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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

(Mark One)

|ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2002

OR

|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission file number 000-25661

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TenFold Corporation(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction
of incorporation or organization)

83-0302610(IRS Employer Identification No.)


698 West 10000 South
South Jordan, Utah 84095(Address of principal executive offices, including zip code)

(801) 495-1010(Registrant's telephone number, including area code)

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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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 ý    No o

As
of June 30, 2002, there were 37,327,080 shares of the registrant's Common Stock outstanding.

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INDEX

|           |         |                                                                                                                    |  | Page
|---------- | ------- | ------------------------------------------------------------------------------------------------------------------ |  | ----
|           |         | Forward-Looking Statements                                                                                         |  | 3   
|PART I.    |         | FINANCIAL INFORMATION                                                                                              |  |     
|           | Item 1. | Condensed Consolidated Financial Statements                                                                        |  |     
|           |         | Condensed Consolidated Balance Sheets at June 30, 2002 and December 31, 2001                                       |  | 4   
|           |         | Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2002 and June 30, 2001 |  | 5   
|           |         | Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2002 and June 30, 2001           |  | 6   
|           |         | Notes to Condensed Consolidated Financial Statements                                                               |  | 7   
|           | Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations                              |  | 18  
|           | Item 3. | Quantitative and Qualitative Disclosures About Market Risk                                                         |  | 43  
|PART II.   |         | OTHER INFORMATION                                                                                                  |  |     
|           | Item 1. | Legal Proceedings                                                                                                  |  | 44  
|           | Item 2. | Changes in Securities and Use of Proceeds                                                                          |  | 44  
|           | Item 4. | Submission of Matters to a Vote of Security Holders                                                                |  | 44  
|           | Item 6. | Exhibits and Reports on Form 8-K                                                                                   |  | 45  
|SIGNATURES |         | 46                                                                                                                

2

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties that may
cause actual future events or results to differ materially from those described in the forward-looking statements. Words such as "expects," "intends," "anticipates," "should," "believes," "will,"
"plans," "estimates," "may," variations of such words, and similar expressions are intended to identify such forward-looking statements. We disclaim any intention or obligation to revise any
forward-looking statements whether as a result of new information, future developments, or otherwise. Our future prospects are difficult to evaluate. There are many factors that could cause actual
results to differ materially from those contained in the forward-looking statements. These factors include: ability to generate sufficient cash flow or secure additional sources of financing;
collectibility of project payments; future customer revenue; our errors and omissions insurance coverage may not cover contractual disputes; defects or other limitations in our software; complaints
filed by customers, shareholders, or other third parties and other litigation or disputes; inability or failure to meet certain contractual obligations; possible de-listing of our stock
from Nasdaq; variability of quarterly operating results; completion of one remaining fixed-time, fixed-price contract; ability to accurately estimate the resources required for our
fixed-price project; ability to adequately anticipate employee and resource utilization rates; lengthy and variable sales cycles; dependence on a small number of customers; revenues have historically
come from a small number of vertical industries; ability to divest vertical applications products; ability to license the Universal Application; attraction, training, and retention of employees and
key management; protection of intellectual property; international political and economic uncertainty; a majority of our stock is owned by a few persons; anti-takeover provisions in our
charter documents; and other competitive factors. Such statements could be affected by general industry and market conditions and growth rates, general domestic and international economic conditions
including interest rate and currency exchange rate fluctuations and other factors. Additional information concerning factors that could cause actual results to differ materially from those in the
forward-looking statements is contained from time to time in documents filed by TenFold Corporation with the Securities and Exchange Commission, including but not limited to, the most recent reports
on Forms 10-Q and 10-K. Some of these factors are described under the section entitled "Management's Discussion and Analysis of Financial Condition and Results of
OperationsFactors That May Affect Future Results and Market Price of Stock."

3

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PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

TENFOLD CORPORATION  CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data)  (unaudited)

|                                      |                                                                                                        | June 30,                                                                                                     |   | December 31, |        
|------------------------------------- | ------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------ | - | ------------ | -------
|
|Assets                                |                                                                                                       
|Current assets:                       |                                                                                                        |                                                                                                              |   |              |        
|                                      | Cash and cash equivalents                                                                              |                                                                                                              | $ | 4,155        |        
|                                      | Accounts receivable, (net of allowances for doubtful accounts of $308 and $955, respectively)          |                                                                                                              |   | 1,877        |        
|                                      | Unbilled accounts receivable, (net of allowances for doubtful accounts of $0 and $1,320, respectively) |                                                                                                              |   | 25           |        
|                                      | Prepaid expenses and other assets                                                                      |                                                                                                              |   | 588          |        
|                                      | Income taxes receivable                                                                                |                                                                                                              |   | 17           |        
|                                      | Assets held for sale                                                                                   |                                                                                                              |   |             |        
|                                      | Other assets, (net of allowances of $153 and $182, respectively) (Note 8)                              |                                                                                                              |   | 6,234        |        
|                                      |                                                                                                        |                                                                                                              |   |              |        
|                                      |                                                                                                        | Total current assets                                                                                         |   |              | 12,896 
|                                      | Restricted cash                                                                                        |                                                                                                              |   | 1,976        |        
|                                      | Property and equipment, net                                                                            |                                                                                                              |   | 3,603        |        
|                                      | Due from stockholders, (net of allowances of $400 and $800, respectively)                              |                                                                                                              |   |             |        
|                                      | Other assets                                                                                           |                                                                                                              |   | 297          |        
|                                      |                                                                                                        |                                                                                                              |   |              |        
|                                      |                                                                                                        | Total assets                                                                                                 |   | $            | 18,772 
|                                      |                                                                                                        |                                                                                                              |   |              |        
|Liabilities and Stockholders' Deficit |                                                                                                       
|Current liabilities:                  |                                                                                                        |                                                                                                              |   |              |        
|                                      | Accounts payable                                                                                       |                                                                                                              | $ | 1,422        |        
|                                      | Income taxes payable                                                                                   |                                                                                                              |   | 1,774        |        
|                                      | Accrued liabilities                                                                                    |                                                                                                              |   | 8,244        |        
|                                      | Deferred revenue                                                                                       |                                                                                                              |   | 24,750       |        
|                                      | Current installments of obligations under capital leases                                               |                                                                                                              |   | 2,967        |        
|                                      | Current installments of notes payable                                                                  |                                                                                                              |   | 1,823        |        
|                                      | Other current liabilities (Note 8)                                                                     |                                                                                                              |   | 6,145        |        
|                                      |                                                                                                        |                                                                                                              |   |              |        
|                                      |                                                                                                        | Total current liabilities                                                                                    |   |              | 47,125 
|                                      |                                                                                                        |                                                                                                              |   |              |        
|Long-term liabilities:                |                                                                                                        |                                                                                                              |   |              |        
|                                      | Obligations under capital leases, excluding current installments                                       |                                                                                                              |   | 463          |        
|                                      | Notes payable, excluding current installments                                                          |                                                                                                              |   | 1,424        |        
|                                      | Other long-term liabilities                                                                            |                                                                                                              |   | 25           |        
|                                      |                                                                                                        |                                                                                                              |   |              |        
|                                      |                                                                                                        | Total long-term liabilities                                                                                  |   |              | 1,912  
|                                      |                                                                                                        |                                                                                                              |   |              |        
|Contingencies (Note 8)                |                                                                                                        |                                                                                                              |   |              |        
|Stockholders' deficit:                |                                                                                                        |                                                                                                              |   |              |        
|                                      | Common stock, $0.001 par value:                                                                        |                                                                                                              |   |              |        
|                                      | Authorized: 120,000,000 shares                                                                         |                                                                                                              |   |              |        
|                                      |                                                                                                        | Issued and outstanding shares: 37,327,080 shares at June 30, 2002 and 36,812,462 shares at December 31, 2001 |   |              | 37     
|                                      | Additional paid-in capital                                                                             |                                                                                                              |   | 66,030       |        
|                                      | Notes receivable from stockholders, (net of allowances of $609 and $786, respectively)                 |                                                                                                              |   | (284         | )      
|                                      | Deferred compensation                                                                                  |                                                                                                              |   | (239         | )      
|                                      | Accumulated deficit                                                                                    |                                                                                                              |   | (95,335      | )      
|                                      | Accumulated other comprehensive loss                                                                   |                                                                                                              |   | (474         | )      
|                                      |                                                                                                        |                                                                                                              |   |              |        
|                                      |                                                                                                        | Total stockholders' deficit                                                                                  |   |              | (30,265
|                                      |                                                                                                        |                                                                                                              |   |              |        
|                                      |                                                                                                        | Total liabilities and stockholders' deficit                                                                  |   | $            | 18,772 
|                                      |                                                                                                        |                                                                                                              |   |              |        

