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, 2005


                                       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: 000-19301


                     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 10, 2005:
102,250,065.




<PAGE>



                                      INDEX



PART I.  FINANCIAL INFORMATION


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

   Condensed Consolidated Balance Sheets at March 31, 2005 (unaudited)
     and December 31, 2004....................................................3

   Condensed Consolidated Statements of Operations for the Three-Month
     Period Ended March 31, 2005 and 2004 (unaudited).........................4

   Condensed Consolidated Statements of Changes in Stockholders' Equity
     for the Three-Month Period Ended March 31, 2005 (unaudited)..............5

   Condensed Consolidated Statements of Cash Flows for the Three-Month
     Period Ended March 31, 2005 and 2004 (unaudited).........................6

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


  Item 2.  Management's Discussion and Analysis of Financial Condition
           and Results of Operations........................................14
           ---------------------.

  Item 3.  Quantitative and Qualitative Disclosures About Market Risk........23
           ----------------------------------------------------------

  Item 4A.  Controls and Procedures..........................................23
            -----------------------
PART II.  OTHER INFORMATION

  Item 1.  Legal Proceedings.................................................24
           -----------------

  Item 2.  Change in Securities and Use of proceeds..........................24
           ----------------------------------------

  Item 3.  Defaults Upon Senior Securities...................................24
           -------------------------------

  Item 4.  Submission of Matters to a Vote of Security Holders...............24
           ---------------------------------------------------

  Item 5.  Other Information.................................................24
           -----------------

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

          (a)      Exhibits..................................................24

  Signatures.................................................................26


                                      -2-
<PAGE>

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

                                                      March 31,    December 31,
                                                        2005           2004
                                                    -----------   -------------
                                                     Unaudited
Assets
Current assets:
     Cash and cash equivalents.....................   $  3,853        $  4,736
     Accounts receivable, net......................        465             356
     Deferred financing costs - current portion....        252             272
     Prepaid expenses and other current assets.....         98             105
                                                     ----------      ----------
         Total current assets......................      4,668           5,469

Property and equipment, net........................        122             123
Patents and trademarks.............................      4,569           4,663
Capitalized software development costs.............        127              32
Deferred financing costs - long term...............        400             502
Other assets.......................................         30              30
                                                     ----------      ----------

         Total assets..............................   $  9,916        $ 10,819
                                                     ==========      ==========

Liabilities and Stockholders' Equity
Current liabilities:
     Short-term debt - related party...............   $      8        $      8
     Short-term debt - other.......................         36              36
     Accounts payable..............................        253             241
Accrued compensation...............................        204             258
     Other accrued liabilities.....................        462             400
     Deferred revenue..............................        304             458
                                                      ---------      ----------
         Total current liabilities.................      1,267           1,401

Long-term debt - related party.....................          3               5

Convertible notes, net of unamortized fair value
 assigned to   the beneficial feature and warrants
 of $2,088 and $2,410 at March 31, 2005 and
 December 31, 2004, respectively...................      1,723           1,785

Minority interest..................................         90              97

Commitments and contingencies......................          -               -

Stockholders' equity:
     Common stock..................................      1,023           1,014
     Additional paid-in capital....................     87,610          87,231
     Accumulated deficit...........................    (81,632)        (80,544)
     Accumulated foreign currency translation
     adjustment....................................       (168)           (170)
                                                     ----------      ----------
         Total stockholders' equity................      6,833           7,531
                                                     ----------      ----------

         Total liabilities and stockholders' equity   $  9,916       $  10,819
                                                     ==========      ==========

             The accompanying notes form an integral part of these
                  Condensed Consolidated Financial Statements

                                      -3-
<PAGE>


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

                                                         Three Months Ended
                                                              March 31,
                                                    ---------------------------
                                                        2005            2004
                                                    ------------    -----------

Revenues:
     Online/retail ...........................      $      24         $     41
     Corporate ...............................            554            2,352
     China ...................................              1               36
                                                    ----------       ----------

         Total revenues.......................            579            2,429

Operating costs and expenses:
     Cost of sales:
         eSignature ..........................             21                7
         China................................              1               26
     Research and development.................            303              319
     Sales and marketing......................            309              332
     General and administrative...............            509              504
                                                    ----------       ----------

         Total operating costs and expenses...          1,143            1,188
                                                    ----------       ----------

Income (loss) from operations.................           (564)           1,241

Other income (expense):
     Interest and other income (expense), net.              1              (1)
     Interest expense.........................           (532)            (83)
     Minority interest........................              7               10
                                                    ----------       ----------

         Net Income (loss) ...................      $  (1,088)        $  1,167
                                                    ==========       ==========

Basic and diluted income (loss) per share.....      $   (0.01)        $   0.01
                                                    ==========       ==========

Weighted average common shares outstanding
 basic........................................        101,682          100,102
                                                    ==========       ==========

Weighted average common shares outstanding
 diluted......................................        101,682          102,618
                                                    ==========       ==========

             The accompanying notes form an integral part of these
                   Condensed Consolidated Financial Statements

                                      -4-
<PAGE>


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

<TABLE>

                                                                                 Accumulated
                                                     Additional                     Other
                              Shares      Common      Paid-In     Accumulated   Comprehensive
                            Outstanding    Stock      Capital       Deficit         Loss          Total
<CAPTION>
<S>                         <C>          <C>         <C>          <C>           <C>             <C>

Balances as of December
  31, 2004.................    101,412    $  1,014    $ 87,231     $(80,544)     $     (170)     $  7,531
                            -------------------------------------------------------------------------------
                            -------------------------------------------------------------------------------

Shares issued on
  conversion of notes......        838           9         379            -               -           388

Comprehensive loss

  Net loss.................          -           -           -       (1,088)              -        (1,088)

  Foreign currency
  translation adjustment...          -           -           -            -               2             2
                                                                                               ------------
Total comprehensive loss                                                                           (1,086)
                            -------------------------------------------------------------------------------
                            -------------------------------------------------------------------------------

Balances as of March 31,
  2005.....................    102,250    $  1,023    $ 87,610     $(81,632)     $     (168)     $  6,833
                            ===============================================================================
</TABLE>

             The accompanying notes form an integral part of these
                   Condensed Consolidated Financial Statements

                                      -5-
<PAGE>


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

                                                             Three Months Ended
                                                                  March 31,
                                                            -------------------
                                                              2005       2004
                                                            --------   --------

Cash flows from operating activities:
  Net income (loss)........................................ $(1,088)  $  1,167
  Adjustments to reconcile net income (loss) to net cash
  (used) in operating activities:
      Depreciation and amortization........................     230        113
      Discount on long term debt...........................     322          -
      Loss on disposal of property and equipment...........       6          -
      Changes in operating assets and liabilities:
         Accounts receivable, net..........................    (109)    (1,953)
         Inventories.......................................       -         23
         Prepaid expenses and other current assets.........       7         16
         Other assets......................................       -          -
         Accounts payable..................................      12       (158)
         Accrued compensation..............................     (54)        53
         Other accrued liabilities.........................      62       (108)
         Deferred revenue..................................    (154)       204
                                                            ---------  --------

         Net cash used in operating  activities............    (766)      (643)
                                                            ---------  --------

Cash flows from investing activities:
     Acquisition of property and equipment.................     (14)        (3)
     Capitalized software development costs................     (99)         -
                                                            ---------   -------

         Net cash used in investing activities.............    (113)        (3)
                                                            ---------   -------

Cash flows from financing activities:
     Principal payments on long-term debt..................      (2)        (2)
     Principal payments on capital lease obligations.......      (2)        (1)
                                                            ---------  --------

         Net cash used in financing activities.............      (4)        (3)
                                                            ---------  --------

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

Net decrease in cash and cash equivalents..................    (883)      (649)
Cash and cash equivalents at beginning of period...........   4,736      1,039
                                                            ---------  --------

Cash and cash equivalents at end of period................. $ 3,853    $   390
                                                            =========  ========

Supplemental Non Cash Flow Information

                                                              2005       2004
                                                             ------    --------

Conversion of convertible notes
  for 838 common shares                                     $   387    $     -

             The accompanying notes form an integral part of these
                   Condensed Consolidated Financial Statements

                                      -6-
<PAGE>


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


1. Interim financial statements and basis of presentation

     The financial  information  contained  herein should be read in conjunction
     with the Company's  consolidated  audited  financial  statements  and notes
     thereto  included  in its  Annual  Report on Form  10-K for the year  ended
     December 31, 2004.

