<PAGE> 1
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------------------
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1999 COMMISSION FILE NUMBER 1-13524
TIMELINE, INC.
(Exact name of small business issuer as specified in its charter)
WASHINGTON 91-1590734
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3055 112TH AVENUE N.E., STE. 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 15, 1999
Common Stock, $.01 Par Value 3,223,709
================================================================================
1
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TIMELINE, INC.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 MARCH 31, 1999
------------------ --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 26,199 $ 59,453
Short-term investments 3,615,859 --
Short-term restricted investments 638,000 --
Accounts receivable, net of allowance
of $125,538 and $52,010 377,907 559,666
Prepaid expenses and other 33,008 56,888
Receivable from related parties 5,364 13,567
----------- -----------
Total current assets 4,696,337 689,574
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $1,708,984 and $1,624,597 307,526 371,850
CAPITALIZED SOFTWARE COSTS, net of accumulated
amortization of $1,172,139 and $1,131,458 701,614 628,508
OTHER ASSETS 2,185 2,185
----------- -----------
Total assets $ 5,707,662 $ 1,692,117
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 245,338 $ 142,487
Accrued expenses 360,427 355,125
Notes payable/Line of credit 13,004 23,705
Deferred revenue 363,976 418,827
Current portion of long-term debt -- 132,578
Current portion of capital leases 9,662 10,705
----------- -----------
Total current liabilities 992,407 1,083,427
OBLIGATIONS UNDER CAPITAL LEASES, net of current portion -- 4,309
----------- -----------
Total liabilities 992,407 1,087,736
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock 32,270 31,946
Additional paid-in capital 8,966,195 9,070,865
Other comprehensive income 246,000 --
Unearned ESOP shares -- (135,417)
Accumulated deficit (4,529,210) (8,363,013)
----------- -----------
Total stockholders' equity 4,715,255 604,381
----------- -----------
Total liabilities and stockholders' equity $ 5,707,662 $ 1,692,117
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
2
<PAGE> 3
TIMELINE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Software license $ 723,957 $ 400,717 $ 5,800,612 $ 1,246,854
Software development 22,313 25,200 22,313 26,873
Maintenance 225,406 210,576 430,474 396,804
Consulting and other 217,494 165,560 424,013 331,233
----------- ----------- ----------- -----------
Total revenues 1,189,170 802,053 6,677,412 2,001,764
COST OF REVENUES: 251,956 220,726 642,493 460,622
----------- ----------- ----------- -----------
Gross profit 937,214 581,327 6,034,919 1,541,142
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Sales and marketing 133,857 102,145 380,057 272,107
Research and development 304,429 182,075 611,610 364,245
General and administrative 459,798 256,527 1,179,244 691,156
Depreciation 42,775 64,268 90,775 100,209
----------- ----------- ----------- -----------
Total operating expenses 940,859 605,015 2,261,686 1,427,717
----------- ----------- ----------- -----------
Income (loss) from operations (3,645) (23,688) 3,773,233 113,425
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest income 42,805 7,358 43,766 8,337
Other income 40,000 -- 40,000
Interest expense (15,146) (18,598) (23,196) (40,641)
----------- ----------- ----------- -----------
Total other income (expense) 67,659 (11,240) 60,570 (32,304)
----------- ----------- ----------- -----------
Net income (loss) $ 64,014 $ (34,928) $ 3,833,803 $ 81,121
=========== =========== =========== ===========
Basic net income (loss) per common share $ 0.02 $ (0.01) $ 1.19 $ 0.03
=========== =========== =========== ===========
Diluted net income (loss) per common and
common equivalent share $ 0.02 $ (0.01) $ 1.10 $ 0.02
=========== =========== =========== ===========
Shares used in calculation of basic
earnings per share 3,223,709 3,215,178 3,212,935 3,215,178
=========== =========== =========== ===========
Shares used in calculation of diluted
earnings per share 3,617,587 3,215,178 3,483,865 3,257,310
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
TIMELINE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operations $ 4,282,638 $ 806,524
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (27,065) (50,165)
Capitalized software costs (158,607) (245,845)
Purchase of short-term investments (4,432,859) --
Proceeds from sale of short-term investments 425,000 --
Proceeds from note receivable 8,204 --
----------- -----------
Net cash used in investing activities (4,185,327) (296,010)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line of credit 287,012 64,892
Payments on long-term debt (122,916) (96,800)
Payments on line of credit (310,717) (211,764)
Payments on capital lease obligations (15,014) (5,353)
Proceeds from exercise of common stock options 31,070 --
----------- -----------
Net cash used in financing activities (130,565) (249,025)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (33,254) 261,489
CASH AND CASH EQUIVALENTS, beginning of period 59,453 59,022
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 26,199 $ 320,511
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for -
Interest $ 20,199 $ 52,860
Income taxes -- --
Non-Cash Transactions
Offset of accounts receivable for purchased software 125,000 --
Retirement of unallocated ESOP shares 135,417 --
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE> 5
TIMELINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1999
1. INTERIM FINANCIAL STATEMENTS
The accompanying financial statements of Timeline, Inc. (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 therein. Results
of operations for the three-month and six-month periods ended September 30, 1999
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, 1999,
previously reported.
2. SHAREHOLDERS' EQUITY
Changes in shareholders' equity for the period from March 31, 1999 to September
30, 1999 were as follows:
<TABLE>
<S> <C>
Shareholders' equity, March 31, 1999 $ 604,381
Exercise of common stock options 31,071
Other comprehensive income - unrealized gain on
available-for-sale securities 246,000
Net income 3,833,803
----------
Shareholders' equity, September 30, 1999 $4,715,255
==========
</TABLE>
3. NET INCOME PER COMMON SHARE
Basic net income per share is the net income divided by the average number of
shares outstanding during the year. Diluted net income per share is calculated
as the net income divided by the sum of the average number of shares outstanding
during the year plus the net additional shares that would have been issued had
all dilutive options been exercised, less shares that would be repurchased with
the proceeds from such exercise (Treasury Stock Method).
