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



                                    FORM 10-Q


X   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

                 For the quarterly period ended: March 31, 2000

                                       OR

    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

                 For the transition period from ______ to ______

                        Commission File Number: 0-19301


                     COMMUNICATION INTELLIGENCE CORPORATION
             (Exact name of registrant as specified in its charter)

             Delaware                                    94-2790442
-------------------------------------     -------------------------------------
 (State or other jurisdiction of                       (I.R.S. Employer
  incorporation or organization)                      Identification No.)


          275 Shoreline Drive, Suite 500, Redwood Shores, CA 94065-1413
               (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code:    (650) 802-7888

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

                          Yes       X                No
                                 --------                  --------

Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.

                           Yes       X                No
                                  --------                  --------

           Number of shares outstanding of the issuer's Common Stock,
           as of May 1, 2000: 84,493,921.

  This Quarterly Report on Form 10-Q contains 18 pages of which this is page 1.

<PAGE>

                                      INDEX


PART I.  FINANCIAL INFORMATION


  Item 1.  Financial Statements                                        Page No.

  Condensed Consolidated Balance Sheets at March 31, 2000
   (unaudited) and December 31,1999.........................................3

  Condensed Consolidated Statements of Operations for the
    Three-Month Period Ended March 31, 2000 and 1999 (unaudited)............4

  Condensed Consolidated Statements of Stockholders' Equity for the
    Three-Month Period Ended March 31, 2000 (unaudited).....................5

  Condensed Consolidated Statements of Cash Flows for the
    Three-Month Period Ended March 31, 2000 and 1999 (unaudited)............6

  Notes to Condensed Consolidated Financial Statements......................7

  Item 2.  Management's Discussion and Analysis of Financial
            Condition and Results of Operations............................12

  Item 3.  Quantitative and Qualitative Disclosures About Market Risk......16

PART II.  OTHER INFORMATION

  Item 1.  Legal Proceedings...............................................16

  Item 2.  Change in Securities............................................16

  Item 3.  Defaults Upon Senior Securities.................................16

  Item 4.  Submission of Matters to a Vote of Security Holders.............16

  Item 5.  Other Information...............................................16

  Item 6.  Exhibits and Reports on Form 8-K

           (a)      Exhibits...............................................16

           (b)      Reports on Form 8-K....................................16

  Signatures...............................................................17

                                       2
<PAGE>

                     Communication Intelligence Corporation
                                 and Subsidiary
                      Condensed Consolidated Balance Sheets
                                 (In thousands)
<TABLE>
<CAPTION>

                                               March 31,          December 31,
                                                 2000                 1999
                                             -------------       -------------
                                               Unaudited
<S>                                            <C>                 <C>
Assets
Current assets:
     Cash and cash equivalents                  $  3,315            $  2,374
     Accounts receivable, net                      2,248               1,575
     Inventories                                      35                  81
     Prepaid expenses and other current assets       227                 175
                                              -------------      -------------
         Total current assets                      5,847               4,205

Note receivable from officer                         113                 135
Property and equipment, net                          315                 344
Other assets                                         254                 279
                                              -------------      -------------

         Total assets                           $  6,507            $  4,963
                                              =============      =============

Liabilities and stockholders' equity
Current liabilities:
     Short-term debt                            $      -            $     60
     Accounts payable                                503                 288
     Accrued compensation                            226                 268
     Other accrued liabilities                       323                 500
     Deferred revenue                              1,051                  35
                                              -------------      -------------
         Total current liabilities                 2,103               1,151

Long-term debt - related party                     1,358               1,338

Minority interest                                    124                 125

Commitments

Stockholders' equity:
     Common stock                                    842                 822
     Additional paid-in capital                   74,422              72,983
     Accumulated deficit                         (72,132)            (71,244)
     Cumulative translation adjustment              (210)               (212)
                                              -------------      -------------
         Total stockholders' equity                2,922               2,349
                                              =============      =============

         Total liabilities and
          stockholders' equity                  $  6,507            $  4,963
                                              =============      =============
</TABLE>

                            See accompanying notes.

                                       3
<PAGE>

                     Communication Intelligence Corporation
                                 and Subsidiary
                 Condensed Consolidated Statements of Operations
                                    Unaudited
                    (In thousands, except per share amounts)
<TABLE>
<CAPTION>
                                                     Three Months Ended
                                                         March 31,
                                         -------------------------------------
                                              2000                     1999
                                         -------------           -------------
<S>                                      <C>                     <C>
Revenues:
  Product                                  $  1,097               $    773
  License and royalty                           184                    218
  Development contracts                          96                    256
                                         -------------           -------------

      Total revenues                          1,377                  1,247

Operating costs and expenses:
  Cost of sales:
      Product                                   654                    471
      License and royalty                        21                     17
      Development contracts                      54                    142
  Research and development                      429                    297
  Sales and marketing                           592                    391
  General and administrative                    470                    417
                                          -------------          -------------

      Total operating costs and expenses      2,220                  1,735
                                          -------------          -------------

Loss from operations                           (843)                  (488)

Interest and other income (expense), net         (7)                     2

Interest expense                                (39)                     -

Minority interest                                 1                      2
                                          -------------          -------------

      Net loss                              $  (888)              $   (484)
                                          =============          =============

Basic loss per common share                 $  (0.01)             $   (0.01)
                                          =============          =============

Diluted loss per common share               $  (0.01)             $   (0.01)
                                          =============          =============
Weighted average common
 shares outstanding                           83,005                 79,111
                                          =============          =============
</TABLE>

                           See accompanying notes.

