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: June 30, 1999

                                       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
   August 12, 1999: 79,568,307.

 This Quarterly Report on Form 10-Q contains 21 pages of which this is page 1.


<PAGE>


                                      INDEX



PART I.  FINANCIAL INFORMATION


 Item 1. Financial Statements                                           Page No.

 Condensed Consolidated Balance Sheets at June 30, 1999 (unaudited) and
   December 31, 1998........................................................3

 Condensed Consolidated Statements of Operations for the three and six month
   periods ended June 30, 1999 and 1998 (unaudited).........................4

 Condensed Consolidated Statements of Cash Flows for the six month periods
   ended June 30, 1999 and 1998 (unaudited).................................5

 Notes to Condensed Consolidated Financial Statements.......................6


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


PART II.  OTHER INFORMATION

 Item 1.  Legal Proceedings................................................18

 Item 2.  Change in Securities.............................................18

 Item 3.  Defaults Upon Senior Securities..................................18

 Item 4.  Submission of Matters to a Vote of Security Holders..............18

 Item 5.  Other Information................................................19

 Item 6.  Exhibits and Reports on Form 8-K

     (a)      Exhibits.....................................................19

     (b)      Reports on Form 8-K..........................................20

 Signatures................................................................21

                                      -2-

<PAGE>


                     Communication Intelligence Corporation
                                 and Subsidiary
                      Condensed Consolidated Balance Sheets
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                 June 30,         December 31,
                                                    1999               1998
                                               --------------     --------------
                                                 (Unaudited)
<S>                                          <C>                <C>

Assets
Current assets:
     Cash and cash equivalents                 $      1,443       $        795
     Restricted cash                                      -                250
     Accounts receivable, net                           710              1,146
     Inventories                                         58                 74
     Other current assets                               141                103
                                               --------------     --------------
         Total current assets                         2,352              2,368

Note receivable from officer                            158                200
Property and equipment, net                             414                539
Other assets                                            233                247
                                               --------------     --------------
         Total assets                          $      3,157       $      3,354
                                               ==============     ==============

Liabilities and stockholders' equity Current liabilities:
     Short-term debt (Note 5)                  $        500       $        145
     Accounts payable                                   252                473
     Accrued compensation                               248                229
     Other accrued liabilities                          631                524
     Deferred revenue                                   508                651
                                               --------------     --------------
         Total current liabilities                    2,139              2,022

Commitments  (Note 5)

Stockholders' equity:
     Common stock                                       796                785
     Additional paid-in capital                      70,778             70,205
     Accumulated deficit                            (70,368)           (69,504)
     Cumulative translation adjustment                 (188)              (154)
                                               --------------     --------------
         Total stockholders' equity                   1,018              1,332
                                               ==============     ==============

Total liabilities and stockholders'
equity (Note 5)                                $      3,157       $      3,354
                                               ==============     ==============
</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     Six Months Ended
                                             June 30,             June 30,
                                       ------------------    -------------------
                                        1999       1998       1999        1998
                                       -------   --------    --------   --------
<S>                                  <C>       <C>         <C>        <C>
Revenues:
   Product                             $  787    $   803     $ 1,560    $ 1,478
   License and royalty                    592        295         810        888
   Development contracts                   57        102         313        200
                                       --------  --------    --------   --------

             Total revenues             1,436      1,200       2,683      2,566

Operating costs and expenses:
   Cost of sales:
      Product                             494        447         965        776
      License and royalty                  15          7          32         22
      Development contracts                24         53         166        110
   Research and development               384        486         681      1,065
   Sales and marketing                    440        734         831      1,281
   General and administrative             485        466         902        966
                                       --------  --------    --------   --------

   Total operating costs and expenses   1,842      2,193       3,577      4,220
                                       --------  --------    --------   --------

Loss from operations                     (406)      (993)       (894)    (1,654)

Interest income and other income
  (expense), net                           28         38          32        102

Interest expense (Note 5)                  (2)        (2)         (2)       (16)
                                       --------  --------    --------   --------

       Net loss                          (380)      (957)       (864)    (1,568)

       Preferred stock dividend             -       (143)          -       (310)
                                       --------  --------    --------   --------

Net loss applicable to common
 stockholders                          $ (380)   $(1,100)    $  (864)   $(1,878)
                                       ========  ========    ========   ========

Basic loss per common share (Note 8)  $(0.005)   $(0.022)    $ 0.011)   $(0.038)
                                       ========  ========    ========   ========

Diluted loss per common share (Note 8)$(0.005)   $(0.022)    $(0.011)   $(0.038)
                                       ========  ========    ========   ========

Weighted average common
  shares outstanding                   79,527     50,884      79,320     49,649
                                       ========  ========    ========   ========
</TABLE>

                            See accompanying notes.

