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

                                   FORM 10-KSB

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

                    For the fiscal year ended March 31, 2002

             |_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
             For the transition period from __________ to __________

                         Commission File Number 1-13524

                                 TIMELINE, INC.
        (Exact name of small business issuer as specified in its charter)

            Washington                                  91-1590734
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

                        3055 112th Avenue N.E., Ste. 106
                               Bellevue, WA 98004
                    (Address of principal executive offices)
                                 (425) 822-3140
                           (Issuer's telephone number)

Securities registered under Section 12(b) of the Exchange Act: Common Stock,
$.01 par value

Securities registered under Section 12(g) of the Exchange Act: (none)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes |X| No |_|

Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. |_|

The issuer's revenues for its most recent fiscal year were: $4,824,543.

As of May 31, 2002, 4,165,998 shares of the Registrant's common stock were
outstanding and the aggregate market value of such common stock held by
nonaffiliates was approximately $1,189,829 based on the average of the bid
($0.30) and ask ($0.45) prices on that date of $0.375.

                       DOCUMENTS INCORPORATED BY REFERENCE

The Company's definitive proxy statement for its 2002 annual meeting of
shareholders (the "Proxy Statement"), which will be filed with the Securities
and Exchange Commission within 120 days after the close of the fiscal year 2002,
is incorporated by reference in Part III hereof.

Transitional Small Business Disclosure Format (Check One): Yes |_| No |X|

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                                     PART I

This Annual Report on Form 10-KSB includes a number of forward-looking
statements that reflect the Company's current views with respect to business
strategies, products, future events and financial performance. These
forward-looking statements are subject to certain risks and uncertainties
including those discussed below that could cause actual results to differ
materially from historical results or those anticipated. When used herein, the
words "anticipate," "believe," "predict," "intend," "may," "will," "expect,"
"would," "could," and similar expressions as they relate to the Company are
intended to identify such forward-looking statements, but are not the exclusive
means of identifying such statements. The Company's actual results, performance
or achievements could differ materially from the results expressed in, or
implied by, these forward-looking statements. The Company does not undertake any
obligation to revise these forward-looking statements to reflect any future
events or circumstances. In addition, the disclosures under the caption "Other
Factors that May Affect Operating Results," consist principally of a brief
discussion of risks which may affect future results and are thus, in their
entirety, forward-looking in nature. To facilitate readers in identifying
forward-looking statements in the other sections of this document, the Company
has attempted to mark sentences containing such statements with a single
asterisk and paragraphs containing only forward looking statements with double
asterisks. However, no assurance can be made all such statements have been
identified and marked. Therefore, readers are urged to carefully review and
consider the various disclosures made by the Company in this report and in the
Company's other reports previously filed with the Securities and Exchange
Commission (the "SEC"), including the Company's periodic reports on Forms 10-KSB
and 10-QSB and its registration statement on Form SB-2, and those described from
time to time in the Company's press releases and other communications, which
attempt to advise interested parties of the risks and factors that may affect
the Company's business.

ITEM 1: DESCRIPTION OF BUSINESS

Our Business

      We develop, market and support company-wide financial reporting, budgeting
and management software, and event-based notification, application integration,
and process automation software applications that streamline key business
activities for workplace efficiency. Our software products enable customers to
automatically access and distribute business and accounting information in a
secure environment and with full accounting controls, integrate software
programs developed at different times, and automate notification messages
pertaining to specific events and business processes. Our marketing and
development strategy is focused on products that report financial data in
meaningful and flexible formats, and on systems for notification of critical
information, integration of applications and transaction automation. Our
reporting products allow our customers to gather and distribute business
information throughout their companies while maintaining maximum flexibility in
determining the types of transaction processing systems they will use. We allow
the end-user to receive information through a web browser, distributed
Microsoft(R) Excel workbooks, data marts or actual reports delivered via e-mail.
In addition, our WorkWise products allow customers to automatically monitor
databases, consolidate data entry, automate tasks and communicate with the
appropriate people.

      Many financial and management reporting products are focused on the
presentation, either electronically or on paper, of processed data in formatted
reports. While our reporting products can present information in formatted
reports, our technology can also distribute an actual database of information (a
"data mart") to an end-user's computer. These databases or data marts are built
through selective criteria that limit the data mart to relevant data for each
particular end-user. This design is intended to allow for the distribution of
manageable packets of data over networks or the Internet while maintaining
corporate security. Each database can be arranged in a unique "view," or
"orientation," as desired by the end-user. The end-user may then view the data
in a standard corporate report format or through a personal library of


                                     Page 1
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customized report formats. Additionally, the data resides in Microsoft Office,
which makes it automatically available for use in Microsoft(R) Excel
spreadsheets and all other Microsoft Office tools.

      We believe that our proprietary technology allows customers to avoid
time-consuming, error-prone and expensive data entry, and improve business
communications and processes. Our products allow customers to avoid data entry
by facilitating an efficient exchange of information between the desktop
computer and the underlying hardware platform and accounting system. Our
products also work with both new and old accounting systems. Many customers
accounting systems are "client/server" systems that store information on a
server that in turn makes the information available to a desktop computer (the
"client"). Our products facilitate an efficient exchange of information between
the client and server.

      Other businesses have elected to retain or upgrade centralized
server-based systems. Our business strategy is focused on meeting the financial
management needs of customers with both types of accounting systems by providing
products that accept and report on data from both centralized or client/server
systems.

      Our Timeline Analyst and Timeline Data Server (formerly Timeline Server)
product lines are designed to gather data from multiple operating systems and
hardware platforms, old and new, for translation into a Microsoft environment.
Our WorkWise Business Alerts product automates and synchronizes notification
messages pertaining to specific events and business processes. Our WorkWise Data
Agent Server integrates software programs developed at different times by
different people using different database structures. Our products enable our
customers to:

      o     perform financial reporting and management functions;
      o     connect to multiple types of operating systems;
      o     efficiently distribute data to desktop computers;
      o     perform consolidations and allocations;
      o     perform budgeting functions;
      o     coordinate the update of business records in multiple modules
            through a single transaction entry; and
      o     automate the notification of responsible parties of events monitored
            by the WorkWise engine.

      The flexibility of our Timeline and WorkWise products make it possible for
our customers to deliver data for reporting, analysis and record update or
monitoring throughout their business enterprise without purchasing a new,
expensive computer system.

      In addition to providing an infrastructure to deliver data, Timeline
products provide a number of processes to enhance or augment sophisticated
financial reporting. These include budgeting, allocations, consolidations,
foreign currency conversion and security.

      We believe that our products can improve the transaction processing
systems, particularly accounting and reporting software of other software
vendors.* Our products are designed to enhance existing software by adding
functions and flexibility that the software may not have. As a result, our
products can eliminate weaknesses or competitive disadvantages in other
transaction-based software. Our preferred method of product distribution is
through transaction-based software vendors that bundle our products or
distribute our products in conjunction with their systems. We believe that a
majority of our license fee revenue in fiscal year 2003 will be generated by
licensing and distribution agreements with these third-party vendors.*

      At March 31, 2002, we employed 22 full-time employees in the U.S. Our
London subsidiary, Analyst Financials, employed seven full-time employees and
one part-time employee at March 31, 2002.


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Our Technology

      Our Timeline Analyst software product family, including Timeline Data
Server, works with a customer's entire computing infrastructure to create a
reporting engine that can accept and organize data, with full accounting
controls, from both new and old accounting systems. Our proprietary
architecture, in conjunction with our proprietary generation engine, is designed
to accomplish this task. The compatibility of our software with older legacy
accounting systems allows a customer to preserve existing computer hardware and
software systems or transition to a client/server environment while providing
enhanced reporting capabilities. If a customer is already using client/server
systems, our technology provides distributed packets of data that enhance the
productivity of reporting, budgeting and analysis professionals throughout the
enterprise. Our products use patent-protected driver technology that not only
automates the transfer of data from accounting and information systems into
desktop databases, but can automate rebuilding databases to reflect changes in
the underlying accounting information. This eliminates the costly process of
maintaining databases in both our software and the underlying accounting system.

      The following is a brief discussion of our three primary proprietary
technologies:

      o     Timeline Architecture. Our architecture contains a multi-dimensional
            data segmentation capacity that exceeds the capacity of all
            accounting data structures known to the Company. This capacity
            enables our reporting products to accept data from multiple
            transaction processing systems concurrently, to combine data into a
            single database and to add reporting relationships not present in
            the source system(s). For example, we can (a) take data from a
            customer's general ledger, human resources/payroll, sales and order
            processing systems, (b) combine all of the data in one database, and
            (c) allow the customer to use the combined data for payroll and
            sales analysis.

      o     Generation Engine. Our generation engine enables our products to
            automate the building of Microsoft-compatible databases. Prior
            technologies required substantial human intervention to manually
            build tables, input forms and manipulate other attributes of the
            data. The generation engine allows a customer to build a wide range
            of databases for distribution throughout the business enterprise.

      o     Interface Technology. Our interface technology allows our products
            to (a) discern the structure of existing transaction-based systems,
            (b) extract data from one or more transaction processing systems,
            and (c) feed data to the generation engine. Our product is tied
            directly to the underlying accounting systems and changes made in
            these underlying systems (such as adding a new accounting
            relationship for a newly purchased company) are automatically
            reflected in our data marts. Prior technologies required substantial
            human intervention to manually maintain structures in both the
            transaction and reporting systems, and maintain the synchronization
            of the accounting and information systems.

      Our WorkWise Business Alerts and Data Agent Server products are deployed
as a set of user-defined "business rule(s)" contained in a software package that
also allows particular fields of other data base systems to be monitored for
change. When a monitored field is updated with a transaction or series of
transactions, an associated business rule may trigger an event. The event so
triggered can cause any number of previously established activities to
automatically occur. Examples are the sending of an informational e-mail or the
running of another software program (or "agent"). Our distribution partners
usually market the WorkWise products prepackaged with a number of agents
specific to the needs of the users of the monitored systems licensed by the
distributor.


                                     Page 3
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      We have been granted four patents by the U.S. Patent and Trademark Office
on our technology and have a total of 81 issued claims. We have also been
granted a patent by the Commonwealth of Australia Patent Office. We believe
additional international patents may be granted during fiscal 2003.*

Our Products

      Our products make it possible to distribute information and data marts
from an underlying accounting system to the desktop. Our primary products,
Timeline Analyst and Timeline Data Server, consist of a set of client/server
software applications based on Microsoft Windows(TM)/Windows NT(TM) and
Microsoft Office operating systems. Once data is contained in a local Microsoft
Office database, the data is available for each end-user to develop his or her
own analysis or personal reports using Microsoft or Timeline-enhanced
technology. The personalized data on the desktop is as accurate as is the data
in the underlying accounting system.

      Timeline Data Server is the central warehouse of financial and management
reporting data structured in a multi-dimensional relational database. The
Timeline Data Server is simply the first instance of a Timeline Analyst database
drawing data from the source. It includes filter and Manager capabilities
allowing initial extraction of data from source systems. It includes traditional
financial reporting features including foreign currency conversion,
consolidations and allocations. The various Timeline Data Server functions
provide desktop and network reporting based on information contained in one or
more underlying accounting systems. Our market focus is to use Timeline Data
Server as a data warehouse to handle large volumes of data in conjunction with
Timeline Analyst.

      Timeline Analyst is a stand alone "data mart," which enables the user to
view, create and distribute reports in Microsoft Excel based on data from one or
more underlying accounting systems. Timeline Analyst also works with our
server-based software to distribute reporting databases to desktop end-users
throughout a business enterprise.

      Timeline Manager is a product designed for the "mid-level" market
(businesses with approximately six to 100 desktop users). This product completes
the Timeline Analyst suite by allowing Timeline Analyst users to distribute
packets of information and assign new reporting relationships at the desktop
level.

      Timeline Budgeting consists of applications and tools that access and
manipulate the underlying Timeline information and data marts. Timeline
Budgeting offers our customers a combination of Microsoft Excel interfaces and
flexible access to and manipulation of information. The functions offered by
Timeline Budgeting include automatic dissemination of budget templates,
consolidation of budget input, allocations, and multiple spread methods.

      WorkWise Data Agent Server is a set of programs that allow the monitoring
of other databases for change, the definition of business rules to apply to any
changes in the monitored database, and the triggering of an event in response to
the detected change. A number of previously defined events are available as part
of the products optional configuration. Additionally, new events can be easily
added to the product without writing additional lower level software code
through a user interface designed for such purpose.

      WorkWise Business Alerts is the most popular event triggered by the Data
Agent Server and is packaged and sold as a stand-alone product. It monitors data
fields for specified activity and then automatically communicates that activity
to the appropriate customer or employee via email.


                                     Page 4
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Other Factors That May Affect Operating Results

      We have a working capital deficit and may need to raise additional capital
      to fund operations during fiscal 2003, and we have received a "going
      concern" opinion from our independent auditors.

      At March 31, 2002, we had cash, cash equivalents, and marketable
securities totaling $286,086, a working capital deficit of $448,937, and our net
working capital (excluding deferred revenue) was $120,888. We believe that our
current cash, cash equivalents, marketable securities, and any net cash provided
by operations may not be sufficient to meet anticipated cash needs for working
capital and capital expenditures through fiscal 2003. Our revenue is
unpredictable, a revenue shortfall could deplete our limited financial resources
and require us to reduce operations substantially or to raise additional funds
through equity or debt financings. Included in our current assets are 203,000
shares of Sagent Technology, Inc. common stock, which were issued to us in
December 2000 in partial settlement of our lawsuit against Sagent. As of May 31,
2002, the market value of our marketable securities had decreased to
approximately $148,507, or $0.97 per share.

      In the event that we are unable to sell any or all of the Sagent shares at
the times or in the amounts we desire, or in the event that the market prices
for any of those securities decreases, this will have a material adverse effect
on our working capital and our capital needs. In such event we would need to
achieve substantially greater revenue from operations or significantly reduce
costs to meet our budget for fiscal 2003.

      Our future capital requirements depend upon many factors, including, but
not limited to:

      o     market acceptance of our products and any other new products we
            develop;
      o     the success of our third-party software licensing and distribution
            arrangements, and the amount of revenues generated from those
            software licenses;
      o     our ability to license our patents, and the amount of revenues
            generated from those licenses;
      o     the liquidity and market prices for the marketable securities held
            by us;
      o     our ability to develop and maintain sustained maintenance and
            support revenue;
      o     the rate at which we are able to further reduce expense levels;
      o     the scope of any reduction of any of our business activities;
      o     the scope and degree of market recovery and performance; and
      o     other business and economic factors that may occur from time to
            time.

