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: September 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 November 12, 1999: 79,624,307.

This Quarterly Report on Form 10-Q contains 19 pages of which this is page 1.


<PAGE>
                     Communication Intelligence Corporation
                                 and Subsidiary
                                    FORM 10-Q

                                      INDEX


PART I.  FINANCIAL INFORMATION


  Item 1.  Financial Statements                                         Page No.

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

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

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

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

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

  Item 3.  Quantitative and Qualitative Disclosures About Market Risk........17

PART II.  OTHER INFORMATION

  Item 1.  Legal Proceedings.................................................17

  Item 2.  Change in Securities..............................................17

  Item 3.  Defaults Upon Senior Securities...................................17

  Item 4.  Submission of Matters to a Vote of Security Holders...............17

  Item 5.  Other Information.................................................17

  Item 6.  Exhibits and Reports on Form 8-K

           (a)      Exhibits.................................................18

           (b)      Reports on Form 8-K......................................18

  Signatures.................................................................19

                                      -2-
<PAGE>
                      Communication Intelligence Corporation
                                 and Subsidiary
                      Condensed Consolidated Balance Sheets
                                 (In thousands)
<TABLE>
<CAPTION>

                                              September 30,     December 31,
                                                  1999              1998
                                              ------------      ------------
                                               Unaudited
<S>                                           <C>             <C>

Assets
Current assets:
     Cash and cash equivalents                  $    768        $     795
     Restricted cash                                   -              250
     Accounts receivable, net                        911            1,146
     Inventories                                      60               74
     Other current assets                            193              103
                                              ------------      -----------
         Total current assets                      1,932            2,368

Note receivable from officer  (Note 4)               137              200
Property and equipment, net                          388              539
Other assets                                         289              247
                                              ------------      -----------

         Total assets                           $  2,746         $  3,354
                                              ============      ===========

Liabilities and stockholders' equity Current liabilities:
     Short-term debt (Note 5)                   $    846         $    145
     Accounts payable                                480              473
     Accrued compensation                            249              229
     Other accrued liabilities                       491              524
     Deferred revenue                                 78              651
                                              ------------      -----------
         Total current liabilities                 2,144            2,022

Commitments  (Note 5)

Stockholders' equity:
     Common stock                                    797              785
     Additional paid-in capital                   70,811           70,205
     Accumulated deficit                         (70,798)         (69,504)
     Cumulative translation adjustment              (208)            (154)
                                              -------------     -----------
         Total stockholders' equity                  602            1,332
                                              =============     ===========

         Total liabilities and stockholders'
          equity (Note 5)                       $  2,746         $  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         Nine Months Ended
                                    September 30,              September 30,
                                 -------------------        ------------------
                                   1999       1998            1999       1998
                                 --------   --------        --------   --------
<S>                            <C>        <C>            <C>         <C>
Revenues:
     Product                     $ 1,200    $   598        $ 2,760     $ 2,076
     License and royalty             717        388          1,527       1,276
     Development contracts            49        130            362         330
                                 --------   --------        --------   --------

             Total revenues        1,966      1,116          4,649       3,682

Operating costs and expenses:
     Cost of sales:
        Product                    1,113        357          2,078       1,133
        License and royalty           12         33             44          55
        Development contracts         10         98            176         208
     Research and development        333        344          1,014       1,409
     Sales and marketing             504        591          1,335       1,872
     General and administrative      419        437          1,321       1,403
                                 --------   --------        -------   --------

          Total operating costs
              and expenses         2,391      1,860          5,968       6,080
                                 --------   --------        -------   --------

Loss from operations                (425)      (744)        (1,319)     (2,398)

Interest income and other income
  (expense), net (Note 7)              9         30             41         132

Interest expense                     (14)        (2)           (16)        (18)
                                ----------  --------       --------    -------

         Net loss                   (430)      (716)        (1,294)     (2,284)

         Preferred stock
         dividend (Note 7)             -       (125)             -        (435)
                                ----------  --------        -------   --------

Net loss applicable to common
     stockholders               $   (430)   $  (841)       $ (1,294)  $ (2,719)
                                ==========  =========      =========  =========

Basic loss per common           $ (0.005)   $(0.015)       $ (0.016)  $ (0.053)
                                ==========  =========      =========  =========

Diluted loss per common         $ (0.005)   $(0.015)       $ (0.016)  $ (0.053)
  share (Note 8)                ==========  =========      =========  =========

Weighted average common
     shares outstanding           79,586     54,544          79,410     51,298
                                ==========  =========      =========  =========
</TABLE>

                          See accompanying notes.

