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



                                    FORM 10-Q


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

                 For the quarterly period ended: March 31, 2002
                                                 --------------


                                       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 May 14,2002: 91,460,777.


<PAGE>

                                      INDEX



PART I.  FINANCIAL INFORMATION


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

   Condensed Consolidated Balance Sheets at March 31, 2002
   (unaudited) and December 31, 2001.........................................3

   Condensed Consolidated Statements of Operations for the
   Three-Month Period Ended March 31, 2002 and 2001 (unaudited)..............4

   Condensed Consolidated Statements of Changes in Stockholders'
   Equity for the Three-Month Period Ended March 31, 2002 (unaudited)........5

   Condensed Consolidated Statements of Cash Flows for the
   Three-Month Period Ended March 31, 2002 and 2001 (unaudited)..............6

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


   Item 2.  Management's Discussion and Analysis of Financial
            -------------------------------------------------
            Condition and Results of Operations.............................11
            -----------------------------------

   Item 3.  Quantitative and Qualitative Disclosures About Market Risk......15
            ----------------------------------------------------------

PART II.  OTHER INFORMATION

   Item 1.  Legal Proceedings...............................................15
            -----------------

   Item 2.  Change in Securities............................................15
            --------------------

   Item 3.  Defaults Upon Senior Securities.................................15
            -------------------------------

   Item 4.  Submission of Matters to a Vote of Security Holders.............15
            ---------------------------------------------------

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

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

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

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

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



                                      -2-
<PAGE>


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

                                                        March 31,   December 31,
                                                          2002         2001
                                                       ----------   ------------
                                                       Unaudited
Assets
Current assets:
Cash and cash equivalents...........................    $  2,145     $  2,588
     Accounts receivable, net.......................       1,117        1,043
     Inventories....................................         169          129
     Prepaid expenses and other
     current assets.................................         173          106
                                                        ---------    ---------
         Total current assets.......................       3,604        3,866

Property and equipment, net.........................         148          161
Capitalized software costs..........................          22           26
Patents and trademarks..............................       5,704        5,799
Other assets........................................          87          220
                                                        ---------    ---------

         Total assets...............................    $  9,565     $ 10,072
                                                        =========    =========

Liabilities and Stockholders' equity
Current liabilities:
     Short-term debt................................    $     60     $    181
     Accounts payable...............................         341          206
Accrued compensation................................         238          208
     Other accrued liabilities......................         179          196
     Deferred revenue...............................         131           88
     Capital Lease Obligations......................           1            3
                                                        ---------    ---------
         Total current liabilities..................         950          882

Notes payable - noncurrent..........................       3,000        3,000

Minority interest...................................         130          130

Commitments

Stockholders' equity:
     Common stock...................................         910          909
     Additional paid-in capital.....................      81,714       81,605
     Accumulated deficit............................     (76,946)     (76,258)
     Cumulative translation adjustment..............        (193)        (196)
                                                        ----------   ----------
      Total stockholders' equity....................       5,485        6,060
                                                        ----------   ----------

      Total liabilities and stockholders' equity....    $  9,965     $ 10,072
                                                        ==========   ==========

                            See accompanying notes.

                                      -3-
<PAGE>


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

                                                      Three Months Ended
                                                           March 31,
                                                   ------------------------
                                                      2002          2001
                                                   -----------   ----------

Revenues:
     Online....................................      $  124       $   350
     Corporate.................................         698           521
       Nonrecurring maintenance fees -M10
       (previously PenOp Inc)..................           -           352
China                                                   335           395
                                                    --------      --------

         Total revenues........................       1,157         1,618

Operating costs and expenses:
     Cost of sales:
         Online................................         163           269
         OEM...................................           1            11
         Corporate ............................          56            64
         China.................................         221           278
     Research and development..................         412           477
     Sales and marketing.......................         387           561
     General and administrative................         540           643
                                                    ---------     ---------

         Total operating costs and expenses....       1,780         2,303
                                                    ---------     ---------

Loss from operations...........................        (623)         (685)

Interest and other income (expense), net.......         (13)            5

Interest expense...............................         (52)          (61)

Minority interest..............................           -             -
                                                    ----------    ---------

         Net loss .............................      $ (688)       $ (741)
                                                    ==========    =========

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

Diluted loss per share.........................      $(0.01)       $(0.01)
                                                    ==========    =========

Weighted average common shares outstanding.....      90,946        90,222
                                                    ==========    ==========

                            See accompanying notes.

