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 September 30, 2002

                         Commission File Number 1-13524

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

          Washington                                             91-1590734
(State or other jurisdiction of                                (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, 2002
Common Stock, $.01 Par Value                                   4,165,998

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


                                       1
<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,
                        ASSETS                                      2002             2002
                                                                ------------     ------------
<S>                                                             <C>              <C>
CURRENT ASSETS:
  Cash and cash equivalents                                     $     52,747     $     82,956
  Marketable securities - available for sale                          27,026          203,130
  Accounts receivable, net of allowance for doubtful
    accounts of $3,549 and $61,827                                   988,227          636,201
  Prepaid expenses and other                                          98,389          142,492
                                                                ------------     ------------
                  Total current assets                             1,166,389        1,064,779

PROPERTY AND EQUIPMENT, net of accumulated
  depreciation of $798,203 and $772,873                               95,704          120,464

CAPITALIZED SOFTWARE, net of accumulated
  amortization of $318,237 and $435,755                              130,172          208,037

CAPITALIZED PATENTS, net of accumulated
  amortization of $32,482 and $26,056                                206,524          187,375

INTANGIBLE ASSETS, net of accumulated
  amortization of $1,048,212 and $872,678                            476,226          781,760

GOODWILL, net of accumulated
  amortization of $123,938 and $48,105                                70,183           34,432

OTHER ASSETS                                                             112               --
                                                                ------------     ------------

                  Total assets                                  $  2,145,310     $  2,396,847
                                                                ============     ============

         LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                              $    235,665     $    474,133
  Accrued expenses                                                   378,980          469,758
  Deferred revenues                                                  511,883          569,825
                                                                ------------     ------------
                  Total current liabilities                        1,126,528        1,513,716
                                                                ------------     ------------

STOCKHOLDERS' EQUITY:
  Common stock, $.01 par value, 20,000,000 shares
    authorized, 4,165,998 and 4,153,498 shares issued
    and outstanding                                                   41,660           41,535
  Additional paid-in capital                                      10,459,745       10,448,488
  Accumulated other comprehensive income (loss)                      (34,018)          17,107
  Accumulated deficit                                             (9,448,605)      (9,623,999)
                                                                ------------     ------------
                  Total stockholders' equity                       1,018,782          883,131
                                                                ------------     ------------

                  Total liabilities and stockholders' equity    $  2,145,310     $  2,396,847
                                                                ============     ============
</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, 2002 and 2001
                                   (unaudited)

<TABLE>
<CAPTION>
                                                  Three Months Ended               Six Months Ended
                                                     September 30,                   September 30,
                                             ---------------------------     ---------------------------
                                                 2002            2001            2002            2001
                                             -----------     -----------     -----------     -----------
<S>                                          <C>             <C>             <C>             <C>
REVENUES:
  Software license                           $   258,294     $   515,148     $   529,615     $   765,350
  Other licenses                               1,049,000              --       1,074,000       1,100,000
  Software development                                --              --              --           3,090
  Maintenance                                    273,030         206,111         543,729         431,145
  Consulting and other                           275,783         168,522         622,407         323,027
                                             -----------     -----------     -----------     -----------
    Total revenues                             1,856,107         889,781       2,769,751       2,622,612

COST OF REVENUES:                                156,057         226,484         335,093         469,181
                                             -----------     -----------     -----------     -----------
  Gross profit                                 1,700,050         663,297       2,434,658       2,153,431

OPERATING EXPENSE:
  Sales and marketing                            155,332         339,224         338,742         700,980
  Research and development                       207,176         347,702         414,316         828,899
  General and administrative                     613,106         529,670       1,113,601       1,188,503
  Depreciation                                    12,542          13,146          25,053          27,644
  Amortization:  intangibles and goodwill        127,648         140,248         257,790         282,543
                                             -----------     -----------     -----------     -----------
    Total operating expenses                   1,115,804       1,369,990       2,149,502       3,028,569
                                             -----------     -----------     -----------     -----------
    Income/(loss) from operations                584,246        (706,693)        285,156        (875,138)
                                             -----------     -----------     -----------     -----------

OTHER (EXPENSE) INCOME:

  Loss on sale of securities                    (123,204)       (124,762)       (129,244)       (148,580)
  Interest income (expense) and
   other                                          14,918          (3,701)         37,898           7,714
                                             -----------     -----------     -----------     -----------
    Total other expense                         (108,286)       (128,463)        (91,346)       (140,866)
                                             -----------     -----------     -----------     -----------
    Income (loss) before income taxes            475,960        (835,156)        193,810      (1,016,004)
  Provision for income tax                            --              --          18,416              --
                                             ===========     ===========     ===========     ===========
    Net income (loss)                        $   475,960     $  (835,156)    $   175,394     $(1,016,004)
                                             ===========     ===========     ===========     ===========