The accompanying notes are an integral part of these condensed consolidated financial statements

4

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TENFOLD CORPORATION  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  (in thousands, except per share data)  (unaudited)

|                                                                                                  |                                                   | Three Months Ended
June 30,       |        | Six Months Ended
June 30, |      
|------------------------------------------------------------------------------------------------- | ------------------------------------------------- | --------------------------------- | ------ | ------------------------- | -----
|
|Revenues:                                                                                         |                                                   |                                   |        |                           |      
|                                                                                                  | License                                           |                                   | $      | 46                        |      
|                                                                                                  | Subscription                                      |                                   |        | 3,509                     |      
|                                                                                                  | Services and other                                |                                   |        | 2,695                     |      
|                                                                                                  |                                                   |                                   |        |                           |      
|                                                                                                  |                                                   | Total revenues                    |        |                           | 6,250
|                                                                                                  |                                                   |                                   |        |                           |      
|Operating expenses:                                                                               |                                                   |                                   |        |                           |      
|                                                                                                  | Cost of revenues                                  |                                   |        | 3,869                     |      
|                                                                                                  | Sales and marketing                               |                                   |        | 607                       |      
|                                                                                                  | Research and development                          |                                   |        | 1,381                     |      
|                                                                                                  | General and administrative                        |                                   |        | 2,007                     |      
|                                                                                                  | Amortization of goodwill and acquired intangibles |                                   |        |                          |      
|                                                                                                  | Special charges                                   |                                   |        | 562                       |      
|                                                                                                  |                                                   |                                   |        |                           |      
|                                                                                                  |                                                   | Total operating expenses          |        |                           | 8,426
|                                                                                                  |                                                   |                                   |        |                           |      
|Income (loss) from operations                                                                     |                                                   |                                   | (2,176 | )                         |      
|                                                                                                  |                                                   |                                   |        |                           |      
|Other income (expense):                                                                           |                                                   |                                   |        |                           |      
|                                                                                                  | Interest income                                   |                                   |        | 71                        |      
|                                                                                                  | Interest expense                                  |                                   |        | (158                      | )    
|                                                                                                  | Other income                                      |                                   |        | 35                        |      
|                                                                                                  | Gain (loss) on sale of The LongView Group, Inc.   |                                   |        | (120                      | )    
|                                                                                                  |                                                   |                                   |        |                           |      
|                                                                                                  |                                                   | Total other income (expense), net |        |                           | (172 
|                                                                                                  |                                                   |                                   |        |                           |      
|Income (loss) before income taxes                                                                 |                                                   |                                   | (2,348 | )                         |      
|Provision (benefit) for income taxes                                                              |                                                   |                                   | 7      |                           |      
|                                                                                                  |                                                   |                                   |        |                           |      
|Net income (loss)                                                                                 |                                                   | $                                 | (2,355 | )                         | $    
|                                                                                                  |                                                   |                                   |        |                           |      
|Basic earnings (loss) per common share                                                            |                                                   | $                                 | (0.06  | )                         | $    
|                                                                                                  |                                                   |                                   |        |                           |      
|Diluted earnings (loss) per common share                                                          |                                                   | $                                 | (0.06  | )                         | $    
|                                                                                                  |                                                   |                                   |        |                           |      
|Weighted average common and common equivalent shares used to calculate earnings (loss) per share: |                                                   |                                   |        |                           |      
|                                                                                                  | Basic                                             |                                   |        | 37,305                    |      
|                                                                                                  |                                                   |                                   |        |                           |      
|                                                                                                  | Diluted                                           |                                   |        | 37,305                    |      
|                                                                                                  |                                                   |                                   |        |                           |      

The
accompanying notes are an integral part of these condensed consolidated financial statements

5

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TENFOLD CORPORATION  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (in thousands)  (unaudited)