                                      -4-

<PAGE>


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


                                                            Accumulated
                                     Additional                 Other
                           Common      Paid-In  Accumulated  Comprehen.
                            Stock      Capital     Deficit      Loss      Total

Balances as of
 December 31, 2001........  $  909   $   81,605   $(76,258)   $ (196)  $  6,060
                            ----------------------------------------------------

Exercise of options
 for 683 sharesof
 Common Stock.............       1          109          -         -        110

Foreign currency
 translation adjustment...       -            -          -         3          3

Net loss..................       -            -       (688)        -       (688)
                            ----------------------------------------------------

Balances as of
March 31, 2002.....          $  910   $   81,714   $(76,946)  $ (193)  $  5,485
                            ====================================================


                            See accompanying notes.

                                      -5-
<PAGE>


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

                                                         Three Months Ended
                                                              March 31,
                                                      ------------------------
                                                          2002          2001
                                                       ----------    ---------

Cash flows from operating activities:
 Net loss...............................................$  (688)      $  (741)
 Adjustments to reconcile net loss to net cash
 (used) in operating activities:
     Depreciation.......................................     19            34
     Patent amortization................................     98            94
     Loan discount amortization.........................      -            17
     Non-cash compensation..............................      -            17
     Disposal of fixed assets...........................      5
     Changes in operating assets and liabilities:
        Accounts receivable, net........................    (74)           84
        Inventories.....................................    (40)           31
        Prepaid expenses and other current assets.......    (67)         (135)
        Other assets....................................    137           (20)
        Accounts payable................................    135            46
        Accrued compensation............................     30          (302)
        Other accrued liabilities.......................    (17)            8
        Deferred revenue................................     43            (4)
                                                         ---------    ---------

     Net cash (used in) operating  activities...........   (419)          (871)
                                                         ---------    ---------

Cash flows from investing activity:
  Acquisition of property and equipment.................    (11)           (49)
                                                         ---------    ---------

     Net cash used in investing activity................    (11)           (49)
                                                         ---------    ---------

Cash flows from financing activities:
 Payments on long-term debt.............................   (121)          (120)
 Proceeds from acquisition of short term debt...........     -             181
 Proceeds from exercise of stock options and warrants...    110            568
 Principal payments on capital lease obligations........     (2)            (2)
                                                         ---------    ---------

     Net cash provided by financing activities..........    (13)           627
                                                         ---------    ---------

Effect of exchange rate changes on cash.................      -              1
                                                         ---------    ---------

Net increase (decrease) in cash and cash equivalents....   (443)          (292)
Cash and cash equivalents at beginning of period........  2,588          2,349
                                                         ---------    ---------

Cash and cash equivalents at end of period..............$ 2,145      $   2,057
                                                         =========    =========

                             See accompanying notes.

                                      -6-
<PAGE>


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


1. Interim financial statements

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

     The  Company   develops   and  markets   biometric   electronic   signature
     verification and natural input software  solutions aimed at emerging,  fast
     growth,  large potential  markets such as e-commerce,  corporate  security,
     mobile voice/Internet  devices including  smartphones/communicators,  PDAs,
     webpads and the Palm OS aftermarket.

     The Company's core software  technologies include multilingual  handwriting
     recognition  systems  (Jot(R))  and  the  Handwriter   Recognition  System,
     referred  to  as  HRS(TM),   electronic   signature,   biometric  signature
     verification,  cryptography,  electronic  ink capture 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 wireless  internet
     and  information  devices  such  as  smartphones,   electronic   organizers
     ("PDA's") and portable web browsers.

