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, 2003


                                       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
                            --------                  --------

              Number of shares outstanding of the issuer's Common
                  Stock, as of August 14, 2003: 100,101,428.




<PAGE>

                                      INDEX



PART I.  FINANCIAL INFORMATION


     Item 1.  Financial Statements                                      Page No.
                  --------------------                                  --------

     Condensed Consolidated Balance Sheets at June 30, 2003
     (unaudited) and December 31, 2002.......................................3

     Condensed Consolidated Statements of Operations for the
     Three and Six-Month Periods Ended June 30, 2003
     and 2002 (unaudited)....................................................4

     Condensed Consolidated Statements of Changes in
     Stockholders' Equity for the Three and Six-Month Periods
     Ended June 30, 2003 and 2002 (unaudited)................................5

     Condensed Consolidated Statements of Cash Flows
     for the Three and Six-Month Periods Ended June 30, 2003
     and 2002 (unaudited)....................................................6

     Notes to Unaudited 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....19
              ----------------------------------------------------------

     Item 4.  Controls and Procedures.......................................19
                  -----------------------

PART II.  OTHER INFORMATION

     Item 1.  Legal Proceedings.............................................20
              -----------------

     Item 2.  Change in Securities..........................................20
              --------------------

     Item 3.  Defaults Upon Senior Securities...............................20
              -------------------------------

     Item 4.  Submission of Matters to a Vote of Security Holders...........20
              ---------------------------------------------------

     Item 5.  Other Information................................... .........21
              -----------------

     Item 6.  Exhibits and Reports on Form 8-K
              --------------------------------

              (a)      Exhibits.............................................21

              (b)      Reports on Form 8-K..................................21

     Signatures.............................................................22


                                      -2-
<PAGE>

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

                                                   June 30,         December 31,
                                                     2003              2002
                                                  -----------       -----------
                                                   Unaudited
Assets
Current assets:
Cash and cash equivalents.......................  $   1,424         $     711
     Accounts receivable, net...................        551               477
     Inventories................................         81               113
     Prepaid expenses and other current assets..        167               244
                                                  -----------       -----------
         Total current assets...................      2,223             1,545

Property and equipment, net.....................        151               159
Capitalized software costs......................          5                12
Patents and trademarks..........................      5,231             5,421
Other assets....................................         31                31
                                                  -----------       -----------

     Total assets...............................  $   7,641         $    7,168
                                                  ===========       ===========

Liabilities and Stockholders' equity
Current liabilities:
     Short-term debt - Related party............  $   3,000         $        -
     Accounts payable...........................        187                160
Accrued compensation............................        231                250
     Other accrued liabilities..................        454                489
     Deferred revenue...........................         79                165
     Capital Lease Obligations..................         34                 38
                                                  -----------       -----------
         Total current liabilities..............      3,985              1,102

Notes payable - Related party...................          -              3,000

Minority interest...............................        128                132

Commitments

Stockholders' equity:
     Common stock...............................       1,001               915
     Additional paid-in capital.................      83,529            82,025
     Accumulated deficit........................     (80,819)          (79,819)
     Cumulative translation adjustment..........        (183)             (187)
                                                   -----------      -----------
         Total stockholders' equity.............       3,528             2,934
                                                   -----------      -----------

     Total liabilities and stockholders' equity.   $   7,641        $    7,168
                                                   ===========      ===========

   The accompanying notes form an integral part of these Financial Statements.


                                      -3-
<PAGE>


                     Communication Intelligence Corporation
                                 and Subsidiary
                 Condensed Consolidated Statements of Operations
                                    Unaudited
                    (In thousands, except per share amounts)

                                         Three Months Ended    Six Months Ended
                                               June 30,            June 30,
                                         ------------------  -------------------
                                             2003      2002      2003      2002
                                         --------  --------  --------  ---------
Revenues:
     Online.............................  $  92    $   80    $  206     $   204
     Corporate..........................    288       708       955       1,406
     China    ..........................    192       323       519         658
                                         --------  --------  --------   --------

         Total revenues.................    572     1,111     1,680       2,268

Operating costs and expenses:
     Cost of sales:
        Online..........................      -        22         1         185
        Corporate.......................     11        76        23         133
        China ..........................    111       205       331         426
     Research and development...........    303       366       643         778
     Sales and marketing  ..............    180       427       463         814
     General and administrative  .......    619       639     1,131       1,179
                                         --------  --------  --------   --------

    Total operating costs and expenses    1,224     1,735     2,592       3,515
                                         --------- --------  --------   --------

Loss from operations  ..................   (652)     (624)     (912)     (1,247)

Interest and other income
  (expense), net  ......................      6         4         5          (9)

Interest expense  ......................    (48)      (50)      (97)       (102)

Minority interest  .....................      4        (1)        4          (1)
                                         --------  ---------  --------   -------

         Net loss  .....................   (690)     (671)   (1,000)     (1,359)
                                         ========  ========= =========   =======

Basic and diluted loss per common share  $(0.01)   $(0.01)   $(0.01)     $(0.01)
                                         ========  ========= =========   =======
Weighted average common
     shares outstanding  ..............  97,514     91,278   94,726      91,113
                                         ========  ========= =========   =======

   The accompanying notes form an integral part of these Financial Statements.

                                      -4-

<PAGE>


                     Communication Intelligence Corporation
                                 and Subsidiary
           Consolidated Statements of Changes in Stockholders' Equity
                                    Unaudited
                    (In thousands, except per share amounts)


                                                                Accumulated
                                          Additional               Other
                         Shares    Common  Paid-In     Accum. Comprehensive
                       Outstanding  Stock  Capital    Deficit      Loss    Total
                       ----------- ------ ----------  ------- ------------- ----
Balances as of December
  31, 2002.............  91,481   $ 915   $ 82,025   $(79,819)  $ (187)  $2,934
                        -------------------------------------------------------

Sale of shares of Common
  Stock net of issuance
  costs................   2,041      20         93                          113

Foreign currency
  translation adjustment.                                             2       2

Net loss...............                                  (310)             (310)
                        --------------------------------------------------------
Balances as of March 31,
  2003.................  93,522    $935    $ 82,118  $(80,129)   $ (185) $2,739
                        --------------------------------------------------------

Sale of shares of Common
  Stock net of issuance
  costs................   6,580      66       1,411                       1,477

Foreign currency
  translation adjustment.                                              2      2

Net loss...............                                   (690)            (690)
                       ---------------------------------------------------------

Balances as of June 30,
  2003................. 100,102   $1,001   $ 83,529   $(80,819)   $(183) $3,528
                       =========================================================


  The accompanying notes form an integral part of these Financial Statements.

