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

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

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

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

|   | large      accelerated filer |   | accelerated      filer |   | non-accelerated      filer |  X | Smaller      reporting Company |
|--------|------------------------------|--------|------------------------|--------|----------------------------|---------|--------------------------------|

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

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Page No.                                                                              |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------|
| PART      I.  FINANCIAL INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                  |
| Item 1.  Financial      Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                  |
| Condensed      Consolidated Balance Sheets at March 31, 2008 (unaudited) andDecember 31, 2007                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                    3 |
| Condensed      Consolidated Statements of Operations for the Three-MonthPeriods Ended March 31, 2008      and 2007 (unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                    4 |
| Condensed      Consolidated Statements of Changes in Stockholders’ Equity for      theThree-Month Period Ended March      31, 2008 (unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                    5 |
| Condensed      Consolidated Statements of Cash Flows for the Three-Month      PeriodsEnded March 31, 2008 and 2007      (unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                    6 |
| Notes      to Unaudited Condensed Consolidated Financial Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                   7       |
| Item      2.  Management's Discussion and      Analysis of Financial Condition and Results of Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                  13            |
| Item      3.  Quantitative and Qualitative      Disclosures About Market Risk                                                                                                                             |                  17            |
| Item      4.  Controls and      Procedures                                                                                                                                                                |                  18            |
| PART      II.  OTHER INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                  |
| Item      1.    Legal      Proceedings                                                                                                                                                          |                  18            |
| Item      1A. Risk      Factors                                                                                                                                                                                     |                  18            |
| Item      2.    Unregistered Sale      of Securities and Use of proceeds                                                                                                                        |                  18            |
| Item      3.    Defaults Upon      Senior Securities                                                                                                                                            |                  18            |
| Item      4.    Submission of      Matters to a Vote of Security Holders                                                                                                                        |                  18            |
| Item      5.    Other      Information                                                                                                                                                          |                  19            |
| Item      6.    Exhibits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                  |
| (a)      Exhibits                                                                                                                                                                                                                       |                  19            |
| Signatures                                                                                                                                                                                                          |                  20            |