|                                                  |                                                                             | Six Months Ended
June 30,                          |                                          
|------------------------------------------------- | --------------------------------------------------------------------------- | -------------------------------------------------- | -----------------------------------------
|
|Cash flows from operating activities:             |                                                                             |                                                    |                                          
|                                                  | Net loss                                                                    |                                                    | $                                        
|                                                  | Adjustments to reconcile net loss to net cash used in operating activities: |                                                    |                                          
|                                                  |                                                                             | Deferred income tax provision (benefit)            |                                          
|                                                  |                                                                             | Amortization of goodwill and acquired intangibles  |                                          
|                                                  |                                                                             | Depreciation and amortization                      |                                          
|                                                  |                                                                             | Impaired assets charge                             |                                          
|                                                  |                                                                             | Provision for bad debts                            |                                          
|                                                  |                                                                             | Amortization of deferred compensation              |                                          
|                                                  |                                                                             | Compensation expense related to stock options      |                                          
|                                                  |                                                                             | (Gain) loss on sale of The LongView Group, Inc.    |                                          
|                                                  | Changes in operating assets and liabilities:                                |                                                    |                                          
|                                                  |                                                                             | Accounts receivable                                |                                          
|                                                  |                                                                             | Unbilled accounts receivable                       |                                          
|                                                  |                                                                             | Prepaid expenses and other assets                  |                                          
|                                                  |                                                                             | Accounts payable                                   |                                          
|                                                  |                                                                             | Income taxes payable                               |                                          
|                                                  |                                                                             | Accrued liabilities                                |                                          
|                                                  |                                                                             | Deferred revenues                                  |                                          
|                                                  |                                                                             | Other liabilities                                  |                                          
|                                                  |                                                                             |                                                    |                                          
|                                                  |                                                                             |                                                    | Net cash used in operating activities    
|                                                  |                                                                             |                                                    |                                          
|Cash flows from investing activities:             |                                                                             |                                                    |                                          
|                                                  | Proceeds from sale of property and equipment                                |                                                    |                                          
|                                                  | Additions to property and equipment                                         |                                                    |                                          
|                                                  | (Additions) decreases to restricted cash                                    |                                                    |                                          
|                                                  |                                                                             | Net proceeds from sale of The LongView Group, Inc. |                                          
|                                                  |                                                                             |                                                    |                                          
|                                                  |                                                                             |                                                    | Net cash provided by investing activities
|                                                  |                                                                             |                                                    |                                          
|Cash flows from financing activities:             |                                                                             |                                                    |                                          
|                                                  | Proceeds from employee stock purchase plan stock issuance                   |                                                    |                                          
|                                                  | Proceeds from common stock issuance                                         |                                                    |                                          
|                                                  | Exercise of common stock options                                            |                                                    |                                          
|                                                  | Repurchase of common stock                                                  |                                                    |                                          
|                                                  | Principal payments on notes payable                                         |                                                    |                                          
|                                                  | Notes receivable from stockholders                                          |                                                    |                                          
|                                                  | Payments of notes receivable from stockholders                              |                                                    |                                          
|                                                  | Principal payments on obligations under capital leases                      |                                                    |                                          
|                                                  |                                                                             |                                                    |                                          
|                                                  |                                                                             |                                                    | Net cash used in financing activities    
|                                                  |                                                                             |                                                    |                                          
|Effect of exchange rate changes                   |                                                                             |                                                    | (474                                     
|                                                  |                                                                             |                                                    |                                          
|Net decrease in cash and cash equivalents         |                                                                             |                                                    | (6,814                                   
|Cash and cash equivalents at beginning of period  |                                                                             |                                                    | 10,969                                   
|                                                  |                                                                             |                                                    |                                          
|Cash and cash equivalents at end of period        |                                                                             | $                                                  | 4,155                                    
|                                                  |                                                                             |                                                    |                                          
|Supplemental disclosure of cash flow information: |                                                                             |                                                    |                                          
|                                                  | Cash paid for income taxes                                                  |                                                    | $                                        
|                                                  | Cash paid for interest                                                      |                                                    | $                                        

The accompanying notes are an integral part of these condensed consolidated financial statements

6

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TENFOLD CORPORATION  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.    Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements included herein have been prepared by TenFold Corporation ("TenFold") pursuant to the rules
and regulations of the Securities and Exchange Commission. In management's opinion, the interim financial data presented includes all adjustments necessary for a fair presentation. All intercompany
accounts and transactions have been eliminated. Certain reclassifications have been made in the prior periods' financial statements to conform to the current period's presentation. Certain information
required by generally accepted accounting principles has been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission. Operating results for the three and six
months ended June 30, 2002 are not necessarily indicative of the results that may be expected for any future period or for the year ending December 31, 2002.

This
report should be read in conjunction with TenFold's audited Consolidated Financial Statements for the year ended December 31, 2001 included in its Annual Report on
Form 10-K filed with the Securities and Exchange Commission.

The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions, including for example,
estimated project costs and profitability and accounts receivable allowances. These assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

TenFold's
financial statements have been prepared under the assumption that TenFold will continue as a going concern. The independent auditors' report on our December 31, 2001
financial statements, prepared by KPMG LLP, included an explanatory paragraph relating to their substantial doubt as to our ability to continue as a going concern. TenFold has been operationally cash
flow negative for the
years ended December 31, 2001 and 2000, and the three and six months ended June 30, 2002. This ongoing negative cash flow has continued to place a burden on TenFold to obtain cash
infusions beyond those generated from normal operations. TenFold continues to seek additional sources of financing such as new sales to existing and new customers, asset sales or equity financing, to
sustain its operations. There can be no assurance that TenFold will be successful in its efforts to obtain financing or generate sufficient cash flow to continue operations in the near term.

2.    Revenue Recognition

TenFold derives revenues from license fees, subscription fees, applications development and implementation services, support, and training services. License
revenues consist of fees for licensing the Universal Application as a tool, and license fees for the applications that TenFold owns and resells. Subscription revenue consists of fees for licensing the
Universal Application, licensing new product releases of TenFold's ComponentWare, providing related time-and-material consulting, training, and support services during a
subscription period. Service revenues consist of fees for applications development and implementation, support and training.

TenFold
follows the provisions of Statement of Position ("SOP") 97-2,Software Revenue Recognition, as modified by SOP
98-9,Modification of SOP 97-2 with Respect to Certain Transactions, and Statement of Position ("SOP") 81-1, Accounting for Performance of Construction-Type and Certain
Production-Type Contracts, in recognizing revenue under each of its
contracts.

TenFold
generally enters into contracts that involve multiple elements, such as software products, enhancements, post-contract customer support, training, and
time-and-material services. TenFold

7

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allocates a portion of the contract fee to each undelivered element based on the relative fair values of the elements and allocates the fee for delivered software products using the residual method.

For
service revenue accounted for under SOP 81-1, TenFold generally estimates a profit range and recognizes revenue as costs are incurred. TenFold adjusts the estimates as
work progresses under the contract and TenFold gains experience.

For
certain contracts for which reasonably dependable estimates cannot be made or for which inherent hazards make our estimates doubtful, TenFold recognizes revenue under the
completed-contract method of contract accounting.

For
certain contracts, including a subscription to future software products when and if they become available, TenFold recognizes the fees for the software products ratably over the
subscription term
beginning with delivery of the first software product. For contracts that include a service element for which the fair value is undeterminable, and the contract includes a subscription to new product
releases on a "when and if available basis," TenFold recognizes the entire contract fee ratably over the subscription period as subscription revenue.

TenFold's
deferred revenue balance generally results from contractual commitments made by customers to pay amounts to TenFold in advance of revenues earned. TenFold's unbilled accounts
receivable represents revenue that TenFold has earned but which TenFold has not yet billed.

3.    Earnings (Loss) Per Share

The following table sets forth the computation of basic and diluted earnings (loss) per share (in thousands except per share data):

|                                  |                                                                                                  | Three Months Ended
June 30, |   | Six Months Ended
June 30, |  
|--------------------------------- | ------------------------------------------------------------------------------------------------ | --------------------------- | - | ------------------------- | -
|
|Numerator:                        |                                                                                                  |                             |   |                           |  
|                                  | Numerator for basic earnings (loss) per sharenet income (loss) available to common stockholders |                             | $ | (2,355                    | )
|                                  |                                                                                                  |                             |   |                           |  
|                                  | Numerator for diluted earnings (loss) per share                                                  |                             | $ | (2,355                    | )
|                                  |                                                                                                  |                             |   |                           |  
|Denominator:                      |                                                                                                  |                             |   |                           |  
|                                  | Denominator for basic earnings (loss) per shareweighted average shares                          |                             |   | 37,305                    |  
|                                  |                                                                                                  |                             |   |                           |  
|                                  | Employee stock options                                                                           |                             |   |                          |  
|                                  |                                                                                                  |                             |   |                           |  
|                                  | Denominator for diluted earnings (loss) per share                                                |                             |   | 37,305                    |  
|                                  |                                                                                                  |                             |   |                           |  
|Earnings (loss) per common share: |                                                                                                  |                             |   |                           |  
|                                  | Basic earnings (loss) per common share                                                           |                             | $ | (0.06                     | )
|                                  |                                                                                                  |                             |   |                           |  
|                                  | Diluted earnings (loss) per common share                                                         |                             | $ | (0.06                     | )
|                                  |                                                                                                  |                             |   |                           |  

Employee
stock options of 13,161,341 outstanding during the three and six months ended June 30, 2002, that have a weighted average exercise price of $3.45, and that could
potentially dilute basic earnings per share in the future, were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive for the
periods. Employee stock options of 12,379,512 and 13,899,862 outstanding during the three and six months ended June 30, 2001, respectively, that have a weighted average exercise price of $11.89
and $10.63 per share, respectively, and that could potentially dilute basic earnings per share in the future, were not included in the computation of diluted earnings per share because to do so would
have been anti-dilutive for the periods.