                                      -5-

<PAGE>


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

                                                            Six Months Ended
                                                                June 30,
                                                           2003          2002
                                                       -----------    ----------

Cash flows from operating activities:
 Net loss.............................................. $ (1,000)     $ (1,359)
 Adjustments to reconcile net loss to net cash
 (used) in operating activities:
     Depreciation......................................       47            50
     Patent amortization...............................      190           189
     Disposal of fixed assets..........................        8             5
     Changes in operating assets and liabilities:
        Accounts receivable, net.......................      (74)         (116)
        Inventories....................................       32           (23)
        Prepaid expenses and other current assets......       77             4
        Other assets...................................        -            79
        Accounts payable...............................       27            79
        Accrued compensation...........................      (19)           81
        Other accrued liabilities......................      (39)            9
        Deferred revenue...............................      (86)           24
                                                       -----------     ---------

     Net cash (used in) operating  activities..........     (837)         (978)
                                                       -----------     ---------

Cash flows from investing activity:
 Acquisition of property and equipment.................      (36)          (12)
                                                       -----------     ---------

     Net cash used in investing activity...............      (36)          (12)
                                                       -----------     ---------

Cash flows from financing activities:
 Payments on short-term debt...........................        -          (181)
 Proceeds from the exercise of stock options and
 warrants..............................................        -           426
 Proceeds from the issuance of common stock............     2,000            -
 Offering costs........................................      (410)           -
 Principal payments on capital lease obligations.......        (4)          (3)
                                                       ------------     --------

     Net cash provided by financing activities.........     1,586          242
                                                       ------------     --------

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

Net increase (decrease) in cash and cash equivalents...       713         (748)
Cash and cash equivalents at beginning of period.......       711        2,588
                                                       ------------     --------

Cash and cash equivalents at end of period.............$    1,424       $1,840
                                                       ============    =========

  The accompanying notes form an integral part of these Financial Statements.

                                      -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 financial  information  contained  herein should be read in conjunction with
the Company's  audited  financial  statements and notes thereto  included in its
Annual Report on Form 10-K for the year ended December 31, 2002.

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 generally accepted  accounting  principles
("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 software that can verify handwritten signatures
and electronic  signature and handwritten data entry software solutions aimed at
emerging,  large  potential  markets such as  e-commerce,  workflow  automation,
corporate  security,  smart  handheld  devices  such  as  handheld  computers  &
smartphones and the Palm OS aftermarket.

The  Company's  core  software  technologies  include  multilingual  handwriting
recognition systems (Jot(R)) and the Handwriter(R)  Recognition System, referred
to  as  HRS(TM),   electronic  signature,   biometric  signature   verification,
cryptography,   electronic  ink  recording  tools   (InkTools(R)),   Sign-it(R),
iSign(TM) and  Sign-On(TM),  and operating  systems  extensions  that enable pen
input (PenX(TM)).

Other consumer and original  equipment  manufacturer  ("OEM")  products  include
electronic  notetaking  (QuickNotes(TM)  and  InkSnap(TM))  and predictive  text
input,  (WordComplete(R)).  CIC's  products are designed to increase the ease of
use,  functionality  and security of electronic  devices with a primary focus on
smart handheld devices such as handheld computers and smartphones.

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 desktop computer or handheld computer 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 PDA's (portable
digital  assistants),  converged  devices (combine voice, PDA  functionality and
internet  access  in a  single  device)  and  digitizer  tablets  do not  have a
keyboard. For such devices, handwriting recognition and software keyboards offer
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.

                                      -7-
<PAGE>
                     Communication Intelligence Corporation
                                 and Subsidiary
         Notes to Unaudited Condensed Consolidated Financial Statements
                    (In thousands, except per share amounts)
                                    FORM 10-Q

Going Concern

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will  continue as a going  concern.  The Company has suffered  recurring
losses  from  operations  that raise a  substantial  doubt  about its ability to
continue as a going concern. At June 30, 2003, the Company's accumulated deficit
was approximately $81 million.  The Company filed a registration  statement with
the  Securities and Exchange  Commission  that was declared  effective  February
2003, pursuant to the line of credit agreement with Cornell Capital Partners, LP
("Cornell").  However,  there can be no  assurance  that the  Company  will have
adequate capital  resources to fund planned  operations or that 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 ability to operate as a going concern.  The financial  statements
do not  include  any  adjustments  that might  result  from the  outcome of this
uncertainty.

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:

                                             June 30,              December 31,
                                               2003                    2002
                                    --------------------- -- -------------------

        Cash in bank                  $        191             $        260
        Money market                         1,233                      451
                                    ---------------------    -------------------
                                      $      1,424             $        711
                                    =====================    ===================

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, 2003,  inventories
consisted primarily of finished goods.


4.   Short-term debt - Related Party Transactions

On June 19, 2001, the Company consummated a three-year $3 million financing (the
"Loan") with a charitable remainder annuity trust of which a former director and
officer of the Company is a trustee (the "Trust"). The proceeds of the Loan were
used to refinance $1.5 million of indebtedness outstanding to the Trust pursuant
to a loan made by the  Trust to the  Company  in  October  1999 and for  working
capital purposes.

The Loan bears interest at the rate of 2% over the prime rate publicly announced
by Citibank N.A. from time to time,  which was 6.00% per annum at June 30, 2003,
and is due June 18, 2004. The Loan may be pre-paid by the Company in whole or in
part at any time without  penalty,  subject to the right of the Trust to convert
the  outstanding  principal  amount  of the Loan into  shares  of common  stock.
Pursuant to the terms of the Loan,  the Trust has the option,  at any time prior
to maturity,  to convert all or any portion of the outstanding  principal amount
of the Loan into shares of common stock of the Company at a conversion  price of
$2.00 per share,  subject to adjustment  upon the occurrence of certain  events.
If,  prior  to  maturity  of the  Loan,  the  Company  consummates  one or  more
financings  providing  $5  million  or more in gross  proceeds,  the  Company is
required  to apply  50% of the  proceeds  in excess  of $5  million  to the then
outstanding  principal  amount  of the  Loan.  The  Loan is  secured  by a first
priority  security  interest in and lien on all of the  Company's  assets as now
owned or hereafter acquired by the Company.

