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



                                    FORM 10-Q


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


                  For the quarterly period ended: June 30, 2000
                                                  -------------
                                       OR

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

                        For the transition period from to

                        Commission File Number: 0-19301


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

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


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

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

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

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

Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.

                  Yes                        No
                         --------                  --------

        Number of shares outstanding of the issuer's Common Stock, as of
        August 2, 2000: 84,512,621.

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


<PAGE>

                                      INDEX



PART I.  FINANCIAL INFORMATION


 Item 1. Financial Statements                                           Page No.

  Condensed Consolidated Balance Sheets at June 30, 2000 (unaudited) and
      December 31,1999.......................................................3

  Condensed Consolidated Statements of Operations for the Three and
      Six-month Periods Ended June 30, 2000 and 1999 (unaudited).............4

  Condensed Consolidated Statements of Changes in Stockholders' Equity
      for the Six-month Period Ended June 30, 2000(unaudited)................5

  Condensed Consolidated Statements of Cash Flows for the Six-month
      Periods Ended June 30, 2000 and 1999 (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.......16

PART II.  OTHER INFORMATION

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

  Item 2.  Change in Securities and Use of Proceeds.........................17

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

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

  Item 5.  Other Information................................................18

  Item 6.  Exhibits and Reports on Form 8-K

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

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

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


                                      -2-

<PAGE>

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

                                                 June 30,           December 31,
                                                   2000                 1999
                                               ------------         -----------
                                                Unaudited
<S>                                           <C>                  <C>

Assets
Current assets:
     Cash and cash equivalents                  $   3,633            $   2,374
     Accounts receivable, net                         923                1,575
     Inventories                                      118                   81
     Prepaid expenses and other current assets        245                  175
                                               ------------         -----------
         Total current assets                       4,919                4,205

Note receivable from officer                           94                  135
Property and equipment, net                           297                  344
Other assets                                          203                  279
                                               ------------         -----------

         Total assets                           $   5,513            $   4,963
                                               ============         ===========

Liabilities and stockholders' equity
Current liabilities:
     Short-term debt                            $       -            $      60
     Accounts payable                                 415                  288
     Accrued compensation                             261                  268
     Other accrued liabilities                        275                  500
     Deferred revenue                               1,113                   35
                                               ------------         -----------
         Total current liabilities                  2,064                1,151

Long-term debt - related party                      1,370                1,338

Minority interest                                     124                  125

Commitments

Stockholders' equity:
     Common stock                                     844                  822
     Additional paid-in capital                    74,578               72,983
     Accumulated deficit                          (73,259)             (71,244)
     Cumulative translation adjustment               (208)                (212)
                                               ------------         -----------
         Total stockholders' equity                 1,955                2,349
                                               ------------         -----------

   Total liabilities and stockholders' equity  $    5,513            $   4,963
                                               ============         ===========
</TABLE>

                           See accompanying notes.


                                      -3-
<PAGE>

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

<TABLE>
<CAPTION>
                                          Three Months Ended   Six Months Ended
                                               June 30,           June 30,

                                          -------   -------   --------   -------
                                            2000       1999      2000      1999
                                          -------    -------   --------  -------
<S>                                    <C>        <C>       <C>       <C>
Revenues:
     Product                             $   977    $  787    $ 2,074   $ 1,560
     License and royalty                     134       592        318       810
     Development contracts                   139        57        235       313
                                         -------    -------    -------   -------

               Total revenues              1,250     1,436      2,627     2,683

Operating costs and expenses:
     Cost of sales:
        Product                              678       494      1,332       965
        License and royalty                   13        15         34        32
        Development contracts                117        24        171       166
     Research and development                388       384        817       681
     Sales and marketing                     588       440       1180       831
     General and administrative              571       485       1041       902
                                         -------    -------    -------   ------

     Total operating costs and expenses    2,355     1,842      4,575     3,577
                                         -------   --------    -------   ------

Loss from operations                      (1,105)    (406)     (1,948)    (894)

Interest and other income
  (expense), net                              53       28          46       32

Interest expense                             (75)      (2)       (114)      (2)

Minority interest                               -      -           1        -
                                           ------- -------     -------  -------

         Net loss                         (1,127)    (380)     (2,015)    (864)
                                          =======  =======     =======  =======

Basic loss per common share              $(0.013) $(0.005)    $(0.024) $(0.011)
                                         ======== ========    ======== ========

Diluted loss per common share            $(0.013) $(0.005)    $(0.024) $(0.011)
                                         ======== ========    ======== ========

Weighted average common
     shares outstanding                   84,370   79,527      83,684   79,320
                                         ======== ========    ======== ========
</TABLE>


                                      -4-

<PAGE>

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

<TABLE>
<CAPTION>

                                                            Accumulated
                                                Additional    Other
                             Common  Paid-In   Accumulated Comprehensive
                              Stock   Capital    Deficit       Loss       Total
                             ------  --------  ----------- -------------  -----
<S>                         <C>     <C>        <C>          <C>       <C>
Balances as of
December 31, 1999.........    $ 822   $ 72,983   $(71,244)    $(212)    $ 2,349

