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



                                    FORM 10-Q


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

               For the quarterly period ended: September 30, 2003


                                       OR

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

                        For the transition period from to

                        Commission File Number: 0-19301


                     COMMUNICATION INTELLIGENCE CORPORATION
             (Exact name of registrant as specified in its charter)

             Delaware                                         94-2790442
      ----------------------------                   ---------------------------
    (State or other jurisdiction of                       (I.R.S. Employer
     incorporation or organization)                      Identification No.)


         275 Shoreline Drive, Suite 500, Redwood Shores, CA 94065-1413
           (Address of principal executive offices)         (Zip Code)

Registrant's telephone number, including area code:    (650) 802-7888

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                       Yes       X                No
                             --------                  --------

Number of shares  outstanding of the issuer's  Common Stock,  as of November 13,
2003: 100,101,428.



<PAGE>


                                                                 INDEX



PART I.  FINANCIAL INFORMATION


    Item 1.  Financial Statements                                      Page No.

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

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

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

    Condensed Consolidated Statements of Cash Flows for the Three
    Month Period Ended September 30, 2003 and 2002 (unaudited)..............6

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


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

    Item 3.  Quantitative and Qualitative Disclosures About Market Risk....20

    Item 4.  Controls and Procedures.......................................20

PART II.  OTHER INFORMATION

    Item 1.  Legal Proceedings.............................................21

    Item 2.  Change in Securities..........................................21

    Item 3.  Defaults Upon Senior Securities...............................21

    Item 4.  Submission of Matters to a Vote of Security Holders...........21

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

    Item 6.  Exhibits and Reports on Form 8-K

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

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

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


                                      -2-
<PAGE>


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

                                                   September 30,   December 31,
                                                       2003            2002
                                                   -------------   ------------
                                                     Unaudited
Assets
Current assets:
Cash and cash equivalents........................  $     747       $     711
     Accounts receivable, net....................        809             477
     Inventories.................................         86             113
     Prepaid expenses and other current assets...        199             244
                                                   ----------      ----------
         Total current assets....................      1,841           1,545

Property and equipment, net......................        146             159
Capitalized software costs.......................          2              12
Patents and trademarks...........................      5,137           5,421
Other assets.....................................         31              31
                                                   ----------      ----------

         Total assets............................  $   7,157        $  7,168
                                                   ==========      ==========

Liabilities and Stockholders' equity
Current liabilities:
     Short-term debt - Related party.............. $   3,000        $      -
     Accounts payable.............................       167             160
Accrued compensation..............................       262             250
     Other accrued liabilities....................       397             489
     Deferred revenue.............................        89             165
     Capital Lease Obligations....................        56              38

                                                   ----------      ----------
       Total current liabilities................       3,971           1,102

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

Minority interest.................................       130             132

Commitments

Stockholders' equity:
     Common stock.................................     1,001             915
     Additional paid-in capital...................    83,527          82,025
     Accumulated deficit..........................   (81,291)        (79,819)
     Cumulative translation adjustment............      (181)           (187)
                                                   -----------      ----------
       Total stockholders' equity.................     3,056           2,934
                                                   -----------      ----------

       Total liabilities and stockholders' equity. $   7,157        $  7,168
                                                   ===========      ==========

   The accompanying notes form an integral part of these financial statements

                                      -3-
<PAGE>

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

                                         Three Months Ended   Nine Months Ended
                                            September 30,        September 30,
                                         ------------------   -----------------
                                            2003     2002       2003     2002
                                         --------- --------   -------- --------
Revenues:
     Online...........................   $   54    $   83     $  260   $  287
     Corporate........................      480       132      1,435    1,538
     China    ........................      402       310        921      968
                                         --------  --------   -------- --------

         Total revenues...............      936       525      2,616    2,793

Operating costs and expenses:
     Cost of sales:
        Online........................        2       13           3      198
        Corporate.....................        4       15          27      148
        China ........................      226      176         557      602
     Research and development.........      324      367         967    1,145
     Sales and marketing  ............      233      367         696    1,181
     General and administrative  .....      569      583       1,700    1,762
                                          -------  -------    -------- --------

     Total operating costs and expenses   1,358    1,521       3,950    5,036
                                          -------  -------    -------- --------

Loss from operations  ...............      (422)    (996)     (1,334)  (2,243)

Interest and other income
  (expense), net  ...................        (2)     (19)          3      (28)

Interest expense  ...................       (46)     (53)       (143)    (155)

Minority interest  ..................        (2)      (2)          2       (3)
                                         -------- --------    -------- --------
         Net loss  ..................      (472)  (1,070)     (1,472)  (2,429)
                                         ======== ========    ======== ========