                                      -8-
<PAGE>
                     Communication Intelligence Corporation
                                 and Subsidiary
         Notes to Unaudited Condensed Consolidated Financial Statements
                    (In thousands, except per share amounts)
                                    FORM 10-Q

4.   Short-term debt Related Party Transactions (continued)

In the event the Company exceeds $5 million in financing from its equity line of
credit with  Cornell  Capital,  LP, 50% of the  proceeds in excess of $5 million
would be required to be used to reduce the amount of the loan.

In connection  with the Loan,  the Company  entered into a  registration  rights
agreement  with the Trust which  obligates  the  Company to file a  registration
statement with the Securities and Exchange  Commission  covering the sale of the
shares of the Company's  common stock issuable upon conversion of the Loan if it
receives a demand by the holder of the Loan to do so, and to use its  reasonable
best efforts to cause such  registration  statement to become  effective.  As of
June  30,  2003,  no  demand  had  been  made  upon  the  Company  to file  this
registration statement.

Interest  paid during the three and six months  ended June 30, 2003 was $47, and
$95, respectively, and for the three and six months ended June 30, 2002, $51 and
$106, respectively.

5.   Net loss per share

The Company  calculates  earnings per share under 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 shares  outstanding,  and diluted  earnings per
share,  which is based on the  weighted  average  number of shares and  dilutive
potential shares outstanding. For the three and six month periods ended June 30,
2003 and 2002,  stock  options of 5,674 and 7,056,  respectively,  were excluded
from the  calculation  of  diluted  earnings  per  share as the  effect of these
options is not dilutive.

6.   Common Stock Options

The Company has adopted  Statement of Financial  Accounting  Standards  No. 123,
"Accounting for Stock-Based  Compensation"  ("SFAS 123") as amended by Financial
Accounting  Standards  Board  Statement  No.  148.  The  Company  has elected to
continue to use the intrinsic value based method of Accounting  Principles Board
Opinion  No.  25,  as  allowed  under  SFAS 123,  to  account  for its  employee
stock-based  compensation plans. No stock based employee compensation expense is
reflected in the consolidated statement of operations as all options granted had
an exercise price equal to the market value of the Company's common stock on the
date of grant. The Company complies with the disclosure provisions of SFAS 123.

Had  compensation  cost for the Company's  option plans been determined based on
the fair value of the options at the date of grant,  as  prescribed by SFAS 123,
the Company's net loss  available to common  stockholders  and basic and diluted
net loss per share available to stockholders  would have been as follows for the
six months ended June 30, 2003:
                                                        Six Months Ended
                                                     June 30,       June 30,
                                                       2003           2002
                                                    ----------    ----------

      Net loss available to stockholders:
        As reported..............................  $ (1,000)       $ (1,359)
        Total stock based employee compensation
        expense determined under fair value
        based method net of tax..................      (246)           (569)
                                                  -------------   -------------
        Pro forma................................  $ (1,246)       $ (1,928)
                                                  =============   =============

                                      -9-
<PAGE>
                     Communication Intelligence Corporation
                                 and Subsidiary
         Notes to Unaudited Condensed Consolidated Financial Statements
                    (In thousands, except per share amounts)
                                    FORM 10-Q

6.   Common Stock Options (continued)

       Basic and diluted net loss per share available to stockholders:

         As reported..............................  $  (0.01)       $  (0.01)
         Pro forma................................  $  (0.01)       $  (0.02)

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option  pricing  model  with  the  following   weighted  average
assumptions used for grants during the applicable periods:
o    risk-free interest rate of 2.11% and 3.12% for 2003 and 2002,
o    an expectedlife of 6.4 years for 2003, 6.9 years and for 2002,
o    expected volatility of 100% all periods, and
o    dividend yield of 0% for all periods.

The Company expects to make additional  option grants.  The Company believes the
above pro forma  disclosures are not  representative of the pro forma effects on
reported results of operations to be expected in future periods.

7.   Comprehensive income (loss)

Total comprehensive (loss) was as follows:
                                                   Six month Ended June 30,
                                             ------------- ----- ---------------
                                                  2003                  2002
                                             -------------       ---------------

   Net loss                                  $     (1,000)        $     (1,359)
   Other comprehensive income:
   Cumulative translation adjustment                    4                    2
                                             --------------      ---------------

         Total comprehensive loss            $       (996)        $     (1,357)
                                             ==============      ===============

8.   Segment Information

The Company  identifies  reportable  segments by  classifying  revenues into two
categories:   handwriting   recognition  and  system  integration.   Handwriting
recognition   software  is  an  aggregate  of  three  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 represent sales to external customers.

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

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

8.   Segment Information (continued)

     The table below  presents  information  about  reporting  segments  for the
periods indicated:

                                 Six months ended June 30,
                            2003                           2002
                 ------------------------------- -------------------------------
                 Handwriting   Systems           Handwriting  Systems
                 Recognition Integration  Total  Recognition Integration  Total
                 ----------- ----------- ------- ----------- ----------- -------

Revenues           $  1,284   $  396   $  1,680   $  1,711    $  557   $  2,268

Loss from
Operations         $   (888)  $  (24)  $   (912)  $ (1,201)   $  (46)  $ (1,247)

Significant change
in Total long
lived assets from
Year End           $    (36)  $    -   $    (36)   $     -     $ (35)  $    (35)

For the three  months ended June 30, 2003,  no one customer  accounted  for more
than 10% of total handwriting  recognition segment revenue. For the three months
ended June 30 2002,  two customers  accounted for 14% each of total  handwriting
recognition  segment  revenue.  For the six months ended June 30, 2003 and 2002,
one customer accounted for 36% and 15% of total handwriting  recognition segment
revenue, respectively.

For the three and months ended June 30, 2003 and 2002,  one  customer  accounted
for 55% and 24% of system integration revenues, respectively. For the six months
ended June 30, 2003 and 2002,  one customer  accounted for 27% and 32% of system
integration revenues, respectively.

                                      -11-
<PAGE>


                     Communication Intelligence Corporation
                                 And Subsidiary
               (In thousands, except share and 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 1, Item 1 of this  quarterly  report on Form 10-Q and
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  set  fourth  in the  Company's  Annual  report on Form 10-K for the
fiscal year ended December 31, 2002.