5
<PAGE> 6
The computation of diluted net income (loss) per common and common equivalent
share is as follows for the three-month and six-month periods ended September
30:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net income (loss) $ 64,014 $ (34,928) $ 3,833,803 $ 81,121
----------- ----------- ----------- -----------
Weighted average common shares
outstanding 3,223,709 3,215,178 3,212,935 3,215,178
Plus: dilutive options and warrants 862,676 -- 788,072 324,644
Less: shares assumed repurchased
with proceeds from exercise (468,798) -- (517,142) (282,512)
----------- ----------- ----------- -----------
Weighted average common and common
equivalent shares outstanding 3,617,587 3,215,178 3,483,865 3,257,310
=========== =========== =========== ===========
Diluted net income (loss) per
common and common equivalent share $ 0.02 $ (0.01) $ 1.10 $ 0.02
=========== =========== =========== ===========
</TABLE>
4. LITIGATION
In March 1999, the Company filed an action in the U.S. Federal District Court
for Western Washington against Sagent Technologies, Inc., seeking monetary
damages and an injunction from further unauthorized licensing of certain
products that Timeline believes infringe on Timeline's patent rights under U.S.
Patent #5,802,511. 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.*
In July 1999, the Company settled a securities lawsuit filed in May 1998,
Tennant v. Timeline, Inc., et al., Case No. 9805-03737, in the Circuit Court of
the State of Oregon for Multnomah County, in which the Company, certain of its
directors, former directors and officers, were named as defendants. The total
amount of the settlement did not exceed the amount of reserves previously
accrued.
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. The
Company believes the claims made by Microsoft have no merit and intends to
vigorously defend itself in this lawsuit.
In July 1999, the Company voluntarily dismissed without prejudice a lawsuit
filed against Clarus Corporation in October 1998, in the US Federal District
Court for Western Washington. This action sought monetary damages and an
injunction against the defendant from unauthorized licensing of certain products
that Timeline believed infringed on Timeline's U.S. Patent rights under U.S.
Patent #5,802,511. The Company determined there was not sufficient sales revenue
generated by the product which was subject of this dispute to justify further
expenditures on this lawsuit.
In September 1999, the Company settled a patent infringement lawsuit filed
against Broadbase Software, Inc. in the U.S. Federal District Court for Western
Washington. Under the agreement reached between the parties, Broadbase has
licensed the Timeline technology covered under U.S. Patent #5,802,511 for a
license fee of $602,000, of which $210,000 was cash and the remainder was
restricted stock. An additional $40,000 in cash was received from Broadbase and
was recorded as other income. The 40,000 shares of Broadbase restricted common
stock was recorded at a value of $9.80 per share as of the date of the licensing
agreement. At September 30, 1999 the reported value of Broadbase's publicly
traded common stock had increased to $15.93 per share.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This Management's Discussion and Analysis of Financial Condition and Results of
Operations includes a number of forward-looking statements which reflect the
Company's current views with respect to 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," "estimate," "intend," "may," "will," "could",
"expect" and similar expressions as they relate to the Company are intended to
identify such forward-looking statements. The Company's actual results,
performance or achievements could differ materially from the results expressed
in, or implied by, these forward-looking statements. The Company does not
undertake any obligation to revise these forward-looking statements to reflect
any future events or circumstances. In addition, the disclosures under the
caption "Other Factors that May Affect Operating Results", consist principally
of a brief discussion of risks which may affect future results and are thus, in
their entirety, forward-looking in nature. TO FACILITATE READERS IN IDENTIFYING
FORWARD-LOOKING STATEMENTS, THE COMPANY HAS ATTEMPTED TO MARK SENTENCES
CONTAINING SUCH STATEMENTS WITH A SINGLE ASTERISK (*) AND PARAGRAPHS CONTAINING
ONLY FORWARD LOOKING STATEMENTS WITH DOUBLE ASTERISKS (**). HOWEVER, NO
ASSURANCE CAN BE MADE ALL SUCH STATEMENTS HAVE BEEN IDENTIFIED. Therefore,
readers are urged to carefully review and consider the various disclosures made
by the Company in this report and in the Company's other reports previously
filed with the Securities and Exchange Commission, including the Company's
periodic reports on Forms 10-KSB and 10-QSB, and the Company's registration
statements on Forms SB-2 and S-3, and those described from time to time in the
Company's press releases and other communications, which attempt to advise
interested parties of the risks and factors that may affect the Company's
business.
