================================================================================

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

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

                                   FORM 10-QSB

                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended                   Commission File Number  1-13524
September 30, 2003

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

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

                        3055 112th Avenue N.E., Suite 106
                               Bellevue, WA 98004
                    (Address of principal executive offices)

                                 (425) 822-3140
                           (Issuer's telephone number)

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
                                                             ---   ---

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

                                                                Outstanding at
            Class                                              October 31, 2003
Common Stock, $.01 Par Value                                      4,178,498


================================================================================
<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

                                 TIMELINE, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                   As of                 As of
                                                                               September 30,           March 31,
                                                                                   2003                  2003
                                                                            --------------------  ------------------
<S>                                                                           <C>                   <C>
                                 ASSETS
                                 ------
CURRENT ASSETS:
  Cash and cash equivalents                                                   $       96,485        $    167,908
  Marketable securities                                                               19,605              19,486
  Accounts receivable, net of allowance for doubtful
    accounts of $10,334 and $10,164                                                  790,587             590,859
  Prepaid expenses and other                                                         137,925             147,239
                                                                            --------------------  ------------------
                  Total current assets                                             1,044,602             925,492

PROPERTY AND EQUIPMENT, net of accumulated
  depreciation of $852,600 and $818,906                                               77,797             100,099

CAPITALIZED SOFTWARE, net of accumulated
  amortization of $956,660 and $817,341                                               46,205             185,524

CAPITALIZED PATENTS, net of accumulated
  amortization of $50,303 and $41,229                                                236,771             223,725

INTANGIBLE ASSETS, net of accumulated
  amortization of $969,981 and $886,442                                                   --              83,539

GOODWILL, net of accumulated amortization
  of $123,938                                                                         70,183              70,183
                                                                            --------------------  ------------------
                  Total assets                                                $    1,475,558        $  1,588,562
                                                                            ====================  ==================

         LIABILITIES AND SHAREHOLDERS' EQUITY
         ------------------------------------
CURRENT LIABILITIES:
  Accounts payable                                                            $      126,983        $     32,844
  Accrued expenses                                                                   471,988             477,056
  Deferred revenues                                                                  612,817             608,301
                                                                             -------------------   -----------------
                  Total current liabilities                                        1,211,788           1,118,201
                                                                             -------------------   -----------------

SHAREHOLDERS' EQUITY:
  Common stock, $.01 par value, 20,000,000 shares
    authorized, 4,178,498 and 4,165,998 shares issued
    and outstanding                                                                   41,785              41,660
  Additional paid-in capital                                                      10,564,347          10,465,478
  Accumulated other comprehensive loss                                               (82,960)            (47,459)
  Accumulated deficit                                                            (10,259,402)         (9,989,318)
                                                                             -------------------   -----------------
                  Total shareholders' equity                                         263,770             470,361
                                                                             -------------------   -----------------

                  Total liabilities and shareholders' equity                  $    1,475,558        $  1,588,562
                                                                             ===================   =================
</TABLE>

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


                                       2
<PAGE>

                                 TIMELINE, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

      For the Three Months and Six Months Ended September 30, 2003 and 2002
                                   (unaudited)

<TABLE>
<CAPTION>
                                                         Three Months Ended                         Six Months Ended
                                                           September 30,                             September 30,
                                                -------------------------------------     -------------------------------------
                                                     2003                 2002                 2003                 2002
                                                ----------------     ----------------     ----------------    -----------------
<S>                                               <C>                  <C>                   <C>                 <C>
REVENUES:
  Software license                                $     449,596        $     258,294         $    890,119        $     529,615
  Patent license                                        150,000            1,049,000              150,000            1,074,000
  Maintenance                                           299,055              273,030              590,772              543,729
  Consulting and other                                  240,411              256,687              450,490              590,412
                                                ----------------     ----------------     ----------------    -----------------
    Total revenues                                    1,139,062            1,837,011            2,081,381            2,737,756

COST OF REVENUES:
  Software license                                       69,659               27,016              139,319               77,864
  Patent license                                          4,642                3,321                9,074                6,426
  Maintenance, consulting and                           107,967              109,944              214,836              225,233
   other
                                                ----------------     ----------------     ----------------    -----------------
    Total cost of revenues                              182,268              140,281              363,229              309,523
                                                ----------------     ----------------     ----------------    -----------------
      Gross profit                                      956,794            1,696,589            1,718,152            2,428,233

OPERATING EXPENSE:
  Sales and marketing                                   250,903              155,332              526,184              338,742
  Research and development                              242,149              207,176              442,075              414,316
  General and administrative                            430,573              384,550              888,634              812,888
  Patents                                                25,059              228,557               44,750              300,714
  Depreciation                                           16,182               12,542               33,289               25,053
  Amortization of intangibles                                --              124,327               83,539              251,364
                                                ----------------     ----------------     ----------------    -----------------
    Total operating expenses                            964,866            1,112,484            2,018,471            2,143,077
                                                ----------------     ----------------     ----------------    -----------------
    (Loss)/income from operations                        (8,072)             584,246             (300,319)             285,156
                                                ----------------     ----------------     ----------------    -----------------

OTHER (EXPENSE) INCOME:
  Loss on sale of securities                                 --             (123,204)                  --             (129,244)
  Interest income and other                               3,964               14,918               30,235               37,898
                                                ----------------     ----------------     ----------------    -----------------
    Total other expense                                   3,964             (108,286)              30,235              (91,346)
                                                ----------------     ----------------     ----------------    -----------------
    (Loss)/income before income taxes
                                                         (4,108)             475,960             (270,084)             193,810
  Provision for income tax                                   --                   --                   --              (18,416)
                                                ================     ================     ================    =================
    Net (loss)/income                             $      (4,108)       $     475,960         $   (270,084)       $     175,394
                                                ================     ================     ================    =================

Basic net earnings (loss) per
  common share                                           $(0.00)              $ 0.12               $(0.06)              $ 0.04
                                                ================     ================     ================    =================
Diluted net earnings (loss) per
  common and common equivalent
  share                                                  $(0.00)              $ 0.11               $(0.06)              $ 0.04
                                                ================     ================     ================    =================
Shares used in calculation of basic
  earnings (loss) per share                           4,178,498            4,126,677            4,176,585            4,125,857
                                                ================     ================     ================    =================
Shares used in calculation of
  diluted earnings (loss) per share                   4,178,498            4,165,998            4,176,585            4,165,178
                                                ================     ================     ================    =================
</TABLE>