                                      -4-
<PAGE>


                     Communication Intelligence Corporation
                                 and Subsidiary
                 Condensed Consolidated Statements of Cash Flows
                                    Unaudited
                                 (In thousands)

<TABLE>
<CAPTION>
                                                            Six Months Ended
                                                                June 30,
                                                       -------------------------
                                                         1999             1998
                                                       --------         --------
<S>                                                  <C>              <C>
Cash flows from operating activities:
 Net loss                                              $  (864)         $(1,568)
 Adjustments to reconcile net loss to net cash
 provided by (used) in operating activities:
     Depreciation and amortization                         136              164
     Non-cash compensation                                  42               32
     Changes in operating assets and liabilities:
        Accounts receivable                                436             (499)
        Inventories                                         16              (52)
        Other current assets                               (38)             (99)
        Other assets                                         -              (17)
        Accounts payable                                  (221)            (673)
        Accrued compensation                                20
        Other accrued liabilities                          118             (273)
        Deferred revenue                                  (143)            (414)
                                                       --------         --------

  Net cash used in operating activities                   (498)          (3,399)
                                                       --------         --------

Cash flows from investing activities:
 Acquisition of property and equipment                     (43)             (35)
                                                       --------         --------

  Net cash used in investing activities                    (43)             (35)
                                                       --------         --------

Cash flows from financing activities:
 Principal payments on short-term debt                    (145)            (490)
 Principal payments on capital lease obligations             -               (3)
 Proceeds from issuance of short-term debt                 500              145
 Proceeds from issuance of common stock                    584              236
 Restricted cash related to short-term debt                250                -
                                                       --------         --------

  Net cash provided by (used in) financing activities    1,189             (112)
                                                       --------         --------

Net decrease in cash and cash equivalents                  648           (3,546)
Cash and cash equivalents at beginning of period           795            5,485
                                                      ==========        ========

Cash and cash equivalents at end of period            $  1,443          $ 1,939
                                                      ========          ========
</TABLE>

                            See accompanying notes.

                                      -5-
<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 (collectively,
       the  "Company" or "CIC",  and the  subsidiary,  individually,  the "Joint
       Venture") 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,  markets and  licenses  pen-input  and  biometric
       security software and technologies for the computer, consumer electronics
       and  communication  markets.  The Company's  core  software  technologies
       include  multilingual  handwriting  recognition  systems  (Jot(R) and the
       Handwriter(R)  Recognition  System,  referred  to  as  HRS(TM)),  dynamic
       signature  verification and capture tools (InkTools(TM) and Sign-it(TM)),
       ink  compression  (INKshrINK(R))  and operating  system  extensions  that
       enable  pen input  (PenX(TM)).  Other  consumer  and  original  equipment
       manufacturer    ("OEM")    products   include    electronic    notetaking
       (QuickNotes(TM))  and spell checking utilities (CIC  Speller(TM)).  CIC's
       products  are  designed to increase  the ease of use,  functionality  and
       security of electronic  devices  ranging from PC  peripherals to cellular
       phones.

       The  Company  offers a wide  range of  software  products  for  pen-based
       computing,  based  on the  Company's  core  handwriting  recognition  and
       related technologies. 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 as the sole input device or in conjunction with a
       keyboard.  The pen  eliminates  the need  for a mouse  as a  navigational
       device.  The Company  believes that pen-input  enhances  productivity and
       creativity  because  it is a more  natural  means of  input,  facilitates
       editing and screen  navigation and reduces the risk of repetitive  stress
       illness.   The   Company's   transaction   and   communication   enabling
       technologies  are  designed  to  provide  a   cost-effective   means  for
       protecting   electronic   transactions,   electronic  files  and  private
       communications. CIC believes that these technologies offer more efficient
       methods  to  conduct   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, data
       compression and pen-based operating environments.

       For the six  months  ended June 30,  1999,  the  Company's  cash and cash
       equivalents increased by $648 from $795 at the beginning of the period to
       $1,443.  The  increase  is due  primarily  to cash of $1,189  provided by
       financing  activities.  These  increases  were  offset  by  $43  used  in
       investing  activities and $498 used in operating  activities.  The $1,189
       provided by financing  activities  consists primarily of $584 in proceeds
       from the exercise of stock options by the Company's  employees,  and $500
       in  proceeds  from  the  issuance  of  short  term  debt to a  charitable
       remainder  annuity trust, of which an officer and director of the Company
       is a trustee. In addition, $105 was provided by the release of restricted
       which previously  secured a loan from a Chinese bank. The loan was repaid
       in February 1999. As of June 30, 1999, the Company's  principal source of
       funds  were its cash and cash  equivalents  of  $1,443.  There  can be no
       assurance that the Company will have adequate  capital  resources to fund
       planned  operations  in the near  future.  If the  Company  does not have
       adequate  capital  resources  to fund  operations,  it may be required to
       delay, scale back or eliminate some or all of its operations, which could
       have a material  adverse  effect on the  Company's  business,  results of
       operations and prospects.