Basic and diluted loss per
 common share........................   $ (0.01)  $(0.01)    $ (0.02)  $(0.03)
                                        ========= ========   ========  ========

Weighted average common
     shares outstanding  ............    100,101  91,481      96,537   91,237
                                        ========= ========   ========  ========

   The accompanying notes form an integral part of these financial statements

                                      -4-
<PAGE>

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


                                                              Accumulated
                                        Additional               Other
                       Shares    Common   Paid-In Accumulated Comprehensive
                     Outstanding Stock    Capital   Deficit      Loss     Total

Balances as of December
  31, 2002.............. 91,481  $  915  $ 82,025  $(79,819)  $ (187)  $  2,934
                         ------------------------------------------------------

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

Foreign currency
  translation adjustment.     -       -         -         -        2         2

Net loss................      -       -         -      (310)       -      (310)
                         ------------------------------------------------------
Balances as of March 31,
  2003.................. 93,522  $  935  $ 82,118   $(80,129) $ (185)  $ 2,739
                         ------------------------------------------------------
Sale of shares of Common
  Stock net of issuance
  costs.................  6,580      66     1,411          -       -     1,477

Foreign currency
  translation adjustment.     -       -         -          -       2         2

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

Balances as of June 30,
  2003..................100,101  $1,001  $ 83,529   $(80,819) $ (183)  $ 3,528
                        -------------------------------------------------------

Foreign currency
  translation adjustment.     -       -         -          -       2         2

Issuance costs...........     -       -        (2)         -       -        (2)

Net loss.................     -       -         -       (472)      -   $  (472)
                         ------------------------------------------------------

Balances as of September
  30, 2003..............100,101  $1,001   $ 83,527   $(81,291) $ (181) $ 3,056
                        -------------------------------------------------------

   The accompanying notes form an integral part of these financial statements

                                      -5-
<PAGE>

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

                                                         Nine Months Ended
                                                            September 30,
                                                     ------------  ------------
                                                         2003           2002
                                                     ------------   -----------

Cash flows from operating activities:
  Net loss..........................................  $   (1,472)   $   (2,429)
  Adjustments to reconcile net loss to net cash
  (used) in operating activities:
      Depreciation..................................          62            69
      Patent amortization...........................         284           284
      Disposal of fixed assets......................           8             6
      Changes in operating assets and liabilities:
         Accounts receivable, net...................        (332)          295
         Inventories................................          27           (19)
         Prepaid expenses and other current assets..          45           (87)
         Other assets...............................          (2)           99
         Accounts payable...........................           7           (66)
         Accrued compensation.......................          12             3
         Other accrued liabilities..................         (92)          241
         Deferred revenue...........................         (76)           35
                                                      ------------   ----------

      Net cash (used in) operating  activities......      (1,529)       (1,569)
                                                      ------------   ----------

Cash flows from investing activity:
  Acquisition of property and equipment.............         (16)          (54)
                                                      ------------   ----------

         Net cash used in investing activity........         (16)          (54)
                                                      ------------   ----------

Cash flows from financing activities:
  Payments on short-term debt.......................           -          (181)
  Acquisition of property under capital lease.......           -            40
  Proceeds from the exercise of stock
    options and warrants............................           -           426
  Proceeds from the issuance of common stock........       2,000             -
  Offering costs....................................        (412)            -
  Principal payments on capital lease obligations...          (7)           (4)
                                                      ------------   ----------

      Net cash provided by financing activities.....       1,581           281
                                                      ------------   ----------

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

Net increase (decrease) in cash and cash equivalents.         36        (1,342)
Cash and cash equivalents at beginning of period.....        711         2,588
                                                      ------------   ----------

Cash and cash equivalents at end of period..........  $      747     $   1,246
                                                      ===========    ==========

   The accompanying notes form an integral part of these financial statements

                                      -6-
<PAGE>

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


1.     Interim financial statements

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

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

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

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

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

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

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

       Going Concern

          The accompanying financial statements have been prepared assuming that
          the Company will continue as a going concern. The Company has suffered
          recurring losses from operations that raise a substantial  doubt about
          its ability to continue as a going concern. At September 30, 2003, the
          Company's  accumulated  deficit was  approximately  $81  million.  The
          Company  filed  a  registration  statement  with  the  Securities  and
          Exchange   Commission  that  was  declared  effective  February  2003,
          pursuant  to  the  line  of  credit  agreement  with  Cornell  Capital
          Partners, LP ("Cornell").  However, there can be no assurance that the
          Company  will  have  adequate   capital   resources  to  fund  planned
          operations or that  additional  funds will be available to the Company
          when needed, or if available,  will be available on favorable terms or
          in amounts required by the Company. If the Company is unable to obtain
          adequate capital  resources to fund operations,  it may be required to
          delay,  scale back or eliminate some or all of its  operations,  which
          may have a material adverse effect on the Company's business,  results
          of operations and ability to operate as a going concern. The financial
          statements do not include any  adjustments  that might result from the
          outcome of this uncertainty.