                                       4
<PAGE>

                     Communication Intelligence Corporation
                                 and Subsidiary
           Consolidated Statements of Changes in Stockholders' Equity
                                    Unaudited
                    (In thousands, except per share amounts)
<TABLE>
<CAPTION>
                                                                 Accum.
                                            Additional           Other
                                   Common    Paid-In    Accum.    Comp.
                                    Stock    Capital    Deficit   Loss     Total
<S>                                <C>      <C>        <C>       <C>      <C>
Balances as of December 31, 1999..  $  822  $ 72,983   $(71,244) $ (212)  $2,349
                                   ---------------------------------------------
Cashless Exercise of 300 warrants
  for 255 shares of Common Stock..       3         -          -       -       3
Exercise of options for 1,596
  shares of Common Stock..........      16     1,439          -       -   1,455
Exercise of 106 warrants for 106
  shares of Common Stock..........       1         -          -       -       1
Foreign currency translation
  adjustment......................       -         -          -       2       2

Net loss..........................       -         -       (888)      -    (888)
                                   ---------------------------------------------

Balances as of March 31, 2000.....  $  842  $ 74,422   $(72,132) $ (210)  $2,922
                                   =============================================
</TABLE>
                            See accompanying notes.


                                       5
<PAGE>

                     Communication Intelligence Corporation
                                 and Subsidiary
                 Condensed Consolidated Statements of Cash Flows
                                    Unaudited
                                 (In thousands)
<TABLE>
<CAPTION>
                                                 Three Months Ended
                                                     March 31,
                                          --------------------------------
                                              2000               1999
                                          -------------     --------------
<S>                                       <C>               <C>
Cash flows from operating activities:
  Net loss                                $ (888)              $  (484)
  Adjustments to reconcile net loss
  to net cash provided by (used)
  in operating activities:
    Depreciation and amortization             68                    63
    Non-cash compensation                     21                    20
    Changes in operating assets
    and liabilities:
      Accounts receivable                   (673)                  519
      Inventories                             46                     1
      Prepaid expenses and other current
       assets                                (52)                  (57)
      Other assets                            22                     -
      Accounts payable                       215                   (79)
      Accrued compensation                   (39)                   (2)
      Other accrued liabilities             (182)                  162
        Deferred revenue                   1,016                  (129)
                                          -------------      -------------

      Net cash provided by (used in)
       operating activities                 (446)                   14
                                          -------------      -------------

Cash flows from investing activity:
  Acquisition of property and equipment      (14)                  (16)
                                          -------------      -------------

      Net cash used in investing activity    (14)                  (16)
                                          -------------      -------------

Cash flows from financing activities:
  Principal payments on short-term debt      (60)                 (145)
  Proceeds from exercise of stock
    options and warrants                   1,460                   507
  Principal payments on capital
    lease obligations                         (2)                    -
  Restricted cash related
    to short-term debt                         -                   250
                                          -------------      -------------

      Net cash provided by
        financing activities                1,398                  612
                                          -------------      -------------

Effect of exchange rate changes on cash         3                    -
                                          -------------      -------------

Net increase in cash and
  cash equivalents                            941                   610
Cash and cash equivalents
  at beginning of period                    2,374                   795
                                          -------------      -------------

Cash and cash equivalents at end
  of period                               $ 3,315               $ 1,405
                                          =============      =============
</TABLE>


                          See accompanying notes.

                                       6
<PAGE>

                     Communication Intelligence Corporation
                                 and Subsidiary
         Notes to Unaudited Condensed Consolidated Financial Statements
                    (In thousands, except per share amounts)
                                    FORM 10-Q


1.   Interim financial statements

     The accompanying  unaudited condensed  consolidated financial statements of
     Communication Intelligence Corporation and its subsidiary (the "Company" or
     "CIC")  have been  prepared  pursuant to the rules and  regulations  of the
     Securities and Exchange Commission. Accordingly, they do not include all of
     the  information  and  footnotes  required by GAAP for  complete  financial
     statements. In the opinion of management, the financial statements included
     in this quarterly report reflect all adjustments (consisting only of normal
     recurring  adjustments)  which the Company  considers  necessary for a fair
     presentation  of its  financial  position  at the dates  presented  and the
     Company's  results of operations and cash flows for the periods  presented.
     The Company's interim results are not necessarily indicative of the results
     to be expected for the entire year.

     The Company  develops and markets  natural input and  electronic  signature
     solutions  for  wireless  internet   information   devices  and  enterprise
     applications  including  e-commerce,   document  automation  and  corporate
     security.  The Company's core software  technologies  include  multilingual
     handwriting  recognition systems (Jot(R) and the Handwriter(R)  Recognition
     System, referred to as HR(TM)),  dynamic signature verification and capture
     tools   (InkTool(TM),   Sign-it(TM),   and  Sign-On(TM),   ink  compression
     (INKshrINK(R))  and  operating  system  extensions  that  enable  pen input
     (PenX(TM)  and  PenX(TM)  VC).  Other   consumer  and  original   equipment
     manufacturer ("OEM") products include electronic notetaking (QuickNotes(TM)
     and  InkSnap(TM))  and  predictive  text input,  (WordComplete(TM)).  CIC's
     products  are  designed  to  increase  the ease of use,  functionality  and
     security of electronic  devices with a primary  focus on wireless  internet
     and  information  devices  such  as  smartphones,   electronic   organizers
     ("PDA's") and portable web browsers.

