INTERLINQ Reports Record Revenue and 238% Increase inNet Income for First Quarter; Board...

KIRKLAND, Wash.--(BUSINESS WIRE)--Oct. 29, 1998--INTERLINQ Software Corporation (Nasdaq:INLQ) today reported quarterly net revenue of $5,808,000 for the first quarter ending September 30, 1998. This marks the second consecutive quarter of record revenues for the company and represents a 59% increase

over revenue of $3,642,000 for the same period last year. Net income for the quarter was $707,000, or $0.13 per diluted share on 5,565,000 shares. This represents a 238% increase over net income of $209,000, or $0.04 per diluted share on 5,495,000 shares for the same period last year.

"INTERLINQ's revenues continued to grow in the first quarter due to strong demand from new and existing customers for our MortgageWare(R) Enterprise product suite," said Jiri Nechleba, president and chief executive officer. The MortgageWare Enterprise is a suite of integrated technology solutions that manage mortgage loans through all stages of the loan's life cycle, including origination, processing, secondary marketing and servicing.

"Our technology enables customers to reduce the total cost of ownership," said Nechleba. "By offering integrated solutions that make use of thin-client, Web-browser and 32-bit Windows(R)-based technology, mortgage lenders can increase productivity while spending less on hardware, software and related training, maintenance and support."

Nechleba noted that revenue from MortgageWare software license fees more than doubled in the first quarter, growing to $3,347,105 from $1,546,160 for the same period a year ago. "As in the past," he said, "we can expect this growth in license fees to contribute to additional software support fees, which fosters a healthy, recurring revenue base."

In addition, the company announced that its board of directors has authorized a fourth program to repurchase up to 500,000 shares, approximately 9 percent of the company's outstanding common stock. The company has nearly completed an earlier buy-back program with the repurchase of 250,000 shares during the first quarter. As in the past, the repurchases will be made from time to time in the open market.

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 provides business solutions to approximately 2,000 banks, savings institutions, mortgage banks, mortgage brokers, and credit unions at 7,000 sites. INTERLINQ's new enterprise technology division provides process-centered, enterprise application integration (EAI) solutions both directly and through third-party application developers, OEMs and system integrators. 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 http://www.interlinq.com.

When used in this discussion, the words, "believes" and "expects" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. 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 that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. -0-

                    INTERLINQ Software Corporation
                       Statements of Operations
                              (Unaudited)
                                           Quarter ended September 30,
                                              1998            1997
Net revenues:
     Software license fees             $  3,347,105     $  1,546,160
     Software support fees                1,981,275        1,693,586
     Other                                  479,687          402,094
        Total net revenues                5,808,067        3,641,840
Cost of revenues:
     Software license fees                  539,834          416,875
     Software support fees                  638,812          522,587
     Other                                  262,252          243,570
        Total cost of revenues            1,440,898        1,183,032
        Gross profit                      4,367,169        2,458,808
Operating expenses:
     Product development                    839,039          323,464
     Sales and marketing                  1,448,622        1,201,060
     General and administrative           1,155,191          768,958
        Total operating expenses          3,442,852        2,293,482
        Operating income                    924,317          165,326
Net interest and other income               154,507          191,771
Income before income taxes                1,078,824          357,097
Income tax expense                          372,194          147,883
        Net income                     $    706,630     $    209,214


Per share data:
     Net income - basic                       $ .13            $ .04
     Net income - diluted                     $ .13            $ .04
     Shares used to calculate
      net income - basic                  5,309,918        5,389,826
     Shares used to calculate
      net income - diluted                5,564,657        5,494,728


                  INTERLINQ Software Corporation
                           Balance Sheets

                                            September 30,   June 30,
                                               1998           1998
Assets                                      (Unaudited)
Current assets:
 Cash and cash equivalents                $  5,075,783  $  7,233,826
 Investments available-for-sale, at
  fair value                                 2,204,978     3,406,389
 Investments held-to-maturity,
  at amortized cost                          3,276,889     3,267,534
 Accounts receivable, less allowance
  for doubtful accounts of $310,364
  and $255,900, respectively                 3,313,519     3,400,194
  Inventory                                     41,988        39,556
  Prepaid expenses                             406,564       341,717
     Total current assets                   14,319,721    17,689,216

Furniture and equipment, at cost             6,771,262     6,434,017
 Less accumulated depreciation and
  amortization                               5,686,820     5,434,285
     Net furniture and equipment             1,084,442       999,732

Capitalized software costs, less
 accumulated amortization of $2,942,045
 and $2,438,852, respectively                4,408,245     4,421,806

Goodwill, net                                  904,789       932,333
Other assets                                    98,820       110,102
                                          $ 20,816,017  $ 24,153,189

Liabilities and Shareholders' Equity
Current liabilities:
 Accounts payable                         $    398,983  $    690,138
 Accrued compensation & benefits             1,086,300     1,745,908
 Other accrued liabilities                     674,296       695,387
 Purchase consideration payable                      -     2,600,000
 Customer deposits                             525,680       374,151
 Deferred software support fees              4,050,148     3,434,092
     Total current liabilities               6,735,407     9,539,676

Noncurrent liabilities, excluding
  current installments                          22,483        14,864

Shareholders' equity:
 Common stock, $.01 par value. Authorized
  30,000,000 shares; issued and
  outstanding 5,121,777 shares and
  5,350,559 shares, respectively                51,218        53,506
 Additional paid-in capital                  9,197,971    10,442,835
 Retained earnings                           4,808,938     4,102,308
     Total shareholders' equity             14,058,127    14,598,649
                                          $ 20,816,017  $ 24,153,189