Timeline Reports Fiscal First Quarter Results.

Business Editors

BELLEVUE, Wash.--(BUSINESS WIRE)--Aug. 14, 2000

Timeline Inc., (OTCBB:TMLN) today reported its financial results for the first fiscal 2001 quarter ended June 30, 2000 were impacted by continued focus on establishing intellectual property rights, a new outsourcing arrangement, and softness in the Enterprise Resource Planning (ERP) markets. Operating revenues totaled $345,000 and net losses were $729,000 or $.21 per diluted share.

The acquisition of Analyst Financials Limited, effective June 30th, was accounted for as a purchase transaction. Consequently, results of operations for Analyst Financials are not included in the income statement, while the balance sheet shows consolidated balances. The company ended the quarter with virtually no short or long-term debt and cash and short-term investments of $4.2 million. Results from the prior year period are not directly comparable since revenues and profits in fiscal 2000 were significantly impacted by a single $5 million license agreement. Timeline earned $3.77 million or $1.17 per diluted share on revenues of $5.49 million in the first quarter of fiscal 2000.

"We accomplished a great deal during the first quarter in implementing our strategic plan, although in combination, these initiatives caused revenues to decline in the short-term while increasing operating expenses," said Charles Osenbaugh, President and CEO. "Our plan emphasizes establishing Timeline's intellectual property rights as a platform for increased technology licensing and, assuming success, as a basis to acquire or launch additional lines of business. This approach will undoubtedly produce very lumpy results, as expenses will be incurred before achieving results. At the same time, we are streamlining current operations to focus solely on our newer technologies and consolidating with our European distribution capabilities through the acquisition of Analyst Financials.

First quarter maintenance and consulting revenues were reduced, because the company has moved to an outsourcing arrangement, effective June 1st, for all support for its installed Digital-based customers. For the initial three months of the outsourcing contract, revenues for the maintenance services from these clients accrue to the new service provider. "We expect the outsourcing decision will significantly extend the expected life of the revenues from this legacy business line. In addition, we are now able to focus exclusively on building the value in our patented data mart technology," Osenbaugh explained.

Software licensing revenues were generated from only four of the company's eight alliance partners during the first quarter. Of these four, two are continuing to experience substantial weakness in revenue generation, reflecting general market weakness. Newer alliance partners are slated to complete integration and begin marketing Timeline products later this year. Typically, new alliance partners begin contributing to revenues between six and 12 months following the execution of an agreement. With Timeline's acquisition of Analyst Financials, the combined companies now have 10 distribution partners, several value added resellers, a direct sales presence in England and more than 200 organizations paying annual maintenance on licensed software.

"As we increase the number of new alliances and expand joint marketing campaigns with existing partners, we expect our reliance on any single company, region or market will diminish," Osenbaugh continued. During the first quarter, the company undertook the following new business development activities:

1. Signed an OEM distribution agreement with Applied Systems,

Inc., whose product Applied Vision is the premier insurance

agency management solution in the market today. This alliance

is the second significant agreement (with Primark being the

first) focused on utilizing Timeline's technology in

conjunction with strong vertical markets other than ERP /

Accounting systems. It further reflects the broad range of

applications for the technology and demonstrates the

competitive advantage it delivers for data management and

delivery outside of the traditional financial reporting venue

of the company's main competitors.

2. Expanded the third party distribution network to included

Value-Added Resellers (VARs) with the signing of Omega Group,

Inc., a Solomon Software products VAR. VARs provide local

consulting services to the ultimate end users, and are an

excellent channel for expanding the target market to existing

users of transactions systems. By expanding our focus to

include already installed end users of ERP systems, Timeline

can continue to build its business in this market and reduce

the impact of the current weakness in the market for new

licenses of ERP systems.

3. Hired Chris Bishop, formerly of Navision US, as Director of

Marketing.

A majority of the expenses associated with establishing and implementing the strategic initiatives discussed above were concentrated in the quarter. In addition, the company expended in the first quarter approximately $170,000 for patent litigation, consistent with its level of quarterly spending during fiscal 2000. "We continue to vigorously defend our patented technology with the suit filed against Oracle in July," Osenbaugh said. "In addition, we are continuing to pursue the action we filed against Sagent and to defend against the action Microsoft filed against us last year. The trial date in the Microsoft matter has recently been reset for October 2000. The resolution of this litigation should provide the Microsoft-based software development community with a clear picture of that community's respective rights. Additionally, the resolution of the Sagent case, scheduled for trial in January 2001, should establish whether the Timeline patents can withstand a very vigorous, costly and thorough challenge. As we draw near to our trial dates in October and January, we expect to continue to incur high legal expenses."

Last year's successful patent defense efforts contributed to other income and partially offset the company's first quarter operating loss due to the sale of 15,000 shares of restricted Broadbase Software (Nasdaq:BBSW) stock at $30.24 per share. The company continues to hold 60,750 restricted shares of BBSW, acquired in September 1999.

First quarter EBITDA (earnings before interest, taxes, depreciation and amortization) was negative $643,000 compared to $4.0 million in the first fiscal quarter a year ago. First quarter cash earnings (net income excluding depreciation and amortization costs) totaled $(638,000) or $(0.18) per diluted share compared to $4.0 million or $1.23 per diluted share in the first quarter a year ago.

At June 30, 2000, Timeline's total assets were $7.4 million compared to $5.3 million at June 30, 1999. Liabilities totaled $2.0 million compared to $1.2 million a year ago. The company's current ratio was 2.6-to-1 at June 30, 2000. At the end of the first quarter, stockholder equity was $5.4 million, or $1.43 per share, compared to $4.41 million or $1.37 per share at the end of the first quarter of fiscal 2000.