     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 accounting  principles  generally
     accepted in the United States of America ("GAAP") for complete consolidated
     financial statements. In the opinion of management, the unaudited condensed
     consolidated 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 electronic  signature software,  biometric
     verification software for handwritten signatures and handwritten data entry
     software  solutions  aimed at  emerging,  large  potential  markets such as
     e-commerce, workflow automation, corporate security, smart handheld devices
     such as handheld computers & smartphones and the Palm OS aftermarket.

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

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

     The Company offers a wide range of  multi-platform  software  products that
     enable or enhance pen-based computing.  The Company's core technologies are
     classified  into  two  broad  categories:  "transaction  and  communication
     enabling technologies" and "natural input technologies".

     Transaction and communication  enabling  technologies have been fundamental
     to  the  Company's  development  of  software  for  electronic  signatures,
     handwritten   biometric  signature   verification,   data  security,   data
     compression, and electronic ink capture. These 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   while  providing  more   functional   user   authentication,
     heightened data security, and increased user productivity.

     Natural  input  technologies  are designed to allow users to interact  with
     handheld devices,  including PDA's and smartphones,  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,   and  predictive  text  entry
     technologies.

     Going Concern

     The  accompanying  condensed  consolidated  financial  statements have been
     prepared  assuming that the Company will continue as a going  concern.  The

                                      -7-
<PAGE>
                     Communication Intelligence Corporation
                                 and Subsidiary
                    (In thousands, except per share amounts)
                                    FORM 10-Q

     Company  has  suffered  recurring  losses  from  operations  that  raise  a
     substantial  doubt about its ability to  continue  as a going  concern.  At
     March 31, 2005, the Company's  accumulated deficit is approximately $81,632
     and the  Company  has  working  capital  of  $3,401.  The  Company  filed a
     registration statement with the Securities and Exchange Commission that was
     declared effective January 2005,  pursuant a financing of convertible notes
     (see Note 8). There can be no assurance that the Company will have adequate
     capital resources to fund planned  operations or that additional funds will
     be available to the Company when needed, or if available, will be available
     on favorable terms or in amounts required by the Company. If the Company is
     unable to obtain adequate capital  resources to fund operations,  it may be
     required to delay,  scale back or eliminate some or all of its  operations,
     which may have a material adverse effect on the Company's business, results
     of operations and ability to operate as a going concern.  The  accompanying
     condensed  consolidated financial statements do not include any adjustments
     that might result from the outcome of this uncertainty.

     Recent Pronouncements

     In December 2004, the FASB issued SFAS No.123 (revised 2004),  "Share-Based
     Payment".  Statement  123(R)  will  provide  investors  and other  users of
     financial  statements with more complete and neutral financial  information
     by requiring that the  compensation  cost relating to  share-based  payment
     transactions  be  recognized  in  financial  statements.  That cost will be
     measured  based on the fair  value of the equity or  liability  instruments
     issued.  Statement  123(R) covers a wide range of share-based  compensation
     arrangements    including   share   options,    restricted   share   plans,
     performance-based  awards,  share  appreciation  rights, and employee share
     purchase  plans.   Statement   123(R)  replaces  FASB  Statement  No.  123,
     Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25,
     Accounting  for Stock Issued to  Employees.  Statement  123, as  originally
     issued in 1995,  established  as  preferable a  fair-value-based  method of
     accounting for share-based  payment  transactions with employees.  However,
     that  Statement  permitted  entities the option of  continuing to apply the
     guidance in Opinion 25, as long as the  footnotes to  financial  statements
     disclosed   what  net   income   would   have   been  had  the   preferable
     fair-value-based method been used. Public entities (other than those filing
     as small business issuers) will be required to apply Statement 123(R) as of
     the first  interim or annual  reporting  period that begins  after June 15,
     2005.

     On April 14, 2005, the Securities and Exchange Commission (SEC) announced a
     delay of up to six  months in the  effective  date of the  option-expensing
     requirements  set forth in Statement No. 123(R).  For public companies with
     less than $25 million in revenues,  the new effective  date for  compliance
     with FAS 123R is the first  quarter of their first  fiscal  year  beginning
     after  December 15, 2005.  The Company is still  evaluating  the transition
     provisions  allowed by SFAS  123(R) and the impact of the  adoption  of the
     Statement.

     In December 2004 the Financial  Accounting  Standards Board issued two FASB
     Staff  Positions - FSP FAS 109-1,  Application  of FASB  Statement  No. 109
     "Accounting for Income Taxes" to the Tax Deduction on Qualified  Production
     Activities  Provided by the American Jobs Creation Act of 2004, and FSP FAS
     109-2,   Accounting  and  Disclosure  Guidance  for  the  Foreign  Earnings
     Repatriation  Provision  within the  American  Jobs  Creation  Act of 2004.
     Neither of these  affected  the Company as it does not  participate  in the
     related activities.

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,
                                            2005                    2004
                                    --------------------- -- -------------------

        Cash in bank                 $        828             $      1,734
        Money market                        3,025                    3,002
                                    ---------------------    -------------------
                                     $      3,853             $      4,736
                                    =====================    ===================

                                      -8-
<PAGE>
                     Communication Intelligence Corporation
                                 and Subsidiary
                    (In thousands, except per share amounts)
                                    FORM 10-Q

3.  Accounts receivable concentration

     For the three months ended March 31, 2005,  one customer  accounted for 48%
     of net accounts receivable.  For the three months ended March 31, 2004, one
     customer accounted for 95% of net accounts receivable.

4.  Patents

     The Company performs  intangible  asset impairment  analyses on a quarterly
     basis in accordance with the guidance in Statement of Financial  Accounting
     Standards No. 142,  "Goodwill and Other Intangible Assets" ("SFAS 142") and
     Statement of Financial  Accounting  Standards No. 144,  "Accounting for the
     Impairment or Disposal of Long Lived Assets" ("SFAS 144"). The Company uses
     SFAS 144 in  response  to changes in industry  and market  conditions  that
     affects its patents;  the Company then  determines  if an impairment of its
     assets has occurred.  The Company  reassesses  the lives of its patents and
     tests for impairment quarterly in order to determine whether the book value
     of each  patent  exceeds  the fair  value  of each  patent.  Fair  value is
     determined by  estimating  future cash flows from the products that are and
     will be protected by the patents and  considering  the  additional  factors
     listed in Critical  Accounting  Policies.  The Company  believes that as of
     March 31, 2005 no impairment of the carrying values of the patents existed.
     Amortization  of patent  costs was $95 for each of the three  months  ended
     March 31, 2005 and 2004.

5.  Short and Long-term debt - related party

     In  June  2003,  the  Company's  90%  owned  joint  venture,  Communication
     Intelligence  Computer  Corporation,  Ltd., (the " Joint Venture') borrowed
     from one of its directors,  Tong Ming Sheng,  approximately $24 denominated
     in U. S.  dollars  to  purchase  a  replacement  van used in the  Company's
     operations. The note bears interest at the rate of 5% per annum, and is due
     in June 2006.  Principal  payments on long term debt are $2, and $2 for the
     three months ended March 31, 2005, and 2004, respectively.


6.  Short-term debt - other

     On April 20, 2004,  the  Company's  Joint  Venture  borrowed the  aggregate
     equivalent of $36,  denominated in Chinese  currency,  from a Chinese bank.
     The unsecured  loan bears interest at 5.0% per annum and was paid in April,
     2005.  The  borrowing  did not  require  the  Joint  Venture  to  deposit a
     compensating balance.

7.  Deferred revenue

     Deferred revenue is recorded for post-contract support and is recognized as
     revenue  when costs are  incurred  or over the  support  period,  generally
     twelve months, whichever is longer.