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

     For the three  months  ended March 31, 2002,  the  Company's  cash and cash
     equivalents decreased by $443 from $2,588 at the beginning of the period to
     $2,145. The decrease was due primarily to cash used in operating activities
     of $419,  cash  used in  investing  activities  of $11,  and  cash  used in
     financing  activities of $13. The $13 used by financing activities consists
     primarily of the repayment of the notes by the Joint Venture of $121 and by
     payments of capital lease  obligations  of $2 . The payments were offset by
     $110 in  proceeds  from the  exercise  of stock  options  by the  Company's
     employees.  As of March 31, 2002, the Company's  principal  source of funds
     were  its  cash  and  cash  equivalents  aggregating  $2,145.  The  Company
     anticipates  that  it will  have  adequate  capital  to  fund  its  planned
     operations for the near future. However, there can be no assurance that the
     Company will have adequate capital resources to fund planned  operations or
     that any additional funds will be available to the

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

1. Interim financial statements
   ----------------------------

     Company when needed, or if available,  will be available on favorable terms
     or in amounts  required by the Company.  If the Company is unable to obtain
     adequate capital resources to fund operations, it may be required to delay,
     scale back or  eliminate  some or all of its  operations,  which may have a
     material  adverse effect on the Company's  business,  results of operations
     and prospects.

     The financial  information  contained  herein should be read in conjunction
     with the  Company's  audited  financial  statements  included in its Annual
     Report on Form 10-K for the year ended December 31, 2001.

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:

                                  March 31,              December 31,
                                     2002                    2001
                             --------------------- -- -------------------

         Cash in bank              $      1,422             $      1,621
         Commercial paper                     -                       26
         Money market                       723                      941
                             ---------------------    -------------------
                                   $      2,145             $      2,588
                             =====================    ===================

3. Inventories
   -----------

     Inventories  are  stated  at the  lower  of  cost  or  market,  cost  being
     determined using the first-in,  first-out (FIFO) method. At March 31, 2002,
     inventories consisted primarily of finished goods.

4. Short-term debt
   ---------------

     On August 23, 2001,  the  Company's  90% owned Joint  Venture  borrowed the
     aggregate  equivalent  of $181,  denominated  in Chinese  currency,  from a
     Chinese bank.  The loan bears interest at 5.37% per annum and is due August
     23,  2002.  The  borrowing  did not require the Joint  Venture to deposit a
     compensating  balance.  In February  2002,  the Joint  venture  repaid $121
     reducing the note to an equivalent of $60 denominated in Chinese currency.

5. Related Party Transactions:
   --------------------------

   A. Short-term debt related party
   -------------------------------

     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  $1,500  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 6.75% per annum at
     March 31, 2002,  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

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

     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.

     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.

     B. During the fourth  quarter of 2000 the Company  engaged in a transaction
     with PenOp to provide  nonrecurring  maintenance services from pre-existing
     PenOp  contracts in the aggregate  amount of $1.5 million of which $877 was
     recorded (net). The Company previously entered into a separate transaction,
     to acquire the  intellectual  property rights from PenOp. At March 31, 2001
     the  Company  recognized  $325  of this  contract  revenue  net of  related
     expenses of $48.


6. Revenue recognition
   --------------------

     Online Revenue - 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.

     Corporate  Revenue - Corporate  Revenue - License and product  revenues are
     recognized  when the software has been  delivered and when all  significant
     obligations  have been met in  accordance  with the  American  Institute of
     Certified Public Accountants  Statement of Position Number 97-2,  "Software
     Revenue Recognition." The Company also follows the interpretive guidance of
     SAB 101 issued by the  Securities  and Exchange  Commission  and EITF issue
     00-21 of the  AICPA  Emerging  Issues  Task  Force.  Royalty  revenues  are
     recognized  as  products  are   licensed/sold  by  licensees.   Development
     contracts  revenue is generated  primarily from  non-recurring  engineering
     activities.  Revenue  is  recognized  in  accordance  with the terms of the
     agreements,  generally  when  collection is probable and related costs have
     been incurred.

     China  Revenue - Revenue  from system  integration  activities  and product
     sales are recognized upon shipment provided that no significant obligations
     remain and the collection of the resulting receivable is probable.

7. 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 months
     ended March 31, 2002, and 2001 potential  equivalent  shares  excluded from
     the  calculation  of diluted  earnings  per share,  as their  effect is not
     dilutive,  include  stock  options of 7,095,  and 7,486,  respectively,  of
     equivalent shares and warrants of 470 equivalent shares at March 31, 2001.