8

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4.    Restricted Cash

Restricted cash relates to $1.5 million held in escrow to secure a lease and provide for leasehold improvements on office space in South Jordan, Utah;
$165,000 held as collateral for TenFold's letter of credit obligations used to secure leases on office space in Dallas, Texas; $100,000 held in a deposit account related to an employment agreement;
and $189,000 held to support various other accounts payable activities.

5.    Comprehensive Income (Loss)

TenFold has adopted the provisions of Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS No. 130"). SFAS
No. 130 establishes standards for reporting comprehensive income (loss) and its components in financial statements. Comprehensive loss for the
three and six months ended June 30, 2002 and 2001, ignoring the insignificant impact of taxes on foreign currency translation, were as follows (in thousands):

|                             |  | Three Months Ended
June 30, |        | Six Months Ended
June 30, |  
|---------------------------- |  | --------------------------- | ------ | ------------------------- | -
|
|Net income (loss)            |  | $                           | (2,355 | )                         | $
|Foreign currency translation |  |                             | (32    | )                         |  
|                             |  |                             |        |                           |  
|Comprehensive income (loss)  |  | $                           | (2,387 | )                         | $
|                             |  |                             |        |                           |  

6.    Income Taxes

The provision for income taxes for the three months ended June 30, 2002 relates primarily to foreign taxes. The benefit for income taxes for the six months
ended June 30, 2002 relates primarily to reversing accrued Federal alternative minimum taxes from 2001 due to recently enacted tax legislation. No tax benefit was recorded during the six months
ended June 30, 2002 for TenFold's net operating losses.

The
valuation allowance as of June 30, 2002 was recorded in accordance with the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes, which
requires that a valuation allowance be established when there is significant uncertainty as to the realizability of
deferred tax assets.

9

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7.    Commitments

TenFold has commitments under long-term operating leases, principally for office space and computer equipment. Future minimum lease payments under
non-cancelable operating leases, in excess of one year and excluding amounts accrued as part of restructurings, at June 30, 2002 are as follows (in thousands):

Year

AmountQ3-4 2002

$
9462003


2,2122004


2,3422005


2,4042006


2,469Thereafter


15,492Total minimum lease commitments

$
25,865


In
2000, TenFold entered into a 10-year lease for 102,569 square feet of office space in South Jordan, Utah. The lease commenced in March 2002. This lease is an
operating lease. In April 2002, TenFold negotiated with the developer to extend the term of the lease to eleven years and to reduce its monthly payment obligations for the first year. As of the
date of this filing, TenFold is pursuing options to reduce this lease commitment further, including the sublease of a significant portion of this space.

Operating
lease payment obligations for properties that have been restructured are included in accounts payable and accrued liabilities in the Condensed Consolidated Balance Sheet at
June 30, 2002. See Note 9 for more information.

During
the three months ended June 30, 2002, in connection with TenFold's termination of office leases in San Francisco, California, and Chicago, Illinois, TenFold released to the
landlords $3.5 million previously held as restricted cash to support these leases, and terminated the related $3.5 million of stand-by letters of credit. TenFold has
remaining stand-by letters of credit totaling $165,000, which will terminate by December 31, 2003. These letters of credit have not been drawn upon at June 30, 2002.

8.    Legal Proceedings and Contingencies

Resolved Disputes

During the three months ended June 30, 2002, TenFold has settled a customer dispute with Cedars-Sinai Medical Center and a dispute with Perot Systems. In
neither of these settlement agreements did any party admit liability.



On November 14, 2001, Cedars-Sinai Medical Center ("Cedars-Sinai"), a formerly disclosed unnamed customer, sent a letter alleging breach under the parties'
contract. On April 30, 2002, TenFold and Cedars-Sinai entered into a number of agreements, including a Settlement Agreement, which provide a basis to resolve the dispute between the parties and
beneficially restructure the relationship between the parties. The Settlement Agreement provides for a three-phased release of Cedars-Sinai's alleged claims against TenFold, a release of TenFold's
potential claims against Cedars-Sinai and a restructuring of the parties' business arrangement. As part of the resolution, Cedars-Sinai has assumed the obligations of completing the Patient Care
Expert ("PCX") application facilitated in part by the transfer of employees from TenFold to Cedars-Sinai. TenFold will continue to provide Universal Application license rights and support to
Cedars-Sinai. Under the agreements, TenFold will also provide certain Universal Application training to Perot Systems Corporation ("Perot"), an interested

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party to the original transaction, and a continuing participant in the restructured venture. As part of the arrangement, TenFold also granted a subsidiary of Cedars-Sinai a license to resell the
Universal Application in connection with their selling the PCX application in the hospital and healthcare provider
market globally. On May 14, 2002, Cedars-Sinai sent a letter rejecting certain Universal Application modification work delivered by TenFold as part of Phase I of the Settlement Agreement. On
May 15, 2002, Cedars-Sinai sent another letter alleging certain breaches of the Settlement Agreement. TenFold has denied the alleged breaches and the parties are working together to resolve
their disputes. Should TenFold fail to meet certain obligations under the Settlement Agreement, Cedars-Sinai may reassert certain claims against TenFold. Should Cedars-Sinai fail to meet certain
obligations under the Settlement Agreement, TenFold may reassert certain claims against Cedars-Sinai. If Cedars-Sinai were to reassert its claims, an unfavorable outcome of the matter may have a
material adverse impact on TenFold's business, results of operations, financial position, or liquidity.



On November 19, 2001, TenFold received a demand for arbitration from Perot Systems Corporation ("Perot") alleging that TenFold had materially breached its
prior agreements with Perot relating to the termination of certain other agreements with Perot. On April 30, 2002, TenFold and Perot entered into a number of agreements, including a Compromise
and Settlement Agreement, resolving the dispute between the parties and beneficially restructuring the relationship between the parties. As part of the resolution, Perot agreed to withdraw the demand
for arbitration without prejudice and TenFold provided Perot with a limited license to the Universal Application and agreed to provide Perot with certain Universal Application training. Perot also
agreed to issue a general release to TenFold, which would include the arbitration claim, when TenFold has provided the Universal Application training to Perot and met other conditions precedent
relating to the Cedars-Sinai project noted above. TenFold continues to fulfill its agreements with Perot. Specifically, TenFold has completed the initial phases of the knowledge transfer agreement and
is currently ahead of schedule on the training of a Perot Universal Application maintenance team. If TenFold fails to meet certain obligations, Perot may reinstate its demand for arbitration. If the
Perot fails to meet certain obligations, TenFold may seek damages. If Perot were to reinstate its demand for arbitration, an unfavorable outcome of the matter may have a material adverse impact on
TenFold's business, results of operations, financial position, or liquidity.