8.  Convertible Notes

     In November  2004,  the Company  entered into an unsecured Note and Warrant
     Purchase  Agreement (the "Purchase  Agreement")  and a registration  rights
     agreement (the "Registration  Rights Agreement"),  each dated as of October
     28, 2004. The financing,  a combination of debt and equity, closed November
     2, 2004. The proceeds to the Company were approximately $3,885, net of $310
     in  commissions   and  legal   expenses.   H.C.   Wainwright  &  Co.,  Inc.
     ("Wainwright")  acted  as  placement  agent.  As  placement  agent  for the
     Company, at closing Wainwright received $731 in commissions, legal fees and
     warrants.  The  commissions  of  approximately  $285 and legal fees of $25,
     mentioned  above,  were  paid in  cash.  The  Company  issued  warrants  to
     Wainwright to acquire 1,218 shares of the  Company's  common stock.  Of the
     warrants  issued,  870 are exercisable at $0.462 and 348 are exercisable at
     $0.508.  The  Company  has  ascribed  the  value of $421 to the  Wainwright
     warrants,  which is  recorded as  deferred  financing  costs in the balance
     sheet. The fair value ascribed to the Wainwright  warrants was estimated on
     the  commitment  date  using  the  Black-Scholes  pricing  model  with  the
     following assumptions: risk-free interest

                                      -9-
<PAGE>
                     Communication Intelligence Corporation
                                 and Subsidiary
                    (In thousands, except per share amounts)
                                    FORM 10-Q

8.     Convertible Notes (continued)

     rate of 3.21%;  expected life of 3 years;  expected volatility of 100%; and
     expected  dividend  yield of 0%. The  Company is using the  proceeds of the
     financing for working capital purposes.

     Under the terms of the financing,  the Company issued to certain accredited
     investors convertible promissory notes in the aggregate principal amount of
     $4,195 and warrants to acquire 3,632 shares of the  Company's  common stock
     at an exercise price of $0.508 per share.  The notes accrue interest at the
     rate of 7% per  annum,  payable  semi-annually,  and are  convertible  into
     shares of the Company's  common stock at the rate of $0.462 per share.  The
     Company has  ascribed a value of $982 to the  investor  warrants,  which is
     recorded as a discount  to notes  payable in the  balance  sheet.  The fair
     value ascribed to the warrants was estimated on the  commitment  date using
     the Black-Scholes pricing model with the following  assumptions:  risk-free
     interest rate of 3.21%;  expected life of 3 years;  expected  volatility of
     100%;  and  expected  dividend  yield of 0%. In  addition to the fair value
     ascribed to the warrants, the Company has ascribed $1,569 to the beneficial
     conversion  feature  in the  convertible  notes,  which  is  recorded  as a
     discount to notes payable in the balance sheet.  The values ascribed to the
     warrants and beneficial  conversion feature follow the guidance of the EITF
     Issue No. 98-5,  "Accounting  for  Convertible  Securities  with Beneficial
     Conversion Features or Contingently Adjustable Conversion Ratios", and ETIF
     Issue No.  00-27,  "Application  of Issue No.  98-5 to Certain  Convertible
     Instruments" of the FASB's  Emerging  Issues Task Force.  The fair value of
     the warrants and beneficial conversion feature is amortized to expense over
     the life of the  convertible  notes or upon  earlier  conversion  using the
     effective  interest method.  For the three months ended March 31, 2005, the
     Company had amortized to interest  expense  approximately  $532 of the loan
     discount  and  deferred   financing   costs.  The  balance  due  under  the
     convertible notes is shown net of the remaining unamortized discount on the
     accompanying  consolidated  balance  sheet.  During the three  months ended
     March 31, 2005,  the investors  converted $388 of the notes in exchange for
     838  shares of the  Company's  common  stock.  If the  remaining  aggregate
     principal amount owing under the notes is converted, the Company will issue
     8,242  shares of its  common  stock.  If the notes are not  converted,  all
     remaining principal and accrued but unpaid interest will be due October 28,
     2007. The Company may pay accrued  interest in cash or in shares of Company
     common  stock,  issued at the market price for the common stock  calculated
     prior to the interest payment. The Company does not currently intend to pay
     accrued interest with shares of its common stock.

     The above  warrants  expire on October 28,  2009.  The Company may call the
     warrants  if the  Company's  common  stock  trades at $1.00 or above for 20
     consecutive  trading  days  after  the date that is 20 days  following  the
     effectiveness of a registration  statement  providing for the resale of the
     shares  issued  upon  the  conversion  of the  notes  and  exercise  of the
     warrants. Wainwright will be paid approximately $28 in the aggregate if all
     of the investor  warrants are exercised.  The Company will receive proceeds
     of approximately $1,845 if all of the warrants are exercised.

     The Company also was required to file a  registration  statement  providing
     for the resale of the shares that are issuable  upon the  conversion of the
     notes and the exercise of the  warrants.  The  registration  statement  was
     filed on December 22, 2004 and was declared effective on January 26, 2005.

     Interest paid during the three months ended March 31, 2005 and 2004 was $1,
     and $83, respectively.

9.  Net income (loss) per share

     The Company  calculates net income (loss) 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 net income
     (loss) per share,  which is based on the weighted  average number of shares
     outstanding,  and diluted  income  (loss) per share,  which is based on the
     weighted average number of shares and dilutive

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

9.   Net income (loss) per share (continued)

     potential shares  outstanding.  For the three-month  period ended March 31,
     2005,  5,871 shares of common stock subject to outstanding  options,  8,242
     shares  issuable  upon the  conversion of the  convertible  notes and 4,850
     warrants were excluded from the calculation of dilutive  earnings per share
     because the exercise or conversion price of such options and warrants,  was
     greater than the average  market price of the Company's  common stock.  For
     the three months ended March 31, 2004,  4,813 stock  options were  excluded
     from the  calculation  of dilutive  earnings per share because the exercise
     price of such  options was greater  than the  average  market  price of the
     Company's common stock.

<TABLE>
<CAPTION>

                                                                     Three Months Ended
                                                     March 31, 2005                        March 31, 2004
                                          -------------------------------------- -----------------------------------
                                                        Weighted                               Weighted
                                                         Average     Per-Share              Average Shares  Per-Share
                                              Net        Shares        Amount       Net      Outstanding     Amount
                                             Loss      Outstanding                Income
    <S>                                  <C>           <C>         <C>     <C>     <C>        <C>           <C>
      Basic income (loss) per share:
         Income (loss) available to
         stockholders                     $ (1,088)      101,682     $      (0.01$  1,167      100,102      $     0.01

      Effect of dilutive securities
         Stock options                            -            -             -              -      529            -
         Note payable to Cornell                  -            -             -              -    1,987            -
                                          ----------- -------------- ----------- ---------- --------------- ----------
         Diluted income (loss)            $ (1,088)      101,682     $(0.01)     $  1,167      102,618      $0.01
                                          =========== ============== =========== ========== =============== ==========
</TABLE>

10. Common Stock Options

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

     Had compensation  cost for the Company's option plans been determined based
     on the fair value of the  options at the date of grant,  as  prescribed  by
     SFAS 123, the Company's net income (loss) available to common  stockholders
     and basic and diluted net income (loss) per share available to stockholders
     would have been as follows:

                                                         Three Months Ended
                                                   -----------------------------
                                                     March 31,        March 31,
                                                       2005             2004
                                                   -----------------------------
   Net income (loss) available to stockholders:
     As reported................................. $    (1,088)    $     1,167

                                                  ------------------------------
   Add: Stock-based employee compensation expense
     included in reported results of operations,
     net of related tax effect....................          -               -

     Deduct: Total stock based employee
     compensation expense determined under fair
     value based method, net of tax...............        (52)            (38)
                                                  ------------------------------

        Pro forma................................. $    (1,140)    $     1,129
                                                  ==============================

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

10.    Common Stock Options (continued)

        Basic and diluted net income (loss) per share available to
          stockholders:
          As reported............................. $     (0.01)    $       0.01
                                                   =============================
              Pro forma........................... $     (0.01)    $       0.01
                                                   =============================

     The fair value of each option grant is estimated on the date of grant using
     the Black-Scholes  option pricing model with the following weighted average
     assumptions used for grants during the applicable periods:

     o    risk-free  interest  rate  of  3.65%  and  2.37%  for  2005  and  2004
          respectively;
     o    an  expected  life of 7  years  for  2005,  and 6.6  years  for  2004;
          respectively;
     o    expected volatility of 52% for 2005 and 100% for 2004; and
     o    dividend yield of 0% for all periods.

     The Company expects to make additional option grants.  The Company believes
     the above pro forma  disclosures may not be representative of the pro forma
     effects on reported  results of operations to be expected in future periods
     due to changes in  interest  rates,  expected  lives of current  and future
     option  grants and changes in the  volatility of the price of the Company's
     common stock in the market.