Cashless Exercise of
  300 warrantsfor 255
  shares of Common Stock..        3          -          -         -           3
Exercise of options
  for 1,596shares of
  Common Stock..........         16      1,439          -         -       1,455
Exercise of 106 warrants
  for 106shares of Common
  Stock..........                 1          -          -         -           1
Foreign currency translation
  adjustment................      -          -          -         2           2

Net loss....................      -          -       (888)        -        (888)
                             ---------------------------------------------------

Balances as of
  March 31, 2000............  $ 842   $ 74,422   $(72,132)    $(210)    $ 2,922
                             ---------------------------------------------------

Exercise of options
  for 1,809 shares of
  Common Stock..............      2        156          -         -         158
Foreign currency translation
  adjustment................      -          -          -         2           2

Net loss....................      -          -     (1,127)        -      (1,127)
                             ---------------------------------------------------

Balances as of
  June 30, 2000.............  $ 844   $ 74,578   $(73,259)    $(208)    $ 1,955
                             ===================================================
</TABLE>


                                      -5-

<PAGE>

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

<TABLE>
<CAPTION>

                                                         Six Months Ended
                                                             June 30,
                                                  -----------------------------
                                                     2000              1999
                                                  ----------       ------------

<S>                                               <C>             <C>
Cash flows from operating activities:
 Net loss                                           $(2,015)        $   (864)
 Adjustments to reconcile net loss to net cash
 provided by (used) in operating activities:
     Depreciation and amortization                      133              136
     Non-cash compensation                               40               42
     Changes in operating assets and liabilities:
        Accounts receivable                             653              436
        Inventories                                     (36)              16
        Prepaid expenses and other current assets       (70)             (38)
        Other assets                                     69                -
        Accounts payable                                127             (221)
        Accrued compensation                             (5)              20
        Other accrued liabilities                      (225)             118
        Deferred revenue                              1,078             (143)
                                                  -----------       -----------
     Net cash used in operating activities             (251)            (498)
                                                  -----------       -----------

Cash flows from investing activities:
     Acquisition of property and equipment              (43)             (43)
                                                  -----------       -----------
         Net cash used in investing activities          (43)             (43)
                                                  -----------       -----------

Cash flows from financing activities:
 Principal payments on short-term debt                  (60)            (145)
 Principal payments on capital lease obligations         (4)               -
 Proceeds from issuance of short-term debt                -              500
 Proceeds from issuance of common stock               1,617              584
 Restricted cash related to short-term debt               -              250
                                                  -----------       -----------

     Net cash provided by financing activities        1,553            1,189
                                                  -----------       -----------

Net increase in cash and cash equivalents             1,259              648
Cash and cash equivalents at beginning of period      2,374              795
                                                  -----------       -----------

Cash and cash equivalents at end of period        $   3,633         $  1,443
                                                  ===========       ===========
</TABLE>


                                      -6-
<PAGE>

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


1.   Interim financial statements

     The accompanying  unaudited condensed  consolidated financial statements of
     Communication Intelligence Corporation and its subsidiary (the "Company" or
     "CIC")  have been  prepared  pursuant to the rules and  regulations  of the
     Securities and Exchange Commission. Accordingly, they do not include all of
     the  information  and  footnotes  required by GAAP for  complete  financial
     statements. In the opinion of management, the financial statements included
     in this quarterly report reflect all adjustments (consisting only of normal
     recurring  adjustments)  which the Company  considers  necessary for a fair
     presentation  of its  financial  position  at the dates  presented  and the
     Company's  results of operations and cash flows for the periods  presented.
     The Company's interim results are not necessarily indicative of the results
     to be  expected  for the entire  year.  The  Company  develops  and markets
     natural input and  electronic  signature  solutions  for wireless  internet
     information  devices  and  enterprise  applications  including  e-commerce,
     document  automation  and corporate  security.  The Company's core software
     technologies include multilingual  handwriting  recognition systems (Jot(R)
     and the Handwriter(R) Recognition System, referred to as HRS(TM)),  dynamic
     signature  verification and capture tools (InkTools(TM),  Sign-it(TM),  and
     Sign-On(TM)),   ink  compression   (INKshrINK(R))   and  operating   system
     extensions that enable pen input (PenX(TM) and PenX(TM) VC). Other consumer
     and original  equipment  manufacturer  ("OEM") products include  electronic
     notetaking  (QuickNotes(TM)  and  InkSnap(TM))  and predictive  text input,
     (WordComplete(TM)).  CIC's  products  are  designed to increase the ease of
     use,  functionality and security of electronic devices with a primary focus
     on  wireless   internet  and  information   devices  such  as  smartphones,
     electronic  organizers  ("PDA's")  and portable web  browsers.  The Company
     offers a wide range of  multi-platform  software  products  that  enable or
     enhance pen-based computing. The Company's core technologies are classified
     into two broad  categories:  "natural input  technologies" and "transaction
     and communication  enabling  technologies".  Natural input technologies are
     designed to allow users to interact  with a computer or handheld  device by
     using an  electronic  pen or  "stylus" as the  primary  input  device or in
     conjunction  with  a  keyboard.   CIC's  natural  input  offerings  include
     multilingual   handwriting   recognition   systems,   software   keyboards,
     predictive text entry, and electronic ink capture technologies.  Many small
     handheld devices such as electronic  organizers,  pagers and smart cellular
     phones do not have a keyboard.  For such devices,  handwriting  recognition
     and software  keyboards offer the most viable solutions for performing text
     entry and editing.  CIC's predictive text entry technology  simplifies data
     entry even further by reducing the number of actual letters  required to be
     entered. The Company's ink capture  technologies  facilitate the capture of
     electronic ink for notetaking,  drawings or short handwritten messages. The
     Company's transaction and communication  enabling technologies are designed
     to provide a  cost-effective  means for securing  electronic  transactions,
     providing  network  and  device  access  control,   and  enabling  workflow
     automation of traditional  paper form  processing.  CIC believes that these
     technologies  offer  more  efficient  methods  for  conducting   electronic
     transactions and provide more functional user authentication and heightened
     data  security.   The  Company's  transaction  and  communication  enabling
     technologies  have been  fundamental  in its  development  of software  for
     signature  verification,  data security, and data compression.  For the six
     months  ended  June 30,  2000,  the  Company's  cash  and cash  equivalents
     increased  by $1,259 from $2,374 at the  beginning of the period to $3,633.
     The  increase is due  primarily  to cash of $1,553  provided  by  financing
     activities.  This increase was offset by cash used in operating  activities
     of $251 and cash used in investing  activities of $43. The $1,553  provided
     by financing  activities  consists primarily of $1,617 in proceeds from the
     exercise of stock  options  and  warrants by the  Company's  employees  and
     others,  offset by principal  payments of short-term debt and capital lease
     obligations of $64. As of June 30, 2000, the Company's  principal source of
     funds were its cash and cash equivalents  aggregating  $3,633.  The Company
     anticipates that it will