   The accompanying notes are an integral part of these financial statements


                                       3
<PAGE>

                                 TIMELINE, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

              For the Six Months Ended September 30, 2003 and 2002
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                              2003                 2002
                                                                        -----------------    -----------------
<S>                                                                       <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net cash used in operating activities                                   $   (125,332)        $    (55,150)
                                                                        -----------------    -----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment                                           (10,613)                  --
  Capitalized patent & software development costs                              (22,120)             (25,575)
  Proceeds from sale of short-term investments                                      --               46,861
                                                                        -----------------    -----------------
    Net cash (used in) provided by investing activities                        (32,733)              21,286
                                                                        -----------------    -----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Issuance of common stock warrants                                             83,994                   --
                                                                        -----------------    -----------------
    Net cash provided by financing activities                                   83,994                   --
                                                                        -----------------    -----------------

EFFECT OF FOREIGN EXCHANGE RATE                                                  2,648                3,655

NET CHANGE IN CASH AND CASH EQUIVALENTS                                        (71,423)             (30,209)

CASH AND CASH EQUIVALENTS, beginning of period                                 167,908               82,956
                                                                        -----------------    -----------------

CASH AND CASH EQUIVALENTS, end of period                                  $     96,485         $     52,747
                                                                        =================    =================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
  Cash paid for interest during year                                      $      3,803         $     11,335

Non-cash transactions:
  Unrealized loss on available for sale securities                        $        119         $         --
</TABLE>


    The accompanying notes are an integral part of these financial statements


                                       4
<PAGE>

                                 TIMELINE, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                               September 30, 2003

1. THE COMPANY

Organization

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

Operations

The Company has historically suffered recurring operating losses and negative
cash flows from operations. As of September 30, 2003, the Company had negative
net working capital of approximately $167,000 and had an accumulated deficit of
approximately $10,259,000 with total shareholders' equity of approximately
$264,000. These condensed consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of America, assuming that the Company will continue as a going concern. Our
auditors added an explanatory paragraph to their opinion on our 2003 financial
statements stating that there was substantial doubt about our ability to
continue as a going concern. Management believes that current cash and cash
equivalent balances are adequate resources to fund operations, as well as costs
and expenses of any patent litigation we undertake, through the balance of
fiscal 2004. Management is contemplating a number of alternatives to enable the
Company to continue operating including, but not limited to:

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

None of these potential alternatives may be available to the Company, or may
only be available on unfavorable terms. 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 and/or cease operations.

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.


                                       5
<PAGE>

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim Financial Statements

The accompanying condensed consolidated financial statements of the Company are
unaudited. In the opinion of the Company's management, the financial statements
include all adjustments, consisting only of normal recurring adjustments,
necessary to state fairly the financial information set forth in this Report in
conformity with accounting principles generally accepted in the United States of
America. Results of operations for the six-month periods ended September 30,
2003 are not necessarily indicative of future financial results.

Certain notes and other information have been condensed or omitted from the
interim financial statements presented in this Quarterly Report on Form 10-QSB.
Accordingly, these financial statements should be read in conjunction with the
Company's annual financial statements for the year ended March 31, 2003, as
previously reported in the Company's Form 10-KSB.

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. Reclassifications have been made to the fiscal 2003 amounts to
conform to the fiscal 2004 presentation.

Marketable Securities

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

The Company has accounted for these securities as available for sale securities
under Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" (SFAS 115). Accordingly,
these securities are stated at fair 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. At
September 30, 2003 and March 31, 2003, the Company owned 150,800 shares of
Sagent common stock, which had a fair market value of $19,605 and $19,486,
respectively.

The Company periodically reviews the carrying value of its available for sale
securities to determine if declines in the fair value of securities are other
than temporary. Factors considered by the Company in its review include the time
period and extent for which the quoted market prices were less than the
accounting basis, the issuing company's financial condition and overall industry
health. In performing its review in the second quarter of fiscal 2003, the
Company determined that declines in the fair value 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 and established a new
accounting basis in the securities.


                                       6
<PAGE>

The net six month change in the unrealized loss on available for sale securities
of a $119 gain in the period ended September 30, 2003 is composed solely of
unrealized holding gains arising during this period. As of September 30, 2003,
an unrealized loss of $7,421 on these securities was included as a component of
accumulated other comprehensive loss in the Company's balance sheet.

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" (SOP 98-9). Under SOP 97-2, revenue attributable to an
element in a customer arrangement is recognized when persuasive evidence of an
arrangement exists and delivery has occurred, provided the fee is fixed or
determinable, collectibility is probable and the arrangement does not require
significant customization of the software.

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

For software license fees in single element arrangements and multiple element
arrangements that 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 significant portion of a fee is due after the Company's normal payment terms,
is based upon a variable matrix such as a minimum level of distribution or is
subject to refund, the Company accounts for the fee as not being fixed and
determinable. In these cases, it defers revenue and recognizes it when it
becomes due and payable.

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

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

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


                                       7
<PAGE>

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's 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 place with the end user before the
end user is allowed to physically load the Timeline software on a unique
machine. These distributors 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 (SAB) No.101, "Revenue Recognition" (SAB
101).

Net Loss per Common Share

Basic net income/(loss) per share is the net income or loss divided by the
weighted average number of shares outstanding during the year less, for the
three and six months ended September 30, 2002, 39,321 issued and outstanding
restricted shares of common stock that were subject to repurchase. Diluted net
income/(loss) per share is calculated as the net income or loss divided by the
sum of the weighted average number of shares outstanding during the year plus
the net additional shares that would have been issued had all dilutive options
been exercised, less shares that would be repurchased with the proceeds from
such exercise (Treasury Stock Method). The effect of including outstanding
options and warrants is anti-dilutive for all periods presented. The issued and
outstanding restricted shares of common stock are dilutive for periods presented
where net income was achieved. Therefore, options and warrants have been
excluded from the calculation of diluted net income/(loss) per share for all
periods presented and restricted shares of common stock have been included in
the calculation of net income per share.


                                       8
<PAGE>

Shares issuable pursuant to stock options and warrants that have not been
included in the calculation of net loss per share because they are antidilutive
totaled 651,508 and 648,867 for the three-month periods ended September 30, 2003
and 2002, respectively.

Comprehensive Loss

Comprehensive (loss)/income for the three and six months ended September 30,
2003 and 2002 was as follows:

<TABLE>
<CAPTION>
                                          Three months ended                         Six months ended
                                          ------------------                         ----------------
                               Sept. 30, 2003       Sept. 30, 2002       Sept. 30, 2003       Sept. 30, 2002
                               --------------       --------------       --------------       --------------
<S>                               <C>                  <C>                   <C>                 <C>
Foreign currency
  translation                     $     (7,254)        $   (11,017)          $  (35,620)         $    (51,125)
Change in unrealized
  (loss)/gain on
  available for sale
  securities                            (4,105)                 --                  119                    --
Net (loss)/income                       (4,108)            475,960             (270,084)              175,394
                                  ------------         -----------           ----------          ------------

Total comprehensive
  (loss)/income                   $    (15,467)        $   464,943           $ (305,585)         $    124,269
                                  ============         ===========           ==========          ============
</TABLE>

Accumulated other comprehensive loss consisted of the following at September 30,
2003 and March 31, 2003:

