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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, 2004

             [ ] 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:  $5,441,242.

As of June 1, 2004, 4,190,998 shares of the Registrant's common stock were
outstanding and the aggregate market value of such common stock held by
nonaffiliates was approximately $2,515,761 based on the average of the bid
($0.76) and ask ($1.01) prices on such date of $0.885.

                       DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this Report, to the extent not set forth
herein, is incorporated in this Report by reference to the Company's definitive
proxy statement relating to its 2004 annual meeting of shareholders. The
definitive proxy statement will be filed with the Securities and Exchange
Commission within 120 days after the end of the 2004 fiscal year.

Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X]

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                                 TIMELINE, INC.
                            Form 10-KSB Annual Report

                                Table of Contents

                                     PART I

                                                                           Page
                                                                           ----

Item 1.  Our Business....................................................... 2

Item 2.  Property...........................................................16

Item 3.  Legal Proceedings..................................................16

Item 4.  Submission of Matters to a Vote of Shareholders....................16

                                     PART II

Item 5.  Market for Common Stock and Related Shareholder Matters............17

Item 6.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations..........................................17

Item 7.  Financial Statements...............................................26

Item 8.  Changes in and Disagreements with Accountants on Accounting
         and Financial Disclosure...........................................26

Item 8A. Controls and Procedures............................................26

                                    PART III

Item 9.  Directors, Executive Officers and Control Persons; Compliance
         with Section 16(a) of the Exchange Act.............................27**

Item 10. Executive Compensation.............................................27**

Item 11. Security Ownership of Certain Beneficial Owners and
         Management and Related Shareholder Matters.........................27**

Item 12. Certain Relationships and Related Transactions.....................28**

Item 13. Exhibits and Reports on Form 8-K...................................29

Item 14. Principal Accountant Fees and Services.............................30**

SIGNATURES..................................................................31

**      Items 9 through 12 and Item 14 of Part III are incorporated by reference
        from the definitive proxy statement for our 2004 annual meeting of
        shareholders, which will be filed with the Securities and Exchange
        Commission within 120 days after the close of the 2004 fiscal year.

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             CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS

        This Annual Report on Form 10-KSB includes a number of forward-looking
statements that reflect our current views with respect to our 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. All statements other
than statements of historical fact, including future results of operations or
financial position, made in this Annual Report on Form 10-KSB are forward
looking. In particular, the words "predict," "anticipate," "believe," "intend,"
"may," "will," "expect," "would," "could," and similar expressions as they
relate to us are intended to identify such forward-looking statements, but are
not the exclusive means of identifying such statements. Our actual results,
performance or achievements could differ materially from the results expressed
in, or implied by, these forward-looking statements. We do 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, we have
attempted to mark sentences containing such statements with a single asterisk
and paragraphs containing primarily 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 in this report and in our other reports
previously filed with the Securities and Exchange Commission (the "SEC"),
including periodic reports on Forms 10-KSB and 10-QSB, and those described from
time to time in our press releases and other communications, which attempt to
advise interested parties of the risks and factors that may affect our business.

                                     PART I

ITEM 1: DESCRIPTION OF BUSINESS

OUR BUSINESS

        Our business consists of two separate activities. To date, the most
important has been the development, licensing, maintenance, and consulting with
respect to the implementation and use of our propriety software applications.
Since 1998 we have also been actively pursuing licensing of our patent portfolio
to other software manufacturers and users.

        Software: We develop, market, license and support financial reporting,
budgeting, and consolidations 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 access automatically and distribute business and
accounting information in a secure environment and with full accounting controls
that allow validation by going back to the detail transactions, 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 monitor databases
automatically, 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

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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 customized report formats.

        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 enterprise resource planning
(ERP) systems. Our specialty is working with the accounting functions embodied
in both new and old ERP or accounting systems.

        Many customers' 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 and ERP systems by providing products that accept and report on
data from both centralized or client/server systems.

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

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

        The flexibility of our Timeline and WorkWise products makes it possible
for our customers to deliver data for reporting, analysis and record updating 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, 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 overcome 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 software license fee revenue in fiscal year 2005 will be
generated by licensing and distribution agreements with these third-party
vendors.*

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        Patent Licensing: As discussed in "Our Technology" below, we hold a
number of patents that arose from our work using data marts as a means to
provide our software products. We have been granted six patents by the U.S.
Patent and Trademark Office on our technology and have a total of 136 issued
claims. We have also been granted patents in Australia, Israel, Singapore, and
Mexico. We have a number of pending patent applications, and believe additional
international patents may be granted during fiscal 2005.* These patents are on
inventions that have broad application, not only in financial reporting, but in
many other areas of data warehousing and data mart creation, use, enhancement,
and publishing. We determined the broad application of this technology would
allow for licensing of the patents to a wider community. These efforts have
generated substantial, although sporadic, revenue. We have licensed our patents
to eight organizations in the six years beginning March 1998 through April 2004
for a total of approximately $14,000,000. We believe that there remain many
organizations that would benefit from a license to this technology and are
actively marketing patent licenses as a distinct line of business.

OUR TECHNOLOGY

        Our Timeline Analyst family of products works with a customer's
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
or LAN-based 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:

        .       Timeline Architecture. Our architecture contains a
                multi-dimensional data segmentation capacity that exceeds the
                capacity of all other accounting data structures known to us.
                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 systems. For example, our software
                applications 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.

        .       Generation Engine. Our generation engine enables our products to
                automate the building of Microsoft, Oracle or IBM-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.

        .       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.

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        Our WorkWise Business Alerts and Data Agent Server(TM) 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
occur automatically. 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.

OUR PRODUCTS

        We develop and license data management and reporting software products,
consisting of our Timeline Analyst reporting and financial analytics products,
and our WorkWise alerting and process automation software.

        Timeline Analyst

        Our products make it possible to distribute information and data marts
from an underlying accounting system to the desktop. Our primary product,
Timeline Analyst ("Analyst"), consists of a set of client/server software
applications based on Microsoft(R) Windows(R)/Windows(R) NT operating systems.
Once data is contained in a 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.

        Analyst includes the central warehouse of financial and management
reporting data structured in a multi-dimensional relational database. This
central warehouse 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 and
consolidations. The various functions provide desktop and network reporting
based on information contained in one or more underlying accounting systems.

        Analyst's "data marts," enable the user to view, create and distribute
reports in Microsoft Excel based on data from one or more underlying accounting
systems. Analyst also distributes reporting databases to desktop end-users
throughout a business enterprise.

        Analyst Manager allows Analyst users to distribute packets of
information and assign new reporting relationships at the desktop level.

        Analyst Budgeting

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

        Analyst Consolidations

        Analyst Consolidations is another module that works with our Analyst
software. Consolidations builds a multi-dimensional consolidations database into
which general ledger data can be imported and mapped directly to the accounts
dimension. Consolidations merges the reporting processes of both statutory and
management reporting, allowing our customers to deliver financial statements
that illustrate both financial and non-financial critical performance measures.

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        WorkWise Data Agent Server(TM)

        WorkWise Data Agent Server(TM) is a process automation application
consisting of a set of programs that allows 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
product's 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

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

OUR SERVICES

        Our revenue-generating services, which consist primarily of consulting
and software maintenance, relate to our family of products.

        Consulting

        We do not provide general consulting services, but rather focus on the
installation, training, enhancement, and use of our products by our licensees.
These services are provided by our employees who are highly skilled in the use
of our products and are billed on a fee for service basis. Many of our
consulting engagements require our consultants to provide the services on the
customer's site. The amount of consulting services we perform varies according
to the mix of systems licensed directly by us or through a reseller. Many of our
resellers provide their own direct installation services to end-users, requiring
less of our consulting.

        Maintenance

        We provide software maintenance services either directly to end users of
our products (first-tier maintenance) or to third party resellers (second-tier
maintenance). In first-tier maintenance, we provide telephonic diagnostics and
instruction by our technical support personnel, backed by our product managers
and developers, under annually renewable agreements. As our strategy of using
third party reseller relationships to market our products has evolved, we have
also entered into agreements to provide second tier maintenance where the
responsibility for telephonic support rests with the reseller, and we provide
software patches, updates and more sophisticated diagnostics to the reseller. We
receive a smaller portion of the annual support fees for second tier support
than we do for first tier support. As with first tier maintenance, second-tier
is typically provided under annually renewable agreements.

OUR RESEARCH AND DEVELOPMENT

        Our research and development efforts are primarily focused on enhancing
our products to work with additional underlying systems, to incorporate changing
technologies in underlying operating systems and platforms, and to allow greater
ease of use. For example, in March 2004 we released our new Version 2.9 to our
Analyst suite of applications. These enhancements allow for the deployment of
target analytical data marts on Oracle 8 or 9i and IBM's DB2 Universal Data
Bases Versions 7 & 8, as well as Microsoft SQL Server. Previous versions allowed
marts to be generated from source transaction systems housed on all of these
database management systems. This version, however, is the first that allows
target data marts on which Timeline's reporting, budgeting and consolidation
applications reside to be built on all of these three platforms. Additionally,
Version 2.9 provided some measurable improvements in performance, error
tracking, and other technical enhancements.

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OUR SALES AND MARKETING

        Our sales and marketing focus is on the recruitment, training, and
continued involvement with resellers to represent our products. These
relationships are generally entities that have transaction systems software of
their own that potentially would be improved by use in conjunction with our
products (original equipment manufacturers or "OEMs"). We also pursue reseller
relationships with service providers who want to provide services to end users
based upon the installation, training and use of our products (Value Added
Resellers or VARS). The VAR strategy is of particular importance in order to
market our products for use with software applications where we have little
prospect of forming an OEM relationship. This would be the case, for instance,
when the manufacturers of the underlying transaction systems are owned by
competitors, have pre-existing relationships with competitors, or have a
business model that is not conducive to the representation of third party
products. Our agreements with licensees and distributors are generally not
exclusive, may be terminated at any time on 90 days' notice by either party
without cause, and generally do not impose minimum licensing or purchase
requirements. We currently have relationships with approximately 34 OEMs, VARs
and other resellers in approximately 14 countries.

        In addition, in certain instances we pursue direct sales activities,
particularly through our London subsidiary, Analyst Financials Limited. However,
we expect a majority of our new license activity to be through reseller
agreements.*

PATENT RIGHTS

        We have been granted six patents by the U.S. Patent and Trademark Office
on our technology and have a total of 136 issued claims. We have also been
granted patents in Australia, Israel, Singapore, and Mexico. In May 2004, our
wholly-owned subsidiary, WorkWise Software, Inc. was granted a patent by the
U.S. Patent and Trademark Office on its process automation technology. We have a
number of pending patent applications, and believe additional international
patents may be granted during fiscal 2005.*

        We consider our patent rights to be of considerable value and importance
to our business. No successful challenges to our issued patents have arisen. See
"- Other Factors That May Affect Future Results," below.