11. Comprehensive income (loss)

       Total comprehensive income (loss) was as follows:

                                                 -------------------------------
                                                       Three Months Ended
                                                           March 31,
                                                 --------------- ---------------
                                                      2005            2004
                                                 --------------- ---------------

        Net income (loss)                            $  (1,088)    $   1,167
           Other comprehensive income:
           Cumulative translation adjustment                 2             1
                                                 --------------- ---------------

           Total comprehensive income (loss)         $  (1,086)    $   1,168
                                                 =============== ===============

12. Segment Information

     The Company identifies reportable segments by classifying revenues into two
     categories:  handwriting  recognition and system  integration.  Handwriting
     recognition   software  is  an   aggregate   of  two  revenue   categories;
     online/retail,   corporate,   which   includes   eSignature   and   natural
     input/original equipment manufacturers ("OEM"). All handwriting recognition
     software  is  developed  around  the  Company's  core  technology.   System
     integration  represents the sale and  installation  of third party computer
     equipment  and systems  that  utilize  the  Company's  products.  All sales
     represent sales to external customers.

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

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

12. Segment Information

     The tables  below  present  information  about  reporting  segments for the
     periods indicated:

<TABLE>
<CAPTION>

                                                         Three Months Ended March 31,
                                              2005                                         2004
                           ------------------------------------------- ---------------------------------------------
                            Handwriting      Systems                     Handwriting       Systems
                            Recognition    Integration       Total       Recognition     Integration       Total
                           -------------- --------------- ------------ ---------------- --------------- ------------
     <S>                   <C>            <C>             <C>          <C>             <C>             <C>

       Revenues              $       579    $          -    $    579     $     2,398      $         31    $  2,429

       Income (loss) from
       Operations            $      (564)   $          -  $     (564)    $     1,286      $        (45) $    1,241

       Significant change
       in total long
       lived assets from
       year end              $         -    $          -    $      -     $         -      $          -    $      -
</TABLE>

     For the three months ended March 31, 2005,  one customer  accounted for 35%
     of total  handwriting  recognition  segment  revenue.  For the three months
     ended March 31, 2004, one customer  accounted for 83% of total  handwriting
     recognition segment revenue.

     For the three months ended March 31, 2005 there were no system  integration
     revenues recorded.  For the three months ended March 31, 2004, one customer
     accounted for 47% of system integration revenues.

13. Commitments and contingencies

     In  February of 2005,  Valyd,  Inc.  filed a complaint  against the Company
     seeking a declaratory  judgment that Valyd is not infringing certain of the
     Company's patents, that such patents are invalid or unenforceable, and that
     the Company  tortiously  interfered with a contract between Valyd, Inc. and
     Interlink  Electronics,  Inc.  by  delivering  an  infringement  notice  to
     Interlink  Electronics,  Inc. The complaint also alleged unfair competition
     under  California  law.  No  specific  monetary  claim is set  forth in the
     complaint.  On March 3,  2005,  the  Company  responded  to the  complaint,
     denying all allegations,  and filed  counterclaims  against Valyd, Inc. The
     counterclaims  assert  that  Valyd,  Inc.  is  infringing  certain  of  the
     Company's  patents  and  asked  for  treble  damages,   alleging  that  the
     infringement  is willful,  deliberate  and in conscious  disregard of CIC's
     rights.  The  ultimate  outcome  of this  litigation  cannot  presently  be
     determined.  However, in management's opinion, the likelihood of a material
     adverse  outcome is remote and any liability  that might be incurred  would
     not have a material adverse effect on the Company's  financial  position or
     its  results of  operations.  Accordingly,  adjustments,  if any that might
     result from the  resolution  of this matter have not been  reflected in the
     financial statements.

                                      -13-
<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 1, Item 1 of this  quarterly  report on Form 10-Q and
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  set  fourth  in the  Company's  Annual  report on Form 10-K for the
fiscal year ended December 31, 2004.

Overview

     The Company was  incorporated  in  Delaware in October  1986.  In each year
since its inception,  the Company has incurred losses.  For the five-year period
ended December 31, 2004, operating losses aggregated approximately $7,792 and at
December 31, 2004 the Company's  accumulated deficit was approximately  $80,544.
At March 31, 2005, the Company's accumulated deficit was approximately $81,632.

     Total  revenue of $579 for the quarter  ended March 31, 2005  decreased 76%
compared to revenues of $2,429 in the  corresponding  quarter of the prior year.
Revenue in the first quarter of last year was dominated by a single $2.0 million
eSignature  order from Wells Fargo.  The first quarter 2005 revenue reflects the
continuing  realities  of  an  unpredictable  economic  recovery,   mergers  and
acquisition  and other  factors  over which we have no control  that  negatively
impact  sustained  IT  spending  in the  financial  services  segment,  and  the
challenges  associated with the new and emerging  applications upon which we are
dependent to ramp up and produce viable revenue streams.

     Net  loss for the  three  months  ended  March  31,  2005  was  $1,088,  on
significantly  lower  sales,  compared  with  a net  income  of  $1,167  in  the
corresponding prior year period.  Operating expenses decreased approximately 3%,
or $34, to $1,121 for the three months ended March 31, 2005,  compared to $1,155
in the prior year period.  The decrease in operating expenses primarily reflects
a decrease in commission expense due to lower sales volumes in the first quarter
compared to last year.

     Our ability to predict  quarterly  sales  continues to be challenged by the
emerging market realities of our eSignature  business.  Despite concerns about a
slowing in the  economic  recovery  and  reports of  weakness  in first  quarter
enterprise IT spending,  we believe that the benefits of risk  mitigation,  both
legal and compliance  related,  together with the ROI potential  afforded by our
solutions  are  recognized  by our pilot and proof of concept  customers.  Hence
although  the  IT  spending  required  for  full  follow-on  deployments  of our
technology  by  large  financial   institutions  is  impacted  by  the  economic
environment, there is increasing awareness among these customers that to achieve
the full ROI potential of document management and paperless  operations,  and to
recoup their extensive past expenditures, they must address the sixty percent of
their documents that are signature dependent.  It is recognition of this message
at our  installed  base of large  financial  institutions  that is leading us to
believe  that  there  is  potential  for  near  term  rollouts  by more of these
customers.  Although we believe there is a direct  correlation  between economic
recovery,  IT  expenditures  and  deployment of our  technology in the financial
services  industry,  we believe other vertical  markets on which we focus,  have
recognized the significant  benefits and ROI potential afforded by our products.
Many of these  potential  customers  possess  the  capital  to fund  deployments
notwithstanding a less than robust economy.


Critical Accounting Policies

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

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

     Revenue  Recognition.  Revenue is recognized when earned in accordance with
applicable accounting  standards,  including AICPA Statement of Position ("SOP")
No. 97-2, Software Revenue  Recognition,  as amended,  Staff Accounting Bulletin
104 ("SAB  104") and the  interpretive  guidance  issued by the  Securities  and
Exchange Commission and EITF issue 00-21 of the FASB Emerging Issues Task Force.
We recognize  revenues from sales of software  products upon shipment,  provided
that persuasive evidence of an arrangement  exists,  collection is determined to
be  probable  and  no  significant  obligations  remain.  Revenue  from  service
subscriptions  is recognized  as costs are incurred or over the service  period,
whichever is longer.

     In December 2003, the  Securities  and Exchange  Commission  ("SEC") issued
Staff Accounting  Bulletin ("SAB") No. 104, "Revenue  Recognition." The adoption
of SAB 104 did not impact the Company's consolidated financial statements.

     We recognize revenue from software license  agreements upon delivery of the
software provided that persuasive evidence of an arrangement exists,  collection
is determined to be probable and no  significant  obligations  remain.  Deferred
revenue is recorded for  post-contract  support and is  recognized  as costs are
incurred  or over the  support  period  whichever  is  longer.  Vendor  specific
objective evidence of the fair value of the elements contained in these software
license  agreements is based on the price  determined  by management  having the
relevant authority when the element is not yet sold separately.

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

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

     We perform  intangible  asset  impairment  analysis on a quarterly basis in
accordance with the guidance in Statement of Financial  Accounting  Standard No.
142,  Goodwill  and Other  Intangible  Assets  ("SFAS  No.  142") and  Financial
Accounting  Standard No. 144,  Accounting for the Impairment or Disposal of Long
Lived  Assets  ("SFAS  No.  144").  We use SFAS 144 in  response  to  changes in
industry and market conditions that affect our patents,  we then determine if an
impairment of our assets has occurred.  Based on the impairment  analysis of the
intangible assets, no impairment existed as of March 31, 2005.