     The Company offers a wide range of  multi-platform  software  products that
     enable or enhance pen-based computing.  The Company's core technologies are
     classified  into two broad  categories:  "natural input  technologies"  and
     "transaction  and  communication  enabling  technologies".   Natural  input
     technologies  are  designed to allow  users to interact  with a computer or
     handheld device by using an electronic pen or "stylus" as the primary input
     device or in  conjunction  with a keyboard.  CIC's natural input  offerings
     include multilingual  handwriting recognition systems,  software keyboards,
     predictive text entry, and electronic ink capture technologies.  Many small
     handheld devices such as electronic  organizers,  pagers and smart cellular
     phones do not have a keyboard.  For such devices,  handwriting  recognition
     and software  keyboards offer the most viable solutions for performing text
     entry and editing.  CIC's predictive text entry technology  simplifies data
     entry even further by reducing the number of actual letters  required to be
     entered. The Company's ink capture  technologies  facilitate the capture of
     electronic ink for notetaking,  drawings or short handwritten messages. The
     Company's transaction and communication  enabling technologies are designed
     to provide a  cost-effective  means for securing  electronic  transactions,
     providing  network  and  device  access  control,   and  enabling  workflow
     automation of traditional  paper form  processing.  CIC believes that these
     technologies  offer  more  efficient  methods  for  conducting   electronic
     transactions and provide more functional user authentication and heightened
     data  security.   The  Company's  transaction  and  communication  enabling
     technologies  have been  fundamental  in its  development  of software  for
     signature verification, data security, and data compression.

     For the three  months  ended March 31, 2000,  the  Company's  cash and cash
     equivalents increased by $941 from $2,374 at the beginning of the period to
     $3,315.  The  increase  is due  primarily  to cash of  $1,398  provided  by
     financing  activities.  This  increase was offset by cash used in operating
     activities of $446 and cash used in investing activities of $14. The $1,398
     provided by financing  activities  consists primarily of $1,460 in proceeds
     from the exercise of stock options and warrants by the Company's  employees
     and others,  offset by principal  payments of  short-term  debt and capital
     lease  obligations  of $62. As of March 31, 2000,  the Company's  principal
     source of funds were its cash and cash equivalents  aggregating $3,315. The
     Company  anticipates that it will have adequate capital to fund its planned
     operations in the forseeable future. However, there can be

                                       7
<PAGE>

                     Communication Intelligence Corporation
                                 and Subsidiary
         Notes to Unaudited Condensed Consolidated Financial Statements
                    (In thousands, except per share amounts)
                                    FORM 10-Q

1.   Interim financial statements (continued)

     no assurance that the Company will have adequate capital  resources to fund
     planned  operations or that any  additional  funds will be available to the
     Company when needed, or if available,  will be available on favorable terms
     or in amounts  required by the Company.  If the Company is unable to obtain
     adequate capital resources to fund operations, it may be required to delay,
     scale back or  eliminate  some or all of its  operations,  which may have a
     material  adverse effect on the Company's  business,  results of operations
     and prospects.

     The financial  information  contained  herein should be read in conjunction
     with the  Company's  audited  financial  statements  included in its Annual
     Report on Form 10-K for the year ended December 31, 1999.

2.   Cash and cash equivalents

     The  Company   considers  all  highly  liquid   investments  with  original
     maturities of up to 90 days to be cash equivalents.

     Cash and cash equivalents consist of the following:
<TABLE>
<CAPTION>
                                            March 31,              December 31,
                                              2000                    1999
                                    --------------------------------------------
       <S>                          <C>                      <C>
        Cash in bank                   $      2,767             $      2,359
        Commercial paper                        541                       11
        Money market                              7                        4
                                    =====================    ===================
                                       $      3,315             $      2,374
                                    =====================    ===================
</TABLE>
3.   Inventories

     Inventories  are  stated  at the  lower  of  cost  or  market,  cost  being
     determined using the first-in,  first-out (FIFO) method. At March 31, 2000,
     inventories consisted primarily of finished goods.


4.   Note receivable from officer

     In  April  1994,  the  Company  loaned  $210 to the  Company's  then  Chief
     Executive  Officer  in  exchange  for a  note,  secured  by  shares  of the
     Company's Common Stock. The note bore interest at the lesser of the highest
     marginal  rate per annum  applicable  to the  Company's  borrowings  or the
     highest rate allowable by law. On August 14, 1998, the Company entered into
     an agreement (the "Agreement")  with the former Chief  Executive  Officer.
     Under the Agreement,  the former  officer has agreed to provide  consulting
     services to the Company  through  December 15, 2001.  In exchange for these
     services,  $110 of the note receivable from the officer will be forgiven on
     a monthly  basis over the  period  commencing  August  15,  1998 and ending
     December 15,  2001.  The  remaining  $100 of the note  receivable  from the
     officer will be forgiven on December 15, 2001 if the officer has  performed
     all the required services under the Agreement. The Agreement will terminate
     on December 15, 2001.