COMPETITION

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

OUR EMPLOYEES

        At March 31, 2004, we employed 17 full-time and 3 part-time employees in
the U.S. Our London subsidiary, Analyst Financials, employed 8 full-time
employees and 1 part-time employee at March 31, 2004. We believe our relations
with our employees are good.

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OTHER FACTORS THAT MAY AFFECT OPERATING RESULTS

        The following discussion in this Annual Report on Form 10-KSB contains
forward-looking statements regarding our business, prospects and results of
operations that involve risks and uncertainties. Our actual results could differ
materially from the results that may be anticipated by such forward-looking
statements and discussed elsewhere in this Report. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
below, as well as those discussed under the captions "Business" and
"Management's Discussion and Analysis or Plan of Operations" as well as those
discussed elsewhere in this Report. In evaluating our business, prospects and
results of operations, readers should carefully consider the following factors
in addition to other information presented in this Report and in our other
reports filed with the Securities and Exchange Commission that attempt to advise
interested parties of the risks and factors that may affect our business,
prospects and results of operations. See "Cautionary Notice Regarding Forward
Looking Statements" above.

FACTORS RELATING TO OUR COMPANY AND OUR BUSINESS

        We have limited financial resources and any decrease in our revenues
        could have a significant adverse impact on our cash and working capital
        position.

        At March 31, 2004, we had cash and cash equivalents totaling $511,483,
and our net working capital was $142,829 (excluding deferred revenue of
$619,036, it was $761,865). We believe that our current cash and cash
equivalents and any net cash provided by operations may be sufficient to meet
anticipated cash needs for working capital and capital expenditures through
fiscal 2005. However, our revenue is unpredictable; a revenue shortfall could
deplete our limited financial resources and require us to reduce operations
substantially or to seek to raise additional funds through equity or debt
financings.

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

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

None of these factors can be predicted with certainty. Our independent
accountants have issued a "going concern" emphasis paragraph in their report on
our financial statements for the fiscal year ended March 31, 2004, stating that
we have suffered recurring losses and have an accumulated deficit. Accordingly,
those conditions raise substantial doubt about our ability to continue as a
going concern.

        We may need to raise additional capital to fund continuing operations.
        If our financing efforts are not successful, we may need to explore
        alternatives to continue operations, which may include a merger, asset
        sale, joint venture, loans or further expense reductions.

        Our efforts to increase revenue and improve our working capital position
may not be successful. We anticipate that we may need substantial additional
debt or equity financing in the future for which we have no current commitments,
discussions or arrangements. Any additional financing may not be available in
amounts or at times when needed, 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

                                     Page 8
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shareholders will be diluted. Our plans which may or may not occur for financing
may include, for example, any one or more of the following:

        .       engaging a financial advisor to explore strategic alternatives,
                which may include a merger, asset sale, joint venture or another
                comparable transaction;
        .       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;
        .       forming a joint venture with one or more strategic partners to
                provide additional capital resources to fund operations; and
        .       loans from management or employees, salary deferrals or other
                cost cutting mechanisms.

        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. If
additional financing is not available and if we cannot generate sufficient
revenue from operations, 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.

        We rely extensively on third-party licensing and distribution
        relationships. To the extent that these relationships are not effective
        in selling our products, our revenues and results of operations will be
        adversely affected.

        We rely on agreements with third-party licensees and distributors for
sales and licensing of our products, and believe that a majority of our software
license fee revenue in fiscal year 2005 will be generated from these third-party
partners. Our agreements with licensees and distributors are generally not
exclusive, may be terminated at any time on 90 days' notice 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:

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

        These licensees and distributors may not perform their contractual
obligations as expected, and we may not derive any additional revenue from these
licensing and distribution arrangements. Also, we may not be able to
successfully develop new relationships or maintain existing relationships with
third-party licensees and distributors. Our ability to maintain our distribution
network and attract additional distributors will depend on a number of factors,
many of which are outside our control. In addition, our licensees and
distributors may be unable to market our products effectively, or may decide to
stop representing our products. Any of these events could materially adversely
affect our results of operations. To the extent that our distributors are
distracted from selling or promoting our products or do not employ sufficient
efforts in managing and selling our products, our sales and profitability will
be adversely affected.

        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, however their emphasis will be on reseller
relationships. 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. We may not be able to profitably or
successfully maintain the direct sales model through Analyst Financials.

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        Our patent license revenue is sporadic, and a decrease in patent revenue
        could materially affect our profitability and cash flow.

        Since 1998, we have relied on substantial fees generated by licensing of
our various patents. These patent revenues tend to be sporadic and the patent
licenses generally do not provide for ongoing revenue subsequent to the initial
licensing fees. Future patent licenses may not occur and we may be unable to
generate additional patent fees. Any inability to generate additional patent
revenue could have a material impact on our profitability and working capital.
For example, in fiscal 2004, we received $1.75 million from our patent license
with Cognos; without this one-time license fee, we would have had a net loss.

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

        Product-license revenues and related services from our Analyst suite of
products accounted for a significant portion of our total revenues during fiscal
2004 (exclusive of patent license revenues). We expect revenues from our
Analyst, Budgeting, Consolidation, Business Alerts and Data Agent Server,
products to account for a significant part of our 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, as well as our ability to
provide on-going maintenance and support for those products.

        Our ability to operate profitably is uncertain.

        Although we had approximately $22,000 in net income for fiscal 2004, our
historical operations have not been consistently profitable and we may not be
able to sustain profitability for any fiscal period into the future. We had an
accumulated deficit of $9,966,994 as of March 31, 2004. 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 and maintain
profitability, we must do some combination of:

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

We may not meet these objectives. We currently have budgeted to incur losses
during the first half of fiscal 2005, and our efforts to increase our revenue to
cover expenses by mid-year fiscal 2005 may not be successful. Over the past
several years, we have significantly decreased operating expenses and, as a
result, we believe our profitability will depend on generating sufficient
license and other revenues. Any lack of profitability would have a detrimental
effect on our working capital position, as well as the market price of our
stock.

        Our profitability depends on the success of our products.

        Our future profitability depends in part on the successful development,
marketing and licensing of our existing product line and other new products.
However,

        .       our products may not achieve or sustain revenue growth;
        .       enhancements to our products and other applications may not be
                successfully developed;
        .       demand for and market acceptance of our products and
                enhancements may not grow or continue;

                                     Page 10
<PAGE>

        .       our sales and marketing efforts, whether direct sales or through
                our reseller distribution channel, may not be effective; and
        .       our products may not successfully compete with the products of
                others.

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

        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 our ability to maintain high levels of employee utilization, project
and instructional quality and competitive pricing for our services. We may not
be successful in maintaining the required levels of revenue with the current
number of employees.

        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:

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

        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.

                                     Page 11
<PAGE>

        We need to retain and, as needed, recruit 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,
as well as creative personnel, and sales and marketing personnel. As a result of
our focus on reducing operating expenses over the past several years, we are
dependent for our operations on a smaller number of employees. 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 as and when needed, 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 retaining and, as needed, hiring 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 also heavily dependent on the
        continued services of our senior management.

        Our future success also depends to a significant extent on the skills,
experience and efforts of our senior management. In particular, we depend on
Charles R. 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. Mike Evans also serves as Managing
Director of Analyst Financials Limited which now is responsible for
approximately 40% of our worldwide software revenue. 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 Analyst Financials, or becomes
incapacitated and unable to perform his duties, then our business and financial
condition could be seriously harmed.

        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 six U.S.
patents and have been granted patent protection in certain foreign countries. We
have additional international patent applications pending. Despite our efforts
to protect our intellectual property rights:

        .       laws and contractual restrictions may not be sufficient to
                prevent misappropriation of our technology or deter others from
                developing similar technologies;
        .       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;
        .       other companies may claim common law trademark rights based upon
                state or foreign laws that precede the federal registration of
                our trademarks; and
        .       policing the 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. Such litigation is costly and may not be successful.

                                     Page 12
<PAGE>

        Our intellectual property protections may not be adequate and third
parties may 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 Microsoft products.

        We have developed all of our products to function in the Microsoft
Windows 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, Excel or other future
Microsoft software products or operating systems. 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 may not 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.

        We may be subject to 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.

CERTAIN FACTORS RELATING TO OUR INDUSTRY

        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.
Additionally we must stay current with Oracle, IBM and Microsoft database
platforms. 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 may not be successful in developing
new products or enhancing our existing products on a timely basis, and any new
products or product enhancements may not achieve market acceptance.

        We face intense competition in our businesses.

        The business information software market is highly competitive. We
believe that our primary competition for our Analyst product line is software
vendors such as FRx Software Corporation, Cognos Corporation, Hyperion Solutions
Corporation, and various budgeting vendors such as Microsoft Corporation, and
SRC Corporation. For our WorkWise Business Alerts and Data Agent Server
software, we compete with companies such as Categoric Software Corporation,
Orbis Software, and Innovalink Corporation. Many of

                                     Page 13
<PAGE>

our competitors in the software and consulting arenas have substantially greater
financial, management, marketing and technical resources than we do. Because
there are minimal barriers to entry into these markets, we believe that
competition will continue to proliferate. The market for our products and
services is characterized by significant price competition, and we expect that
our products and services 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 seriously harm our ability to sell
products on favorable terms. We may not be able to compete successfully against
current and future competition, and the failure to do so would negatively impact
our business and financial condition.

        An uncertain economy and reductions in information technology spending
        may negatively affect our revenues.

        Our revenues may be negatively affected by the uncertain economic
conditions both in the market generally and in our industry. As the economic
recovery continues to be slow, many companies are hesitant to increase their
budgets for spending on information technology and business software, and in
fact some companies may further reduce their budgets. 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 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.

CERTAIN FACTORS RELATED TO OUR COMMON STOCK

        Because our common stock is traded on the OTC Bulletin Board and is a
        "penny stock," a shareholder's ability to sell shares in the secondary
        trading market may be 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.

                                     Page 14
<PAGE>

        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 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 quarterly operating results may vary, and these fluctuations could
        affect the market price of our stock.

        Our operating results may vary significantly from quarter to quarter and
are influenced by such factors as:

        .       the commencement, completion or cancellation of large contracts,
        .       the results of patent licensing activity,
        .       other changes in the mix of our services.

        We believe that operating results for any particular quarter are not
necessarily a meaningful indication of future results. While fluctuations in our
quarterly operating results could negatively or positively affect the market
price of our common stock, these fluctuations may not be related to our future
overall operating performance.

        The price of our common stock may be volatile, and a shareholder's
        investment in our common stock could suffer a decline in value.

        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:

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

        We do not intend to pay dividends, so any return on your investment must
        come from appreciation.

        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.
As a result, any return on your investment in our common stock must come from
increases in the fair market value and trading price of our common stock.

        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

                                     Page 15
<PAGE>

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.