None of these factors can be predicted with certainty.

      We anticipate that the company may need substantial additional debt or
equity financing in the future for which we have no current commitments or
arrangements. We cannot assure you that any additional financing, if required,
will be available or, even if it is available that it will be on terms
acceptable to us. If we raise additional funds by selling equity or equity-based
securities, the ownership of our existing shareholders will be diluted. Our
plans which may or may not occur for financing may include, but are not limited
to, any one or more of the following:

      o     engaging a financial advisor to explore strategic alternatives,
            which may include a merger, asset sale, joint ventures or another
            comparable transaction;
      o     raising additional capital to fund continuing operations by private
            placements of equity or debt securities or through the establishment
            of other funding facilities, which may be on terms unfavorable to
            us;
      o     forming a joint venture with a strategic partner or partners to
            provide additional capital resources to fund operations; and
      o     loans from management or employees, salary deferrals or other cost
            cutting mechanisms.


                                     Page 5
<PAGE>

Our inability to secure additional financing could have a material adverse
effect on whether we would be able to successfully implement our proposed
business plan and our ability to continue as a going concern. Our independent
accountants have issued a "going concern" emphasis paragraph in their report on
our financial statements for the fiscal year ended March 31, 2002, citing
recurring operating losses, negative cash flows from operations, and a net
working capital deficit. Accordingly, those conditions raise substantial doubt
about our ability to continue as a going concern. If additional financing is not
available, we may need to change our business plan, significantly reduce or
suspend our operations (which may include further reducing our operating
expenses, downsizing our staff and closing offices), sell or merge our business,
or file a petition in bankruptcy.

      Our ability to operate profitably is uncertain.

      Our historical operations have not been consistently profitable. We had an
accumulated deficit of $9,623,999 as of March 31, 2002 and a net loss of
$2,286,932 for the fiscal year then-ended. Our license revenues have fluctuated
substantially from quarter to quarter in the past and are likely to continue to
fluctuate substantially in the future. To become profitable, we must do some
combination of:

      o     increasing the licensing and maintenance revenues of our existing
            products;
      o     increasing the licensing of patented technology to third parties;
      o     developing new products; and
      o     controlling our expenses.

We cannot assure you that we will meet these objectives or achieve profitability
or even if we do achieve profitability, that we will be able to sustain
profitability. We expect to incur losses in the near future. We have
significantly decreased operating expenses and, as a result, will need to
maintain our level of revenues with fewer personnel in order to achieve
profitability. We can give no assurances that sufficient license or other
revenues will be generated or that sufficient financing will be obtained to
enable us to obtain or sustain profitability. This could have a detrimental
effect on the market price of our stock.

      Our profitability depends on the success of our products.

      Our future profitability will depend upon the successful development,
marketing and licensing of our existing product line and other new products. We
cannot give you any assurances that:

      o     our products will achieve or sustain revenue growth;
      o     enhancements to our products and other applications can be
            successfully developed;
      o     demand for our products will continue to grow or be sustained; or
      o     our products will successfully compete with the products of others.

      To the extent demand for our products does not develop due to competition,
poor product performance, negative assessments by our customers of our financial
resources and expertise, technological change or other factors, our operations
may be materially and adversely affected.

      We rely extensively on licensing and distribution relationships, and
      direct sales to a lesser degree.

      We rely on agreements with third-party licensees and distributors for
sales and licensing of our products. Our agreements with licensees and
distributors are generally not exclusive, may be terminated by either party
without cause, and generally do not impose minimum licensing or purchase
requirements. The effectiveness of third-party licensing and distribution
agreements depends in part on:


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      o     market acceptance and distribution channels of our third-party
            licensees' and distributors' products and services;
      o     our ability to integrate our products with those of the third party;
            and
      o     the continued viability and financial stability of such third
            parties, which, in turn, depends on the overall economic health of
            the software industry.

      We cannot assure you that these licensees and distributors will perform
their contractual obligations as expected or that we will derive any additional
revenue from these licensing and distribution arrangements. Also, we can give no
assurances that we will successfully develop new relationships or maintain
existing relationships with third-party licensees and distributors. Finally we
cannot assure you that such licensees and distributors will be able to market
our products effectively, or that any existing licensee or distributor will
continue to represent our products. A failure of any of these events to occur
could materially adversely affect our results of operations.

      Our subsidiary Analyst Financials is also heavily reliant on distribution
alliances in Europe and is subject to risk factors similar to those described
immediately above. In addition, Analyst Financials also relies in part on its
direct sales force for some of its sales and licensing efforts, especially in
the greater London area. We expect to continue this direct sales effort through
Analyst Financials. Over the last several years, we have moved away from the
direct sales model in the U.S. and have relied more on licensing through our
third-party distribution channels. There are no assurances that we will be able
to profitably or successfully maintain the direct sales model through Analyst
Financials.

      Finally, during the last two fiscal years we have relied on substantial
fees generated by licensing of our various patents. These revenues tend to be
sporadic and generally do not provide for ongoing revenue subsequent to the
initial licensing fees. We can give no assurance that additional fees will be
generated in the future.

      Our operating results may vary significantly.

      Our results of operations have historically varied substantially from
period to period (quarterly or otherwise), and we expect they will continue to
do so. Fluctuations in our operating results have resulted, and may result in
the future, from many factors, including the following:

      o     varying size, timing and contractual terms of product licensing
            agreements and customer orders for our products;
      o     customers' decisions to defer orders or implementations,
            particularly large orders or implementations, from one quarter to
            the next;
      o     the success of our distribution and licensing partners to market and
            sell our products;
      o     lengthy negotiation and integration cycles associated with
            establishing new distributorships;
      o     the timing of the introduction and customer acceptance of new
            products or product enhancements by us or our competitors;
      o     our ability to timely complete our service obligations related to
            product sales;
      o     changes in pricing policies by us or our competitors;
      o     the size, timing and contractual terms of any patent licensing
            agreements;
      o     changes in the mix of revenue attributable to higher-margin product
            license revenue as opposed to substantially lower-margin service
            revenue;
      o     changes in demand for our business and accounting software and
            applications generally;
      o     software defects and other product quality problems;
      o     our ability to hire, train and retain sufficient consulting,
            training and sales staff; and
      o     changes in general economic conditions.

      Over the past several years, we have made great efforts to reduce our
operating and other expenses. We cannot assure you that these expense reductions
will have the desired result of enabling us to


                                     Page 7
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achieve profitability or that they will not have adverse effects on us. In
addition, we are currently more reliant on licensing and distribution
arrangements and less on direct sales, and accordingly we expect that timing of
revenues will fluctuate from quarter to quarter. If we increase our direct sales
and marketing efforts or undertake research and development not funded by third
parties, our operating expenses would increase and may have an adverse impact on
our results of operations. Any of these fluctuations may cause significant
variations in periodic results of operations. We do not take any actions
specifically designed to limit fluctuations in our periodic results of
operations. Because a significant portion of our expenses, particularly
personnel costs and rent, are relatively fixed in advance of any particular
quarter, shortfalls in revenue caused by a fluctuation of licensing, maintenance
and consulting revenue may cause significant variation in operating results in
any particular quarter.

      A slowing economy and reductions in information technology spending may
      negatively affect our revenues.

      Our revenues may be negatively affected by the increasingly uncertain
economic conditions both in the market generally and in our industry. If the
economy continues to slow, some companies may reduce their budgets for spending
on information technology and business software. As a consequence, our sales
cycle may become longer with some customers, and other prospective customers may
postpone, reduce, or even forego the purchase of our products and services,
which could negatively affect our revenues.

      We are subject to pending legal proceedings.

      From time to time we have been, and expect to continue to be, subject to
legal proceedings and claims in the ordinary course of our business. Such legal
proceedings could expose us to liability and require the expenditure of
significant financial and managerial resources, which could harm our business.

      In July 1999, Microsoft Corporation filed a complaint against us in the
Superior Court of Washington for King County alleging that we violated our June
1999 patent license agreement. In December 2000, the Court issued a Memorandum
Decision, and a Final Judgment was issued in January 2002, holding the language
of the agreement would support Microsoft's right to sublicense to its customers
the right to use Microsoft's SQL Server by adding code or software products to
it so long as the added code or software does not itself independently infringe
our patents. We appealed this Judgment to the Washington Court of Appeals, and
in March 2002 the Appellate Court remanded the case to the Superior Court of
Washington and ordered it to enter a judgment in our favor. Microsoft has filed
a motion for certiorari requesting the Washington Supreme Court to hear an
appeal of the case. A response is expected in November or December 2002.

      In June 2001, we filed and subsequently served a complaint against
Hyperion Solutions, Inc. in the Federal District Court for the Western District
of Washington, alleging infringement of certain of our patents. We intend to
seek monetary damages and an injunction against Hyperion licensing certain of
its products. The trial date is set for March 2003.

      We may not be able to enforce our intellectual property rights, and others
      may claim that we are infringing their intellectual property rights.

      We rely on a combination of patents, copyright, trademark and trade
secrecy laws, confidentiality procedures and contractual provisions to protect
our intellectual property rights. We attempt to protect our software,
documentation and other written materials under patent, trade secret and
copyright laws, which afford only limited protection. We have received four U.S.
patents and have filed for patent protection in certain foreign countries.
Despite our efforts to protect our intellectual property rights:

      o     laws and contractual restrictions may not be sufficient to prevent
            misappropriation of our technology or deter others from developing
            similar technologies;


                                     Page 8
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      o     current federal laws that prohibit unauthorized copying and
            distribution of software provide only limited protection from
            software "pirates", and effective patent, trademark, copyright and
            trade secret protection may be unavailable or limited in foreign
            countries;
      o     other companies may claim common law trademark rights based upon
            state or foreign laws that precede the federal registration of our
            trademarks; and
      o     policing unauthorized use of our products and trademarks is
            difficult, expensive and time-consuming, and we may be unable to
            determine the extent of this unauthorized use.

      Spending additional resources on research and development could adversely
affect our financial condition and results of operation. We intend to protect
our patent rights against infringement through negotiation and litigation, if
necessary. As described above, we are currently involved in a lawsuit filed
against us by Microsoft Corporation for breach of contract, and a lawsuit filed
by us against Hyperion Solutions, Inc. Such litigation is costly and we cannot
assure you that we will be successful.

      We cannot assure you that our intellectual property protections will be
adequate or that third parties will not independently develop substantially
similar products, services and technology. Although we believe our products,
services and technology do not infringe on any proprietary rights of others, as
the number of software products available in the market increases and the
functions of these products further overlap, we may become increasingly subject
to infringement claims. These claims, with or without merit, could result in
costly litigation or might require us to enter into royalty or licensing
agreements, which may not be available on terms acceptable to us.

      We rely on license revenue from a limited line of products.

      Product-license revenues and related services from our Timeline Analyst
and Timeline Data Server products accounted for a significant portion of our
total revenues during fiscal 2002 (exclusive of one-time patent license
revenues). We expect revenues from our Timeline Analyst, Timeline Data Server,
Business Alerts and Data Agent Server, Budgeting and Consolidation products to
account for substantially all of our long-term future revenues. As a result,
factors adversely affecting the demand for these products, such as competition,
pricing or technological change, could materially adversely affect our business,
financial condition and operating results. Our future financial performance will
substantially depend on our ability to sell current versions, and our ability to
develop and sell enhanced versions, of our products.

      We rely on Microsoft products.

      We have developed all of our products to function in the Microsoft Windows
and/or Windows NT environments. We anticipate that our future products will also
be designed for use in connection with Microsoft software products. In light of
this product strategy, sales of our new products would be materially and
adversely affected by market developments adverse to Microsoft Windows, Windows
NT, Windows XP, Windows 2000, Windows ME or other future Microsoft software
products. Our success in developing products for use with Microsoft software
products depends on our ability to gain timely access to, and to develop
expertise in, current and future Microsoft software products. We cannot assure
you that we will be able to develop expertise in, and continue to develop
products for, Microsoft software products. Moreover, the abandonment by
Microsoft of, or any adverse change to, its current operating system product
line, strategy or business operations would materially and adversely affect our
business. We cannot predict the impact, if any, that the current anti-trust
lawsuit against Microsoft will have on our business or products.

      Our ability to manage successfully is uncertain.

      If planned revenue stability does not materialize, our business, financial
condition and results of operation will be materially harmed. To manage
operations effectively, we must continue to improve our operational, financial
and other management processes and systems. Our success also depends largely on
management's ability to maintain high levels of employee utilization, project
and instructional quality and


                                     Page 9
<PAGE>

competitive pricing for our services. We cannot assure you that we will be
successful in maintaining the required levels of revenue with the current number
of employees.

      If we do not keep pace with technological change our products may be
      rendered obsolete and our business may fail.

      Our industry is subject to rapid technological change. To remain
competitive, we must develop new software products while enhancing and improving
our existing software programs. The development of software products is
characterized by rapid technological change, changes in user and customer
requirements and preferences, frequent new product and service introductions
embodying new technologies and the emergence of new industry standards and
practices that could render our existing proprietary technology and systems
obsolete. Our success will depend on our ability to maintain compatibility with
existing and future Microsoft Windows, Windows NT, Windows 2000, Windows XP and
other operating environments, database systems and development tools. There will
be a material adverse effect on our results of operations if we fail to
anticipate or respond promptly and adequately to changes in technology and
customer preferences, or if there are any significant delays in our product
development or introductions. We cannot assure you that we will be successful in
developing new products or enhancing our existing products on a timely basis, or
that such new products or product enhancements will achieve market acceptance.

      We may be subject to liabilities associated with our software products.

      Software products frequently contain errors or defects, especially when
first introduced or when new versions or enhancements are released. Although we
intend to subject our existing and future software products and new versions and
enhancements to vigorous testing prior to their release, our products may
contain errors or defects. These errors or defects may result in unexpected
re-programming costs, shipping costs and other expenses. Although our license
agreements with our customers contain provisions designed to limit our exposure
to potential product liability claims, any errors or defects could also result
in liability claims against us by the consumers of our products. Also,
Microsoft, our competitors, or we may announce new products, capabilities or
technologies which have the potential to replace or shorten life cycles of our
existing products and which may cause customers to defer purchasing our existing
products. Delays or difficulties associated with new product introductions or
product enhancements could have a material adverse effect on our results of
operations. Any of the foregoing events could have a negative impact on our
business or financial condition.

      We face intense competition in our businesses.