                                       8
<PAGE>

                     Communication Intelligence Corporation
                                 and Subsidiary
         Notes to Unaudited Condensed Consolidated Financial Statements
                    (In thousands, except per share amounts)
                                    FORM 10-Q

5.   Short-term debt

     On September 3, 1999,  the Company's  90% owned Joint Venture  borrowed the
     equivalent of $96,  denominated in Chinese  currency,  from a Chinese bank.
     The  loan  bore  interest  at  5.12%  and was due on  March  2,  2000.  The
     borrowings did not require a compensating  balance.  The note was repaid in
     full in January, 2000.

6.   Long-term debt related party

     On October 20,  1999,  the Company  entered  into a loan  agreement  with a
     charitable  remainder annuity trust, of which a director and officer of the
     Company is a trustee,  in the amount of $1,500 (the "1999 Loan").  The 1999
     Loan  is  secured  by a  first  priority  security  interest  in all of the
     Company's  assets as now owned or hereafter  acquired by the  Company.  The
     1999 Loan bears interest at the rate of 2% over the prime rate as published
     by Citibank  from time to time,  10.25% at March 31, 2000.  The note is due
     January 31, 2002.  Interest on the principal  amount under the 1999 Loan is
     payable quarterly.  The 1999 Loan can be re-paid in whole at any time or in
     part at any  time  without  penalty.  Any  partial  payment  must be in the
     principal amount of $100 or a multiple thereof.

     On October 20, 1999, in connection with the 1999 Loan the Company issued to
     the charitable  remainder  annuity trust warrants to purchase 300 shares of
     the Company's  common stock.  The warrants expire October 20, 2001 and have
     an exercise price of $1.09 per share.  The Company ascribed a value of $179
     to these  warrants,  which will be  amortized to the  Company's  results of
     operations  over  the life of the  debt.  The fair  value  ascribed  to the
     warrants  was  estimated  on the date of issuance  using the  Black-Scholes
     pricing model with the following  assumptions:  risk-free  interest rate of
     5.50%;  expected life of 2 years;  expected volatility of 99%; and expected
     dividend yield of 0%.

     On January 20, 2000, the charitable  remainder  trust,  of which a director
     and officer of the Company is a trustee,  exercised all 300 warrants issued
     in connection  with the 1999 Loan.  The warrants were  exercised  under the
     cashless exercise  provision in the warrant  agreement.  The Company issued
     255 shares of common stock in exchange for the 300 warrants.

7.   Revenue recognition

     Revenue from retail  product sales is recognized  upon sell through,  while
     revenue from other product sales is recognized upon shipment  provided that
     no  significant  obligations  remain and the  collection  of the  resulting
     receivable is probable. The Company provides for estimated sales returns at
     the time of shipment.

     License  revenues are  recognized  when the software has been delivered and
     when all  significant  obligations  have been  met.  Royalty  revenues  are
     recognized as products are licensed/sold by licensees.  Deferred revenue in
     the accompanying balance sheets reflects advance royalty fees received from
     the Company's licensees in advance of revenue recognition.

     Development  contracts  revenue is generated  primarily from  non-recurring
     engineering  activities  and  research  grants  from  government  agencies.
     Revenue  is  recognized  in  accordance  with the terms of the  grants  and
     agreements,  generally  when  collection is probable and related costs have
     been incurred.

8.   Net loss per share

     Effective  December  31,  1997,  the  Company  adopted  the  provisions  of
     Statement of Financial  Accounting  Standards No. 128, "Earnings Per Share"
     ("SFAS 128"). SFAS 128 requires the disclosure of both basic


                                       9
<PAGE>

                     Communication Intelligence Corporation
                                 and Subsidiary
         Notes to Unaudited Condensed Consolidated Financial Statements
                    (In thousands, except per share amounts)
                                    FORM 10-Q

8.   Net loss per share (continued)

     earnings per share, which is based on the weighted average number of common
     shares  outstanding,  and diluted earnings per share, which is based on the
     weighted  average  number of common  shares and dilutive  potential  common
     shares  outstanding.  All prior  year  earnings  per  share  data have been
     restated to reflect the  provisions of SFAS 128.  Potential  common shares,
     including  stock,  stock options and warrants,  have been excluded from the
     calculation  of diluted  earnings  per share for all periods  presented  as
     their effect is anti-dilutive.

9.   Comprehensive income

     Total comprehensive income (loss) was as follows:
<TABLE>
<CAPTION>
                                                   Three Months Ended March 31,
                                           -------------------------------------
                                                2000                   1999
                                           -------------          -------------
         <S>                               <C>                    <C>
         Net loss                             $  (888)             $  (484)
         Other comprehensive income:
         Cumulative translation adjustment          2                  (22)
                                           =============          =============
         Total comprehensive loss             $  (886)             $  (506)
                                           =============          =============
</TABLE>
10.  Segment Information

     In June 1997, the Financial  Accounting Standards Board issued Statement of
     Financial Accounting  Standards No. 131,  "Disclosures About Segments of An
     Enterprise  and  Related   Information"  ("SFAS  131").  SFAS  131  revises
     information  regarding the reporting of operating segments and was required
     to be  adopted  in periods  beginning  after  December  15,  1997.  It also
     establishes  standards for related disclosures about products and services,
     geographic areas and major customers.  The Company adopted SFAS 131 for the
     year ended December 31, 1998 and the Company's  information has been broken
     down into two  Segments -  Handwriting  recognition  software  and  Systems
     integration.