                                      -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 (continued)

       There can be no assurance 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.

       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, 1998.

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>
                                         June 30,              December 31,
                                           1999                   1998
                                 --------------------------------------------
         <S>                       <C>                      <C>
         Cash in bank                $        743             $       668
         Commercial paper                       -                     125
         Money market accounts                700                       2
                                 =====================    ===================
                                     $      1,443             $       795
                                 =====================    ===================
</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 June 30, 1999,
       inventory is comprised 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.

5.     Short-term debt

       On June 16, 1999, the Company obtained a bridge loan, (the "Bridge Loan")
       in the amount of $500 from a charitable remainder annuity trust, of which
       a director and officer of the Company is a trustee. The Bridge Loan bears
       interest at the prime rate plus 2%; that was 9.75% at June 30, 1999.  The
       loan is secured by the  Company's  cash,  accounts  receivable  and other
       receivables as now owned or hereafter acquired by the Company. The Bridge
       Loan plus accrued interest is due December 31, 1999.

                                      -7-
<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 (continued)
       In June  1998,  the  Company's  90%  owned  Joint  Venture  borrowed  the
       equivalent of $145, denominated in Chinese currency, from a Chinese bank.
       The loan bore  interest at 9% and was due on June 30, 1999.  The note was
       repaid in February 1999. The borrowings  were secured by a $250 US dollar
       denominated deposit held by the bank.

       In May 1997, the Company purchased office furniture and a security system
       with an  approximate  value of $209 from a third party.  The Company paid
       $100 in cash and  signed  an  unsecured  note  for  $109  due in  monthly
       installments  through  May 1998.  The note bore  interest  on the  unpaid
       balance  at a rate of 10% per  annum.  The  note  was paid in full in May
       1998.

       In  October  1997,  the  Company  entered  into  an  accounts  receivable
       financing  agreement  under  which the  Company  may factor its  accounts
       receivable in  accordance  with the terms of the  agreement.  The maximum
       credit  available  to the Company  under the  agreement is $1,500 with an
       advance  rate of 80% of eligible  accounts  receivable  less than 90 days
       old. The term of the agreement is twelve months with annual  renewals.  A
       financing fee of 2.1% per month applies to the outstanding  balance based
       on the face  value of each  invoice.  The line of credit is  secured by a
       blanket first  priority lien on all Company  assets with the exception of
       intellectual property.  There were no amounts financed under the accounts
       receivable  financing agreement at June 30, 1999. It is unlikely that the
       Company will finance additional  accounts receivable under this agreement
       due to the  cessation of the sale of the Company's  hardware  products in
       the retail market .

6.     Revenue recognition

       In October 1997, the American  Institute of Certified Public  Accountants
       (the "AICPA") issued  Statement of Position No. 97-2,  "Software  Revenue
       Recognition"  ("SOP  97-2"),  which  the  Company  has  adopted,  without
       material  effect,  for  transactions  entered into during the fiscal year
       beginning  January 1, 1998.  SOP 97-2 provides  guidance for  recognizing
       revenue on software transactions and supersedes Statement of Position No.
       91-1,  "Software  Revenue  Recognition".  In March 1998, the AICPA issued
       Statement  of Position No. 98-4,  "Deferral  of the  Effective  Date of a
       Provision of SOP 97-2,  Software Revenue  Recognition"  ("SOP 98-4"). SOP
       98-4 defers,  for one year, the  application  of certain  passages in SOP
       97-2 which limit what is considered  vendor-specific  objective  evidence
       ("VSOE")   necessary  to  recognize  revenue  for  software  licenses  in
       multiple-element   arrangements  when  undelivered   elements  exist.  In
       December  1998,  the AICPA  issued  Statement  of Position No. 98-9 ("SOP
       98-9")  "Modifications of SOP 97-2,  Software Revenue  Recognition,  With
       Respect to Certain  Transactions." SOP 98-9 extends the effective date of
       SOP 98-4 and provides  additional  interpretative  guidance.  SOP 98-9 is
       effective for fiscal years  beginning  after March 15, 1999.  The Company
       will  determine  the  impact,  if any,  of SOP  98-9 on  current  revenue
       recognition  practice when adopted.  Adoption of the remaining provisions
       of SOP 97-2  should  not have a material  impact on  revenue  recognition
       during 1999.

       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.

                                      -8-
<PAGE>


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

6.     Revenue recognition(continued)

       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.