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

8. Comprehensive income
   --------------------

       Total comprehensive income (loss) was as follows:

                                                  Three Months Ended March 31,
                                             ------------- ----- --------------
                                                2002                   2001
                                             -------------       --------------

         Net loss                            $    (688)           $    (741)
         Other comprehensive income:
         Cumulative translation adjustment           3                    1
                                             -------------       --------------
         Total comprehensive loss            $    (685)           $    (740)
                                             =============       ==============

9. Segment Information
   -------------------

     The Company's segment information under the Financial  Accounting Standards
     Board  Statement of Financial  Accounting  Standards No. 131,  "Disclosures
     About Segments of An Enterprise and Related  Information"  ("SFAS 131"), is
     comprised of 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:

                                 Three Months ended March 31,
                             2002                             2001
                  ------------------------------- ------------------------------
                  Handwriting   Systems           Handwriting  Systems
                  Recognition Integration  Total  Recognition Integration Total
                  ----------- ----------- ------- ----------- ----------- -----

  Revenues              $ 859    $ 298    $ 1,157    $ 1,223    $ 395   $ 1,618
  Loss from Operations  $(586)   $ (37)   $  (623)   $  (684)   $  (1)  $  (685)
  Significant change
  in   Total assets
  from Year End         $   -    $ (35)   $     -    $     -    $   -   $     -


10. Change in Chairman and Directors
    --------------------------------

     In February  2002,  Mr.  Guido  DiGregorio,  President & CEO was  appointed
     Chairman,  President  & CEO.  Prior to Mr.  DiGregorio's  appointment,  Mr.
     Philip  Sassower  resigned  his  Chairmanship  and board  position  and Mr.
     Jeffrey Steiner also resigned from the board.


                                      -10-
<PAGE>

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

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

     The following  discussion and analysis  should be read in conjunction  with
the Company's unaudited condensed  consolidated  financial  statements and notes
thereto  included in Part I - Item 1 of this  Quarterly  Report on Form 10-Q and
"Management`s  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" set forth in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2001.

Results of Operations

     Revenues.  For the three  months  ended  March  31,  2002,  total  revenues
decreased  by 28% to $1,157 from $1,618 for the  comparable  three month  period
ended March 31, 2001 as discussed below:

                                             Three Months Ended
                                                   March 31,
                                 -----------------------------------------------
                                         2002                        2001
                                 ------------------        ---------------------

    Revenues:
     Online                        $       124               $       350
     Corporate                             698                       521
      M10(previously PenOp Inc.)             -                       352
     China                                 335                       395
                                 ------------------        ---------------------
              Total revenues        $     1,157               $     1,618
                                 ==================        =====================

     Online  revenues  decreased  65% or $226 to $124 for the three months ended
March 31, 2002 as compared to $350 in the prior year period.  This  decrease was
primarily due to a decrease in names  available for use in the Company's  direct
mail campaign compared to the same period last year.

     Corporate sales, which includes Enterprise and OEM revenues,  increased 34%
or $177 to $698 for the three months ended March 31, 2001 as compared to $521 in
the prior year period.  Sales to software providers  decreased 87% or $91 to $14
for the three  months  ended March 31,  2002  compared to $105 in the prior year
period. This decrease was primarily due to one large order received in the first
quarter of 2001.  OEM  revenues  included in  corporate  sales at March 31, 2002
decreased  72% or $239 to $92 from $331 in the prior  period.  This decrease was
due to a decrease in the amount of royalty  and  development  contract  revenues
recognized  from OEMs  compared  to the prior  year.  Revenues  from  enterprise
customers  included in corporate  sales at March 31, 2002 increased 596% or $507
to $592 from $85 for the prior  period due  primarily  to  increases  in revenue
generated from the Company's  enterprise solutions software sold to end-users as
compared to the same three month period last year.  During the fourth quarter of
2000, the Company engaged in a transaction  with M10 (previously  PenOp Inc.) to
provide nonrecurring maintenance services from pre-existing M10 contracts in the
aggregate amount of $1.5 million. The Company previously entered into a separate
transaction,  to acquire the intellectual property rights from M10 (see note 5).
During the three  months  ended  March 31,  2001,  $352 was  recorded as revenue
(net). No such nonrecurring maintenance service revenues were recorded in 2002.