----

|                                                                                                                                                                                                                                           |   | March      31 |         |   | December      31 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|--------------|--------|------------------|--------|
|                                                                                                                                                                                                                                           |   | 2008          |         |   | 2007             |   |
| Assets                                                                                                                                                                                                                                         |   | Unaudited     |         |   |             |   |
| Current      assets:                                                                                                                                                                                                                           |   |          |         |   |             |   |
| Cash and cash      equivalents                                                                                                                                                                                                                 |   | $             | 355          |   |             | $      | 1,144 |   |
| Accounts receivable, net of      allowances of $120 and $117 at March 31, 2008 and December 31, 2007      respectively                                                                                                                         |   |          | 316          |   |             |   | 452 |   |
| Prepaid expenses and other      current assets                                                                                                                                                                                                 |   |          | 115          |   |             |   | 135 |   |
|                                                                                                                                                                                                                                           |   |          |         |   |             |   |   |   |
| Total current      assets                                                                                                                                                                                                                      |   |          | 786          |   |             |   | 1,731 |   |
| Property      and equipment, net                                                                                                                                                                                                               |   |          | 60           |   |             |   | 77 |   |
| Patents                                                                                                                                                                                                                                        |   |          | 3,433        |   |             |   | 3,528 |   |
| Capitalized      software development costs                                                                                                                                                                                                    |   |          | 1,278        |   |             |   | 1,109 |   |
| Other      assets                                                                                                                                                                                                                              |   |          | 30           |   |             |   | 30 |   |
|                                                                                                                                                                                                                                           |   |          |         |   |             |   |   |   |
| Total assets                                                                                                                                                                                                                                   |   | $             | 5,587        |   |             | $      | 6,475 |   |
|                                                                                                                                                                                                                                           |   |          |         |   |             |   |   |   |
|  Liabilities      and Stockholders' Equity                                                                                                                                                                                                |   |          |         |   |             |   |   |   |
| Current      liabilities:                                                                                                                                                                                                                      |   |          |         |   |             |   |   |   |
| Short-term      debt – net of unamortized fair value assigned to warrants of $217 and $350      at March 31, 2008 and December 31, 2007, including related party debt of      $1,170, net of unamortized fair value assigned to warrants |   | $             | 1,503        |   |             | $      | 1,370 |   |
| Accounts payable                                                                                                                                                                                                                               |   |          | 192          |   |             |   | 135 |   |
| Accrued    compensation                                                                                                                                                                                                                        |   |          | 387          |   |             |   | 364 |   |
| Other accrued      liabilities                                                                                                                                                                                                                 |   |          | 240          |   |             |   | 298 |   |
| Deferred revenue                                                                                                                                                                                                                               |   |          | 223          |   |             |   | 431 |   |
|                                                                                                                                                                                                                                           |   |          |         |   |             |   |   |   |
| Total current      liabilities                                                                                                                                                                                                                 |   |          | 2,545        |   |             |   | 2,598 |   |
|                                                                                                                                                                                                                                           |   |          |         |   |             |   |   |   |
| Long-term      debt – other, net of unamortized fair value assigned to warrants of $18      and $21 at March 31, 2008 and December 31, 2007,    respectively                                                                             |   |          | 99           |   |             |   | 96 |   |
|                                                                                                                                                                                                                                           |   |          |         |   |             |   |   |   |
| Commitments      and contingencies                                                                                                                                                                                                             |   |          |         |   |             |   |   |   |