                                      -4-
<PAGE>
                     Communication Intelligence Corporation
                                 and Subsidiary
                 Condensed Consolidated Statements of Cash Flows
                                    Unaudited
                                 (In thousands)

<TABLE>
<CAPTION>
                                                         Nine Months Ended
                                                            September 30,
                                                 -------------------------------
                                                     1999                 1998
                                                 ------------       ------------
<S>                                            <C>              <C>

Cash flows from operating activities:
   Net loss                                      $    (1,294)      $    (2,284)
   Adjustments to reconcile net loss to net cash
   provided by (used) in operating activities:
       Depreciation and amortization                     188               246
       Non-cash compensation                              62                32
       Changes in operating assets and liabilities:
          Accounts receivable                            235              (437)
          Inventories                                     15               (54)
          Other current assets                           (91)               99
          Other assets                                   (56)             (203)
          Accounts payable                                 8              (882)
          Accrued compensation                            21              (188)
          Other accrued liabilities                      (56)             (171)
          Deferred revenue                              (573)             (452)
                                                 --------------     ------------

       Net cash used in operating activities          (1,541)           (4,294)
                                                 --------------     ------------

Cash flows from investing activities:
    Acquisition of property and equipment                (66)              (49)
    Acquisition of property under capital lease           12                 -
                                                 --------------     ------------

        Net cash used in investing activities            (54)              (49)
                                                 --------------     ------------

Cash flows from financing activities:
    Principal payments on short-term debt               (145)             (490)
    Principal payments on capital lease obligations       (2)               (4)
    Proceeds from issuance of short-term debt            847               145
    Proceeds from issuance of common stock               618               527
    Restricted cash related to short-term debt           250                 -
                                                 -------------      ------------

      Net cash provided by financing activities        1,568               178
                                                 -------------      ------------

Effect of exchange rate changes on cash                    -                (6)
                                                 -------------      ------------

Net decrease in cash and cash equivalents                (27)           (4,171)
Cash and cash equivalents at beginning of period         795             5,485
                                                 -------------      ------------

Cash and cash equivalents at end of period      $        768       $     1,314
                                                 =============      ============
</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 nine months ended September 30, 1999, the Company's cash and cash
       equivalents  decreased by $27 from $795 at the beginning of the period to
       $768.  The decrease is due  primarily to cash of $1,541 used in operating
       activities,  and by $54 used in investing  activities.  This decrease was
       offset by $1,568 provided by financing activities. The $1,568 provided by
       financing  activities  consists  primarily  of $618 in proceeds  from the
       exercise  of  stock  options  by the  Company's  employees,  and  $750 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 cash
       which previously  secured a loan from a Chinese bank. The loan was repaid
       in February  1999. On October 20, 1999,  the Company  entered into a loan
       agreement with a charitable  remainder annuity trust, of which a director
       and officer of the Company is a trustee,  whereby its existing short-term
       Bridge Loan of $750 was converted  into a long term loan in the amount of
       $1,500 (the "1999  Loan").  On October 20, 1999 the Company  received the
       additional $750 in cash.

                                      -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)


       As of September 30, 1999,  the Company's  principal  source of funds were
       its cash and cash equivalents of $768. 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.

       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>
                                        September 30,            December 31,
                                            1999                    1998
                                    --------------------    -------------------

<S>                                    <C>                      <C>
         Cash in bank                  $        765             $       668
         Commercial paper                         -                     125
         Money market accounts                    3                       2
                                    ---------------------    ------------------
                                       $        768             $       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 September 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,  an aggregate of $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.

                                      -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

       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 was
       increased by $150 and $100 in August and  September  1999,  respectively.
       The Bridge Loan bears  interest  at the prime rate plus 2%. At  September
       30, 1999,  the Bridge Loan bore interest at 9.75% per annum.  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.
       (See Note 11).

       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.

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

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.

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

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

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  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

                                      -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)

       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>
                                              Nine months ended September 30,
                                          ----------------    -----------------
                                                 1999               1998
                                          ----------------    -----------------
        <S>                              <C>                 <C>

         Net loss                          $     (1,294)       $     (2,284)
         Other comprehensive income:
         Cumulative translation adjustment          (54)                (52)
                                          ----------------    -----------------
         Total comprehensive loss          $     (1,348)       $     (2,336)
                                          ================    =================
</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.