Basic net earnings (loss) per
  common share                                     $0.12          $(0.21)          $0.04          $(0.25)
                                             ===========     ===========     ===========     ===========
Diluted net earnings (loss) per
  common and common equivalent
  share                                            $0.11          $(0.21)          $0.04          $(0.25)
                                             ===========     ===========     ===========     ===========
Shares used in calculation of basic
  earnings (loss) per share                    4,126,677       4,040,998       4,125,857       4,040,998
                                             ===========     ===========     ===========     ===========
Shares used in calculation of
  diluted earnings (loss) per share            4,165,998       4,040,998       4,165,178       4,040,998
                                             ===========     ===========     ===========     ===========
</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, 2002 and 2001
                                   (unaudited)

<TABLE>
<CAPTION>
                                                           2002          2001
                                                        ---------     ---------
<S>                                                     <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net cash used in operating activities                 $ (55,150)    $(344,157)
                                                        ---------     ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment                           --       (10,924)
  Capitalized software development costs                  (25,575)      (21,086)
  Proceeds from sale of short-term investments             46,861       444,057
                                                        ---------     ---------
    Net cash provided by investing activities              21,286       412,047
                                                        ---------     ---------

EFFECT OF FOREIGN EXCHANGE RATE                             3,655       (25,041)

NET CHANGE IN CASH AND CASH EQUIVALENTS                   (30,209)       42,849

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

CASH AND CASH EQUIVALENTS, end of period                $  52,747     $  42,849
                                                        =========     =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
  Cash paid for interest during year                    $  11,335     $   4,243

Non-cash transactions:
  Unrealized loss on available for sale securities             --        (3,655)
</TABLE>

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


                                       4
<PAGE>

                                 TIMELINE, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                               September 30, 2002

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, 2002, the Company had net
working capital of approximately $40,000 and had an accumulated deficit of
approximately $9,449,000 with total stockholders' equity of approximately
$1,019,000. 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.
Management believes that current cash and cash equivalent balances, along with
the ability to sell marketable securities, and any net cash provided by
operations, will provide adequate resources to fund operations through March 31,
2003. See "Liquidity and Capital Resources" below. Management is contemplating a
number of alternatives to enable the Company to continue operating including,
but not limited to:

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

There can be no assurance that any of these alternatives will be successful. If
the Company is unable to obtain sufficient cash when needed to fund its
operations, it may be forced to seek protection from creditors under the
bankruptcy laws 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. 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 herein in
conformity with accounting principles generally accepted in the United States of
America. Results of operations for the six-month period ended September 30, 2002
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, 2002, as
previously reported in the Company's Form 10-KSB.

3. 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 2002 amounts to
conform to the fiscal 2003 presentation.

4. 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 income (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. As of September 30, 2002 and March 31, 2002, the Company owned
150,800 and 203,100 shares of Sagent common stock, respectively, which had a
fair market value of $27,026 and $203,130, respectively. During the first
quarter of fiscal 2003, the Company sold 52,300 shares resulting in realized
losses of approximately $6,000.

The Company periodically reviews the carrying value of its available for sale
securities to determine if the decline in the fair value of the securities is
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 fourth quarter of fiscal 2002, the
Company determined that the decline in the fair value of the Sagent shares
through March 31, 2002 was other than temporary. As a result, the Company
recognized a loss on the impairment of available for sale securities of $279,262
in the fourth quarter. This established a new accounting basis in the
securities. The Company has subsequently determined that further declines in the
fair value of the securities from such new accounting basis in the second
quarter of fiscal 2003 are most likely not going to be temporary.


                                       6
<PAGE>

Accordingly, the Company has recorded a realized loss of an additional $123,204
in the second fiscal quarter and established another new accounting basis in the
securities.

As of November 12, 2002, the market value of the Sagent stock had increased to
$0.22 per share from $0.18 per share on September 30, 2002.

5. Revenue Recognition

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

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

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

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

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

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

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


                                       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.

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.

6. Net Income/(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 are 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.

Shares issuable pursuant to stock options and warrants that have not been
included in the calculation of net income/(loss) per share because they are
antidilutive totaled 648,167 and 678,642 for the three month periods ended
September 30, 2002 and 2001, respectively.


                                       8
<PAGE>

7. Comprehensive Income/(Loss)

Comprehensive income/(loss) for the three and six months ended September 30,
2002 and 2001 were as follows:

<TABLE>
<CAPTION>
                                Three months ended                  Six months ended
                                ------------------                  ----------------
                        Sept. 30, 2002    Sept. 30, 2001    Sept. 30, 2002    Sept. 30, 2001
                        --------------    --------------    --------------    --------------
<S>                       <C>               <C>               <C>               <C>
Foreign currency
  translation             $   (11,017)      $   (21,271)      $   (51,125)      $   (25,041)
Unrealized loss on
  available for sale
  securities                       --          (129,820)               --            (3,655)
Net income/(loss)         $   475,960       $  (835,156)      $   175,394       $(1,016,004)
                          -----------       -----------       -----------       -----------