     Sources of Revenues.  To date,  the  Company's  revenues  have been derived
principally  from  end-users,  manufacturers,   retailers  and  distributors  of
computer  products in North  America,  Europe and the Pacific  Rim.  The Company
performs  periodic  credit  evaluations  of its  customers  and does not require
collateral.   The  Company  maintains  reserves  for  potential  credit  losses.
Historically,  such  losses  have been  insignificant  and  within  management's
expectations.

     Software Development Costs. Software development costs are accounted for in
accordance with Statement of Financial  Accounting Standards No. 86, "Accounting
for the Costs of Computer  Software to be Sold,  Leased or  Otherwise  Marketed"
("SFAS 86"). Under SFAS 86,  capitalization of software development costs begins
upon the establishment of technological  feasibility,  subject to net realizable
value considerations.  In the Company's case,  capitalization commences upon the
completion  of a  working  model and  generally  ends  upon the  release  of the
product. The capitalized costs are amortized to cost of sales on a straight line
basis over the estimated life of the product,  generally three years. During the
quarter ended March 31, 2005, $99 in  engineering  costs were  capitalized.  The
Company  expects that  capitalization  of  engineering  costs will increase over
prior period amounts to reflect new product development and enhancements.  As of
March 31, 2004, such costs were insignificant.

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

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

     Foreign Currency  Translation.  We consider the functional  currency of the
Joint Venture to be the respective  local currency and,  accordingly,  gains and
losses from the translation of the local foreign currency  financial  statements
are included as a component of  "accumulated  other  comprehensive  loss" in our
consolidated  balance  sheets.  Foreign  currency  assets  and  liabilities  are
translated  into U.S.  dollars at exchange  rates  prevailing  at the end of the
period,  except for  non-monetary  assets and liabilities that are translated at
historical  exchange rates.  Revenues and expenses are translated at the average
exchange rates in effect during each period,  except for those expenses included
in balance sheet accounts, which are translated at historical exchange rates.

     Net  foreign  currency   transaction  gains  and  losses  are  included  as
components of "interest income and other income (expense), net" in the Company's
consolidated  statements of operations.  Due to the stability of the currency in
China, net foreign currency  transaction  gains and losses were not material for
the three months ended March 31, 2005 and 2004, respectively.

     Net  Operating  Loss  Carryforwards.   Utilization  of  the  Company's  net
operating  losses may be subject to an annual  limitation  due to the  ownership
change  limitations  provided by the  Internal  Revenue Code of 1986 and similar
state  provisions.  As a result,  a portion of the Company's net operating  loss
carryforwards may not be available to offset future taxable income.  The Company
has  provided a full  valuation  allowance  for deferred tax assets at March 31,
2005 based upon the Company's history of losses.

Segments

     We report in two segments: handwriting recognition and systems integration.
Handwriting  recognition  includes  online/retail  revenues and corporate sales,
including eSignature and natural input/original  equipment manufacturers ("OEM")
revenues. Handwriting recognition represents the sale of software for electronic
signatures,  handwritten biometric signature  verification,  data security, data
compression,  and electronic  ink capture.  It also includes the sale of natural
input  technologies  that are designed to allow users to interact  with handheld
devices.  All  handwriting  recognition  software is  developed  around our core
technology.  Handwriting  recognition product revenues are generated through our
web site and a direct sales force to  individual  or  enterprise  end users (see
discussion under revenues - Handwriting recognition).  We also license a version
of our handwriting  recognition  software to OEM's. The handwriting  recognition
software is included as part of the OEM's product  offering.  From time to time,
we are required to develop an interface  (port) for our software to run on a new
customer's hardware platform or within the customer's software operating system.
The development  contract  revenues are included in the handwriting  recognition
segment.

     System  integration  represents  the sale and  installation  of third party
computer  equipment  and systems that utilize our products.  System  integration
sales are derived  through a direct sales force which then  develops a system to
utilize our software based on the customers  requirements.  Systems  integration
sales are accomplished solely through our Joint Venture.  The system integration
business  has become  highly  competitive  with a low  barrier  to entry.  It is
increasingly  comprised of small  Chinese  owned  businesses  with  virtually no
differentiation  in  service  offerings  and  primarily  competing  on price and
relationships.  The Company made the decision in late 2003 not to continue in or
expand  this  low  margin,   labor  intensive  business,   which  would  require
significant increases in base costs to provide turn-key capabilities.

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

Results of Operations

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

                                                   Three Months Ended
                                                        March 31,

                                                 2005                2004
                                             ------------         ------------
Segment revenues:
  Handwriting recognition
    Online/retail                            $      24              $      41
    Corporate                                      554                  2,352
    China                                            1                      5
                                             ------------         ------------

Total Handwriting recognition                $     579              $   2,398

Systems integration
    China                                            -                     31
                                             ------------         ------------
Total revenues                               $     579              $   2,429
                                             ------------         ------------

Cost of Sales
    Handwriting recognition                  $      22              $       7
    Systems integration                              -                     26
                                             ------------         ------------

Total cost of sales                          $      22              $      33
                                             ------------         ------------

   Other operating cost and expenses
   Research and development                  $     303              $     319
   Sales and Marketing                             309                    332
   General and administrative                      509                    504
                                             ------------         ------------

Total other operating costs and expenses     $   1,121              $   1,155
                                             ------------         ------------

Interest and other income (expense) net      $    (524)             $     (74)
                                             ------------         ------------

Net income (loss)                            $  (1,088)             $   1,167
                                             ============         ============

Amortization of intangible assets
   Cost of sales                             $       3              $       3
   General and administrative                       95                     95
                                             ------------         ------------

Total amortization of intangible assets      $      98              $      98
                                             ============         ============

Revenues

Handwriting recognition.

     Handwriting  recognition segment revenues include online/retail,  corporate
and China software sales.  Handwriting  recognition  segment revenues  decreased
76%, or $1,819,  to $579 for the three months ended March 31, 2005,  compared to
$2,398 in the prior year period as discussed below.

     Online/retail  revenues  decreased 41%, or $17, to $24 for the three months
ended March 31, 2005,  compared to $41 in the prior year period.  In early 2003,
PalmSource  announced that it had licensed CIC's Jot(R) handwriting  recognition
software to replace Graffiti(R) as the standard and only handwriting software on
all new Palm  Powered(R)  devices.  The embedding of Jot on Palm related devices
had a negative impact on the online/retail sales by limiting the number of units
that would be upgraded to older units.  The  transition to Jot based  PalmSource
operating  systems by OEM's was  completed in the third  quarter of 2004 and the

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

Company no longer offers its products  through  online/retail  outlets.  CIC has
phased out the consumer  offering of its Palm OS products.  Jot  continues to be
the de  facto  standard,  embedded  in the  PalmSource  OS  that is used by many
leading handheld computer and smartphones suppliers.  In addition,  major device
manufacturers,  such as Sony-Ericsson,  continue to embed Jot in their products.
These events  dramatically  reduced the demand for our text entry  products sold
directly to end users via retail and online outlets.  Corporate revenues,  which
includes  eSignature and natural input sales,  decreased 76%, or $1,798, to $554
for the three months ended March 31, 2005,  compared to $2,352 in the prior year
period.  Natural input OEM and channel  partner sales  decreased 19%, or $53, to
$225 for the three months  ended March 31,  2005,  compared to $278 in the prior
year period. The decrease in natural input channel partner and OEM sales was due
primarily to lower  royalties  from the shipment by  PalmSource of its operating
system  containing the Company' Jot software.  The Company expects natural input
channel  partner and OEM sales to increase  in the future as new  customers  are
identified  and new agreements are signed.  eSignature  sales  decreased 84%, or
$1,745,  to $329  compared  to  $2,074 in the prior  year  period.  In the first
quarter ended March 31, 2004, the Company sold $2,000 of its eSignature products
to Wells Fargo Bank.  The  absence of a similarly  large order  during the three
months ended March 31, 2005 was the primary reason for the decline.  The Company
continues working with other customers that are developing internal applications
that utilize the Company's  eSignature  products.  The Company believes that the
sales of these smaller pilot deployments to large national eSignature  customers
will lead to greater  sales in future  periods as the  customers  roll out their
applications on a wider scale.  However the timing of customer  product roll out
is difficult to project due to many factors  beyond the Company's  control.  The
Company  views  eSignature  as a high  potential  revenue  market and intends to
continue to place increasing focus on this market.