       The table below presents  information  about  reporting  segments for the
periods indicated:
<TABLE>
<CAPTION>

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

 Revenues            $ 3,372    $ 1,277  $  4,649  $ 2,283   $ 1,399    $ 3,682
 Loss from Operations$(1,305)   $   (14) $ (1,319) $(1,821)  $  (577)   $(2,398)
 Significant change
 in   Total assets
 from Year End       $     -   $     -   $      -  $     -   $     -    $     -

</TABLE>

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

11.      Subsequent event

         On October 20, 1999,  the Company  entered into a loan agreement with a
         charitable  remainder annuity trust, of which a director and officer of
         the Company is a trustee,  whereby its existing  short-term Bridge Loan
         of $750 was  converted  into a long term  loan in the  amount of $1,500
         (the "1999  Loan").  On October  20,  1999,  the Company  received  the
         additional  $750 in cash.  The  long-term  loan is  secured  by a first
         priority  security interest in all of the Company's assets as now owned
         or  hereafter  acquired by the Company The 1999 Loan bears  interest at
         the rate of 2% over the prime rate as published  by Citibank  from time
         to time,  and is due January 31, 2002.  Interest is payable  quarterly.
         The  funds can be  re-paid  in whole at any time or in part at any time
         without penalty. Any partial payment must be in the principal amount of
         $100 or a multiple thereof.

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



                                      -11-
<PAGE>
                     Communication Intelligence Corporation
                                 and Subsidiary
                    (In thousands, except per share amounts)
                                    FORM 10-Q

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

The following  discussion and analysis  should be read in  conjunction  with the
Company's  unaudited  condensed  consolidated  financial  statements  and  notes
thereto  included  in  Part I - Item  1 of  this  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 September 30,
1999,  total revenues  increased by 76% to $1,966 from $1,116,  and for the nine
months revenue  increased 26% to $4,649 from $3,682 for the comparable three and
nine month periods ended September 30, 1998 as discussed below:
<TABLE>
<CAPTION>

                            Three Months Ended           Nine Months Ended
                               September 30,               September 30,
                            ---------------------    ------------------------
                               1999         1998        1999           1998
                            ---------------------    ------------------------
<S>                        <C>         <C>          <C>            <C>
Revenues:
   Product sales             $ 1,200     $   598      $ 2,760        $ 2,076
   License and royalty fees      717         388        1,527          1,276
   Development contracts          49         130          362            330
                             --------    --------     --------      --------
         Total revenues      $ 1,966     $ 1,116      $ 4,649        $ 3,682
                             ========    ========     ========      ========
</TABLE>

Product sales for the three months ended  September 30, 1999 increased to $1,200
or by 101% from $598 in the  comparable  prior year  period.  Handwriter(R)  and
other product sales for the three months ended September 30, 1999 decreased $104
or 98% to $2 from $106 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 $437  or  567%  in  aftermarket  consumer  software  sales  via the
Company's  website to $514,  compared to $77 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")  increased 65% to $685 for the three month period ended  September 30,
1999 compared to $415 during the same period last year.  The increase  primarily
resulted from the increase in system  integration  business compared to the same
period last year.

Product sales for the nine months ended  September 30, 1999  increased to $2,760
or by 33% from $2,076 in the comparable prior year period. This increase was due
to the increase of $1,254 or 786% in aftermarket consumer software sales via the
Company's website to $1,414, compared to $160 in the prior year. The increase in
aftermarket   consumer  software  sales  resulted  from  increased  direct  mail
campaigns  as compared to the 1998 nine month  period.  Handwriter(R)  and other
product sales for the nine months ended September 30, 1999 decreased $448 or 87%
to $70 from $518 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 9% to $1,277 from $1,399 for the nine month period ended September 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
                    (In thousands, except per share amounts)
                                    FORM 10-Q

Revenues  from  license  and  royalty  fees for the  three  month  period  ended
September  30, 1999  increased  $329 or 85% to $717 from $388 in the  comparable
prior year period. This increase is primarily attributable to the recognition of
the $500 of deferred  revenue from Ericsson for 1,250 software  licenses,  which
offset lower product shipments by four OEM's bundling the Company's  handwriting
recognition  software  during the three months ended September 30, 1999 compared
to the same period last year.  For the nine month  period  ended  September  30,
1999,  revenues  from license and royalty fees  increased  $251 or 20% to $1,527
from $1,276 in the comparable prior year period. This increase was primarily the
result of new OEM agreements,  the recognition of the Ericsson deferred revenue,
and  increased  OEM  product  shipments   bundling  the  Company's   handwriting
recognition  software over the nine months ended  September 30, 1999 compared to
the same period last year.