     The  accounting  policies  followed by the  segments  are the same as those
     described in the "Summary of Significant Accounting Policies." Segment data
     includes  revenues,  as  well  as  allocated  corporate-headquarters  costs
     charged to each of the operating segments.

     The Company identifies reportable segments by classifying revenues into two
     categories:  Handwriting  recognition and system  integration.  Handwriting
     recognition  software  is an  aggregate  of five  revenue  categories.  All
     Handwriting  recognition  software is developed  around the company's  core
     technology.  System  integration  represents the sale and  installation  of
     third party  computer  equipment  and systems  that  utilize the  Company's
     products. All sales above represent sales to external customers.

                                       10
<PAGE>

                     Communication Intelligence Corporation
                                 and Subsidiary
         Notes to Unaudited Condensed Consolidated Financial Statements
                    (In thousands, except per share amounts)
                                    FORM 10-Q

10.  Segment Information (continued)

     The table below  presents  information  about  reporting  segments  for the
     periods indicated:
<TABLE>
<CAPTION>
                                        Three Months ended March 31,
                                      2000                       1999
                        --------------------------  ----------------------------
                                    Systems                     Systems
                        Handwriting Integra-        Handwriting Integra-
                        Recognition   tion   Total  Recognition   tion    Total
                        ----------- -------- -----  ----------- -------- -------
       <S>                  <C>      <C>     <C>      <C>      <C>     <C>

       Revenues             $ 1,012  $  365  $ 1,377  $  943   $  304  $ 1,247
       Loss from Operations $  (828) $  (15) $  (843) $ (463)  $  (25) $  (488)
       Significant change
       in Total assets
       from Year End        $     -  $    -  $     -  $    -   $    -  $     -
</TABLE>

                                       11
<PAGE>

                     Communication Intelligence Corporation
                                 and Subsidiary
                    (In thousands, except per share amounts)
                                    FORM 10-Q

Item 2.   Management's  Discussion and Analysis of Financial Condition and
          Results of Operations

The following  discussion and analysis  should be read in  conjunction  with the
Company's  unaudited  condensed  consolidated  financial  statements  and  notes
thereto  included in Part I - Item 1 of this  Quarterly  Report on Form 10-Q and
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" set forth in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999.

Results of Operations

Revenues.  The Company's  revenues are derived from product sales,  license
and royalty revenues and development contracts. For the three months ended March
31,  2000,  total  revenues  increased  by 10% to  $1,377  from  $1,247  for the
comparable  three month period ended March 31, 1999 as  discussed  below:
<TABLE>
<CAPTION>
                                            Three Months Ended
                                                 March 31,
                                 -----------------------------------------------
                                          2000                     1999
                                 -------------------      ---------------------
   <S>                            <C>                     <C>

   Revenues:
     Product                        $     1,097               $       773
     License and royalty                    184                       218
     Development contracts                   96                       256
                                 ==================        =====================
   Total revenues                   $     1,377               $     1,247
                                 ==================        =====================
</TABLE>
Product  sales  increased  to $1,097 or by 42% for the three month  period ended
March 31, 2000 from $773 in the comparable prior year period.  This increase was
due to the increase of $415 in product sales to $433 from $18 in the prior year.
The  Product  revenue  increase  reflects a  breakthrough  order for  electronic
signature  solution  technology  from Charles  Schwab & Co. Product sales by the
Company's 90% owned joint venture in the People's  Republic of China (the "Joint
Venture")  increased 20% to $364 for the period ended March 31, 2000 compared to
$304 during the same period last year.  Aftermarket  product  consumer  software
sales via the Company's  website  declined 30% to $295,  compared to $419 in the
prior year period. The decrease in aftermarket  consumer software sales resulted
from a decrease in the  availability of new names used for Direct Mail campaigns
as compared to the 1999  comparable  quarter.  Handwriter(R)  and other  product
sales  decreased by 87% to $5 during the period ended March 31, 2000 compared to
$38 in the prior year period.  The decline in Handwriter(R)  sales resulted from
the  Company's  decision  in 1997 to focus on  software  sales  and  discontinue
hardware sales.

Revenues from license and royalty revenue for the three month period ended March
31, 2000 decreased by 16% to $184 from $218 in the comparable prior year period.
This  decrease  was  primarily  the result of a large one time order of products
bundled with the  Company's  software in 1999 which did not reoccur in the first
quarter ended March 31, 2000

Development  contract  revenues  for the three month period ended March 31, 2000
decreased  63% to $96  from  $256 in the  comparable  prior  year  period.  This
decrease  resulted  primarily from a decrease in non-recurring  engineering fees
primarily associated with smartphone development of $73 and a decrease of $80 in
grant revenue  recognized from the National Science  Foundation  compared to the
prior year period.