Total comprehensive
  income/(loss)           $   464,943       $  (986,247)      $   124,369       $(1,044,700)
                          ===========       ===========       ===========       ===========
</TABLE>

8. Intangible Assets and Goodwill

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 141, "Business Combinations" (SFAS 141),
and No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). SFAS 141
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001 as well as all purchase method
business combinations completed after June 30, 2001. SFAS 141 also specifies
criteria intangible assets acquired in a purchase method business combination
must meet to be recognized and reported apart from goodwill. SFAS 142 requires
that goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead tested for impairment at least annually in accordance
with the provisions of SFAS 142. SFAS 142 also requires that intangible assets
with definite useful lives be amortized over their respective estimated useful
lives to their estimated residual values, and reviewed for impairment in
accordance with Statement of Financial Accounting Standards No. 144, "Accounting
for the Impairment or Disposal of Long-lived Assets" (SFAS 144).

The provisions of SFAS 141 were adopted effective June 30, 2001. No business
combinations have been completed since July 1, 2001. The Company adopted the
provisions of SFAS 142 on April 1, 2002.

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

In connection with the transitional goodwill impairment evaluation, SFAS 142
required the Company to perform an assessment of whether there is an indication
that goodwill was impaired as of April 1, 2002. To accomplish this the Company
was required to identify its reporting units and determine the


                                       9
<PAGE>

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

Upon adoption of SFAS 142 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. The Company has
completed the transitional goodwill impairment test and has determined that the
Company did not have a transitional impairment loss to record.

As required by SFAS 142, the Company has ceased amortization of goodwill
effective April 1, 2002.

Net loss and net loss per share for the six months ended September 30, 2001 and
for the years ended March 31, 2002 and 2001, adjusted to exclude goodwill
amortization are as follows:

<TABLE>
<CAPTION>
                                  Three Months
                                      Ended       Six Months Ended     Year Ended         Year Ended
                                   September 30,    September 30,       March 31,         March 31,
                                      2001              2001              2002               2001
                                   -----------       -----------       -----------       -----------
<S>                                <C>               <C>               <C>               <C>
Net loss:
  Reported net loss                $  (835,156)      $(1,016,004)      $  (2,286,932)     $  (1,885,632)
  Goodwill amortization                  6,886            13,773              70,879             53,059
                                   -----------       -----------       -------------      -------------
    Adjusted net loss              $  (828,270)      $(1,002,231)      $  (2,216,053)     $  (1,832,573)
                                   ===========       ===========       =============      =============

Basic and diluted net loss
  per share:
 Reported basic and
  diluted net loss per share            $(0.21)           $(0.25)             $(0.57)            $(0.48)
 Goodwill amortization                      --                --                0.02               0.01
                                   -----------       -----------       -------------      -------------
   Adjusted basic and
   diluted net loss per share           $(0.21)           $(0.25)             $(0.55)            $(0.47)
                                   ===========       ===========       =============      =============
</TABLE>


                                       10
<PAGE>

Expected future amortization expense related to identifiable intangible assets
is as follows:

October 1, 2002 to March 31, 2003                                 $248,656
Year ending March 31, 2004                                         227,570
                                                                  --------

Total                                                             $476,226
                                                                  ========

9. Impairment of Long-lived Assets

On April 1, 2002, the FASB issued Statement of Financial Accounting Standards
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS
144), which supersedes certain provisions of APB Opinion No. 30, "Reporting the
Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions" (APB 30) and supersedes Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" (SFAS 121). In accordance with SFAS 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.

10. Litigation

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. This amount was
recognized as other licenses revenue in the quarter ended September 30, 2002. As
of September 30, 2002, Hyperion paid $550,000 and the Company had $500,000 in
accounts receivable due from Hyperion. During October 2002, Hyperion paid an
additional $250,000 of the license fee and the remaining $250,000 is due on or
before January 1, 2003.

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.

11. 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 are included in the Timeline segment. The
accounting policies of the segments are the same as those described in the
summary of significant accounting policies included herein and in the Company's
annual financial statements for the year ended March 31, 2002. During the second
quarter of fiscal year 2003 and fiscal year 2002, the Timeline segment includes
intersegment revenues and the Analyst Financials segment includes intersegment
expenses that totaled $105,486 and $91,983, respectively. During the six months
ended September 30, 2002 and 2001, the Timeline segment


                                       11
<PAGE>

includes intersegment revenues and the Analyst Financials segment includes
intersegment expenses that totaled $247,291 and $158,272, respectively. These
intersegment transactions are recorded at market rates as if the transactions
occurred with third parties. The following table summarizes operations by
segment during the three and six months ended September 30, 2002 and September
30, 2001.

