))
  Item
  1.01                     Entry
  into a Material Definitive Agreement
  Item
  2.03                     Creation
  of a Direct Financial Obligation or an Obligation under an Off- Balance Sheet
  Arrangement of a Registrant
  Item
  3.02                     Unregistered
  Sales of Equity Securities
  Item
  5.02(e)                Compensatory
  Arrangements of Certain Officers
  Summary of New Financing
  Transaction
  On May
  28, 2009, Communications Intelligence Corporation (the "Company") executed
  documents and closed a financing transaction under which the Company raised
  capital through the issuance of new secured indebtedness and equity and modified
  the terms of certain existing secured indebtedness and equity (collectively, the
  "New Financing Transaction").
  In the
  New Financing Transaction, the Company received an aggregate of $1.1 million
  from Phoenix Venture Fund LLC ("Phoenix"), Michael Engmann and certain entities
  controlled by Mr. Engmann (each a "New Loan" and collectively, the "New Loans")
  through the issuance of secured promissory notes (each a "New Note" and
  collectively, the "New Notes") (Phoenix, Mr. Engmann and certain entities
  controlled by Mr. Engmann are referred to herein individually as a "New Lender"
  and collectively as the "New Lenders").  In conjunction with the New
  Loans, the Company also issued warrants to the New Lenders to purchase an
  aggregate of 18,333,333 shares of Common Stock (these warrants, together with
  warrants issued as replacements for certain existing warrants being canceled in
  the New Financing Transaction as described in greater detail below, each a "New
  Warrant" and collectively the "New Warrants").  Additionally, the
  Company paid $22,000 and issued a warrant to SG Phoenix LLC, an affiliated
  entity of Phoenix, to purchase 3,947,917 shares of Common Stock in connection
  with administrative services provided by SG Phoenix (the "Administrative Agent
  Warrant").  The Company also modified the maturity date for
  approximately $3.7 million of existing Company secured indebtedness, extending
  the maturity date from June 5, 2010 to December 31, 2010.  Lastly, the
  Company modified the warrant coverage for the Company's indebtedness from its
  previous financing transaction consummated on June 5, 2008, such that warrants
  previously exercisable for an aggregate of 26,494,666 shares of the Company's
  Common Stock at an exercise price of fourteen cents ($0.14) per share have been
  canceled, and replaced by warrants now exercisable for an aggregate of
  61,820,884 shares of the Company's Common Stock at an exercise price of six
  cents ($0.06) per share (these replacement warrants are also referred to herein
  as "New Warrants").  The Company may use the proceeds from the New
  Loans to pay the Company's indebtedness and accrued interest on that
  indebtedness, for working capital and general corporate purposes, in each case
  in the ordinary course of business, and to pay fees and expenses in connection
  with the New Financing Transaction, which are expected not to
  exceed $200,000.
  Summary of Previous
  Financing Transaction
  On June
  5, 2008, the Company entered into a Credit Agreement (the "Credit Agreement")
  and a Pledge and Security Agreement (the "Pledge Agreement"), with Phoenix,
  Michael Engmann and Ronald Goodman (each a "Lender" and collectively the
  "Lenders").  Under the terms of the Credit Agreement, the Company
  received an aggregate of three million dollars ($3,000,000) and refinanced
  $637,500 of existing indebtedness and accrued interest on that indebtedness
  (individually, a "Loan" and collectively, the "Loans").  The Loans
  were represented by secured promissory notes (each a "Note" and collectively,
  the "Notes"), which provided for interest at eight percent (8%) per annum and
  which, at the option of the Company, could be paid in cash or in kind and
  matured two (2) years from issue date, or June 5, 2010.  Under the
  terms of the Pledge Agreement, the Company and its subsidiary, CIC Acquisition
  Corp., granted the Lenders a first priority security interest in and lien upon
  the collateral, as set forth in the Pledge Agreement, and the Company granted to
  Lenders a pledge of all outstanding shares of capital stock of CIC Acquisition
  Corp.