     2.Cash and cash equivalents

          The Company  considers  all highly  liquid  investments  with original
          maturities of up to 90 days to be cash equivalents.

          Cash and cash equivalents consist of the following:

                                               September 30,       December 31,
                                                   2003                2002
                                              --------------- -- --------------

        Cash in bank                            $     195          $     260
        Money market                                  552                451
                                              ---------------    --------------
                                                $     747          $     711
                                              ===============    ==============

     3.   Inventories

          Inventories  are  stated at the lower of cost or  market,  cost  being
          determined using the first-in,  first-out (FIFO) method.  At September
          30, 2003, inventories consisted primarily of finished goods.

     4.   Short-term debt - Related Party Transactions

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

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

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

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

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

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

          Interest  paid during the three and nine months  ended  September  30,
          2003 was $48,  and  $146,  respectively,  and for the  three  and nine
          months ended September 30, 2002, $53 and $160, respectively.

     5.   Net loss per share

          The Company  calculates  earnings  per share under the  provisions  of
          Statement of Financial  Accounting  Standards  No. 128,  "Earnings Per
          Share"  ("SFAS 128").  SFAS 128 requires the  disclosure of both basic
          earnings per share,  which is based on the weighted  average number of
          shares outstanding,  and diluted earnings per share, which is based on
          the weighted  average number of shares and dilutive  potential  shares
          outstanding.  For the three and nine month periods ended September 30,
          2003 and 2002,  stock options of 5,854 and 6,688,  respectively,  were
          excluded  from the  calculation  of diluted  earnings per share as the
          effect of these options is not dilutive.

     6.   Common Stock Options

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

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

                                                         Nine Months Ended
                                                    September 30,  September 30,
                                                         2003          2002

           Net loss available to stockholders:
             As reported.............................$  (1,472)   $  (2,429)
             Total stock based employee compensation
             expense determined under fair value
             based method net of tax.................     (306)        (569)
                                                     -----------  -----------

               Pro forma.............................$  (1,778)   $  (2,998)
                                                     ===========  ===========

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

     6.   Common Stock Options (continued)

                                                         Nine Months Ended
                                                   September 30,   September 30,
                                                       2003            2002
         Basic and diluted net loss per share
          available to stockholders:
         As reported..............................  $  (0.016)      $  (0.03)
         Pro forma................................  $  (0.019)      $  (0.03)

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

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

     7.   Comprehensive income (loss)

       Total comprehensive (loss) was as follows:

                                              Nine month Ended September 30,
                                          --------------- ------ --------------
                                                2003                  2002
                                          ---------------        --------------

        Net loss                            $  (1,472)             $  (2,429)
        Other comprehensive income:
        Cumulative translation adjustment           6                      4
                                           --------------        --------------

         Total comprehensive loss           $  (1,466)             $  (2,425)
                                           ==============        ==============

     8.   Segment Information

          The Company  identifies  reportable  segments by classifying  revenues
          into two categories:  handwriting  recognition and system integration.
          Handwriting  recognition  software is an  aggregate  of three  revenue
          categories.  All handwriting  recognition software is developed around
          the Company's core technology.  System integration represents the sale
          and  installation  of third party computer  equipment and systems that
          utilize the Company's products.  All sales represent sales to external
          customers.

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

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

     8.   Segment Information (continued)

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

                                  Nine months ended September 30,
                              2003                                 2002
               ---------------------------------  ------------------------------
                Handwriting   Systems             Handwriting   Systems
                Recognition  Integration   Total  Recognition  Integration Total
                -----------  -----------  ------- -----------  ----------- -----

Revenues           $  2,015   $  601    $  2,616    $  2,016   $  777  $  2,793

Loss from
Operations         $ (1,325)  $  (9)    $ (1,334)   $ (2,273)  $   30  $ (2,243)

Significant change
in Total long
lived assets from
Year End           $      5   $   -     $      -    $      -   $  (35) $    (35)

          For the three months ended  September 30, 2003 and 2002,  one customer
          accounted  for  35%  and  20%   respectively,   of  total  handwriting
          recognition  segment revenue.  For the nine months ended September 30,
          2003  and  2002,  one  customer  accounted  for 22%  and 12% of  total
          handwriting recognition segment revenue, respectively.