Overview

     History.  The Company was  incorporated  in Delaware in October  1986.  The
Company has incurred losses in each year since its inception.  For the five-year
period ended December 31, 2002, operating losses aggregated  approximately $13.9
million  and at  December  31,  2002,  the  Company's  accumulated  deficit  was
approximately $80 million. At June 30, 2003, the Company's  accumulative deficit
was approximately $81 million.

Critical Accounting Policies

     The  preparation  of  financial   statements  and  related  disclosures  in
conformity with generally accepted accounting principles in the United States of
America  requires  management to make judgments,  assumptions and estimates that
affect the amounts  reported in our  consolidated  financial  statements and the
accompanying  notes.  The  amounts of assets  and  liabilities  reported  in our
balance sheets and the amounts of revenues and expenses reported for each period
presented are affected by these  estimates and  assumptions  which are used for,
but not limited to,  accounting  for product  returns,  allowance  for  doubtful
accounts, intangible asset impairments, and inventory. Actual results may differ
from  these  estimates.   The  following   critical   accounting   policies  are
significantly  affected by  judgments,  assumptions  and  estimates  used by our
management in the preparation of the consolidated financial statements.

     Revenue  Recognition.  Revenue is recognized when earned in accordance with
applicable accounting  standards,  including AICPA Statement of Position ("SOP")
No. 97-2, Software Revenue Recognition,  as amended,  Staff Accounting Bulletins
101 ("SAB  101") and the  interpretive  guidance  issued by the  Securities  and
Exchange  Commission  and EITF issue  00-21 of the AICPA  Emerging  Issues  Task
Force.  We recognize  revenues from sales of software  products  upon  shipment,
provided  that  persuasive  evidence of an  arrangement  exists,  collection  is
determined to be probable and no significant  obligations  remain.  Revenue from
service subscriptions is recognized prorata over the service period.

     Software  license   agreements  may  contain  multiple  elements  including
upgrades and enhancements, products deliverable on a when and if available basis
and  post  contract  support.   Revenue  from  software  license  agreements  is
recognized upon delivery of the software provided that persuasive evidence of an
arrangement  exists,  collection is determined to be probable and no significant
obligations  remain.  Deferred revenue is recorded for post contract support and
is  recognized  prorata  over the  support  period.  Vendor  specific  objective
evidence of the fair value for multiple element  software license  agreements is
determined by the price charged for the same element when sold separately or the
price determined by management having the relevant authority when the element is
not yet sold separately. The price established by management for the element not
yet sold  separately  will not change  prior to  separate  introduction  of that
element into the marketplace.

     Revenue from system integration  activities is recognized upon installation
provided that  persuasive  evidence of an  arrangement  exists,  no  significant
obligations remain and the collection of the resulting receivable is probable.

     Allowance for Doubtful  Accounts.  The  allowance for doubtful  accounts is
based on our assessment of the  collectibility of specific customer accounts and
an assessment of international, political and economic risk as well as the aging
of the accounts  receivable.  If there is a change in actual  defaults  from our
historical  experience,  our estimates of recoverability of amounts due us could
be affected and we will adjust the allowance and the related  operating  expense
accordingly.

     Impairment of intangible  assets.  We perform  intangible  asset impairment
analysis on a quarterly  basis in  accordance  with the guidance in Statement of

                                      -12-
<PAGE>
                     Communication Intelligence Corporation
                                 And Subsidiary
               (In thousands, except share and per share amounts)
                                    Form 10-Q

Financial  Accounting  Standard No. 142,  Goodwill and Other  Intangible  Assets
("SFAS No. 142") and Financial  Accounting  Standard No. 144, Accounting for the
Impairment or Disposal of Long Lived Assets ("SFAS No. 144"). We use SFAS 144 in
response to changes in industry and market  conditions  that affect our patents,
we then determine if an impairment of our assets has occurred. For the three and
six months ended June 30, 2003 and 2002, no impairment of intangible  assets was
determined to have occurred.

     Software Development Costs. Software development costs are accounted for in
accordance with Statement of Financial  Accounting Standards No. 86, "Accounting
for the Costs of Computer  Software to be Sold,  Leased or  Otherwise  Marketed"
("SFAS 86"). Under SFAS 86,  capitalization of software development costs begins
upon the establishment of technological  feasibility,  subject to net realizable
value considerations.  In the Company's case,  capitalization commences upon the
completion  of a  working  model and  generally  ends  upon the  release  of the
product. The capitalized costs are amortized to cost of sales on a straight line
basis over the estimated life of the product,  generally three years. As of June
30, 2003 and 2002, such costs were insignificant.

     Research and  Development.  Research and  development  costs are charged to
expense as incurred.

     Foreign Currency Translation.  The Company currently owns 90% of CIC China,
(the "Joint Venture'),  with the Jiangsu Hongtu  Electronics Group, a provincial
agency of the People's Republic of China. The Joint Venture provides  electronic
signature based applications and handheld  receipt/delivery  based systems,  and
provides  systems  integration  services  that  affords  the Joint  Venture  the
opportunity to include the sale of its core software by  integrating  electronic
signature and Chinese handwriting  recognition into its turn-key  solutions.  We
consider the functional currency of the Joint Venture to be the respective local
currency and,  accordingly,  gains and losses from the  translation of the local
foreign   currency   financial   statements  are  included  as  a  component  of
"accumulated  other  comprehensive  loss" in our  consolidated  balance  sheets.
Foreign  currency assets and  liabilities  are translated  into U.S.  dollars at
exchange  rates  prevailing  at the end of the period,  except for  non-monetary
assets  and  liabilities  that are  translated  at  historical  exchange  rates.
Revenues and expenses are  translated  at the average  exchange  rates in effect
during  each  period,  except  for those  expenses  included  in  balance  sheet
accounts, which are translated at historical exchange rates.

     Net  foreign  currency   transaction  gains  and  losses  are  included  as
components of "interest income and other income (expense), net" in the Company's
consolidated  statements of operations.  Due to the stability of the currency in
China, net foreign currency  transaction  gains and losses were not material for
the three months ended June 30, 2003 and 2002, respectively.