<TABLE>
<CAPTION>
                                                  September 30, 2003        March 31, 2003
                                                  --------------------    --------------------
<S>                                                  <C>                     <C>
Unrealized loss on available for sale
  securities                                         $     (7,421)           $       (7,540)
Foreign currency translation adjustment                   (75,539)                  (39,919)
                                                  --------------------    --------------------
                                                     $    (82,960)           $      (47,459)
                                                  ====================    ====================
</TABLE>

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" (APB No. 25), and
related interpretations including FASB Interpretation No. 44, "Accounting for
Certain Transactions involving Stock Compensation, and 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


                                       9
<PAGE>

outstanding and unvested awards in each three and six month period ended
September 30, 2003 and 2002, respectively:

<TABLE>
<CAPTION>
                                               Three Months Ended                       Six Months Ended
                                               ------------------                       ----------------
                                      Sept. 30, 2003      Sept. 30, 2002      Sept. 30, 2003       Sept. 30, 2002
                                      --------------      --------------      --------------       --------------
<S>                                      <C>                 <C>                  <C>                 <C>
Net (loss)/income, as reported           $    (4,108)        $   475,960          $ (270,084)         $   175,394

Add stock-based employee
compensation expense included in
reported net (loss)/income                        --               3,441              15,000               11,382

Deduct total stock-based employee
compensation expense determined
under fair-value based method for
all awards                                   (11,064)            (17,644)            (38,702)             (41,076)
                                      ----------------    -----------------   -----------------    ----------------

    As adjusted net loss                 $   (15,172)        $   461,757          $ (293,786)         $   145,700
                                      ================    =================   =================    ================

Shares used in basic net
(loss)/income per share                    4,178,498           4,126,677           4,176,585            4,125,857
                                      ================    =================   =================    ================

Shares used in diluted net
(loss)/income per share                    4,178,498           4,165,998           4,176,585            4,165,178
                                      ================    =================   =================    ================

Basic net (loss)/income per share
as reported                                   $(0.00)              $0.12              $(0.06)               $0.04
                                      ================    =================   =================    ================

Diluted net (loss)/income per share
as reported                                   $(0.00)              $0.11              $(0.06)               $0.04
                                      ================    =================   =================    ================

Basic net (loss)/income per share -
as adjusted                                   $(0.00)              $0.11              $(0.07)               $0.04
                                      ================    =================   =================    ================

Diluted net (loss)/income per share
- as adjusted                                 $(0.00)              $0.11              $(0.07)               $0.03
                                      ================    =================   =================    ================
</TABLE>

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 options-pricing model.

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.

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


                                       10
<PAGE>

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.

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 142, "Goodwill and Other Intangible
Assets" (SFAS No. 142). SFAS No. 142 requires that goodwill and intangible
assets with indefinite useful lives no longer be amortized, but instead tested
for impairment at least annually in accordance with the provisions of SFAS 142.
SFAS No. 142 also requires that intangible assets with definite useful lives be
amortized over their respective estimated useful lives to their estimated
residual values, and reviewed for impairment in accordance with Statement of
Financial Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long-lived Assets " (SFAS No. 144).

Upon adoption of SFAS No. 142 on April 1, 2002, the Company was required to
evaluate its existing intangible assets and goodwill that were acquired in a
prior purchase business combination. Likewise, SFAS No. 142 required the Company
to reassess the useful lives and residual values of all intangible assets
acquired in purchase business combinations, and make any necessary amortization
period adjustments by the end of the first interim reporting period after
adoption. Finally, to the extent an intangible asset was identified as having an
indefinite useful life, the Company was required to test the intangible asset
for impairment in accordance with SFAS No. 142 within the first quarter of
fiscal 2003. Any impairment loss would have been measured as of April 1, 2002
and recognized as the cumulative effect of a change in accounting principle in
the first quarter of fiscal 2003.

In connection with the transitional goodwill impairment evaluation, SFAS No. 142
required the Company to perform an assessment of whether there was an indication
that goodwill was impaired at the reporting unit level as of April 1, 2002. The
Company determined that it has 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. The Company
completed the transitional goodwill impairment test and determined that it did
not have a transitional impairment loss to record.

Upon adoption of SFAS No. 142 on April 1, 2002, the Company reclassified a
workforce-in-place intangible asset with an unamortized balance of $54,167 to
goodwill. As a result of the reclassification of the workforce-in-place
intangible asset to goodwill and the corresponding reduction in the related
deferred tax liability, the Company's valuation allowance for deferred tax
assets was increased resulting in income tax expense of $18,416. The Company has
also reviewed the useful lives of its identifiable intangible assets and
determined that the original estimated lives remain appropriate.

As required by SFAS No. 142, the Company ceased amortization of goodwill
effective as of April 1, 2002.

The Company performed its annual goodwill impairment test as required by SFAS
No. 142 during its fiscal 2003 fourth quarter. The results of this test did not
give any indication that goodwill was potentially impaired, and accordingly no
amounts were recorded for goodwill impairment in fiscal 2003.


                                       11
<PAGE>

Carrying amounts as of September 30, 2003 and March 31, 2003 are as follows:

<TABLE>
<CAPTION>
                                                          September 30, 2003        March 31, 2003
                                                          --------------------    --------------------
<S>                                                           <C>                     <C>
Gross carrying amount:
  Goodwill                                                    $    194,121            $    194,121
  Acquired technology                                              649,981                 649,981
  Customer/distributor contracts                                   320,000                 320,000
                                                          --------------------    --------------------
    Total                                                     $  1,164,102            $  1,164,102
                                                          ====================    ====================

Accumulated amortization:
  Goodwill                                                    $    123,938            $    123,938
  Acquired technology                                              649,981                 620,216
  Customer/distributor contracts                                   320,000                 266,226
                                                          --------------------    --------------------
    Total                                                     $  1,093,919            $  1,010,380
                                                          ====================    ====================
Net book value                                                $     70,183            $    153,722
                                                          ====================    ====================
</TABLE>

Each class of intangible assets subject to amortization has a weighted average
amortization period of three years.

Amortization of intangible assets was $-0- and $124,186 in the quarters ended
September 30, 2003 and September 30, 2002, respectively. Identifiable intangible
assets were fully amortized as of June 30, 2003.

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.

Recent Accounting Pronouncements

In November, 2002, the Emerging Issues Task Force (EITF) reached a consensus on
Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables" (EITF 00-21).
EITF 00-21 addresses certain aspects of the accounting by a vendor for
arrangements under which the vendor will perform multiple revenue generating
activities. EITF 00-21 became effective for periods beginning after June 15,
2003. The Company does not expect the adoption of EITF 00-21 to have a material
impact on its financial position or results of operations.