RESULTS OF OPERATIONS
REVENUES
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1999 1998 Change 1999 1998 Change
- ----------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Software license 724 401 81% 5,801 1,247 365%
Software development 22 25 (12%) 22 27 (19%)
Maintenance 225 211 7% 430 397 8%
Consulting and Other 218 165 32% 424 331 28%
------ ------ ------ ------
Revenues 1,189 802 48% 6,677 2,002 234%
- ----------------------------------------------------------------------------------------------------
</TABLE>
Total operating revenues increase by 48% to approximately $1,189,0000 for the
three months ended September 30, 1999 compared to September 30, 1998 operating
revenue of approximately $802,000. For the six-month periods ended September 30,
1999 compared to September 30, 1998, total revenues were up 234% from
approximately $2,002,000 to approximately $6,677,000. Software license fees
showed the most dramatic growth in both the comparative quarter and six-month
revenue numbers due to a significant fee from licensing of rights under US
Patent No. 5,802,511 (the `511 Patent) in each of the first two quarters of
fiscal 2000. There were no such license fees in the fiscal 1999 quarters as the
patent was issued effective September 1, 1998. Due to the nature of patent
licensing, it is virtually impossible to predict the timing or amount of further
licensing of the `511 Patent, if any. The Company is currently in litigation
with Sagent Technologies, Inc. wherein the Company has alleged certain of
Sagent's products infringe the `511 Patent. Management believes this litigation
will be viewed as a test case of the validity of the `511 Patent as Sagent is
vigorously defending against the Company's allegations on a number of grounds,
including that the `511 Patent is invalid due to material prior art.* The
Company's other
7
<PAGE> 8
software license fees, not related to the `511 Patent, continue to be low, due
in large part to the decrease in license revenue experienced by the Company's
distribution partners. Management believes this is attributable to an
industry-wide weakness as the result of Year 2000 concerns.*
Development fee revenue of $22,000 and $25,000 in the quarters ended September
30, 1999 and 1998, respectively, and $22,000 and $27,000 for the six month
periods ended September 30, 1999 and 1998, respectively, was not significantly
different. Maintenance revenue continued to show modest growth in both the
comparable six-month periods, up 8% from $397,000 in 1998 to $430,000 in 1999,
and three-month periods, up 7% from $211,000 in 1998 to $225,000 in 1999. This
reflects the continued increase in maintenance revenue from the Company's
product series based on Microsoft Corporation's operating systems, more than
offsetting decreasing maintenance fees from licensees of Timeline's older
VAX-based product line.
Consulting and other revenue increased 32%, from $165,000 to $218,000, and 28%,
from $331,000 to $424,000, in the comparable quarters and six-month periods,
respectively. This increase is reflective of a more seasoned staff in consulting
able to handle more projects. The Company believes consulting revenue growth
will be moderate at best in the short term as it does not currently have plans
to increase the headcount in consulting, and because consulting projects are
generated through new license sales which are expected to be weak through the
end of calendar 1999.*
GROSS MARGIN
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1999 1998 Change 1999 1998 Change
- -------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Gross profit 937 581 61% 6,035 1,541 292%
Percentage of
operating revenues 79% 72% 90% 77%
- -------------------------------------------------------------------------------------------------------
</TABLE>
The positive change in the Company's gross margin as a percentage of gross
revenue is due in large part to changes in the mix of higher-margin software and
patent licenses, and lower margin consulting and maintenance revenue which is
labor intensive. A significantly higher proportionate share of revenue in the
periods ended September 30, 1999 consisted of software and patent license
revenue when compared to the same periods in fiscal 1999. Amortization of
capitalized software development costs for the three and six-month periods of
fiscal 2000 was $55,000 and $211,000 respectively, compared with $76,000 and
$130,000 for the three and six-month periods of fiscal 1999, respectively.
During the quarter ended September 30, 1999, the Company acquired certain
software source code from a distributor, Analyst Financials Limited. The Company
has a 12.84% ownership interest in Analyst Financials Limited. This cost, along
with normal capitalized software costs during the quarter, caused capitalized
software costs for the quarter to total $253,000. Consequently, amortization in
future quarters will increase over that experienced in the quarter ended
September 30, 1999.
8
<PAGE> 9
SALES AND MARKETING EXPENSE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1999 1998 Change 1999 1998 Change
- -------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Sales and marketing 134 102 31% 380 272 40%
Percentage of
operating revenues 11% 13% 6% 14%
- -------------------------------------------------------------------------------------------------------
</TABLE>
Sales and marketing expenses as a percentage of gross revenue decreased from 13%
to 11% for the three months ended September 1998 and 1999, and from 14% to 6%
for the six months ended September 1998 and 1999. The decrease as a percentage
of operating revenue reflects higher revenue numbers as between the periods.
However, in actual dollar amounts, these costs increased between the periods due
to an increase in personnel and commissions and bonuses related to increased
patent license revenue. Management believes actual dollar amounts and percentage
of revenue comparisons may vary in future quarters based upon the volume of
sales from quarter to quarter.*
RESEARCH AND DEVELOPMENT EXPENSE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1999 1998 Change 1999 1998 Change
- -------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Research & development 304 182 67% 612 364 68%
Percentage of
operating revenues 26% 23% 9% 18%
- -------------------------------------------------------------------------------------------------------
</TABLE>
The Company previously made a strategic decision not to undertake any research
and development on new products unless directly related to its third-party
alliance relationships and better serving the needs of its distributors'
end-user community. Accordingly, research and development expenses during the
periods ended September 30, 1999 and 1998 were attributable solely to making
certain software enhancements to meet the particular needs of its distributors
and to integrate the Company's products with the accounting package(s) of the
various vendors. The increases in the quarter and six-month periods ending
September 30, 1999 over the quarter and six-month periods ending September 30,
1998 are due to a significant shift of work effort towards maintenance and
upgrades of software which is currently expensed. For the three and six month
periods ended September 30, 1998, a large portion of the staff's efforts was in
the area of new products which were capitalized for future amortization. There
was only a modest increase in staffing between the periods.