          For the three months ended  September 30, 2003 and 2002,  one customer
          accounted   for   37%  and  29%  of   system   integration   revenues,
          respectively.  For the nine months ended  September 30, 2003 and 2002,
          one customer accounted for 25% and 31% of system integration revenues,
          respectively.

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

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

     The following  discussion and analysis  should be read in conjunction  with
the Company's unaudited condensed  consolidated  financial  statements and notes
thereto  included  in Part 1, Item 1 of this  quarterly  report on Form 10-Q and
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  set  fourth  in the  Company's  Annual  report on Form 10-K for the
fiscal year ended December 31, 2002.

Overview

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

Critical Accounting Policies

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

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

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

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

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

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

     Impairment of intangible  assets.  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. For the three and
nine months ended  September  30, 2003 and 2002,  no  impairment  of  intangible
assets was determined to have occurred.

     Software Development Costs. Software development costs are accounted for in
accordance with Statement of Financial  Accounting Standards No. 86, "Accounting
for the Costs of Computer  Software to be Sold,  Leased or  Otherwise  Marketed"
("SFAS 86"). Under SFAS 86,  capitalization of software development costs begins
upon the establishment of technological  feasibility,  subject to net realizable
value considerations.  In the Company's case,  capitalization commences upon the
completion  of a  working  model and  generally  ends  upon the  release  of the
product. The capitalized costs are amortized to cost of sales on a straight line
basis over the  estimated  life of the product,  generally  three  years.  As of
September 30, 2003 and 2002, such costs were not material.

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

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

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

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

Segments

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

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

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.

Results of Operations

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


                                    Three Months Ended        Nine Months Ended
                                         Unaudited                 Unaudited
                                       September 30,             September 30,
                                     2003        2002          2003        2002
Segment revenues:
  Handwriting recognition
    Online                         $   54     $   83         $   260   $   287
    Corporate                         480        132           1,435     1,538
    China                             197         90             320       191
                                   --------   --------       --------  --------
 Total handwriting recognition     $  731     $   305        $ 2,015   $ 2,016

Systems integration                $  205     $   220        $   601   $   777
                                   --------   --------       --------  --------
Total revenues                     $  936     $   525        $ 2,616   $ 2,793
                                   --------   --------       --------  --------
Cost of Sales
    Handwriting recognition        $   51     $    64        $    88   $   443
    Systems integration               181         140            499       505
                                   --------   --------       --------  --------
Total cost of sales                $  232     $   204        $   587   $   948
                                   --------   --------       --------  --------

Operating cost and expenses
   Research and development        $  324     $   367        $   967   $ 1,145
   Sales and Marketing                233         367            696     1,181
   General and administrative         569         583          1,700     1,762
                                   --------   --------       --------  --------
Total operating costs and expenses $1,126     $ 1,317        $ 3,363   $ 4,088
                                   --------   --------       --------  --------

Interest and other income
 (expense) net                     $  (50)    $  (74)        $  (138)  $  (186)
                                   --------   --------       --------- --------

Net loss                           $ (472)    $(1,070)       $(1,472)  $(2,429)
                                   ========   =========      ========= ========
Amortization of intangible assets
   Cost of sales                   $    3     $     3        $    10   $    10
   General and administrative          95          57            284       284
                                   --------   --------       --------- --------
Total amortization of
 intangible assets                 $   98     $    60        $   294   $   294
                                   ========   ========       ========= ========
Revenues

Handwriting recognition.

     Handwriting  recognition  segment revenues increased 140%, or $426, to $731
for the three  months  ended  September  30,  2003,  as  compared to $305 in the
comparable  prior year period.  For the nine month period  ended  September  30,
2003, handwriting  recognition revenues declined $1 to $2,015 from $2,016 in the
comparable  prior year.  The  changes in the  handwriting  recognition  revenues
between the comparable periods are described below.

                                      -14-

<PAGE>

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

     Online/retail sales declined 35%, or $29, to $54 for the three months ended
September 30, 2003,  compared to $83 in the comparable period of the prior year.
For the nine months ended September 30, 2003,  online/retail  revenues  declined
9%, or $27, to $260 as compared  to $287 in the  comparable  period of the prior
year. The Company believed the January 2003 PalmSource announcement,  to replace
Graffiti(R) with CIC's Jot as the standard and only handwriting  software on all
new Palm PoweredTM devices,  and a multi-channel  marketing campaign launched in
March 2003 would  sustain  online/retail  revenues  through the third quarter of
2003.  The sales  momentum  from these  announcements  and  campaigns has slowed
sooner than anticipated and is the reason for the decline in sales for the three
and nine month periods ended  September 30, 2003. The Company  anticipates  that
its Palm products will be featured in the current box advertisement with all new
Palm devices shipping beginning in the early fourth quarter of 2003. The Company
hopes that the new advertisement will stimulate the sales of its products to new
palm users in the fourth quarter of 2003 and into the first half of 2004.