  Under the
  terms of the Credit Agreement and in partial consideration for the Lenders'
  respective Loans made pursuant to the terms of the Credit Agreement as described
  above, the Company issued to each Lender a warrant to purchase up to the number
  of shares of the Company's Common Stock obtained by dividing the amount of such
  Lender's Loan by 0.14 (each a "Warrant" and collectively, the
  'Warrants").  A total of 25,982,143 shares of the Company's Common
  Stock were issuable upon exercise of the Warrants.  The Warrants
  issued were exercisable until June 30, 2011, with an exercise price of fourteen
  cents ($0.14) per share. The Company had the ability under the Credit Agreement
  to issue additional Warrants if the Company exercised its option to make
  interest payments on the Loans in kind.
  In
  connection with the closing on June 5, 2008, the Company also entered into a
  Securities Purchase Agreement (the "Purchase Agreement") and a Registration
  Rights Agreement (the "Registration Rights Agreement").  Under the
  Purchase Agreement, in exchange for the cancellation of another $995,000 in
  principal and $45,000 of interest accrued thereon of the Company's then-existing
  indebtedness, the Company issued to the holders of such indebtedness (each an
  "Investor" and collectively, the "Investors") an aggregate of
  1,040,000 shares of the
  Company's Series A Cumulative Convertible Preferred Stock (the "Preferred
  Shares").  Under the terms of the Registration Rights Agreement, the
  Company was obligated to prepare and file with the Securities and Exchange
  Commission (the "Commission") a registration statement under the Securities Act
  of 1933, as amended, covering the resale of the shares of Common Stock issuable
  upon conversion of the Preferred Shares and issuable upon exercise of the
  Warrants.
  Amendments to Agreements,
  Notes, and Warrants from Previous Financing Transaction in New Financing
  Transaction
  In
  connection with the New Financing Transaction, the Credit Agreement from the
  previous financing transaction has been amended, such that the Notes for the
  Loans have been canceled and the New Notes have been issued both to replace the
  canceled Notes and to evidence the New Loans.  Thus, for those New
  Notes being issued to Lenders from the previous financing transaction, the
  principal amount of the New Note for each such Lender will include both the
  outstanding principal amount for the existing Loan for such Lender and the
  principal amount of any New Loan.  New Notes were also issued to
  parties who did not participate in the previous financing
  transaction.  The New Notes bear interest at eight percent (8%) per
  annum which, at the option of the Company, may be paid in cash or in
  kind.  The canceled Notes had a maturity date of June 5, 2010 and the
  New Notes have a maturity date of December 31, 2010.
  As
  described above, in connection with the New Financing Transaction, the Company
  issued to each holder of a New Note a New Warrant to purchase up to the number
  of shares of the Company's Common Stock obtained by dividing the principal
  amount of the New Loan by 0.06.  Based on the Company having received
  $1.1 million in New Loans from Phoenix, Michael Engmann and certain entities
  controlled by Mr. Engmann, the Company issued New Warrants to purchase an
  aggregate of 18,333,333 shares.   The New Warrants will be
  exercisable until June 30, 2012.  In addition, as described above, the
  Company issued to each Lender in the previous financing transaction a Warrant to
  purchase the number of shares of the Company's Common Stock obtained by dividing
  the amount of such Lender's Loan by 0.14.  As provided for under the Credit
  Agreement, the Company also exercised its option to pay an aggregate amount of
  $71,754 in accrued interest on the Loans in kind for the Company's fiscal
  quarter ended March 31, 2009, and issued the warrants to purchase an aggregate
  of 512,523 shares at an exercise price of $0.14 per share on such amount (each a
  "PIK Warrant" and collectively, the "PIK Warrants").  In connection
  with the New Financing Transaction, the existing warrant coverage has been
  amended, such that the existing Warrants and PIK Warrants have now been
  canceled, and New Warrants have been issued as replacement for the canceled
  Warrants and PIK Warrants.  The canceled Warrants and PIK Warrants,
  which were previously exercisable for an aggregate of 26,494,666 shares of the
  Company's Common Stock at an exercise price of fourteen cents ($0.14) per share,
  have been canceled and replaced by New Warrants to purchase an aggregate of
  61,820,884 shares of the Company's Common Stock at an exercise price of six
  cents ($0.06) per share.  These New Warrants are partially exercisable
  from May 28, 2009 to June 30, 2009 with respect to an aggregate of 25,982,143
  shares of Common Stock, which is the number of shares represented by the
  original Warrants from the previous financing transaction, and fully exercisable
  from June 30, 2009 until June 30, 2012.  The aggregate number of
  shares issuable upon exercise of the New Warrants and the Administrative Agent
  Warrant is 84,102,134.