Cost of sales. Cost of sales for the three months ended March 31, 2000 increased
16% to $729 from $630 in the comparable prior year period.  This increase is due
primarily  to  product  costs  associated  with  the  Charles  Schwab  order  of
approximately  $128. Costs associated with the system integration  activities of
the Joint Venture  increased $38 to $256 compared to  approximately  $218 in the
prior year period. The increase in systems  integration cost of product sales is
due to the  increase in sales.  Aftermarket  cost of sales  increased 7% to $270
compared to $253 in the prior year  period.  The increase is due to the increase
in cost of Direct  Mail  programs  and banner  advertising  associated  with the

                                       12
<PAGE>

                     Communication Intelligence Corporation
                                 and Subsidiary
         Notes to Unaudited Condensed Consolidated Financial Statements
                    (In thousands, except per share amounts)
                                    FORM 10-Q

aftermarket  consumer  software sales. In addition,  license and royalty cost of
sales increased by 23% to $21 for the three months ended March 31, 1999 compared
to $17 for the  comparable  1999 period.  These  increases  were offset by lower
costs incurred in connection with  development  contract  revenues.  Development
contract costs decreased 62% for the three months ended March 31, 2000 to $54 as
compared  to $142 in the  prior  year  period,  as a result of the  decrease  in
contract development revenues in the first quarter of 2000.

Gross profit. Gross profit increased to $648 compared to $617 for the comparable
period in the prior year.  This  increase  was due  primarily  to an increase in
revenues  compared to the prior year.  Product gross  margins  increased to $443
compared to $302 in the prior year.  This  increase was due to the  breakthrough
order of the  Company's  electronic  signature  solution  technology  to Charles
Schwab.  License and royalty  gross profit  declined to $163 for the three month
period ended March 31, 2000 compared to $201 for the same period last year.  The
decrease  is the  result  of  lower  shipments  by the  Company's  licensees  as
discussed  above.  Development  contract  gross profit  decreased to $42 for the
three  months  ended  March 31,  2000  compared to $114 for the same period last
year. The decrease is due to lower revenues as discussed above.

Research and development  expenses.  Research and  development  expenses for the
three month  period  ended March 31,  2000  increased  by $132 or 44% to $429 as
compared to $297 in the comparable  period of the prior year.  This increase was
primarily due to a $88 decrease in the amount of  engineering  costs  associated
with development  contract revenues and transferred to cost of sales. During the
three months ended March 31, 2000, $54 in engineering  costs were transferred to
cost of sales compared to $142 in the comparable  period of the prior year. This
decrease  is the result of a  decrease  in  development  contract  revenues.  In
addition,  there was an  increase  of  approximately  $37 in payroll and related
costs  attributable to an increase in the number of personnel in the US compared
to the same period last year. Other costs including facilities expense increased
$7 compared to the same period  last year.  The Company did not  capitalize  any
software development costs during the three months ended March 31, 2000 or 1999,
respectively.

Sales and marketing  expenses.  Sales and marketing expenses for the three month
period ended March 31, 2000 increased $201 or 51% to $592 as compared to $391 in
the comparable period of the prior year.  Professional  services and advertising
expenses increased $58 and $98, respectively. This increase was due primarily to
the one-time cost of  development  of a media  campaign  aimed at  significantly
increasing aftermarket software sales via CIC's website. In addition, salary and
related  costs  increased  $26 due to  increases in  personnel  associated  with
Enterprise  sales.  Other costs,  including  travel and  facilities  and related
expenses, increased $19 commensurate with increase in staffing.

General and administrative expenses. General and administrative expenses for the
three month period ended March 31, 2000 increased $53 or 13% to $470 as compared
to $417 in the comparable  period of the prior year. This increase was primarily
attributable  to an increase in payroll and related costs of  approximately  $24
due to an  increase in  personnel  during the fourth  quarter of 1999.  Investor
related  expenses  increased  $46 due to the  renewed  investor  interest in the
Company and the expense associated with providing  information to the investment
community.  Other costs,  including  professional  services and  facilities  and
related costs,  decreased $17 over the comparable  period of the prior year. The
decrease is due to lower expenses for services provided by third parties.

Interest and other income  (expense),  net. Interest and other income (expense),
net  decreased  to an expense of $7 for the three  months  ended  March 31, 2000
compared to income of $2 in the  comparable  period of the prior year.  Interest
income from cash and cash equivalents was $25 compared to $14 in the prior year.
The increase in interest  income was offset by $13 of credit card processing and
other fees  compared to $12 in the prior year related to sales via the Company's
website. In addition,  loan discount amortization  associated with the Company's
long term debt was $19 for the three months  ended March 31, 2000.  There was no
loan discount amortization during the comparable period of the prior year.

Interest  expense  increased $39 for the three month period ended March 31, 2000
compared to the  comparable  prior year period.  The increase is due to interest
expense related to long term debt.

                                       13
<PAGE>

                     Communication Intelligence Corporation
                                 and Subsidiary
         Notes to Unaudited Condensed Consolidated Financial Statements
                    (In thousands, except per share amounts)
                                    FORM 10-Q

Liquidity and Capital Resources

At March 31, 2000, cash and cash equivalents totaled $3,315 compared to cash and
cash  equivalents  of $2,374 at December 31, 1999. The increase is due primarily
to cash of $1,398 provided by financing activities.  This increase was offset by
cash used in operating  activities of $446 and cash used in investing activities
of $14. The $1,398 provided by financing activities consists primarily of $1,460
in proceeds  from the exercise of stock  options and  warrants by the  Company's
employees  and  others,  offset by  principal  payments of  short-term  debt and
capital lease obligations of $60 and $2, respectively. Total current assets were
$5,847 at March 31, 2000 compared to $4,205 at December 31, 1999.