| Stockholders'      equity:                                                                                                                                                                                                                     |   |          |         |   |             |   |   |   |
| Preferred stock, $.01 par value;      10,000 shares authorized; 0 outstanding at March 31, 2008 and December 31,      2007, respectively                                                                                                       |   |          | –      |   |             |   | – |   |
| Common stock, $.01 par value;      155,000 shares authorized; 129,057 shares issued and outstanding at March      31, 2008 and December 31, 2007, respectively                                                                                 |   |          |   1,291 |   |             |   |   1,291 |   |
| Additional paid-in      capital                                                                                                                                                                                                                |   |          | 93,799       |   |             |   | 93,785 |   |
| Accumulated    deficit                                                                                                                                                                                                                         |   |          | (92,110      | )      |             |   | (91,260 | ) |
| Accumulated other comprehensive      loss                                                                                                                                                                                                      |   |          | (37          | )      |             |   | (35 | ) |
|                                                                                                                                                                                                                                           |   |          |         |   |             |   |   |   |
| Total      stockholders' equity                                                                                                                                                                                                                |   |          | 2,943        |   |             |   | 3,781 |   |
|                                                                                                                                                                                                                                           |   |          |         |   |             |   |   |   |
| Total      liabilities and stockholders' equity                                                                                                                                                                                                |   | $             | 5,587        |   |             | $      | 6,475 |   |
|                                                                                                                                                                                                                                           |   |          |         |   |             |   |   |   |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | Three      Months EndedMarch      31, |    |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | 2008                                  |    |   | 2007 |   |
| Revenues:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                  |    |   |   |   |
| Product                                                                                                                                                        |   | $                                     | 242     |   |   | $ | 158 |   |
| Maintenance                                                                                                                                                    |   |                                  | 188     |   |   |   | 176 |   |
|  Total      revenues                                                                                                                                                               |   |                                  | 430     |   |   |   | 334 |   |
|  Operating      costs and expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                  |    |   |   |   |   |   |
| Cost of sales:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                  |    |   |   |   |   |   |
| Product                                                                                                                                                                                      |   |                                  | 170     |   |   |   | 30 |   |
| Maintenance                                                                                                                                                                                  |   |                                  | 30      |   |   |   | 28 |   |
| Research and      development                                                                                                                                  |   |                                  | 53      |   |   |   | 129 |   |
| Sales and      marketing                                                                                                                                       |   |                                  | 360     |   |   |   | 260 |   |
| General and      administrative                                                                                                                                |   |                                  | 467     |   |   |   | 475 |   |
|  Total operating costs and      expenses                                                                                                                                           |   |                                  | 1,080   |   |   |   | 922 |   |
|  Loss      from      operations                                                                                             |   |                                  | (650    | ) |   |   | (588 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                  |    |   |   |   |   |   |
| Interest      and other income (expense),      net                                                                               |   |                                  | 3       |   |   |   | – |   |
| Interest      expense:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                  |    |   |   |   |   |   |
| Related party (Note      4)                                                                                                                                    |   |                                  | (44     | ) |   |   | (23 | ) |
| Other (Note      3)                                                                                                                                            |   |                                  | (23     | ) |   |   | (24 | ) |
| Amortization      of loan discount and deferred financing cost:                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                  |    |   |   |   |   |   |
| Related party (Note      4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                  | (91     | ) |   |   | (84 | ) |
| Other (Note      3)                                                                                                                                            |   |                                  | (45     | ) |   |   | (91 | ) |
| Minority      interest                                                                                                           |   |                                  |    |   |   |   | 3 |   |
|  Net      loss                                                                                                                                                                     |   | $                                     | (850    | ) |   | $ | (807 | ) |
|  Basic      and diluted loss per      share                                                                                 |   | $                                     | (0.01   | ) |   | $ | (0.01 | ) |
|  Weighted      average common shares outstanding basic and diluted                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                  | 129,057 |   |   |   | 107,557 |   |