ITEM 2. DESCRIPTION OF PROPERTY

        We lease approximately 8,704 square feet of office space at 3055 112th
Ave. N.E., Bellevue, Washington, under a lease that expires April 30, 2005. 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 2005. We do not own any
real estate.


ITEM 3. LEGAL PROCEEDINGS

        On September 17, 2003, we filed an action in the Federal District Court
for the Western District of Washington against Cognos Inc. and its US
subsidiary, Cognos Corporation, alleging patent infringement in the United
States. On February 12, 2004, we entered into a settlement agreement with Cognos
in which we granted to Cognos a license to our patented technology and Cognos
paid us a one-time license fee of $1.75 million. We recognized the total amount
as Patent license revenue in the quarter ended March 31, 2004.

        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 SHAREHOLDERS

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

                                     Page 16
<PAGE>

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

COMMON STOCK

        Our common stock is traded on the OTC Bulletin Board and the Boston
Stock Exchange 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 has been quoted on the OTC Bulletin
Board. The following table contains the high and low closing sales prices as
reported by the OTC Bulletin Board, for each quarter of fiscal 2003 and 2004,
and reflects inter-dealer prices without retail mark-up, mark-down, or
commissions and may not represent actual transactions.

<TABLE>
<CAPTION>
                             Fiscal 2003                             Fiscal 2004
                -------------------------------------   -------------------------------------
                  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          $  0.37   $  0.35   $  1.15   $  2.00      1.40      1.04      1.01      1.22
  Low           $  0.24   $  0.17   $  0.25   $  0.54      0.55      0.55      0.53      0.53
</TABLE>

HOLDERS

        As of May 19, 2004, there were 4,178,498 shares of common stock
outstanding held by approximately 92 holders of record and approximately 535
beneficial holders.

DIVIDENDS

        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.

RECENT SALES OF UNREGISTERED SECURITIES

        In March 2003, two of our officers, Fred Dean and Michael Evans each
received a performance-based award of 6,250 shares of Timeline common stock,
which were issued in April 2003. In March 2004, Messrs. Dean and Evans each
received an additional performance based award of 6,250 shares of Timeline
common stock, which were issued in May 2004. These stock issuances were made in
reliance on the exemption from registration provided by Section 4(2) under the
Securities Act of 1933, as amended.

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

        You should read the following discussion and analysis in conjunction
with our consolidated financial statements and related notes included elsewhere
in this Report. Except for historical information, the

                                     Page 17
<PAGE>

following discussion contains forward-looking statements. See "Cautionary Notice
Regarding Forward Looking Statements" on page 1.

Overview

        Our primary business is in the development and licensing of data
management and reporting software products. Our Timeline(R) Analyst product line
is designed to gather data from multiple operating systems and hardware
platforms, old and new, for translation into a Microsoft environment. Our
WorkWise(R) Business Alerts(R) product automates and synchronizes notification
messages pertaining to specific events and business processes. Our WorkWise(R)
Data Agent Server integrates software programs developed at different times by
different people using different database structures. During fiscal 2004, we
received approximately $1.4 million in software license revenue from these
products. We also provide consulting and maintenance services in support of
these software applications. For fiscal 2005, we believe that a majority of our
software license fee revenue will be generated by licensing and distribution
agreements with our third-party licensees and resellers.*

        In addition, we actively pursue licensing of our patent portfolio to
other software manufacturers and users. We have been granted six patents by the
U.S. Patent and Trademark Office on our technology and have a total of 136
issued claims. We have also been granted patents in Australia, Israel,
Singapore, and Mexico. We have a number of pending patent applications, and
believe additional international patents may be granted during fiscal 2005.*
During fiscal 2004, we received $1.9 million in patent license revenue. For
fiscal 2005, we cannot predict if we will be successful in entering into
additional patent licenses, nor the timing or amount of any such licenses.*

        Our consolidated financial statements for the fiscal years ended March
31, 2003 and 2004 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. Although we had approximately $22,000 in net income
for fiscal 2004, we incurred a net loss of $365,319 for the 2003 fiscal year and
had incurred recurring net losses from operations over the previous several
fiscal years. As of March 31, 2004, we have an accumulated deficit of
$9,966,994. These factors raise substantial doubt about our ability to continue
as a going concern.

        We believe that our current cash and cash equivalents, and any net cash
provided by operations may be sufficient to meet anticipated cash needs for
working capital and capital expenditures through fiscal 2005. However, 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, which may be on
unfavorable terms or may not be available. See "Liquidity and Capital Resources"
below.**

CRITICAL ACCOUNTING ESTIMATES AND POLICIES

        The discussion and analysis of our financial condition and results of
operations is based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, we evaluate our estimates including, among
others, those affecting revenues, the allowance for doubtful accounts, and the
useful lives of tangible and intangible assets. The discussion below is intended
as a brief discussion of some of the judgments and uncertainties that can impact
the application of these policies and the specific dollar amounts reported on
our financial statements. We base our estimates on historical experience and on
various other assumptions that we believe to be reasonable under the
circumstances, the results of which form our basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions, or if management made different judgments or utilized
different estimates. Our estimates or judgments are based in part on anticipated
future events or performance, and as such are forward-looking

                                     Page 18
<PAGE>

in nature, and are subject to many risks and uncertainties, including those
discussed below and elsewhere in this Report. We do not undertake any obligation
to update or revise this discussion to reflect any future events or
circumstances.

        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. Actual
results may differ from those estimates.*

        REVENUE RECOGNITION

        We recognize revenue 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. We assess whether the fee is fixed and
determinable based on the payment terms associated with the transaction. If a
fee is based upon a variable such as a minimum level of distribution or is
subject to acceptance by the customer, 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 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 all software licenses, we use either a binding purchase order or
signed agreement, depending on the nature of the transaction, as evidence of an
arrangement. Licenses through our resellers are evidenced by a master agreement
governing the relationship. For software license fees which do not include
customization or consulting services, delivery typically occurs when the product
is shipped to a customer. We offer a 90 day money-back warranty if the software
does not perform in accord with our published specifications. However, within
the 90 days, we have the right to correct any valid issues. Historically we have
had few or no warranty claims resulting in a refund. However, if our software
fails to work in accordance with our published standards, we could be subject to
refund claims which, on average, would equal 25% of our annual license fee
revenue.*

        Consulting revenue is recognized in the month the work is performed and
invoiced on payment terms of net 30 days. Nonpayment of an invoice could occur
in the event of disagreement on the amount billed, dissatisfaction with the work
performed, or an unforeseen inability to pay on the part of the customer.
However, because consulting projects are typically preapproved by the customer,
historically we have experienced very few invoice disputes. Revenue from support
agreements is recognized on a straight-line basis over the life of the contract,
although the fee is due and payable at the time the agreement is signed or upon
annual renewal.

        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, the fee is
fixed and determinable, and collectibility is probable. Once minimum royalties
have been received, additional royalties are recognized as revenue when earned,
based on the distributor's or reseller's contractual reporting obligations.

                                     Page 19
<PAGE>

        ALLOWANCE FOR DOUBTFUL ACCOUNTS

        We estimate the uncollectibility of our accounts receivable by analyzing
historical bad debts, customer concentrations, customer credit-worthiness,
current economic trends and changes in our customer payment terms in order to
evaluate the adequacy of the allowance for doubtful accounts. Historically, we
have experienced a minimal rate of doubtful accounts and therefore provide for
an allowance of a set percentage based on aging of the receivable, i.e., 1% for
receivables within 60 days of due date and 5% for those 61 days or more past the
due date. However, material differences may result in the amount and timing of
our bad debt expenses for any period if we had an increase in unpaid accounts,
which could reduce our total current assets. At March 31, 2002, we accrued an
additional allowance of $58,000 due to a disputed account with one of our
resellers. This account was paid in part during fiscal 2003, and the remaining
balance was written off. In fiscal 2004, no bad debt expense was recorded
against our bad debt reserves. Additionally, if we underestimated the
collectibility of our accounts receivable, it would have a negative impact on
our reported net receivables, net loss and our cash flow.*

        CAPITALIZED PATENTS

        We capitalize the direct out-of-pocket costs to obtain patents on our
technology. Such costs are amortized over the life of the patent, which have
typical contractual lives of 20 years. 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.* At
March 31, 2004, such a write-off would reduce our total assets by $253,932. It
would have no effect on cash. 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.*

        IMPAIRMENT OF LONG-LIVED ASSETS

        Long-lived assets, including property and equipment, capitalized
patents, and acquired identifiable amortizable intangibles are amortized over
their useful lives. We assess the impairment of these assets whenever events or
changes in circumstances indicate that the carrying value may not be recoverable
based on estimated undiscounted cash flows attributable to that asset. The
amount of any impairment is measured as the difference between the carrying
value and the fair value of the impaired asset. 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.* Such an adjustment would have no effect on our cash.*

        IMPAIRMENT OF GOODWILL

        The Company evaluates its goodwill, or the excess of acquisition cost
over the fair value of net identifiable assets acquired in a business
combination, in accordance with Statement of Financial Accounting Standards No.
142, "Goodwill and Other Intangible Assets" (SFAS No. 142). SFAS No. 142
requires that goodwill no longer be amortized, but instead be tested for
impairment at least annually at the reporting unit level in accordance with the
provisions of SFAS No. 142. We determined we have two reporting units consisting
of operations in the United States (Timeline) and Europe (Analyst Financials,
Ltd.). All goodwill is attributable to the Analyst Financials, Ltd. reporting
unit. Future events could cause us to conclude that impairment indicators exist
and that goodwill is impaired, which would reduce the $70,183 currently reported
on our balance sheet as of March 31, 2004.* Such an adjustment would have no
effect on cash.*

                                     Page 20
<PAGE>

RESULTS OF OPERATIONS FOR THE FISCAL YEAR ENDED MARCH 31, 2004

        REVENUES

                                   Years Ended March 31,
                                   ---------------------
                                     2004          2003        Change
                                   -------       -------       ------
        (Dollars in Thousands)

        Software license           $ 1,419       $ 1,209           17%
        Patent license               1,900         1,074           77%
        Maintenance                  1,272         1,143           11%
        Consulting and other           850           902           (6)%
                                   -------       -------
        Total revenues             $ 5,441       $ 4,328           26%
                                   -------       -------       ------

        For the fiscal year ended March 31, 2004, our total operating revenues
were $5,441,000 compared to $4,328,000 for fiscal 2003, representing an increase
of 26%. The increase in total revenues in fiscal 2004 from fiscal 2003 is
attributable to increases in software license, patent license and maintenance
revenue, more than offsetting a decrease in consulting revenue.