     Software  sales in China  decreased  80%, or $4, to $1 for the three months
ended March 31, 2005,  compared to $5 in the prior year. This decline represents
both the impact of delays in rolling out our Joint Venture's channel strategy as
well  as the  passage  of  China's  E-Sign  Law in  August  of  2004.  Achieving
accelerated  and  sustained  sales  growth in China by  leveraging  resellers to
provide  China-wide  market  coverage  requires  investment  in  both  time  and
resources.   Training   resellers'  sales  forces  and  committing  the  upfront
engineering  resources required to embed our eSignature  software into partners'
total solutions was anticipated  and fundamental to achieving  China-wide  sales
coverage.  The  anticipation  and final passage of China's E-Sign Law,  however,
significantly  dampened  sales results as both  resellers and end user customers
awaited the implications of the law on product functionality. We believe passage
of this law is an overall  positive  event in that it provides the framework for
product functionality and standards required to accelerate acceptance and growth
for our technology in China.  It does,  however,  require new market  validation
studies and considerable  engineering  effort to localize our newer technologies
to meet the China market  requirements.  This has led to our current strategy of
identifying   and   focusing   on   fewer   strategic    partners/resellers   in
China-specifically,  those capable of both market  validation  and  possessing a
high level of  engineering  competence  and  effective  selling to target market
applications.

Systems Integration.

     System  integration  segment  revenue  declined 100%, or $31, to $0 for the
three  months  ended March 31,  2005,  compared  to $31 in the prior  year.  The
decline in system  integration  revenue  reflects the decision made in late 2003
not to continue in or expand this low margin,  labor intensive  business,  which
would  require   significant   increases  in  base  costs  to  provide  turn-key
capabilities. The system integration business has become highly competitive with
a low barrier to entry.  It is  increasingly  comprised of small  Chinese  owned
businesses with virtually no  differentiation in service offerings and primarily
competing on price and relationships. Our focus in China is on the emerging high
potential workflow/office automation market leveraging our eSignature technology
and strategic channel partners.

Cost of Sales

Handwriting recognition segment.

     Handwriting  recognition  segment  cost of  sales  includes  online/retail,
corporate and China  software  sales costs.  Such costs are comprised of royalty
and  import tax  payments,  third  party  hardware  costs,  direct  mail  costs,
engineering  direct  costs  and  amortization  of  intangible  assets  excluding
patents.  Cost of sales for the handwriting  recognition segment increased 214%,
or $15, to $22 for the three months ended March 31, 2005,  compared to $7 in the

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

prior year.  The increase was primarily due to the sale of third party  hardware
with the Company's  software  products and  engineering  costs  associated  with
development contract revenue.  Cost of sales may vary in the future depending on
the  customers  decision  to  purchase  its  software  solution  and third party
hardware as a complete package, from the Company,  rather than buying individual
components from separate vendors.

     Online/retail cost of sales remain insignificant for the three months ended
March 31, 2005 and 2004,  respectively.  The sales are  generated by third party
resellers on their respective web sites and the Company receives a percentage of
each  sale.  The  Company  does not  anticipate  a  material  increase  in costs
associated  with  the  online/retail  sales.  CIC has  phased  out the  consumer
offering of its Palm OS products.  Jot  continues  to be the de facto  standard,
embedded in the PalmSource OS that is used by many leading handheld computer and
smartphones  suppliers.  In  addition,  major  device  manufacturers,   such  as
Sony-Ericsson,   continue  to  embed  Jot  in  their   products.   These  events
dramatically reduced the demand for our text entry products sold directly to end
users via retail and online outlets.

     eSignature  and  natural  input  channel  partner  and OEM  cost  of  sales
increased  200%,  or $14,  to $21 for the three  months  ended  March 31,  2005,
compared to $7 in the prior year.  The increase was due to the higher  volume of
third party hardware  sales and  engineering  development  costs compared to the
prior year. Increases in corporate cost of sales in the future will be driven by
the amount of third  party  hardware  that is sold with the  Company's  software
solutions,  and  engineering  costs  associated with  development  contracts and
increased  amortization  of software  development  costs  capitalized  in future
periods associated with enhancements and new product development.

     China  software  cost of sales  increased  100%, or $1, to $1 for the three
months ended March 31, 2005,  compared to $0 in the prior year. The increase was
due to hardware costs sold with the software solution.  It is expected that cost
of sales will remain low for the foreseeable  future as the current focus is the
sale of software solutions through channel partners.

Systems Integration.

     China Systems  integration segment cost of sales decreased 100%, or $26, to
$0 for the three months ended March 31, 2005, compared to $26 in the prior year.
The  decrease in costs was due  primarily  to the  reduction in sales during the
three  months  ended March 31,  2005 as compared to the prior year.  The Company
expects  that  system  integration  cost of sales will be  eliminated  in future
periods as the Company had decided  not to pursue  system  integration  revenues
beyond 2004,  but rather to continue to increase its focus on the emerging  high
potential eSignature/office automation market in China.

Operating expenses

     Research  and  Development  Expenses.   Research  and  Development  expense
decreased  5%, or $16, to $303 for the three  months  ended March 31,  2005,  as
compared  to  $319 in the  prior  year  period.  Engineering  expenses  consists
primarily of salaries and related costs, outside engineering, maintenance items,
and allocated facilities  expenses.  Salaries and related expense increased 14%,
or $30, to $249 for the three months  ended March 31, 2005,  as compared to $219
in the prior  year  period,  due  primarily  to the  increase  of two  engineers
compared  to the  prior  year  period.  Outside  engineering  cost and  expenses
increased  100%,  or $54,  to $54 for the three  months  ended  March 31,  2005,
compared to $0 in the prior year period.  The increase was due  primarily to the
utilization  of  outside  engineering  services  to  complete  several  projects
compared to the prior year. The Company maintains a relationship with an outside
engineering group familiar with its products and may draw on their services,  as
required,  which  could  have  a  material  effect  on  the  amount  of  outside
engineering expense reported.  Facilities  allocation  increased 27%, or $15, to
$70 for the three months ended March 31, 2005, compared to $55 in the prior year
period. Increased engineering head count is the primary reason for the increase.
Other  engineering  expenses  decreased  11%, or $5, to $40 for the three months
ended March 31, 2005 as compared to $45 in the prior year  period.  The decrease
was primarily due to lower maintenance and depreciation expense, compared to the

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

prior year period.  Capitalized  software  development  costs increased 100%, or
$99, as compared to $0 in the prior year  period.  The  increase in  capitalized
software development was due to new product development and significant upgrades
and  enhancements  being  made to the  Company's  natural  input and  eSignature
products.  Capitalization  of  software  development  costs  is  expected  to be
consistent with the increased  amounts for the foreseeable  future.  Engineering
costs  transferred to cost of sales increased 100%, or $11, to $11 for the three
months  ended  March 31,  2005,  compared  to $0 in the prior year  period.  The
increase is due to development  services  purchased by a customer in the current
period.

     Sales and Marketing Expenses. Sales and marketing expenses decreased 7%, or
$23, to $309 for the three months ended March 31, 2005,  compared to $332 in the
prior  year  period.   Sales  and  marketing   expenses  consists  of  salaries,
commissions  and  related  expenses,   professional  services,  advertising  and
promotion,  general  office and  allocated  facilities  expenses.  Salaries  and
related expenses increased 14%, or $16, to $130 for the three months ended March
31, 2005,  compared to $114 in the prior year  period.  The increase in salaries
and related  expense was due  primarily to the  increase of two sales  employees
and, to a lesser  extent,  increases in employee  salaries.  Recruiting  expense
increased  240%,  or $48,  to $68 for the three  months  ended  March 31,  2005,
compared to $20 in the prior year period.  Professional services increased 100%,
or $20, to $20 for the three months ended March 31, 2005,  compared to $0 in the
prior year period.  The increase is due to the organization of health care focus
groups for the eSignature market.  Commission expense decreased 90%, or $103, to
$11 for the three months ended December 31, 2005,  compared to $114 in the prior
year  period.  The  decrease  in  commission  expense was due  primarily  to the
decrease  in  revenues  compared to the prior  year.  Other  expense,  including
general office and allocated  facilities expenses declined 5%, or $4, to $80 for
the three months ended March 31, 2005, compared to $84 in the prior year period.
The Company  anticipates  that sales and  marketing  expenses  will  continue to
increase in the near term as the Company  strengthens  its sales efforts through
increasing headcount to pursue new opportunities in the eSignature market space.
The Company continues to pursue a channel strategy for its eSignature  products.
The Company believes the channel strategy,  along with its current and potential
partners, will produce increasing revenues in the near term.