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

1.   Interim financial statements (continued)

     have  adequate  capital to fund its planned  operations  in the  forseeable
     future.  However,  there can be no  assurance  that the  Company  will have
     adequate  capital  resources  to  fund  planned   operations  or  that  any
     additional  funds will be  available  to the  Company  when  needed,  or if
     available,  will be available on favorable terms or in amounts  required by
     the Company.  If the Company is unable to obtain adequate capital resources
     to fund  operations,  it may be required to delay,  scale back or eliminate
     some or all of its operations,  which may have a material adverse effect on
     the Company's business, results of operations and prospects.

     The financial  information  contained  herein should be read in conjunction
     with the  Company's  audited  financial  statements  included in its Annual
     Report on Form 10-K for the year ended December 31, 1999.

2.   Cash and cash equivalents

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

       Cash and cash equivalents consist of the following:
<TABLE>
<CAPTION>

                                           June 30,              December 31,
                                            2000                    1999
                                    --------------------- -- -------------------
         <S>                        <C>                      <C>

         Cash in bank                 $      1,451             $     1,705
         Commercial paper                      644                      11
         Money market accounts               1,538                     658
                                    ---------------------    -------------------
                                      $      3,633             $     2,374
                                    =====================    ===================
</TABLE>

3.   Inventories

     Inventories  are  stated  at the  lower  of  cost  or  market,  cost  being
     determined using the first-in,  first-out (FIFO) method.  At June 30, 2000,
     inventories consisted primarily of finished goods.

4.   Note receivable from officer

     In  April  1994,  the  Company  loaned  $210 to the  Company's  then  Chief
     Executive  Officer  in  exchange  for a  note,  secured  by  shares  of the
     Company's Common Stock. The note bore interest at the lesser of the highest
     marginal  rate per annum  applicable  to the  Company's  borrowings  or the
     highest rate allowable by law. On August 14, 1998, the Company entered into
     an agreement (the  "Agreement")  with the former Chief  Executive  Officer.
     Under the  Agreement,  the  former  officer  agreed to  provide  consulting
     services to the Company  through  December 15, 2001.  In exchange for these
     services,  $110 of the note  receivable  from the  former  officer  will be
     forgiven on a monthly basis over the period  commencing August 15, 1998 and
     ending  December 15, 2001. The remaining $100 of the note  receivable  from
     the former  officer will be forgiven on December  15,  2001,  if the former
     officer has performed all the required  services under the  Agreement.  The
     Agreement will terminate on December 15, 2001.

                                       -8-

<PAGE>

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

5.   Short-term debt

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

6.   Long-term debt related party

     On October 20,  1999,  the Company  entered  into a loan  agreement  with a
     charitable  remainder annuity trust, of which a director and officer of the
     Company is a trustee,  in the amount of $1,500 (the "1999 Loan").  The 1999
     Loan  is  secured  by a  first  priority  security  interest  in all of the
     Company's  assets as now owned or hereafter  acquired by the  Company.  The
     1999 Loan bears interest at the rate of 2% over the prime rate as published
     by  Citibank  from time to time,  11.5% at June 30,  2000.  The note is due
     January 31, 2002.  Interest on the principal  amount under the 1999 Loan is
     payable quarterly.  The 1999 Loan can be re-paid in whole at any time or in
     part at any  time  without  penalty.  Any  partial  payment  must be in the
     principal amount of $100 or a multiple thereof.  At June 30, 2000 $1,500 of
     the 1999 Loan is outstanding.