In May 2003, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity" (SFAS 150).
SFAS 150 establishes standards for how an issuer classifies and measure certain
financial instruments with characteristics of both liabilities and equity. SFAS
150 is effective for financial instruments entered into or modified after May
31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. SFAS 150 is to be


                                       12
<PAGE>

implemented by reporting the cumulative effect of a change in an accounting
principle for financial instruments created before the issuance date of the
statement and still existing at the beginning of the interim period of adoption.
The adoption of SFAS 150 did not have a material impact on the Company's
financial position or results of operations.

3. MAJOR CUSTOMERS

During the quarter ended September 30, 2003, one customer comprised
approximately 16% of the Company's total revenue and another customer comprised
13% of the Company's total revenue. For the six-month period ended September 30,
2003, one customer comprised approximately 14% and another customer comprised
12% of the Company's total revenue. During the quarter and six month periods
ended September 30, 2002, no customer contributed 10% or more of the Company's
total revenue. At September 30, 2003, one customer comprised 15% and a second
customer 11% of the Company's account receivable balance, while in the same
quarter ended September 30, 2002, one customer comprised 12% of the Company's
account receivable balance. At March 31, 2003, approximately 29% of the
Company's accounts receivable balance was due from two of the Company's
customers.

4. 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 critical accounting policies included herein and in the
Company's annual financial statements for the year ended March 31, 2003. During
the three months ended September 30, 2003 and 2002, the Timeline segment
included intersegment revenues and the Analyst Financials segment included
intersegment expenses that totaled $135,717 and $105,486, respectively. During
the six months ended September 30, 2003 and 2002, the Timeline segment included
intersegment revenues and the Analyst Financials segment included intersegment
expenses that totaled $256,360 and $247,291, respectively. These intersegment
transactions are recorded at market rates as if the transactions occurred with
third parties. The following tables summarize operations by segment during the
three and six months ended September 30, 2003 and September 30, 2002:

<TABLE>
<CAPTION>
                                                              Three Months Ended 9/30/03
                                                              --------------------------
                                                                Analyst
                                            Timeline           Financials       Eliminations         Total
                                            --------           ----------       ------------         -----
<S>                                       <C>                     <C>              <C>           <C>
Revenues                                  $     767,779           507,000          (135,717)     $   1,139,062
Operating (loss)/income                   $    (129,313)          121,241                --      $      (8,072)
Depreciation and amortization             $      14,601             1,581                --      $      16,182
Long lived assets                         $     354,086            76,870                --      $     430,956
Total assets                              $     856,481           619,077                --      $   1,475,558
</TABLE>


                                       13
<PAGE>

<TABLE>
<CAPTION>
                                                              Three Months Ended 9/30/02
                                                              --------------------------
                                                                Analyst
                                            Timeline           Financials       Eliminations         Total
                                            --------           ----------       ------------         -----
<S>                                       <C>                     <C>              <C>           <C>
Revenues                                  $   1,613,408           329,089          (105,486)     $   1,837,011
Operating (loss)/income                   $     586,494            (2,248)               --      $     584,246
Depreciation and amortization             $      58,063            76,665                --      $     136,728
Long lived assets                         $     582,570           396,240                --      $     978,810
Total assets                              $   1,510,216           635,094                --      $   2,145,310
</TABLE>

<TABLE>
<CAPTION>
                                                              Six Months Ended 9/30/03
                                                              ------------------------
                                                                Analyst
                                            Timeline           Financials       Eliminations         Total
                                            --------           ----------       ------------         -----
<S>                                       <C>                     <C>              <C>           <C>
Revenues                                  $   1,400,629           937,112          (256,360)     $   2,081,381
Operating (loss)/income                   $    (434,684)          134,365                --      $    (300,319)
Depreciation and amortization             $      30,278            86,550                --      $     116,828
Long lived assets                         $     354,086            76,870                --      $     430,956
Total assets                              $     856,481           619,077                --      $   1,475,558
</TABLE>

<TABLE>
<CAPTION>
                                                              Six Months Ended 9/30/02
                                                              ------------------------
                                                                Analyst
                                            Timeline           Financials       Eliminations         Total
                                            --------           ----------       ------------         -----
<S>                                       <C>                     <C>              <C>           <C>
Revenues                                  $   2,304,329           680,718          (247,291)     $   2,737,756
Operating (loss) income                   $    (282,667)           (2,489)               --      $    (285,156)
Depreciation and amortization             $     116,409           160,008                --      $     276,417
Long lived assets                         $     582,570           396,240                --      $     978,810
Total assets                              $   1,510,216           635,094                --      $   2,145,310
</TABLE>

5. GUARANTEES

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107
and a rescission of FASB Interpretation No. 34" (FIN No. 45). FIN 45 provides
expanded accounting guidance surrounding liability recognition and disclosure
requirements related to guarantees, as defined by this Interpretation. In the
ordinary course of business, the Company is not subject to potential obligations
under guarantees that fall within the scope of FIN 45 except for standard
indemnification and warranty provisions that are contained within many of its
customer license and service agreements, and give rise only to the disclosure
requirements prescribed by FIN 45.

Indemnification and warranty provisions contained within the Company's customer
license and service agreements are generally consistent with those prevalent in
its industry. The duration of its product warranties generally does not exceed
90 days following delivery of its products. The Company has not incurred
significant obligations under customer indemnifications or warranty provisions
historically and does not expect to incur significant obligations in the future.
Accordingly, the Company does not maintain accruals for potential customer
indemnifications or warranty-related obligations.

6. 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


                                       14
<PAGE>

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 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.

In June 2001, the Company filed and subsequently served a complaint against
Hyperion Solutions, Inc. in the Federal District Court for the Western District
of Washington, alleging infringement of certain of its patents. On August 29,
2002, the Company entered into a settlement agreement with Hyperion in which it
granted to Hyperion a license to its patented technology and Hyperion agreed to
pay a license fee of $1,050,000 over a period of 4 months. The total amount was
recognized as patent licenses revenue in the quarter ended September 30, 2002
and is reflected in Patent license revenue for the year-ended March 31, 2003.
During January 2003, Hyperion made the final license fee payment of $250,000.

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 US subsidiary
alleging patent infringement in the United States. Under court rules, service of
process does not have to occur for a period of time that has not yet expired.
Representatives of Cognos and Timeline have been in continuous communication
since prior to filing the complaint. Service of process will likely occur in the
very near future. Under the complaint, Timeline seeks damages and an injunction
against Cognos from any further licensing of certain products and/or product
features which allegedly infringe Timeline's U.S. patents. Management believes
it is not appropriate to attempt assessing the ultimate outcome of the
litigation noted above other than to state it was instituted in good faith and
the Company has no reason to believe it will not be able to prove the
allegations contained in the complaint.

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.