Unresolved Customer Dispute

TenFold has one unresolved customer dispute.



In March 2001, SkyTel Communications, Inc. ("SkyTel") orally informed TenFold of its intent to terminate the Master Software License and Services
Agreement between SkyTel and TenFold (the "SkyTel Agreement"). On May 15, 2001, SkyTel sent TenFold a letter purporting to terminate the SkyTel Agreement based on TenFold's alleged material
breach of the SkyTel Agreement. SkyTel's letter also
demands a refund of approximately $11 million paid by SkyTel. On September 24, 2001, SkyTel filed a complaint against TenFold in the First Circuit Court of the First Judicial District of
Hinds County, Mississippi. SkyTel seeks monetary damages of at least $17.5 million, plus other damages it may prove at trial, together with pre- and post-judgment
interest, attorneys' fees and expenses and costs. On November 13, 2001, TenFold filed an answer denying the material allegations of the complaint. TenFold also filed a counterclaim for unpaid
fees and SkyTel's disclosure of confidential information. TenFold's counterclaim seeks damages of at least $7 million and punitive damages of at least $10 million. The total contract
value involved in this customer dispute is approximately $17.6 million, of which $11.4 million has been received by TenFold to date. An unfavorable outcome of

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this matter may have a material adverse impact on TenFold's business, results of operations, financial position, or liquidity. During 2002, TenFold has recognized no revenue from the SkyTel
Agreement. For the three months ended June 30, 2001 TenFold recognized no revenue from the SkyTel Agreement, and recognized $263,000 for the six months ended June 30, 2001.

The
parties have currently stayed discovery and are in negotiations to settle the dispute. Based on negotiations, TenFold believes that a loss is probable. TenFold believes that the
supplemental extended reporting period insurance policy covers some of the damages that may arise in the dispute. TenFold's insurance carrier has authorized a settlement offer that has been
communicated to SkyTel. TenFold has recorded an other current liability to SkyTel for the offer, and an other current asset for the receivable from the insurance carrier, in the accompanying balance
sheet. Although, if the offer is accepted, the payment from the insurance carrier would be made directly from the insurance carrier to SkyTel and none of the funds would flow through TenFold. An
unfavorable outcome in the matter may have a material adverse impact on TenFold's business, results of operations, financial position, or liquidity.

Summary and Insurance

As a result of the legal proceedings and contingencies noted above, TenFold has provided an allowance for doubtful accounts of $296,000 related to billed accounts
receivable.

TenFold
maintained errors and omissions and umbrella liability insurance coverage to protect itself in the event of claims for damages related to the performance of computer-related
services or the failure to perform computer-related services that occurred after March 1, 1998, but prior to March 1, 2001. TenFold does not believe that the dispute with SkyTel will be
covered by TenFold's original errors and omissions and umbrella liability insurance coverage. However, TenFold also maintained a $2 million supplemental extended reporting period policy on one
of TenFold's prior errors and omissions liability policies. TenFold believes that this supplementary extended reporting insurance policy covers some of the types of alleged damages (but not unpaid or
unbilled accounts receivable) claimed in the SkyTel dispute noted above, subject to the policy's total limit, and the insurance carriers' standard reservation of rights. TenFold also believes that
this supplementary extended reporting insurance policy may cover the costs of legal defense of the SkyTel dispute, subject to the policy's total limit, and any stated reservation of rights by the
carrier regarding conditions or findings that might exclude coverage for a particular matter. TenFold has begun to use a portion of this supplemental extended reporting insurance policy in defending
the SkyTel dispute. TenFold has reserved against certain of the billed
accounts receivable related to the disputed amounts for which a loss is considered probable and estimable. An unfavorable outcome of any of these matters may have a material adverse impact on
TenFold's business, results of operations, financial position, or liquidity.

On
March 1, 2001, TenFold secured an industry-standard, errors and omissions policy that covers claims made after March 1, 2001. TenFold renewed this policy on
March 1, 2002. TenFold's new policy excludes contractual related disputes such as cost and time guarantees, and only covers software errors or omissions that occur after the delivery of
software. TenFold believes this policy provides adequate coverage for potential damages related to errors and omissions in TenFold's delivered software.

Stockholder Matters

On or after August 12, 2000, six complaints were filed in the United States District Court of Utah alleging that TenFold and certain of TenFold's officers
violated certain federal securities laws. All six complaints were virtually identical and allege that 1) TenFold improperly recognized revenues on some of TenFold's projects; 2) TenFold
failed to maintain sufficient accounting reserves to cover the risk of contract disputes or cancellations; 3) TenFold issued falsely optimistic statements that did not disclose these accounting
issues; and 4) TenFold insiders sold stock in early calendar year 2000 while knowing about these issues. On TenFold's motion, the court consolidated the six complaints into one class action

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complaint. On May 1, 2001, the plaintiffs filed an amended consolidated complaint. TenFold filed a motion to dismiss the amended complaint on June 19, 2001. On March 19, 2002,
the court granted TenFold's motion to dismiss the amended complaint, but allowed the plaintiffs leave to make a motion to amend their complaint. The plaintiffs have filed a motion to amend their
complaint and TenFold has filed a written response. The court is scheduled to hear oral arguments on this motion on August 20, 2002. The parties are currently in discussions to settle the
dispute. Based on negotiations, TenFold believes that a loss is probable. TenFold believes that its insurance policy covers damages that may arise in the dispute. TenFold's insurance carrier has
authorized a settlement offer that has been communicated to the plaintiffs. TenFold has recorded an other current liability to the plaintiffs for the offer, and an other current asset for the
receivable from the insurance carrier, in the accompanying balance sheet. Although, if the offer is accepted, the payment from the insurance carrier would be made directly from the insurance carrier
to the plaintiffs and none of the funds would flow through TenFold. An unfavorable outcome in the matter may have a material adverse impact on TenFold's business, results of operations, financial
position, or liquidity.

On
November 6, 2001, a class action complaint alleging violations of the federal securities laws was filed in the United States District Court for the Southern District of New
York naming as defendants TenFold, certain of its officers and directors, and certain underwriters of TenFold's initial public offering. An amended complaint was filed on April 24, 2002, which
alleges, among other things, that the underwriters of TenFold's initial public offering violated the securities laws by failing to disclose certain alleged compensation arrangements (such as
undisclosed commissions or stock stabilization practices) in the offering's registration statement and by engaging in manipulative practices to artificially inflate the price of TenFold's stock in the
after-market subsequent to the initial public offering. TenFold defendants are named in the amended complaint pursuant to Section 11 of the Securities Act of 1933,
and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 on the basis of an alleged failure to disclose the underwriters' alleged compensation arrangements and
manipulative practices. Similar complaints have been filed against over 300 other issuers that have had initial public offerings since 1998. TenFold is vigorously defending this action and expects
that the costs of defense and/or resolution will be covered by insurance. Although no assurance can be given that this matter will be resolved in TenFold's favor, TenFold believes that the resolution
of this lawsuit will not have a material adverse effect on TenFold's financial position, results of operations or cash flows. If this matter is not covered by insurance and if there is an unfavorable
outcome, there may be a material adverse impact on TenFold's business.