     Net Operating  Loss  Carryforwards.  The Internal  Revenue Code of 1986 and
similar state  provisions  may limit  utilization of the Company's net operating
losses on an annual basis due to ownership  change  limitations.  As a result, a
portion of the Company's net operating loss  carryforwards  may not be available
to offset  future  taxable  income.  The Company has  provided a full  valuation
allowance  for deferred tax assets at December  31, 2002,  of $28 million  based
upon the Company's history of losses.

Segments

     We report in two segments: handwriting recognition and systems integration.
Handwriting  recognition  includes  online/retail  revenues and corporate sales,
including enterprise and original equipment  manufacturers ("OEM") revenues. All
handwriting  recognition  software  is  developed  around  our core  technology.
Handwriting  recognition product revenues are generated through our web site and
a direct sales force to individual or  enterprise  end users.  We also license a
version  of our  handwriting  recognition  software  to OEM's.  The  handwriting
recognition  software is included as part of the OEM's  product  offering.  From
time to time, we are required to develop an interface (port) for our software to
run on a new  customer's  hardware  platform or within the  customer's  software
operating  system.  The  development  contract  revenues  are  included  in  the
handwriting  recognition  segment.  System  integration  represents the sale and
installation  of third party  computer  equipment  and systems  that utilize our
products.  System  integration  sales are derived  through a direct  sales force
which then  develops a system to utilize  our  software  based on the  customers
requirements.  Systems  integration  sales are  accomplished  solely through our
Joint Venture.

                                      -13-
<PAGE>
                     Communication Intelligence Corporation
                                 And Subsidiary
               (In thousands, except share and per share amounts)
                                    Form 10-Q

Results of Operations

     The following table provides  unaudited  financial  information for each of
our two segments.


                               Three Months Ended             Six Months Ended
                                    June 30,                      June 30,
                                   2003         2002         2003        2002
                                 -------      -------      -------    --------
Segment revenues:
  Handwriting recognition
    Online                       $    92      $    80      $   206    $    204
    Corporate                        288          708          955       1,406
    China                             75           64          123         101
                                 --------     --------     --------   ---------
Total handwriting recognition    $   455      $   852      $ 1,284    $  1,711

Systems integration                  117      $   259      $   396    $    557
                                 --------     --------     --------   ---------
Total revenues                   $   572      $ 1,111      $ 1,680    $  2,268
                                 --------     --------     --------   ---------

Cost of Sales
    Handwriting recognition      $    23      $   116      $    37    $    342
    Systems integration               99          187          318         402
                                 --------     --------     --------   ---------
Total cost of sales              $   122      $   303      $   355    $    744
                                 --------     --------     --------   ---------

Operating cost and expenses
   Research and development      $   303      $   366      $   643    $    778
   Sales and Marketing               180          427          463         814
   General and administrative        619          639        1,131       1,179
                                 ---------    --------     --------   ---------
Total operating costs
 and expenses                    $ 1,102      $ 1,432      $ 2,237    $  2,771
                                 ---------    --------     --------   ---------
Interest and other
income (expense) net             $   (38)     $   (47)     $   (88)   $   (112)
                                 ---------    --------     --------   ---------

Net loss                         $  (690)     $  (671)     $(1,000)   $ (1,359)
                                 =========    ========     ========   =========

Amortization of intangible assets
   Cost of sales                 $     4      $     4      $     7    $      7
   General and administrative         94           91          189         190
                                 ---------    --------     --------   ---------

Total amortization of
 intangible assets               $    98      $    95      $   196    $    197
                                 =========    ========     ========   =========


Revenues

Handwriting recognition.

     Handwriting  recognition segment revenues declined 47% and 25%, or $397 and
$427 for the three  and six  month  periods  ended  June 30,  2003 from $852 and
$1,711, respectively, in the comparable prior year periods as described below.

Online/retail  sales  increased 15%, or $12, for the three months ended June 30,
2003  compared to the prior year  period.  The increase for the six month period
ended June 30, 2003, was not material  compared to the  corresponding  six month
period in the prior year. The three month increase in online/retail sales is due
primarily  to the effect of the  November  2002  PalmSource  decision to replace
Graffiti(R) with CIC's Jot as the standard and only handwriting  software on all
new  Palm  PoweredTM  devices.  The  Company  believes  that the  November  2002

                                      -14-
<PAGE>
                     Communication Intelligence Corporation
                                 And Subsidiary
               (In thousands, except share and per share amounts)
                                    Form 10-Q

PalmSource  decision and  subsequent  January 2003  announcement  along with the
multi-channel  marketing  campaign  launched  in March  2003 has had a  positive
effect on its  online/retail  product sales resulting,  in a 43% increase in the
first  half of 2003,  compared  to sales in the  second  half of 2002.  The full
effect, if any, of the retail portion of the marketing  campaign is not expected
to be realized until the third quarter.  The Company cannot predict the duration
of any benefit  provided by the  PalmSource  announcement  or its  multi-channel
marketing campaign.

     Corporate  revenues decreased 59% and 32%, or $420 and $451, over the three
and six month  periods  ended June 30, 2003  compared to the prior year periods.
OEM revenues included in corporate sales decreased 36% and 43%, or $90 and $152,
over the three and six month  periods  ended June 30, 2003 compared to the prior
year  periods.  This  decrease was primarily due to two sales made in the second
quarter of 2002 to hand held device  developers  aggregating  $220.  The Company
believes Palm Source's replacement of Graffiti(R) with the Company's Jot product
as the standard and only handwriting  software on all new Palm PoweredTM devices
will increase OEM revenues in 2003. However, the poor economy may limit or delay
the Company's  anticipated increases in OEM revenues to later in 2003 or beyond.
Enterprise  sales included in corporate sales decreased 72% and 28%, or $330 and
$297, during the three and six month periods ended June 30, 2003 compared to the
prior year period. The Company believes the decline in enterprise revenue in the
second  quarter  of 2003 is a result of the  continued  "wait and see"  attitude
surrounding  IT  spending  due to  the  current  economy.  The  Company  remains
optimistic  and believes  that IT spending  will  increase in the second half of
2003.  The Company  believes  that IT spending and  economic  health will be the
limiting factors related to near term revenues.

     Software  sales in China  increased  17% and 22%, or $11 and $22,  over the
three and six month  periods  ended  June 30,  2003  compared  to the prior year
periods. The increase is due to the recent sales efforts focused on establishing
China-wide channel partners to accelerate sales growth.

Systems Integration.