7.       Convertible preferred stock

       In  December  1996,  the  Company  completed  a  private  placement  (the
       "December  Private  Placement")  of 450 shares of redeemable  convertible
       preferred  stock (the "Series A Preferred  Stock") at $25.00 per share to
       certain  institutional  and  other  investors.  On March  28,  1997,  and
       effective as of December 31, 1996, holders of 100% of the then issued and
       outstanding  Series  A  Preferred  Stock  executed  a waiver  of  certain
       provisions of the Registration Rights Agreement (the "Agreement") entered
       into in connection with the December Private Placement. Under the waiver,
       these  holders  irrevocably  waived  any  redemption  obligations  of the
       Company with respect to the Series A Preferred  Stock in exchange for the
       issuance to such holders of 300 warrants to purchase the Company's Common
       Stock,  allocated  amongst the holders on a pro-rata basis.  The warrants
       expire  five  years  from  the  effective  date of  issuance  and have an
       exercise  price  of  $2.00  per  share,   subject  to   adjustments   for
       anti-dilution.  On November  26,  1997,  the Company  completed a private
       placement  of 240  shares  of Series B  Preferred  Stock  (the  "November
       Private Placement") at $25.00 per share to certain investors.

       Each holder of outstanding  shares of Series A Preferred Stock and Series
       B Preferred Stock was entitled to receive, out of funds legally available
       therefor,  cumulative  dividends  on each  share at the rate of $1.25 per
       share per annum,  compounded  semi-annually and quarterly,  respectively,
       when payable  (whether or not  declared).  The dividends  could have been
       paid  in  cash  or  additional  shares  of  preferred  stock  (with  each
       additional  share valued at $25.00 per share),  at the Company's  option.
       The Company paid the required dividends in additional shares of preferred
       stock.

       Each share of Series A Preferred  Stock and Series B Preferred  Stock was
       convertible by the holders into shares of the Company's Common Stock. All
       of the  outstanding  shares of  Series A  Preferred  Stock  and  Series B
       Preferred  Stock were  converted  into shares of common stock by November
       1998.

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 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 then outstanding  convertible preferred stock and 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. Per
       share  results  of  operations  are  reduced by the  amortization  of the
       beneficial  conversion  rate on the  Series  A  Preferred  Stock  and the
       cumulative dividend requirements earned by the preferred stockholders for
       periods during which preferred stock was outstanding.

9.     Comprehensive income

       In June 1997, the Financial  Accounting  Standards Board issued Statement
       of Financial  Accounting Standards No. 130, "Reporting Comprehensive
       Income" ("SFAS 130"). The Company adopted SFAS 130 effective

                                      -9-
<PAGE>


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

9.     Comprehensive income (continued)

       January  1,  1998.  SFAS 130  requires  that all items  recognized  under
       accounting standards as components of comprehensive  earnings be reported
       in an annual  statement  that is displayed  with the same  prominence  as
       other annual financial statements.
       SFAS 130 also requires that an entity classify

       items as  other  comprehensive  earnings  by their  nature  in an  annual
       financial  statement.  For  example,  other  comprehensive  earnings  may
       include  foreign  currency  translation   adjustments,   minimum  pension
       liability  adjustments,  and  unrealized  gains and losses on  marketable
       securities classified as available-for-sale.  Annual financial statements
       for prior periods will be reclassified, as required.

       Total comprehensive loss was as follows:
<TABLE>
<CAPTION>

                                                  Six months ended June 30,
                                            ------------------------------------
                                                1999                     1998
                                            ------------            ------------
         <S>                              <C>                     <C>

           Net loss                         $      (864)            $    (1,568)
           Other comprehensive income:
           Cumulative translation adjustment        (34)                     80
                                            ============            ============
           Total comprehensive loss         $      (898)            $    (1,488)
                                            ============            ============
</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
       concerning  segment  reporting  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>

                                   Six months ended June 30,
                             1999                             1998
                 ---------------------------------------------------------------
                 Handwriting Systems            Handwriting Systems
                 Recognition Integration Total  Recognition Integration Total
                 ----------- ----------- ------ ----------- ----------- --------
<S>                <C>     <C>        <C>     <C>        <C>         <C>

Revenues             $2,092  $591       $2,683  $ 1,583     $ 983       $ 2,566
Loss from Operations $ (877) $(17)      $ (894) $(1,203)    $(451)      $(1,654)
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
unaudited condensed consolidated financial statements and notes thereto included
in Part I - Item 1 of this 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, 1998.