As of March 31, 2000, the Company's  principal  source of liquidity was its cash
and cash equivalents of $3,315. Although there can be no assurance,  the Company
believes  that its cash and cash  equivalents  together  with cash provided from
projected  revenues will be sufficient to fund planned  operations  for at least
the next twelve months.  However,  if the Company is unable to generate adequate
cash flows from sales,  or if  expenditures  required  to achieve the  Company's
plans are greater than expected, the Company may need to obtain additional funds
or reduce  discretionary  spending.  There can be no assurance  that  additional
funds will be  available  when  needed,  or if  available,  will be available on
favorable terms or in the amounts required by the Company. If adequate funds are
not available when needed,  the Company may be required to delay,  scale back or
eliminate  some or all of its  operations,  which will have a  material  adverse
effect on the Company's business, results of operations and prospects.

Current  liabilities,  which include deferred revenue,  were $2,103 at March 31,
2000.  Deferred revenue,  totaling $1,051 at March 31, 2000,  primarily reflects
nonrefundable  advance  royalty  fees  for the  Company's  licensees  which  are
generally  recognized as revenue by the Company in the period in which licensees
report that products  incorporating the Company's software have been shipped. As
such, the period over which such deferred  revenue will be recognized as revenue
is uncertain because the Company cannot presently determine either the timing or
volume of future shipments by its licensees.

The Company currently owns 90% of a joint venture with the Information  Industry
Bureau, a provincial agency of the People's Republic of China (the "Agency"). In
June 1998, the registered  capital of the Joint Venture was reduced from $10,000
to $2,550.  As of December 31, 1999, the Company had contributed an aggregate of
$1,800 in cash to the Joint  Venture  and  provided  it with both  non-exclusive
licenses  to  technologies  and  certain  distribution  rights.  The  Agency had
contributed  certain land use rights.  Following  the  reduction  in  registered
capital of the Joint Venture, neither the Company nor the Agency are required to
make further  contributions to the Joint Venture.  Prior to the reduction in the
amount of  registered  capital,  the Joint  Venture  was  subject  to the annual
licensing requirements of the Chinese government.  Concurrent with the reduction
in registered  capital,  the Joint Venture's  business  license has been renewed
through  October 18, 2043.  The  Company's  investment  in the Joint  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 on the transfer of funds, longer payment cycles,  greater
difficulty in accounts receivable collections, burdens of complying with foreign
laws and political and economic instability.

On October 20, 1999, the Company entered into a loan agreement with a charitable
remainder  annuity  trust,  of which a director  and officer of the Company is a
trustee,  in the amount of $1,500 (the "1999 Loan"). The 1999 Loan is secured by
a first priority  security  interest in all of the Company's assets as now owned
or hereafter  acquired by the Company.  The 1999 Loan bears interest at the rate
of 2% over the prime rate as published by Citibank from time to time, and is due
January  31,  2002.  Interest  on the  principal  amount  under the 1999 Loan is
payable quarterly.  The 1999 Loan can be re-paid in whole at any time or in part
at any time without penalty. Any partial payment must be in the principal amount
of $100 or a multiple thereof. The interest rate at March 31, 2000 was 10.25%.

                                       14
<PAGE>

                     Communication Intelligence Corporation
                                 and Subsidiary
         Notes to Unaudited Condensed Consolidated Financial Statements
                    (In thousands, except per share amounts)
                                    FORM 10-Q

In October  1999, in connection  with the 1999 Loan,  the Company  issued to the
charitable  remainder  annuity  trust  warrants  to  purchase  300 shares of the
Company's  common stock. The Company ascribed a value of $179 to these warrants,
which will be amortized to the Company's  results of operations over the life of
the warrant.  The fair value  ascribed to the warrants was estimated on the date
of  issuance   using  the   Black-Scholes   pricing  model  with  the  following
assumptions:  risk-free  interest  rate of  5.50%;  expected  life  of 2  years;
expected volatility of 99%; and expected dividend yield of 0%. The warrants were
due to expire October 20, 2001 and had an exercise price of $1.09 per share.  On
January 20,  2000,  the  charitable  remainder  trust,  of which a director  and
officer of the  Company  is a  trustee,  exercised  all 300  warrants  issued in
connection with the $1,500 long-term debt. The warrants were exercised under the
cashless  exercise  provision  in the  warrant  agreement.  The  Company  issued
approximately 255 shares of common stock in exchange for the 300 warrants.

On  September  3, 1999,  the  Company's  90% owned Joint  Venture  borrowed  the
equivalent of $96,  denominated  in Chinese  currency,  from a Chinese bank. The
loan bears interest at 5.12% and was due on March 2, 2000. The borrowings do not
require a compensating balance. The note was repaid in January, 2000.