SEC Inquiry

On May 26, 2000, the United States Securities and Exchange Commission ("SEC") issued a Formal Order Directing Private Investigation. The Order contained no
specific factual allegations. Since February 2001, the SEC has taken testimony from several of TenFold's independent auditors and current and former customers, executives and staff.

On
March 20, 2002, TenFold and five of its current and former officers and employees received notices from the SEC's Denver regional office indicating that the staff intends to
recommend that the SEC commence fraud and non-fraud (books and records) enforcement proceedings against TenFold and these individuals. The SEC's potential remedies under such enforcement
proceedings include various forms of injunctive relief, monetary penalties, and orders barring individuals from future employment in public companies. It is too early in the inquiry to say which of
these remedies, if any, the SEC might seek against TenFold and the individuals. Management and outside legal counsel believe that TenFold has meritorious defenses to any allegations that the SEC might
make and TenFold has filed a response to the SEC's allegations. TenFold intends to continue to cooperate fully with the SEC. At this time, TenFold's outside legal counsel is not able to provide an
opinion on the probable outcome of the inquiry. Although no assurance can be given that this matter will be resolved in TenFold's favor, TenFold believes that the resolution of this lawsuit will not
have a material adverse effect on TenFold's business. However, protracted legal proceedings or an unfavorable outcome of this matter may have a material adverse impact on TenFold's business.

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9.    Special Charges

Special charges for the three months ended June 30, 2002 include restructuring charge adjustments of $562,000. In addition to these adjustments, special
charges for the six months ended June 30, 2002 include a $24,000 asset impairment charge. Special charges for the three months ended June 30, 2001 include a $1.2 million
restructuring charge and a $588,000 asset impairment charge. Special charges for the six months ended June 30, 2001 include a $3.9 million restructuring charge and a $3.7 million
asset impairment charge.

Restructuring
reserves are included in accounts payable and accrued liabilities at June 30, 2002. Detail of the restructuring charges as of and for the six months ended
June 30, 2002 are summarized below (in thousands):

|Restructuring Charges: |  | Balance at
December 31,
2001 |       | New
Charges |   | Adjustments |  | Utilized |     | Balance at
June 30,
2002
|---------------------- |  | ---------------------------- | ----- | ----------- | - | ----------- |  | -------- | --- | ------------------------
|Employee related       |  | $                            | 106   |             | $ |            |  | $        |    |                         
|Facilities related     |  |                              | 5,521 |             |   |            |  |          | 562 |                         
|                       |  |                              |       |             |   |             |  |          |     |                         
|                       |  | $                            | 5,627 |             | $ |            |  | $        | 562 |                         
|                       |  |                              |       |             |   |             |  |          |     |                         

Asset Impairment Charge.During the three months ended June 30, 2002, TenFold incurred no asset impairment charges.
During the six months ended June 30, 2002, TenFold identified $24,000 of fixed assets that had no future value to TenFold and are no longer in active use, and accordingly recorded an asset
impairment charge of $24,000 for the six months ended June 30, 2002. During the three and six months ended June 30, 2001, TenFold restructured operations to reduce operating expenses,
including closing several facilities, and recorded related asset impairment charges of $588,000 and $3.7 million, respectively, for leasehold improvements, computer equipment, furniture and
fixtures, and other assets that it determined had no future value to TenFold and were no longer in active use.

First Half 2002 Restructuring Charges.During the three and six months ended June 30, 2002, TenFold incurred
restructuring charges of $562,000, related to adjustments made to prior restructuring estimates. The adjustments primarily resulted from higher facilities lease termination payments, and lower revised
estimates of future facilities sublease income payments, than previously estimated.

First Half 2001 Restructuring Charges.During the three and six months ended June 30, 2001, TenFold incurred
restructuring charges of $1.2 million and $3.9 million, respectively, as part of its efforts to reduce operating expenses.

10.  Operating Segments

TenFold's CEO reviews financial information on a consolidated basis, identical in format to the accompanying Consolidated Statements of Operations. TenFold
consolidates revenue and expense information for all other business groups for internal and external reporting and for decision-making purposes. TenFold operates in a single operating segment, which
is applications products and services.

Revenues
from operations outside of North America were approximately 18 percent of total revenues for the three months ended June 30, 2002 as compared to 32 percent
of total revenues for the same period in the prior year. For the six months ended June 30, 2002, revenues from operations outside of North America were approximately 25 percent as
compared to 29 percent of total revenues for the same period in the prior year. TenFold's long-lived assets continue to be deployed predominantly in the United States.

One
customer accounted for 67 percent of TenFold's total revenues for the three months ended June 30, 2002, compared to three customers accounting for 41 percent,
21 percent, and 10 percent of

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TenFold's total revenues for the same period in 2001. For the six months ended June 30, 2002, two customers accounted for 61 percent, and 13 percent of TenFold's total revenues,
compared to three customers accounting for 30 percent, 18 percent, and 10 percent of TenFold's total revenues for the same period in 2001. No other single customer accounted for
more than 10 percent of TenFold's total revenues for the three or six months ended June 30, 2002, or the same periods in 2001.

11.  Acquisition and Disposition

On October 7, 1999, TenFold purchased the entire equity interest of Barclays California Corporation ("Barclays") in its wholly owned subsidiary, The
LongView Group, Inc. ("LongView"). On March 15, 2001, TenFold sold LongView for $29.0 million to Linedata Services. Accordingly, the operations of LongView have been included in
the accompanying consolidated statements of operations for TenFold from the acquisition through March 15, 2001. The acquisition was accounted for using the purchase method of accounting. During
the three months ended June 30, 2002, TenFold was notified by Barclays that it needed to reimburse Barclays for an office lease deposit Barclays had maintained for LongView. TenFold researched
the matter and agreed to reimburse Barclays $120,000 for the office lease deposit, and reflected this obligation as a reduction of its gain on sale of LongView.

The
gain recognized on the sale of LongView is summarized as follows (in thousands):

|                                                                      |                                 |  |   | Amount  |  
|--------------------------------------------------------------------- | ------------------------------- |  | - | ------- | -
|Total purchase price                                                  |                                 |  |   |         | $
|                                                                      | Less costs associated with sale |  |   |         |  
|                                                                      |                                 |  |   |         |  
|Net proceeds from sale                                                |                                 |  |   |         |  
|Net book value of subsidiary                                          |                                 |  |   |         |  
|                                                                      | Current assets                  |  | $ | (1,455  | )
|                                                                      | Long-term assets                |  |   | (19,042 | )
|                                                                      | Current liabilities             |  |   | 5,745   |  
|                                                                      | Long-term liabilities           |  |   |        |  
|                                                                      |                                 |  |   |         |  
|                                                                      |                                 |  |   |         |  
|                                                                      |                                 |  |   |         |  
|Initial gain on sale (as of March 31, 2001)                           |                                 |  |   |         | $
|                                                                      |                                 |  |   |         |  
|Proceeds for accounts receivable collection, less additional expenses |                                 |  |   |         |  
|Agreement to release escrowed funds to Linedata                       |                                 |  |   |         |  
|Reimbursement of office lease deposit                                 |                                 |  |   |         |  
|                                                                      |                                 |  |   |         |  
|Cumulative gain on sale                                               |                                 |  |   |         | $
|                                                                      |                                 |  |   |         |  