Results of Operations

Revenues.  The Company's  revenues are derived from product  sales,  license and
royalty  fees and  development  contracts.  For the three  months ended June 30,
1999,  revenues  increased by 20% to $1,436 from $1,200,  and for the six months
revenues  increased  5% to $2,683 from $2,566 for the  comparable  three and six
month periods ended June 30, 1998 as discussed below:
<TABLE>
<CAPTION>

                          Three Months Ended           Six Months Ended
                                June 30,                    June 30,
                          ---------------------       ---------------------

                           1999          1998          1999          1998
                          -------       -------       -------       -------
<S>                     <C>           <C>           <C>           <C>

Revenues:
 Product sales            $   787       $   803       $ 1,560       $ 1,478
 License and royalty fees     592           295           810           888
 Development contracts         57           102           313           200
                          =======       =======       =======       =======

       Total revenues     $ 1,436       $ 1,200       $ 2,683       $ 2,566
                          =======       =======       =======       =======
</TABLE>

Product  sales for the three months ended June 30, 1999  decreased to $787 or by
2% from  $803 in the  comparable  prior  year  period.  Handwriter(R)  and other
product sales for the three months ended June 30, 1999  decreased $218 or 92% to
$18 from $236 in the prior year period.  The decline in Handwriter(R)  and other
product sales resulted from the Company's  decision in 1997 to focus on software
sales and discontinue  hardware sales.  This decrease was offset by the increase
of $440 or  1073% in  aftermarket  consumer  software  sales  via the  Company's
website to $481,  compared to $41 in the prior year. The increase in aftermarket
consumer  software  sales  resulted  from  increased  direct mail  campaigns  as
compared to the 1998  comparable  quarter.  Product  sales by the  Company's 90%
owned joint venture in The People's Republic of China (the "Joint Venture") were
down 45% to $288 for the three month period ended June 30, 1999 compared to $526
during the same period  last year.  The  decrease  primarily  resulted  from the
absence of a large order completed in the second quarter of 1998.

Product  sales for the six months ended June 30, 1999  increased to $1,560 or by
6% from $1,478 in the comparable prior year period. This increase was due to the
increase  of $817  or  984%  in  aftermarket  consumer  software  sales  via the
Company's  website to $900,  compared to $83 in the prior year.  The increase in
aftermarket   consumer  software  sales  resulted  from  increased  direct  mail
campaigns  as compared  to the 1998 six month  period.  Handwriter(R)  and other
product  sales for the six months ended June 30, 1999  decreased  $343 or 83% to
$69 from $412 in the prior year period.  The decline in Handwriter(R)  and other
product sales resulted from the Company's  decision in 1997 to focus on software
sales and discontinue  hardware sales.  Product sales by the Company's 90% owned
joint venture in The People's  Republic of China (the "Joint Venture") were down
40% to $591 from $983 for the six month period  ended June 30, 1999  compared to
the same period last year.  The decrease was primarily due to the absence of two
large  orders  of $112  and  $247 in the  first  and  second  quarters  of 1998,
respectively.
                                      -12-
<PAGE>


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

Revenues from license and royalty fees for the three month period ended June 30,
1999  increased  $297 or 101% to $592 from  $295 in the  comparable  prior  year
period.  This increase is primarily  attributable to new agreements entered into
with  existing  OEM  licensees.  For the six month  period  ended June 30, 1999,
revenues from license and royalty fees  decreased $78 or 9% to $810 from $888 in
the  comparable  prior year period.  This  decrease was  primarily the result of
decreases in reported OEM product shipments  bundling the Company's  handwriting
recognition  software  during the six months ended June 30, 1999 compared to the
same  period last year.  The  Company  recognized  no  revenues  from  licensing
agreements for which the Company has no further obligation to deliver additional
software or services for the six months ended June 30, 1999  compared to $404 in
the comparable prior year period.

Development  contract  revenues  for the three month  period ended June 30, 1999
decreased  44% to $57  from  $102 in the  comparable  prior  year  period.  This
decrease   resulted  from  reduced  grant  revenue  from  the  National  Science
Foundation. For the six months ended June 30, 1998, development contract revenue
increased  57% to $313  from  $200 in the  comparable  prior  year  period.  The
increase is due to non-recurring engineering revenues compared to the prior year
period.