Management believes the actual dollar amount of research and development
expenses will increase in future quarters. The Company has hired additional
personnel in this area during the period ended September 30, 1999 and expects to
hire additional personnel in future quarters to meet the demand generated by the
Company's success in entering into distribution and private label agreements
with various accounting vendors.**
9
<PAGE> 10
GENERAL AND ADMINISTRATIVE EXPENSE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1999 1998 Change 1999 1998 Change
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
General & administrative 460 257 79% 1,179 691 71%
Percentage of
operating revenues 39% 32% 18% 35%
- -------------------------------------------------------------------------------------------------------
</TABLE>
General and administrative expenses increased 79% and 71%, respectively, between
the comparable three-month and six-month periods ended September 30, 1999 and
September 30, 1998. This increase is a direct result of substantially increased
attorneys' fees associated with the Company's patent litigation and its
litigation with Microsoft, increased compensation levels of key personnel
reflecting bonuses paid in the quarter ended June 30, 1999, and general
inflation in wages due to the highly competitive labor market in the software
industry. The reduction in the percent of revenues for the comparative six month
periods is due to the significant revenue generated through licensing of the
patented technology. Management believes that general and administrative
expenses should remain relatively stable over the next several quarters.* This
will continue to include substantial legal fees to pursue enforcement of its
recently granted patent rights and in defense of the lawsuit filed against the
Company by Microsoft.*
INCOME TAX
Income taxes are provided in the statement of operations in accordance with the
asset and liability method. The Company has determined that the tax assets
generated by the net operating losses and research and experimentation credits
do not satisfy the recognition criteria set forth under the liability method.
Accordingly, a valuation allowance is recorded against the applicable deferred
tax assets and therefore no tax benefit is recorded.
In connection with the Company's initial public offering in January 1995, the
Company experienced a significant change in ownership, which limits the amount
of net operating loss carry forwards and credits which may be used in any given
year. However, the Company does not expect this to be a factor in fiscal 2000.*
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalent and short-term investment balances at
September 30, 1999 stood at approximately $4,280,000 compared to approximately
$59,000 at March 30, 1999. The increase in cash is attributable to two
substantial one-time patent license fees received during the six months ended
September 30, 1999. Total obligations, excluding deferred income items, were
approximately $628,000 at September 30, 1999 as compared to approximately
$669,000 at March 31, 1999. The March 31, 1999 obligations include a corporate
guarantee of a $104,000 bank note between the Timeline Employee Stock Ownership
Trust and Silicon Valley Bank. This note was fully paid prior to June 30, 1999.
Net cash generated in operating activities was approximately $4,283,000 in the
six-month period ended September 30, 1999. This was primarily due to the Company
generating net income offset by payment of current liabilities. The Company used
approximately $4,185,000 for investing activities of which $4,008,000, net of
sales of those securities, was invested in short-term securities and
approximately $131,000 for financing activities.
10
<PAGE> 11
The Company has $638,000 of investments in Broadbase Information Systems
securities which are restricted for a period of one year from the time received
or September 2000.
Based on current cash and cash equivalent balances, the Company believes it has
adequate resources to fund operations during fiscal 2000.*
At September 30, 1999, there was no outstanding balance on the Company's line of
credit facility. Timeline has a bank line of credit of up to $500,000 secured by
qualified accounts receivable. As of September 30, 1999, the Company had
approximately $400,000 available on this line of credit, based upon qualified
accounts receivable.
OTHER FACTORS THAT MAY AFFECT OPERATING RESULTS
The Company's operating results may fluctuate due to a number of factors,
including, but not limited to, the ability of the Company to continue to develop
and expand distribution channels and to develop relationships with third-party
distributors and licensees of the Company's products, the ability of the Company
to integrate its products with those of its third-party distributors and
licensees, the ability of the Company to hire qualified sales and marketing
personnel and to generate revenue from such sales and marketing personnel, the
highly competitive labor market in the software industry, the outcome and costs
of the litigation involving Microsoft Corporation and of pursuing patent
litigation against third parties, the availability of additional financing or
capital resources, the volume and timing of systems sales and licenses,
reductions in the size or volume of maintenance contracts with clients, changes
in the product mix of revenues, issues relating to the Year 2000 problem
including the impact on new sales and licensing agreements, changes in the level
of operating expenses, and general economic conditions in the software industry.
All of the above factors are difficult for the Company to forecast, and can
materially adversely affect the Company's business and operating results for one
quarter or a series of quarters.**
YEAR 2000 COMPLIANCE
The statements in the following section include "Year 2000 readiness disclosure"
within the meaning of the Year 2000 Information and Readiness Act. The Company
has undertaken a plan to address the potential impact to its business of "Year
2000 issues" (i.e., issues that may arise as a result of computer programs that
use only the last two, rather than all four, digits of the year). The plan
addresses Internal Matters, which are under the Company's operation and over
which the Company exercises some control, and External Matters, which are
outside the Company's control and influence.
INTERNAL MATTERS. The Company's review of Internal Matters falls into two
categories which are identified and addressed separately below.
Computer Hardware and Software:
1. The Y2K compliance status of the Microsoft products used by the Company is
found at http://www.microsoft.com/technet/topics/year2k/default.html. All
products used by the Company are deemed compliant by Microsoft with one
exception. Microsoft Access 2.0 requires an update be applied in order to
pass Microsoft's Y2K compliance test. However, the Company's use of Access
2.0 as required for its Financial Server products has been tested and it is
the Company's belief that Financial Server using Access 2.0 is Y2K
compliant.
2. The DEC VAX system and a DEC AXP system run OpenVMS. The AXP has been
upgraded to V7.1. Compaq's Y2K position on OpenVMS V7.1 (compliant) is
stated at
11
<PAGE> 12
http://www.openvms.digital.com/openvms/products/year2000/index.html. The
upgrade of the VAX, BASIC compiler and the C Compiler will be completed in
November 1999.*
3. PC hardware. The Company has less than 75 PC's in use and estimates that
fewer than 25% of those will need upgrades to be compliant. This upgrade
project is substantially completed.
4. Various other software packages. Certain employees of the Company require
software products to assist them in their jobs. While the Company intends to
continue its efforts to identify such products, the review of the products
identified to date is completed*.
5. An assessment of printers, modems and other computer hardware has been
completed.