        Software license revenue increased 17% in fiscal 2004 to $1,419,000 from
$1,209,000 for fiscal 2003. The increase is attributable to better results in
both our U.S. and European subsidiary operations. 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. Currently, we have
relationships and strategic alliances with more than 30 national and
international distribution partners. We believe the weakness in the enterprise
resource planning (ERP) and accounting software markets which has prevailed
since the year 2000 is somewhat dissipating. Nevertheless, there is tremendous
consolidation occurring throughout this market and we have experienced the loss
of several reseller accounts due to their acquisition by parties who are not our
clients. Consequently, it is impossible to predict if our distribution channels
will maintain or increase software licenses during fiscal 2005 over fiscal
2004.*

        Our patent license revenue increased to $1,900,000 in fiscal 2004 from
$1,074,000 in fiscal 2003 (a 77% increase). Patent license revenue in fiscal
2004 consisted of a one-time license fee in February 2004 of $1,750,000 from
Cognos, Inc. and a one-time fee in the second quarter of fiscal 2004 of $150,000
to agree to the assignment of a license from Sagent Technology to Group 1. The
patent license revenue in fiscal 2003 consisted of a one-time license fee from
Hyperion Solutions, Inc. of $1,050,000, and payments on an ongoing royalty from
Noetix, Inc. We intend to continue to actively pursue new patent licenses
through various means. It is highly likely that in the course of these efforts,
additional claims of patent infringement will be necessarily filed by way of
suit in federal courts.* We cannot predict the outcome of ongoing and future
negotiations.* We cannot predict if we will be successful in entering into
additional patent licenses, nor the timing or amount of any such licenses.*

        Maintenance revenue increased by 11%, to $1,272,000 from $1,143,000 for
the comparable fiscal years ended March 31, 2004 and 2003. Maintenance revenue
from our software product lines continues to increase as more sites are
installed and maintenance agreements commence. Our software maintenance service
is provided either directly to end users of our products (first-tier
maintenance) or to third party resellers (second-tier maintenance). In
first-tier maintenance, we provide telephonic response and diagnosis to end
users where in second-tier maintenance this function is provided to end-users by
the reseller. We provide software patches, updates and technical diagnostics
under either approach. Both first and second-tier maintenance are typically
provided under annually renewable agreements. We receive approximately 40% of
the annual support revenue for second-tier support and 60% for first-tier
support. Most of our customers sign maintenance agreements and our experience
has been that in excess of 80% of our customers with maintenance agreements
renew their agreements annually. Cancellations typically occur at the time the
customer is no longer using the software.

                                     Page 21
<PAGE>

        Consulting and other revenue decreased 6%, to $850,000 from $902,000 for
the 2004 fiscal year from fiscal 2003. The level of consulting revenue varies
according to the mix of systems directly licensed by Timeline either as a direct
sale or through a reseller that does not provide installation and consulting on
our products, compared to software provided through those resellers that provide
direct installation services to end-users, thereby requiring less of our
consulting. Due to our emphasis on working through resellers who provide
installation and consulting, we do not foresee a significant increase in
consulting projects in fiscal 2005 and, therefore, expect consulting revenue to
remain fairly stable as between fiscal 2004 and fiscal 2005.*

        COST OF REVENUES

                                            Years Ended March 31,
                                            ---------------------
                                              2004          2003       Change
                                            -------       -------      ------
        (Dollars in Thousands)

        Software license                    $   186       $   207          (10%)
        Patent license                           19            15           27%
        Maintenance, consulting and other       486           402           21%
                                            -------       -------
        Total cost of revenues              $   691       $   624           11%
        Percentage of operating revenues         13%           14%
                                            -------       -------      -------

        Cost of revenues increased 11% for the 2004 fiscal year over fiscal
2003. Software license costs decreased due to changes in the amortization
expense associated with certain capitalized software modules either built or
acquired in prior periods. Patent licensing expenses increased in fiscal 2004
due to increased amortization. This is reflective of the fact the amount
expended on acquiring patents has increased as the number of patents held has
increased. Maintenance and consulting expenses increased due primarily to the
payment of bonus compensation in the fourth fiscal quarter of 2004 under our
compensation programs.

        In the third quarter of fiscal 2004, we completed the amortization of
certain software obtained in the 2000 acquisition of WorkWise Software, Inc.
Consequently, we anticipate that the cost of revenue associated with software
licenses will decrease in fiscal 2005 compared to the first three quarters of
fiscal 2004.*

        GROSS PROFIT

                                           Years Ended March 31,
                                           ---------------------
                                             2004          2003       Change
                                           -------       -------      ------
        (Dollars in Thousands)

        Gross profit                       $ 4,750       $ 3,704          28%
        Percentage of operating revenues        87%           86%
                                           -------       -------      ------

        Our gross profit for fiscal 2004 was $4,750,000 as compared to fiscal
2003 which was $3,704,000. This represents a 28% increase. Gross profit for the
two fiscal years is not directly comparable because of the relative mix of
high-margin patent license revenue in each period ($1,074,000 in fiscal 2003
compared to $1,900,000 in fiscal 2004). Also, revenues increased by 26%, but
cost of revenue only increased by 11%, when comparing fiscal 2004 to 2003. We
expect to see continued variations in gross profit.* Margins are affected by the
volume of business as recorded in total revenues, and the mix among various
revenue bearing activities, our ability to control costs associated with the
generation of those activities, and, historically, the level of amortization of
acquired technologies as reflected in cost of revenues. Additionally, because
patent licenses to date have tended to be driven by legal actions or negotiated
settlements of threatened legal actions, the costs of securing patent licenses
vary greatly from license to license. As patent

                                     Page 22
<PAGE>

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,
                                            ---------------------
                                              2004          2003       Change
                                            --------      -------      ------
        (Dollars in Thousands)

        Sales and marketing                 $  1,131      $   690          64%
        Percentage of operating revenues          21%          16%
                                            --------      --------      ------

        Sales and marketing expenses in actual dollar amounts increased by 64%.
In addition, it increased as a percentage of operating revenue between the
fiscal years ended March 31, 2004 and 2003. The increase in actual dollar
amounts in fiscal 2004 was primarily due to increased salaries due to an
increase in personnel, payments of additional commissions as a result of higher
volumes, and payments of significant bonus compensation based on exceeding
budget goals in the fourth quarter of fiscal 2004. Patent license-related
expenses are typically not included in sales and marketing expense due to the
nature of the licensing process.

        RESEARCH AND DEVELOPMENT EXPENSE

                                            Years Ended March 31,
                                            ---------------------
                                              2004          2003       Change
                                            -------       -------      ------
        (Dollars in Thousands)

        Research and development            $ 1,222       $   789          55%
        Percentage of operating revenues         22%           18%
                                            -------       -------      ------

        Research and development expenses increased 55% to $1,222,000 from
$789,000 for the fiscal years ended March 31, 2004 and 2003. This increase in
research and development expenses was primarily attributable to the payment of
bonus compensation to personnel employed in development based upon exceeding
budget goals. In addition, increased fiscal 2004 expenses over fiscal 2003
reflect a full year of expenses from hiring one additional full-time and one
part-time employee in R&D during the third quarter of fiscal 2003.

        It is more difficult to project the level of expense throughout the
upcoming year, but we anticipate a slight decrease.* We do not currently
anticipate any changes in staffing of the development group, but project the
compensation scheme will generate a less significant bonus in fiscal 2005 as
compared in fiscal 2004.* Nevertheless, changes in the economy or the signing of
new channel partners could lead to hiring additional development resources.*

        GENERAL AND ADMINISTRATIVE

                                            Years Ended March 31,
                                            ---------------------
                                              2004          2003       Change
                                            -------       -------      ------
        (Dollars in Thousands)

        General and administrative          $ 1,765       $ 1,602          10%
        Percentage of operating revenues         32%           37%
                                            -------       -------      ------

        General and administrative expenses increased in actual dollar amounts
by 10% to $1,765,000 from $1,602,000 for the comparable fiscal years ended March
31, 2004 and 2003. This increase is due in large

                                     Page 23
<PAGE>

part to bonus compensation based on exceeding budget goals paid in the fourth
quarter of fiscal 2004. We believe that general and administrative costs may
vary greatly from quarter to quarter in fiscal 2005, based in part on the salary
schemes that may cause salaries to vary dependant on gross revenue and net
income.*

        PATENT EXPENSE

                                           Years Ended March 31,
                                           ---------------------
                                             2004          2003       Change
                                           -------       -------      ------
        (Dollars in Thousands)

        Patents                            $   498       $   375          33%
        Percentage of operating revenues         9%            9%
                                           -------       -------      ------

        The costs associated with licensing patents increased by 33% to $498,000
in fiscal 2004 from $375,000 in fiscal 2003. Patent expenses include the costs
of litigation and negotiations with respect to patent licenses. They tend to
vary significantly between periods depending on the level of activity and the
efforts required to manage cases. Furthermore, we are making greater use of
contingency fees in litigated cases which will likely lead to the amount of fees
being directly affected by the magnitude of the resulting license revenue, if
any.* 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 our patents. Consequently, 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.*

        DEPRECIATION AND AMORTIZATION

        Depreciation expense increased in fiscal 2004 to $65,000 from $46,000 in
fiscal 2003. This increase is due to purchases of additional equipment over the
last year. Amortization of intangible assets due primarily to the acquisitions
of Analyst Financials and WorkWise decreased from $459,000 in fiscal 2003 to
$84,000 in the fiscal 2004. Depreciation expense for fiscal 2005 is not expected
to vary significantly from that experienced in fiscal 2004. Amortization expense
since the third quarter of fiscal 2004 now consists solely of the amortization
of the costs of acquiring patents. While this cost will continue to grow due to
a larger number of patents, these increases should be less than the reduction in
amortization from prior acquisitions.

        OTHER INCOME AND EXPENSE

        Other income net of other expenses totaled $36,000 in fiscal 2004
compared with a net expense for fiscal 2003 of $91,000. The improvement in
fiscal 2004 over fiscal 2003 is primarily the result of greater transaction
gains on foreign currency exchange rates and reduced losses on securities held.

        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 asset and liability
method. Accordingly, a valuation allowance is recorded against the applicable
deferred tax assets and therefore no tax benefit is recorded for fiscal 2003 or
fiscal 2004. A reclassification of assets as between amortizable intangible
assets and non-amortizable goodwill which occurred at the beginning of fiscal
2003 to comply with Financial Accounting Standards Board (FASB) Statement of
Financial Accounting Standards No. 141, "Business Combinations" (SFAS No. 141),
and No. 142, "Goodwill and Other Intangible Assets" (SFAS No. 142) caused a
charge of $18,000 in tax expense during fiscal 2003.

                                     Page 24
<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 2005 as we have a large
carryforward of net operating losses that are not restricted.*

LIQUIDITY AND CAPITAL RESOURCES

        Balances of our cash and cash equivalents at March 31, 2004 stood at
approximately $511,000 compared to approximately $168,000 at March 31, 2003.
Available for sale securities at March 31, 2004 stood at $0 compared to
approximately $19,000 at March 31, 2003.