----

|                                               |   |   SharesOutstanding |           |   |   CommonStock |   |   |  AdditionalPaid-InCapital |   |   |   AccumulatedDeficit |   |   | AccumulatedOtherComprehensiveLoss |    |   |    Total |   |
|----------------------------------------------------|--------|-------------------------------|----------------|--------|-------------------------|--------|--------|--------------------------------|--------|--------|--------------------------------|--------|--------|-----------------------------------|---------|--------|-------------------------|--------|
|                                               |   |                          |           |   |                    |   |   |                           |   |   |                           |   |   |                              |    |   |                    |   |
| Balances      as of December 31, 2007              |   |                          | 129,057        |   |                    | $      | 1,291  |                           |   | $      | 93,785                         |   |   | $                                 | (91,260 | )      |                    | $      | (35 | ) |   | $ | 3,781 |   |
|                                               |   |                          |           |   |                    |   |   |                           |   |   |                           |   |   |                              |    |   |                    |   |   |   |   |   |   |   |
| Stock      based employee compensation             |   |                          |           |   |                    |   |   |                           |   |   | 14                             |   |   |                              |    |   |                    |   |   |   |   |   | 14 |   |
|                                               |   |                          |           |   |                    |   |   |                           |   |   |                           |   |   |                              |    |   |                    |   |   |   |   |   |   |   |
| Comprehensive      loss:                           |   |                          |           |   |                    |   |   |                           |   |   |                           |   |   |                              |    |   |                    |   |   |   |   |   |   |   |
|  Net loss                                     |   |                          |           |   |                    |   |   |                           |   |   |                           |   |   |                              | (850    | )      |                    |   |   |   |   |   | (850 | ) |
|  Foreign currency translation      adjustment |   |                          |           |   |                    |   |   |                           |   |   |                           |   |   |                              |    |   |                    |   | (2 | ) |   |   | (2 | ) |
| Total      comprehensive loss                      |   |                          |           |   |                    |   |   |                           |   |   |                           |   |   |                              |    |   |                    |   |   |   |   |   | (852 | ) |
|  Balances      as of March 31, 2008           |   |                          |   129,057 |   |                    | $      | 1,291  |                           |   | $      | 93,799                         |   |   | $                                 | (92,110 | )      |                    | $      | (37 | ) |   | $ | 2,943 |   |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | Three      Months EndedMarch      31, |    |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | 2008                                  |    |   | 2007 |   |
| Cash      flows from operating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                  |    |   |   |   |
| Net      loss                                                                                                                                                    |   | $                                     | (850    | ) |   | $ | (807 | ) |
| Adjustments to reconcile net      loss to net cash provided byused      for operating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                  |    |   |   |   |   |   |
| Depreciation and      amortization                                                                                                                                                        |   |                                  | 208     |   |   |   | 182 |   |
| Amortization of discount on      convertible notes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                  | – |   |   |   | 68 |   |
| Amortization of discount on      Short-term debt related party                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                  | 134     |   |   |   | 84 |   |
| Amortization of discount on      long-term debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                  | 3       |   |   |   | – |   |
| Amortization of deferred      financing costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                  | – |   |   |   | 23 |   |
| Stock-based  employee      compensation                                                                                                                                         |   |                                  | 14      |   |   |   | 24 |   |
| Minority      interest                                                                                                                                                                    |   |                                  | – |   |   |   | (3 | ) |
| Changes in operating assets and      liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                  |    |   |   |   |   |   |
|    Accounts      receivable,      net                                                                                                                                      |   |                                  | 136     |   |   |   | 252 |   |
|    Prepaid      expenses and other current assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                  | 20      |   |   |   | (33 | ) |
|    Accounts      payable                                                                                                                                                   |   |                                  | 57      |   |   |   | 43 |   |
|    Accrued      compensation                                                                                                                                               |   |                                  | 23      |   |   |   | (9 | ) |
|    Other accrued      liabilities                                                                                                                                          |   |                                  | (58     | ) |   |   | (3 | ) |
|    Deferred      revenue                                                                                                                                                   |   |                                  | (208    | ) |   |   | (164 | ) |
| Net cash used for      operating  activities                                                                                                                                    |   |                                  | (521    | ) |   |   | (343 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                  |    |   |   |   |   |   |
| Cash      flows from investing activities:Acquisition of property and      equipment                                                                             |   |                                  | (1      | ) |   |   | (1 | ) |
| Capitalized software development      costs                                                                                                                      |   |                                  | (264    | ) |   |   | (209 | ) |
| Net cash used for investing      activities                                                                                                                                               |   |                                  | (265    | ) |   |   | (210 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                  |    |   |   |   |   |   |
| Cash      flows from financing activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                  |    |   |   |   |   |   |
| Proceeds from issuance of      short-term      debt                                                                                                              |   |                                  | – |   |   |   | 670 |   |
| Principal payments on capital      lease obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                  | – |   |   |   | (2 | ) |
| Net cash provided      by financing      activities                                                                                                                             |   |                                  | – |   |   |   | 668 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                  |    |   |   |   |   |   |
| Effect      of exchange rate changes on      cash                                                                                  |   |                                  | (3      | ) |   |   | – |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                  |    |   |   |   |   |   |
| Net      increase (decrease)  in cash and cashequivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                  | (789    | ) |   |   | 115 |   |
| Cash      and cash equivalents at beginning of period                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                  | 1,144   |   |   |   | 727 |   |
| Cash      and cash equivalents at end of      period                                                                               |   | $                                     | 355     |   |   | $ | 842 |   |