      The business information software market is highly competitive. We believe
that our primary competition for our Timeline Analyst and Timeline Data Server
products is software vendors such as Hyperion Solutions, Inc., Comshare, Inc.,
FRx Software Corporation, Cognos Corporation, and various budgeting vendors such
as Adaytum, Inc., Microsoft, and Pillar by Hyperion. For our WorkWise Business
Alerts and Data Agent Server software, we compete with companies such as
Categoric Software Corporation, Intelliware Systems Ltd., and Metagon
Technologies. Many of our competitors in the consulting arena have substantially
greater financial, management, marketing and technical resources than we do.
Because there are minimal barriers to entry into the software market, we believe
that competition will continue to proliferate. The market for our products is
characterized by significant price competition, and we expect that our products
will face increasing pricing pressures.

      Many of our current and potential competitors have well-established
relationships with our potential customers, have extensive knowledge of the
markets serviced by our customers, and more extensive development, sales and
marketing resources. As a result, our competitors may be able to respond more
quickly to new or emerging technologies and changes in customer requirements, or
to devote greater resources to the development, promotion and sale of their
products than are we. Such competition could


                                    Page 10
<PAGE>

seriously harm our ability to sell products on favorable terms. We cannot assure
you that we will be able to compete successfully against current and future
competition, and the failure to do so would negatively impact our business and
financial condition.

      Our success depends on our ability to recruit and retain qualified
      information technology professionals and sales and marketing personnel.

      Our future success depends in large part on our ability to attract,
develop and retain highly skilled information technology professionals,
particularly project managers, consultants, software engineers and programmers.
If we are unable to keep our current technical employees, we may be unable to
adequately service current projects or bid for new projects. If we are unable to
recruit additional technical employees, we may not be able to expand or grow our
business. We compete for the services of information technology professionals
with other consulting firms, software vendors and consumers of information
technology services, many of which have greater financial resources than we
have. We may not be successful in hiring and retaining a sufficient number of
information technology professionals to staff our consulting projects. To
attract qualified technical employees, we may need to substantially increase the
compensation, bonuses, stock options or other benefits we offer to employees.
These additional costs may negatively affect our business and operating results.

      The future success of our business is heavily dependent on the continued
      services of certain key employees.

      Our future success depends to a significant extent on the skills,
experience and efforts of our senior management. In particular, we depend on
Charles Osenbaugh, our Chief Executive Officer and Chief Financial Officer,
Michael G. Evans, our Vice President of World-Wide Sales, and Craig R. Perkins,
our Vice President of Product and Technology. None of these executive officers
is subject to an employment agreement and we have not obtained key person life
insurance or disability insurance policies on any of them. If any of these
officers ends his employment with us, or becomes incapacitated and unable to
perform his duties, then our business and financial condition could be seriously
harmed.

      We also depend on the services of qualified and experienced information
technology professionals, creative personnel, and sales and marketing personnel.
We typically do not enter into employment agreements with these individuals,
however we do have proprietary technology agreements with them. Any of these
employees could leave their employment with us at any time. Our business and
financial condition could be negatively impacted if any of these events occur.

      The market and liquidity for our shares is limited.

      Our common stock is currently listed for trading on the OTC Bulletin
Board, and as a result, an investor may find it more difficult to dispose of, or
to obtain accurate quotations as to the price of, our securities than if the
securities were traded on the Nasdaq Stock Market or another national exchange.
In addition, our common stock is also listed for trading on the Boston Stock
Exchange. If we were to experience significant or prolonged losses or otherwise,
we may be unable to maintain the standards for continued listing on the Boston
Stock Exchange. As a result, an investor would find it more difficult to dispose
of, or to obtain accurate quotations for, our securities.

      Our common stock is subject to certain rules and regulations relating to
"penny stock" (generally defined as any equity security that is not quoted on
the Nasdaq Stock Market and that has a price less than $5.00 per share, subject
to certain exemptions). Broker-dealers who sell penny stocks are subject to
certain "sales practice requirements" for sales in certain nonexempt
transactions (i.e., sales to persons other than established customers and
institutional "accredited investors"), including requiring delivery of a risk
disclosure document relating to the penny stock market and monthly statements
disclosing recent price information for the penny stock held in the account, and
certain other restrictions. For as long as our


                                    Page 11
<PAGE>

securities are subject to the rules on penny stocks, the market liquidity for
such securities could be significantly limited. This lack of liquidity may also
make it more difficult for us to raise capital in the future.

      Our stock price is volatile.

      The trading price of our common stock has fluctuated significantly in the
past. The future trading price of our common stock may continue experiencing
wide price fluctuations in response to such factors as:

      o     actual or anticipated fluctuations in revenues or operating results;
      o     changing information technology spending habits of our clients and
            prospective clients;
      o     failure to meet expectations of performance;
      o     announcements of technological innovations or new products by our
            competitors;
      o     developments in or disputes regarding copyrights, trademarks,
            patents and other proprietary rights;
      o     product and services pricing, discounts and margins; and
      o     general economic conditions.

      We do not intend to pay dividends.

      We have not declared dividends on our common stock in the past, and do not
intend to declare dividends on our common stock in the foreseeable future.

      There are a number of state law provisions that could delay or prevent an
      acquisition of our company.

      We are subject to the provisions of Chapter 23B.19 of the Washington
Business Corporation Act, which prohibit a corporation registered under the
Securities Exchange Act of 1934, as amended, from engaging in certain
significant transactions with a 10% shareholder. Significant transactions
include, among others, a merger with or disposition of assets to the 10%
shareholder. These provisions have the effect of making it more difficult for a
third party to acquire a majority of our outstanding voting stock, or delaying
such an acquisition, even if the takeover by a third party would be beneficial.

      You may not be able to seek remedies against Arthur Andersen LLP, our
      former independent accountant.

      Arthur Andersen LLP has not consented to the use of its audit report on
our Fiscal year 2001 financial statements. Without this consent, it may become
more difficult for you to seek remedies against Arthur Andersen LLP.
Furthermore, relief in connection with claims which may be available to you
under the federal securities laws against auditing firms may not be available
against Arthur Andersen LLP should it cease to operate or be financially
impaired.

ITEM 2. DESCRIPTION OF PROPERTY

      We lease approximately 12,354 square feet of office space at 3055 112th
Ave. N.E., Bellevue, Washington, under a lease that expires April 30, 2004. In
addition, we lease 1,900 square feet of office space in London for our Analyst
Financials office under a lease that expires in March 2003. We do not own any
real estate.


                                    Page 12
<PAGE>

ITEM 3. LEGAL PROCEEDINGS

      In July 1999, we were served a complaint by Microsoft Corporation in the
Superior Court of Washington for King County alleging breach of contract
regarding a Patent License Agreement signed by both companies in June 1999. In
December 2000, the Court issued a Memorandum Decision and in January 2001 issued
a Final Judgment in the lawsuit holding the language of the agreement would
support Microsoft's right to sublicense to its customers the right to use
Microsoft's SQL Server by adding code or software products to it so long as the
added code or software does not itself independently infringe our patents. We
filed an appeal of the lower court's Final Judgment in the Washington State
Court of Appeals, and in March 2002 the Appellate Court remanded the case to the
Superior Court and ordered it to enter a judgment in our favor. Microsoft has
filed a motion for certiorari requesting the Washington Supreme Court to hear an
appeal of the case. A response is expected in November or December 2002.

      In June 2001, we filed and subsequently served a complaint against
Hyperion Solutions, Inc. in the Federal District Court for the Western District
of Washington, alleging infringement of certain of our patents. We intend to
seek monetary damages and an injunction against Hyperion licensing certain of
its products. The trial date is set for March 2003.

      From time to time, we may pursue litigation against other third parties to
enforce or protect our rights under these patents or our intellectual property
rights generally.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year.

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      Timeline's common stock is traded on the OTC Bulletin Board ("OTCBB") and
the Boston Stock Exchange ("BSE") under the symbol "TMLN". We initiated trading
of our common stock on January 18, 1995, the effective date of our initial
public offering of common stock, and our common stock traded on the Nasdaq
SmallCap Market (Nasdaq) from its effective date until November 1997, following
which time it is has been quoted on the OTCBB. The following table contains the
high and low bid information as reported by OTCBB, for each quarter of fiscal
2001 and 2002, and the first quarter of fiscal 2003. The quotations from the
OTCBB reflect inter-dealer prices without retail mark-up, mark-down, or
commissions and may not represent actual transactions.

<TABLE>
<CAPTION>
                              Fiscal 2001                         Fiscal 2002
                  ------------------------------------ -----------------------------------
                    1st       2nd     3rd      4th       1st      2nd     3rd       4th
                  Quarter   Quarter  Quarter  Quarter   Quarter  Quarter  Quarter  Quarter
                  -------   -------  -------  -------   -------  -------  -------  -------
<S>                <C>      <C>      <C>      <C>       <C>      <C>      <C>      <C>
Common Stock
    High           $4.000   $3.625   $3.000   $1.719    $0.906   $0.850   $0.250   $0.400
    Low            $2.063   $2.438   $1.063   $0.938    $0.550   $0.450   $0.160   $0.170
</TABLE>

                                       Fiscal 2003
                        ---------------------------------------
                        1st Quarter
                        (thru June     2nd      3rd     4th
                         11, 2002)   Quarter  Quarter  Quarter
                         ---------   -------  -------  -------
      Common Stock
          High             $0.37       N/A      N/A     N/A
          Low              $0.24       N/A      N/A     N/A


                                    Page 13
<PAGE>

      As of May 15, 2002, there were 4,165,998 shares of common stock
outstanding held by approximately 89 holders of record and 820 beneficial
holders.

      In December 2001, two of our officers, Fred Dean and Michael Evans each
received a performance-based award of 6,250 shares of Timeline common stock. Mr.
Dean and Mr. Evans each earned a second performance based award of 6,250 shares
of Timeline common stock in March 2002, which were issued in April 2002.

      In March 2002, we issued 100,000 shares of Timeline common stock as a
discretionary contribution to the Timeline, Inc. Employee Stock Ownership Plan.
These shares will be divided among all eligible employees on December 31, 2002,
according to the discretionary distribution terms of the Employee Stock
Ownership Plan.

      We have never declared or paid any cash dividends on our common stock. We
anticipate that we will retain future earnings for use in the operation and
expansion of our business and do not anticipate paying cash dividends on the
shares in the foreseeable future. Any future determination with regard to the
payment of dividends will be at the discretion of the Board of Directors and
will be dependent upon our future earnings, financial condition, applicable
dividend restrictions and capital requirements and other factors deemed relevant
by the Board of Directors.


                                    Page 14
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

      Our consolidated financial statements for the fiscal year ended March 31,
2002 have been prepared on a going concern basis, which contemplates the
realization of assets and the settlement of liabilities in the normal course of
business. We incurred a net loss of $2.3 million for the 2002 fiscal year and
have incurred recurring net losses from operations over the past several fiscal
years. As of March 31, 2002, we have negative working capital of approximately
$450,000. These factors raise substantial doubt about our ability to continue as
a going concern.

      We believe that our current cash, cash equivalents, marketable securities,
and any net cash provided by operations may be insufficient to meet anticipated
cash needs for working capital and capital expenditures through fiscal 2003. Our
revenue is unpredictable, and a revenue shortfall could deplete our limited
financial resources and require us to reduce operations substantially or to
raise additional funds through equity or debt financings. See "Liquidity and
Capital Resources" below.**

Critical Accounting Policies

      We have identified the policies below as critical to our business
operations and the understanding of our results of operations. The impact and
any associated risks related to these policies on our business operations is
discussed throughout Management's Discussion and Analysis or Plan of Operation
where such policies affect our reported and expected financial results. For a
detailed discussion on the application of these and other accounting policies,
see the Notes to Consolidated Financial Statements. Note that our preparation of
this Annual Report on Form 10-KSB requires us to make estimates and assumptions
that affect the reported amount of assets and liabilities, disclosure of
contingent assets and liabilities at the date of our financial statements and
the reported amounts of revenue and expenses during the reporting period. There
can be no assurance that actual results will not differ from those estimates.*

                               Revenue Recognition

      We recognize revenue pursuant to the requirements of Statement of Position
No. 97-2, "Software Revenue Recognition" (SOP 97-2), as amended by Statement of
Position No. 98-9, "Software Revenue Recognition with Respect to Certain
Arrangements." Under SOP 97-2, revenue attributable to an element in a customer
arrangement is recognized when persuasive evidence of an arrangement exists and
delivery has occurred, provided the fee is fixed or determinable, collectibility
is probable and the arrangement does not require significant customization of
the software.

      For all sales, we use either a binding purchase order or signed agreement,
depending on the nature of the transaction, as evidence of an arrangement. Sales
through our resellers are evidenced by a master agreement governing the
relationship.

      For software license fees in single element arrangements and multiple
element arrangements which do not include customization or consulting services,
delivery typically occurs when the product is shipped to customers.

      At the time of each transaction, we assess whether the fee associated with
our revenue transactions is fixed and determinable and whether or not collection
is reasonably assured. We assess whether the fee is fixed and determinable based
on the payment terms associated with the transaction. If a significant portion
of a fee is due after our normal payment terms, is based upon a variable matrix
such as a minimum level of distribution or is subject to refund, we account for
the fee as not being fixed and determinable. In these cases, we defer revenue
and recognize it when it becomes due and payable.

      We assess the probability of collection based on a number of factors,
including past transaction history with the customer and the current financial
condition of the customer. We do not request collateral


                                    Page 15
<PAGE>

from our customers. If we determine that collection of a fee is not reasonably
assured, we defer revenue until the time collection becomes reasonably assured.

      For multiple element arrangements, when Company-specific objective
evidence of fair value exists for all of the undelivered elements of the
arrangement, but does not exist for one or more of the delivered elements in the
arrangement, we recognize revenue under the residual method.

      Under the residual method, at the outset of the arrangement with a
customer, we defer revenue for the fair value of its undelivered elements such
as consulting services and product support and upgrades, and recognize the
revenue for the remainder of the arrangement fee attributable to the elements
initially delivered, such as software licenses, when the criteria in SOP 97-2
have been met. Company-specific objective evidence is established for support
and upgrades of standard products for which no installation or customization is
required based upon the amounts we charge when support and upgrades are sold
separately. Company-specific objective evidence is established for consulting
and installation services based on the hourly rates we charge for our employees
when they are performing these services provided we have the ability to
accurately estimate the hours required to complete a project based upon our
experience with similar projects. For multiple element arrangements involving
installation or customization, Company specific objective evidence is
established for support and maintenance arrangements if our customers have an
optional annual renewal rate specified in the arrangement and the rate is
substantive.

      We recognize revenue from nonrefundable minimum royalty agreements from
distributors or resellers upon delivery of product to the distributor or
reseller, provided no significant obligations remain outstanding and the
conditions of SOP 97-2 have been met. Additional royalties are recognized as
revenue to the extent the minimums are exceeded when earned, based on the
distributor's or reseller's contractual reporting obligations.