        The increase in cash and cash equivalents was provided from operations,
which provided net cash of approximately $321,000. During fiscal 2004, we used
approximately $87,000 for investing activities. During fiscal 2004, we
recognized $84,000 in proceeds from the issuance of warrants to Fidelity
National Information Solutions, Inc.

        Total liabilities, excluding deferred revenue of $619,000 and $608,000
at March 31, 2004 and 2003, respectively, were approximately $344,000 at March
31, 2004 compared to approximately $510,000 at March 31, 2003. This decrease is
attributed to normal fluctuations in payables and accruals.

        We believe that our current cash and cash equivalents, and any net cash
provided by operations may be sufficient to meet anticipated cash needs for
working capital and capital expenditures through fiscal 2005. However, our
revenue is unpredictable, and a revenue shortfall could deplete our limited
financial resources. We currently have budgeted to incur losses during the first
half of fiscal 2005, and our efforts to increase our revenue to cover expenses
by mid-year fiscal 2005 may not be successful.* Over the past several years, we
have significantly decreased operating expenses and, as a result, we believe our
profitability will depend on generating sufficient license and other revenues.*
We currently do not have in place a credit facility with any bank or other
lender to cover any cash flow shortfalls. Accordingly, if we experience a
significant revenue decline, 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. 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.**

        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:

        .       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;
        .       raising additional capital to fund continuing operations by
                private placements of equity or debt securities or through the
                establishment of other funding facilities;
        .       forming a joint venture with one or more strategic partners to
                provide additional capital resources to fund operations; and
        .       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 and if we cannot generate sufficient
revenue from operations, 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.**

                                     Page 25
<PAGE>

        During fiscal 2005, 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 our company if patent and software
licenses do not substantially increase quarter-to-quarter during fiscal 2005.**

ITEM 7. FINANCIAL STATEMENTS.

        Financial Statements are listed in the Index to Financial Statements and
filed and included elsewhere herein as a part of this Annual Report on Form
10-KSB.

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

        None

ITEM 8A. CONTROLS AND PROCEDURE

        We maintain disclosure controls and procedures designed to ensure that
information required to be disclosed in our filings under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms. As of the end of the period covered by this Annual Report on Form 10-KSB,
we carried out an evaluation, under the supervision and with the participation
of management, including our Chief Executive Officer/Chief Financial Officer, of
the effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation,
management and our Chief Executive Officer/Chief Financial Officer concluded
that our disclosure controls and procedures are effective.

        During the fourth quarter of fiscal 2004, there have been no changes in
our internal controls over financial reporting or in other factors that could
significantly affect internal controls over financial reporting. However, in
response to the Sarbanes-Oxley Act of 2002, we are continuing a comprehensive
review of our disclosure procedures and internal controls and expect to make
minor modifications and enhancements to these controls and procedures. In
particular, we have had in place a disclosure practices committee since early
2003, and have reviewed and implemented additional internal controls with
respect to our UK operations.

                                     Page 26
<PAGE>

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT

         We have a Code of Ethics that applies to our principal executive
officer/principal financial officer, and others performing similar functions. A
copy of the Code of Ethics is included with this Report as Exhibit 14.

         The other information called for by Part III, Item 9, will be included
in our proxy statement relating to our 2004 annual meeting of shareholders, and
is incorporated herein by reference. The proxy statement will be filed within
120 days of March 31, 2004, our fiscal year end.

ITEM 10. EXECUTIVE COMPENSATION

        Information called for by Part III, Item 10, will be included in our
proxy statement relating to our 2004 annual meeting of shareholders, and is
incorporated herein by reference.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED SHAREHOLDER MATTERS

        Certain information called for by Part III, Item 11, will be included in
our proxy statement relating to our 2004 annual meeting of shareholders, and is
incorporated herein by reference.

EQUITY COMPENSATION PLAN AND WARRANT GRANT INFORMATION

        The following table gives information as of March 31, 2004, the end of
the our most recently completed fiscal year, about shares of our common stock
that may be issued upon the exercise of options and rights under our equity
compensation plans and option and warrant grants not covered under our equity
compensation plans, described in the footnotes following the table below. For
additional information on our stock option plans, see Note 11, "Shareholders'
Equity," to our Consolidated Financial Statements for the fiscal year ended
March 31, 2004 included in this report.

<TABLE>
<CAPTION>
                                  (a)                 (b)                   (c)                (d)
                             No. of Shares         Weighted
                              to be Issued      Average Exercise
                            Upon Exercise of        Price of                             Total of Shares
                              Outstanding         Outstanding          No. of Shares       Reflected in
                           Options, Warrants   Options, Warrants       Available for         Columns
   Plan Category               and Rights         and Rights       Future Issuance (1)     (a) and (c)
   -------------           -----------------   -----------------   -------------------   ---------------
<S>                             <C>            <C>                       <C>                  <C>
Equity Compensation
Plans Approved by
Shareholders (2)                319,625        $      1.31               254,750              574,375

Equity Compensation
Plans and Warrant Grants
Not Approved
by Shareholders (3)             296,000        $      1.36                    --              296,000
                           -------------                           -------------         ------------
  TOTAL                         615,625        $      1.33               254,740              870,375
                           =============                           =============         ============
</TABLE>

                                     Page 27
<PAGE>

----------
(1)     Excludes from this calculation the number of shares reflected in
        Column (a).
(2)     Consists of our 1994 Stock Option Plan, and Directors' Nonqualified
        Stock Option Plan.
(3)     Consists of:
        (i)     a fully-vested performance-based option to purchase 75,000
                shares of common stock granted to Mr. Osenbaugh in November 1997
                (50% of which vested when the closing price of our common stock
                was at $2.00 or more for 10 consecutive days, and 50% of which
                vested when the closing price of our common stock was at $3.00
                or more for 10 consecutive days);
        (ii)    a currently unvested performance-based option to purchase 50,000
                shares of common stock granted to Mr. Osenbaugh in February 1999
                which vests on the earlier of when the closing price of our
                common stock is $5.00 or more for 10 consecutive days, or
                February 2006, if Mr. Osenbaugh is then in our employment;
        (iii)   a currently unvested performance-based option to purchase 50,000
                shares of common stock granted to Mr. Osenbaugh in November 1999
                which vests on the earlier of when the closing price of our
                common stock is $5.00 or more for 10 consecutive days, or
                November 2006, if Mr. Osenbaugh is then in our employment;
        (iv)    warrants to purchase 21,000 shares of common stock granted to
                various of our service providers in April 1999 in consideration
                for services performed, exercisable at $1.00 per share (all of
                which warrants subsequently expired in April 2004 without being
                exercised); and
        (v)     fully-vested warrants to purchase 100,000 shares of common stock
                granted to one of our development partners in March 2003 in
                consideration for an $84,000 payment, exercisable at $1.62 per
                share and which expire in March 2007.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        Information called for by Part III, Item 12, will be included in our
proxy statement relating to our 2004 annual meeting of shareholders, and is
incorporated herein by reference.

                                     Page 28
<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      (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)   Form of Indemnification Agreement with directors and officers
10.6      (6)   Form of Distributorship Agreement
10.7      (1)   Solution Provider Agreement with Microsoft Corporation dated
                September 23, 1994
10.8A     (3)   Office Lease Agreement dated September 8, 1995, as amended, with
                G&W Investment Partners
10.8B     (4)   Amendment to Office Lease Agreement dated March 20, 1999, with
                G&W Investment Partners
10.8C     (5)   Amendment to Office Lease Agreement dated March 10, 2000 with
                MONY Life Insurance Company
10.9      (6)   Form of WorkWise Reseller Marketing Agreement
14        **    Code of Ethics for Financial Officers
21.1      (6)   Subsidiaries of Timeline, Inc
23.1      **    Consent of Independent Registered Public Accounting Firm
31.1      **    Certification by Charles R. Osenbaugh, Chief Executive Officer
                and Chief Financial Officer, pursuant to Rule 13a-14(a),
                pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1      **    Certification by Charles R. Osenbaugh, Chief Executive Officer
                and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350,
                as adopted pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002

----------
**      Filed as an exhibit to this annual report on Form 10-KSB.
(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, 1997.
(4)     Incorporated herein by reference from Item 13 of Company's Form 10-KSB
        for the year ended March 31, 1999.
(5)     Incorporated herein by reference from Item 13 of Company's Form 10-KSB
        for the year ended March 31, 2000.
(6)     Incorporated herein by reference from Item 27 of the Company's
        Registration Statement on Form SB-2 filed on June 15, 2001.

        (b)     Reports on Form 8-K

        We filed a report on Form 8-K on February 13, 2004, reporting that a
news release was issued on February 12, 2004 announcing our financial results
for the fiscal 2004 third quarter ended December 31, 2003.

                                     Page 29
<PAGE>

        We filed a report on Form 8-K on February 18, 2004, announcing our
entering into a settlement agreement with Cognos Inc. and its U.S.-based
subsidiary, Cognos Corporation, with respect to our patent infringement lawsuit.

ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES

        Information called for by Part III, Item 14, will be included in our
proxy statement relating to our 2004 annual meeting of shareholders, and is
incorporated herein by reference.

                                     Page 30
<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 23, 2004

        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
               ---------                       ----------              ----

      /s/ Charles R. Osenbaugh             Director, President     June 23, 2004
-------------------------------------   Chief Executive Officer
        Charles R. Osenbaugh            Chief Financial Officer
                                             and Treasurer



       /s/ Frederick W. Dean                    Director           June 23 2004
-------------------------------------   Executive Vice President
         Frederick W. Dean


       /s/ Donald K. Babcock                    Director           June 23, 2004
-------------------------------------
         Donald K. Babcock


        /s/ Kent L. Johnson                     Director           June 23, 2004
-------------------------------------
          Kent L. Johnson


          /s/ Terry Harvey                      Director           June 23, 2004
-------------------------------------
              Terry Harvey

                                     Page 31
<PAGE>

                                 TIMELINE, INC.

                            Form 10-KSB Annual Report

                          Index to Financial Statements

                                                                          Page
                                                                          ----

Report of Independent Registered Public Accounting Firm                    F-2

Consolidated Financial Statements:

   Consolidated balance sheets as of March 31, 2004 and 2003               F-3

   Consolidated statements of operations for the years ended
    March 31, 2004 and 2003                                                F-4

   Consolidated statements of shareholders' equity and comprehensive
    loss for the years ended March 31, 2004 and 2003                       F-5

   Consolidated statements of cash flows for the years ended
    March 31, 2004 and 2003                                                F-6

Notes to Consolidated Financial Statements                                 F-7

                                    Page F-1
<PAGE>

             Report of Independent Registered Public Accounting Firm

The Board of Directors of
Timeline, Inc.:

We have audited the accompanying consolidated balance sheets of Timeline, Inc.
and subsidiaries (the Company) as of March 31, 2004 and 2003, and the related
consolidated statements of operations, shareholders' equity and comprehensive
loss, and cash flows for the years then ended. These consolidated 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 audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide 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, 2004 and 2003, and the results of their operations
and their cash flows for the years then ended in conformity with U.S. generally
accepted accounting principles.