     China sales  decreased  15% or $60 to $335 for the three months ended March
31, 2002 as compared to $395 in the prior year period.  This decrease was due to
a general  decrease  in sales  activity in 2001 and not related to any one large
sale to a single customer.

     Cost of Sales.  Cost of sales  decreased  $166 or 27% to $456 for the three
months ended March 31, 2002 as compared to $622 in the prior year period.

     Online  cost of sales  decreased  $106 to $163 for the three  months  ended
March 31, 2002 as compared to $269 in the prior year  period.  This  decrease is
due to the reduction in names  available from Palm and the associated  reduction
in mailing costs during the three months ended March 31, 2002 as compared to the
prior year period.

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

     Corporate  sales  costs  decreased  $18 or 24% to $57 from $75 in the prior
year period.  Costs associated with the Company's  enterprise software solutions
decreased $8 and was primarily due to lower third party hardware costs sold with
the  Company's  corporate  signature  software  solution  products.   OEM  costs
decreased  $10 or 91% to $1 in the three  month  period  ended March 31, 2002 as
compared to $11 in the three month  period in the prior year.  The  decrease was
due to a decrease in revenues and the associated  technology import tax from the
Company's Japanese OEM customers.

     China cost of sales  decreased $57 or 21% to $221 in the three month period
ended March 31, 2002 as compared to $278 in the three month  period of the prior
year.  The decrease was due  primarily to the decrease in sales  activity in the
three month period ended March 31, 2002 as compared to the three month period of
the prior year.

     Gross  Margin.  Gross  margin  decreased  $280 or 28% to $716 in the  three
months ended March 31, 2002 as compared to $996 in the prior year period.

     Online gross margin  decreased  $120 or 148%  resulting in a negative gross
margin of $39 in the three  months  ended  March 31, 2002 as compared to a gross
margin of $81 in the three month period of the prior year. This decrease was due
to the less than  anticipated  close rate on fewer names  available from Palm as
discussed  above.  Online gross  margins was negative for the three months ended
March 31, 2002 compared to 23% of revenues in the comparable  three month period
of the prior year.

     Corporate  sales gross  margin  increased  $195 or 44% to $641 in 2002 from
$446 in the prior year period.  This  increase was primarily due to the increase
in Corporate  sales other than OEM and the lower hardware costs  associated with
the sale of the Company's  enterprise  solution software in the comparable three
month period of the prior year.  Corporate sales gross margin as a percentage of
sales was 91% for the three months ended March 31, 2002  compared to 86% for the
three month  period of the prior year.  During the three  months ended March 31,
2001,  $352  nonrecurring  maintenance  service  revenue  and gross  margin  was
recorded as revenue (net). No such nonrecurring maintenance service revenues and
gross margins were recorded in 2002.

     China sales gross  margin  decreased  $3 or 3% to $114 in the three  months
ended March 31, 2002 from $117 in the three month period of the prior year. This
decrease is primarily due to the 15% decrease in sales as discussed  above.  The
decrease in gross margins was minimal due to lower cost of third party  hardware
and an  increase  in the sale of software  for system  integration.  China gross
margin as a  percentage  of sales  increased  to 34% for the three  months ended
March 31, 2002 compared to 30% for the three month period of the prior year.

     Research and development  expenses.  Research and development  expenses for
the  three  months  ended  March  31,  2002  decreased  by $65 or 14% to $412 as
compared to $477 in the  comparable  three month period of the prior year.  This
decrease  was  due  primarily  to  approximately  $131 of  nonrecouring  outside
engineering  costs  associated with the  assimilation of the PenOp  intellectual
property into the Company's  products and continued  support for new engineering
projects incurred in the prior year.  Payroll and related costs decreased $42 or
14% due to the  reduction  in staff  resulting  from  actions  taken to  control
expenses  consistent  with the slowdown in the  economy.  These  decreases  were
offset  by  increases  of  approximately  $39  in  allocated   facilities  costs
attributable  to the over all  reductions  in the  number  of  personnel.  Costs
transferred to cost of sales  decreases 77% to $15 in 2002 as compared to $64 in
the  comparable  quarter of the prior year.  This  decrease  resulted from fewer
development contracts during the comparable three month periods. The Company did
not capitalize any software  development  costs in the three months ending March
31, 2002  compared  to $20 in software  development  costs  associated  with new
products and  enhancements  capitalized  during the three months ended March 31,
2001.