                                       15
<PAGE>

Item 2. Management's Discussion and Analysis or Plan of Operations

This Quarterly Report on Form 10-QSB includes a number of forward-looking
statements that reflect our current views with respect to business strategies,
products, future events and financial performance. These forward-looking
statements are subject to certain risks and uncertainties, that could cause
actual results to differ materially from historical results or those
anticipated, including the risks and uncertainties described below, as well as
in our annual report on Form 10-KSB for the year ended March 31, 2003, under the
respective caption "Other Factors that May Affect Operating Results." When used
in this Report, the words "anticipate," "believe," "predict," "intend," "may,"
"could," "will," "expect," "future," "continue," "foresee" and variations of
such words and similar expressions as they relate to the Company are intended to
identify such forward-looking statements, but are not the exclusive means of
identifying such statements. 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 this
Report, we have attempted to mark sentences containing such statements with a
single asterisk and paragraphs containing only forward-looking statements with
double asterisks. However, no assurance can be made all such statements have
been identified and marked. Therefore, readers are urged to carefully review and
consider the various disclosures made in this report and in our other reports
previously filed with the Securities and Exchange Commission (the "SEC"),
including our 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 the
Company's business.

Critical Accounting Policies AND ESTIMATES

We have identified below some of our accounting policies that we consider
critical to our business operations and the understanding of our results of
operations. This is not a complete list of all of our accounting policies, and
there may be other accounting policies that are significant or critical to the
Company. The impact and any associated risks related to these policies on our
business operations are 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 our other accounting policies, see the Notes to Condensed Consolidated
Financial Statements of this Form 10-QSB and Note 2 to the Consolidated
Financial Statements in our Annual Report on Form 10-KSB for the year ended
March 31, 2003.

The preparation of our financial statements 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. 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. There can
be no assurance that actual results will not differ from those estimates.*
Material differences could result in the amount and timing of our results
reported on our financial statements for any period if management made different
judgments or utilized different estimates.* Many of our estimates or judgments
are based on anticipated future events or performance, and as such are
forward-looking in nature, and are subject to many risks and uncertainties,
including those discussed below and elsewhere in this Report, including under
the


                                       16
<PAGE>

caption "Other Factors that May Affect Operating Results." We do not undertake
any obligation to update or revise this discussion to reflect any future events
or circumstances.

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 the
Company has had few or no warranty claims resulting in a refund. However, if our
belief that the software will work in accordance with published standards proved
to be inaccurate, 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 pre-approved 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,
typically one year, 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.

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 lives of 20 years from the date of the original patent application.
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.* We currently do not consider our patents
impaired.


                                       17
<PAGE>

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.
The Company determined that it has 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 the impairment indicators exist and that
goodwill is impaired.*

RESULTS OF OPERATIONS

Our consolidated financial statements for the first six months and second
quarter of fiscal 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. We incurred net losses of $4,108 for the second
quarter and $270,084 for the first six months of fiscal 2004 and have incurred
recurring net losses from operations over the past several fiscal years. As of
September 30, 2003, we had negative net working capital of $167,186. These
factors raise substantial doubt about our ability to continue as a going
concern.

We believe that our current cash, cash equivalents, marketable securities, and
any net cash provided by operations may be sufficient to meet anticipated cash
needs for working capital and capital expenditures through fiscal 2004. 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. See "Liquidity and
Capital Resources" below.**

Revenues

<TABLE>
<CAPTION>
                                    Three Months Ended                          Six Months Ended
                                      September 30,                              September 30,
                                    2003          2002         Change          2003           2002         Change
------------------------------- ------------- ------------- ------------- --------------- ------------- -------------
(Dollars in Thousands)
<S>                                <C>           <C>            <C>            <C>           <C>            <C>
Software license                  $   450       $   258          74%           $  890       $   530          68%
Patent license                        150         1,049         (86%)             150         1,074         (86%)
Maintenance                           299           273          10%              591           544           9%
Consulting and other                  240           257          (7%)             450           590         (24%)
                                ------------- -------------               --------------- -------------
Total revenues                     $1,139        $1,837         (38%)          $2,081        $2,738         (24%)
------------------------------- ------------- ------------- ------------- --------------- ------------- -------------
</TABLE>

For the quarter ended September 30, 2003, our total operating revenues were
$1,139,000 compared to $1,837,000 for the quarter ended September 30, 2002. This
represents an overall decrease of approximately 38%. However, excluding patent
license revenues, revenue would have increased by 26% overall. Patent license
revenue for the quarter and six months ended September 30, 2003 was 86% less
than the patent license revenue generated in the quarter and six months ended
September 30, 2002. Large variations in patent license revenue is normal as
patent license fees have historically been derived from one time fees as opposed
to royalties based upon licensee sales.


                                       18
<PAGE>

An increase in software license revenue of 74% for comparable fiscal quarters
was driven by increases in both European and U.S. based license fees received
from new licensees of our software. We believe this increase is due to several
factors. In Europe, we are reaping the benefits of having signed and trained a
number of new resellers over the prior year who are now successfully licensing
our products. In U.S.-based operations, we had one large license fee in the
amount of $99,000 from Fidelity National Information Systems, Inc. (FNIS)
arranged through a single Value Added Reseller. This large U.S. fee was the
second (and final) initial license fee from FNIS and was contingent upon certain
events that did not come about until the quarter ended September 30, 2003. A
prior fee of $92,000 was accounted for in the first quarter of fiscal 2004. The
cumulative effect of these two fees contributed substantially to the increase of
68% in comparable license fees between the six month periods ended September 30
of 2003 and 2002, respectively. They also offset continuing weakness in new
licenses generated by several of our U.S. OEM resellers. In the quarter and six
month periods ended September 30, 2003 and 2002, our software license revenue
was generated in approximately equal amounts from the U.S. and Europe.

Our sales tend to reflect the strength and weakness of our distribution
partners' new license activity as our software is 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 there is continued weakness in the enterprise resource planning (ERP)
and accounting software markets, which directly affects the sale and
distribution of our products as an additional module on their products or as an
"after-market" add-on. We have continued to release new products in conjunction
with national and international distribution partners. Additionally, we intend
to expand our geographic marketplace through international partners who can
assist in translating our products into additional languages with the goal of
generating sales in new markets.* While we were successful in signing new
reseller relationships during fiscal 2003, in the current economic uncertainty,
particularly in the United States, it is impossible to predict if our
distribution channels will increase software licenses during fiscal 2004 over
fiscal 2003.* Due to an increased number of reseller relationships in Europe, we
expect our European operations will continue to show favorable revenue
comparisons to the prior year for the remainder of fiscal 2004.* Notwithstanding
the improvements we have seen in our software license activity, historically our
third fiscal quarter (ended December 31) is a seasonally slow period,
particularly in Europe due to the holidays, and we do not expect to match the
second quarter strong revenue growth in the upcoming third quarter.*

Patent license revenue is very sporadic. The timing of fees often corresponds to
the settlement of litigation and, therefore, is unpredictable. While we intend
to continue to pursue additional patent license agreements, we cannot predict
the outcome of ongoing and future negotiations and there are no assurances that
we will be successful in entering into additional patent licenses, or the timing
or amount of any such licenses.*