      Revenue from support agreements is recognized on a straight-line basis
over the life of the contract.

                         Allowance for Doubtful Accounts

      Our management must estimate the uncollectibility of our accounts
receivable. Management analyzes accounts receivable and analyzes historical bad
debts, customer concentrations, customer credit-worthiness, current economic
trends and changes in our customer payment terms when evaluating the adequacy of
the allowance for doubtful accounts. Material differences may result in the
amount and timing of our bad debt expenses for any period if management made
different judgments or utilized different estimates.*

                               Capitalized Patents

      We capitalize the costs to obtain patents on our technology. Such costs
are amortized over the life of the patent. Should we determine that we will not
be able to generate future revenues as a result of these patents, we would need
to write off the patent in the period we determine that the patent is impaired.*
Costs of defending our patents are expensed as incurred, which depending on the
nature and complexity of the legal defense strategy, could materially impact our
results of operations in any given period.*

                    Capitalized Internally Developed Software

      We capitalize internally developed software costs subsequent to
establishing technological feasibility of a project. Such costs are amortized
over the projects useful lives using the greater of the ratio of current gross
revenues to total current and projected future gross revenues for the product or
the straight line method. Useful lives are based on management's estimates of
the period that the assets will generate revenue. Material differences may
result in the amount and timing of our amortization expense for any period if
management made different judgments or utilized different estimates.*


                                    Page 16
<PAGE>

                   Valuation of Acquired Businesses and Assets

      Our business acquisitions typically result in goodwill and other
intangible assets, which affect the amount of future period amortization expense
and possible impairment expense that we will incur. The determination of the
value of such intangible assets requires management to make estimates and
assumptions that materially affect our financial condition and results of
operations.

         Impairment of Long-lived Assets, Goodwill and Other Intangibles

      Property and equipment, goodwill, identifiable intangibles and certain
other long-lived assets are amortized over their useful lives. Useful lives are
based on management's estimates of the period that the assets will generate
revenue. We assess the impairment of these assets whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. Our
judgments regarding the existence of impairment indicators are based on legal
factors, market conditions and operational performance of our acquired
businesses. Future events could cause us to conclude that impairment indicators
exist and that certain assets are impaired.* In fiscal 2003, we will assess the
impairment of goodwill in connection with the adoption of SFAS 142 and other
assets in connection with the adoption of SFAS 144.* At such time, the Company
may record an impairment charge upon completion of the initial impairment
review.* Any resulting impairment loss could have a material adverse impact on
our financial condition and results of operations.*

                            Impairment of Investments

      As part of the process of preparing our consolidated financial statements
we periodically evaluate whether any declines in the fair value of our
investments are other-than-temporary. Significant judgments and estimates must
be made to assess whether an other-than-temporary decline in fair value of
investments has occurred. The factors we considered in evaluating whether
declines in fair value of our investments were other-than-temporary include the
time period and extent for which the quoted market price is less than the
accounting basis, the investees' financial condition and overall industry
health.

Results of Operations

                                    Revenues

                                        Years Ended March 31,
                                         2002          2001          Change
--------------------------------------------------------------------------------
(Dollars in Thousands)

Software license                          1,605         1,466          10%
Other license                             1,550         2,025         (23%)
Maintenance                                 923           734          26%
Consulting and Other                        742           680           9%
Software development                          5            46         (89%)
                                        ---------------------
Total Revenues                            4,825         4,951          (3%)
--------------------------------------------------------------------------------

      Results of operations for fiscal 2002 and fiscal 2001 are not directly
comparable, because results for fiscal 2001 include nine months of operations of
Analyst Financials Limited (Analyst Financials), which we acquired as of June
30, 2000, as well as approximately four months of operations for WorkWise
Software, Inc. (WorkWise), acquired December 4, 2000. Both acquisitions were
accounted for under the purchase method of accounting. Results of operations for
fiscal year ended March 31, 2002, however, include the operations of both
Analyst Financials and WorkWise for the full fiscal year. For the quarter ended
June 30, 2000, prior to its acquisition, Analyst Financials paid royalties to
Timeline on license and maintenance revenue under its then distributor agreement
in the amount of $46,830. There was no financial relationship between WorkWise
and Timeline prior to its acquisition.


                                    Page 17
<PAGE>

      For the fiscal year ended March 31, 2002, our total operating revenues
were $4,825,000 compared to $4,951,000 for fiscal 2001, representing a decrease
of 3%. The decrease in total revenues in fiscal 2002 from fiscal 2001 is
primarily attributable to a decrease in patent license revenue more than
offsetting increased software license, maintenance, consulting and other
revenue. Software licensing revenues were slightly higher in fiscal 2002 over
fiscal 2001 (representing a 10% increase), while patent license revenue
decreased to $1,550,000 in fiscal 2002 from $2,025,000 in fiscal 2001 (a 23%
decrease). The patent license revenue in fiscal 2001 consisted of a one-time
$2,025,000 license fee from Sagent Technology, Inc., whereas the patent license
revenue in fiscal 2002 includes a one-time $450,000 license fee from Lawson
Software and a one-time license fee of $1,100,000 from Oracle Corporation. None
of these patent license fees provide for recurring license revenue. Without
consideration of the patent license revenues, total operating revenues for the
fiscal year ended March 31, 2002 increased by 12% from operating revenues for
the like period ended in 2001. We will continue to pursue additional patent
licenses when appropriate, and we believe that the settlements made to date
regarding our patents will have a positive impact on our ability to enter into
additional patent licenses.* However, we cannot predict the outcome of ongoing
and future negotiations and there are no assurances that we will be successful
in entering into additional patent licenses, or the timing of any such
licenses.*

      Software license revenue for the fiscal year ended March 31, 2002
increased by 10%, to $1,605,000 from $1,466,000 for fiscal 2001. The increase in
revenue from software licenses in fiscal 2002 over fiscal 2001 is primarily
attributable to the inclusion of Analyst Financials and WorkWise results for a
full year in fiscal 2002 and improved results from our third-party distribution
partners and additions of new partners. However, despite this increase in
license revenue, during fiscal 2002 we have witnessed significant diminution of
license revenue by several key distribution partners, presumably based upon the
general decline in economic conditions. Our sales tend to reflect the strength
and weakness of our distribution partners' new license activity as we are
generally licensed as part of their package of software. Additionally, our
marketing agreement with Infinium Software will terminate in July 2002, but we
expect that our license agreements with Infinium end users will continue to
generate consulting and maintenance revenue.* Currently, we have relationships
and strategic alliances with more than 30 national and international
distribution partners. We believe there is continued weakness in the enterprise
resource planning (ERP) and accounting software markets, which directly affects
the sale and distribution of our products as an additional module on their
products or as an "after-market" add-on. We have continued to release new
products in conjunction with national and international distribution partners.
In the current economic uncertainty, particularly in the United States, it is
impossible to predict if the channels will increase software licenses during
fiscal 2003 over fiscal 2002.*

      Maintenance revenue increased by 26%, to $923,000 from $734,000 for the
comparable fiscal years, a result of increased maintenance fees from new
customers who have installed and are using our software. Maintenance revenue
from our Microsoft-based product lines continues to increase as more sites are
installed and maintenance agreements commence.

      Consulting revenue increased 9%, to $742,000 from $680,000 for the fiscal
year ended March 31, 2002 from fiscal 2001. The increase in consulting revenue
resulted from an increase in the number of consulting staff generating revenue
due primarily to the acquisition of Analyst Financials in June 2000. The level
of consulting revenue varies according to the mix of systems directly licensed
by Timeline compared to software provided through OEMs, who market the products
at lower levels of functionality and use and provide direct installation
services to end-users, thereby requiring less consulting. Because our U.K.
office (Analyst Financials) employs a direct sales force and licenses software
directly to large organizations, this has resulted in an increased demand for
consulting. However, we believe that any fluctuations in consulting revenue
levels will become less material in the future as a larger percentage of new
product licensing is transacted through OEM channels.*


                                    Page 18
<PAGE>

      Software development fee revenue was $5,000 and $46,000 for the fiscal
years ended March 31, 2002 and 2001, respectively. Development revenues are not
material to overall revenue and we do not anticipate that development revenue
will contribute significantly to revenue in fiscal 2003 as there are no
substantial contracts currently in place or being pursued for development
efforts.* We do not consider software development for fees to be a line of
business that should be pursued except in exceptional situations.

                                  Gross Profit

                                        Years Ended March 31,
                                         2002          2001          Change
--------------------------------------------------------------------------------
(Dollars in Thousands)

Gross profit                              3,968         3,866           3%
Percentage of operating revenues            82%           78%

      Our gross profit for fiscal 2002 was $3,968,000, representing a 3%
increase from fiscal 2001. Gross profit for the two fiscal years is not directly
comparable due to the inclusion of WorkWise and Analyst Financials revenues in
all of fiscal 2002 and only part of fiscal 2001, and because of the relative mix
of high-margin patent license revenue in each period ($1,550,000 in fiscal 2002
compared to $2,025,000 in fiscal 2001). We expect to see continued variations in
gross profit dependant on the mix of high-margin software and patent licenses
and lower margin consulting and maintenance revenue which is labor intensive.*
Additionally, because patent licenses to date have tended to be driven by legal
actions and/or negotiated settlements of threatened legal actions, the costs of
securing patent licenses vary greatly from license to license. As patent
licensing is expected to continue to be both relevant and widely different
between reporting periods, substantial fluctuations in comparative margins may
continue to occur.*

                           Sales and Marketing Expense

                                        Years Ended March 31,
                                         2002          2001          Change
--------------------------------------------------------------------------------
(Dollars in Thousands)

Sales and marketing                       1,251         1,336          (6%)
Percentage of operating revenues            26%           27%

      Sales and marketing expenses in actual dollar amounts decreased by 6% and
also decreased as a percentage of operating revenue between the fiscal years
ended March 31, 2002 and 2001. The decrease in actual dollar amounts in fiscal
2002 was primarily due to a reduction of three in the number of sales and
marketing personnel. The slight decrease in sales and marketing expense as a
percentage of operating revenue also reflects not only the decreased costs of a
smaller sales and marketing staff, but also changes in the amounts and sources
of revenue between the comparable periods relating to large patent license fees
in both fiscal 2002 and 2001. Patent license-related expenses are typically not
included in sales and marketing expense, but in general and administrative
expenses, due to the nature of the licensing process.

                        Research and Development Expense

                                        Years Ended March 31,
                                         2002          2001          Change
--------------------------------------------------------------------------------
(Dollars in Thousands)

Research and development                  1,481         1,605          (8%)
Percentage of operating revenues            31%           32%


                                    Page 19
<PAGE>

      Research and development expenses decreased to $1,481,000 from $1,605,000
(an 8% decrease) for the fiscal years ended March 31, 2002 and 2001. This
decrease in research and development expenses was primarily attributable to a
decrease of 10 personnel employed in Development. We entered fiscal 2003 with
fewer personnel in Development than we did in fiscal 2002. Consequently, we
believe the actual dollar amount of research and development expenses in fiscal
2003 will be less than fiscal 2002 expenses, particularly in the first several
fiscal quarters.* It is more difficult to project the level of expense
throughout the upcoming year as changes in the economy or the signing of new
channel partners could lead to hiring additional Development resources.*

                  General and Administrative and Patent Expense

                                        Years Ended March 31,
                                         2002          2001          Change
--------------------------------------------------------------------------------
(Dollars in Thousands)

General and administrative                2,301         2,624         (12%)
Percentage of operating revenues            48%           53%

      General and administrative expenses, which include the costs of litigation
and negotiations with respect to patent licenses, decreased in actual dollar
amounts by 12% to $2,301,000 from $2,624,000 for the comparable fiscal years
ended March 31, 2002 and 2001. General and administrative expenses typically
fluctuate significantly from fiscal quarter to quarter largely due to variations
in expenses associated with our patent litigation. During fiscal 2001 and fiscal
2002, general and administrative costs were significantly impacted by attorneys
fees associated with our patent litigation and our contract litigation with
Microsoft, and, in fiscal 2001, employee bonuses relating to a favorable
settlement. We believe that general and administrative costs may vary greatly
from quarter to quarter in fiscal 2003.* In conjunction with counsel, we have
continued to monitor a number of other software products which we believe may,
subject to further due diligence, present embodiments of the Timeline patents,
and there is a significant possibility that we may decide to pursue additional
litigation to defend our property rights.* We cannot express an opinion on the
cost, timing or arrangement with counsel that may result from these additional
actions, if any.*

      Fluctuations of general and administrative expenses as a percentage of
revenues for comparative periods are also due to the significant changes in
revenue for each period, especially the amount of revenue generated through
patent licensing.

                                  Other Income

      Other income for fiscal 2002 generated a loss of $556,000, down from a
positive impact of $318,000 in fiscal 2001. The decrease is primarily the result
of a significant loss on sales of securities from a gain of $355,000 in fiscal
2001 to a loss of $298,000 in fiscal 2002 as well as a $279,000 write-down
reflecting the decrease in the value of shares we own of Sagent Technology, Inc.
We had previously carried the Sagent shares as an "available for sale" security
with cumulative losses carried in Other Comprehensive Income (Loss) in
Stockholders' Equity. During the fourth quarter, we determined that the market
value decline in these shares was "other than temporary" and took a
corresponding charge to earnings.

                                   Income Tax

      Income taxes are provided in the statement of operations in accordance
with the asset and liability method. We have determined that the tax assets
generated by the net operating losses and research and experimentation credits
do not satisfy the recognition criteria set forth under the liability method.
Accordingly, a valuation allowance is recorded against the applicable deferred
tax assets and therefore no tax benefit is recorded for fiscal 2002.


                                    Page 20
<PAGE>

      In connection with our initial public offering in January 1995, we
experienced a significant change in ownership, which limits the amount of net
operating loss carry forwards and credits that may be used in any given year.
However, we do not expect this to be a factor in fiscal 2003.*

                         Liquidity and Capital Resources

      Balances of our cash and cash equivalents and marketable securities
classified as trading at March 31, 2002 stood at approximately $83,000 compared
to approximately $29,000 at March 31, 2001. Additionally, available for sale
securities at March 31, 2002 stood at approximately $203,000 compared to
approximately $1,069,000 at March 31, 2001. At March 31, 2001, we also
maintained a balance of $26,000 of securities held for others, which were
subsequently transferred under securities sales agreements.