     System integration  segment revenue declined 55% and 29%, or $142 and $161,
for the three and six month  periods  ended June 30, 2003  compared to the prior
year period.  The decrease  primarily reflects the need for the Joint Venture to
expand sales coverage from a traditional  focus on the local Nanjing and Jiangsu
Province markets to other provinces with in China. The Company believes that the
SARS related  health  crises in China  negatively  impacted  system  integration
revenues  and further  hampered  the  implementation  of its plans to expand its
system integration sales efforts into other provinces in China.

Cost of Sales

Handwriting recognition segment.

     Handwriting  recognition  segment cost of sales includes royalty and import
tax payments,  third party hardware costs, direct mail costs, engineering direct
costs and amortization of intangible assets excluding patents. Cost of sales for
the  handwriting  recognition  segment  decreased  80% and 89%, or $93 and $305,
during the three and six month  periods  ended June 30,  2003,  compared  to the
prior year periods.

     Online/retail cost of sales decreases 100% and 99%, or $22 and $184, during
the three and six month  periods  ended June 30, 2003 compared to the prior year
periods.  The decrease was due primarily to the  elimination  of the direct mail
campaign  and  related  costs as a result of  reductions  in the number of names
available  and a poor sales  close  rate.  The  Company  does not  anticipate  a
material  increase  in  costs  associated  with  the  multi-channel  JotComplete
campaign discussed in the online/retail revenue paragraph above.

     Enterprise  and OEM cost of sales  decreased  86% and 83%, or $65 and $110,
during the three and six month  periods  ended June 30,  2003,  compared  to the
prior year periods.  The decrease was due primarily to the lower volume of third
party hardware sales and engineering development costs.

     Handwriting  recognition  segment cost of sales for software  sold in China
increased  33% and 46%,  or $6 and $11,  during the three and six month  periods
ended June 30,  2003  compared  to the prior year  period.  The  increase is due
primarily to third party hardware costs.

                                      -15-
<PAGE>
                     Communication Intelligence Corporation
                                 And Subsidiary
               (In thousands, except share and per share amounts)
                                    Form 10-Q
Systems Integration.

     Systems integration segment cost of sales decreased 47% and 54%, or $88 and
$219,  over the three and six month  periods  ended June 30, 2003 as compared to
the prior year periods. The decrease in costs was due primarily to the reduction
in sales. See revenue discussion above.

Operating expenses

     Research  and  development  expenses.  Research  and  development  expenses
decreased  $63 and $135,  respectively,  or 17% and 17% to $303 and $643 for the
three and six month  periods  ended June 30, 2003, as compared to $366 and $778,
respectively,  in the prior year periods. Engineering expenses consist primarily
of salaries and related  costs,  outside  engineering,  maintenance  items,  and
allocated facilities  expenses.  Salaries and related expenses decreased 24% and
17%, or $60 and $87,  compared to the three and six month periods ended June 30,
2002  due  primarily  to  the  reduction  in  head  count  of  three  engineers.
Professional  services  declined  100%,  or $30 and $60,  over the three and six
month periods ended June 30, 2003, due to the elimination of outside engineering
support.  Other engineering  administrative costs including allocated facilities
expenses  increased  5%, or $5,  during the three months ended June 30, 2003 and
declined 10%, or $25,  during the six months ended June 30, 2003 compared to the
prior year period.  During the three and six month  periods ended June 30, 2003,
the Company did not transferred any project  development costs to cost of sales,
compared to $22 and  $37,respectively,  during the corresponding  periods in the
prior year. The Company  believes that the reductions in engineering  head count
and  expenses  will not have an adverse  effect on its  ability to cope with the
current  requirements.  The Company  maintains its relationship  with an outside
engineering  group  familiar with its products and, if required,  can engage the
group on an as needed basis to fill future engineering requirements. In addition
the  Company  draws on the  engineering  capabilities  of the Joint  Venture  as
required.

     Sales and marketing expenses. Sales and marketing expenses declined 58% and
43%,respectively, or $247 and $351, to $180 and $463 for the three and six month
periods ended June 30, 2003,  compared to $427 and $814,  respectively,  for the
comparable  three and six month periods in 2002.  Sales and  marketing  expenses
consist of salaries,  commissions and related expenses,  professional  services,
advertising  and promotion,  general office and allocated  facilities  expenses.
Salaries and related  expenses  declined 66% and 40%, or $128 and $128,  for the
three and six month  periods  ended June 30,  2003,  compared  to the prior year
period.  The decline in salaries  and related  expense is due  primarily  to the
reduction  of three sales  persons.  The  Company is  currently  implementing  a
channel strategy for its handwriting  recognition segment that will increase the
amount of market coverage by utilizing the sales force of the channel  partners.
The Company has  continued  to sign new  partner  agreements  in both the US and
China.  The Company  believes  these channel  partners  will produce  increasing
revenues in the near term.  Professional services declined 100%, or $51 and $54,
during the three and six month  periods  ended June 30,  2003,  compared  to the
prior year periods.  The decline is primarily  due to $37 in outside  commission
expense and $14 in salaries expense paid to an outside sales  consultant  during
the six months ended June 30, 2002.  Advertising  expense decreased 100%, or $42
and $53, for the three and six month  periods  ended June 30, 2003,  compared to
the prior year periods. This decrease is due to the discontinuance of in-the-box
advertising  during  the three and six month  periods  ended June 30,  2003,  as
compared to the prior year periods.  Commission expense decreased 42% and 56% to
$13 and $44,  respectively,  for the three and six months  ended June 30,  2003,
compared  to $23  and $99 in the  comparable  periods  in the  prior  year.  The
decrease is  primarily  due to the  decrease in sales over current the three and
six month periods compared to the prior year.