  In
  connection with the New Financing Transaction, the Registration Rights Agreement
  from the previous financing transaction has also been amended to provide the New
  Lenders and Lenders certain rights to demand registration of shares issuable
  upon exercise of New Warrants.
  Solicitation of Stockholder
  Approval for Increase in Number of Authorized Shares of Common Stock Under
  Company's Certificate of Incorporation
  The
  Company is seeking stockholder approval to increase the number of authorized
  shares of Common Stock in order to allow for the exercise of all New Warrants
  and the Administrative Agent Warrant at its annual meeting of stockholders to be
  held on June 30,
  2009.  The
  Company's proxy statement issued in connection with this meeting was mailed to
  stockholders on or about May 28, 2009.  In the event that
  the stockholders do not approve the increase in the number of authorized shares
  of Common Stock as requested by the Company in the proxy statement, it will
  result in the occurrence of an event of default under the Credit Agreement, as
  amended.
  Transactions With Related
  Persons
  Certain
  parties to the Financing Transactions have a pre-existing relationship with the
  Company and, with respect to such parties, the Financing Transactions may be
  considered related party transactions.  As described above, Phoenix,
  Michael Engmann and certain entities controlled by Mr. Engmann are New Lenders
  in the Company's New Financing Transaction.  Phoenix and Mr. Engmann
  were also Lenders in the Company's previous financing transaction.
  Under the
  Credit Agreement, as amended, the Company is prohibited from selling or
  otherwise disposing of material properties, assets or rights of the Company
  without the consent of the Lenders and New Lenders holding a majority of the
  aggregate principal amount of the Loans and New Loans, and Phoenix by itself
  holds such an amount of Loans and New Loans.  In connection with the
  New Financing Transaction, New Warrants to purchase an aggregate of 55,513,750
  shares of the Company's Common Stock have been issued to Phoenix both in
  connection with Phoenix's New Loan and as replacements for canceled
  Warrants.  The Company also issued the Administrative Agent Warrant to
  SG Phoenix LLC, an affiliated entity of Phoenix, to purchase an additional
  3,947,917 shares of Common Stock.  Phoenix's New Warrants and the
  Administrative Agent Warrant are exercisable until June 30,
  2012.  Lastly, in connection with the New Financing Transaction, SG
  Phoenix received a fee of $22,000 and the Company will pay certain legal fees
  and expenses of Phoenix's law firm, not expected to exceed
  $128,000.
  Prior to
  these transactions, in August 2007, the Company entered into a Securities
  Purchase and Registration Rights Agreement (the "2007 Purchase Agreement") and
  related agreements and documents with Phoenix.  Under the terms of
  that transaction, the Company issued 21,500,000 shares of the Company's Common
  Stock at a price per share of approximately $0.14, for an aggregate purchase
  price of $3,000,000. An advisory fee of $250,000 was paid to the managing member
  of Phoenix for services rendered in connection with the transaction. The Company
  was permitted under the terms of the 2007 Purchase Agreement to use up to
  $1,400,000 of the net proceeds to repay outstanding indebtedness.  As
  of the date hereof, Phoenix, directly or through one or more affiliates, owns
  21,500,000 shares of Common Stock.  Pursuant to the terms of the 2007
  Purchase Agreement, Phoenix has the right to appoint two Board
  observers.  Phillip Sassower, a principal of Phoenix, has been
  appointed by Phoenix as an observer.