| Supplementary      disclosure of cash flow information                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Interest      paid                                                                         |   | $      | 66     |   |   | $      | 11 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |

----

| Item1. | Interim financial      statements and basis ofpresentation |
|--------|------------------------------------------------------------|

| 1.   | Nature of      business |
|----------------|-------------------------|

----

| Item1. | Interim financial      statements and basis ofpresentation |
|--------|------------------------------------------------------------|

| 1.   | Nature of      business |
|----------------|-------------------------|

|  2.  |   Accounts receivable      and revenue concentration |
|----------------|----------------------------------------------------------------|

| 3.   | Patents |
|----------------|---------|

----

| Item1. | Interim financial      statements and basis of presentation  (continued) |
|--------|--------------------------------------------------------------------------|

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

----

| Item1. | Interim financial      statements and basis of presentation  (continued) |
|--------|--------------------------------------------------------------------------|

| 5.   | Long-term      debt |
|----------------|---------------------|

|             6. | Net (loss) per      share |
|----------------------------------------------|---------------------------|

|             7. | Common stock      options |
|----------------------------------------------|---------------------------|

----

| Item1. | Interim financial      statements and basis of presentation  (continued) |
|--------|--------------------------------------------------------------------------|

|             7. | Common Stock      Options      (continued) |
|----------------------------------------------|--------------------------------------------|

|                         |   | Three      Months Ended     |
|------------------------------|--------|-----------------------------|
|                         |   | March      31, 2008         | March      31, 2007 |
| Risk      free interest rate |   | 3.32%      – 5.11%    | 4.60%      – 5.11% |
| Expected      life (years)   |   | 3.21      – 6.83      | 3.46      –5.02 |
| Expected      volatility     |   | 80.96%      – 104.57% | 80.92%      – 104.57% |
| Expected      dividends      |   | None                        | None |

|                                                                 |   | Three      Months Ended |   |
|----------------------------------------------------------------------|--------|-------------------------|--------|
|                                                                 |   | March      31, 2008     |   |   | March      31, 2007 |   |
| Research      and development                                        |   | $                       | 1      |   |   | $ | 3 |   |
| Sales      and marketing                                             |   |                    | 12     |   |   |   | 18 |   |
| General      and administrative                                      |   |                    | 1      |   |   |   | 3 |   |
| Stock-based      compensation expense included in operating expenses |   | $                       | 14     |   |   | $ | 24 |   |

|                                         | Three      Months Ended                                                                     |                                                                                                                                                   |
|----------------------------------------------|---------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                         | March      31, 2008                                                                         |                                                                                                                                                   | March      31, 2007 |
|     Options              |    Shares                                                               |  Weighted      Average Exercise Price                                                                                                             |  Weighted      average Remaining Contractual Term |   Aggregate      Intrinsic Value |   |    Shares  |  Weighted      Average Exercise Price | Weighted      average Remaining Contractual Term |   Aggregate      Intrinsic Value |
| Outstanding      at January 1,               | 6,036                                                                                       | $0.58                                                                                                                                                  |   |   |   | 5,893 | $0.69 |   |   |
| Granted                                      |                    − |                                                                                                                                                   |   |   |   |                    − |   |   |   |
| Exercised                                    |                    − |                                                                                                                                                   |   |   |   |                    − |   |   |   |
| Forfeited      or expired                    | (134)                                                                                       | $0.35                                                                                                                                                  |   |   |   | (78) | $0.33 |   |   |
| Outstanding      at March 31                 | 5,902                                                                                       | $0.59                                                                                                                                                  | 4.35 | $− |   | 5,815 | $0.69 | 4.79 | $− |
| Vested      and expected to vest at March 31 |  5,902                                                                                 |                               $0.59 |                           4.35 |                       $− |   |                     5,650 |                               $0.73 |                                 4.79 |                                      $− |
| Exercisable      at March 31                 | 5,381                                                                                       | $0.62                                                                                                                                                  | 4.20 | $− |   | 5,199 | $0.73 | 4.62 | $− |

----

| Item1. | Interim financial      statements and basis of presentation  (continued) |
|--------|--------------------------------------------------------------------------|

|             7. | Common Stock Options      (continued) |
|----------------------------------------------|---------------------------------------|

|                                            |                        |   | March      31, 2008                 |   |
|-------------------------------------------------|-----------------------------|--------|-------------------------------------|--------|
|                                            |                        |   | Options      Outstanding            |   |   | Options      Exercisable |   |
|    Range      of Exercise Prices |                        |   |   Number      Outstanding |   |   | Weighted      Average Remaining Contractual Life(in years) |   |   | Weighted      Average Exercise Price |   |   |   Number      Outstanding |   |   | Weighted      Average Exercise Price |   |
| $                                               | 0.12      – $0.50     |   |                                |   | 2,379 |   |   |   | 4.9 |   |   | $ | 0.32 |   |   |   | 1,859 |   |   | $ | 0.34 |   |
|                                            | 0.51      – 1.00 |   |                                |   | 3,341 |   |   |   | 4.1 |   |   | $ | 0.73 |   |   |   | 3,341 |   |   | $ | 0.73 |   |
|                                            | 1.01      – 2.00 |   |                                |   | 167 |   |   |   | 1.8 |   |   | $ | 1.32 |   |   |   | 167 |   |   | $ | 1.32 |   |
|                                            | 2.01      – 3.00 |   |                                |   | − |   |   |   | − |   |   | $ | − |   |   |   | − |   |   | $ | − |   |
|                                            | 3.01      – 7.50 |   |                                |   | 15 |   |   |   | 2.2 |   |   | $ | 3.56 |   |   |   | 15 |   |   | $ | 3.56 |   |
|                                            |                        |   |                                |   | 5,902 |   |   |   | 4.4 |   |   | $ | 0.59 |   |   |   | 5,382 |   |   | $ | 0.62 |   |