      The substantial decrease in the total amount of our cash and cash
equivalent and marketable securities balances, is attributable to the operating
losses during fiscal 2002 and losses in the value of security holdings of Sagent
stock. Of more significance was the dramatic decrease in the market value of
available-for-sale securities. Available for sale securities at March 31, 2002
includes 203,000 shares of Sagent Technology, Inc. common stock, valued at
approximately $203,000. At March 31, 2001 we held 600,000 shares of Sagent
common stock with a market value of $1,050,000. The shares of Sagent common
stock held by us are registered and we have no restrictions on the sale of this
common stock. However, we cannot predict the timing to sell these shares or the
then-market value of such shares. In the event that we are unable to sell any or
all of our marketable securities or the Sagent shares at the times or in the
amounts we desire, or in the event that the market prices for any of those
securities decreases, this will have a material adverse effect on our working
capital and our capital needs.* In such event we would need to achieve
substantially greater revenue from operations to meet our budget for fiscal
2003.*

      Total obligations, excluding deferred income items, were approximately
$944,000 at March 31, 2002 compared to approximately $962,000 at March 31, 2001.
This slight decrease is attributed to normal fluctuations in payables, accruals
and deferred maintenance balances.

      Net cash used in operating activities was approximately $623,000 in the
year ended March 31, 2002. This was primarily due to our generating net losses
for four quarters of fiscal 2002. We generated approximately $697,000 from
investing activities and used approximately $14,000 for financing activities.

      We licensed certain patented technology to Oracle in June 2001, and to
Lawson Software in December 2001, in settlement of our patent infringement
litigation with each company. We received cash and other consideration under the
terms of these patent technology licenses. The payments received from Lawson
were made over six months, from December 2001 through June 2002, and the license
is fully paid.

      We believe that our current cash, cash equivalents, marketable securities,
and any net cash provided by operations may be insufficient to meet anticipated
cash needs for working capital and capital expenditures through fiscal 2003. Our
revenue is unpredictable, and a revenue shortfall could deplete our limited
financial resources. Accordingly, if results of operations do not improve, we
may be required to reduce operations substantially or to raise additional funds
through equity or debt financings. There is substantial doubt about our ability
to continue as a going concern. We are at risk as to the market value of our
shares in Sagent currently held and we must achieve substantially greater
revenue from operations than we did in the last several quarters of fiscal 2002.
We have witnessed significant diminution of license revenue by several key
distribution partners, presumably based upon the general decline in economic
conditions. Our sales tend to reflect the strength and weakness of our
distribution partners' new license activity as we are generally licensed as part
of their package of software.**


                                    Page 21
<PAGE>

      Many companies in the software industry have experienced difficulty in
raising additional financing in the current economic climate. Our strategies for
financing may include, but are not limited to, any one or more of the following:

   o  engaging a financial advisor to explore strategic alternatives, which may
      include a merger, asset sales, the shut down of assets or divisions, joint
      ventures or another comparable transaction;
   o  raising additional capital to fund continuing operations by private
      placements of equity and/or debt securities or through the establishment
      of other funding facilities;
   o  forming a joint venture with a strategic partner or partners to provide
      additional capital resources to fund operations; and
   o  loans from management or employees, salary deferrals or other cost cutting
      measures.

Additional financing may not be available to us on favorable terms, or at all.
If additional financing is not available, we may need to change our business
plan, sell or merge our business, or file a petition in bankruptcy. In addition,
any issuance of additional equity or equity-related securities will dilute the
ownership interest of existing shareholders and our issuance of debt securities
could increase the risk or perceived risk of our company. The results of any of
these measures could materially affect our business, results of operations and
financial position. We are exploring strategies for financing, however,
currently we do not have any commitment for any of the foregoing.**

      During fiscal 2003, we anticipate generating cash from operations from
software license revenues as well as potential additional licenses of our
patented technology. We expect that our primary uses of cash will be salaries
and other controllable expenses associated with Research and Development, Sales
and Marketing, and General and Administrative activities. We intend to continue
to monitor new license activity closely and may have to reduce staff, and/or
seek outside financing or a sale or merger of the Company if patent and software
licenses do not substantially increase quarter-to-quarter during fiscal 2003.**

Quantitative and Qualitative Disclosures About Market Risk

                               Interest Rate Risk

      We do not hold derivative financial instruments in our short-term
investment portfolio. Our cash and cash equivalents consist of highly liquid
investments.

                       Foreign Currency Exchange Rate Risk

      Currently, the majority of our revenue and expenses is denominated in U.S.
dollars, and, as a result, we have not experienced significant foreign exchange
gains and losses to date. While we have conducted some transactions in foreign
currencies and expect to continue to do so, we do not anticipate that foreign
exchange gains or losses will be significant.*

      The international segment of our business, Analyst Financials Limited
based in the United Kingdom, is subject to risks typical of international
activity, including, but not limited to, differing economic conditions, changes
in political climate, differing tax structures, other regulations and
restrictions, and foreign exchange rate volatility. Accordingly, our future
results could be materially adversely impacted by changes in these or other
factors.*

      Our exposure to foreign exchange rate fluctuations can vary as the
financial results of our foreign subsidiary are translated into U.S. dollars in
consolidation. As exchange rates vary, these results, when translated, may vary
from expectations and adversely impact overall expected profitability.* The
effect of foreign exchange rate fluctuations for the year ended March 31, 2002
was not material.


                                    Page 22
<PAGE>

                                 Investment Risk

      We have investments in voting capital stock of Sagent Technology, Inc, a
publicly traded company. To the extent that the capital stock held is in a
public company and the securities have a quoted market price, then the
investment is marked to market. Our policy is to regularly review the operating
performance of the company in assessing the carrying value of the investment
(See Note 2 to the consolidated financial statements).

      We review our long-lived assets, including goodwill, for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable.

Impact of Recently Issued Accounting Standards

      In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 141, "Business Combinations"
(SFAS 141), and No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). SFAS
141 requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001 as well as all purchase method
business combinations completed after June 30, 2001. SFAS 141 also specifies
criteria intangible assets acquired in a purchase method business combination
must meet to be recognized and reported apart from goodwill. SFAS 142 requires
that goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead tested for impairment at least annually in accordance
with the provisions of SFAS 142. SFAS 142 also requires that intangible assets
with definite useful lives be amortized over their respective estimated useful
lives to their estimated residual values, and reviewed for impairment in
accordance with Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed
of" (SFAS 121).

      The provisions of SFAS 141 were adopted effective June 30, 2001. No
business combinations were completed during the period from July 1, 2001 to
March 31, 2002. Goodwill and intangible assets acquired in business combinations
completed before July 1, 2001 have been amortized through March 31, 2002.

      SFAS 141 requires, upon adoption of SFAS 142 on April 1, 2002, that we
evaluate our existing intangible assets and goodwill that were acquired in a
prior purchase business combination, and make any necessary reclassifications in
order to conform with the new criteria in SFAS 141 for recognition apart from
goodwill. Upon adoption of SFAS 142, we are required to reassess the useful
lives and residual values of all intangible assets acquired in purchase business
combinations, and make any necessary amortization period adjustments by the end
of the first interim period after adoption. In addition, to the extent an
intangible asset is identified as having an indefinite useful life, we are
required to test the intangible asset for impairment in accordance with the
provisions of SFAS 142 within the first quarter of Fiscal 2003. Any impairment
loss will be measured as of April 1, 2002 and recognized as the cumulative
effect of a change in accounting principle in the first quarter of 2002.

      In connection with the transitional goodwill impairment evaluation, SFAS
142 requires us to perform an assessment of whether there is an indication that
goodwill is impaired as of April 1, 2002. To accomplish this we must identify
our reporting units and determine the carrying value of each reporting unit by
assigning the assets and liabilities, including the existing goodwill and
intangible assets, to those reporting units as of the date of adoption. We will
then have until September 30, 2002 to determine the fair value of each reporting
unit and compare it to the reporting unit's carrying amount. To the extent a
reporting unit's carrying amount exceeds its fair value, an indication exists
that the reporting unit's goodwill may be impaired and we must perform the
second step of the transitional impairment test. In the second step, the we must
compare the implied fair value of the reporting unit's goodwill, determined by
allocating the reporting unit's fair value to all of its assets (recognized and
unrecognized) and liabilities in a manner similar to a purchase price allocation
in accordance with SFAS 141, to its carrying amount, both of which


                                    Page 23
<PAGE>

would be measured as of the date of adoption. This second step is required to be
completed as soon as possible, but no later than March 31, 2003.

      Upon adoption of SFAS 142, we will no longer amortize goodwill. Although
we do not presently anticipate an impairment charge upon adoption of SFAS 142,
we have not yet completed our analysis as of the date of this report. Goodwill
amortization was $27,546 and $20,559 in Fiscal 2002 and 2001, respectively.
Unamortized goodwill was $34,432 at March 31, 2002. Other intangible assets
totaling $54,167 at March 31, 2002 will be reclassified to goodwill under SFAS
142. Amortization of these intangible assets was $43,333 and $32,500 in Fiscal
2002 and 2001, respectively.

      In August 2001, the FASB issued Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment of Disposal of Long-Lived
Assets" (SFAS 144), which is effective for fiscal years beginning after December
15, 2001. SFAS 144 supersedes certain provisions of APB Opinion No. 30
"Reporting the Results of Operations-Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions" and supersedes SFAS 121. We do not expect the adoption
of SFAS 144 to have a material effect on our consolidated financial position or
results of operations.


                                    Page 24
<PAGE>

ITEM 7. FINANCIAL STATEMENTS

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors of
Timeline, Inc.:

We have audited the accompanying consolidated balance sheet of Timeline, Inc.
and subsidiaries (the Company) as of March 31, 2002, and the related
consolidated statements of operations, stockholders' equity and comprehensive
loss and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Timeline, Inc. and
subsidiaries as of March 31, 2002, and the results of their operations and their
cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has suffered recurring losses and
negative cash flows from operations and has a net working capital deficit of
$448,937 at March 31, 2002 that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

                                                     /s/ KPMG LLP

Seattle, Washington
June 21, 2002


                                    Page 25
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of
Timeline, Inc.:

We have audited the accompanying consolidated balance sheets of Timeline, Inc.
(a Washington corporation) and subsidiaries as of March 31, 2001 and 2000, and
the related consolidated statements of operations, stockholders' equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Timeline, Inc. and subsidiaries
as of March 31, 2001 and 2000, and the results of their operations and their
cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States.

                                           /s/ ARTHUR ANDERSEN LLP

Seattle, Washington,
June 12, 2001

      The report of Arthur Andersen LLP (Andersen) is a copy of a report
previously issued by Andersen on June 12, 2001. We have not been able to obtain
a re-issued report from Andersen. Andersen has not consented to the inclusion of
its report in this Annual Report on Form 10-KSB. The report of Andersen refers
to financial statments for the year ended March 31, 2000 not included herein.
Because Andersen has not consented to the inclusion of its report in this Annual
Report, it may be more difficult for you to seek remedies against Andersen and
your ability to seek relief against Andersen may be impaired.


                                    Page 26
<PAGE>

                                 TIMELINE, INC.
              CONSOLIDATED BALANCE SHEETS - MARCH 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                     ASSETS

                                                                    2002            2001
                                                                ------------    ------------
<S>                                                             <C>             <C>
CURRENT ASSETS:
  Cash and cash equivalents                                     $     82,956    $         --
  Marketable securities - trading                                         --          28,802
  Marketable securities - available for sale                         203,130       1,068,981
  Securities held for others                                              --          26,000
  Accounts receivable
    net of allowance of $61,827 and $4,902                           636,201         773,287
  Prepaid expenses and other                                         142,492         166,687
                                                                ------------    ------------
               Total current assets                                1,064,779       2,063,757

PROPERTY AND EQUIPMENT, net of accumulated
  depreciation of $772,873 and $871,576                              120,464         167,841

CAPITALIZED SOFTWARE, net of accumulated
  amortization of $435,755 and $256,789                              208,037         429,761

CAPITALIZED PATENTS, net of accumulated
  amortization of $26,056 and $15,069                                187,375         157,015

GOODWILL AND INTANGIBLE ASSETS, net of accumulated
  amortization of $920,783 and $380,983                              816,192       1,393,638

OTHER ASSETS                                                              --             328
                                                                ------------    ------------

               Total assets                                     $  2,396,847    $  4,212,340
                                                                ============    ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                              $    474,133    $    441,377
  Accrued expenses                                                   469,758         520,248
  Deferred revenues                                                  569,825         533,145
                                                                ------------    ------------
               Total current liabilities                           1,513,716       1,494,770
                                                                ------------    ------------

STOCKHOLDERS' EQUITY:
  Common stock, $.01 par value, 20,000,000 shares authorized,
    4,153,498 and 4,038,498 issued and outstanding                    41,535          40,385
  Additional paid-in capital                                      10,448,488      10,424,703
  Accumulated other comprehensive income (loss)                       17,107        (410,451)
  Accumulated deficit                                             (9,623,999)     (7,337,067)
                                                                ------------    ------------
               Total stockholders' equity                            883,131       2,717,570
                                                                ------------    ------------

               Total liabilities and stockholders' equity       $  2,396,847    $  4,212,340
                                                                ============    ============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.


                                    Page 27
<PAGE>

                                 TIMELINE, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                   FOR THE YEARS ENDED MARCH 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                    2002            2001
                                                                ------------    ------------
<S>                                                             <C>             <C>
REVENUE
  Software license                                              $  1,605,238    $  1,466,148
  Other license                                                    1,550,000       2,025,000
  Software development                                                 4,740          45,432
  Maintenance                                                        922,488         733,983
  Consulting and other                                               742,077         680,178
                                                                ------------    ------------

        Total revenues                                             4,824,543       4,950,741

COST OF REVENUES                                                     857,005       1,084,730
                                                                ------------    ------------

        Gross profit                                               3,967,538       3,866,011
                                                                ------------    ------------

OPERATING EXPENSES:
  Sales and marketing                                              1,251,297       1,336,373
  General and administrative                                       2,300,587       2,624,279
  Research and development                                         1,480,768       1,605,398
  Depreciation                                                        52,544         161,251
  Amortization of intangibles and goodwill                           613,134         342,765
                                                                ------------    ------------

        Total operating expenses                                   5,698,330       6,070,066
                                                                ------------    ------------

        Loss from operations                                      (1,730,792)     (2,204,055)
                                                                ------------    ------------

OTHER INCOME (EXPENSE):
  Realized (loss) gain on marketable equity securities              (298,377)        355,498
  Impairment of available for sale securities                       (279,263)             --
  Interest expense                                                   (39,694)        (46,310)
  Interest income                                                     61,194           9,235
                                                                ------------    ------------

        Total other (expense) income                                (556,140)        318,423
                                                                ------------    ------------

        Net loss                                                $ (2,286,932)   $ (1,885,632)
                                                                ============    ============

Basic and diluted net loss per share                            $      (0.57)   $      (0.48)
                                                                ============    ============

Shares used in calculation of net loss
  per share                                                        4,044,080       3,900,400
                                                                ============    ============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.