  Michael
  Engmann and certain entities controlled by Mr. Engmann are holders of the
  Company's New Notes.  In the previous financing transaction, a portion
  of the Company's indebtedness held by Mr. Engmann and certain entities
  controlled by Mr. Engmann, including accrued and unpaid interest on such
  indebtedness, was exchanged for Preferred Shares. As described above, the
  remainder of the indebtedness held by Mr. Engmann prior to the previous
  financing transaction, including accrued and unpaid interest through May 31,
  2008 on the portion of such indebtedness not converted to Preferred Shares, was
  refinanced in the previous financing transaction pursuant to the Credit
  Agreement.  The debt so exchanged or refinanced in the Company's
  previous financing transaction was originally issued in four transactions
  between August 2006 and June 2007 pursuant to certain Note and Warrant Purchase
  Agreements. The debt so exchanged, and the related Note and Warrant Purchase
  Agreements, were terminated in connection with the previous financing
  transaction.  In addition to the New Notes issued to Mr. Engmann and
  certain entities controlled by Mr. Engmann in the New Financing Transaction, Mr.
  Engmann and certain entities controlled by Mr. Engmann have been issued New
  Warrants to acquire up to 12,292,606 shares in the aggregate.  These
  New Warrants are exercisable until June 30, 2012.
  Salary Reduction for
  Company's Executive Officers
  .
  Under the
  amendment to the Credit Agreement entered into in connection with the New
  Financing Transaction and certain related agreements between SG Phoenix and the
  Company, the Company proposed to the Lenders and the Lenders agreed that the
  Company would reduce the aggregate amount of salaries for the Company's
  executive officers and all other employees by at least 13%.  All
  executive officers and employees volunteered to participate in order to achieve
  that percentage reduction.  The salary reductions were implemented for
  the pay period that commenced on June 1, 2009. These reductions will remain
  in effect until the Company has, for two consecutive fiscal quarters, positive
  cash flows from operating activities, as determined by the Company's
  consolidated statements of cash flows filed with the Commission in connection
  with the Company's quarterly or annual reports, as the case may be. The Company
  may grant to each of its executive officers or employees whose salary has been
  reduced options to purchase Common Stock of the Company with an aggregate value
  equivalent to the amount of the salary reduction for each such executive officer
  or employee, provided that such options have an exercise price equal to the
  closing market price of the Common Stock of the Company on the date of grant and
  are exercisable for not longer than three (3) years from the date of
  grant.
  The
  Company has agreed to the following reductions in salaries for its executive
  officers:
  NAME
        OF EXECUTIVE OFFICER
  CURRENT
        ANNUAL ($)
  AFTER REDUCTION ($)
  AMOUNT OF
  REDUCTION ($)
  REDUCTION
  PERCENTAGE
  Guido
        DiGregorio
  285,000.00
  200,000.00
  85,000.00
  30%
  Russel
        Davis
  165,000.00
  148,500.00
  16,500.00
  10%
  Francis
        V. Dane
  160,000.00
  136,000.00
  24,000.00
  15%
  TOTAL
  610,000.00
  484,500.00
  125,500.00
  Item
  7.01                      Regulation
  FD Disclosure
  On May
  29, 2009, the Company issued a press release announcing closing of the Financing
  Transaction.  A copy of the press release is furnished as Exhibit 99.1
  to this Current Report on Form 8-K and incorporated by reference herein. In
  accordance with General Instruction B.2 of Form 8-K, Exhibit 99.1 hereto shall
  not be deemed to be "filed" for purposes of Section 18 of the Securities
  Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to
  the liabilities of that section, and shall not be incorporated by reference into
  any registration statement or other document filed under the Securities Act or
  the Exchange Act, except as shall be expressly set forth by specific reference
  in such filing.
  Item
  9.01                      Financial
  Statements and Exhibits
  (d)           Exhibits
  99.1           Press
  Release dated May 29, 2009.
  SIGNATURES
  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:
             June 3, 2009
  Communication
        Intelligence Corporation
  By:
  /s/
        Francis V. Dane
  Francis
        V. Dane
  Chief
        Financial Officer
  Exhibit Index
  Exhibit
  Description
  Exhibit
        99.1
  Press
        Release dated May 29, 2009