     On October 20, 1999, in connection with the 1999 Loan the Company issued to
     the charitable  remainder  annuity trust warrants to purchase 300 shares of
     the Company's  common stock. The warrants expire October 20, 2001, and have
     an exercise price of $1.09 per share.  The Company ascribed a value of $179
     to these  warrants,  which will be  amortized to the  Company's  results of
     operations  over  the life of the  debt.  The fair  value  ascribed  to the
     warrants  was  estimated  on the date of issuance  using the  Black-Scholes
     pricing model with the following  assumptions:  risk-free  interest rate of
     5.50%;  expected life of 2 years;  expected volatility of 99%; and expected
     dividend yield of 0%. On January 20, 2000, the charitable  remainder  trust
     exercised  all 300 warrants  issued in connection  with the 1999 Loan.  The
     warrants  were  exercised  under the  cashless  exercise  provision  in the
     warrant  agreement.  The  Company  issued  255  shares of  common  stock in
     exchange for the 300 warrants.

7.   Revenue recognition

     Revenue from retail  product sales is recognized  upon sell through,  while
     revenue from other product sales is recognized upon shipment  provided that
     no  significant  obligations  remain and the  collection  of the  resulting
     receivable is probable. The Company provides for estimated sales returns at
     the time of shipment.

     License  revenues are  recognized  when the software has been delivered and
     when all  significant  obligations  have been  met.  Royalty  revenues  are
     recognized as products are licensed/sold by licensees.  Deferred revenue in
     the accompanying balance sheets reflects advance royalty fees received from
     the Company's licensees in advance of revenue recognition.

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


                                      -9-
<PAGE>

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

8.   Net loss per share

     Effective  December  31,  1997,  the  Company  adopted  the  provisions  of
     Statement of Financial  Accounting  Standards No. 128, "Earnings Per Share"
     ("SFAS 128").  SFAS 128 requires the  disclosure of both basic earnings per
     share,  which is based on the  weighted  average  number of  common  shares
     outstanding, and diluted earnings per share, which is based on the weighted
     average  number of common  shares  and  dilutive  potential  common  shares
     outstanding.  All prior year  earnings per share data have been restated to
     reflect the  provisions of SFAS 128.  Potential  common  shares,  including
     stock, stock options and warrants,  have been excluded from the calculation
     of diluted earnings per share for all periods  presented as their effect is
     anti-dilutive.

9.     Comprehensive income

       Total comprehensive income (loss) was as follows:
<TABLE>
<CAPTION>

                                                  Six months ended June 30,
                                          --------------------------------------
                                               2000                      1999
                                          --------------           -------------
       <S>                               <C>                      <C>

       Net loss                            $   (2,015)              $    (864)
       Other comprehensive income:
       Cumulative translation adjustment            4                     (34)
                                           ------------             ------------
                  Total comprehensive loss $   (2,011)              $    (898)
                                           ============             ============
</TABLE>

10.  Segment Information

     In June 1997, the Financial  Accounting Standards Board issued Statement of
     Financial Accounting  Standards No. 131,  "Disclosures About Segments of An
     Enterprise  and  Related   Information"  ("SFAS  131").  SFAS  131  revises
     information  regarding the reporting of operating segments and was required
     to be  adopted  in periods  beginning  after  December  15,  1997.  It also
     establishes  standards for related disclosures about products and services,
     geographic areas and major customers.  The Company adopted SFAS 131 for the
     year ended December 31, 1998 and the Company's  information has been broken
     down into two  Segments -  Handwriting  recognition  software  and  Systems
     integration.

     The  accounting  policies  followed by the  segments  are the same as those
     described in the "Summary of Significant  Accounting Policies" set forth in
     the Company's Annual Report on Form 10-K for the fiscal year ended December
     31,  1999.   Segment  data   includes   revenues,   as  well  as  allocated
     corporate-headquarters costs charged to each of the operating segments.

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

                                      -10-

<PAGE>

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

10.  Segment Information (continued)

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

                                    Six months ended June 30,
                               2000                          1999
                  ------------------------------- -----------------------------
                   Handwriting    Systems          Handwriting  Systems
                   Recognition  Integration Total Recognition Integration Total
                   -----------  ----------- ----- ----------- ----------- -----
<S>                 <C>       <C>       <C>         <C>       <C>     <C>

 Revenues             $ 1,891   $   736   $  2,627    $ 2,092   $  591  $ 2,683
 Loss from Operations $(1,942)  $    (6)  $ (1,948)   $  (877)  $  (17) $  (894)
 Significant change
 in   Total assets
 from Year End        $     -   $     -   $      -    $     -   $    -  $     -

</TABLE>

                                      -11-
<PAGE>


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

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

The following  discussion and analysis  should be read in  conjunction  with the
unaudited condensed consolidated financial statements and notes thereto included
in Part I - Item 1 of this Form 10-Q and  "Management's  Discussion and Analysis
of Financial  Condition  and Results of  Operations"  set forth in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1999.