     General and Administrative  Expenses.  General and administrative  expenses
increased  1%,  or $5, to $509,  for the  three  months  ended  March 31,  2005,
compared to $504 in the prior year period.  General and  administrative  expense
consists of salaries,  professional fees,  investor relations  expenses,  patent
amortization  and office and  allocated  facilities  costs.  Salaries  and wages
increased 3%, or $6, to $184 for the three months ended March 31, 2005, compared
to $178 in the prior year period. The increase was due primarily to increases in
employee  salaries.  Professional  service expenses,  which include  consulting,
legal and outside accounting fees, increased 128%, or $77, to $137 for the three
months  ended  March 31,  2005,  compared to $60 in the prior year  period.  The
increase  was due  primarily  to an increase in legal fees  associated  with the
infringement  litigation  incurred by the  Company in  protecting  its  patented
intellectual  property during the three months ended March 31, 2005, compared to
the prior year. The Company  decreased its expense for bad debts 100%, or $6, to
$0 for the three months  ended March 31, 2005,  compared to $6 in the prior year
period.  The decrease was due to adequate  coverage at December 31, 2004 for the
slow payment cycle of channel partner  receivables of the Joint Venture. At this
time,  the  Company  believes  that its  provision  for bad  debts is  adequate.
Insurance expense decreased 33%, or $12, to $24 for the three months ended March
31,  2005,  compared  to $36 in the  prior  year  period.  Other  administrative
expenses  decreased  27%, or $60, to $164 for the year ended  December 31, 2004,
compared to $224 in the prior year period.  The  decrease  was due  primarily to
spending  reductions.  The Company believes that its General and  Administrative
expenses will remain fairly stable for the near term.

Interest and other income (expense), net

     Interest and other income (expense), net increased $2, for the three months
ended March 31, 2005,  compared to the same prior year period.  The increase was
due to higher cash balances earning interest than in the prior year period.

Interest expense

     Interest  expense  increased  541%,  or $449,  to $532 for the three months
ended March 31, 2005, compared to $83 in the prior year period. The increase was
primarily  due  to  non-cash  charges  for  the  accrual  of  interest  and  the
amortization of prepaid  financing costs, and warrant and beneficial  conversion
feature cost associated with the convertible  notes (See Note 7 of the condensed
consolidated financial statements).

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

Liquidity and Capital Resources

     At March 31, 2005,  cash and cash  equivalents  totaled $3,853  compared to
cash and cash  equivalents  of $4,736 at December 31, 2004. The decrease in cash
was primarily due to cash used in operating  activities of $766,  acquisition of
property and equipment amounting to $14,  capitalization of software development
costs of $99 and payments of long term debt and capital lease obligations of $4.
Total  current  assets  were  $4,668 at March 31,  2005,  compared  to $5,469 at
December 31, 2004.  As of March 31, 2005,  the  Company's  principal  sources of
funds included its cash and cash equivalents aggregating $3,853.

     Accounts  receivable  increased  $109 for the three  months ended March 31,
2005 compared to the December 31, 2004 balance, due primarily to the increase in
recurring  maintenance  billings and sales  compared to the prior  quarter.  The
Company  expects the  development of the  eSignature  market will result in more
consistent revenue on a quarter to quarter basis and therefore, less fluctuation
in accounts receivable from quarter to quarter.

     Prepaid  expenses  and other  current  assets  declined by $7 for the three
months ended March 31, 2005,  compared to December 31, 2004,  due to annual fees
or  maintenance  and support costs added to prepaids over the three months ended
March 31, 2005 being approximately equal to the quarterly  amortization amounts.
Generally,  annual  insurance  premiums  and  maintenance  and support  fees are
prepaid in December and June of each year and, therefore, the balances typically
begin to decrease in the first and third  quarters as the prepaid  balances  are
amortized.

     Accounts  payable  increased $12 for the three months ended March 31, 2005,
compared  to  December  31,  2004,  due  to  increased   professional  fees  for
engineering  and  recruiting  utilized  during  the  quarter.  Accounts  payable
balances typically increase in the second and fourth quarters when the insurance
and annual maintenance and support fees are incurred.  Materials used in cost of
sales may  impact  accounts  payable  depending  on the  amount  of third  party
hardware sold as part of the software solution.  Accrued compensation  decreased
$54 due to the payment of deferred  salaries during the three months ended March
31, 2005, compared to the prior year period.

     Current liabilities,  which include deferred revenue,  were $1,267 at March
31, 2005,  compared to $1,401 at December 31, 2004.  Deferred revenue,  totaling
$304 at March  31,  2005,  compared  to $458 at  December  31,  2004,  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.

     In November  2004,  the Company  entered into an unsecured Note and Warrant
Purchase  Agreement  (the  "Purchase   Agreement")  and  a  registration  rights
agreement (the "Registration  Rights  Agreement"),  each dated as of October 28,
2004. The financing,  a combination of debt and equity, closed November 2, 2004.
The  proceeds  to  the  Company  were  approximately  $3,885,  net  of  $310  in
commissions and legal expenses. H.C. Wainwright & Co., Inc. ("Wainwright") acted
as placement  agent. As placement agent for the Company,  at closing  Wainwright
received  $731 in  commissions,  legal fees and  warrants.  The  commissions  of
approximately  $285 and legal fees of $25,  mentioned above,  were paid in cash.
The  Company  issued  warrants  to  Wainwright  to acquire  1,218  shares of the
Company's  common stock. Of the warrants  issued,  870 are exercisable at $0.462
and 348 are exercisable at $0.508. The Company has ascribed the value of $421 to
the Wainwright  warrants,  which is recorded as deferred  financing costs in the
balance sheet. The fair value ascribed to the Wainwright  warrants was estimated
on the commitment date using the Black-Scholes  pricing model with the following
assumptions:  risk-free  interest  rate of  3.21%;  expected  life  of 3  years;
expected  volatility of 100%; and expected  dividend yield of 0%. The Company is
using the proceeds of the financing for working capital purposes.

     Under the terms of the financing,  the Company issued to certain accredited
investors  convertible  promissory  notes in the aggregate  principal  amount of
$4,195 and warrants to acquire 3,632 shares of the Company's  common stock at an
exercise price of $0.508 per share.  The notes accrue interest at the rate of 7%
per  annum,  payable  semi-annually,  and are  convertible  into  shares  of the
Company's common stock at the rate of $0.462 per share. The Company has ascribed
a value of $982 to the  investor  warrants,  which is  recorded as a discount to
notes payable in the balance sheet.  The fair value ascribed to the warrants was
estimated on the commitment date using the Black-Scholes  pricing model with the
following  assumptions:  risk-free  interest  rate of 3.21%;  expected life of 3
years;  expected  volatility  of 100%;  and  expected  dividend  yield of 0%. In

                                      -21-
<PAGE>
                     Communication Intelligence Corporation
                                 and Subsidiary
                    (In thousands, except per share amounts)
                                    FORM 10-Q

addition to the fair value  ascribed to the  warrants,  the Company has ascribed
$1,569 to the beneficial  conversion  feature in the convertible notes, which is
recorded  as a  discount  to notes  payable  in the  balance  sheet.  The values
ascribed to the warrants and beneficial  conversion  feature follow the guidance
of the  EITF  Issue  No.  98-5,  "Accounting  for  Convertible  Securities  with
Beneficial  Conversion Features or Contingently  Adjustable  Conversion Ratios",
and ETIF Issue No. 00-27,  "Application of Issue No. 98-5 to Certain Convertible
Instruments"  of the FASB's  Emerging  Issues Task Force.  The fair value of the
warrants and beneficial conversion feature is amortized to expense over the life
of the convertible notes or upon earlier conversion using the effective interest
method.  For the three months ended March 31, 2005, the Company had amortized to
interest expense  approximately $532 of the loan discount and deferred financing
costs. The balance due under the convertible notes is shown net of the remaining
unamortized discount on the accompanying  consolidated balance sheet. During the
three months ended March 31, 2005, the investors  converted $388 of the notes in
exchange  for  838  shares  of the  Company's  common  stock.  If the  remaining
aggregate principal amount owing under the notes is converted,  the Company will
issue 8,242  shares of its common  stock.  If the notes are not  converted,  all
remaining  principal  and  accrued but unpaid  interest  will be due October 28,
2007.  The  Company  may pay  accrued  interest  in cash or in shares of Company
common stock,  issued at the market price for the common stock  calculated prior
to the interest  payment.  The Company does not currently  intend to pay accrued
interest with shares of its common stock.