|                                            |                        |   | March      31, 2007                 |   |
|-------------------------------------------------|-----------------------------|--------|-------------------------------------|--------|
|                                            |                        |   | Options      Outstanding            |   |   | Options      Exercisable |   |
|    Range      of Exercise Prices |                        |   |   Number      Outstanding |   |   | Weighted      Average Remaining Contractual Life(in years) |   |   | Weighted      Average Exercise Price |   |   |   Number      Outstanding |   |   | Weighted      Average Exercise Price |   |
| $                                               | 0.12      – $0.50     |   |                                |   | 1,937 |   |   |   | 5.3 |   |   | $ | 0.36 |   |   |   | 1,390 |   |   | $ | 0.38 |   |
|                                            | 0.51      – 1.00 |   |                                |   | 3,455 |   |   |   | 4.9 |   |   | $ | 0.73 |   |   |   | 3,386 |   |   | $ | 0.74 |   |
|                                            | 1.01      – 2.00 |   |                                |   | 333 |   |   |   | 1.5 |   |   | $ | 1.51 |   |   |   | 333 |   |   | $ | 1.51 |   |
|                                            | 2.01      – 3.00 |   |                                |   | 50 |   |   |   | 0.6 |   |   | $ | 3.00 |   |   |   | 50 |   |   | $ | 3.00 |   |
|                                            | 3.01      – 7.50 |   |                                |   | 40 |   |   |   | 1.3 |   |   | $ | 3.43 |   |   |   | 40 |   |   | $ | 3.43 |   |
|                                            |                        |   |                                |   | 5,815 |   |   |   | 4.8 |   |   | $ | 0.69 |   |   |   | 5,199 |   |   | $ | 0.73 |   |

|   Nonvested      Shares       |   |  Shares |    |   | Weighted      AverageGrant-DateFair      Value |   |
|-----------------------------------------|--------|--------------|---------|--------|------------------------------------------------|--------|
|  Nonvested      at January 1, 2008 |   |         | 672     |   |                                           | $      | 0.22 |   |
| Granted                                 |   |         | − |   |                                           | $      | 0.00 |   |
| Forfeited                               |   |         | (134    | )      |                                           | $      | 0.25 |   |
| Vested                                  |   |         | (17     | )      |                                           | $      | 0.25 |   |
| Nonvested                               |   |         | 521     |   |                                           | $      | 0.25 |   |

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| ·   | Technological,      engineering, manufacturing, quality control or other circumstances that      could delay the sale or shipment ofproducts; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Economic,      business, market and competitive conditions in the software industry and      technological innovations that could affect the Company’s      business; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 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 |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | General      economic and business conditions and the availability of sufficient      financing. |
|--------------------|--------------------------------------------------------------------------------------------------|

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|                                    |   | Payments      due by period |   |
|-----------------------------------------|--------|-----------------------------|--------|
| Contractual      obligations            |   | Total                       |   |   | 2008 |   |   | 2009 |   |   | 2010 |   |   | 2011 |   |   | 2012 |   |   | Thereafter |   |
| Short-term      debt related party (1)  |   | $                           | 1,720  |   |   | $ | 1,720 |   |   | $ | – |   |   | $ | – |   |   | $ | – |   |   | $ | – |   |   | $ | – |   |
| Long-term      debt (2)                 |   |                        | 117    |   |   |   | – |   |   |   | 117 |   |   |   | – |   |   |   | – |   |   |   | – |   |   |   | – |   |
| Operating      lease commitments (3)    |   |                        | 990    |   |   |   | 198 |   |   |   | 272 |   |   |   | 280 |   |   |   | 240 |   |   |   | – |   |   |   | – |   |
| Total      contractual cash obligations |   | $                           | 2,827  |   |   | $ | 1,918 |   |   | $ | 389 |   |   | $ | 280 |   |   | $ | 240 |   |   | $ | – |   |   | $ | – |   |