                                    Page 28
<PAGE>

                                 TIMELINE, INC.

     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE LOSS
                   FOR THE YEARS ENDED MARCH 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                          Accumulated
                                     Common Stock           Additional       Other                        Total
                               -------------------------     Paid-in     Comprehensive  Accumulated    Stockholders'
                                  Shares        Amount       Capital     Income (Loss)    Deficit        Equity
                               -----------   -----------   -----------   -------------  -----------    ------------
<S>                              <C>         <C>           <C>           <C>            <C>            <C>
BALANCE, March 31, 2000          3,449,112   $    34,492   $ 9,124,178   $ 2,658,825    $(5,451,435)   $ 6,366,060

  Equity consideration
    issued for acquisitions        548,814         5,488     1,289,681            --             --      1,295,169
  Exercise of common stock
    options                         40,572           405        10,844            --             --         11,249
  Net loss                              --            --            --            --     (1,885,632)    (1,885,632)
  Unrealized loss on
    available for sale
    securities                          --            --            --    (3,060,660)            --     (3,060,660)
  Foreign currency
    translation adjustment              --            --            --        (8,616)            --         (8,616)
                               -----------   -----------   -----------   -----------    -----------    -----------

BALANCE, March 31, 2001          4,038,498   $    40,385   $10,424,703   $  (410,451)   $(7,337,067)   $ 2,717,570

  Stock-based compensation         115,000         1,150        23,785            --             --         24,935
  Comprehensive income
    (loss):                             --            --            --            --             --             --
  Net loss                              --            --            --            --     (2,286,932)    (2,286,932)
  Change in unrealized gain
    (loss) on available for
    sales securities, net               --            --            --       401,835             --        401,835
  Foreign currency
    translation adjustment              --            --            --        25,723             --         25,723
                                                                                                       -----------
    Total comprehensive loss            --            --            --            --             --     (1,859,374)
                               -----------   -----------   -----------   -----------    -----------    -----------

BALANCE, March 31, 2002          4,153,498   $    41,535   $10,448,488   $    17,107    $(9,623,999)   $   883,131
                               ===========   ===========   ===========   ===========    ===========    ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements


                                    Page 29
<PAGE>

                                 TIMELINE, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   FOR THE YEARS ENDED MARCH 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                    2002            2001
                                                                ------------    ------------
<S>                                                             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                      $ (2,286,932)   $ (1,885,632)
  Adjustments to reconcile net loss to net cash used in
  operating activities:
    Depreciation and amortization                                    862,642         701,392
    Loss (gain) on disposal of property and equipment                  1,536         (18,905)
    Stock-based compensation                                          38,697              --
    Realized loss (gain) on sale of marketable equity
      securities                                                     298,377        (355,498)
    Impairment of available for sale securities                      279,263              --
    Marketable equity securities received as consideration                --      (1,425,000)
    Changes in operating assets and liabilities, net of
      businesses acquired:
      Accounts receivable                                            140,719          56,453
      Prepaid expenses and other                                      24,774         (95,363)
      Accounts payable                                                28,921        (669,062)
      Accrued expenses and other                                     (49,706)        (82,225)
      Deferred revenues                                               38,324         155,645
      Other noncurrent assets                                             --          25,561
                                                                ------------    ------------
         Net cash used in operating activities                      (623,385)     (3,592,634)
                                                                ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Cash acquired in acquisitions                                           --          29,056
  Purchase of property and equipment                                  (7,738)        (28,640)
  Proceeds from sale of property and equipment                         1,035          22,075
  Investment in capitalized software and patents                     (41,288)       (240,246)
  Purchase of short-term investments                                      --      (1,017,325)
  Proceeds from sale of short-term investments                       744,848       3,359,637
  Issuance of note receivable                                             --            (952)
                                                                ------------    ------------
      Net cash provided by investing activities                      696,857       2,123,605
                                                                ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of notes payable to related parties         172,580              --
  Repayment of notes payable to related parties                     (172,580)             --
  Payments on capital lease obligations                                   --          (4,309)
  Sales of common stock and exercise of stock options                     --          11,251
  Other                                                              (13,762)             --
                                                                ------------    ------------
      Net cash (used in) provided by financing activities            (13,762)          6,942
                                                                ------------    ------------

EFFECT OF FOREIGN EXCHANGE RATE FLUCTUATIONS                          23,246          (8,616)

NET CHANGE IN CASH AND CASH EQUIVALENTS                               82,956      (1,470,703)

CASH AND CASH EQUIVALENTS, beginning of period                            --       1,470,703
                                                                ------------    ------------

CASH AND CASH EQUIVALENTS, end of period                        $     82,956    $         --
                                                                ============    ============

SUPPLEMENTAL CASH AND NONCASH DISCLOSURES:
  Cash paid for interest                                        $     32,932    $     16,340
Non-cash transactions:
  Equity consideration issued for acquisitions                            --       1,295,169
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements


                                    Page 30
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                 MARCH 31, 2001

1. THE COMPANY:

Organization

The accompanying consolidated financial statements are for Timeline, Inc. and
subsidiaries (the Company). The Company, which is headquartered in Bellevue,
Washington and has operations in the United Kingdom, develops, markets and
supports enterprise-wide financial management, budgeting and reporting software
and event-based notification, application integration and process automation
systems. Timeline's software products are designed to automatically access and
distribute business information with full accounting control.

Operations

The Company has historically suffered recurring operating losses and negative
cash flows from operations. As of March 31, 2002, the Company had a net working
capital deficit of $448,937 and had an accumulated deficit of $9,623,999, with
total stockholders' equity of $883,131. These consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States, assuming that the Company will continue as a going
concern. Management believes that current cash and cash equivalent balances,
along with the ability to sell marketable securities, and any net cash provided
by operations, may not provide adequate resources to fund operations at least
until March 31, 2003. Management is contemplating a number of alternatives to
enable the Company to continue operating including, but not limited to:

      o     engaging a financial advisor to explore strategic alternatives,
            which may include a merger, asset sale, joint ventures or another
            comparable transaction;
      o     raising additional capital to fund continuing operations by private
            placements of equity or debt securities or through the establishment
            of other funding facilities, which may be on terms unfavorable to
            the Company;
      o     forming a joint venture with a strategic partner or partners to
            provide additional capital resources to fund operations; and
      o     loans from management or employees, salary deferrals or other cost
            cutting mechanisms.

There can be no assurance that any of these alternatives will be successful. If
the Company is unable to obtain sufficient cash when needed to fund its
operations, it may be forced to seek protection from creditors under the
bankruptcy laws.

The Company's inability to obtain additional cash as needed could have a
material adverse effect on its financial position, results of operations and its
ability to continue in existence. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of Presentation

All subsidiaries of the Company are wholly-owned. The accompanying consolidated
financial statements include the accounts and operations of these subsidiaries.
All intercompany balances and transactions have been eliminated in
consolidation.


                                    Page 31
<PAGE>

Foreign Currency Translation

The functional currency of the Company's foreign subsidiary is the local
currency of the country in which the subsidiary is located. Assets and
liabilities in foreign operations are translated in U.S. dollars using rates of
exchange in effect at the end of the reporting period. Income and expense
accounts are translated into U.S. dollars using average rates of exchange for
the period. The net gain or loss resulting from translation is shown as a
translation adjustment and included in other comprehensive income (loss) in
stockholders' equity. Gains and losses from foreign currency transactions are
included in the consolidated statements of operations and were not significant
in any of the periods presented.

Significant Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities. Actual results could differ from these estimates. Changes in these
estimates and assumptions may have a material impact on the financial
statements. Critical estimates include valuation and useful lives of intangible
assets, the nature of declines in the value of marketable equity securities, and
the collectibility of accounts receivable.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a purchased maturity of
three months or less to be cash equivalents. Cash equivalents are valued at
cost, which approximates fair value, due to the short-term nature of these
investments.

Marketable Securities - Trading

Marketable securities consist of both equities and debt instruments, which are
under the management of investment brokers. The Company actively buys and sells
individual securities in this account and has classified these securities as
Trading under the provisions of Statement of Financial Accounting Standards 115.
Consistent with the provisions of that statement, the Company has recorded these
investments at their fair market value in the accompanying balance sheet.
Realized and unrealized gains and losses on these securities are included in the
accompanying statements of operations. The Company does not have any derivative
financial instruments in this account.

Marketable Securities - Available for Sale

In December 2000, the Company settled a patent infringement lawsuit filed
against Sagent Technology, Inc. (Sagent). As part of the settlement, the Company
licensed certain patented technology to Sagent in exchange for $600,000 and
600,000 shares of Sagent common stock with a fair market value of $1,425,000 at
the date of the settlement. There are no restrictions on the sale of these
securities.

The total value of the remaining 203,000 shares of Sagent common stock was
$203,000 at March 31, 2002. During 2002, the Company sold 397,000 of the Sagent
shares resulting in realized losses of $275,051. Subsequent to year-end,
Timeline has sold an additional 50,000 shares. The Company has accounted for
these shares as available for sale securities as required under SFAS 115.
Accordingly, these securities are stated at fair market value, based on quoted
market prices, with unrealized gains and losses excluded from results of
operations and reported as a component of total comprehensive loss. Realized
gains and losses on sales of these securities are determined on the specific
identification method and included in results of operations.

During the fourth quarter, the Company determined, after considering a number of
factors, that the decline in the fair value of these securities was other than
temporary. These factors include the time period and


                                    Page 32
<PAGE>

extent for which the quoted market price was less than the accounting basis, the
investees' financial condition and overall industry health. As a result, the
Company recognized a loss on the impairment of available for sale securities of
$279,262. There is no amount related to the securities included in the
accompanying balance sheet as a component of accumulated other comprehensive
loss at March 31, 2002. The net change in unrealized gain (loss) on available
for sale securities of $401,835 is composed of the following:

      Unrealized holding losses during the period                    $(172,142)
      Reclassification adjustment for losses included in net loss      298,715
      Impairment of marketable equity securities                       279,262
                                                                     ---------
                                                                     $ 401,835
                                                                     =========

Property and Equipment

Property and equipment are stated at historical cost. Improvements and
replacements are capitalized. Maintenance and repairs are expensed when
incurred. The provision for depreciation is determined by the straight-line
method, which allocates the cost of property and equipment additions, including
capital leases, over the shorter of the lease period or their estimated useful
lives of three to seven years.

Capitalized Software Costs and Research and Development Costs

The Company capitalizes certain internally generated software development costs,
which consist primarily of salaries, in accordance with Statement of Financial
Accounting Standards No. 86. Amounts capitalized relate to software development
costs incurred after the technological feasibility of a product has been
established. Amortization is recognized using the greater of the ratio of
current gross revenues to total current and projected future gross revenues for
the product or the straight-line method over the product's estimated economic
life of three years. Amortization starts when the product is available for
general release to customers. During fiscal 2002 and 2001, the Company
capitalized $-0- and $136,595, respectively, of software development costs.
Amortization expense for fiscal 2002 and 2001 was $221,725 and $205,026,
respectively. This amortization is included in cost of revenues in the
accompanying statements of operations.

All research and development costs are expensed as incurred.

Patents

The Company capitalizes the costs to obtain patents on its technology. Such
costs are amortized over the life of the patent. Costs to defend patents are
expensed as incurred.

Intangible Assets

Intangible assets consist primarily of acquired technology, customer lists,
skilled workforce and goodwill related to acquisitions accounted for under the
purchase method of accounting. Amortization of these purchased intangibles is
provided on the straight-line basis over the respective useful lives of the
assets, primarily three years. The Company identifies and records impairment
losses on intangible and other assets when events and circumstances indicate
that such assets might be impaired. The Company considers factors such as
significant changes in the regulatory or business climate and projected future
cash flows from the respective asset. Impairment losses are measured as the
amount by which the carrying amount of the asset exceeds the fair value of the
asset.

The Company will continue to analyze long-lived and identifiable intangible
assets in the future to determine possible impairment charges. Future
evaluations could result in impairment charges and those charges could be
material.


                                    Page 33
<PAGE>

Fair Value of Financial Instruments

The Company's financial instruments include cash and cash equivalents,
receivables, accounts payable and accrued liabilities. The fair value of these
financial instruments approximates their carrying amounts based on current
market indicators or their short-term nature.

Revenue Recognition

The Company recognizes revenue pursuant to the requirements of Statement of
Position No. 97-2, "Software Revenue Recognition" (SOP 97-2), as amended by
Statement of Position No. 98-9, "Software Revenue Recognition with Respect to
Certain Arrangements." Under SOP 97-2, revenue attributable to an element in a
customer arrangement is recognized when persuasive evidence of an arrangement
exists and delivery has occurred, provided the fee is fixed or determinable,
collectibility is probable and the arrangement does not require significant
customization of the software.

For all sales, the Company uses either a binding purchase order or signed
agreement, depending on the nature of the transaction, as evidence of an
arrangement. Sales through its resellers are evidenced by a master agreement
governing the relationship.

For software license fees in single element arrangements and multiple element
arrangements which do not include customization or consulting services, delivery
typically occurs when the product is shipped to customers.

At the time of each transaction, the Company assesses whether the fee associated
with its revenue transactions is fixed and determinable and whether or not
collection is reasonably assured. The Company assesses whether the fee is fixed
and determinable based on the payment terms associated with the transaction. If
a significant portion of a fee is due after the Company's normal payment terms,
is based upon a variable matrix such as a minimum level of distribution or is
subject to refund, the Company accounts for the fee as not being fixed and
determinable. In these cases, it defers revenue and recognizes it when it
becomes due and payable.

The Company assesses the probability of collection based on a number of factors,
including past transaction history with the customer and the current financial
condition of the customer. It does not request collateral from its customers. If
the Company determines that collection of a fee is not reasonably assured, it
defers revenue until the time collection becomes reasonably assured.

For multiple element arrangements, when Company-specific objective evidence of
fair value exists for all of the undelivered elements of the arrangement, but
does not exist for one or more of the delivered elements in the arrangement, the
Company recognizes revenue under the residual method.