Development  contract  revenues for the three month period ended  September  30,
1999  decreased 62% to $49 from $130 in the comparable  prior year period.  This
decrease   resulted  from  reduced  grant  revenue  from  the  National  Science
Foundation.  For the nine months ended September 30, 1999,  development contract
revenue increased 10% to $362 from $330 in the comparable prior year period. The
increase is due to increases in  non-recurring  engineering  revenues other than
grant revenues compared to the prior year period.

Cost of sales.  Cost of product sales for the three and nine month periods ended
September 30, 1999 increased 133% and 65%,  respectively,  to $1,135 and $2,298,
respectively,  from $488 and $1,396, respectively,  in the comparable prior year
periods.  Cost of  product  sales  for the three and nine  month  periods  ended
September  30,  1999  includes  approximately  $541 and $922,  respectively,  of
hardware and software components related to the system integration activities of
the Joint Venture, compared to approximately $309 and $1,018,  respectively,  in
the prior year  periods.  The increase in systems  integration  costs of product
sales for the three month period ended September 30, 1999 is due to the increase
in sales of such products and their higher material content. For the nine months
ended September 30, 1999 the decrease in system  integration  costs 9 was due to
lower  sales  during the  comparable  period of 1998.  The cost of sales via the
company's  website for three and nine month  periods  ending  September 30, 1999
increased $572 and $1,156 respectively. The increase in website cost of sales is
due to increased  direct mail campaigns as compared to the three and nine months
ended  September  30,  1998.   License  and  royalty  cost  of  sales  decreased
approximately $21 and $11, respectively,  to $12 and $44, respectively,  for the
three  and nine  months  ended  September  30,  1999,  compared  to $33 and $55,
respectively,  for the comparable 1998 periods. The decrease is due to decreased
technology  import tax on the Japanese  OEM  shipments  bundling  the  Company's
handwriting recognition software.  Costs incurred in connection with development
contract revenues  decreased 90% to $10 for the three months ended September 30,
1999 as compared to $98 in the prior period,  commensurate  with the decrease in
contract  development  revenues.  For the nine months ended  September 30, 1999,
contract  development  costs  decreased  15% to $176 as  compared to $208 in the
prior period.  The decrease is due to a reduction in grant related revenues over
the nine months ended  September 30, 1999 compared to the same nine month period
last year.

Research and development  expenses.  Research and  development  expenses for the
three and nine month periods ended  September 30, 1999  decreased by 3% and 28%,
respectively,  to $333 and $1,014, respectively,  as compared to $344 and $1,409
in the comparable  period of the prior year. The decreases were primarily due to
reductions of approximately $11 and $211,  respectively,  in payroll and related
costs  attributable  to a decrease in the number of U.S. based personnel for the
three and nine month periods ended September 30, 1999 compared to the same three
and nine month prior year periods. Other costs, including facilities and related
costs, increased approximately $9 and $184, respectively, for the three and nine
month periods ended  September 30, 1999 from the comparable  prior year periods.
The Company did not capitalize any significant software development costs in the
three and nine month periods ended September 30, 1999, and 1998.

Sales and marketing  expenses.  Sales and  marketing  expenses for the three and
nine month  periods ended  September 30, 1999  decreased 15% and 29% to $504 and
$1,335,  respectively,  as compared to $591 and $1,872 in the comparable periods
of the prior year.  The  decreases  were  primarily due to decreases of $199 and
$426 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 increased $112 for the three months ended September
30, 1999 as compared to the same period last year. The increase is primarily due

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

to an increase in professional  services in connection with a marketing study of
the  Company's  Web Sales  strategies.  For the nine months ended  September 30,
1999,  other costs  declined  $111,  compared to the same periods last year, due
primarily to reductions in staffing in the first and second quarters of 1998.


General and administrative expenses. General and administrative expenses for the
three and nine  month  period  ended  September  30,  1999  decreased  4% and 6%
respectively,  to $419 and $1,321, respectively, as compared to $437 and $1,403,
respectively,  in the comparable period of the prior year. This decrease for the
three months ended  September 30, 1999 was primarily  attributable to a decrease
in payroll and related costs due to a reduction in personnel associated with the
Joint Venture  operations.  The decrease for the nine months ended September 30,
1999, was due primarily to a reduction of $100 in payroll and related  expenses,
offset by increases in professional service expenses.