Maintenance revenue increased 10% to $299,000 for the second quarter of fiscal
2004 as compared to $273,000 for the second quarter of fiscal 2003. The increase
in maintenance revenue is primarily due to fees from new customers who have
installed and are using our software. 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 telephone 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 both
approaches. Our first and second-tier maintenance is typically provided under
annually renewable agreements. We receive a smaller portion of the annual
support fees for second-tier support than we do for first-tier support, which
generates the majority of our maintenance revenue. Most of our customers sign
maintenance agreements and renew them on an annual basis until such time as they
no longer use our software products. Our non-renewal rate on maintenance
agreements has not been material for the periods reported. Future fiscal 2004
quarters may show mixed results depending


                                       19
<PAGE>

upon the commencement of new maintenance agreements and the expiration of
existing maintenance agreements.*

The decrease in consulting revenue in the quarter and six-month periods ending
September 30, 2003 as compared to the quarter and six-month periods ended
September 30, 2002 was the result of an unusually high level of consulting
revenue generated in the first two quarters of fiscal 2003. In the six-month
period ended September 30, 2002 we experienced an increased demand for
consulting due to scheduled upgrades to a new version of our Analyst software.
The consulting revenue in the first six months of fiscal 2004 is more in line
with what we believe will be sustainable with current staffing.* 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 2004 and, therefore,
expect consulting revenue to remain fairly stable quarter to quarter for the
balance of fiscal 2004.*

Cost of Revenues

<TABLE>
<CAPTION>
                                    Three Months Ended                          Six Months Ended
                                      September 30,                              September 30,
                                    2003          2002         Change          2003           2002         Change
------------------------------- ------------- ------------- ------------- --------------- ------------- -------------
(Dollars in Thousands)
<S>                                   <C>           <C>         <C>              <C>            <C>           <C>
Software license                       70            27         159%             139             78           78%
Patent license                          5             3          67%               9              6           50%
Maintenance, consulting
  and other                           107           110          (3%)            215            225           (4%)
                                ------------- -------------               --------------- -------------
Total cost of revenues                182           140          30%             363            309           17%
Percentage of revenues                 16%            8%                          17%            11%
------------------------------- ------------- ------------- ------------- --------------- ------------- -------------
</TABLE>

Cost of revenues increased 30% for the comparable quarters and 17% for the
six-month periods ended September 30, 2003 over September 30, 2002.
Additionally, cost as a percentage of revenues increased in fiscal 2004 when
compared to fiscal 2003. These increases were primarily the result of increases
in our software licensing costs. The cost associated with software licensing
consists entirely of the amortization of capitalized and acquired software
development costs. This increase reflects the reclassifications explained below,
representing approximately $45,000 and $90,000, respectively, for the quarter
and six-months ended September 30, 2003. If the effect of the reclassification
were removed, the total cost of revenues for fiscal 2004 would reflect a slight
decrease for both the quarter and six month periods when compared to fiscal
2003. The comparative costs associated with consulting and the increase in cost
associated with patent licenses are not materially different in dollar amounts
for the quarter and six-month periods ended September 30, 2003 and 2002.

In the fourth quarter of fiscal 2003, we reclassified certain acquired
technology from intangible assets to capitalized software. This was the result
of this technology now being incorporated in a commercial product which became
part of new license deliverables beginning in the fourth quarter of fiscal 2003.
The effect of this change caused amortization of these assets to be included in
cost of revenues rather than amortization of intangibles under operating
expenses. These assets were acquired as part of the December 2000 acquisition of
WorkWise Software, Inc. The original amount of the acquisition costs allocated
to this asset was $554,000. It has been amortized over a useful life of three
years starting in December 2000 ($15,000 per month) as part of amortization of
intangibles. The net remaining


                                       20
<PAGE>

amount included in intangible assets of $185,000 as of December 31, 2002 and
then reclassified to capitalized software continued to be amortized at the same
rate of $15,000 per month during the fourth quarter of fiscal 2003 and the first
two quarters of fiscal 2004. The remaining $46,000 will be fully amortized
during the third quarter of fiscal 2004.*

Gross Profit

<TABLE>
<CAPTION>
                                           Three Months Ended                         Six Months Ended
                                             September 30,                             September 30,
                                           2003          2002        Change          2003           2002        Change
-------------------------------------- ------------- ------------- ------------ --------------- ------------- -----------
(Dollars in Thousands)
<S>                                       <C>           <C>           <C>           <C>            <C>          <C>
Gross profit                              $  957        $1,697        (44%)         $1,718         $2,428       (29%)
Percentage of revenues                        84%           92%                         83%            89%
-------------------------------------- ------------- ------------- ------------ --------------- ------------- -----------
</TABLE>

Gross profit for the second quarter and six-month period of fiscal 2004
decreased by 44% and 29%, respectively, from the comparable period in fiscal
2003. Margins are affected by the volume of business as recorded in total
revenue, and the mix among various revenue bearing activities, our ability to
control costs associated with the generation of those activities, and the level
of amortization of acquired technologies as reflected in cost of revenues. There
is a dramatic swing in revenue between the comparable periods caused by the
significantly higher patent license fees recorded in the second quarter of
fiscal 2003. Patent license fees tend to have a much lower cost of revenue than
other revenue categories. Additionally, the reclassification of certain acquired
technology from intangible assets to capitalized software, described above in
Cost of Revenues, contributed to the decrease in gross profit in the quarter and
six months ended September 30, 2003, when compared to comparable periods ended
September 30, 2002. Consequently, these factors affected gross margin
percentages significantly while actual cost of revenue varied less so.

Sales and Marketing Expense

<TABLE>
<CAPTION>
                                           Three Months Ended                         Six Months Ended
                                             September 30,                             September 30,
                                           2003          2002        Change          2003           2002        Change
-------------------------------------- ------------- ------------- ------------ --------------- ------------- -----------
(Dollars in Thousands)
<S>                                        <C>           <C>           <C>           <C>            <C>          <C>
Sales and marketing                        $251          $155          62%           $526           $339         55%
Percentage of revenues                       22%            8%                         25%            12%
-------------------------------------- ------------- ------------- ------------ --------------- ------------- -----------
</TABLE>

Sales and marketing expenses in actual dollar amounts increased by 62% between
the three months ended September 30, 2003 and September 30, 2002. The largest
increase was due to an accrued payment to a reseller of approximately $35,000
for its efforts in securing a direct sale by the company of the FNIS license.
This was in addition to a similar payment of approximately $65,000 in the first
quarter of fiscal 2004. The remaining increases are due to higher commissions
and bonus compensation paid to employees because of increased performance in the
quarter and six months ended September 30, 2003.