<TABLE>
<CAPTION>
                                        Three Months Ended 9/30/02                            Six Months Ended 9/30/02
                                        --------------------------                            ------------------------
                                                 Analyst                                               Analyst
                               Timeline         Financials          Total           Timeline          Financials          Total
                               --------         ----------          -----           --------          ----------          -----
<S>                          <C>               <C>               <C>               <C>               <C>               <C>
Revenues,
    net of intersegment      $ 1,527,019       $   329,088       $ 1,856,107       $ 2,089,035       $   680,716       $ 2,769,751
Operating income,
    net of intersegment          508,371            75,875           584,246           123,713           161,443           285,156
Depreciation and
    amortization                  61,524            78,666           140,190           122,832           160,011           282,843
Long lived assets                730,876           247,933           978,809           730,876           247,933           978,809
Total assets                   1,658,523           486,787         2,145,310         1,658,523           486,787         2,145,310

<CAPTION>
                                        Three Months Ended 9/30/01                            Six Months Ended 9/30/01
                                        --------------------------                            ------------------------
                                                 Analyst                                               Analyst
                               Timeline         Financials          Total           Timeline          Financials          Total
                               --------         ----------          -----           --------          ----------          -----
<S>                          <C>               <C>               <C>               <C>               <C>               <C>
Revenues,
    net of intersegment      $   556,152       $   333,629       $   889,781       $ 2,036,389       $   586,223       $ 2,622,612
Operating (loss),
    net of intersegment         (481,027)         (225,666)         (706,693)         (430,030)         (445,108)         (875,138)
Depreciation and
    amortization                  59,156            94,238           153,394           123,027           186,661           309,688
Long lived assets              1,044,828           694,522         1,739,350         1,044,828           694,522         1,739,350
Total assets                   1,865,239           914,028         2,779,447         1,865,239           914,028         2,779,447
</TABLE>


                                       12
<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 including those
discussed below that could cause actual results to differ materially from
historical results or those anticipated. When used herein, the words
"anticipate," "believe," "predict," "intend," "may," "could," "should", "will,"
"expect," 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 the other sections of this document, 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

We have identified the policies below as critical to our business operations and
the understanding of our results of operations. The impact and any associated
risks related to these policies on our business operations 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 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, 2002. Note that our 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. There can be no assurance
that actual results will not differ from those estimates.*

Revenue Recognition

See Note 5 "Revenue Recognition" to the Company's Condensed Consolidated
Financial Statements in this Report for a detailed discussion of our revenue
recognition policies.

Allowance for Doubtful Accounts

Our management must estimate the collectibility of our accounts receivable.
Management analyzes accounts receivable and analyzes historical bad debts,
customer concentrations, customer credit-worthiness, current economic trends and
changes in our customer payment terms when evaluating the adequacy of the
allowance for doubtful accounts. Material differences may result in the amount
and


                                       13
<PAGE>

timing of our bad debt expenses for any period if management made different
judgments or utilized different estimates.*

Capitalized Patents

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

Capitalized Internally Developed Software

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

Valuation of Acquired Businesses and Assets

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

Impairment of Long-lived Assets, Goodwill and Other Intangibles

Property and equipment, goodwill, identifiable intangibles and certain other
long-lived assets are amortized over their useful lives. Useful lives are based
on management's estimates of the period that the assets will generate revenue.
We assess the impairment of these assets whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. Our
judgments regarding the existence of impairment indicators are based on legal
factors, market conditions and operational performance of our acquired
businesses. Future events could cause us to conclude that impairment indicators
exist and that certain assets are impaired.* On April 1, 2002, we began to
assess the impairment of goodwill in accordance with the provisions of SFAS 142
and other assets in accordance with the provisions of SFAS 144. We may record an
impairment charge upon completion of the initial impairment review.* Any
resulting impairment loss could have a material adverse impact on our financial
condition and results of operations.*

Impairment of Investments

As part of the process of preparing our consolidated financial statements, we
periodically evaluate whether any declines in the fair value of our investments
are other-than-temporary. Significant judgments and estimates must be made to
assess whether an other-than-temporary decline in fair value of investments has
occurred. The factors we considered in evaluating whether declines in fair value
of our investments were other-than-temporary include the time period and extent
for which the


                                       14
<PAGE>

quoted market price is less than the accounting basis, the issuing company's
financial condition and overall industry health.

Business Combinations

On July 1, 2001, we adopted certain provisions of SFAS 141, although no business
combinations have been consummated since June 30, 2001. We adopted the remaining
provisions of SFAS 141 effective April 1, 2002. SFAS 141 requires that all
business combinations be accounted for using the purchase method, thereby
prohibiting the pooling-of-interests method. SFAS 141 also specifies criteria
for recognizing and reporting intangible assets apart from goodwill; however,
workforce-in-place must be recognized and reported in goodwill.