Results of Operations

Revenues.  The Company's  revenues are derived from product  sales,  license and
royalty  fees and  development  contracts.  For the three  months ended June 30,
2000,  revenues  decreased by 13% to $1,250 from $1,436,  and for the six months
revenues  decreased  2% to $2,627 from $2,683 for the  comparable  three and six
month periods ended June 30, 1999, as discussed below:
<TABLE>
<CAPTION>

                              Three Months Ended        Six Months Ended
                                   June 30,                 June 30,
                              ------------------       -------------------

                                 2000      1999          2000        1999
                               -------   -------       --------    -------
<S>                          <C>       <C>           <C>         <C>

Revenues:
     Product sales             $   977   $   787       $ 2,074     $ 1,560
     License and royalty fees      134       592           318         810
     Development contracts         139        57           235         313
                               -------   -------       -------     -------

           Total revenues      $ 1,250   $ 1,436       $ 2,627     $ 2,683
                               =======  ========       =======     =======
</TABLE>

Product  sales for the three  months ended June 30, 2000  increased  24% to $977
from $787 in the  comparable  prior  year  period.  This  increase  is due to an
increase of $159 or 883% in the sales of electronic  signature software compared
to the same three month period last year. This increase was offset by a decrease
of $52 or 11% in aftermarket  consumer  software sales via the Company's website
to $429 compared to $481 in the prior year. The decrease in aftermarket consumer
software sales resulted from decreased  availability  of new names to be used in
direct mail campaigns as compared to the 1999 comparable quarter.  Product sales
by the Company's 90% owned joint venture in The People's  Republic of China (the
"Joint  Venture")  increased $83 or 29% to $371 for the three month period ended
June 30, 2000 compared to $288 during the same period last year. The increase is
primarily  due to increased  sales  activity as opposed to one time large orders
during the period.

Product  sales for the six months  ended June 30, 2000  increased  33% to $2,074
from $1,560 in the  comparable  prior year period.  This increase was due to the
increase of $535 or 723% in the Company's  electronic  signature  software.  The
product revenue increase reflects a breakthrough order for electronic  signature
software from Charles Schwab & Co in 2000.  Aftermarket  consumer software sales
via the Company's  website  declined $171 or 19% to $729 compared to $900 in the
prior year.  The decrease in aftermarket  consumer  software sales resulted from
decreased availability in names used in direct mail campaigns as compared to the
1999 six month period.  Product sales by the Joint Venture increased $150 or 26%
to $736 from $586 for the six month period  ended June 30, 2000  compared to the
same period last year. The increase is primarily due to increased sales activity
as opposed to one time large orders during the period.

Revenues from license and royalty fees for the three month period ended June 30,
2000  decreased  $458 or 77% to $134  from  $592 in the  comparable  prior  year
period.  This decrease is primarily  attributable  to the recognition of $400 in
the second quarter of 1999 in connection with a license  agreement for which the
Company had no further  obligation to provide software or services.  For the six
month  period  ended June 30,  2000,  revenues  from  license and  royalty  fees
decreased  $492 or 61% to $318 from $810 in the  comparable  prior year  period.

                                      -12-
<PAGE>

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

This  decrease was  primarily  the result of the event  described  above and the
decrease in reported OEM product  shipments  bundling the Company's  handwriting
recognition  software  during the six months ended June 30, 2000 compared to the
same period last year.

Development  contract  revenues  for the three month  period ended June 30, 2000
increased  143% to $139  from $57 in the  comparable  prior  year  period.  This
increase  resulted  from grant  revenue  from the  National  Science  Foundation
("NSF").  For the six months ended June 30, 2000,  development  contract revenue
decreased  25% to $235  from  $313 in the  comparable  prior  year  period.  The
decrease is due to the higher  non-recurring  engineering revenues from Ericsson
during the six month period in the prior year.

Cost of sales.  Cost of total  product sales for the three and six month periods
ended June 30,  2000  increased  52% and 32%,  respectively,  to $808 and $1,537
respectively,  from $533 and $1,163, respectively,  in the comparable prior year
periods.  Cost of product  sales for the three and six month  periods ended June
30, 2000 includes  approximately  $271 and $526,  respectively,  of hardware and
software  components related to the system  integration  activities of the Joint
Venture,  compared to approximately  $218 and $381,  respectively,  in the prior
year periods. The increase in systems integration costs of product sales for the
three and six month  periods ended June 30, 2000 is due to the increase in sales
of such  products.  Web sale costs over the three and six month  periods  ending
June  30,  2000  increased  $130  and  $112,  respectively,  to $400  and  $671,
respectively,  compared to $270 and $559 in the  comparable  period of the prior
year. The increase in web product cost of sales is due to banner  advertising on
the web as well as direct mail  campaigns.  No banner  advertising was done over
the three and six months ended June 30, 1999.  License and royalty cost of sales
decreased  approximately  $2 to $13 in the  three  months  ended  June 30,  2000
compared to $15 during the prior year period.  For the six months ended June 30,
2000  license and royalty  cost of sales  increased $2 to $34 compared to $32 in
the comparable  1999 period.  The change is due to the technology  import tax on
the  Company's  Japanese  OEM  shipments  bundling  the  Company's   handwriting
recognition  software.  Costs incurred in connection with  development  contract
revenues  increased  388% to $117 for the three  months  ended June 30,  2000 as
compared to $24 in the prior period,  due to the costs  associated  with the NSF
grant.  For the six  months  ended June 30,  2000,  contract  development  costs
increased  3% to $171 as compared to $166 in the prior  period.  The increase is
due to the higher costs  associated with the NSF grant over the six months ended
June 30, 2000 compared to the same period last year.