The Company estimates that the cost for the upgrades listed above and any
replacements will not exceed $15,000. The Company intends to fund Year 2000
upgrades and changes through operating cash flow and indebtedness.**
Timeline Software Products:
The Company's current versions of its products and services are designed to be
Year 2000 compliant. Following is a list showing the current version number of
the software products that are believed to be Year 2000 compliant:
Vax/Alpha Version 6.0
Financial Analytics Version 2.5 and higher
MV Server Versions 2.4d and 2.5c
Analyst 1.5 compatible suite(1)
Third-Party Alliance Partner Filters
(1)Designed to be Y2K compliant, but no testing performed. Upgrade
recommended to Financial Analytics
The Company recognizes that certain customers may have made custom,
site-specific changes to software provided by the Company. The Company cannot
assess the number or nature of such customizations nor their Y2K compliance. To
the extent the customization work was performed by the Company, customers may
request a review and, if possible, an upgrade to the customization on a time and
materials basis. While the Company's above-listed products have been released as
Year 2000 compliant, certain customers have not yet upgraded to these versions.
The Company believes that its internal systems, products and services are
currently Year 2000 compliant and a re-testing of the current release of the
software has been substantially completed and has revealed no Year 2000
compliance issues. However, there can be no assurances that the Company's
products and systems contain all necessary date codes. In addition, there can be
no guarantee that the systems of other companies on which the Company relies or
with whom it does business will be Year 2000 compliant and would not have an
adverse effect on the Company's business.*
Timeline makes no representation or warranty as to, and will not address, the
Year 2000 readiness of any hardware, firmware, software, services protocols,
data, interfaces to third party systems, or user-customized functions or
features that may be used with Timeline software other than those Company
products discussed above. The Company does not plan to test any products other
than the current version and will not provide Year 2000 support for any products
other than those identified on the list. The information contained on the list
is based on data available to the Company at the time of its preparation. From
time to time, Timeline may change the information on the list without notice to
the customer.
12
<PAGE> 13
The Company estimates that the cost to date for upgrading its products to be
Year 2000 compliant is approximately $160,000. These costs have been incurred
over a several year period and have been funded by operating cash flow. Although
future expenses are not known at this time, the Company believes they will not
be material.*
The Company estimates that it has completed approximately 95% of its Year 2000
Plan regarding Internal Matters.
EXTERNAL MATTERS. The Company has commenced a review of External Matters which
are outside the Company's control and influence. This process consists of a
determination of the customer and supplier relationships and third-party
alliance partners that could have a potential material impact upon the Company
and its ongoing operations. Confirmation of Y2K compliance has been received
from the building management with regard to building systems, the telephone
system and service providers, and the Company's business equipment such as
copiers, postage and fax machines. Additional vendors and suppliers may be added
if further analysis determines the impact on the Company would be material in
the event of a Year 2000 compliance failure. The Company will continue to
monitor its third-party alliance partners with regard to their Year 2000
compliance status and any compatibility issues that may arise.*
Although there can be no assurance that Year 2000 problems resulting from
customer, supplier or third-party alliance partner relationships will not have a
material adverse impact on the Company, the Company believes it has adequate
contingency planning in place to mitigate any such adverse impact.
The Company estimates that it has completed approximately 95% of its Year 2000
plan for External Matters. To date, it has incurred expenses of less than
$15,000, and anticipates future direct costs to be no more than an additional
$20,000.*
Although the Company believes that it has an effective plan in place that will
resolve any Year 2000 issues in a timely manner, the Company may be adversely
impacted by Year 2000 issues if its re-testing of its software products indicate
Year 2000 processing problems, or if upgrades to internal computer hardware and
software are not completed on schedule. In the event that third parties do not
complete the necessary remediation, the Company could be subject to interruption
of its normal business activities, including its ability to meet product
development deadlines, maintain consulting schedules, generate revenue through
third-party alliance partners, deliver software to customers, invoice customers,
collect payments or engage in similar business activities. Such an event could
result in a material adverse effect on the Company's revenues or in litigation
surrounding such business interruptions. In addition, disruptions in the economy
generally resulting from the Year 2000 issue could materially adversely affect
the Company. The amount of potential liability and revenues cannot reasonably be
estimated at this time.**
13
<PAGE> 14
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1999, the Company filed an action in the U.S. Federal District
Court for Western Washington against Sagent Technologies, Inc., seeking
monetary damages and an injunction from further unauthorized licensing
of certain products that Timeline believes infringe on Timeline's U.S.
Patent rights under U.S. Patent #5,802,511. 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.*
In July 1999, the Company settled a securities lawsuit filed in May
1998, Tennant v. Timeline, Inc., et al., Case No. 9805-03737, in the
Circuit Court of the State of Oregon for Multnomah County, in which the
Company, certain of its directors, former directors and officers, were
named as defendants. The total amount of the settlement did not exceed
the amount of reserves previously accrued.
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. The Company believes the claims made by
Microsoft have no merit and intends to vigorously defend itself in this
lawsuit.*
In July 1999, the Company voluntarily dismissed without prejudice a
lawsuit filed against Clarus Corporation in October 1998, in the US
Federal District Court for Western Washington. This action sought
monetary damages and an injunction against the defendant from
unauthorized licensing of certain products that Timeline believed
infringed on Timeline's U.S. Patent rights under U.S. Patent #5,802,511.
The Company determined there was not sufficient sales revenue generated
by the product which was subject of this dispute to justify further
expenditures on this lawsuit.
