INTERLINQ Reports Second Quarter Results; Separately, Board Appoints New Chairman.

Business Editors

BELLEVUE, Wash.--(BUSINESS WIRE)--Jan. 18, 2001

INTERLINQ Software Corporation (Nasdaq:INLQ) today reported quarterly net revenue of $4,118,000 for the second quarter ended December 31, 2000. This represents a 13% decrease compared to revenue of $4,713,000 for

Net revenue for the six months ended December 31, 2000, was $7,965,000, representing a 17% decrease compared to revenue of $9,580,000 for the same period last year. The company had a net loss of $1,659,000 or $0.34 per share, on 4,824,077 shares, for the six months ended December 31, 2000, compared to a net loss of $417,000 or $0.08 per share, on 4,998,982 shares, for the same period last year.

"We saw an uptick in revenue after a poor first quarter," said Jiri Nechleba, president and chief executive officer, "and we hope we can build on this momentum. With lower mortgage interest rates and the industry gearing up for a surge in loan refinancing, we may see further growth as customers require more capacity or efficiencies."

Nechleba noted that the company continues to maintain a solid financial position with just under $9 million in cash and investments.

In other news, the board of directors named Robert Gallagher as chairman this week. Gallagher, an INTERLINQ director since 1994, was until 1997 an executive at North American Mortgage Company, now the mortgage banking subsidiary of the Dime Savings Bank of New York, FSB (NYSE:DME).

"By bringing on Bob in this new role, we gain his considerable industry experience and horsepower," said Nechleba. "Bob and I will partner on corporate strategic initiatives, enabling me to focus more energy on operations in the wake of Patricia Graham's departure last month."

The board also approved the appointment of Alan Pickerill as chief financial officer (CFO), reflecting his expanded role as vice president of finance and administration.

INTERLINQ Software Corporation, established in 1982, is a leading provider of technology that helps organizations effectively manage complex, information-intensive business transactions. The company's mortgage technology division offers client-server-based business solutions to commercial banks, mortgage banks, credit unions and savings institutions, including a number of the top originators. INTERLINQ lending systems process approximately one in eight retail home loans, more than any other system. INTERLINQ's enterprise technology division provides process-centered, enterprise application integration (EAI) solutions. INTERLINQ is a proven innovator in EAI software technology and business-process knowledge management; its technology solutions have won industry recognition and awards. More information on INTERLINQ's products and services is available on the company's Web site at www.interlinq.com.

When used in this discussion, the words, "believes," "hopes" and "may" and similar expressions are intended to identify forward-looking statements. Such forward-looking statements are based on the opinions or estimates of management at the time the statements are made and are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Factors that could affect INTERLINQ's actual results include, but are not limited to, the "Certain Additional Factors Affecting Future Results" described in our quarterly report on Form 10-Q for the quarter ended September 30, 2000. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

                    INTERLINQ Software Corporation
                       Statements of Operations
                              (Unaudited)

                 Quarter ended Dec. 31,     Six months ended Dec. 31,
                     2000       1999           2000            1999
               ------------  ------------  ------------  -------------

Net revenues:
  Software
   license fees $ 1,066,295   $ 1,721,570   $ 2,034,691   $ 3,524,038
  Software
   support fees   2,496,398     2,385,254     4,789,151     4,844,655
  Other             555,230       606,004     1,141,695     1,210,853
                 -----------   -----------   -----------   -----------
     Total net
      revenues    4,117,923     4,712,828     7,965,537     9,579,546
                 -----------   -----------   -----------   -----------
Cost of revenues:
  Software
   license fees     841,527       538,535     1,632,624     1,063,887
  Software
   support fees     603,057       658,389     1,193,018     1,363,849
  Other             311,703       385,892       658,000       753,990
                 -----------   -----------   -----------   -----------
     Total cost of
      revenues    1,756,287     1,582,816     3,483,642     3,181,726
                 -----------   -----------   -----------   -----------
     Gross
      profit      2,361,636     3,130,012     4,481,895     6,397,820
                 -----------   -----------   -----------   -----------
Operating expenses:
  Product
   development    1,063,282       993,915     2,140,712     1,929,414
  Sales and
   marketing      1,144,819     1,249,007     2,228,788     2,614,396
  General and
   admini-
   strative       1,231,117     1,197,285     2,628,752     2,348,818
  Amortization
   of goodwill
   & other
   intangible
   assets           214,830       214,830       429,660       429,660
                 -----------   -----------   -----------   -----------
     Total
      operating
      expenses    3,654,048     3,655,037     7,427,912     7,322,288
                 -----------   -----------   -----------   -----------
     Operating
      loss       (1,292,412)     (525,025)   (2,946,017)     (924,468)
Net interest
 and other
 income             149,861       122,481       312,050       262,623
                 -----------   -----------   -----------   -----------

Loss before
 income taxes    (1,142,551)     (402,544)   (2,633,967)     (661,845)
Income tax
 benefit           (422,744)     (148,941)     (974,568)     (244,882)
                 -----------   -----------   -----------   -----------
     Net loss   ($  719,807)  ($  253,603)  ($1,659,399)  ($  416,963)
                ===========   ===========   ===========   ===========


Per share data:
  Net loss -
   basic and
   diluted           ($ .15)       ($ .05)      ($ .34)        ($ .08)


  Shares used
   to calculate
   net loss -
   basic and
   diluted        4,824,077     4,860,026     4,824,077     4,998,982

                    INTERLINQ Software Corporation
                            Balance Sheets

                                        December 31,     June 30,
                                           2000            2000

Assets                                  (Unaudited)
Current assets:
   Cash, cash equivalents and
    short term investments              $ 8,737,498    $10,110,958
   Accounts receivable, net               2,078,552      1,982,668
   Current deferred tax asset               422,707        422,707
   Inventory, prepaid expenses,
    and other current assets              1,913,123      1,292,753
                                        -----------    -----------
      Total current assets               13,151,880     13,809,086
                                        -----------    -----------

Furniture and equipment, net              1,566,891      1,692,686

Capitalized software costs, net           4,653,886      5,094,766

Goodwill and other intangible
 assets, net                              1,095,397      1,525,057

Other assets                                 68,285         68,284
                                        -----------    -----------
                                        $20,536,339    $22,189,879
                                        ===========    ===========

Liabilities and Shareholders' Equity
Current liabilities:
   Accounts payable                     $   358,239    $   559,339
   Accrued compensation & benefits          889,157        897,367
   Other accrued liabilities                125,343        124,038
   Customer deposits                        772,592        820,112
   Deferred software support fees         4,778,006      4,531,712
                                        -----------    -----------
      Total current liabilities           6,923,337      6,932,568
                                        -----------    -----------

Noncurrent liabilities:
   Noncurrent liabilities,
    excluding current installments          101,850         86,760
   Noncurrent deferred tax liability        418,662        418,662
                                        -----------    -----------
      Total noncurrent liabilities          520,512        505,422
                                        -----------    -----------

Shareholders' equity:
   Common stock, $.01 par value
    Authorized 30,000,000 shares;
    issued and outstanding
    4,824,077 shares                         48,241         48,241
   Additional paid-in capital             7,649,952      7,649,952
   Retained earnings                      5,394,297      7,053,696
                                        -----------    -----------
      Total shareholders' equity         13,092,490     14,751,889
                                        -----------    -----------
                                        $20,536,339    $22,189,879
                                        ===========    ===========