     Corporate  revenues  increased  264%,  or $348,  for the three month period
ended  September  30,  2003,  compared to the prior year  period.  OEM  revenues
included in  corporate  sales for the three  months  ended  September  30, 2003,
increased $364 to $367,  compared to $3 in the prior year period.  This increase
was  primarily  due to sales made to one  customer  servicing  the  Pacific  Rim
amounting to $250 and royalties from the Company's other licensees. For the nine
months ended  September 30, 2003, OEM revenues  increased 60%, or $212, to $568,
as  compared  to $356 in the prior  year  period.  The  increase  was due to the
increase for the three month period  described  above.  The Company believes OEM
revenues will increase due to Palm Source's  replacement of Graffiti(R) with the
Company's Jot product as the standard and only  handwriting  software on all new
Palm  PoweredTM  devices.  However,  economic  conditions may limit or delay the
Company's  anticipated  increases in OEM revenues to later  periods.  Enterprise
sales  included in  corporate  sales  decreased  12% and 26%, or $16,  and $313,
respectively,  during the three and six month periods  ended  September 30, 2003
compared to the prior year period. The number of individual orders has increased
121%  and  66%  for  the  three  and  nine  months  ended  September  30,  2003,
respectively.  However the average  individual order value declined  compared to
the prior year and is the  reason  for the  decline  in  revenues.  The  Company
believes that the increased  interest in its e-Signature  products  evidenced by
the  increase in "pilot  programs " purchases  will result in  increased  future
revenues.  The Company also believes enterprise revenues continue to be hampered
by the  on-going  "wait and see"  attitude  surrounding  IT spending and that IT
spending and economic health will be the major limiting  factors related to near
term revenues.

     Software  sales  in  China  increased  119%  and  68%,  or $107  and  $129,
respectively,  over the three and nine month  periods  ended  September 30, 2003
compared to the prior year periods.  The increase is due to the continued  sales
efforts focused on establishing  China-wide channel partners to accelerate sales
growth.

Systems Integration.

     System  integration  segment revenue  declined 7% and 23%, or $15 and $176,
respectively,  for the three and nine month  periods  ended  September 30, 2003,
compared to the prior year period.  The Company  believes  that the SARS related
health  crises in China  negatively  impacted  system  integration  revenues and
further  hampered  the   implementation  of  its  plans  to  expand  its  system
integration sales efforts into other provinces in China during the first half of
2003.  The decrease also reflects the need for the Joint Venture to expand sales
coverage  from a  traditional  focus on the local  Nanjing and Jiangsu  Province
markets to other provinces with in China. System integration  revenues increased
75% in the three months ended September 30,2003,  compared to the prior quarter.
The Company  believes  the  increase is due to the  abatement of the SARS crises
earlier in 2003, which made personal selling in China extremely  difficult.  The
potential  return of SARS during the winter months may again  negatively  impact
system integration  revenues due to customer contact required during the selling
and installation phase of the system integration revenue cycle.

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

Cost of Sales

Handwriting recognition segment.

     Handwriting  recognition  segment cost of sales includes royalty and import
tax payments,  third party hardware costs, direct mail costs, engineering direct
costs and amortization of intangible assets excluding patents. Cost of sales for
the  handwriting  recognition  segment  decreased  20% and 80%, or $13 and $355,
respectively,  during the three and nine month periods ended September 30, 2003,
compared to the prior year periods.

     Online/retail  cost of  sales  decreases  85%  and  98%,  or $11 and  $195,
respectively,  during the three and nine month periods ended September 30, 2003,
compared  to the prior year  periods.  The  decrease  was due  primarily  to the
elimination  of the  direct  mail  campaign  and  related  costs as a result  of
reductions  in the number of names  available  and a poor sales close rate.  The
Company does not  anticipate a material  increase in costs  associated  with the
multi-channel  JotComplete  campaign  discussed  in  the  online/retail  revenue
paragraph above.

     Enterprise  and OEM cost of sales  decreased  73% and 82%, or $11 and $121,
respectively,  during the three and nine month periods ended September 30, 2003,
compared to the prior year periods.  The decrease was due primarily to the lower
volume  of  third  party  hardware  sales  and  engineering   development  costs
associated with sales compared to the same period last year.

     Handwriting  recognition  segment cost of sales for software  sold in China
increased  25%, or $9,  during the three month period ended  September 30, 2003,
compared to the prior year period.  The increase is due primarily to third party
hardware  costs and  discounts  on the sales to channel  partners.  For the nine
months ended September 30, 2003,  handwriting  recognition segment cost of sales
for software  sold in China  decreased  40%, or $39,  compared to the prior year
period. The decrease is due to lower third party hardware sales during the first
half of 2003 compared to the first half of 2002.