Cost of sales.  Cost of product  sales for the three and six month periods ended
June  30,  1999  increased  11%  and  25%,  respectively,   to  $494  and  $965,
respectively,  from $447 and $776,  respectively,  in the comparable  prior year
periods.  Cost of product  sales for the three and six month  periods ended June
30, 1999 includes  approximately  $163 and $381,  respectively,  of hardware and
software  components related to the system  integration  activities of the Joint
Venture,  compared to approximately  $405 and $709,  respectively,  in the prior
year periods. The decrease in systems integration costs of product sales for the
three and six month  periods ended June 30, 1999 is due to the decrease in sales
of such  products.  The  decrease  in system  integration  costs  was  offset by
increases  over the three and six month periods ending June 30, 1999 of $331 and
$584, respectively,  in the Company's web product cost of sales. The increase in
web product cost of sales is due to increased  direct mail campaigns as compared
to the three and six months  ended June 30,  1998.  License and royalty  cost of
sales  increased  approximately  $8  and  $10,  respectively,  to $15  and  $32,
respectively,  for the three and six months ended June 30, 1999,  compared to $7
and $22,  respectively,  for the comparable 1998 periods. The increase is due to
increased  technology  import tax on the higher Japanese OEM shipments  bundling
the Company's  handwriting  recognition  software.  Costs incurred in connection
with  development  contract  revenues  decreased 55% to $24 for the three months
ended June 30, 1999 as compared to $53 in the prior  period,  commensurate  with
the decrease in contract development revenues. For the six months ended June 30,
1999,  contract  development  costs increased 51% to $166 as compared to $110 in
the prior  period.  The increase is  commensurate  with the increase in contract
development  revenues  over the six months  ended June 30, 1999  compared to the
same period last year.

Research and development  expenses.  Research and  development  expenses for the
three  and six month  periods  ended  June 30,  1999  decreased  by 21% and 36%,
respectively,  to $384 and $681, respectively, as compared to $486 and $1,065 in
the  comparable  period of the prior year.  The decreases  were primarily due to
reductions of approximately $20 and $200,  respectively,  in payroll and related
costs  attributable  to a decrease in the number of U.S. based personnel for the
three and six month  periods  ended June 30, 1999 compared to the same three and
six month prior year  periods.  Other costs,  including  facilities  and related
costs, decreased approximately $81 and $184, respectively, for the three and six
month periods ended June 30, 1999 from the  comparable  prior year periods.  The
decrease in other costs was commensurate with the decreased number of U.S. based
personnel.  The Company did not capitalize any significant  software development
costs in the three and six month periods ended June 30, 1999, and 1998.

Sales and marketing expenses. Sales and marketing expenses for the three and six
month  periods  ended  June 30,  1999  decreased  40% and 35% to $440 and  $831,
respectively,  as compared to $734 and $1,281 in the  comparable  periods of the
prior year.  The decreases  were  primarily due to decreases of $174 and $302 in
salaries and related costs due to reductions in U.S. based personnel  associated
with the Joint Venture  operations in the first and second quarters of the prior
year.  Other  costs,  including  travel and  facilities  and  related  expenses,
decreased $120 and $140,  respectively,  compared to the same periods last year,
commensurate with reductions in staffing.

                                      -13-
<PAGE>


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

General and administrative expenses. General and administrative expenses for the
three month period ended June 30, 1999  increased 4% to $485 as compared to $466
in the  comparable  period  of the  prior  year.  This  increase  was  primarily
attributable to a an increase in other costs,  including  professional services,
of $36. This increase was offset by a reduction of approximately  $17 in payroll
and related  costs due to  reductions  in  personnel  associated  with the Joint
Venture  operations in the first  quarter of the prior year.  For the six months
ended June 30, 1999,  general and  administrative  expenses decreased 7% to $901
compared to $966 in the comparable prior year period. This decrease was due to a
reduction  of $34 and $18 in payroll  and  related  expenses,  and other  costs,
respectively,  associated  to the  reductions in personnel  associated  with the
Joint Venture operations in the first and second quarters of the prior year.

Interest and other income  (expense),  net. Interest and other income (expense),
net,  decreased  for the three and six  months  ended  June 30,  1999 due to the
increase in credit card processing  fees  associated  with internet  sales.  The
decrease  was  offset  by the  extinguishment  of debt and  associated  interest
related to the factoring of accounts receivable and equipment purchased in 1997.
The associated debt was paid off in January and June of 1998, respectively.

Preferred  stock dividend.  The preferred  stock dividend  relates to cumulative
dividends of $1.25 per share, per annum, compounded quarterly and semi-annually,
respectively,  whether  or not  declared,  on the  convertible  preferred  stock
outstanding  during the three and six month  periods  ended June 30,  1998.  All
Series A Preferred  and Series B Preferred  Stock was  converted  into shares of
common stock by November 1998.  Accordingly,  no preferred  stock dividends were
paid in 1999.