Gross profit. Gross profit decreased to $442 and $1,090 or 35% and 41% of sales,
respectively for the three and six months period ended June 30, 2000 compared to
$903 and $1,852 or 63% and 69% of sales, respectively, for the comparable period
in the prior year.  This decrease was due primarily to the decrease in licensing
and royalty revenues compared to the prior year. Product gross margins increased
to $299 and $742 compared to $293 and $595 in the prior year.  This increase was
due to the breakthrough  order of the Company's  electronic  signature  solution
software  from  Charles  Schwab & Co in 2000.  License and royalty  gross profit
declined to $121 and $284 for the three and six-month period ended June 30, 2000
compared to $577 and 778 for the same period last year.  The lower gross margins
were  primarily  due to a $400  licensing  agreement  recognized  in the  second
quarter of last year and lower shipments by the Company's licensees as discussed
above.  Development contract gross profit decreased to $22 and $64 for the three
and  six-months  ended June 30, 2000 compared to $33 and $147 for the comparable
periods last year.  The decrease is due to costs  associated  with the NSF grant
and lower revenues as discussed above.

Research and development  expenses.  Research and  development  expenses for the
three and six month periods  ended June 30, 2000  increased by $4 and $136 or 1%
and 20%, respectively,  to $388 and $817, respectively,  as compared to $384 and
$681 in the  comparable  period of the prior year.  The increases were primarily
due to  increases of  approximately  $19 and $55,  respectively,  in payroll and
related  costs for existing  personal over the three and six month periods ended
June 30, 2000 compared to the same three and six month prior year period.  Other
costs including facilities expenses increases $77 and $86 over the three and six
month periods of the prior year.  During the three and six months ended June 30,
2000, $116 and $171, respectively, of engineering costs were transferred to cost
of sales compared to $24 and $166, respectively, in the comparable period of the

                                      -13-
<PAGE>

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

prior year. The higher rate of transferred cost is associated with the NSF grant
in  the  current  three  month  period.  The  Company  did  not  capitalize  any
significant  software development costs in the three and six month periods ended
June 30, 2000, and 1999.

Sales and marketing expenses. Sales and marketing expenses for the three and six
month periods ended June 30, 2000 increased $148 and $349, respectively,  or 34%
and 42% to $588  and  $1,180,  respectively,  as  compared  to  $440  and  $831,
respectively,  in the  comparable  periods of the prior year. The increases were
due to increases of $65 and $91, respectively, in salaries and related costs due
to  increased  sales   personal.   Other  expenses   including   recruiting  and
professional  service expenses  increased $56 and $133,  respectively,  over the
prior year three and six month periods.  These increases were due to the expense
of hiring  additional  sales  and  marketing  personal  and a  one-time  cost of
development of a media campaign aimed at  significantly  increasing  aftermarket
software sales via CIC's website.  Advertising and promotion  expense  increased
$27 and $125,  respectively  as compared to the same three and six month periods
in the prior year. This increases resulted from increased efforts to promote the
Company and its products in the marketplace.

General and administrative expenses. General and administrative expenses for the
three  and six  month  period  ended  June  30,  2000  increased  $86 and  $139,
respectively,  or 18% and 15% to $571 and $1,041 as compared to $485 and $902 in
the comparable  three and six month period of the prior year.  This increase was
primarily attributable to an increase of $73 and $119, respectively, in investor
relations expenses due to the costs associated with disseminating information to
the  substantially  increased number of shareholders over the prior year period.
In addition,  salaries and related  expenses for the three and six month period,
increased $30 and $54, respectively. This increase was due to an increase in the
number of  administrative  personal  late in the  fourth  quarter  of 1999.  The
increases in payroll and investor  relations expenses were off set by reductions
in other costs such as recruiting,  professional  service and facilities related
costs of $17 and $34, respectively compared to the three and six month period in
the prior year.

Interest and other income  (expense),  net. Interest and other income (expense),
net,  increased  $25 and $14 to $53 and $46 for the three and six  months  ended
June 30, 2000,  compared to $28 and $32 in the comparable prior year period. The
increase  is due to the  increase  in  interest  income from the higher cash and
equivalents  compared to the prior  year.  The  increase  in interest  income is
offset by credit card processing fees associated with internet sales.