     Sales and marketing  expenses.  Sales and marketing  expenses for the three
months ended March 31, 2002 decreased $174 or 31% to $387 as compared to $561 in
the comparable  period of the prior year.  Recruiting and  advertising  expenses
decreased $44 and $97,  respectively.  These decreases were due primarily to the
reduction in recruiting and the  elimination of banner  advertising and resource
publications  associated  with sales via CIC's  website  during the three months
ended  March  31,  2002 as  compared  to the prior  year  period.  Other  costs,
including travel  expenses,  decreased $33 due to the slowdown in sales activity
brought about by the current economic conditions.

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

     General and administrative  expenses.  General and administrative  expenses
for the three  months  ended  March 31,  2002  decreased  $108 or 17% to $535 as
compared to $643 in the comparable  period of the prior year.  This decrease was
attributable  primarily  to a decrease in  professional  services  and  investor
relations of $73 and $31,  respectively.  Other costs,  including  insurance and
facilities  and related  costs,  decreased $10 over the  comparable  three month
period of the prior year.  The  decrease was due  primarily  to lower  insurance
expenses  during the three  months ended March 31, 2002 as compared to the prior
year period.  Salaries  expense increase $6 for the three months ended March 31,
2002 compared to the same period last year due to salary increases.

     Interest  and other  income  (expense),  net.  Interest  and  other  income
(expense),  net  decreased  by $18 and to an expense of $13 for the three months
ended March 31, 2002 compared to an income of $5 in the comparable period of the
prior year.  Interest income from cash and cash  equivalents  decreased $7 to $5
compared to $12 in the prior year.  The  decrease is due to lower cash  balances
and decrease in the interest  rates paid by the banking  institutions.  Interest
income at March 31, 2002 was offset by $18 of other  costs for the three  months
ended March 31, 2002 compared to $7 in the comparable prior year period.

     Interest  expense  increased  $10 to $51 for the three month  period  ended
March 31,  2002  compared  to $44 in the prior  year  period.  Interest  expense
associated  with the Company's  long term debt increased $17 to $51 at March 31,
2002 as compared to $44 in the same three month  period in the prior year.  Loan
discount amortization  associated with the refinanced debt was $17 for the three
months ended March 31, 2001.  There was no loan  discount  amortization  for the
three months ended March 31, 2002.

Liquidity and Capital Resources

     At March 31, 2002,  cash and cash  equivalents  totaled $2,145  compared to
cash and cash  equivalents  of $2,588 at December 31, 2001. The decrease was due
primarily to cash used in operating  activities of $419,  cash used in investing
activities of $11, and cash used in financing activities of $13. The $13 used by
financing  activities  consists  primarily of the  repayment of the notes by the
Joint Venture of $121 and by payments of capital lease  obligations  of $2 . The
payments  were offset by $110 in proceeds  from the exercise of stock options by
the  Company's  employees.  Total  current  assets were $3,604 at March 31, 2002
compared to $3,866 at December 31, 2001.

     As of March 31, 2002, the Company's  principal  source of liquidity was its
cash and cash  equivalents of $2,145.  Although  there can be no assurance,  the
Company believes that its cash and cash equivalents  together with cash provided
from  projected  revenues will be sufficient to fund planned  operations for the
near future.  However,  if the Company is unable to generate adequate cash flows
from sales,  or if  expenditures  required to achieve  the  Company's  plans are
greater than expected, the Company may need to obtain additional funds or reduce
discretionary spending.  There can be no assurance that additional funds will be
available when needed, or if available,  will be available on favorable terms or
in the amounts required by the Company. If adequate funds are not available when
needed,  the Company may be required to delay,  scale back or eliminate  some or
all of  its  operations,  which  will  have a  material  adverse  effect  on the
Company's business, results of operations and prospects.