Liquidity and Capital Resources

At June 30, 1999, cash and cash equivalents  totaled $1,443 compared to cash and
cash  equivalents of $795 at December 31, 1998. The increase is due primarily to
cash  provided by financing  activities  consisting of $584 in proceeds from the
exercise of stock  options by the  Company's  employees and $500 from the Bridge
Loan obtained from a charitable remainder annuity trust, of which a director and
officer of the Company is a trustee. These increases were offset by $498 used in
operating activities and $43 used in investing activities.  Total current assets
were $2,352 at June 30, 1999 compared to $2,368 at December 31, 1998,  and total
current liabilities were $2,139 compared to $2,022 for the same periods

As of June 30, 1999,  the Company's  principal  source of liquidity was its cash
and cash equivalents of $1,443. Although there can be no assurance,  the Company
believes that its cash and cash equivalents together with cash provided from the
Bridge Loan and projected revenues will be sufficient to fund planned operations
in the near future.  However,  if, among other things,  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 $2,139 at June 30,
1999.  Deferred  revenue,  totaling  $508 at June 30, 1999,  primarily  reflects
nonrefundable  advance royalty fees received from 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. In addition,  current
liabilities  include a Bridge Loan of $500 from a charitable  remainder  annuity
trust,  of which a director and officer of the Company is a trustee.  The Bridge
Loan bears  interest at the prime rate plus 2%; that was 9.75% at June 30, 1999.
The loan is  secured  by the  Company's  cash,  accounts  receivable  and  other
receivables as now owned or hereafter  acquired by the Company.  The Bridge Loan
plus accrued interest is due December 31, 1999.

                                      -14-
<PAGE>


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

The  Company  currently  owns  90% of a  joint  venture  with  the  Ministry  of
Electronic  Industries  of the  Jiangsu  Province,  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 June 30, 1999,
the Company had  contributed an aggregate of $1,800 in cash to the Joint Venture
and  provided  it  with  non-exclusive  licenses  to  technologies  and  certain
distribution  rights and 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.

In December  1996,  the Company  completed a private  placement  (the  "December
Private Placement") of 450 shares of redeemable convertible preferred stock (the
"Series A  Preferred  Stock") at $25.00 per share to certain  institutional  and
other  investors.  On March 28,  1997,  and  effective  as of December 31, 1996,
holders of 100% of the then  issued and  outstanding  Series A  Preferred  Stock
executed a waiver of certain  provisions of the  Registration  Rights  Agreement
(the  "Agreement")   entered  into  in  connection  with  the  December  Private
Placement.  Under the waiver,  these holders  irrevocably  waived any redemption
obligations  of the  Company  with  respect to the Series A  Preferred  Stock in
exchange  for the  issuance to such  holders of 300  warrants  to  purchase  the
Company's Common Stock,  allocated  amongst the holders on a pro-rata basis. The
warrants  expire  five years from the  effective  date of  issuance  and have an
exercise price of $2.00 per share, subject to adjustments for anti-dilution.  On
November 26, 1997,  the Company  completed a private  placement of 240 shares of
Series B Preferred Stock (the "November Private  Placement") at $25.00 per share
to certain investors.

Each  holder of  outstanding  shares of Series A  Preferred  Stock and  Series B
Preferred  Stock  was  entitled  to  receive,  out of  funds  legally  available
therefor,  cumulative dividends on each share at the rate of $1.25 per share per
annum,  compounded  semi-annually  and  quarterly,  respectively,  when  payable
(whether  or not  declared).  The  dividends  could  have  been  paid in cash or
additional  shares of  preferred  stock (with each  additional  share  valued at
$25.00 per  share),  at the  Company's  option.  The Company  paid the  required
dividends  in  additional  shares of  preferred  stock.  Each  share of Series A
Preferred Stock and Series B Preferred Stock was convertible by the holders into
shares of the Company's Common Stock. All of the outstanding  shares of Series A
Preferred  Stock and Series B  Preferred  Stock were  converted  into  shares of
common stock by November 1998.

In October  1997,  the Company  entered  into an accounts  receivable  financing
agreement  under  which the  Company  has the  ability  to factor  its  accounts
receivable in accordance  with the terms of the  agreement.  The maximum  credit
available to the Company under the agreement is $1,500,  with an advance rate of
80% of the  eligible  accounts  receivable  which are less than 90 days old. The
term of the agreement is twelve months with annual renewals.  A financing fee of
2.1% per month  applies to the  outstanding  balance  based on the face value of
each invoice.  The line of credit is secured by a blanket first priority lien on
all Company assets with the exception of its intellectual  property.  As of June
30, 1999, the Company had no outstanding financed accounts receivable under this
agreement.  It is unlikely  that the Company  will finance  additional  accounts
receivable  under  this  agreement  due to the  cessation  of  the  sale  of the
Company's hardware products in the retail market.

The Company  leases  facilities in the United States and China.  Future  minimum
lease  payments  under  non-cancelable  operating  leases  are  expected  to  be
approximately $603, $620, and $558 for the years ending December 31, 1999, 2000,
and 2001, respectively.  The Company's rent expense is expected to be reduced by
approximately  $129 in 1999 in  connection  with the subleases it has granted on
excess office space in the United States.

                                      -15-
<PAGE>


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

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 arise 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.  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 replaced older desktop PC's which were not, and could not be upgraded to
be, Year 2000 compliant.  The  replacement of such older computer  equipment has
been completed. The cost of replacing these desktop systems was not significant.
The Company is not aware of any other hardware related problems.