Goodwill and Intangible Assets

We adopted the provisions of SFAS 142 effective April 1, 2002. SFAS 142 requires
that intangible assets with an indefinite life should not be amortized until
their life is determined to be finite and all other intangible assets must be
amortized over their useful life. SFAS 142 also requires that goodwill not be
amortized but instead tested for impairment at the reporting unit level at least
annually and more frequently upon the occurrence of certain events. We have
completed the first step of the transitional goodwill impairment test and have
determined that there was no transitional impairment upon full adoption on April
1, 2002. If the non-amortization provisions of SFAS 142 had been effective in
fiscal year 2002, net loss and basic and diluted net loss per share for the six
months ended September 30, 2001, would have been a loss of $1,002,231 and $0.25
per share, respectively.

Impairment of Long-Lived Assets and Discontinued Operations

On April 1, 2002, we adopted SFAS 144. SFAS 144 supersedes certain provisions of
APB Opinion No. 30, "Reporting the Results of Operations--Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions" and supersedes SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." There was no cumulative transition adjustment required upon
adoption and we do not have any long-lived assets that we consider to be
impaired. However, upon conclusion of our initial impairment review, we may have
an impairment charge.*


                                       15
<PAGE>

RESULTS OF OPERATIONS

Revenues

<TABLE>
<CAPTION>
                                     Three Months Ended                     Six Months Ended
                                       September 30,                          September 30,
                                      2002        2001       Change         2002        2001       Change
-------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S>                                  <C>         <C>            <C>        <C>         <C>            <C>
Software license                     $  258      $  515         (50%)      $  530      $  765         (31%)
Other license                         1,049           0         N/A         1,074       1,100          (2%)
Maintenance                             273         206          33%          544         431          26%
Consulting and other                    276         169          63%          622         323          93%
Software development                      0           0         N/A             0           3         N/A
                                     ------------------                    ------------------
Revenues                             $1,856      $  890         109%       $2,770      $2,622           6%
-------------------------------------------------------------------------------------------------------------
</TABLE>

For the quarter ended September 30, 2002, our total operating revenues were
$1,856,000 compared to $890,000 for the quarter ended September 30, 2001,
representing an increase of approximately 109%. However, if "Other licenses",
consisting entirely of patent license revenue, are excluded, total revenues for
the comparable quarters decreased by 9%, primarily due to decreased software
license revenue, partially offset by increased maintenance and consulting
revenue. For the six months ended September 30, 2002, our total operating
revenues were $2,770,000 compared to $2,622,000 for the same period a year ago,
a slight increase of 6%, again representing a decrease in software license
revenue, offset by increased maintenance and consulting revenue.

The increase in consulting reflects the increased emphasis we have placed on
services in an attempt to counter concerns about weakening demand for software
licenses in the U.S. due to a weak economy. As our European operation is
gradually shifting its emphasis to OEM and Value Added Resellers and away from
direct sales, we expect there to be downward pressure on consulting revenue.*
This shift in approach is consistent with the direction set by Timeline and is
indicative of Analyst Financials adopting its parent's approach to the market.
Third party distributors, particularly Value Added Resellers, typically provide
consulting services directly to the end users. As a result, we anticipate that
our consultants will tend to be deployed in training or advisory capacities,
which have a lower proportionate billable time to actual time expended ratio
than pure consultancy services.* Furthermore, in the U.S. market, we experienced
an unusually high demand for consulting in the first fiscal quarter of 2003. We
do not expect that the level of consulting accomplished in that quarter can or
will be maintained as neither our current staffing level nor the anticipated
demands of the market will likely support such results.* We expect the level of
consulting revenue for the remaining two quarters of fiscal 2003 to decrease
slightly from the three month level experienced in the second fiscal quarter and
consulting revenues for the second half of fiscal 2003 to decrease more
significantly from the first half experience.*

Other license revenue, consisting of patent license fees, for the second quarter
of fiscal 2003 was $1,049,000 compared to no patent license revenue for the
second fiscal quarter in the prior year. On a comparative six-month basis,
patent license fees were $1,074,000 for fiscal 2003 compared to $1,100,000 for
fiscal 2002, representing a 2% decrease. 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.* In addition, we are currently in litigation with Microsoft on
enforcing the limitations Microsoft agreed to in the patent license it
negotiated with Timeline in June 1999. The ultimate outcome of this litigation
may have a significant impact on the


                                       16
<PAGE>

strategy we will deploy in pursuing additional patent licenses and,
alternatively, could adversely affect our ability to enter into additional
patent licenses.*

The decrease in software license revenue in the second quarter to $258,000 and
six-month period to $530,000 for fiscal 2003 from the comparable periods of
fiscal 2002 of $515,000 and $765,000, respectively, reflects a significant
diminution of license revenue generated by several key distribution partners in
the United States. European license fees received through our wholly-owned
subsidiary, Analyst Financials, are also weaker in both the three- and six-month
periods of fiscal 2003, but not by as wide a margin as in the U.S. We believe
this decline is due to several factors, including the general decline in
economic conditions, one of our key distribution partners, Infinium Software,
Inc., offering of a competitive product during fiscal 2002, and our reduced
sales and marketing staff in both markets.