     General and Administrative  Expenses.  General and administrative  expenses
decreased  3% and 4%,  respectively,  or $20 and $48, to $619 and $1,131 for the
three and six month  periods  ended June 30, 2003,  compared to $639 and $1,179,
respectively,  in the prior year  periods.  General and  administrative  expense
consists of salaries,  professional fees,  investor relations  expenses,  patent
amortization  and office and  allocated  facilities  costs.  Salaries  and wages
increased  3% and 5%,  respectively,  or $6 and $16, for the three and six month
periods  ended June 30, 2003,  compared to the three and six month  periods last
year, due primarily to salary  increases.  Professional  service  expenses which

                                      -16-
<PAGE>
                     Communication Intelligence Corporation
                                 And Subsidiary
               (In thousands, except share and per share amounts)
                                    Form 10-Q

include  consulting,  legal and outside  accounting fees,  decreased 20% and 1%,
respectively,  or $26 and $3, compared to the three and six month periods in the
prior year.  The  increase  was due  primarily  to increases in the service fees
associated  with new  legal and  accounting  issues.  The  Company  reduced  its
provision  for   uncollectable   accounts  by  67%  and  67%,  or  $6  and  $12,
respectively,  for the  three  and six  month  periods  ended  June 30,  2003 as
compared  to the prior year  periods  due  primarily  to  collection  of certain
accounts  fully  reserved  for  in  prior  periods.  The  Company  believes  its
uncollectible  accounts  provision  is  adequate  at  the  present  time.  Other
administrative expenses declined 14% and 10%, respectively, or $46 and $55, over
the three and six month periods ended June 30, 2003,  compared to the prior year
periods. The decreases were due primarily to the reduction in expense brought on
by the recent  health  crises in China and  investor  relation  expenses  due to
reductions  in the  costs  associated  with  the  dissemination  of  shareholder
information. The Company believes that the lifting of the travel advisories will
not have a material  unfavorable  impact on travel expenses.  Investor relations
expenses are  expected to remain less than those  incurred in the prior year for
the foreseeable future.

Interest and other income (expense), net

     Interest and other income (expense),  net increased 50% and 266%, or $2 and
$24, during the three and six month periods ended June 30, 2003, compared to the
prior year  periods.  The  increase in income was due to a refund of value added
tax from 2002 received by the Joint Venture,  and the elimination of credit card
fees as a result of outsourcing  the Company's web store at the end of the first
quarter of 2003.

Interest expense

     Interest  expense  decreased  4% and 5% or $2 and $5 over the three and six
month  periods  ended June 30,  2003  compared  to the prior year  periods.  The
decrease was due  primarily to the decrease in the bank  floating  interest rate
paid on the Company's $3,000 debt.

Liquidity and Capital Resources

     At June 30, 2003, cash and cash equivalents totaled $1,424 compared to cash
and cash  equivalents of $711 at December 31, 2002. The increase in cash was due
primarily to financing  activities through Cornell Capital Partners,  LP. During
the six months ended June 30, 2003 the Company  received $1,590 from the sale of
8,620,651 shares of stock, net of issuance costs associated with the preparation
and filing and maintenance of the S-1 in February 2003. This increase was offset
by $837 used in  operating  activities,  and by  equipment  purchases of $36 and
payments of capital lease obligations of $4. Total current assets were $2,223 at
June 30, 2003, compared to $1,545 at December 31, 2002. As of June 30, 2003, the
Company's  principal  sources of funds  included  its cash and cash  equivalents
aggregating  $1,424  and the  Equity  Line of  Credit  through  Cornell  Capital
Partners LP.

     Accounts  receivable  increased  $74 for the six months ended June 30, 2003
compared to December 31, 2002, due primarily to the increase in sales during the
three  months ended June 30, 2003  compared the three months ended  December 31,
2002.  Revenue from the Joint Venture in July exceeded it's total second quarter
revenue  and,  based on  planned  deployments  both  domestically  and in China,
together  with the  increasing  level of proposal and  quotation  activity,  the
Company anticipates that revenue will increase in the last half of 2003.


     Prepaid  expenses  declined  $77 for the six months  ended  June 30,  2003,
compared to December  31,  2002,  due to  expensing  the  appropriate  quarterly
prepaid amounts through  operations.  Generally  annual  insurance  premiums and
maintenance fees are prepaid in December and June of each year.

     Accounts  payable  increased  $27 for the six months  ended June 30,  2003,
compared to December 31, 2002,  due primarily to the fees  associated  with both
the annual audit and the preparation and filing of the Registration Statement on
Form S-1. Accrued compensation  decreased $19 between December 31, 2002 and June
30, 2003 due primarily to the elimination of four positions and related personal
late in March 2003. The Company  believes that the  elimination of the positions
will not have an negative  impact on its ability to conduct  business on a going
forward basis.

     The Company has  suffered  recurring  losses from  operations  that raise a
substantial doubt about its ability to continue as a going concern.  At June 30,
2003, the Company's accumulated deficit was approximately $81 million. There can

                                      -17-
<PAGE>
                     Communication Intelligence Corporation
                                 And Subsidiary
               (In thousands, except share and per share amounts)
                                    Form 10-Q

be no assurance  that the Company will have adequate  capital  resources to fund
planned  operations  or that any  additional  funds will be available to it when
needed,  or if  available,  will be available  on favorable  terms or in amounts
required by it. 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 its business,
results of operations and ability to operate as a going  concern.  The financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.

     The Company intends to use the net proceeds from the issuance of the shares
of its common stock under the Equity Line of Credit to repay short term debt and
for working  capital  purposes.  Fifty percent of any such funds in excess of $5
million must be applied to the outstanding principal of the Company's short-term
debt.  The Company  believes  that the proceeds  from the Equity Line of Credit,
when combined with cash provided from operations, will be sufficient to meet its
capital  requirements  for the foreseeable  future.  If the Company is unable to
secure at least $5 million in funds under the Equity Line of Credit or is unable
to increase  substantially funds generated from operations,  the Company may not
be able to continue its operations in their current form and may not be a viable
company on a going forward basis without  significant changes in its operations.
The  Company  believes  it will be able to raise the  necessary  funds under the
Equity  Line of Credit  and from  operations.  The  Company  has not  formulated
specific plans to change its operations.  Possible changes could include reduced
personnel expenses to better match its revenue stream.

     Current  liabilities,  which include deferred revenue,  were $4,015 at June
30, 2003,  compared to $1,102 at December  31, 2002.  The increase is due to the
inclusion in current liabilities of the $3,000 related party note which had been
classified as long-term as of December 31, 2002(see material commitments below).
Deferred  revenue,  totaling $79 at June 30, 2003,  compared to $165 at December
31, 2002,  primarily  reflects the balance of advance  payments for products and
maintenance fees from the Company's licensees which are generally  recognized as
revenue  by the  Company  when all  obligations  are met or over the term of the
maintenance agreement.