12.  Fusion Capital Transaction

In February 2002, TenFold entered into a Common Stock Purchase Agreement (the "Purchase Agreement") with Fusion Capital Fund II, LLC ("Fusion Capital"), in
connection with a private equity line financing transaction pursuant to which TenFold may offer and sell to Fusion Capital up to $10,000,000 of our Common Stock, over a period of up to
40 months. As a condition to Fusion Capital's obligation to make purchases under the Purchase Agreement, the Common Stock to be offered and sold to Fusion Capital must be registered in an
effective registration statement with the Securities and Exchange Commission. Once the registration statement is effective, TenFold may make draws under the equity line, and can elect to draw up to
$250,000 per month so long as TenFold's stock price exceeds $0.25. TenFold's stock has recently traded below $0.25 per share and TenFold is considering whether to file the registration statement. The
Purchase Agreement required the registration statement to be filed by March 29, 2002. Consequently, Fusion Capital may elect to cancel

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the Purchase Agreement. Through June 30, 2002, TenFold has incurred expenses of $282,000 in connection with the Fusion Capital private equity line.

13.  Recent Accounting Pronouncements

In June 2001, the FASB issued SFAS No. 143Accounting for Asset Retirement Obligations. SFAS
No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This
Statement applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and (or) the normal operation of a
long-lived asset, except for certain obligations of lessees. TenFold is required to adopt the provisions of SFAS No. 143 on January 1, 2003. TenFold is currently evaluating
this statement but does not expect that it will have a material effect on TenFold's business, results of operations, financial position, or liquidity.

In
July 2001, the FASB issued SFAS No. 141Business Combinationsand SFAS No. 142Goodwill
and Other Intangible Assets. SFAS No. 141 requires business combinations initiated after June 30, 2001 to be accounted for using the purchase method of
accounting, and broadens the criteria for recording intangible assets separate from goodwill. SFAS No. 142 requires the use of a non-amortization approach to account for purchased
goodwill and certain intangibles. Under a non-amortization approach, goodwill and certain intangibles will not be amortized into results of operations, but instead will be reviewed for
impairment and written down and charged to results of operations only in the periods in which the recorded value of goodwill and certain intangibles is more than its fair value. TenFold adopted the
provisions of SFAS No. 141 immediately, and SFAS No. 142 on January 1, 2002. The adoption of SFAS No. 141 and 142 did not have a material effect on TenFold's business,
results of operations, financial position, or liquidity.

In
July 2001, the FASB reached final consensus on EITF No. 00-25,Vendor Income Statement Characterization of Consideration Paid to a
Reseller of the Vendor's Products("EITF 00-25"). EITF 00-25 generally requires that consideration, including equity instruments, given to a customer be
classified in a vendor's financial statements not as an expense, but as a reduction to revenue up to the amount of cumulative revenue recognized or to be recognized. In November 2001, the EITF
reached consensus on EITF No. 01-09,Accounting for a Consideration Given by a Vendor to a Customer or Reseller of the Vendor's
Products("EITF 01-09"). EITF 01-09 clarifies and modifies certain items discussed in EITF 00-25. In accordance with the transition guidance
in EITF 00-25, adoption will require reclassification of financial statements for prior periods presented for comparative purposes. TenFold adopted EITF 00-25 and EITF
01-09 on January 1, 2002. The adoption of EITF 00-25 and EITF 01-09 did not have a material effect on TenFold's business, results of operations, financial
position, or liquidity.

In
August 2001, the FASB issued SFAS No. 144Accounting for the Impairment or Disposal of Long-Lived Assets.
SFAS No. 144 addresses financial accounting and reporting for the impairment of long-lived assets and for long-lived assets to be disposed of. TenFold adopted the
provisions of SFAS No. 144 on January 1, 2002. The adoption of SFAS No. 144 did not have a material effect on TenFold's business, results of operations, financial position, or
liquidity.

In
November 2001, the FASB issued an announcement,Income Statement Characterization of Reimbursements Received for Out of Pocket Expense
Incurred. The announcement requires companies to characterize reimbursements received for out of pocket expenses as revenues in the statement of operations. Historically,
TenFold netted reimbursements received for out of pocket expenses against the related expenses in the accompanying condensed consolidated statements of operations. The announcement is to be applied in
financial reporting periods beginning after December 15, 2001 and comparative financial statements for the prior year are to be reclassified to comply with the guidance in the announcement.
TenFold adopted this announcement on January 1, 2002. The adoption of this announcement resulted in increased revenues and expenses by the same amount in each period of

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$425,000 and $882,000 for the three months ended June 30, 2002 and 2001, respectively, and $559,000 and $1.7 million for the six months ended June 30, 2002 and 2001,
respectively.

In
May 2002, the FASB issued SFAS No. 145Rescission of FASB Statements Nos. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. SFAS No. 145 eliminates Statement 4 (and Statement 64, as it amends Statement 4), which requires gains and losses from extinguishments of debt to be
aggregated and, if material, classified as an extraordinary item, net of the related income tax effect. As a result, the criteria in APB Opinion No. 30 will now be used to classify those gains
and losses. SFAS No. 145 amends FASB Statement No. 13 to require that certain lease modifications that have economic effects similar to sale-leaseback transactions are
accounted for in the same manner as sale-leaseback transactions. In addition, SFAS No. 145 makes technical corrections to some existing pronouncements. TenFold is required to adopt
the provisions related to the rescission of Statements 4 and 64 on January 1, 2003, and for all transactions entered into beginning May 15, 2002 adopt the provision related to the
amendment of Statement 13. TenFold is currently evaluating this statement but does not expect that it will have a material effect on TenFold's business, results of operations, financial position, or
liquidity.

In
July 2002, the FASB issued SFAS No. 146Accounting for Costs Associated with Exit or Disposal Activities. SFAS
No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring).SFAS No. 146 requires recognition of a liability for a cost associated with an exit or disposal activity when the liability is incurred, as opposed to
when the entity commits to an exit plan under EITF No. 94-3. TenFold is required to adopt the provisions of SFAS No. 146 for exit or disposal activities that are initiated
after December 31, 2002. TenFold is currently evaluating the impact of this statement on TenFold's future business, results of operations, financial position, or liquidity.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Business Overview

TenFold is the provider of the Universal Application, a software applications platform that accelerates development and deployment and reduces costs
of maintaining complex enterprise applications. The Universal Application automates most of what applications programmers typically do, and thereby enables small teams of predominantly
non-technical business users to design, build, test, deploy, and maintain complex, transaction- and database-intensive applications, with limited demand on scarce IT resources.

We
believe that the Universal Application platform makes building complex, replacement and Internet-ready applications three to ten times cheaper, easier, and faster than traditional
application development methodologies. TenFold customers have proven that primarily non-technical business people can use the Universal Application to build better applications faster and
cheaper than traditional approaches due to the business people's detailed understanding of their business requirements. Consequently, our business model focuses on providing the Universal Application,
and our assistance through time-and-materials consulting and training, to customers who use their own business teams and our systems implementation partners to build
applications.