Interest and other income  (expense),  net. Interest and other income (expense),
net, decreased for the three and nine months ended September 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.

Interest expense.  Interest expense increased $12 to $14 during the three months
ended September 30, 1999 as compared to $2 in the comparable  prior year period.
The increase is due to the accrual of interest on the Bridge Loan.  For the nine
months ended September 30, 1999,  interest expense decreased 11% to $16 from $18
in the comparable prior year period.

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 nine month periods  ended  September 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 September 30, 1999, cash and cash  equivalents  totaled $768 compared to cash
and cash equivalents of $795 at December 31, 1998. The decrease is due primarily
to cash  used in  operating  activities  of  $1,541  and $54  used in  investing
activities   These  decreases  were  offset  by  $1,568  provided  by  financing
activities  consisting of $618 in proceeds from the exercise of stock options by
the Company's employees and $750 from the Bridge Loan obtained from a charitable
remainder  annuity  trust,  of which a director  and officer of the Company is a
trustee.  Total  current  assets were $1,932 at September  30, 1999  compared to
$2,368 at December 31, 1998, and total current  liabilities were $2,144 compared
to $2,022 for the same periods

As of September 30, 1999,  the Company's  principal  source of liquidity was its
cash and cash  equivalents  of $768.  Although  there can be no  assurance,  the
Company believes that its cash and cash equivalents  together with cash provided
from the 1999 Loan discussed below and projected  revenues will be sufficient to
fund planned  operations for 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.

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

Current  liabilities,  which include deferred revenue,  were $2,144 at September
30,  1999.  Deferred  revenue,  totaling $78 at  September  30, 1999,  primarily
reflects nonrefundable advance non-recurring  engineering fees received from the
Company's licensees, which are generally recognized as revenue by the Company as
the projects are completed.  In addition,  current  liabilities include a Bridge
Loan of $750 from a charitable  remainder annuity trust, of which a director and
officer of the Company is a trustee.  On October 20, 1999,  the Company  entered
into a loan agreement  with a charitable  remainder  annuity  trust,  of which a
director  and  officer  of  the  Company  is a  trustee,  whereby  its  existing
short-term Bridge Loan of $750 was converted into a long term loan in the amount
of $1,500 (the "1999  Loan").  On October 20,  1999,  the Company  received  the
additional  $750 in cash. The 1999 Loan is secured by a first priority  security
interest in all of the  Company's  assets as now owned or hereafter  acquired by
the  Company  1999 Loan bears  interest at the rate of 2% over the prime rate as
published by Citibank from time to time,  and is due January 31, 2002.  Interest
is payable  quarterly.  The funds can be re-paid in whole at any time or in part
at any time without penalty. Any partial payment must be in the principal amount
of  $100  or a  multiple  thereof.  At  November  12,  1999,  there  was  $1,500
outstanding under the 1999 Loan, which bore interest at 9.75 per annum.


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 September  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.

                                      -15-
<PAGE>
                     Communication Intelligence Corporation
                                 and Subsidiary
                    (In thousands, except per share amounts)
                                    FORM 10-Q

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. As of September 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.

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

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

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

         None

Part II-Other Information

Item 1.  Legal Proceedings

         None

Item 2.  Change in Securities

         During the nine  months  ended  September  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 (5) Sept. 7,1999  275,000    $ 1.1875     Quarterly   Sept.  7,2006
                                                                  over three
                                                                  years

  Employees (1) Sept.30,1999   10,000    $ 1.3125     Quarterly   Sept. 30,2006
                                                                  over three
                                                                  years

  -----------------------------------------------------------------------------
</TABLE>

Item 3.  Defaults Upon Senior Securities

         None

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

         None

Item 5.  Other Information

         None

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

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits

         Exhibit 27, Financial Data Schedule.

(b)      Reports on Form 8-K

         None

                                      -18-
<PAGE>
                     Communication Intelligence Corporation
                                 and Subsidiary
                    (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



       November 19, 1999                       //Guido Di Gregorio
-------------------------------   ---------------------------------------------
              Date                               Guido DiGregorio
                                 (Principal Financial Officer and Officer Duly
                                 Authorized to Sign on Behalf of the Registrant)


                                      -19-
<PAGE>