In September 1999, the Company settled a patent infringement lawsuit
filed against Broadbase Software, Inc. in the U.S. Federal District
Court for Western Washington. Under the agreement reached between the
parties, Broadbase has licensed the Timeline technology covered under
U.S. Patent #5,802,511.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Shareholders held on July 29,
1999, one director nominee was duly elected on the following vote:
<TABLE>
<CAPTION>
Affirmative Votes Votes Withheld
----------------- --------------
<S> <C> <C>
Charles R. Osenbaugh 2,779,901 27,800
</TABLE>
In addition, the shareholders were also asked to approve an amendment
to the company's 1994 Stock Option Plan and Directors' Nonqualified
Stock Option Plan which would increase the number of shares
authorized for issuance under such plans from a total of 400,000
shares to 475,000 shares. The amendment was approved on the following
vote:
<TABLE>
<CAPTION>
Affirmative Votes Negative Votes Abstentions
----------------- -------------- -----------
<S> <C> <C>
2,757,670 18,350 28,750
</TABLE>
14
<PAGE> 15
A third proposal, the ratification of Arthur Andersen LLP as the
Company's independent auditors for the year ending March 31, 2000 was
voted on and approved at the Company's Annual Meeting on the
following vote:
<TABLE>
<CAPTION>
Affirmative Votes Negative Votes Abstentions
----------------- -------------- -----------
<S> <C> <C>
2,776,051 900 30,750
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 License Agreement with Broadbase Information Systems,
Inc.
27.1 Financial Data Schedule
(b) No reports on Form 8-K were filed during the three months
ended September 30, 1999.
15
<PAGE> 16
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 9, 1999 By: /s/ Charles R. Osenbaugh
--------------------------------------
Charles R. Osenbaugh
President/Chief Financial Officer
Signed on behalf of registrant and
as principal financial officer.
16
<PAGE> 17
EXHIBITS INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
10.1 License Agreement with Broadbase Information Systems, Inc.
27.1 Financial Data Schedule
</TABLE>
17
<PAGE> 1
EXHIBIT 10.1
LICENSE AGREEMENT
This License Agreement ("License Agreement"), made as of the Effective
Date below, is by and between Broadbase Information Systems, Inc., a corporation
organized under the laws of the State of California with a place of business at
172 Constitution Drive, Menlo Park, California 94025, and its Affiliates,
successors and assigns hereto ("Broadbase") and Timeline, Inc., a corporation
organized under the laws of the State of Washington with a place of business at
3055 112th Avenue NE, Bellevue, Washington 98004, and its Affiliates, successors
and assigns hereto ("Timeline").
WHEREAS, Timeline and Broadbase are or have been parties to a patent
infringement action in the United States District Court for the Western District
of Washington, Civil Action No. 99-1172 (the "Action"); and
WHEREAS, Timeline and Broadbase have agreed to settle the
above-mentioned Action pursuant to that Settlement Agreement and Mutual Release
dated on or about August 30, 1999 (the "Settlement Agreement");
NOW, THEREFORE, in consideration of the covenants and conditions
contained in this License Agreement and in the Settlement Agreement, and
intending to be legally bound hereby, Timeline and Broadbase agree as follows:
ARTICLE I - DEFINITIONS
1.1. An "Affiliate" of an entity means any other entity having a
relationship to the first entity in which fifty percent or more of the actual
voting power of the outstanding Voting Securities of either entity are owned by
or controlled by, or under common control with, either directly or indirectly,
the other entity, provided, however, that in each case, the entities shall be
deemed to be Affiliates of each other only for so long as such ownership or
control exists. Broadbase Software Inc. is acknowledged to be an Affiliate of
Broadbase Information Systems, Inc.
1.2 "Broadbase Product" means any service offered or provided, and any
software or other product which is manufactured, designed, used, or sold, or for
which a primary copyright license is provided either directly or indirectly, by
or for Broadbase or any of Broadbase's Affiliates anywhere in the world, except
that:
in the event that Broadbase undergoes a Corporate Transaction with an
entity that makes and markets an Independently Infringing Product at the
time of such Corporate Transaction, the term "Broadbase product" shall
thereafter mean (i) any service, software or other product which was a
Broadbase Product prior to such Corporate Transaction ("Existing
Broadbase Product") and any service offered or provided, and (ii) any
software or other product manufactured, designed, used, licensed for use
by third parties or sold, by or for Broadbase or any of Broadbase's
Affiliates anywhere in the world which is based on or otherwise derived
from an Existing Broadbase Product.
1.3 "Change-Of-Form Transaction" means, with reference to a party
hereto, a merger or consolidation with a wholly-owned subsidiary, a
reincorporation of the party in a different jurisdiction, or other transaction
in which there is no substantial change in the stockholders of the
<PAGE> 2
party or their relative stock holdings.
1.4 "Corporate Transaction" means, with reference to a party hereto, (a)
a merger or consolidation in which such party is not the surviving corporation
(other than a Change-Of-Form Transaction), (b) a merger in which the party is
the surviving corporation but after which the stockholders of the party
immediately prior to such merger (other than any stockholder that merges, or
which owns or controls another corporation that merges, with the party in such
merger) cease to own their shares or other equity interest in the party, (c) the
sale of substantially all of the assets of the party, or (d) the acquisition,
sale, or transfer of more than 50% of the outstanding shares of the party by
tender offer or similar transaction.
1.5. "Effective Date" means August 30, 1999.
1.6 "Independently Infringe" means for a Product Set to directly
infringe by meeting all limitations of a valid claim of a Licensed Timeline
Patent by itself (independent of and without reference to any features or steps
provided by or through the use of a Broadbase Product)
1.7 "Independently Infringing Product Set" means a Product Set which
Independently Infringes a Licensed Timeline Patent.
1.8 "Licensed Timeline Patents" means any and all United States and
foreign patents worldwide owned or controlled by Timeline or any of Timeline's
Affiliates, directly or indirectly, that issue or have issued on applications,
including continuations, divisionals, continuations-in-part and foreign
counterparts thereof, which have, claim the benefit of or are entitled to claim
the benefit of a filing date prior to one year after the Effective Date. Without
limiting the generality of the foregoing, the Licensed Timeline Patents
specifically include U.S. Patent No. 5,802,511 issued to Timeline on September
1, 1998, and any other patent issued on or related to U.S. Appln. No.