The Company  leases  facilities in the United States and China.  Future  minimum
lease  payments  under  non-cancelable  operating  leases  are  expected  to  be
approximately  $517,  and $431 excluding  sub-lease  income for the years ending
December  31,  2000,  and 2001,  respectively.  The  Company's  rent  expense is
expected  to be  reduced by  approximately  $98 in 2000 in  connection  with the
subleases on excess office space in the United States.

The Company has an  investment  portfolio  of fixed income  securities  that are
classified  as  cash  equivalents.  These  securities,  like  all  fixed  income
instruments,  are  subject to  interest  rate risk and will fall in value if the
market interest rates increase.  The Company  attempts to limit this exposure by
investing primarily in short term securities.

From  time to  time,  the  Company  makes  certain  capital  equipment  or other
purchases  denominated in foreign  currencies.  As a result,  the Company's cash
flows and earnings  are exposed to  fluctuations  in interest  rates and foreign
currency  exchange rates. The Company attempts to limit these exposures  through
operational strategies and generally has not hedged currency exposures.

Year 2000

Year 2000 issues arose because most computer  systems and programs were designed
to handle only a two-digit date code for the year, not a four-digit  code. Thus,
the Year 2000 could be interpreted as the year 1900 by such computer systems and
programs, resulting in the incorrect processing of data. CIC's software products
as developed and distributed by CIC are not date  sensitive,  and therefore Year
2000 issues are not applicable to such products.

Management as a whole is responsible for issues arising from Year 2000 problems.
The Company has  evaluated  its  internal  software  programs  and  equipment to
ascertain the readiness of computer  software and operating systems for the Year
2000. Management of the Company believes that its internal software programs are
Year 2000 compliant. The Company has not received any reports of malfunctions or
errors  in any of its  products  related  to the  change to the Year  2000.  The
Company does not anticipate  that it will  experience any material  difficulties
with Year 2000  issues in the  future,  and  therefore  has not  formalized  any
contingency  plan.  The Company has been informed by third parties which it does
significant  business  with  that  they are Year  2000  compatible,  and has not
experienced  any  major  interruptions  or  difficulties  with its  third  party
relationships.

Future Results and Stock Price

The Company's stock price may be subject to significant  volatility.  The public
stock markets have experienced  significant volatility in stock prices in recent
years. The stock prices of technology  companies have  experienced  particularly
high volatility, including, at times, severe price changes that are unrelated or
disproportionate  to the operating  performance of such  companies.  The trading
price of the  Company's  Common Stock could be subject to wide  fluctuations  in
response to, among other  factors,  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 industry or the
global  economy  generally,  or market  volatility  unrelated  to the  Company's
business and operating results.


                                     15
<PAGE>

                     Communication Intelligence Corporation
                                 and Subsidiary
         Notes to Unaudited Condensed Consolidated Financial Statements
                    (In thousands, except per share amounts)
                                    FORM 10-Q

Certain  statements  contained in this Quarterly Report on Form 10-Q,  including
without limitation,  statements containing the words "believes",  "anticipates",
"hopes",  "intends",  "expects",  and other words of similar import,  constitute
"forward looking" statements within the meaning of the Private Litigation Reform
Act of 1995. Such statements involve known and unknown risks,  uncertainties and
other  factors  which  may  cause  actual  events  to  differ   materially  from
expectations. Such factors include the following (1) technological, engineering,
manufacturing, quality control or other circumstances which could delay the sale
or  shipment  of  products;  (2)  economic,  business,  market  and  competitive
conditions in the software  industry and  technological  innovations which could
affect the Company's business;  (3) the Company's inability to protect its trade
secrets  or  other  proprietary  rights,  operate  without  infringing  upon the
proprietary  rights  of  others  and  prevent  others  from  infringing  on  the
proprietary  rights  of the  Company;  and (4)  general  economic  and  business
conditions and the availability of sufficient financing.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

         None

Part II-Other Information

Item 1.  Legal Proceedings

         None

Item 2.  Change in Securities

         During the three months ended March 31, 2000,  the Company has granted
stock options to employees as follows:
<TABLE>
<CAPTION>
  -----------------------------------------------------------------------------
               Grant         Number of    Option   Vesting        Expiration
  Grantees     Date          Options      Price    Period            Date
  -----------------------------------------------------------------------------
  <S>          <C>            <C>         <C>      <C>           <C>

  Employee (1)  March 15,2000  75,000     $ 8.06   Quarterly     March 15, 2007
                                                   over three
                                                   years
  -----------------------------------------------------------------------------
</TABLE>
Item 3.  Defaults Upon Senior Securities

         None

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

         None

Item 5.  Other Information

         None

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits

         Exhibit 27, Financial Data Schedule.

(b)      Reports on Form 8-K

         None

                                       16
<PAGE>

                     Communication Intelligence Corporation
                                 and Subsidiary
         Notes to Unaudited Condensed Consolidated Financial Statements
                    (In thousands, except per share amounts)
                                    FORM 10-Q


                                   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 thereunto duly authorized.





                                         COMMUNICATION INTELLIGENCE CORPORATION
                                         ---------------------------------------
                                                       Registrant



       May 2, 2000                              /s/ Guido DiGregorio
------------------------           ---------------------------------------------
          Date                                   Guido DiGregorio
                                 (Principal Financial Officer and Officer Duly
                                 Authorized to Sign on Behalf of the Registrant)

                                        17