Liquidity and Capital Resources

At June 30, 2000, cash and cash equivalents  totaled $3,633 compared to cash and
cash  equivalents  of $2,374 at December 31, 1999. The increase is due primarily
to cash of $1,553 provided by financing activities.  This increase was offset by
cash used in operating  activities of $251 and cash used in investing activities
of $43. The $1,553 provided by financing activities consists primarily of $1,617
in proceeds  from the exercise of stock  options and  warrants by the  Company's
employees  and  others,  offset by  principal  payments of  short-term  debt and
capital lease obligations of $60 and $4, respectively. Total current assets were
$4,919 at June 30, 2000, compared to $4,205 at December 31, 1999.

As of June 30, 2000,  the Company's  principal  source of liquidity was its cash
and cash equivalents of $3,633. Although there can be no assurance,  the Company
believes  that its cash and cash  equivalents  together  with cash provided from
projected  revenues will be sufficient to fund planned  operations  for at least
the next twelve months.  However,  if the Company is unable to generate adequate
cash flows from sales,  or if  expenditures  required  to achieve the  Company's
plans are greater than expected, the Company may need to obtain additional funds
or reduce  discretionary  spending.  There can be no assurance  that  additional
funds will be  available  when  needed,  or if  available,  will be available on
favorable terms or in the amounts required by the Company. If adequate funds are
not available when needed,  the Company may be required to delay,  scale back or
eliminate  some or all of its  operations,  which will have a  material  adverse
effect on the Company's business, results of operations and prospects.

                                      -14-
<PAGE>

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

Current  liabilities,  which include deferred  revenue,  were $2,064 at June 30,
2000.  Deferred revenue,  totaling $1,113 at June 30, 2000,  primarily  reflects
nonrefundable  advance  royalty  fees  for the  Company's  licensees  which  are
generally  recognized as revenue by the Company in the period in which licensees
report that products  incorporating the Company's software have been shipped. As
such, the period over which such deferred  revenue will be recognized as revenue
is uncertain because the Company cannot presently determine either the timing or
volume of future shipments by its licensees.

The Company currently owns 90% of a joint venture with the Information  Industry
Bureau, a provincial agency of the People's Republic of China (the "Agency"). In
June 1998, the registered  capital of the Joint Venture was reduced from $10,000
to $2,550.  As of December 31, 1999, the Company had contributed an aggregate of
$1,800 in cash to the Joint  Venture  and  provided  it with both  non-exclusive
licenses  to  technologies  and  certain  distribution  rights.  The  Agency had
contributed  certain land use rights.  Following  the  reduction  in  registered
capital of the Joint Venture, neither the Company nor the Agency are required to
make further  contributions to the Joint Venture.  Prior to the reduction in the
amount of  registered  capital,  the Joint  Venture  was  subject  to the annual
licensing requirements of the Chinese government.  Concurrent with the reduction
in registered  capital,  the Joint Venture's  business  license has been renewed
through  October 18, 2043.  The  Company's  investment  in the Joint  Venture is
subject to risks of doing business abroad,  including  fluctuations in the value
of currencies,  export  duties,  import  controls and trade barriers  (including
quotas),  restrictions on the transfer of funds, longer payment cycles,  greater
difficulty in accounts receivable collections, burdens of complying with foreign
laws and political and economic instability.

On October 20, 1999, the Company entered into a loan agreement with a charitable
remainder  annuity  trust,  of which a director  and officer of the Company is a
trustee,  in the amount of $1,500 (the "1999 Loan"). The 1999 Loan is secured by
a first priority  security  interest in all of the Company's assets as now owned
or hereafter  acquired by the Company.  The 1999 Loan bears interest at the rate
of 2% over the prime rate as published by Citibank from time to time, and is due
January  31,  2002.  Interest  on the  principal  amount  under the 1999 Loan is
payable quarterly.  The 1999 Loan can be re-paid in whole at any time or in part
at any time without penalty. Any partial payment must be in the principal amount
of $100 or a multiple thereof.  The interest rate at June 30, 2000 was 11.5%. At
June 30, 2000 $1,500 of the 1999 Loan is outstanding.

In October  1999, in connection  with the 1999 Loan,  the Company  issued to the
charitable  remainder  annuity  trust  warrants  to  purchase  300 shares of the
Company's  common stock. The Company ascribed a value of $179 to these warrants,
which will be amortized to the Company's  results of operations over the life of
the warrant.  The fair value  ascribed to the warrants was estimated on the date
of  issuance   using  the   Black-Scholes   pricing  model  with  the  following
assumptions:  risk-free  interest  rate of  5.50%;  expected  life  of 2  years;
expected volatility of 99%; and expected dividend yield of 0%. The warrants were
due to expire October 20, 2001, and had an exercise price of $1.09 per share. On
January 20,  2000,  the  charitable  remainder  trust,  of which a director  and
officer of the  Company  is a  trustee,  exercised  all 300  warrants  issued in
connection with the $1,500 long-term debt. The warrants were exercised under the
cashless  exercise  provision  in the  warrant  agreement.  The  Company  issued
approximately 255 shares of common stock in exchange for the 300 warrants.

The Company  leases  facilities in the United States and China.  Future  minimum
lease  payments  under  non-cancelable  operating  leases  are  expected  to  be
approximately  $517,  and $431 excluding  sub-lease  income for the years ending
December  31,  2000,  and 2001,  respectively.  The  Company's  rent  expense is
expected  to be  reduced by  approximately  $98 in 2000 in  connection  with the
subleases on excess office space in the United States.