Systems Integration.

     Systems  integration  segment cost of sales increased 29%, or $41, over the
three month  period  ended  September  30,  2003,  as compared to the prior year
period.  The  increase  in costs was due  primarily  to the higher  third  party
hardware  content of the sales.  For the nine months ended  September  30, 2003,
systems  integration  cost of sales  decreased 1%, or $6,  compared to the prior
year period.  The company  believes that systems  integration cost of sales will
remain at the higher  percentage of sales as the Joint Venture expands its sales
territories   into  other  provinces  where   competition  will  become  a  more
significant factor.

Operating expenses

Research and development expenses. Engineering expense decreased 12% and 18%, or
$43 and $178,  respectively,  for the three and nine months ended  September 30,
2003,  to $ 324 and $967,  as  compared  to $367 and  $1,145  in the prior  year
periods.  Engineering  expenses consist primarily of salaries and related costs,
outside  engineering,  maintenance  items,  and allocated  facilities  expenses.
Salaries  and  related  expense   declined  12%  and  16%,  to  $201  and  $620,
respectively,  for the  three and nine  months  ended  September  30,  2003,  as
compared  to $228  and  $734,  respectively,  in the  prior  year  periods,  due
primarily to the reduction in head count of two engineers.  Outside  engineering
cost and expenses declined 56% and 86%, or $15 and $75, to $12 in both the three
and nine month periods ended September 30, 2003, compared to $27 and $87, in the
prior year periods.  Other engineering  expenses  decreased 6%, or $3, to $51 as
compared to $54 in the prior year period. The decrease is primarily due to lower
maintenance and depreciation expense compared to the prior year periods. For the
nine months ended  September  30, 2003,  other  expenses  increased 4% or $6, to
$158, as compared to $152 in the prior year  periods.  The increase is due to an
increase in data terminal lines for the Company's Web-site. The Company believes
that the  reductions  in  engineering  head count and expenses  will not have an
adverse effect on its product engineering and

                                      -16-
<PAGE>

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

development  efforts.  The Company draws on the engineering  capabilities of the
Joint  Venture  as  required  and,  maintains  a  relationship  with an  outside
engineering group familiar with its products. These two resources can be engaged
on an as needed basis to fill future engineering requirements.

     Sales and marketing expenses. Sales and marketing expenses declined 37% and
41%,  respectively,  or $134 and  $485,  respectively,  to $233 and $696 for the
three and nine month  periods  ended  September  30, 2003,  compared to $367 and
$1,181,  respectively,  for the comparable three and nine month periods in 2002.
Sales and  marketing  expenses  consist of  salaries,  commissions  and  related
expenses,  professional services,  advertising and promotion, general office and
allocated  facilities  expenses.  Salaries and related expenses declined 61% and
47%, or $100 and $228, respectively,  for the three and nine month periods ended
September 30, 2003,  compared to the prior year period.  The decline in salaries
and related  expense is due  primarily to the actions taken in the prior year in
the face of the declining  economic  environment and reduced IT spending,  which
resulted in a reduction of three sales persons  during most of the current three
and nine  months  compared  to the prior year  periods.  The  Company  continues
rolling out a channel strategy for its handwriting recognition segment that will
increase  the amount of market  coverage  by  utilizing  the sales  force of the
channel partners.  The Company continues to sign new partner  agreements in both
the US and China.  The Company  believes  these  channel  partners  will produce
increasing  revenues in the near term.  Professional  services  declined 67% and
92%, or $12 and $67, respectively, during the three and nine month periods ended
September 30, 2003, compared to the prior year periods. The decline is primarily
due to $37 in outside  commission expense and $14 in salaries expense paid to an
outside sales consultant  during the nine months ended September 30, 2002 of the
prior year.  Advertising  expense decreased 100%, or $23 and $76,  respectively,
for the three and nine month periods ended  September 30, 2003,  compared to the
prior year  periods.  This decrease is due to the  discontinuance  of in-the-box
advertising during the three and nine month periods ended September 30, 2003, as
compared to the prior year periods. Commission expense increased 193% to $44 for
the three months ended  September  30, 2003,  compared to $15 in the  comparable
period  in the  prior  year.  For the  nine  months  ended  September  30  2003,
commissions  expense  decreased  23% or $26 to  $88,  compared  to  $114  in the
comparable  nine month period of the prior year.  The  fluctuation in commission
expense is primarily due to the  fluctuation in sales over the current three and
nine month periods compared to the prior year.