Maintenance revenue increased 33% to $273,000 for the second quarter of fiscal
2003 as compared to $206,000 for the second quarter of fiscal 2002 and increased
26% to $544,000 for the first six months of fiscal 2003 compared to $431,000 for
the first six months of fiscal 2002. The increase in maintenance revenue is
primarily due to increased maintenance fees from new customers who have
installed and are using our software. Future fiscal 2003 quarters may show mixed
results depending upon the commencement of new maintenance agreements and the
expiration of existing maintenance agreements.*

Software development revenue is not material in either the three or six months'
results for either fiscal 2003 or 2002, and we do not anticipate that
development revenue will contribute significantly to our revenue during the rest
of fiscal 2003.* We currently do not have any significant contracts in place for
fee-based software development. We do not consider software development for fees
to be a line of business that should be pursued except in exceptional
situations.

Gross Profit

<TABLE>
<CAPTION>
                                             Three Months Ended                     Six Months Ended
                                                September 30,                         September 30,
                                             2002         2001        Change        2002         2001        Change
-------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S>                                         <C>          <C>             <C>       <C>          <C>              <C>
Gross profit                                $1,700       $  663          156%      $2,435       $2,153           13%
Percentage of revenues                          92%          74%                       88%          82%
-------------------------------------------------------------------------------------------------------------------
</TABLE>

Our gross profit for the second quarter of fiscal 2003 was dramatically greater
than in the comparable period in fiscal 2002 primarily due to a one-time patent
license fee recorded in the second quarter fiscal 2003. Patent licenses also
result in relatively high gross profits as a percentage of revenue. For this
reason, the six-month periods of fiscal 2003 and fiscal 2002 are more directly
comparable as they contain a comparable mix of differing types of income,
including equivalent patent license revenue. On that basis, gross profit and
margins both increased in fiscal 2003. This is, we believe, a direct result of
the cost cutting measures that have been instituted in all areas of the
Company's operations as between the two fiscal years.


                                       17
<PAGE>

Sales and Marketing Expense

<TABLE>
<CAPTION>
                                             Three Months Ended                     Six Months Ended
                                                September 30,                         September 30,
                                             2002         2001        Change        2002         2001        Change
-------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S>                                         <C>          <C>          <C>            <C>            <C>         <C>
Sales and marketing                         $155         $339         (54%)          $339           $701        (52%)
Percentage of revenues                         8%          38%                         12%            27%
-------------------------------------- ------------- ------------- ------------ --------------- ------------- -----------
</TABLE>

Sales and marketing expenses in actual dollar amounts decreased by 54% between
the three months and 52% between the six months ended September 30, 2002 and
September 30, 2001, primarily due to a substantial decrease in the number of
sales and marketing personnel. Sales and marketing expenses are expected to
continue to be lower in fiscal 2003 compared to fiscal 2002 as the decrease in
personnel occurred gradually throughout fiscal 2002 and the first six months of
fiscal 2003.* Sales and marketing expenses quarter-to-quarter for the remainder
of fiscal 2003 are expected to remain relatively stable.*

Sales and marketing expenses as a percentage of revenues decreased significantly
in both the quarterly and six-month periods of fiscal 2003 over the same periods
in fiscal 2002. As noted above in Gross Profit, the six-month numbers provide
the best direct comparisons as they have a similar mix between patent and
software license revenues. The significant decrease for the six-month periods is
primarily due to the reduction in the number of sales and marketing personnel.
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,
                                             2002         2001        Change        2002         2001        Change
-------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S>                                         <C>          <C>          <C>           <C>            <C>         <C>
Research & development                     $207          $348         (41%)         $414           $829        (50%)
Percentage of revenues                       11%           39%                        15%            32%
-------------------------------------------------------------------------------------------------------------------
</TABLE>

Research and development expenses decreased during the quarter ended September
30, 2002 in actual dollar amounts by 41% over the quarter ended September 30,
2001, and decreased by 50% for the comparative six-month periods. These
decreases are primarily attributable to a decrease in the number of research and
development personnel due to the consolidation of resources after the
acquisition of WorkWise and Analyst Financials in fiscal 2001, as well as
reduced headcount from our efforts to cut costs. We expect future quarters to
reflect a decrease in research and development expenses due to additional staff
reductions made in the past year.*

Research and development expenses during all 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 2003 fiscal year.*


                                       18
<PAGE>

General and Administrative Expense

<TABLE>
<CAPTION>
                                             Three Months Ended                     Six Months Ended
                                                September 30,                         September 30,
                                             2002         2001        Change        2002         2001        Change
-------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S>                                         <C>          <C>           <C>        <C>            <C>         <C>
General & administrative                   $613          $530          16%        $1,114         $1,189        (6%)
Percentage of revenues                       33%           60%                        40%            45%
-------------------------------------------------------------------------------------------------------------------
</TABLE>

General and administrative expenses increased by 16% between the comparable
three-month periods ended September 30, 2002 and 2001. This increase from period
to period is due in large part to the payment of a partial contingency fee in
the quarter ended September 30, 2002 on settlement of the patent litigation with
Hyperion. In the comparable six-month periods, general and administrative
expenses were 6% less in the first half of fiscal 2003 compared with the same
period in fiscal 2002. The expenses for fiscal 2003 represent similar costs with
regard to patent litigation, but reflect reduced salaries instituted in the
fourth quarter of fiscal 2002 to mirror the concerns related to lower new
license revenue and the weak software market in general.