08/593,118.
1.9 "Product Set" means a group of one or more products which interact
with each other.
1.10. "Voting Securities" of any entity shall mean (i) if such entity is
a corporation, any securities of such corporation entitled to vote generally in
the election of directors of such corporation and any other securities
(including rights, warrants and options) convertible into, exchangeable for or
exercisable for any such securities, whether or not presently convertible,
exchangeable or exercisable, and (ii) if such entity does not have any
outstanding shares or securities, as may be the case in a partnership, joint
venture, or unincorporated association, any ownership interests in such entity
representing the right to make decisions for such entity and any security,
right, warrant or options convertible into, exchangeable for or exercisable for
any such ownership interest, whether or not presently convertible, exchangeable
or exercisable.
ARTICLE 2 - CONSIDERATION
2.1. Broadbase hereby agrees that, as consideration for the licenses and
covenants granted herein, (i) Broadbase shall pay Timeline the sum of Two
Hundred Ten Thousand Dollars ($210,000.00) within five business of the Effective
Date; and (ii) Broadbase shall, jointly with
2
<PAGE> 3
the execution hereof, enter into the Restricted Stock Purchase Agreement
attached hereto as License Exhibit A. Upon payment of the $210,000 and delivery
of the shares identified in the Restricted Stock Purchase Agreement, Broadbase
shall be fully paid up and shall be free from any further demand for any
consideration for the licenses granted herein.
ARTICLE 3 - GRANT OF LICENSE
3.1. Timeline hereby grants to Broadbase and Broadbase's Affiliates an
irrevocable, perpetual, assignable in connection with any Corporate Transaction
or Change-Of-Form Transaction, non-exclusive, royalty-free, worldwide,
sublicensable, paid-up license under the Licensed Timeline Patents to make, have
made, import, use, provide, offer for sale and sell Broadbase Products, whether
alone or in combination with any other products or steps performed by third
parties.
3.2 Timeline and Broadbase hereby agree that to the extent of any
Independent Infringement by an Independently Infringing Product Set, neither the
above license nor any associated sublicense shall extend to cover any third
party liability for such Independent Infringement by such Independently
Infringing Product Set. Timeline does acknowledge, however, that pursuant to
Sections 3.1 and 3.3 hereof, that Broadbase would have no liability under the
Licensed Timeline Patents for providing for compatibility, interoperability, or
similar interaction between a Broadbase Product and an Independently Infringing
Product Set (such as providing for schema deployment into such Independently
Infringing Product Set).
3.3. Covenant Not to Sue. Timeline covenants and agrees that will not,
at any time hereafter, initiate, assign, maintain or prosecute any claim, demand
or cause of action at law or otherwise, against any customer, distributor,
purchaser, or licensee of, or any other third party doing business with,
Broadbase or of any of Broadbase's Affiliates ("Protected Entities"), for an
injunction, damages, or loss or injury of any kind, arising from or related to,
in whole or in part, the licensing, distribution, copying, making, use, sale or
offering for sale of any Broadbase Product, whether alone or in combination with
any other products or steps performed by or for the Protected Entities. The
Protected Entities shall have the right to independently assert this covenant
not to sue on their own behalf as third party beneficiaries.
ARTICLE 4 - DURATION OF LICENSE AGREEMENT
4.1. The Term of this License Agreement shall commence on the Effective
Date and shall continue until the later of (i) September 1, 2015, (ii) the last
to expire of the Licensed Timeline Patents has expired or (iii) there are no
longer any pending patent applications anywhere in the world which could issue
so as to become a Licensed Timeline Patent, unless earlier terminated by mutual
written consent of the parties.
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES, DISCLAIMER AND
LIMITATION OF LIABILITY
3
<PAGE> 4
5.1. AS IS. THE PATENT RIGHTS LICENSED BY EACH PARTY HEREUNDER ARE
LICENSED AND PROVIDED "AS IS". NEITHER TIMELINE NOR BROADBASE MAKES OR GIVES,
AND EACH SPECIFICALLY DISCLAIMS, ALL WARRANTIES, WHETHER WRITTEN OR ORAL,
EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, INCLUDING BUT NOT LIMITED TO IMPLIED
WARRANTIES OF MERCHANTABILITY, INFRINGEMENT AND FITNESS FOR A PARTICULAR
PURPOSE, WITH RESPECT TO ANY LICENSED PRODUCTS WHICH MAY BE MANUFACTURED, USED
OR SOLD BY THE OTHER PARTY. Without limiting the generality of the foregoing,
each of Timeline and Broadbase disclaims, and shall have no obligation or other
liability in respect of defense, contribution or indemnity with respect to any
actual or alleged intellectual property infringement arising out of the exercise
by the other party of any of the Licensed Rights by such party.
5.2. Timeline represents and warrants that it has the right to enter
into this License Agreement and to grant to Broadbase the licenses specified
herein.
5.3. Nothing in this License Agreement shall be construed as a warranty,
representation or admission by either party as to the validity, enforceability,
scope or infringement of any Licensed Timeline Patent;
5.4. Neither party hereto shall be liable to the other party, its
customers or other transferees, or any other entity claiming through or under
such other party for any loss of profits or income or other tangible business
loss or other consequential, incidental or special damages, even if such party
hereto has been advised of the possibility of such damages, arising out of or in
connection with this License Agreement.
5.5. Each party acknowledges that the limits on warranties and
liabilities contained in this Article are a fundamental part of the basis of
this License Agreement and the bargain negotiated by the parties and set forth
herein and that this License Agreement would not have been consummated without
such limits.