Timeline develops, markets and supports proven, Microsoft Windows-based financial management reporting software suitable for complex applications such as those found in medium to large, multinational corporations. Timeline Analyst (formerly MV Analyst) for Microsoft Excel was developed for Windows 95, Office 97 and Windows NT and thus takes full advantage of the new operating systems from Microsoft. Friday August 11, 2000, Timeline shares closed the trading day at $2.69. Timeline can be reached at 800/342-3365.

                         FINANCIAL HIGHLIGHTS

INCOME STATEMENT               First Quarter         Fiscal Year
 ($ in thousands,              ended June 30,       ended March 31,
  except per share)           2000       1999       2000      1999
                           ---------- ---------- ---------- ---------
Revenues
   Software licenses           $ 113    $ 5,076    $ 6,329   $ 1,794
   Maintenance                   154        205        833       854
   Consulting and other           78        207        784       754
                           ---------- ---------- ---------- ---------
          Total Revenue          345      5,488      7,946     3,402
                           ---------- ---------- ---------- ---------
COST OF REVENUES
    Amortization                  44        150        400       268
    Other                        134        241        756       674
                           ---------- ---------- ---------- ---------
Cost of Revenue                  178        391      1,156       942
                           ---------- ---------- ---------- ---------
Gross profit                     167      5,097      6,790     2,460
                           ---------- ---------- ---------- ---------
   Gross margin                   48%        93%        85%      72%
Operating Expenses
   Sales and marketing           234        246        617       599
   Research and development      321        307      1,162       657
   General and
    administrative               572        720      2,365     1,329
   Depreciation                   47         48        182       196
                           ---------- ---------- ---------- ---------
   Total operating expenses    1,174      1,321      4,326     2,781
                           ---------- ---------- ---------- ---------
Income from operations      $ (1,007)   $ 3,776    $ 2,464    $ (321)

OTHER INCOME (EXPENSES)
   Interest income                10          1        145        12
   Gain on sale of
    securities                   274         --        391        --
   Interest expense and
    other                         (5)        (8)       (32)      (57)
                           ---------- ---------- ---------- ---------
Total other income               279         (7)       504       (45)
Income before income taxes      (728)     3,769      2,968      (366)
Income tax provision              --         --        (56)       --
Net Income                    $ (728)   $ 3,769    $ 2,912    $ (366)
                           ========== ========== ========== =========
Basic net income per share   $ (0.21)    $ 1.19     $ 0.89   $ (0.12)
                           ========== ========== ========== =========
Diluted net income
 per share                   $ (0.21)    $ 1.17     $ 0.83   $ (0.12)
                           ========== ========== ========== =========
Basic shares outstanding   3,449,612  3,159,432  3,274,673  3,152,834
                           ========== ========== ========== =========
Diluted shares outstanding 3,449,612  3,221,099  3,524,273  3,152,834
                           ========== ========== ========== =========
EBITDA                        $ (643)    $ 3,976    $ 3,550     $ 155


BALANCE SHEET                            June 30, March 31,  June 30,
   (audited)                               2000      2000      1999
                                         -------   ------    -------
                                       (unaudited)(audited)(unaudited)
     Cash and cash equivalents             $ 702   $ 1,471     $ 116
     Marketable securities - trading       1,645     1,546        --
     Short-term investments                1,837     3,030     3,800
     Securities held for other               170       170        --
     Accounts receivable, net                729       323       362
     Prepaid expenses and other               67        70        58
     Notes receivable                          1         1       102
                                         -------   ------    -------
     Total Current Assets                  5,151     6,611     4,438
   Property and equipment, net               262       266       335
   Capitalized software, net                 652       655       504
   Intangible assets and goodwill, net     1,315         2         2
                                         -------   ------    -------
     Total Assets                        $ 7,380   $ 7,534   $ 5,279
                                         =======   =======   =======

 LIABILITIES AND STOCKHOLDERS' EQUITY
   Current Liabilities
     Accounts payable                    $ 1,162     $ 304      $ 93
     Accrued expenses                        530       488       355
     Notes payable                            42        --        32
     Deferred revenue                        229       372       381
     Current portion of long term debt         2         4        --
     Other                                    --        --        11
                                              --        --        --
     Total Current Liabilities             1,965     1,168       872
     Total Liabilities                     1,965     1,168       874
                                         -------   ------    -------

STOCKHOLDERS' EQUITY
     Common stock and paid in capital    $ 9,957   $ 9,159   $ 8,998
     Other comprehensive income            1,539     2,658        --
     Accumulated deficit                  (6,081)   (5,451)   (4,593)
                                         -------   ------    -------
     Total Stockholders' Equity            5,415     6,366     4,405
                                         -------   ------    -------
     Total Liabilities & Stockholders'
      Equity                             $ 7,380   $ 7,534   $ 5,279
                                         =======   =======   =======

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Statements in this news release looking forward in time involve risks and uncertainties, including the ability of third party partners to generate sales, the ability to reach definitive agreements in negotiations with third-parties to market or license Timeline's technology, acceptance of new products introduced by alliance partners, ability of the company to successfully absorb acquisitions, risks associated with international operations, corporate spending patterns, the outcome of pending litigation regarding a contract dispute and the cost related thereto, and other risk factors detailed in the Company's Securities and Exchange Commission filings.