Except for attorneys' fees and expert witness fees associated with ongoing and
anticipated patent licensing and enforcement actions, we expect general and
administrative expenses to remain relatively steady throughout the remainder of
fiscal 2003 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. Due to the uncertainties associated with patent
litigation and negotiations, such as certain costs which are paid as incurred,
it is difficult to estimate the level of litigation expenses on an ongoing
basis.**

Depreciation and Amortization

Depreciation expense was relatively stable having decreased in the quarter ended
September 30, 2002 by 5% to $12,500 from $13,100 in the quarter ended September
30, 2001. Additionally, amortization of intangible assets due primarily to the
acquisition of Analyst Financials and WorkWise in fiscal 2001 decreased by 9%
from $140,000 in the second quarter of fiscal 2002 to $128,000 in the second
quarter of fiscal 2003. Similar amounts will continue to be amortized in future
quarters of fiscal 2003. We adopted SFAS 142 on April 1, 2002 and accordingly we
ceased amortization of goodwill. (See Note 7 to Notes to Condensed Consolidated
Financial Statements in this Report).

Other Income (Expense)

Other income increased to $15,000 in the second fiscal quarter of 2003 versus a
net expense in the second quarter of fiscal 2002 of approximately $4,000. The
increase includes the effect of recovery of a previously written-off bad debt in
fiscal 2003. Lower interest costs and increased benefits from foreign currency
conversions also contributed to the improvement between the comparable periods.

Losses on the sale or write-down of securities were comparable between the
quarters ended September 30, 2002 and 2001 at $123,000 and $125,000,
respectively. Comparable periods on a six-month basis showed a loss of $129,000
in fiscal 2003 versus a loss of $149,000 in fiscal 2002.


                                       19
<PAGE>

Income Tax

No income tax expense was recorded in either quarter of the first six months of
fiscal 2002 or the second quarter of fiscal 2003. Approximately $18,000 of
income tax expense was recorded in the first quarter of fiscal 2003. That
accrual was from the results of the reclassification of our workforce-in-place
intangible asset to goodwill upon adoption of SFAS 142 on April 1, 2002. (See
Note 7 to Notes to Condensed Consolidated Financial Statements in this Report).
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. Otherwise, all income or loss is offset by appropriate
adjustments to the valuation allowance of the Company's net operating loss
carry-forwards.

LIQUIDITY AND CAPITAL RESOURCES

We have historically suffered recurring operating losses and negative cash flows
from operations. As of September 30, 2002, we had net working capital of $40,000
($552,000 when excluding deferred revenue). In addition, our cash and cash
equivalent and marketable securities balances as of September 30, 2002 stood at
approximately $80,000 compared to approximately $286,000 as of March 31, 2002.
Total obligations, excluding deferred income items, totaled approximately
$615,000 as of September 30, 2002 as compared to approximately $944,000 as of
March 31, 2002. These balances include available for sale securities as of
September 30, 2002 of approximately $27,000 compared to approximately $203,000
as of March 31, 2002.

The decrease in the total amount of our cash and cash equivalent and short-term
investment balances, are attributable to an increase in accounts receivable
during the first six months of fiscal 2003 and the continued decline in value of
stock in Sagent Technology, Inc. which we received as partial payment of a
patent license. (As of October 22, 2002, the market value of Sagent stock was
$0.24 per share, an increase of $0.06 per share from September 30, 2002). Net
cash consumed by operating activities was $55,000 in the six-month period ended
September 30, 2002.

During fiscal 2003, we expect to generate cash from increased consulting and
maintenance revenues and to a lesser extent software license revenues and
possibly additional licenses of our patented technology.* On August 29, 2002,
the Company entered into a settlement agreement with Hyperion in which we
granted to Hyperion a license to our patented technology and Hyperion agreed to
pay a license fee of $1,050,000 over a period of 4 months. As of September 30,
2002, Hyperion paid $550,000 and we had $500,000 in accounts receivable due from
Hyperion. During October 2002, Hyperion paid an additional $250,000 of the
license fee and the remaining $250,000 is due on or before January 1, 2003. We
expect that our primary uses of cash will be salaries and other expenses
associated with General and Administrative, Research and Development, 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 2003.* 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
continued costs and expenses of litigation, through fiscal 2003.* Additionally,
our auditors added an explanatory paragraph to their opinion on our 2002
financial statements stating that there was substantial doubt about our ability
to continue as a going concern.