     Current liabilities, which include deferred revenue, were $950 at March 31,
2002.  Deferred  revenue,  totaling $131 at March 31, 2002,  primarily  reflects
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.

     The Company  currently  owns 90% of a joint  venture  with the  Information
Industry  Bureau of the Jiangsu  Province,  a provincial  agency of the People's
Republic of China (the "Agency").. 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.

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

     On  October  2, 2001 the  Company  entered  a new five  year  lease for its
existing  principal  offices at 275 Shoreline  Drive,  Suite 500, Redwood Shores
California for approximately  9,634 square feet. The lease commenced November 1,
2001 with a first year lease costs of  approximately  $347,000.  The cost of the
lease will increase  approximately 3% per annum over the term of the lease which
expires  October 31,  2006.  In addition to the base rent the Company will pay a
percentage of the increase,  if any, in operating  cost incurred by the landlord
in such year over the  operating  expenses  incurred by the landlord in the base
year.  The Company  believes the offices will be adequate for its needs over the
term of the lease.

     On August 23, 2001,  the  Company's  90% owned Joint  Venture  borrowed the
aggregate  equivalent of $181,  denominated in Chinese currency,  from a Chinese
bank. The loan bears interest at 5.37% per annum and is due August 23, 2002. The
borrowing did not require the Joint Venture to deposit a  compensating  balance.
In  February  2002,  the  Joint  venture  repaid  $121  reducing  the note to an
equivalent of $60 denominated in Chinese currency.

     On June 19, 2001, the Company consummated a three-year $3 million financing
(the "Loan") with a charitable  remainder  annuity trust of which a director and
officer of the Company is a trustee (the "Trust"). The proceeds of the Loan were
used to refinance $1,500 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 6.75% per annum at
March  31,  2002,  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.

     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.

     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, but are not limited to, the
following:

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.

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

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.

Foreign Currency Risk

     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.

Future Results and Stock Price Risk

     The Company's  stock price may be subject to  significant  volatility.  The
public stock markets have experienced  significant volatility in stock prices in
recent  years.  The  stock  prices  of  technology  companies  have  experienced
particularly high volatility, including, at times, severe price changes that are
unrelated or  disproportionate  to the operating  performance of such companies.
The  trading  price of the  Company's  Common  Stock  could be  subject  to wide
fluctuations in response to, among other factors,  quarter-to-quarter variations
in operating results, announcements of technological innovations or new products
by the Company or its competitors,  announcements of new strategic relationships
by the Company or its competitors,  general  conditions in the computer industry
or the global economy generally, or market volatility unrelated to the Company's
business and operating results.

Part II-Other Information..

Item 1.  Legal Proceedings

         None

Item 2.  Change in Securities

         During the three months ended March 31, 2002, the Company granted stock
options to five employees and one director as follows:
 -------------------------------------------------------------------------------
                Grant     Number of   Option       Vesting          Expiration
  Grantees      Date       Options    Price        Period              Date
 -------------------------------------------------------------------------------

 2 Employee    02/11/02       150     $ 0.62     Quarterly over        02/11/09
                                               three years
 1 Employee    02/14/02       100     $ 0.61     Quarterly over        02/14/09
                                               three years
 2 Employees   02/22/02       350     $ 0.79     Quarterly over        02/22/09
                                               three years
 1 Director    02/11/02        50     $ 0.62       Immediately         02/11/09
 -------------------------------------------------------------------------------


Item 3.  Defaults Upon Senior Securities
         -------------------------------
         None

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

         None


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

Part II-Other Information (continued)
-------------------------------------

Item 5.  Other Information

         None

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits

         None
(b)      Reports on Form 8-K

         None

                                      -16-
<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



      May 14, 2002                         /s/ Francis V. Dane
-------------------------------  ----------------------------------------------
          Date                                 Francis V. Dane
                                 (Principal Financial Officer and Officer Duly
                                 Authorized to Sign on Behalf of the Registrant)














                                      -17-
<PAGE>