Our plans are to continue to expand our Value Added Reseller (VAR) accounts,
which require management of a greater number of relationships per dollar of
revenue. We employed one new sales person during the first six months and intend
to employ one to two additional sales personnel during the third quarter of
fiscal 2004.* These additional hires will cause an increase in sales and
marketing expense.* Sales and marketing expenses quarter-to-quarter for the
remainder of fiscal 2004 will also


                                       21
<PAGE>

be directly impacted by commissions payable with respect to new licenses.*
Additionally, sales and marketing expenses as a percentage of revenue may vary
widely in future quarters based upon the level and type of gross revenue in each
quarter.*

Research and Development Expense

<TABLE>
<CAPTION>
                                           Three Months Ended                         Six Months Ended
                                             September 30,                             September 30,
                                           2003          2002        Change          2003           2002        Change
-------------------------------------- ------------- ------------- ------------ --------------- ------------- -----------
(Dollars in Thousands)
<S>                                        <C>           <C>           <C>           <C>            <C>           <C>
Research & development                     $242          $207          17%           $442           $414          7%
Percentage of revenues                       21%           11%                         21%            15%
-------------------------------------- ------------- ------------- ------------ --------------- ------------- -----------
</TABLE>

Research and development expenses increased during the quarter ended September
30, 2003 in actual dollar amounts by 17% compared to the quarter ended September
30, 2002. This increase caused the six month comparative periods to reflect a 7%
increase during the fiscal year to date. This increase is attributable in large
part to accruals under the bonus program adopted by the Company which triggered
bonuses for most employees for the September 30, 2003 quarter based upon results
for the quarter exceeding budget. No bonus was paid for the results of the first
fiscal quarter of 2004.

Research and development expenses during both periods were primarily
attributable to the enhancement of the functionality of the current product
lines and to integration of our products with various accounting packages. We
anticipate such efforts will continue throughout the remainder of the 2004
fiscal year, and research and development head count quarter-to-quarter for the
remainder of fiscal 2004 will remain relatively stable.*

General and Administrative Expense

<TABLE>
<CAPTION>
                                           Three Months Ended                         Six Months Ended
                                             September 30,                             September 30,
                                           2003          2002        Change          2003           2002        Change
-------------------------------------- ------------- ------------- ------------ --------------- ------------- -----------
(Dollars in Thousands)
<S>                                        <C>           <C>           <C>           <C>            <C>           <C>
General & administrative                   $431          $385          12%           $889           $813          9%
Percentage of revenues                       38%           21%                         43%            30%
-------------------------------------- ------------- ------------- ------------ --------------- ------------- -----------
</TABLE>

General and administrative expenses increased by 12% between the comparable
three-month periods and 9% between the six-month periods ended September 30,
2003 and 2002. Increases in insurance and professional fees contributed in part
to the increase. Also, results for the second quarter of fiscal 2004 include
some bonus compensation based on results for the quarter exceeding budget.

We expect general and administrative expenses to remain relatively steady
throughout the remainder of fiscal 2004 unless the economy and new license
revenue numbers improve to a level where salary reductions instituted in the
fourth quarter of fiscal 2002 are no longer deemed necessary or compensation
based on reaching gross revenue and net income targets is triggered.**


                                       22
<PAGE>

Patent Expenses

<TABLE>
<CAPTION>
                                           Three Months Ended                         Six Months Ended
                                             September 30,                             September 30,
                                           2003          2002        Change          2003           2002        Change
-------------------------------------- ------------- ------------- ------------ --------------- ------------- -----------
(Dollars in Thousands)
<S>                                        <C>           <C>          <C>            <C>            <C>         <C>
Patent                                     $25           $229         (89%)          $45            $301        (85%)
Percentage of revenues                       2%            12%                         2%             11%
-------------------------------------- ------------- ------------- ------------ --------------- ------------- -----------
</TABLE>

Patent expenses for the comparable periods ended September 30, 2003 decreased
significantly from September 30, 2002. These expenses vary significantly
depending upon the level of activity required from legal counsel and experts.
During the September 30, 2002 quarter, considerable activity occurred in the
patent litigation against Hyperion Solutions, Inc. that was settled in that
quarter. For the comparable period of fiscal 2004, the majority of patent
activity was under contingent fee agreements with outside counsel and no expert
fees or other significant costs were incurred. We have entered into litigation
during fiscal 2004 to protect our patent rights.* Consequently, we expect
significant swings in patent costs will result.*

Depreciation and Amortization

Depreciation expense increased in the quarter ended September 30, 2003 to
$16,000 from $13,000 in the quarter ended September 30, 2002. Alternatively,
amortization of intangible assets due primarily to the acquisitions of Analyst
Financials and WorkWise decreased from $128,000 to zero due to reclassification
of certain intangible assets to capitalized software and the completion of
amortization of intangibles from the acquisition of Analyst Financials Limited.
These assets were amortized over a 36 month period which ended June 30, 2003.
Consequently, as of September 30, 2003, all remaining intangible assets acquired
have either been fully amortized or reclassified to capitalized software.

Other Income

Other income was $4,000 in the second fiscal quarter of 2004, compared to a loss
of $108,000 in fiscal 2003. In the quarter ended September 30, 2003, the major
component of other income was from foreign currency exchange fluctuations,
offset in part by interest expense. In the comparable quarter ended September
30, 2002, the dominant factor was losses on marketable securities.

Income Tax

We recorded income tax expense of approximately $18,000 in the first quarter of
fiscal 2003, which resulted from the reclassification of our workforce-in-place
intangible asset to goodwill upon adoption of SFAS 142 on April 1, 2002. As a
result of the reclassification, we reduced the deferred tax liability related to
the acquired identifiable intangibles with a corresponding decrease in goodwill.
Due to the reduction in the deferred tax liability, the valuation allowance for
deferred tax assets was increased, resulting in income tax expense of
approximately $18,000.

No income tax expense was recorded in the second fiscal quarter of fiscal 2003
nor either of the first two quarters of fiscal 2004. All income or loss is
offset by appropriate adjustments to the valuation allowance of the Company's
net operating loss carry-forwards.


                                       23
<PAGE>

Recent Accounting Pronouncements

In November, 2002, the Emerging Issues Task Force (EITF) reached a consensus on
Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables" (EITF 00-21).
EITF 00-21 addresses certain aspects of the accounting by a vendor for
arrangements under which the vendor will perform multiple revenue generating
activities. EITF 00-21 became effective for periods beginning after June 15,
2003. The Company does not expect the adoption of EITF 00-21 to have a material
impact on its financial position or results of operations.

In May 2003, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity" (SFAS 150).
SFAS 150 establishes standards for how an issuer classifies and measure certain
financial instruments with characteristics of both liabilities and equity. SFAS
150 is effective for financial instruments entered into or modified after May
31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. SFAS 150 is to be implemented by reporting
the cumulative effect of a change in an accounting principle for financial
instruments created before the issuance date of the statement and still existing
at the beginning of the interim period of adoption. The Company does not expect
the adoption of SFAS 150 to have a material impact on its financial position or
results of operations.