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.

                                      -15-
<PAGE>

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

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

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

Certain  statements  contained in this Quarterly Report on Form 10-Q,  including
without limitation,  statements containing the words "believes",  "anticipates",
"hopes",  "intends",  "expects",  and other words of similar import,  constitute
"forward looking" statements within the meaning of the Private Litigation Reform
Act of 1995. Such statements involve known and unknown risks,  uncertainties and
other  factors  which  may  cause  actual  events  to  differ   materially  from
expectations. Such factors include the following (1) technological, engineering,
manufacturing, quality control or other circumstances which could delay the sale
or  shipment  of  products;  (2)  economic,  business,  market  and  competitive
conditions in the software  industry and  technological  innovations which could
affect the Company's business;  (3) the Company's inability to protect its trade
secrets  or  other  proprietary  rights,  operate  without  infringing  upon the
proprietary  rights  of  others  and  prevent  others  from  infringing  on  the
proprietary  rights  of the  Company;  and (4)  general  economic  and  business
conditions and the availability of sufficient financing.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

         None

                                      -16-
<PAGE>


                     Communication Intelligence Corporation
                                 and Subsidiary
                                    FORM 10-Q

Part II-Other Information

Item 1.  Legal Proceedings

         None

Item 2.  Change in Securities

         For the six months  ended June 30, 1999 the  Company has granted  stock
options to employees and directors for services rendered as follows:
<TABLE>
<CAPTION>

  ------------------------------------------------------------------------------
                    Grant         Number of  Option     Vesting     Expiration
  Grantees           Date          Options   Price      Period          Date
  ------------------------------------------------------------------------------
<S>             <C>               <C>      <C>       <C>         <C>
  Employees (30) January 31, 2000   45,000  $ 7.3125   Quarterly  Jan. 31, 2010
                                                         over three
                                                           years
  Employees (2)  June 12, 2000     575,000  $ 3.3438   Quarterly  June 12, 2010
                                                         over three
                                                           years
  Employees (1)  June 13, 2000      10,000  $ 3.1250   Quarterly  June 13, 2010
                                                         over three
                                                           years
  Employees (1)  June 20, 2000      15,000  $ 3.5625   Quarterly  June 20, 2010
                                                         over three
                                                           years
  Employees (1)  June 26, 2000      75,000  $ 3.0625   Quarterly  June 26, 2010
                                                         over three
                                                            years
  Non-Employee
  Directors (3)  June 12, 2000      75,000  $ 3.3438   Upon grant June 12, 2007
  ------------------------------------------------------------------------------
</TABLE>

Item 3.  Defaults Upon Senior Securities

         None

Item 4.  Submission of Matters to a Vote of Security Holders
         (in thousands, except percentages)

The Company held its Annual Meeting of Stockholders on June 12, 2000. The number
of shares of common stock with voting  rights as of the record date  represented
at the  meeting  either in person  or by proxy was  78,336  shares or 93% of the
eligible  outstanding Common Stock of the Company. Two proposals were voted upon
by the stockholders.
The proposals and the voting results follow:

Proposal 1

Each of the five  persons  listed below were elected as directors to serve until
the next Annual  Meeting or until his  successor  is elected or  appointed.  The
number of votes for and withheld for each individual is listed next to his name.
<TABLE>
<CAPTION>

                                                       Broker
                                               -------------------------
   Name                   For      Withheld    Non-votes      Abstain
------------------    ----------  ----------   ----------   ------------
  <S>                 <C>          <C>         <C>           <C>

  Guido DiGregorio      77,702        634        None           None
  Jess M. Ravich        75,577      2,759        None           None
  Philip Sassower       74,532      3,803        None           None
  Jeffrey Steiner       74,785      3,551        None           None
  C. B. Sung            77,640        696        None           None
</TABLE>


                                      -17-
<PAGE>

                     Communication Intelligence Corporation
                                 and Subsidiary
                                    FORM 10-Q

Proposal 2

To  ratify  the  appointment  of  Stonefield  Josephson,   Inc.  as  independent
accountants  of the Company for the fiscal year ending  December 31,  2000.  The
number of votes for, against and abstaining on this proposal was as follows:
<TABLE>
<CAPTION>

                                                                 Broker
                                                          ---------------------
                   For         Against       Abstain      Non-votes    Abstain
                ---------    ----------      -------      ---------   ---------
<S>            <C>             <C>           <C>         <C>         <C>

All Classes      77,620          411           305          None        None
</TABLE>

Item 5.  Other Information

         None

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits
         27        Financial Data Schedule.

(b)      Reports on Form 8-K

         None

                                      -18-
<PAGE>


                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.





                                   COMMUNICATION INTELLIGENCE CORPORATION
                                   --------------------------------------
                                                Registrant


        August 2, 2000                   /s/ Guido DiGregorio
-----------------------------   -----------------------------------------------
             Date                            Guido DiGregorio
                                 (Principal Financial Officer and Officer Duly
                                 Authorized to Sign on Behalf of the Registrant)





















                                      -19-