     General and Administrative  Expenses.  General and administrative  expenses
decreased 2% and 4%, or $14 and $62, to $569 and $1,700,  respectively,  for the
three and nine month  periods  ended  September  30, 2003,  compared to $583 and
$1,762,  respectively,  in the prior year  periods.  General and  administrative
expense consists of salaries,  professional fees,  investor relations  expenses,
patent  amortization  and office and allocated  facilities  costs.  Salaries and
wages  increased 3% and 4%, or $5 and $21,  respectively,  for the three and six
month  periods ended  September  30, 2003,  compared to the three and nine month
periods last year,  due  primarily  to salary  increases.  Professional  service
expenses which include consulting,  legal and outside accounting fees, decreased
14% and 4%, or $20 and $17,  respectively,  compared to the three and nine month
periods in the prior year.  The decrease was due primarily to a decreases in the
fees during the current quarter  compared to the same periods in the prior year.
The Company decreased its provision for  uncollectable  accounts by 60% and 62%,
or $35 and $47,  respectively,  for the  three  and  nine  month  periods  ended
September  30,  2003,  as compared to the prior year  periods due  primarily  to
collection of older accounts receivable.  The Company believes its uncollectible
accounts  provision  is  adequate  at the  present  time.  Other  administrative
expenses increased 17% and 2%, or $36 and $19, respectively,  over the three and
nine month periods ended September 30, 2003, compared to the prior year periods.
The increases were due primarily to the increases in investor  relation expenses
due to a late billing  received  for mailing  costs  associated  with the annual
report  and  printing  costs  for the  second  quarter  2003  supplement  to the
Company's Form S1. Investor  relations expenses are expected to remain less than
those incurred in the prior year for the foreseeable future.

Interest and other income (expense), net

     Interest  and  other  income  (expense),  net  Interest  and  other  income
(expense), net increased 89% and 111%, or $17 and $31, respectively,  during the
three and nine month  periods ended  September  30, 2003,  compared to the prior
year periods. The increase in income was due to a refund of value added tax from
2002 received by the Joint Venture and the  elimination of credit card fees as a

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

result of outsourcing the Company's web store at the end of the first quarter of
2003.

Interest expense

     Interest  expense  Interest  expense  decreased  13% and 8%, or $7 and $12,
respectively,  over the three and nine month  periods  ended  September 30, 2003
compared  to the prior year  periods.  The  decrease  was due  primarily  to the
decrease in the bank floating interest rate paid on the Company's $3,000 debt.

Liquidity and Capital Resources

     At September 30, 2003, cash and cash  equivalents  totaled $747 compared to
cash and cash equivalents of $711 at December 31, 2002. The increase in cash was
due primarily to financing  activities  through  Cornell Capital  Partners,  LP.
During the nine months ended  September 30, 2003,  the Company  received  $1,590
from the sale of 8,620,651  shares of stock,  net of issuance  costs  associated
with the  preparation  and filing and  maintenance  of the S-1 in February 2003.
This increase was offset by $1,529 used in operating activities and by equipment
purchases of $16 and payments of capital lease  obligations of $7. Total current
assets were $1,841 at  September  30,  2003,  compared to $1,545 at December 31,
2002.  As of  September  30,  2003,  the  Company's  principal  sources of funds
included its cash and cash  equivalents  aggregating $747 and the Equity Line of
Credit  through  Cornell  Capital  Partners  LP,  under which we may issue up to
$13,000,000 of our common stock over the next 2 years.

     Accounts  receivable  increased  70%, or $332,  due to the 96%  increase in
third  quarter 2003  revenues  compared to the  revenues  realized in the fourth
quarter of 2002.  Based on  anticipated  deployments  both  domestically  and in
China,  together with the increasing  level of proposal and quotation  activity,
the Company  anticipates that accounts  receivable will increase from quarter to
quarter.

     Prepaid expenses  declined 18%, or $45, for the nine months ended September
30,  2003,  compared to December  31, 2002,  due to  expensing  the  appropriate
quarterly  prepaid  amounts  through  operations.   Generally  annual  insurance
premiums and maintenance fees are prepaid in December and June of each year.

     Accounts  payable  increased 4%, or $7, for the nine months ended September
30, 2003,  compared to December 31, 2002.  Accrued  compensation  increased  $12
between  December 31, 2002 and September 30, 2003, due primarily to the deferral
of a portion of the President  and Chief  Executive  Officer's  salary until the
Company's cash flows improves.

     Other accrued liabilities  decreased 18%, or $92, due to the realization of
the accrued  professional  services and import taxes  associated  with the Joint
venture.  Other accrued  liabilities  are expected to be reduced  further in the
future as accrued expenses are billed and paid.