We have the following material commitments as of June 30, 2003:

                                            Payments Due by Period
                                   Less than  One to three  Four to    After
                         Total      one year     years     five years five years
                        -------     --------- ------------ ---------- ----------
Contractual Obligations

Short-term debt (1)   $  3,000      $  3,000     $     -    $      -          -
Capital lease
obligations                 34             6          25           3          -
Operating
lease commitments (2)    1,495           407       1,088           -          -
                      ---------     ---------    --------    ---------   -------
Total contractual
 cash obligations     $  4,529      $  3,413     $ 1,113      $    3     $    -
                      =========     =========    ========    =========   =======

1.   The  Short-term  debt may be pre-paid by the Company in whole or in part at
     any time without  penalty,  subject to the right to convert the outstanding
     principal amount into shares of common stock at a conversion price of $2.00
     per share, subject to adjustment upon the occurrence of certain events.

2.   The operating  lease  commenced on November 1, 2001.  The cost of the lease
     will increase  approximately 3% per annum over the term of the lease, which
     expires on October 31, 2006.

Forward Looking Statements

     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
Securities  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:

                                      -18-
<PAGE>
                     Communication Intelligence Corporation
                                 And Subsidiary
               (In thousands, except share and per share amounts)
                                    Form 10-Q

o    Technological,   engineering,   manufacturing,  quality  control  or  other
     circumstances which could delay the sale or shipment of products;
o    Economic,  business,  market and  competitive  conditions  in the  software
     industry and  technological  innovations  which could affect the  Company's
     business;
o    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
o    General economic and business conditions and the availability of sufficient
     financing.

     The Company  undertakes  no  obligation  to  publicly  update or revise any
forward-looking  statements,  as a result of new  information,  future events or
otherwise.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

     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. The Company did not enter into any
short-term security investments during the three months ended June 30, 2003.

Foreign Currency Risk

     The Company currently owns 90% of CIC China,  (the "Joint  Venture'),  with
the Jiangsu  Hongtu  Electronics  Group,  a  provincial  agency of the  People's
Republic  of China.  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.

Future Results and Stock Price Risk

     Over the last six months the  Company's  stock price has ranged from a high
of  $0.65 to a low of  $0.19.  The  Company's  stock  price  may be  subject  to
significant  volatility  in the future as well.  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.

Item 4. Controls and Procedures

     Under  the  supervision  and  with  the   participation  of  the  Company's
management,  including the Company's Chief Executive Officer and Chief Financial
Officer, the Company has evaluated the effectiveness of the design and operation
of its  disclosure  controls  and  procedures  pursuant  to  Exchange  Act  Rule
13a-14(c) within 90 days of the filing date of this quarterly  report.  Based on
that evaluation,  the Chief Executive  Officer and Chief Financial  Officer have
concluded that these  disclosure  controls and  procedures are effective.  There
were no  significant  changes in the  Company's  internal  controls  or in other
factors that could significantly affect internal controls subsequent to the date
of their evaluation.

                                      -19-
<PAGE>
                     Communication Intelligence Corporation
                                 And Subsidiary
               (In thousands, except share and per share amounts)
                                    Form 10-Q

Part II-Other Information

Item 1. Legal Proceedings

     The  Company was named as a defendant  in a suit  brought in U.S.  District
Court for the  Southern  District  of New York,  filed on August 5,  2002,  case
number 02-CV-6197 (the  "Complaint").  The plaintiffs,  Richard M. Ross and Jane
Spaulder Ross, brought claims for breach of contract, conversion, negligence and
statutory  violations,  alleging  that the Company  provided  incorrect or false
information  to  plaintiffs'  stockbroker,  thereby  delaying  the sale of their
shares in the Company and  causing a loss in excess of  $500,000.  In a separate
arbitration  proceeding  the plaintiffs  have brought  similar claims for relief
against Charles Schwab & Co., Inc.,  their broker during the period in question,
based upon other legal theories.

     The Company  filed a motion to dismiss or to stay the  proceedings  pending
the outcome of the arbitration  between the plaintiffs and Charles  Schwab.  The
court determined that the plaintiffs had not met the burden of establishing that
the amount in  controversy,  excluding  interest  and costs,  exceeded  $75,000.
Therefore  the  Court  dismissed  the  Complaint  for  lack  of  subject  matter
jurisdiction.

Item 2. Change in Securities

        None

Item 3. Defaults Upon Senior Securities

        None

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

     The Company held its Annual Meeting of  Stockholders  on June 23, 2003. 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 92,678  shares or
95.8% 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 four  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.

                                                              Broker
                                                  ------------------------------
    Name                  For        Withheld       Non-votes         Abstain
   ------------------ ----------  --------------  ---------------  -------------

    Guido DiGregorio     91,369        1,309           None              None
    Michael Farese       92,200          478           None              None
    Louis Panetta        92,209          469           None              None
    C. B. Sung           92,185          493           None              None


                                      -20-
<PAGE>
                     Communication Intelligence Corporation
                                 And Subsidiary
               (In thousands, except share and per share amounts)
                                    Form 10-Q


Item 4.  Submission of Matters to a Vote of Security Holders (continued)
         ---------------------------------------------------------------

Proposal 2

         To ratify the appointment of Stonefield Josephson, Inc. as independent
accountants of the Company for the fiscal year ending December 31, 2002. The
number of votes for, against and abstaining on this proposal was as follows:

                                                                Broker
                                                      ------------------------
                      For       Against     Abstain     Non-votes    Abstain
                   ---------   ---------  ----------- ------------ -----------


All Classes         92,327         276            75       None       None


Item 5. Other Information

        None

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits                                                            Page

        Exhibit 31.1 Certification 302 of Chief Financial Officer         23
        Exhibit 31.2 Certification 302 of Chief Executive Officer         24
        Exhibit 32.1 Certification 906 of Chief Financial Officer         25
        Exhibit 32.1 Certification 906 of Chief Executive Officer         26

(b) Reports on Form 8-K

     Current  Report on Form 8-K,  incorporated  by  reference,  dated April 28,
2003, with respect to:

1. The Company's financial results for the quarter ended March 31, 2003.


                                      -21-
<PAGE>


                                   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 14 , 2003                       /s/ Francis V. Dane
-----------------------            -----------------------------------------
          Date                                  Francis V. Dane
                                 (Principal Financial Officer and Officer Duly
                                  uthorized to Sign on Behalf of the Registrant)











                                      -22-