                                       20
<PAGE>

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 the Company to fund continuing operations including, but
not limited to, engaging a financial advisor to explore strategic alternatives,
which may include a merger, asset sale, joint ventures or another comparable
transaction, 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, which may be on terms unfavorable to the Company. 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 and/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.

Recent Accounting Pronouncements

In June 2001, The Financial Accounting Standards Board (FASB) issued SFAS No.
143, "Accounting for Asset Retirement Obligations," which addresses financial
accounting and reporting for legal obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. SFAS No.
143 is effective for fiscal years beginning after June 15, 2002. We are in the
process of evaluating the financial statement impact of adoption of SFAS No.
143.

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which is effective for exit or disposal
activities that are initiated after December 31, 2002. SFAS No. 146 nullifies
EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit and Activity." We are in the process of
evaluating the financial statement impact of adoption of SFAS No. 146.

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 success and revenue growth of our products,
     o    reductions in the size or volume of consulting or maintenance
          contracts with existing clients and potential clients,
     o    our ability to continue to develop and expand distribution channels
          and to develop relationships with third-party distributors and
          licensees of our products,
     o    our ability to manage growth,
     o    our ability to integrate our products with those of our third-party
          distributors and licensees,
     o    our ability to hire qualified sales and marketing personnel and to
          generate revenue from such sales and marketing personnel,
     o    the outcome of the litigation involving Microsoft Corporation,
     o    the outcome and costs of pursuing patent litigation against third
          parties,
     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.**


                                       21
<PAGE>

Item 3 Controls and Procedure

Within the 90 days prior to the filing date of this report, we carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Chief Executive Officer/Chief Financial Officer, of
the effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, our
Chief Executive Officer/Chief Financial Officer concluded that our disclosure
controls and procedures are effective. Disclosure controls and procedures are
controls and procedures that are designed to ensure that information required to
be disclosed in Company reports filed or submitted under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms.

There have been no significant changes in our internal controls or in other
factors that could significantly affect internal controls subsequent to the date
we carried out this evaluation. However, in response to the Sarbanes-Oxley Act
of 2002, we are currently undertaking a comprehensive review of our disclosure
procedures and internal controls and expect to make modifications and
enhancements to these controls and procedures.*


                                       22
<PAGE>

                          PART II. - OTHER INFORMATION

Item 1. Legal Proceedings

In June 2001, we filed and subsequently served a complaint against Hyperion
Solutions, Inc. in the Federal District Court for the Western District of
Washington, alleging infringement of certain of our patents. On August 29, 2002,
the Company entered into a settlement agreement with Hyperion in which we
granted to Hyperion a license to our patented technology and Hyperion will pay a
license fee of $1,050,000 over a period of 4 months. As of September 30, 2002,
Hyperion paid $550,000 and we had $500,000 in accounts receivable due from
Hyperion. During October 2002, Hyperion paid an additional $250,000 of the
license fee and the remaining $250,000 is due on or before January 1, 2003.

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

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

At the Company's Annual Meeting of Shareholders held on September 5, 2002, two
director nominees were duly elected on the following vote for three-year terms
expiring at the 2005 annual meeting of shareholders:

                                   Affirmative Votes         Votes Withheld
                                   -----------------         --------------

     Charles R. Osenbaugh              2,858,931                  1,711
     Robert B. Wallace                 2,858,931                  1,711

Directors Donald K. Babcock and Kent L. Johnson continued in office as directors
for terms expiring at the 2003 annual meeting of shareholders, and Directors
Frederick W. Dean and Terry Harvey continued in office as directors for terms
expiring at the 2004 annual meeting of shareholders.

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits

     99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.


                                       23
<PAGE>

                                   SIGNATURES

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 14, 2002                By: /s/ Charles R. Osenbaugh
                                           -------------------------------------
                                           Charles R. Osenbaugh
                                           President/Chief Financial Officer

                                           Signed on behalf of registrant and
                                           as principal financial officer.


                                       24
<PAGE>

                                  CERTIFICATION

I, Charles R. Osenbaugh, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Timeline, Inc.

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report.

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

          a. designed such disclosure controls and procedures to ensure that
     material information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this quarterly report is being
     prepared;

          b. evaluated the effectiveness of the registrant's disclosure controls
     and procedures as of a date within 90 days prior to the filing date of this
     quarterly report (the "Evaluation Date"); and

          c. presented in this quarterly report our conclusions about the
     effectiveness of the disclosure controls and procedures based on our
     evaluation as of the Evaluation Date.

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and to the audit committee
of the registrant's board of directors (or persons performing the equivalent
function):

          a. all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

          b. any fraud, whether or not material, that involves management or
     other employees who have a significant role in the registrant's internal
     controls.

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 14, 2002

                                        /s/ Charles R. Osenbaugh
                                        ----------------------------------------
                                        Charles R. Osenbaugh
                                        President, CEO and CFO


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