     Deferred  revenues declined 46%, or $76, due to the recognition of deferred
maintenance costs since December 31, 2002.  Deferred revenues will increase over
the next quarter as customers renew their  maintenance  contracts for the twelve
months  subsequent  to  September  30,  2003,  and  new  maintenance   contracts
associated with anticipated orders are entered into in future quarters.

     Capital lease obligations  increased $18, or 47%, due to the replacement of
the  original  service  vehicle by the Joint  Venture in July 2003.  The Company
believes that the new vehicle will provide service well past the lease period of
36 months.

     The Company has  suffered  recurring  losses from  operations  that raise a
substantial doubt about its ability to continue as a going concern. At September
30,  2003,  the  Company's  accumulated  deficit was  approximately  $81 million
compared to $80 million at December 31, 2002. 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

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

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

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

     Current  liabilities,  which  include  deferred  revenue,  were  $3,971  at
September 30, 2003, compared to $1,102 at December 31, 2002. The increase is due
to the inclusion in current  liabilities  of the $3,000 related party note which
had  been  classified  as  long-term  as of  December  31,  2002  (see  material
commitments  below).  Deferred  revenue,  totaling  $89 at  September  30, 2003,
compared to $165 at December 31, 2002, primarily reflects the balance of advance
payments for products and maintenance fees from the Company's licensees that are
generally  recognized as revenue by the Company when all  obligations are met or
over the term of the maintenance agreement.

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

                                               Payments Due by Period
                                          Less than   1 to 3      4 to    After
Contractual Obligations           Total    1 year      years   5 years   5 years
                                --------   ---------  -------   -------  -------
Short-term debt (1)             $  3,000   $  3,000   $    -    $    -   $    -
Capital lease obligations             55         14       40         1        -
Operating lease commitments (2)    1,411        407    1,004         -        -
                                ---------  ---------  -------   -------  -------
Total contractual cash
 obligations                    $  4,466   $   3,421  $1,044    $    1   $    -
                                =========  =========  =======   =======  =======

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

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

Forward Looking Statements

     Certain  statements  contained  in this  quarterly  report  on  Form  10-Q,
including  without  limitation,  statements  containing  the  words  "believes",
"anticipates", "hopes", "intends", 'expects', and other words of similar import,
constitute  "forward  looking"  statements  within the  meaning  of the  Private
Securities  Litigation  Reform Act of 1995.  Such  statements  involve known and
unknown risks,  uncertainties and other factors which may cause actual events to
differ materially from expectations. Such factors include the following:

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

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

     The Company  undertakes  no  obligation  to  publicly  update or revise any
forward-looking  statement,  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  September  30,
2003.

Foreign Currency Risk

     The Company currently owns 90% of CIC China,  (the "Joint  Venture"),  with
the Jiangsu  Hongtu  Electronics  Group,  a  provincial  agency of the  People's
Republic of China.  As a result,  the  Company's  cash flows and  earnings  are
exposed to fluctuations in interest rates and foreign  currency  exchange rates.
The Company attempts to limit these exposures through operational strategies and
generally has not hedged currency exposures.

Future Results and Stock Price Risk

     Over the last nine months, the Company's stock price has ranged from a high
of  $0.65 to a low of  $0.19.  The  Company's  stock  price  may be  subject  to
significant  volatility  in the future as well.  The public  stock  markets have
experienced  significant  volatility in stock prices in recent years.  The stock
prices of technology  companies have experienced  particularly  high volatility,
including, at times, severe price changes that are unrelated or disproportionate
to the  operating  performance  of such  companies.  The  trading  price  of the
Company's  common  stock could be subject to wide  fluctuations  in response to,
among  other  factors,   quarter-to-quarter  variations  in  operating  results,
announcements of technological innovations or new products by the Company or its
competitors,  announcements of new strategic relationships by the Company or its
competitors,  general  conditions in the computer industry or the global economy
generally,  or  market  volatility  unrelated  to  the  Company's  business  and
operating results.

Item 4. Controls and Procedures

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

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

Part II-Other Information

Item 1. Legal Proceedings

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

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

Item 2. Change in Securities

        None

Item 3. Defaults Upon Senior Securities

        None

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

         None

Item 5. Other Information

        None

Item 6. Exhibits and Reports on Form 8-K

(a)     Exhibits                                                         Page

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

(b)     Reports on Form 8-K

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

1.       The Company's financial results for the quarter ended June 30, 2003.

                                      -21-
<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



  November 5 , 2003                        /s/ Francis V. Dane
----------------------         ------------------------------------------------
        Date                                   Francis V. Dane
                                 (Principal Financial Officer and Officer Duly
                                 Authorized to Sign on Behalf of the Registrant)



                                      -22-