5.6 Limited Liability. IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE
OTHER OR ANY OTHER ENTITY FOR ANY LOSS WHATSOEVER ARISING OUT OF OR IN
CONNECTION WITH THE LICENSES GRANTED HEREIN, INCLUDING WITHOUT LIMITATION LOSS
OF DATA, COSTS OF PROCUREMENT OF SUBSTITUTE GOODS OR ANY SPECIAL CONSEQUENTIAL
OR INCIDENTAL DAMAGES, UNDER ANY CAUSE OF ACTION ARISING FROM THE EXERCISE OR
INABILITY TO EXERCISE ANY Licensed RIGHTS AND WHETHER OR NOT SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. The limitations, exclusions and
disclaimers for the benefit of Broadbase or Timeline in this Agreement shall
apply irrespective of the nature of the cause of the action or demand, including
but not limited to breach of contract negligence, tort or any other legal theory
and shall survive any breach or breaches and/or failure of the essential purpose
of this License Agreement, or any remedy contained in this License Agreement.
ARTICLE 6 - MISCELLANEOUS TERMS
6.1. No Admissions. Timeline expressly states and stipulates this
License Agreement
4
<PAGE> 5
and the associated Settlement Agreement do not constitute and shall not be
construed as an admission or acknowledgement of any infringement by Broadbase of
any Licensed Timeline Patents or the validity of any Licensed Timeline Patents.
6.2. Governing Law. The validity, construction and performance of this
License Agreement shall be governed by and construed in accordance with the laws
of the State of California, applicable to contracts executed in and performed
entirely within such State, without reference to any choice of law principles of
such State.
6.3. Notices. All notices, consents and other communications under this
License Agreement shall be in writing and shall be deemed to have been duly
given when:
a. delivered by hand;
b. when sent by facsimile (with receipt confirmed), provided that a
copy is promptly thereafter delivered by Express Mail, FedEx, or
other express delivery service;
c. when received by the addressee if sent by Express Mail, FedEx, or
other express delivery service;
d. seven (7) business days after being mailed in the United States,
by first class postage prepaid registered or certified mail,
return receipt requested; or
e. by such other means as the parties to this License Agreement may
agree from time to time.
In each case notice shall be sent to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as a
party may designate as to itself by notice to the other parties):
If to Timeline:
Timeline, Inc.
Attention: Charles Osenbaugh
3055 112th Avenue NE
Bellevue, Washington 98004
Facsimile: 425-822-1120
If to Broadbase:
Broadbase Software, Inc.
Attention: Chuck Bay
172 Constitution Drive
Menlo Park California 94025
Facsimile: 650-614-8301
Either party may change its address by a notice given to the other party in the
manner set forth above.
5
<PAGE> 6
6.4. Entire Agreement. This License Agreement and the associated
Settlement Agreement and Restricted Stock Purchase Agreement represent and
contain the entire agreement and understanding among the parties hereto with
respect to the subject matter of this License Agreement, and supersede any and
all prior oral and written agreements and understandings. No representation,
warranty, condition, understanding or agreement of any kind with respect to the
subject matter shall be relied upon by the parties except those contained
herein. This License Agreement may not be amended or modified except by an
agreement signed by the party against whom enforcement of any modification or
amendment is sought. The parties agree that this License Agreement and any of
the documents contemplated by it may be signed in counterparts and that copies
and signatures exchanged via facsimile shall be fully enforceable as originals.
6.5. Service of Process. Each party irrevocably consents to service of
process in the manner provided for the giving of notices pursuant to this
License Agreement. Nothing in this License Agreement shall affect the right of
any party to this License Agreement to serve process in any other manner
permitted by law.
6.6. Severability. If any provision of this License Agreement shall be
held to be illegal, invalid or unenforceable, that provision will be enforced to
the maximum extent permissible so as to effect the intent of the parties, and
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby. If necessary to effect the intent of
the parties, the parties will negotiate in good faith to amend this License
Agreement to replace the unenforceable language with enforceable language which
as closely as possible reflects such intent.
6.7. Advice Of Counsel. In entering into this License Agreement, the
parties each acknowledge and represent that they have sought and obtained the
legal advice of their attorneys, who are the attorneys of their own choice. They
further represent that the terms of this License Agreement have been completely
read by them, and that those terms are fully understood and voluntarily accepted
by them. This License Agreement is not to be construed for or against any party
on the basis of who proffered, drafted or proposed any section or language.
Intending to be bound thereby, the parties have caused their duly
authorized representatives to execute this License Agreement.
TIMELINE, INC. BROADBASE INFORMATION SYSTEMS, INC.
By: /s/ Frederick W. Dean By: /s/ Chuck Bay
------------------------------- --------------------------------
Title: Vice President Title: CFO
---------------------------- -----------------------------
Date: August 28, 1999 Date:
----------------------------- ------------------------------
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED
SEPTEMBER 30, 1999 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> SEP-30-1999
<CASH> 26,199
<SECURITIES> 3,615,859
<RECEIVABLES> 503,445
<ALLOWANCES> 125,538
<INVENTORY> 0
<CURRENT-ASSETS> 4,696,337
<PP&E> 2,016,510
<DEPRECIATION> 1,708,984
<TOTAL-ASSETS> 5,707,662
<CURRENT-LIABILITIES> 992,407
<BONDS> 0
0
0
<COMMON> 32,270
<OTHER-SE> 8,966,195
<TOTAL-LIABILITY-AND-EQUITY> 5,707,662
<SALES> 5,800,612
<TOTAL-REVENUES> 6,677,412
<CGS> 0
<TOTAL-COSTS> 642,493
<OTHER-EXPENSES> 2,261,686
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,196
<INCOME-PRETAX> 3,833,803
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,833,803
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,833,803
<EPS-BASIC> 1.19
<EPS-DILUTED> 1.10
</TABLE>