LIQUIDITY AND CAPITAL RESOURCES

We have historically suffered recurring operating losses and negative cash flows
from operations. As of September 30, 2003, we had negative net working capital
of $167,000. In addition, as of September 30, 2003, our cash and cash
equivalents were $96,000 and our marketable securities were $20,000, compared to
cash and cash equivalents of $168,000 and marketable securities of $19,000 as of
March 31, 2003. Total obligations, excluding deferred revenue, totaled
approximately $599,000 as of September 30, 2003 compared to approximately
$510,000 as of March 31, 2003. Total accounts receivable, excluding the
allowance for doubtful accounts, was approximately $791,000 in the quarter ended
September 30, 2003 and $591,000 at March 31, 2003.

The decrease in our cash and cash equivalents is attributable to losses from
operations during the six-month period ended September 30, 2003. Cash flow
year-to-date is negative $71,000 and was positive for the most recent fiscal
year ended March 31, 2003.

During the balance of fiscal 2004, we expect to generate cash from increased
maintenance revenues and software license revenues and, possibly, additional
licenses of our patented technology.* We expect that our primary uses of cash
will be salaries and other expenses associated with general and administrative,
research and development, patent litigation and sales and marketing activities.*
We intend to continue to monitor new license activity closely and may have to
reduce staff, and/or seek outside financing or a sale or merger of the Company
if consulting and maintenance revenues and patent and software licenses do not
increase quarter-to-quarter during fiscal 2004 and beyond.* By taking this
cautious approach combined with our current cash and cash equivalent balances,
we believe we have adequate resources to fund operations, as well as costs and
expenses of any patent litigation we undertake, through the balance of fiscal
2004.* Our auditors added an explanatory paragraph to their opinion on our
fiscal 2003 consolidated financial statements stating that there was substantial
doubt about our ability to continue as a going concern.

There can be no assurance that our efforts to monitor expenses and generate
revenue will be successful.* Accordingly, we need to contemplate other
alternatives to enable us to fund continuing


                                       24
<PAGE>

operations, including, but not limited to, exploring strategic alternatives,
which may include a merger, asset sale, joint venture or another comparable
transaction, loans from management or employees, salary deferrals or other cost
cutting mechanisms, or raising additional capital by private placements of
equity or debt securities or through the establishment of other funding
facilities.* None of these potential alternatives may be available to us, or may
only be available on unfavorable terms.* If we are unable to obtain sufficient
cash to continue to fund our operations, we may be forced to seek protection
from creditors under the bankruptcy laws or cease operations.* Our inability to
obtain additional cash as needed could have a material adverse effect on our
financial position, results of operations and our ability to continue in
existence.* The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

Other Factors That May Affect Operating Results

Our operating results may fluctuate due to a number of factors, including, but
not limited to, the following factors:

     o    the ability of our third-party distributors and licensees in selling
          and marketing our products,
     o    market acceptance of our products,
     o    changes in the size or volume of consulting or maintenance contracts
          with existing clients and potential clients,
     o    our ability to develop and expand distribution channels and to develop
          relationships with third-party distributors and licensees of our
          products, both internationally and domestically,
     o    our decreased emphasis on direct sales, and increased reliance on OEMs
          and VARs
     o    competition from existing or new product offerings,
     o    our ability to motivate and retain our existing employees, including
          sales and marketing personnel, as well as to attract and hire new
          employees in the future,
     o    our ability to integrate our products with those of our third-party
          distributors and licensees,
     o    our patent licensing strategies and ability to pursue further patent
          licenses,
     o    the availability of additional financing or capital resources,
     o    the volume and timing of systems sales and licenses,

     o    changes in the level of operating expenses, and
     o    general economic conditions in the software industry.

All of the above factors are difficult for us to forecast, and can materially
adversely affect our business and operating results for one quarter or a series
of quarters.**


                                       25
<PAGE>

Item 3 Controls and Procedure

(a) Evaluation of Disclosure Controls and Procedures
----------------------------------------------------

Based on the evaluation as of the end of the period covered by this report, our
principal executive and financial officer has concluded that our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934 (the "Exchange Act")) are effective to ensure
that information required to be disclosed by us in reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms.

(b) Changes in Internal Controls
--------------------------------

There were no significant changes in our internal controls or in other factors
that could significantly affect these controls subsequent to the date of the
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.


                                       26
<PAGE>

                          PART II. - OTHER INFORMATION

Item 1. 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
alleging patent infringement in the United States. Under court rules, service of
process does not have to occur for a period of time that has not yet expired.
Representatives of Cognos and Timeline have been in continuous communication
since prior to filing the complaint. Service of process will likely occur in the
very near future. Under the complaint, Timeline seeks damages and an injunction
against Cognos from any further licensing of certain products and/or product
features which allegedly infringe Timeline's U.S. patents. We believe it is not
appropriate to attempt assessing the ultimate outcome of the litigation noted
above other than to state it was instituted in good faith and we have no reason
to believe we will not be able to prove the allegations contained in the
complaint.

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.

Except as described above, we are not a party to any material pending
litigation.

Item 4. Submission of Matters to a Vote of Security Holders

At the Company's Annual Meeting of Shareholders held on September 18, 2003, two
director nominees were duly elected on the following vote for three-year terms
expiring at the 2006 annual meeting of shareholders:

<TABLE>
<CAPTION>
                                        Affirmative Votes                Votes Withheld
                                        -----------------                --------------
<S>                                         <C>                                 <C>
     Donald K. Babcock                      3,456,772                           30,631
     Kent L. Johnson                        3,258,427                            9,650
</TABLE>

Directors Frederick W. Dean and Terry Harvey continued in office as directors
for terms expiring at the 2004 annual meeting of shareholders, and Director
Charles R. Osenbaugh continued in office as director for the term expiring at
the 2005 annual meeting of shareholders. Director Robert B. Wallace resigned his
position on the Board of Directors, effective July 31, 2003.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits:

     31.1 Certification of Charles R. Osenbaugh, President, Chief Executive
Officer and Chief Financial Officer of Timeline, Inc. pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.

     32.1 Certification of Charles R. Osenbaugh, President, Chief Executive
Officer and Chief Financial Officer of Timeline, Inc. pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.

(b) Reports on Form 8-K:

A report on Form 8-K was filed on August 14, 2003, reporting that a news release
was issued on August 12, 2003 announcing the Company's financial results for its
fiscal 2004 first quarter ended June 30, 2003.


                                       27
<PAGE>

                                    SIGNATURE

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                        Timeline, Inc.
                                        (Registrant)

Date: November 13, 2003                 By: /s/ Charles R. Osenbaugh
                                            ------------------------------------
                                            Charles R. Osenbaugh
                                            President/Chief Financial Officer

                                            Signed on behalf of registrant and
                                            as principal financial officer.


                                       28