| 1.   | Short-term      debt reported on the balance sheet is net of approximately $217 in      discounts representing the fair value of warrants issued in connection      with the Company’s debt financings. Short-term debt includes $1,170 due      to  the AffiliatedStockholder. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | Long-term      debt reported on the balance sheet is net of approximately $18 in      discounts representing the fair value of warrants issued to the      investors. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | The      operating lease commenced on November 1, 2002. The lease was renegotiated      in December 2005 and extended for an additional 60 months. The base rent      will increase approximately 3% per annum over the term of the lease, which      expires on October 31, 2011. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Exhibit      Number |  Document                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|---------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.0                 | Second      Amended Plan of Reorganization of the Company, incorporated herein by      reference to the Company's Form 8-K filed October 24,      1994.                                                                                                                                                                                                                                                                                                    |
| 2.1                 | Orderly      Liquidation Valuation, Exhibit F to the Second Amended Plan of      Reorganization, incorporated herein by reference to the Company's      Form 8-K filed October 19, 1994.                                                                                                                                                                                                                                                                   |
| 2.2                 | Order      Confirming Plan of Reorganization, incorporated herein by reference to the      Company's Form 8-K filed November 14, 1994.                                                                                                                                                                                                                                                                                                                     |
| 3.1                 | Certificate      of Incorporation of the Company, as amended, incorporated herein by      reference to Exhibits 3.1, 3.2, 3.3 and 3.4 to the Company's Registration      Statement on Form 10 (File No. 0-19301).                                                                                                                                                                                                                                     |
| 3.2                 | Certificate      of Amendment to the Company's Certificate of Incorporation (authorizing      the reclassification of the Class A Common Stock and Class B      Common Stock into one class of Common Stock) as filed with the Delaware      Secretary of State's office on November 1, 1991, incorporated herein      by reference to Exhibit 3 to Amendment 1 on Form 8 to the      Company's Form 8-A (File No. 0-19301). |
| 3.3                 | By-laws      of the Company adopted on October 6, 1986, incorporated herein by      reference to Exhibit 3.5 to the Company's Registration Statement on      Form 10 (File No. 0-19301).                                                                                                                                                                                                                                                         |
| 3.4                 | By-laws      of the Company adopted on October 6, 1986, incorporated herein by      reference to Exhibit 3.5 to the Company's Registration Statement on      Form 10 (FileNo. 0-19301).                                                                                                                                                                                                                                                          |

| 3.5   | Certificate      of Amendment to the Company’s Amended and Restated Certificate of      Incorporation dated January 24, 2001, incorporated herein by reference to      Exhibit 3.5 to the Company’s Registration Statement on Form S/1, filed      December 28, 2007.           |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.6   | Certificate      of Elimination of the Company’s Certificate of Designation of the Series A      Preferred Stock dated August 17, 2001, incorporated herein by reference to      Exhibit 3.6 to the Company’s Registration Statement on Form S/1, filed      December 28, 2007. |
| *31.1 | Certification      of Company’s Chief Executive Officer pursuant to Section 302 of the      Sarbanes-Oxley Act of 2002                                                                                                                                                                |
| *31.2 | Certificate      of Company’s Chief Financial Officer pursuant to Section 302 of the      Sarbanes-Oxley Act of 2002                                                                                                                                                                  |
| *32.1 | Certification      of Chief Executive Officer pursuant to 18 USC Section 1750, as adopted      pursuant to Section 906 of the Sarbanes-Oxley Act of  2002                                                                                                                                   |
| *32.2 | Certification      of Chief Financial Officer pursuant to 18 USC Section 1750, as adopted      pursuant to Section 906 of the Sarbanes-Oxley Act of  2002                                                                                                                                   |

| * | Filed      herewith. |
|---|----------------------|

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

| May      14, 2008 |   | /s/      Francis V. Dane                                                                                |
|-------------------|--------|---------------------------------------------------------------------------------------------------------|
| Date              |   | Francis      V. Dane                                                                                    |
|              |   | (Principal      Financial Officer and Officer Duly Authorized to Sign on Behalf of the      Registrant) |