The Company is in the process of analyzing  the  readiness of third parties with
which  it  does  business.  The  Company  believes  that  the  only  potentially
significant  Year 2000  problems  it may  experience  will result from Year 2000
issues affecting its website or its banks.  The Company  generates a significant
percentage of revenues from sales made via its website. If the Company's website
were  to  go  off-line  for  an  extended  period  of  time,   income  would  be
significantly  impacted  until  service was  restored.  The Company has received
assurances that its website is Year 2000 compliant; however, it has not received
any information regarding the phone carrier that links the website server to the
internet.  The Company believes that it is not possible to develop a contingency
plan at this time for dealing with the  potential  effects of such an event.  If
banking  systems were to fail due to Year 2000 problems,  the Company may be cut
off from access to some of its funds for a period of time. The Company maintains
its cash with various financial institutions so that an incident at any one bank
would not have a material adverse impact on the Company's cash availability.

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.

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 the  Company's  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.

                                      -16-
<PAGE>


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

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

         None

                                      -17-
<PAGE>


                     Communication Intelligence Corporation
                                 and Subsidiary
                                    FORM 10-Q

Part II-Other Information

Item 1.  Legal Proceedings

         None

Item 2.  Change in Securities

         For the six months ended June 30, 1999 the Company has granted stock
         options to employees and directors for services
         rendered as follows:
<TABLE>
<CAPTION>

--------------------------------------------------------------------------------
               Grant            Number of  Option    Vesting    Expiration
Grantees       Date             Options    Price     Period     Date
--------------------------------------------------------------------------------
<S>          <C>              <C>        <C>       <C>        <C>

 Employees(34) January 12, 1999 9,528,261  $ 0.7500  Quarterly  January 12, 2006
                                                     over three
                                                     years

 Employees(16) June 7, 1999     300,000    $ 1.1875  Quarterly  June 7, 2006
                                                     over three
                                                     years

 Non-Employee
 Directors(3)  June 7, 1999     75,000     $ 1.1875  Upon grant June 7, 2006
  ------------------------------------------------------------------------------
</TABLE>

Item 3.  Defaults Upon Senior Securities

         None

Item 4.  Submission of Matters to a Vote of Security Holders
         (in thousands, except percentages)

The Company held its Annual Meeting of  Stockholders on June 7, 1999. The number
of shares of common stock with voting  rights as of the record date  represented
at the  meeting  either in person  or by proxy was  69,821  shares or 88% of the
eligible  outstanding  Common Stock of the Company.  Three  proposals were voted
upon by the stockholders. The proposals and the voting results follow:

Proposal 1

Each of the five  persons  listed below were elected as directors to serve until
the next Annual  Meeting or until his  successor  is elected or  appointed.  The
number of votes for and withheld for each individual is listed next to his name.
<TABLE>
<CAPTION>

                                                            Broker
                                                   ------------------------
    Name               For           Withheld      Non-votes        Abstain
    ----------------   ------        --------      ---------        -------
<S>                  <C>           <C>           <C>               <C>

    Guido DiGregorio   69,397        424           None              None
    Jess M. Ravich     69,274        546           None              None
    Philip Sassower    69,361        460           None              None
    Jeffrey Steiner    69,383        437           None              None
    C. B. Sung         69,388        432           None              None
</TABLE>

Proposal 2

To approve  the  Company's  1999  Stock  Option  Plan.  The number of votes for,
against and abstaining on this proposal was as follows:
<TABLE>
<CAPTION>

                                                            Broker
                                                   -------------------------
             For       Against       Abstain       Non-votes         Abstain
             ------    -------       -------       ---------         -------
<S>        <C>       <C>          <C>            <C>               <C>

All Classes  67,337    1,756         231           None              None
</TABLE>

                                      -18-
<PAGE>


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

Proposal 3

To  ratify  the  appointment  of   PricewaterhouseCoopers   LLP  as  independent
accountants  of the Company for the fiscal year ending  December 31,  1999.  The
number of votes for, against and abstaining on this proposal was as follows:
<TABLE>
<CAPTION>

                                                            Broker
                                                   -------------------------
             For       Against       Abstain       Non-votes         Abstain
             ------    -------       -------       ---------         -------
<S>        <C>         <C>           <C>           <C>               <C>

All Classes  69,481      288           52            None              None
</TABLE>

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

                                      -19-
<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


     August 12, 1998                        /s/ Guido DiGregorio
--------------------------      ------------------------------------------------
           Date                                 Guido DiGregorio
                                 (Principal Financial Officer and Officer Duly
                                 Authorized to Sign on Behalf of the Registrant)















                                      -20-
<PAGE>