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
has an accumulated deficit at March 31, 2004. These factors 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

May 9, 2004
Seattle, Washington

                                    Page F-2
<PAGE>

                                 TIMELINE, INC.
                           CONSOLIDATED BALANCE SHEETS
                             MARCH 31, 2004 AND 2003

                                     ASSETS

                                                         2004          2003
                                                     ------------  ------------
CURRENT ASSETS:
  Cash and cash equivalents                          $    511,483  $    167,908
  Marketable securities - available for sale                    -        19,486
  Accounts receivable net of allowance of
   $12,326 and $10,164                                    423,085       590,859
  Prepaid expenses and other current assets               171,456       147,239
                                                     ------------  ------------
    Total current assets                                1,106,024       925,492
PROPERTY AND EQUIPMENT, net of accumulated
  depreciation of $875,625 and $818,906                    74,761       100,099
CAPITALIZED SOFTWARE, net of accumulated
 amortization of $1,002,865 and $817,341                        -       185,524
CAPITALIZED PATENTS, net of accumulated
 amortization of $60,069 and $41,229                      253,932       223,725
INTANGIBLE ASSETS, net of accumulated amortization
 of $969,981 and $886,442                                       -        83,539
GOODWILL, net of accumulated amortization of
 $123,938 and $123,938                                     70,183        70,183
                                                     ------------  ------------
    Total assets                                     $  1,504,900  $  1,588,562
                                                     ============  ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                   $     46,589  $     32,844
  Accrued expenses                                        297,570       477,056
  Deferred revenues                                       619,036       608,301
                                                     ------------  ------------
    Total current liabilities                             963,195     1,118,201
                                                     ------------  ------------

SHAREHOLDERS' EQUITY:
  Common stock, $.01 par value, 20,000,000 shares
   authorized, 4,178,498 and 4,165,998 issued and
   outstanding                                             41,785        41,660
  Additional paid-in capital                           10,564,347    10,465,478
  Accumulated other comprehensive loss                    (97,433)      (47,459)
  Accumulated deficit                                  (9,966,994)   (9,989,318)
                                                     ------------  ------------
    Total shareholders' equity                            541,705       470,361
                                                     ------------  ------------
    Total liabilities and shareholders' equity       $  1,504,900  $  1,588,562
                                                     ============  ============

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

                                    Page F-3
<PAGE>

                                 TIMELINE, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                   FOR THE YEARS ENDED MARCH 31, 2004 AND 2003

                                                         2004          2003
                                                     ------------  ------------

REVENUE:
  Software license                                   $  1,418,788  $  1,208,881
  Patent license                                        1,900,000     1,074,000
  Maintenance                                           1,271,948     1,143,027
  Consulting and other                                    850,506       902,367
                                                     ------------  ------------
    Total revenues                                      5,441,242     4,328,275

COST OF REVENUES:
  Software license                                        185,524       207,332
  Patent license                                           18,840        15,172
  Maintenance, consulting and other                       486,463       402,190
                                                     ------------  ------------
    Total cost of revenues                                690,827       624,694
                                                     ------------  ------------
    Gross profit                                        4,750,415     3,703,581
                                                     ------------  ------------

OPERATING EXPENSES:
  Sales and marketing                                   1,130,810       690,116
  Research and development                              1,222,360       788,694
  General and administrative                            1,764,515     1,601,570
  Patents                                                 498,024       374,625
  Depreciation                                             65,218        45,733
  Amortization of intangibles and goodwill                 83,539       459,235
                                                     ------------  ------------
    Total operating expenses                            4,764,466     3,959,973
                                                     ------------  ------------
    Loss from operations                                  (14,051)     (256,392)
                                                     ------------  ------------

OTHER INCOME (EXPENSE):
  Realized loss on and impairment of marketable
   securities - available for sale                        (11,834)     (129,244)
  Interest income and other                                48,209        38,733
                                                     ------------  ------------
    Total other income (expense)                           36,375       (90,511)
                                                     ------------  ------------
    Income (loss) before income taxes                      22,324      (346,903)
  Income tax provision                                          -       (18,416)
                                                     ------------  ------------
    Net income (loss)                                $     22,324  $   (365,319)
                                                     ============  ============
Basic net income (loss) per share                    $       0.01  $      (0.09)
                                                     ============  ============
Diluted net income (loss) per share                  $       0.01  $      (0.09)
                                                     ============  ============
Shares used in calculation of basic net income
 (loss) per share                                       4,177,542     4,127,236
                                                     ============  ============
Shares used in calculation of diluted net income
 (loss) per share                                       4,186,038     4,127,236
                                                     ============  ============

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

                                    Page F-4
<PAGE>

                                 TIMELINE, INC.
     CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE LOSS
                   FOR THE YEARS ENDED MARCH 31, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                                         Accumulated
                                                   Common Stock            Additional       Other                         Total
                                           ----------------------------     Paid-in     Comprehensive   Accumulated   Shareholders'
                                               Shares         Amount        Capital     (Loss) Income     Deficit         Equity
                                           -------------  -------------  -------------  -------------  -------------  -------------
<S>                                            <C>        <C>            <C>            <C>            <C>            <C>
BALANCE, March 31, 2002                        4,153,498  $      41,535  $  10,448,488  $      17,107  $  (9,623,999) $     883,131
                                           =============  =============  =============  =============  =============  =============
  Stock-based compensation                        12,500  $         125  $      16,990  $           -  $           -  $      17,115
  Net loss                                             -              -              -              -       (365,319)      (365,319)
  Change in unrealized gain (loss) on
   available for sales securities, net                 -              -              -         (7,540)             -         (7,540)
  Foreign currency translation adjustment
                                                       -              -              -        (57,026)             -        (57,026)
                                                                                                                      -------------
    Total comprehensive loss                           -              -              -              -              -       (429,885)
                                           -------------  -------------  -------------  -------------  -------------  -------------
BALANCE, March 31, 2003                        4,165,998  $      41,660  $  10,465,478  $     (47,459) $  (9,989,318) $     470,361
                                           =============  =============  =============  =============  =============  =============
  Stock-based compensation                        12,500  $         125  $      14,875  $           -  $           -  $      15,000
  Warrants issued                                      -              -         83,994              -              -         83,994
  Net income                                           -              -              -              -         22,324         22,324
  Change in unrealized gain (loss) on
   available for sales securities, net                 -              -              -          7,540              -          7,540
  Foreign currency translation adjustment
                                                       -              -              -        (57,514)             -        (57,514)
                                                                                                                      -------------
    Total comprehensive loss                           -              -              -              -              -        (27,650)
                                           -------------  -------------  -------------  -------------  -------------  -------------

BALANCE, March 31, 2004                        4,178,498  $      41,785  $  10,564,347  $     (97,433) $  (9,966,994) $     541,705
                                           =============  =============  =============  =============  =============  =============
</TABLE>

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

                                    Page F-5
<PAGE>

                                 TIMELINE, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   FOR THE YEARS ENDED MARCH 31, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                        2004           2003
                                                                    ------------   ------------
<S>                                                                 <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                                 $     22,324   $   (365,319)
  Adjustments to reconcile net income (loss) to net cash provided
   by operating activities:
    Depreciation and amortization                                        353,121        727,472
    Gain on disposal of property and equipment                              (426)             -
    Stock-based compensation                                              15,000         17,115
    Realized loss on and impairment of marketable securities -
     available for sale                                                   11,834        129,244
    Income taxes                                                               -         18,416
    Changes in operating assets and liabilities:
      Accounts receivable                                                199,328         66,353
      Prepaid expenses and other current assets                           (1,552)           611
      Accounts payable                                                   (42,944)      (490,306)
      Accrued expenses                                                  (199,813)        (6,219)
      Deferred revenues                                                  (36,095)        12,413
                                                                    ------------   ------------
          Net cash provided by operating activities                      320,777        109,780
                                                                    ------------   ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment                                     (38,432)       (24,956)
  Proceeds from sale of property and equipment                               426              -
  Investment in patents                                                  (49,047)       (51,522)
  Proceeds from sale of marketable securities - available for sale             -         46,860
                                                                    ------------   ------------
      Net cash used in investing activities                              (87,053)       (29,618)
                                                                    ------------   ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Warrants issued to FNIS                                                 83,994              -
                                                                    ------------   ------------
      Net cash provided by financing activities                           83,994              -
                                                                    ------------   ------------
EFFECT OF FOREIGN EXCHANGE RATE FLUCTUATIONS                              25,857          4,790
NET CHANGE IN CASH AND CASH EQUIVALENTS                                  343,575         84,952
CASH AND CASH EQUIVALENTS, beginning of year                             167,908         82,956
                                                                    ------------   ------------
CASH AND CASH EQUIVALENTS, end of year                              $    511,483   $    167,908
                                                                    ============   ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid for interest                                            $      6,142   $     13,042
</TABLE>

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

                                    Page F-6
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                 MARCH 31, 2004

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 also 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. Additionally, the Company licenses its patent library to other software
vendors.

OPERATIONS

        The Company has historically suffered recurring operating losses and
negative cash flows from operations. As of March 31, 2004, the Company had net
working capital of $142,829 and had an accumulated deficit of $9,966,994, with
total shareholders' equity of $541,705. 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. While management believes that current cash and cash equivalent
balances, and any net cash provided by operations, may provide adequate
resources to fund operations at least until March 31, 2005, this may not be
adequate. Management is therefore contemplating a number of alternatives to
enable the Company to continue operating including, but not limited to:

        .       engaging a financial advisor to explore strategic alternatives,
                which may include a merger, asset sale, joint ventures or
                another comparable transaction;
        .       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;
        .       forming a joint venture with a strategic partner or partners to
                provide additional capital resources to fund operations; and
        .       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 F-7
<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 to 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 loss in shareholders'
equity. Gains and losses from foreign currency transactions are included in the
consolidated statements of operations.

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 assessments impacting revenue
recognition, the nature of declines in the value of marketable securities,
collectibility of accounts receivable, valuation of capitalized patents, and
valuation of intangible assets and goodwill.

CASH AND CASH EQUIVALENTS

        The Company considers all highly liquid investments with a purchased
maturity of three months or less to be cash and cash equivalents. Cash
equivalents are valued at cost, which approximates fair value, due to the
short-term nature of these investments. Cash equivalents as of March 31, 2004
were $425,112 and consisted entirely of money market funds investments.

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.