     The above  warrants  expire on October 28,  2009.  The Company may call the
warrants  if the  Company's  common  stock  trades  at  $1.00  or  above  for 20
consecutive  trading  days  after  the  date  that  is  20  days  following  the
effectiveness of a registration statement providing for the resale of the shares
issued upon the conversion of the notes and exercise of the warrants. Wainwright
will be paid  approximately $28 in the aggregate if all of the investor warrants
are exercised.  The Company will receive proceeds of approximately $1,845 if all
of the warrants are exercised.

     The Company also was required to file a  registration  statement  providing
for the resale of the shares that are issuable upon the  conversion of the notes
and the  exercise  of the  warrants.  The  registration  statement  was filed on
December 22, 2004 and was declared effective on January 26, 2005.

We have the following material commitments as of March 31, 2005:
<TABLE>
<CAPTION>

                                                                        Payments due by periods
     --------------------------------------    --------------------------------------------------------------------------
                                                              Less than         One to        Four to        After five
     Contractual obligations                     Total         One year      three years      five years        years
     --------------------------------------    -----------    -----------    -------------    -----------    ------------
   <S>                                         <C>            <C>             <C>             <C>             <C>
     Short-term debt related party                      8              8               -               -               -
     Short term debt - other                           36             36
     Long-term debt - related party                     3              -               3               -               -
     Long-term debt (1)                             1,723              -           1,723               -               -
     Operating lease commitments (2)                  642            380             262               -               -
                                               ----------- -- ----------- -- ------------- -- ----------- -- ------------
                                               ----------- -- ----------- -- ------------- -- ----------- -- ------------
     Total contractual cash obligations        $    2,412     $      424      $    1,988      $      -       $       -
                                               =========== == =========== == ============= == =========== == ============
</TABLE>

     1.   Long-term   debt  is  net  of   approximately   $2,088  in   discounts
          representing  the fair value of warrants  issued to the  investors and
          the beneficial  conversion  feature  associated  with the  convertible
          notes.

     2.   The  operating  lease  commenced on November 1, 2002.  The cost of the
          lease will  increase  approximately  3% per annum over the term of the
          lease, which expires on October 31, 2006.

     The Company has  suffered  recurring  losses from  operations  that raise a
     substantial  doubt about its ability to continue as a going concern.  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 it when needed, or if available, will be available on favorable terms or
     in amounts  required  by it. If the  Company  is unable to obtain  adequate
     capital  resources to fund operations,  it may be required to delay,  scale
     back or eliminate some or all of its operations,  which may have a material
     adverse  effect on its  business,  results  of  operations  and  ability to
     operate as a going  concern.  The  financial  statements do not include any
     adjustments that might result from the outcome of this uncertainty.

                                      -22-
<PAGE>
                     Communication Intelligence Corporation
                                 and Subsidiary
                    (In thousands, except per share amounts)
                                    FORM 10-Q

Forward Looking Statements

     Certain  statements  contained  in this  quarterly  report  on  Form  10-Q,
including  without  limitation,  statements  containing  the  words  "believes",
"anticipates", "hopes", "intends", "expects", and other words of similar import,
constitute  "forward  looking"  statements  within the  meaning  of the  Private
Securities  Litigation  Reform Act of 1995.  Such  statements  involve known and
unknown risks,  uncertainties and other factors which may cause actual events to
differ  materially from  expectations.  Such factors include those set fourth in
the Company's  Annual  Report on Form 10-K for the year ended  December 31, 2004
and delineated as follows:

o    Technological,   engineering,   manufacturing,  quality  control  or  other
     circumstances which could delay the sale or shipment of products;
o    Economic,  business,  market and  competitive  conditions  in the  software
     industry and  technological  innovations  which could affect the  Company's
     business;
o    The Company's  inability to protect its trade secrets or other  proprietary
     rights,  operate without  infringing upon the proprietary  rights of others
     and  prevent  others  from  infringing  on the  proprietary  rights  of the
     Company; and
o    General economic and business conditions and the availability of sufficient
     financing.

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

     The Company has an investment portfolio of fixed income securities that are
classified  as  cash  equivalents.  These  securities,  like  all  fixed  income
instruments,  are  subject to  interest  rate risk and will fall in value if the
market interest rates increase.  The Company  attempts to limit this exposure by
investing primarily in short term securities. The Company did not enter into any
short-term security investments during the three months ended March 31, 2005.

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,  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  in  general,  or  market  volatility  unrelated  to the
Company's business and operating results.

Item 4. Controls and Procedures

     Under  the  supervision  and  with  the   participation  of  the  Company's
management,  including the Company's Chief Executive Officer and Chief Financial
Officer, the Company has evaluated the effectiveness of the design and operation
of its  disclosure  controls  and  procedures  pursuant  to  Exchange  Act  Rule

                                      -23-
<PAGE>
                     Communication Intelligence Corporation
                                 and Subsidiary
                    (In thousands, except per share amounts)
                                    FORM 10-Q

13a-14(c) as of the end of the period covered by this quarterly report. Based on
that evaluation,  the Chief Executive  Officer and Chief Financial  Officer have
concluded that these  disclosure  controls and  procedures are effective.  There
were no  significant  changes in the  Company's  internal  controls  or in other
factors that could significantly affect internal controls subsequent to the date
of their evaluation.

Part II-Other Information

Item 1. Legal Proceedings

     In  February of 2005,  Valyd,  Inc.  filed a complaint  against the Company
seeking a  declaratory  judgment  that  Valyd is not  infringing  certain of the
Company's patents, that such patents are invalid or unenforceable,  and that the
Company tortiously  interfered with a contract between Valyd, Inc. and Interlink
Electronics, Inc. by delivering an infringement notice to Interlink Electronics,
Inc. The complaint  also alleged unfair  competition  under  California  law. No
specific  monetary  claim is set forth in the  complaint.  On March 3, 2005, the
Company  responded  to  the  complaint,   denying  all  allegations,  and  filed
counterclaims  against Valyd, Inc. The counterclaim asserted that Valyd, Inc. is
infringing  certain  of the  Company's  patents  and asked for  treble  damages,
alleging that the infringement is willful, deliberate and in conscious disregard
of CIC's rights.  The ultimate  outcome of this litigation  cannot  presently be
determined.  However,  in  management's  opinion,  the  likelihood of a material
adverse  outcome is remote and any  liability  that might be incurred  would not
have a  material  adverse  effect on the  Company's  financial  position  or its
results of operations.  Accordingly,  adjustments, if any that might result from
the  resolution  of  this  matter  have  not  been  reflected  in the  financial
statements.

Item 2. Change in Securities and Use of Proceeds

        None

Item 3. Defaults Upon Senior Securities

        None

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

        None

Item 5. Other Information

        None

Item 6. Exhibits

(a)     Exhibits

        EXHIBIT 31 - Certification of Chief Executive Officer and Chief
        Financial Officer pursuant to Section 302 of the Sarbanes-Oxley act of
        2002.

        EXHIBIT 32 - Certification of Chief Executive Officer and Chief
        Financial Officer pursuant to Section 18 USC Section 1750, as adopted
        pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


                                      -24-
<PAGE>


                     Communication Intelligence Corporation
                                 and Subsidiary
               (In thousands, except share and 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 10, 2005                   /s/ Francis V. Dane
-------------------------------  -----------------------------------------------
                Date                           Francis V. Dane
                                 (Principal Financial Officer and Officer Duly
                                 Authorized to Sign on Behalf of the Registrant)


                                      -25-