Under the residual method, at the outset of the arrangement with a customer, the
Company defers revenue for the fair value of its undelivered elements such as
consulting services and product support and upgrades, and recognizes the revenue
for the remainder of the arrangement fee attributable to the elements initially
delivered, such as software licenses, when the criteria in SOP 97-2 have been
met. Company-specific objective evidence is established for support and upgrades
of standard products for which no installation or customization is required
based upon the amounts charged when support and upgrades are sold separately.
Company-specific objective evidence is established for consulting and
installation services based on the hourly rates charged for its employees when
they are performing these services provided the Company has the ability to
accurately estimate the hours required to complete a project based upon its
experience with similar projects. For multiple element arrangements involving
installation or customization, Company-specific objective evidence is
established for support and maintenance arrangements if its customers have an
optional annual renewal rate specified in the arrangement and the rate is
substantive.


                                    Page 34
<PAGE>

The Company recognizes revenue from nonrefundable minimum royalty agreements
from distributors or resellers upon delivery of product to the distributor or
reseller, provided no significant obligations remain outstanding and the
conditions of SOP 97-2 have been met. Additional royalties are recognized as
revenue to the extent the minimums are exceeded when earned, based on the
distributor's or reseller's contractual reporting obligations.

Revenue from support agreements is recognized on a straight-line basis over the
life of the contract.

The Company also enters into separately priced consulting agreements with its
customers to provide installation, training and other consulting services. These
agreements are generally priced on a time and materials basis and revenues are
recognized as the services are performed. The nature of the services does not
significantly alter the licensed software.

Stock-Based Compensation

The Company accounts for stock option plans for employees in accordance with the
provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations. As such, compensation
expense related to employee stock options is recorded if, on the date of grant,
the fair value of the underlying stock exceeds the exercise price. The Company
applies the disclosure-only requirements of SFAS No. 123, Accounting for
Stock-Based Compensation, which allows entities to continue to apply the
provisions of APB Opinion No. 25 for transactions with employees, and to provide
pro forma results of operations disclosures for employee stock option grants as
if the fair-value-based method of accounting in SFAS No. 123 had been applied to
those transactions. Compensation costs for fixed awards with pro rata vesting
are recognized using the straight-line method.

Net Loss per Common Share

Basic net loss per share is the net loss divided by the average number of shares
outstanding during the year. Diluted net loss per share is calculated as the net
loss divided by the sum of the average number of shares outstanding during the
year plus the net additional shares that would have been issued had all dilutive
options been exercised, less shares that would be repurchased with the proceeds
from such exercise. During fiscal year 2002 and 2001, the effect of including
outstanding options is antidilutive, therefore, options have been excluded from
the calculation of diluted net loss per share.

The computation of diluted net loss per common and common equivalent share is as
follows at March 31:

                                                       2002            2001
                                                   ------------    ------------

Net loss                                           $ (2,286,932)   $ (1,885,632)
                                                   ------------    ------------
Weighted average common shares outstanding            4,044,080       3,900,400
                                                   ------------    ------------
Diluted net loss per common share                  $      (0.57)   $      (0.48)
                                                   ============    ============

The calculation of diluted net loss per common and common equivalent share does
not include 642,129 and 701,842 options and warrants in 2002 and 2001,
respectively, as they are antidilutive.

New Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 141, "Business Combinations" (SFAS 141),
and No. 142, "Goodwill and Other Intangible Assets" (SFAS 142), SFAS 141
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001 as well as all purchase method
business combinations completed


                                    Page 35
<PAGE>

after June 30, 2001. SFAS 141 also specifies criteria intangible assets acquired
in a purchase method business combination must meet to be recognized and
reported apart from goodwill. SFAS 142 requires that goodwill and intangible
assets with indefinite useful lives no longer be amortized, but instead tested
for impairment at least annually in accordance with the provisions of SFAS 142.
SFAS 142 also requires that intangible assets with definite useful lives be
amortized over their respective estimated useful lives to their estimated
residual values, and reviewed for impairment in accordance with Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to be Disposed of" (SFAS 121).

The provisions of SFAS 141 were adopted effective June 30, 2001. No business
combinations were completed during the period from July 1, 2001 to March 31,
2002. Goodwill and intangible assets acquired in business combinations completed
before July 1, 2001 have been amortized through March 31, 2002.

SFAS 141 requires, upon adoption of SFAS 142 on April 1, 2002, that the Company
evaluate its existing intangible assets and goodwill that were acquired in a
prior purchase business combination, and make any necessary reclassifications in
order to conform with the new criteria in SFAS 141 for recognition apart from
goodwill. Upon adoption of SFAS 142, the Company is required to reassess the
useful lives and residual values of all intangible assets acquired in purchase
business combinations, and make any necessary amortization period adjustments by
the end of the first interim period after adoption. In addition, to the extent
an intangible asset is identified as having an indefinite useful life, the
Company is required to test the intangible asset for impairment in accordance
with the provisions of SFAS 142 within the first quarter of Fiscal 2003. Any
impairment loss will be measured as of April 1, 2002 and recognized as the
cumulative effect of a change in accounting principle in the first quarter of
2002.

In connection with the transitional goodwill impairment evaluation, SFAS 142
requires the Company to perform an assessment of whether there is an indication
that goodwill is impaired as of April 1, 2002. To accomplish this the Company
must identify its reporting units and determine the carrying value of each
reporting unit by assigning the assets and liabilities, including the existing
goodwill and intangible assets, to those reporting units as of the date of
adoption. The Company will then have until September 30, 2002 to determine the
fair value of each reporting unit and compare it to the reporting unit's
carrying amount. To the extent a reporting unit's carrying amount exceeds its
fair value, an indication exists that the reporting unit's goodwill may be
impaired and the Company must perform the second step of the transitional
impairment test. In the second step, the Company must compare the implied fair
value of the reporting unit's goodwill, determined by allocating the reporting
unit's fair value to all of its assets (recognized and unrecognized) and
liabilities in a manner similar to a purchase price allocation in accordance
with SFAS 141, to its carrying amount, both of which would be measured as of the
date of adoption. This second step is required to be completed as soon as
possible, but no later than March 31, 2003.

Upon adoption of SFAS 142, the Company will no longer amortize goodwill.
Although it does not presently anticipate an impairment charge upon adoption of
SFAS 142, the Company has not yet completed its analysis as of the date of this
report. Goodwill amortization was $27,546 and $20,559 in Fiscal 2002 and 2001,
respectively. Unamortized goodwill was $34,432 at March 31, 2002. Other
intangible assets totaling $54,167 at March 31, 2002 will be reclassified to
goodwill under SFAS 142. Amortization of these intangible assets was $43,333 and
$32,500 for fiscal 2002 and 2001, respectively.

In August 2001, the FASB issued Statement of Financial Accounting Standards No.
144, "Accounting for the Impairment of Disposal of Long-Lived Assets" (SFAS
144), which is effective for fiscal years beginning after December 15, 2001.
SFAS 144 supersedes certain provisions of APB Opinion No. 30 "Reporting the
Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions" and supersedes SFAS 121. The Company does not expect the adoption
of SFAS 144 to have a material effect on its consolidated financial position or
results of operations.


                                    Page 36
<PAGE>

3. MAJOR CUSTOMERS:

During fiscal 2002, one customer comprised approximately 25% of the Company's
total revenue and another customer comprised 23% of the Company's total revenue.
During 2001, a different customer comprised approximately 41% of the Company's
total revenue. At March 31, 2002, approximately 24% of the accounts receivable
balance was due from the Company's largest customer. At March 31, 2001,
approximately 25% of the accounts receivable balance was due from the Company's
two largest customers.

4.  VALUATION AND QUALIFYING ACCOUNTS:

<TABLE>
<CAPTION>
                               Balance at       Charged to                       Balance at
                               Beginning        Costs and                           End
                               of Period         Expenses        Writeoffs       of Period
                               ----------       ----------       ---------       ----------
<S>                              <C>             <C>             <C>               <C>
Year Ended March 31, 2002        $4,902          $94,805         $(37,880)         $61,827
</TABLE>

5. PROPERTY AND EQUIPMENT:

Property and equipment consists of the following at March 31:

<TABLE>
<CAPTION>
                                                                    2002            2001
                                                                ------------    ------------
<S>                                                             <C>             <C>
Computer equipment                                              $    716,474    $    832,440
Office equipment                                                     176,863         206,977
                                                                ------------    ------------

                                                                     893,337       1,039,417
Less - accumulated depreciation                                     (772,873)       (871,576)
                                                                ------------    ------------

Total property and equipment, net of accumulated depreciation   $    120,464    $    167,841
                                                                ============    ============
</TABLE>

6. ACCRUED EXPENSES:

Accrued expenses consists of the following:

<TABLE>
<CAPTION>
                                                                    2002            2001
                                                                ------------    ------------
<S>                                                             <C>             <C>
Compensation and benefits                                       $    249,579    $    366,321
Securities held for others                                               -0-          26,000
Other                                                                220,179         127,927
                                                                ------------    ------------
Total accrued expenses                                          $    469,758    $    520,248
                                                                ============    ============
</TABLE>

7. ACQUISITIONS:

Effective June 30, 2000, the Company acquired Analyst Financials Limited
(Analyst Financials). The total purchase consideration for this acquisition was
$1,862,419 and consisted of 303,814 shares of Timeline common stock with a total
fair market value of $797,525, cash of $20,000 and the assumption of certain
liabilities.


                                    Page 37
<PAGE>

In connection with the Analyst Financials acquisition, assets acquired and
liabilities assumed were allocated based on estimated fair values of assets and
settlement amounts of liabilities as follows:

Cash                                                                $    29,056
Accounts receivable                                                     496,603
Property and equipment                                                   23,570
Intangible assets                                                     1,032,993
Accounts payable                                                       (700,708)
Accrued expenses                                                        (63,989)
                                                                    -----------

Net assets acquired                                                 $   817,525
                                                                    ===========

On December 4, 2000, the Company acquired WorkWise Software Inc. (WorkWise). The
total purchase consideration for this acquisition was $587,144 and consisted of
245,000 shares of Timeline common stock (225,000 shares issued to Oralis.com and
20,000 shares issued to certain WorkWise employees who joined the Company) with
a total fair market value of $497,644, cash paid for transaction costs of
approximately $80,000 and the assumption of certain liabilities.

In connection with the WorkWise acquisition, assets acquired and liabilities
assumed were allocated based on estimated fair values of assets and settlement
amounts of liabilities as follows:

Accounts receivable                                                   $   9,750
Property and equipment                                                    7,000
Intangible assets                                                       570,394
Accounts payable                                                         (4,000)
Accrued expenses                                                         (5,500)
                                                                      ---------

Net assets acquired                                                   $ 577,644
                                                                      =========

Intangible assets acquired in these acquisitions consisted primarily of software
source code, customer contracts, skilled workforce and goodwill. These
intangible assets are being amortized on a straight-line basis over their
estimated useful lives of up to three years.

The following table summarizes the pro forma results of the Company's operations
for the year ended March 31, 2001 assuming that the acquisitions discussed above
had occurred as of the beginning of fiscal 2001. The pro forma results are
presented for the purposes of additional analysis only and do not purport to
present the results of operations that would have occurred for the periods
presented or that may occur in the future.

                                                  (Unaudited)
                                                 March 31, 2001
                                                 --------------

Revenue                                            $5,838,580
Net loss                                           (2,826,148)
Diluted net loss per share                              (0.70)


                                    Page 38
<PAGE>

8. FEDERAL INCOME TAXES:

Federal income taxes are determined using an asset and liability approach.

The Company has determined that the deferred tax assets do not satisfy the more
likely than not criteria set forth in SFAS No. 109. Accordingly, a valuation
allowance has been recorded against the applicable deferred tax assets and
therefore no tax benefit has been recorded in the accompanying statement of
operations. The Company's deferred tax assets (liabilities) as of March 31 are
as follows:

                                                        2002            2001
                                                    -----------     -----------

Net operating loss carryforward                     $ 1,954,000     $ 1,581,000
Research and experimentation credit                     800,000         800,000
Deferred revenues                                       194,000          79,000
Capitalized software costs                              (71,000)       (223,000)
Impairment of available for sale securities              95,000              --
Other                                                    53,000          44,000
                                                    -----------     -----------

                                                      3,025,000       2,281,000

Less - valuation allowance                           (3,025,000)     (2,281,000)
                                                    -----------     -----------

     Net deferred tax assets                        $        --     $        --
                                                    ===========     ===========

The net operating loss carryforwards of approximately $5,750,000 and research
and experimentation credit carryforwards expire through 2022.

The valuation allowance increased by $744,000 during the year ended March 31,
2002 and increased by $501,000 during 2001.

In connection with its initial public offering in 1995, the Company experienced
a significant change in ownership, which limits the amount of previously
generated net operating loss carryforwards and research and experimentation
credits of $1,753,000 and $221,000, respectively, which may be used in any given
year to approximately $300,000. As a result of other ownership changes, the
utilization of net operating losses against future taxable income may be
limited.


                                    Page 39
<PAGE>

9. 401(k) SAVINGS AND PROFIT SHARING PLAN:

All employees of the Company over 21 years of age have the option of
participating in a company-sponsored 401(k) savings and profit sharing plan.
Employees can contribute up to 80% of their gross pay subject to statutory
maximums. At its discretion, the Company may make contributions to the plan
based on a percentage of participants' contributions. Employer contributions
vest over a period of six years. The Company made contributions of $15,718 and
$19,272 to the plan during the years ended March 31, 2002 and 2001,
respectively.

10. EMPLOYEE STOCK OWNERSHIP PLAN:

During March 1996, the Company established an Employee Stock Ownership Plan
(ESOP) that covers substantially all U.S. employees. The Company registered and
sold 95,200 shares of common stock to the ESOP. Financing for the purchase was
provided by a $500,000 bank loan which was a direct obligation of the Company's
Employee Stock Ownership Trust (the Trust) and was secured by a pledge of the
shares purchased and was guaranteed by the Company and the chief executive
officer. This loan was repaid in full during fiscal 2000.

The Company made matching and discretionary contributions totaling $41,229 and
$105,600 to the ESOP during fiscal 2002 and 2001, respectively.

In March 2002, the Company issued 100,000 shares of Timeline common stock as a
discretionary contribution to the ESOP. These shares will be divided among all
eligible employees on December 31, 2002, according to the discretionary
distribution terms of the ESOP. The Company recorded a charge totaling $35,000
related to this issuance representing the fair value of the shares on the
issuance date.

11. COMMITMENTS AND CONTINGENCIES:

Litigation

In July 1999, the Company was served a complaint by Microsoft Corporation in the
Superior Court of Washington for King County alleging breach of contract
regarding a Patent License Agreement signed by both companies in June 1999. In
December 2000, the Court issued a Memorandum Decision and in January 2001 issued
a Final Judgment in the lawsuit holding the language of the agreement would
support Microsoft's right to sublicense its customers to use Microsoft's SQL
Server by adding code or software products to it so long as the added code or
software does not itself independently infringe Timeline's patent. The Company
filed an appeal of the lower court's Final Judgment in the Washington State
Court of Appeals, and in March 2002 the Appellate Court remanded the case to the
Superior Court and ordered it to enter a judgment in the Company's favor.
Microsoft has filed a motion for certiorari requesting the Washington Supreme
Court to hear an appeal of the case. A response is expected in November or
December 2002.