        The Company has accounted for these shares as available for sale
securities as required under Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments: Debt and Equity Securities" (SFAS No.
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 accumulated other comprehensive loss
on the Company's balance sheet. Realized gains and losses on sales of these
securities are determined on the specific identification method and included in
results of operations. During fiscal 2003, the Company sold 52,300 of the Sagent
shares resulting in realized losses of $6,040. As of March 31, 2003, unrealized
losses excluded from results of operations and reported as a component of
accumulated other comprehensive loss were $7,540. The Company accumulated $2,334
of additional unrealized holding losses during fiscal 2004. During the fourth
quarter of fiscal 2004, the Company determined, subsequent to the distribution
discussed below, that the securities had no longer any value to the Company and
all unrealized losses on securities were eliminated and recorded as a component
of realized loss on and impairment of marketable securities - held for sale in
the consolidated statement of operations.

        In fiscal 2003, the Company determined that declines in the fair value
of the securities from a new accounting basis as established in fiscal 2002 were
other than temporary. Accordingly, the Company recorded a loss on the impairment
of the available for sale securities of $123,204 in the second fiscal quarter of
2003, and established another new accounting basis.

                                    Page F-8
<PAGE>

        The Company subsequently determined in the current year, upon
announcement of Sagent's liquidation, that further declines in the fair value of
the securities from such new accounting basis as established in the second
fiscal quarter of 2003 were other than temporary. Accordingly, the Company
recorded a loss on the impairment of available for sale securities of $11,834 in
the fourth quarter of fiscal 2004.

        The Company received notification of a distribution of $15,080 for its
remaining shares held as of the record date of March 31, 2004, which
distribution was received subsequent to year-end. The Company has recorded this
distribution receivable in prepaid expenses and other current assets in the
consolidated balance sheet.

ACCOUNTS RECEIVABLE

        Accounts receivable are recorded at the invoiced amount and do not bear
interest. The allowance for doubtful accounts is the Company's best estimate of
the amount of probable credit losses in the Company's existing accounts
receivable. Management determines the allowance for doubtful accounts based on
known troubled accounts and historical experience. Account balances are
written-off against the allowance when the Company deems specific customer
amounts to be uncollectible.

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, over 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, "Accounting for the Costs of
Computer Software to be Sold, Leased, or otherwise Marketed" (SFAS 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 2003 and 2004, the Company did not capitalize any software development
costs. Amortization expense for fiscal 2004 and 2003 was $185,524 and $207,332,
respectively. This amortization is included in cost of revenues in the
accompanying statements of operations.

        At January 1, 2003, the Company reclassified an asset from intangible
assets to capitalized software. This reclassification reflects the release of a
version of the Company's Analyst software that incorporated the core technology
obtained in the December 2000 acquisition of WorkWise Software, Inc. During the
year ended March 31, 2003, such release met the criteria to establish
technological feasibility. Consequently, effective January 1, 2003, $554,457 in
cost and $415,842 of accumulated amortization were reclassified as capitalized
software and accumulated amortization of capitalized software, respectively. The
remaining unamortized balance was amortized on a straight line basis over the
remaining term of the original estimated life of 36 calendar months. At March
31, 2004, the capitalized software was fully amortized.

        All research and development costs are expensed as incurred.

                                    Page F-9
<PAGE>

PATENTS

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

INTANGIBLE ASSETS AND GOODWILL

        Intangible assets historically consisted 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. Goodwill
represents the excess of acquisition cost over the fair value of net
identifiable assets acquired.

        Amortization of intangible assets was $83,539 and $459,235 in the fiscal
years ended March 31, 2004 and March 31, 2003, respectively.

        The Company performed its annual goodwill impairment test as required by
Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" (SFAS No. 142) during its fiscal fourth quarter of 2004 and
2003. The results of these tests did not give any indication that goodwill was
potentially impaired, and accordingly no amounts have been recorded for goodwill
impairment in fiscal 2004 or fiscal 2003.

        Carrying amounts of goodwill as of March 31 are as follows:

                                      2004         2003
                                   ----------   ----------
        Gross carrying amount      $  194,121   $  194,121

        Accumulated amortization      123,938      123,938
                                   ----------   ----------
        Net book value             $   70,183   $   70,183
                                   ==========   ==========

IMPAIRMENT OF LONG-LIVED ASSETS

        In accordance with Statement of Financial Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS No. 144),
the Company evaluates long-lived assets, including intangible assets other than
goodwill, for impairment whenever events or changes in circumstances indicate
that the carrying value of an asset may not be recoverable based on estimated
undiscounted cash flows attributable to that asset. The amount of any impairment
is measured as the difference between the carrying value and the fair value of
the impaired asset. The Company does not currently believe that any of its
long-lived assets are impaired.

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

                                    Page F-10
<PAGE>

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 and a license
key is issued.

        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 fee 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.

        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 or reseller's contractual reporting obligations.

        In all other cases, the Company recognizes revenue when delivery to the
end user has occurred and the amount due from the reseller is fixed and
determinable. Most resellers are required to contact Timeline directly to
request Timeline provide a "key" to the reseller's customer that allows the
software to operate. In those situations, Timeline invoices the reseller at the
time the key is released to the customer indicating the software has been loaded
on a unique customer machine. Some resellers have the right to distribute keys
to their own customers, in which case the reseller distributes a copy of the
software and then provides a "key" to the end user. The reseller is
contractually required to have a binding license or purchase order in

                                    Page F-11
<PAGE>

place with the end user before the end user is allowed to physically load the
Timeline software on a unique machine. These resellers report to Timeline on a
monthly or quarterly basis the number and dollar amount of licenses they have
distributed in the prior period; i.e. the 'keys' utilized. Based upon that
report, Timeline then invoices the reseller. Timeline records revenue at the
time of invoice for the period covered. There are no return rights offered to
either the reseller or the end user.

        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.

        With regard to revenue generated from the licensing of patents, the
Company recognizes revenue when a patent license agreement is signed,
collectibility is probable and the amount of payment is fixed and determinable,
consistent with SOP 97-2 and Staff Accounting Bulletin No. 104, "Revenue
Recognition" (SAB No. 104).

STOCK-BASED COMPENSATION

        The Company applies the intrinsic value based method of accounting
prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees"
(ABP No. 25), and related interpretations including FASB Interpretation No. 44,
"Accounting for Certain Transactions involving Stock Compensation, an
interpretation of APB Opinion No. 25" (FIN No. 44), to account for its fixed
plan stock options. Under this method, compensation expense is recorded on the
date of grant only if the current market price of the underlying stock exceeded
the exercise price. Compensation costs for fixed awards with pro rata vesting
are recognized using the straight-line method. SFAS No. 123, "Accounting for
Stock Based Compensation" (SFAS No. 123), established accounting and disclosure
requirements using a fair value based method of accounting for stock based
employee compensation plans. As allowed by SFAS No. 123, the Company has elected
to continue to apply the intrinsic-value-based method of accounting described
above, and has adopted only the disclosure requirements of SFAS No. 123. The
following table illustrates the effect on net loss if the fair-value-based
method had been applied to all outstanding and unvested awards in each period:

                                                         2004          2003
                                                     -----------   -----------

Net income (loss), as reported                       $    22,324   $  (365,319)
Add stock-based employee compensation expense
 included in reported net income (loss)                   15,000        17,115
Deduct total stock-based employee compensation
 expense determined under fair-value-based method
 for all awards                                          (58,581)      (73,767)
                                                     -----------   -----------
Pro forma net loss                                   $   (21,257)  $  (421,971)
                                                     ===========   ===========
Basic and diluted net loss per share - as reported   $     (0.01)  $     (0.09)
                                                     ===========   ===========
Basic and diluted net loss per share - pro forma     $     (0.01)  $     (0.10)
                                                     ===========   ===========

        Options and warrants issued to non employees are accounted for using the
fair value method of accounting as prescribed by SFAS No. 123, using the
Black-Scholes option-pricing model.

        The fair value of each option grant is established on the date of grant
using the Black-Scholes option-pricing model. No options were granted in fiscal
2004. For fiscal 2003, the following weighted-average

                                    Page F-12
<PAGE>

assumptions were used: zero dividend yield; expected volatility of 98%;
risk-free interest rates of 4.00%, and expected lives of five years. All options
granted during fiscal 2003 were done so at prices above fair market value on the
date of grant. The weighted-average grant date fair value of options granted
during fiscal 2003 was $0.32.

NET INCOME (LOSS) PER COMMON SHARE

        Basic and diluted income (loss) per share is the net income (loss)
divided by the weighted average number of shares outstanding during the period.
The calculation of weighted average shares in fiscal 2003 excludes 39,231
outstanding shares which were subject to vesting conditions for fiscal 2003
until the shares vested. These shares vested on March 22, 2003, and have been
included in the calculation from that date forward. The effect of including
outstanding options and warrants is anti-dilutive in fiscal 2003.

        Shares issuable pursuant to stock options and warrants that have not
been included in the calculation of net income (loss) per share because they are
antidilutive totaled 607,129 and 614,279 in fiscal 2004 and 2003, respectively.

COMPREHENSIVE LOSS

        Accumulated other comprehensive loss consisted of the following at March
31, 2004 and 2003:

                                             2004            2003
                                         ------------    ------------
        Unrealized loss on available
         for sale securities             $          -    $     (7,540)
        Foreign currency translation          (97,433)        (39,919)
                                         ------------    ------------
                                         $    (97,433)   $    (47,459)
                                         ============    ============

3. MAJOR CUSTOMERS:

        During fiscal 2004, one customer comprised approximately 10% of the
Company's total revenue, other than revenue generated by licensing its patents.
During fiscal 2003, two customers combined comprised approximately 15% of the
Company's total revenue other than revenue generated by licensing patents. At
March 31, 2004, approximately 21% of the Company's accounts receivable balance
was due from three of the Company's customers. At March 31, 2003, approximately
29% of the Company's accounts receivable balance was due from two of the
Company's customers.

4. VALUATION AND QUALIFYING ACCOUNTS:

                               Balance at    Charged to               Balance at
      Allowance for           Beginning of    Costs and                  End
    Doubtful Accounts             Year        Expenses    Writeoffs     of Year
-------------------------     ------------   ----------   ---------   ----------
Year ended March 31, 2003       $ 73,599       $ 5,484    $ (68,919)   $ 10,164
Year ended March 31, 2004       $ 10,164       $ 2,162    $       -    $ 12,326

                                    Page F-13
<PAGE>

5. PROPERTY AND EQUIPMENT:

        Property and equipment consists of the following at March 31:

                                               2004           2003
                                           ------------   ------------
Computer equipment                         $    781,064   $    742,142
Office equipment                                169,322        176,863
                                           ------------   ------------
                                                950,386        919,005
Less - accumulated depreciation                (875,625)      (818,906)
                                           ------------   ------------
Total property and equipment, net of
 accumulated depreciation                  $     74,761   $    100,099
                                           ============   ============

6. ACCRUED EXPENSES:

        Accrued expenses consist of the following:

                                           2004           2003
                                       ------------   ------------

Compensation and benefits              $    170,585   $    243,266
Other                                       126,985        233,790
                                       ------------   ------------
Total accrued expenses                 $    297,570   $    477,056
                                       ============   ============

7. INCOME TAXES:

        The Company has determined that the deferred tax assets do not satisfy
the more likely than not criteria set forth in Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (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) are as follows as of
March 31:

                                                        2004           2003
                                                    ------------   ------------
    Deferred tax assets:
      Net operating loss carryforwards              $  2,425,000   $  2,465,000
      Research and experimentation credit                255,000        250,000
      Deferred revenues                                   89,000        207,000
      Capitalized software/patent costs                        -          3,000
      Impairment of available for sale securities              -        136,000
      Other                                               71,000         23,000
                                                    ------------   ------------

    Gross deferred tax assets                          2,840,000      3,084,000
    Less - valuation allowance                        (2,754,000)    (3,084,000)
                                                    ------------   ------------
                                                          86,000              -
    Deferred tax liabilities:
      Capitalized software/patent costs                  (86,000)             -
                                                    ------------   ------------
        Net deferred tax assets                     $          -   $          -
                                                    ============   ============

        The net operating loss carryforwards of approximately $5.7 million and
research and experimentation credit carryforwards of approximately $255,000 in
the United States begin expiring in 2005.

