1mage Software Reports First-Quarter Financial Results, Licensing Dispute with Reynolds & Reynolds.

Business Editors/High-Tech Writers

ENGLEWOOD, Colo.--(BUSINESS WIRE)--May 21, 2002

1mage Software Inc. (OTCBB:ISOL), a developer of enterprise document imaging and management software for business and industry, today reported its financial results for the first quarter, ended March 31, 2002.

Revenue for the first quarter was $517,000, up from the $447,000 reported in the fourth quarter of 2001, but down from the $832,000 reported in the first quarter of 2001. Net loss for the first quarter of 2002 was $144,000, or $.05 per share. This compares with a net loss of $123,000, or a basic net loss of $.04 per share for the fourth quarter of 2001 and net income for the first quarter in 2001 of $222,000, or a basic net income of $.08 per share.

The Company also announced that it was engaged in a dispute with its largest customer, The Reynolds & Reynolds Company (NYSE:REY), over Reynolds' continuing use of the Company's software after Reynolds terminated a 1996 subscription and maintenance agreement with the Company. Despite having paid subscription fees for six years under the terminated agreement, Reynolds now claims that it has a perpetual, royalty-free license to continue using the Company's software. Reynolds markets the Company's software under the trademark DocVantage(TM).

This dispute has led to litigation in Colorado and Ohio between Reynolds and the Company. In the Colorado litigation, the Company has asked the court for a declaratory judgment that Reynolds does not have the perpetual license that it claims. In the Ohio lawsuit, Reynolds is seeking to force the Company to submit to mediation and arbitration in Ohio. The Company intends to oppose the Ohio action because it believes that arbitration is not required by the agreement and is not the best way to protect its rights in its software. The Company declined to predict the results of any mediation, arbitration or litigation with Reynolds.

David R. DeYoung, president and CEO, stated: "We are extremely concerned about what appears to be a cavalier disregard by Reynolds for our proprietary rights in our software, as well as for the proprietary rights of third parties whose software is embedded in ours. It is our hope, however, that when Reynolds' senior management becomes aware of the facts, they will insist on adherence to the standards of corporate integrity and fair dealing so long associated with their organization."

"First-quarter financial results were significantly below our expectations due to the cancellation of the 1996 Reynolds agreement as well as the continuation of the general economic slowdown," added DeYoung. "Despite the Reynolds situation and the general economic uncertainty, we remain cautiously optimistic that, as the economy improves, significant potential orders will mature into sales and revenue levels will rebound. Needless to say, a positive resolution of our dispute with Reynolds would go a long way toward meeting those goals."

EARNINGS RECAP

                    Three Months ended          Three Months ended
                        03/31/2002                  03/31/2001
                    ------------------          ------------------

Revenue                  $ 517,264                   $ 832,397

Income/(Loss) from
 Operations               (144,569)                    227,925

Net Income/(Loss)         (144,314)                    221,842

Earnings/(Loss) Per
 Share                   $    (.05)                  $     .07

About 1mage: 1mage Software Inc. is a leading provider of document management and workflow automation systems for Linux(R), UNIX(R), and Microsoft Windows NT(R) environments. The company's flagship product, 1MAGE, converts business documents of any origin into electronic images, and manages them throughout their lifecycle. 1mage's entire product line is marketed through a direct sales force and an international network of value-added resellers (VARs). The company also operates a Professional Services Group offering project management, consulting, installation, training and application image-enabling services. For more information, call 800/844-1468, or visit www.1mage.com.

Statements expressing the beliefs and expectations of 1mage Software management regarding future performance are forward-looking and involve risks and uncertainties, including, but not limited to: market demand for products, the overall demand for imaging software, maintenance of adequate cash flow to sustain operations, quarterly fluctuations in financial results, and other risk factors identified from time to time in 1mage Software's reports filed with the Securities and Exchange Commission, copies of which may be obtained at www.sec.gov or by written request submitted to 1mage Software.

Brands and products referenced herein are trademarks or registered trademarks of their respective holders.