In July 2000, the Company filed a lawsuit against Oracle Corporation seeking
monetary damages and injunctive relief. The Company's claims were based on
Oracle's alleged introduction of elements in its product family that utilize
technology similar to the Company's patented technology licensed to Microsoft.
On June 12, 2001, the Company settled this lawsuit. As part of the settlement,
the Company licensed certain patented technology to Oracle in exchange for cash
and certain other consideration.

In June 2001, the Company filed and subsequently served a complaint against
Hyperion Solutions, Inc. in the Federal District Court for the Western District
of Washington, alleging infringement of certain of its patents. The Company
intends to seek monetary damages and an injunction against Hyperion licensing
certain of its products. The trial date is set for March 2003.


                                    Page 40
<PAGE>

In June 2001, the Company filed a complaint against Lawson Software Inc. in the
Federal District Court for the Western District of Washington, alleging
infringement of certain of its patents. Additionally, Lawson is a reseller of
software provided by Hyperion. On December 3, 2001, the Company signed a
settlement agreement with Lawson in which it granted to Lawson a license to its
patented technology and Lawson would pay a license fee of $450,000, over time.
At June 3, 2002, all license fees have been fully paid under the settlement
agreement.

From time to time, the Company may pursue litigation against other third parties
to enforce or protect its rights under this patent or its intellectual property
rights generally.

Leases

The Company has entered into noncancelable operating lease agreements involving
equipment and office space. The following is a schedule of future minimum lease
payments under these leases as of March 31, 2001:

Fiscal Year ending March 31,
               2003                                  $398,737
               2004                                   393,683
               2005                                    48,290
               2006                                     5,704
                                                     --------

               Total minimum lease payments          $846,414
                                                     ========

Rent expense amounted to $547,331 and $261,969 for the years ended March 31,
2002 and 2001, respectively.

12. STOCKHOLDERS' EQUITY:

Stock Options and Warrants

The Company has two plans: The 1994 Stock Option Plan (the "1994 Plan") and the
Directors' Nonqualified Stock Option Plan (the "Directors' Plan"). An aggregate
of 600,000 shares of common stock are collectively reserved for issuance upon
exercise of options granted to the Company's employees, directors and
consultants under the 1994 Plan and the Directors' Plan (collectively, the
"Stock Option Plans") and 247,875 shares are available for grant as of March 31,
2002. The exercise price of any options to be granted is typically equal to or
greater than the fair market value of the common stock at the date of grant. The
Company also has a 1993 Stock Option Plan (the "Old Plan"). A total of 132,000
shares of common stock have been reserved for issuance under the Old Plan. As of
March 31, 2002, no further option grants are available under the Old Plan. At
March 31, 2002, the Company had granted options to purchase 600,129 shares of
common stock, including those described in the following paragraphs which are
not part of these option plans. Options under these plans generally vest ratably
over three or four-year periods. The term of the options is for a period of 10
years or less. Options automatically expire 90 days after termination of
employment.

In February 1999, the Company granted a performance-based stock option to the
President/CEO to purchase 50,000 shares of common stock at an exercise price of
$1.00 per share. This option will vest in full when the Company's common stock
closes trading at a price of $5.00 or more per share for a period of 10
consecutive days. In any event, this option will vest, if not otherwise vested,
seven years from the date of grant provided that this individual is then
employed by the Company. This option had not vested as of March 31, 2002.

In November 1999, the Company granted a performance-based stock option to the
President/CEO to purchase 50,000 shares of common stock at an exercise price of
$1.875 per share. This option will vest in


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<PAGE>

full when the Company's common stock closes trading at a price of $5.00 or more
per share for a period of 10 consecutive days. In any event, this option will
vest, if not otherwise vested, seven years from the date of grant provided that
this individual is then employed by the Company. This option had not vested as
of March 31, 2002.

In January 2001, the Company granted a performance-based stock option under the
1994 Stock Option Plan to the President/CEO to purchase 25,000 shares of common
stock at an exercise price of $1.156 per share. This option will vest in full
when the Company's common stock closes trading at a price of $7.50 or more per
share for a period of 10 consecutive days. In any event, this option will vest,
if not otherwise vested, seven years from the date of grant provided that this
individual is then employed by the Company. This option had not vested as of
March 31, 2002.

Options outstanding as of each period are as follows:

                                                     Weighted
                                                     Average
                                        Number of    Exercise
                                         Options      Price
                                        ---------    --------

Balance, March 31, 2000                  616,814     $   1.46
   Granted                               102,500         1.94
   Exercised                             (40,572)         .28
   Canceled                              (18,900)        1.98
                                        --------     --------

Balance, March 31, 2001                  659,842     $   1.53
   Granted                                 7,500         1.00
   Canceled                              (67,213)        1.07
                                        --------     --------

Balance, March 31, 2002                  600,129     $   1.59
                                        ========     ========

The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS
No. 123). Accordingly, no compensation cost has been recognized for stock
options issued at market value on the date of grant. Had compensation cost for
the Company's stock option plans been determined based on the fair value of the
options at the grant date for awards in 2001 and 2000, consistent with the
provisions of SFAS No. 123, the Company's net loss and net loss per common share
would have been equal to the pro forma amounts indicated below:

                                                      2002             2001
                                                 -------------    -------------

Net loss - as reported                            $(2,286,932)     $(1,885,632)
Net loss - pro forma                               (2,380,226)      (1,973,435)

Basic net loss per share - as
  reported                                              $(.57)           $(.48)

Diluted net loss per share - pro
  forma                                                 $(.59)           $(.51)

The fair value of each option grant is established on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants during 2002 and 2001: zero dividend yield; expected
volatility of 98%; risk-free interest rates of 4.00% and 6.00%, respectively;
and expected lives of five years. The weighted-average grant date fair value of
options granted during fiscal 2002 and 2001, was $0.75 and $1.49, respectively.

In September 1998 and March 1999, the Company issued warrants to purchase 21,000
and 21,000 shares of common stock, respectively, with an exercise price of $1.00
per share, to outside consultants in exchange for services rendered. These
warrants have a term of 5 years.


                                    Page 42
<PAGE>

Information relating to stock options outstanding and stock options exercisable
at March 31, 2002 is as follows:

<TABLE>
<CAPTION>
                                        Options Outstanding             Options Exercisable
                                  --------------------------------      -------------------
                                             Weighted
                                             Average      Weighted                  Weighted
                                  Number    Remaining      Average      Number      Average
                                    of       Life in      Exercise        of        Exercise
    Range of Exercise Prices      Shares      Years         Price       Shares       Price
    ------------------------      ------    ---------     --------      ------      --------
<S>                              <C>        <C>           <C>          <C>           <C>
$1.00-$2.88..................... 532,104       8.3         $1.33        332,812      $1.23
$3.57-$6.75.....................  68,025       4.1          3.70         69,150       3.69
                                 -------       ---         -----        -------      -----
Totals                           600,129       7.8         $1.59        401,962      $1.65
                                 =======       ===         =====        =======      =====
</TABLE>

At March 31, 2002 and 2001, options to purchase 401,962 and 385,992,
respectively, were exercisable at weighted average exercise prices of $1.65 and
$1.67 per share, respectively.

13. RELATED PARTY TRANSACTIONS:

The Company's transactions with related parties are as follows:

In December 2001, two of the Company's officers, Frederick Dean and Michael
Evans, each received a performance-based award of 6,250 shares of Timeline
common stock. Mr. Dean and Mr. Evans each earned a second performance based
aware of 6,250 shares of Timeline common stock in March 2002, which were issued
in April 2002.

In March 2002, two of the Company's officers, Michael Evans and Craig Perkins,
each borrowed funds from the Company ($6,881.00 and $6,881.35, respectively).
These funds were used to purchase Timeline common stock from a third party
shareholder. The loans were granted as part of the officers' compensation
package, and will be forgiven in full provided Mr. Evans and Mr. Perkins are
employed by the Company at March 22, 2003. The Company is accounting for the
stock purchase on a variable basis over the one-year term of the note.

In May 2001, three of the Company's directors loaned the Company a total of
$172,580 to fund operations. These loans bore interest at 12% per annum.
Principal and interest of $2,290 under these loans was paid in full in July
2001.

14. SEGMENT INFORMATION

The Company follows the requirements of Statement of Financial Accounting
Standards No. 131 (SFAS 131), Disclosures About Segments of an Enterprise and
Related Information. As defined in SFAS No. 131, the Company operates in two
reportable segments that are based on geographic business units in the United
States (Timeline) and Europe (Analyst Financials). Both segments generate
revenues from the license and support of the Company's software products.
Revenues from other licenses are included in the Timeline segment. The
accounting policies of the segments are the same as those described in the
summary of significant accounting policies. During 2002, the Timeline segment
includes intersegment revenues which totaled $364,994, and are recorded at


                                    Page 43
<PAGE>

market rates as if the transactions occurred with third parties. The following
table summarizes operations by segment during the year ended March 31, 2002.

                                  Timeline     Analyst Financials      Total
                                  --------     ------------------      -----

Revenues, net of intersegment    $3,457,555        $1,366,988        $4,824,543
Operating loss                     (888,111)         (845,681)       (1,730,792)
Depreciation and amortization       245,000           420,678           665,678
Long lived assets                   835,817           496,251         1,332,068
Total asset                       1,583,751           813,092         2,396,843

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

      Effective as of May 28, 2002, the Company changed its independent auditors
from Arthur Andersen LLP to KPMG LLP. The change in independent auditors was
made prior to commencing the audit on the Company's financial statements for the
fiscal year ended March 31, 2002. This change in accountants was approved by the
Company's Board of Directors, upon the recommendation of the Audit Committee.
The Company filed a report with the SEC on Form 8-K on June 3, 2002 reporting
the change in accountants.

                                    PART III

The information called for by Items 9 through 12 of Part III is included in the
Registrant's Proxy Statement and is incorporated herein by reference. The
information appears in the Proxy Statement under the captions "Proposal 1.
Election of Directors," "Continuing Directors and Executive Officers," "Security
Ownership of Directors and Executive Officers," "Executive Compensation,"
"Section 16(a) Beneficial Ownership Reporting Compliance" and "Certain
Transactions."


                                    Page 44
<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

      (a) Exhibits

  Exhibit
  Number                                 Description
--------------   ---------------------------------------------------------------

  3.1 (1)        Articles of Incorporation, as amended and in effect
  3.2 (1)        Bylaws
  4.1 (1)        Specimen Common Stock Certificate
 10.1.A (1)      Amended and Restated 1993 Stock Option Plan
 10.1.B (1)      Form of Employee Stock Option Agreement
 10.2 (1)        1994 Stock Option Plan
 10.3 (1)        Directors' Nonqualified Stock Option Plan
 10.4 (2)        Employee Stock Ownership Plan
 10.5 (1)        Common Stock Purchase Warrants issued in consideration of
                 loans or loan guarantees:
 10.5A (1)          Warrant issued July 31, 1994 to Frederick W. Dean
 10.5B (1)          Warrant issued July 31, 1994 to Charles R. Osenbaugh
 10.5C (1)          Warrant issued July 31, 1994 to John W. Calahan
 10.6 (1)        Form of Indemnification Agreement with directors and officers
 10.7 (1)        Form of Employee (Confidentiality) Agreement
 10.8 (1)        Form of License Agreement for Computer Application Software
                 (client/server)
 10.9 (1)        Form of License Agreement for Computer Application Software
                 (VAX-based)
 10.10 (1)       Form of Basic Service for Software Agreement
 10.11 (7)       Form of Distributorship Agreement
 10.12 (1)       Solution Provider Agreement with Microsoft Corporation dated
                 September 23, 1994
 10.13A (4)      Lease Agreement dated September 8, 1995, as amended, with
                 G&W Investment Partners
 10.13B (5)      Amendment to Lease Agreement dated March 20, 1999, with G&W
                 Investment Partners
 10.13C (6)      Amendment to Lease Agreement dated March 10, 2000 with MONY
                 Life Insurance Company
 10.14 (3)       Form of Consulting Partners Agreement
 10.19 (7)       Form of WorkWise Reseller Marketing Agreement
 21.1 (7)        Subsidiaries of Timeline, Inc
 23.1            Consent of Independent Public Accountants

----------
1  Incorporated herein by reference from Item 27 of Company's Registration
   Statement on Form SB-2 filed on October 18, 1994.
2  Incorporated herein by reference from the Company's Registration Statement on
   Form S-8 filed on March 11, 1996.
3  Incorporated herein by reference from Item 13 of Company's Form 10-KSB for
   the year ended March 31, 1995.
4  Incorporated herein by reference from Item 13 of Company's Form 10-KSB for
   the year ended March 31, 1997.
5  Incorporated herein by reference from Item 13 of Company's Form 10-KSB for
   the year ended March 31, 1999.
6  Incorporated herein by reference from Item 13 of Company's Form 10-KSB for
   the year ended March 31, 2000.
7  Incorporated herein by reference from Item 27 of the Company's Registration
   Statement on Form SB-2 filed on June 15, 2001.

      (b) No reports on Form 8-K were filed during the quarter ended March 31,
2002.


                                    Page 45
<PAGE>

                                   SIGNATURES

      In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                      Timeline, Inc.


                                      By: /s/ Charles R. Osenbaugh
                                          -------------------------------
                                          Charles R. Osenbaugh, President

                                      Dated:  June 27, 2002

      In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

          Signature                     Capacities                   Date
          ---------                     ----------                   ----

                                         Director
   /s/ Charles R. Osenbaugh             President                June 27, 2002
-------------------------------  Chief Executive Officer
     Charles R. Osenbaugh        Chief Financial Officer
                                      and Treasurer



                                         Director
    /s/ Frederick W. Dean        Executive Vice President        June 27, 2002
-------------------------------
      Frederick W. Dean


    /s/ Donald K. Babcock                Director                June 27, 2002
-------------------------------
      Donald K. Babcock


     /s/ Kent L. Johnson                 Director                June 27, 2002
-------------------------------
       Kent L. Johnson


       /s/ Terry Harvey                  Director                June 27, 2002
-------------------------------
         Terry Harvey


    /s/ Robert B. Wallace                Director                June 27, 2002
-------------------------------
      Robert B. Wallace


                                    Page 46