                                    Page F-14
<PAGE>

The net operating loss carryforwards of approximately 1.5 million British Pounds
can be carried forward indefinitely.

        The valuation allowance decreased by $330,000 during the year ended
March 31, 2004 and increased by $59,000 during the year ended March 31, 2003.
The fiscal 2004 decrease is attributable to an adjustment to net operating loss
carryforwards. An amended filing is anticipated for fiscal years 2001 through
2003 to remove tax amortization erroneously taken for acquisitions that occurred
in fiscal 2001. Additionally, in fiscal 2004, taxable income was generated and
will be offset by carryforwards.

        The Company recorded tax expense of $0 and $18,416 in fiscal 2004 and
fiscal 2003, respectively.

        The difference between the expected benefit computed using the statutory
tax rate of approximately 34% in fiscal 2003 and tax expense of $18,416
disclosed above is the result of (1) a non-cash charge to increase our valuation
allowance in connection with our adoption of SFAS No. 142, which resulted in our
not being able to utilize the deferred tax liability related to skilled
workforce which was reclassified to goodwill, and (2) the full valuation
allowance against our net deferred tax assets. In fiscal 2004, no tax expense
was recorded due to the prior establishment of valuation allowances which were
utilized.

8. 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 $8,631 and
$7,609 to the plan during the years ended March 31, 2004 and 2003, respectively.

9. 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 made
matching and discretionary contributions totaling $2,982 and $2,912 to the ESOP
during fiscal 2004 and 2003, respectively.

10. 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 filed a motion for review requesting the
Washington Supreme Court to hear an appeal of the case. In December 2002, review
was denied. On February 14, 2003, the Superior Court entered a new Final
Judgment in accord with the Court of Appeals mandate. The time to file any
further appeals expired prior to March 31, 2003.

        On September 17, 2003, the Company filed an action in the Federal
District Court for the Western District of Washington against Cognos Inc. and
its U.S. subsidiary, Cognos Corporation, alleging patent infringement in the
United States. On February 12, 2004, the Company entered into a settlement

                                    Page F-15
<PAGE>

agreement with Cognos in which it granted to Cognos a license to its patented
technology and Cognos agreed to pay a license fee of $1,750,000. The total
amount was recognized as patent license revenue in the quarter ended March 31,
2004 and is reflected in patent license revenue for the year-ended March 31,
2004.

        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, 2004:

        Fiscal Year ending March 31,

                2005                                 $ 408,414
                2006                                    18,269
                                                     ---------
                Total minimum lease payments         $ 426,683
                                                     =========

        Rent expense amounted to $571,222 and $546,743 for the years ended March
31, 2004 and 2003, respectively. The Company received income under subleased
facilities totaling $41,113 in fiscal 2004. The Company did not receive sublease
income in fiscal year 2003.

11. SHAREHOLDERS' EQUITY:

STOCK OPTIONS

        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 254,750 shares are available for grant as of March 31,
2004. 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 had a 1993 Stock Option Plan (the "Old Plan"), which expired in
September 2003. A total of 132,000 shares of common stock had been reserved for
issuance under the Old Plan. As of September 30, 2003, all options granted under
the Old Plan expired. At March 31, 2004, the Company had granted options and
warrants to purchase 615,625 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, 2004.

        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 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

                                    Page F-16
<PAGE>

date of grant provided that this individual is then employed by the Company.
This option had not vested as of March 31, 2004.

        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, 2004.

        In June 2002, 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 $1.00 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, 2004.

        Options outstanding as of each period are as follows:

<TABLE>
<CAPTION>
                                        Options Granted                   Options Granted
                                        Under the Plans                  Outside the Plans
                               -------------------------------   -------------------------------
                                                   Weighted                          Weighted
                                  Number of         Average        Number of          Average
                                   Options      Exercise Price      Options       Exercise Price
                               --------------   --------------   --------------   --------------
<S>                                   <C>       <C>                     <C>       <C>
Balance, March 31, 2002               359,500   $         1.57          282,629   $         1.54
  Granted                              35,000             1.00                -                -
  Canceled                            (32,325)            1.62          (30,525)            3.64
                               --------------   --------------   --------------   --------------

Balance, March 31, 2003               362,175   $         1.51          252,104             1.29
  Granted                                   -                -                -                -
  Canceled                            (42,550)            3.00          (56,104)            1.51
                               --------------   --------------   --------------   --------------

Balance, March 31, 2004               319,625   $         1.31          196,000   $         1.22
                               ==============   ==============   ==============   ==============
</TABLE>

        Information relating to stock options outstanding and stock options
exercisable at March 31, 2004 is as follows:

<TABLE>
<CAPTION>
                                            Options Outstanding               Options Exercisable
                                   --------------------------------------    ---------------------
                                                  Weighted       Weighted                 Weighted
                                                   Average       Average                  Average
                                     Number       Remaining      Exercise     Number      Exercise
  Range of Exercise Prices         of Shares    Life in Years     Price      of Shares     Price
------------------------------     ---------    -------------    --------    ---------    --------
<S>                                  <C>             <C>         <C>           <C>        <C>
$1.00-$2.88                          511,125         4.55        $   1.25      355,625    $  1.20
$3.57-$6.75                            4,500         1.25            4.63        4,500       4.63
                                   ---------                     --------    ---------    --------
Totals                               515,625         4.52        $   1.28      360,125    $  1.25
                                   =========                     ========    =========    ========
</TABLE>

        At March 31, 2004 and 2003, options to purchase 360,125 and 428,195,
respectively, were exercisable at weighted average exercise prices of $1.25 and
$1.45 per share, respectively.

                                    Page F-17
<PAGE>

WARRANTS

        In March 1999, the Company issued warrants to purchase 21,000 shares of
common stock, with an exercise price of $1.00 per share, to outside consultants
in exchange for services rendered. These warrants had a term of 5 years and
expired in April 2004.

        In April 2003, Fidelity National Information Solutions (Nasdaq:FNIS)
obtained a license to use and sublicense Timeline products to provide financial
reporting and analytics for real estate, lenders and settlement companies.
Additionally, FNIS may sublicense Timeline products and build its own private
label derivative products for its customers. As part of this agreement, FNIS was
issued a warrant to buy up to 100,000 shares of Timeline stock at $1.62 per
share and, upon appropriate notice, to appoint either an observer or member to
the Timeline Board of Directors. The warrants were fully vested upon issuance.
The fair value of each warrant was established on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions: zero dividend yield; expected volatility of 91%; risk-free interest
rate of 2.78%, and a contractual life of 4 years. These warrants expire if not
exercised by April 2007. The aggregate fair value of these warrants was
approximately $84,000 and was recognized as a reduction to license revenue
recognized in the first quarter of fiscal 2004.

12. RELATED PARTY TRANSACTIONS:

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

        In March 2002, two of the Company's officers, Frederick Dean and Michael
Evans, each earned a performance based award of 6,250 shares of Timeline common
stock in March 2002, which were issued in April 2002. The Company recognized
$4,500 of compensation expense in fiscal 2003 related to these awards. In March
2003, Messrs. Dean and Evans each received another performance based award of
6,250 shares of Timeline common stock, which were issued in April 2003. The
Company recognized $15,000 of compensation expense in fiscal 2004 related to
these awards. In March 2004, Mr. Dean and Mr. Evans each received another
performance based award of 6,250 shares of Timeline common stock, which were
issued in May 2004.

        In March 2002, two of the Company's officers, Michael Evans and Craig
Perkins, each borrowed funds from the Company ($6,881 and $6,882, 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 were forgiven in full on March 22, 2003. The Company accounted for
the stock purchase on a variable basis over the one-year term of the note, and
recognized a total of $12,615 of compensation expense in fiscal years 2003
related to this note.

13. SEGMENT INFORMATION:

        The Company follows the requirements of Statement of Financial
Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and
Related Information" (SFAS 131). As defined in SFAS 131, the Company operates in
two reportable segments that are based on geographic business units in the
United States (Timeline) and Europe (Analyst Financials Ltd.). Both segments
generate revenues from the license and support of the Company's software
products. Revenues from other licenses and patent 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 included herein.
During the year ended March 31, 2004 and 2003, the Timeline segment included
intersegment revenues and the Analyst Financials segment included intersegment
expenses that totaled $488,988 and $481,253, respectively. These intersegment
transactions are recorded at market rates as if the transactions occurred with
third parties. The following table summarizes operations by segment during the
fiscal years ended March 31, 2004 and 2003.

                                    Page F-18
<PAGE>

<TABLE>
<CAPTION>
                                                     Year Ended 3/31/04
                                ----------------------------------------------------------
                                                 Analyst
                                  Timeline      Financials    Eliminations        Total
                                ------------    ----------    ------------    ------------
<S>                             <C>              <C>             <C>          <C>
Revenues                        $  4,246,723     1,683,507       (488,988)    $  5,441,242
Operating (loss) income         $    (49,575)       35,524              -     $    (14,051)
Depreciation and amortization   $    140,785         7,972              -     $    148,757
Long lived assets               $    315,503        83,373              -     $    398,876
Total assets                    $  1,147,623       357,277              -     $  1,504,900
</TABLE>

<TABLE>
<CAPTION>
                                                     Year Ended 3/31/03
                                ----------------------------------------------------------
                                                  Analyst
                                  Timeline      Financials    Eliminations        Total
                                ------------    ----------    ------------    ------------
<S>                             <C>              <C>             <C>          <C>
Revenues                        $  3,342,129     1,467,399       (481,253)    $  4,328,275
Operating (loss) income         $    136,269      (392,661)             -     $   (256,392)
Depreciation and amortization   $    163,485       341,483              -     $    504,968
Long lived assets               $    502,847       160,223              -     $    663,070
Total assets                    $  1,023,731       564,831              -     $  1,588,562
</TABLE>

                                    Page F-19