During
2001, we began discussions to establish relationships with value added resellers ("VAR"), systems integrators, software distributors, application service providers and others. We
believe that such relationships will accelerate and broaden market distribution of Universal Application for us at a significantly lower cost and greater speed than we could achieve on our own. In
April 2002, we entered into a strategic alliance with a global systems integrator, Sapient Corporation. In May 2002, we entered into a second strategic alliance, with Perot Systems
Corporation, focused around accelerated penetration of the healthcare industry.

While
there are many companies supplying applications development tools, we believe that there is no other applications platform supplier with technology capable of addressing the scale
and robustness required by the complex applications that we and our customers have built using Universal Application.

The
Universal Application platform has been in development more than 9 years, contains more than 2.5 million lines of C and C++ code, and is protected by three issued U.S.
patents. Universal Application makes programming in C, C++, Java, HTML, SQL or other programming languages or doing other programming-like tasks such as designing screens and writing
requirements documents unnecessary.

We
have completed applications products now in production in the communications, energy, financial services, healthcare and insurance industries. We have begun discussions to establish
VAR and other distribution agreements with applications companies that may take ownership of specific vertical market applications product intellectual property, and will provide direct support,
maintenance and marketing of specific vertical market applications products. In February 2002, we entered into our first VAR agreement with 3Genesis through which 3Genesis will resell a
Universal Application-based communications industry application worldwide. In April 2002, we entered into a second VAR agreement with PCX Systems, LLC ("PCX Systems"), a subsidiary of
Cedars-Sinai Medical Center, through which PCX Systems will resell Universal Application in connection with the sale of the Patient Care Expert application in the hospital and healthcare provider
market globally.

We,
however, continue to face significant challenges, including without limitation, the ability to generate or raise sufficient operating capital (see "Liquidity and Capital Resources"
below), outstanding litigation and an SEC investigation (see "Legal Proceedings"), and a difficult sales environment.

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Industry Challenge

Organizations worldwide face increasing pressure to install mission critical software applications and replace their legacy enterprise applications as they seek
to increase productivity, cut costs, address changing business and competitive demands, and access new technology. Many organizations continue to invest large amounts of money to maintain legacy
applications that remain inadequate. These companies still need new or replacement applications, but they face daunting odds of failure because the process for building and integrating complex
applications is costly and risky. To obtain new or replacement applications, companies choose between buying a packaged software application or building a custom software application.

Companies
generally turn to independent software vendors, such as Enterprise Resource Planning vendors or vertical software vendors, when looking for packaged applications. In general,
packaged applications promise predictable quality and relatively quick implementation, but often do not address specific industry problems, such as patient management or securities lending, and lack
the functionality and flexibility that many companies need. This lack of functionality and flexibility can force a company
to alter its business processes to the detriment of the company's business mission. In addition, customizing a packaged application can be costly and time-consuming, and makes it difficult
to upgrade the packaged application when subsequent standard releases are available.

Alternatively,
companies can build custom applications, either internally or with third parties. This approach may give them the functionality, flexibility and fit they seek, but the
applications development process carries a high risk of failure, with most projects exceeding financial and time budgets and schedules, and with many projects being cancelled prior to implementation
due to time delays, budget overruns, and functional or technical deficiencies. Companies often hire software integration or services firms to build and implement mission-critical applications. These
firms generally engage a large number of consultants who may remain on-site for years, and may exceed budgets and schedules without producing significantly better results than internal
development organizations. In addition, these firms typically do not offer ongoing product enhancements because they build custom solutions for a single customer.

Applications
projects fail because the process of replacing complex applications is very complicated. When most enterprise applications were built, the complexity of the technology
environment was much simpler than it is today. In today's technology environment, programming and testing complex applications can be difficult, take a long time, be expensive, and tie up scarce IT
resources. Business dynamics change rapidly and in IT projects, time introduces risk.

Today's
companies need a radically new approach to applications development. TenFold's patented Universal Application is a new paradigm for applications development that lets small teams
of non-technical business users design, build, deploy, maintain, and upgrade applications with extraordinary speed and limited demand on scarce IT resources.

TenFold Technology and Products

We have demonstrated that our Universal Application platform makes building complex applications three to ten times cheaper, easier, and faster than traditional
application development methodologies because the Universal Application automates many tasks that applications programmers typically do. TenFold customers have demonstrated that primarily
non-technical business people can use the Universal Application to build better applications than IT consultants or traditional programmers due to the business people's detailed
understanding of their business requirements. Consequently, we have focused our business away from building applications for customers and toward providing the Universal Application, and our
assistance through time-and-materials consulting and training, to customers who use their own business teams to build applications.

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The
business value of the Universal Application is more than a rapid development technology. The Universal Application is an applications platform that simplifies complex applications
development and integration so that non-technical business people can use it to build applications. Customers can get new applications into production with limited demand on scarce IT
resources. And, once a new application is in production, the Universal Application provides business people with the agility to modify that application dramatically cheaper, easier, and faster than
with traditional technologies.

The
Universal Application platform has been in development more than 9 years, contains more than 2.5 million lines of C and C++ code, and is protected by three issued U.S.
patents. With the Universal Application, business people or applications developers with little or no traditional programming skills can build and maintain an application by describing the
application's desired data and functionality without needing to program in C, C++, Java, HTML, Structured Query Language ("SQL") or other programming languages and without the need to
do other programming-like tasks such as designing screens and writing requirements documents.

The
Universal Application is a tightly integrated development and maintenance environment and a powerful, efficient, scalable rendering engine. This integrated development and
maintenance environment includes: business rules definitions; automatic SQL generation; automated user interface generation; Windows and Web-enablement; integrated product testing, report
generation, and data analysis. The Universal Application rendering engine provides significant already-built applications functionality, good applications performance and scalability, portability
across relational databases, operating systems and networks, and a code-less means for integrating with legacy and third-party applications.

We
believe that the Universal Application delivers these benefits:



In
addition to the above benefits, the Universal Application has many distinguishing advanced features. The following is a partial listing of these features:



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The
Universal Application is composed of components for describing, executing, integrating, and configuring applications.

Describing an Application.ApplicationXpress includes an application, named TenFold Librarian, built
using the Universal Application. Applications developers use TenFold Librarian to describe their application. TenFold Librarian provides fill-in-the-blank
interfaces to codelessly describe an application. Non-technical business people or other applications developers describe the database that the application manages, transactions that
support each business end-user for each end-user activity, and rules that control transaction behavior. TenFold AutoTest uses patented techniques to simplify and automate
functional, performance, scalability and regression testing. TenFold Reporter and TenFoldAnalyzer are each applications that let business people define their own reports and real-time data
analysis. These applications development tools store the description of applications objects in a relational database called TenFold Dictionary.

Executing an Application.The Universal Application rendering engine runs the application, provides
data and presentation services, and automatically executes rules. There are several components to the Universal Application rendering engine. Universal Application Server hosts the application,
providing security, resource management, load balancing, and failover, for outstanding scalability and availability. Universal Application Client manages client workstations and supports standard
Internet browsers to provide data presentation services and user interface features. LogicXpress converts rules and procedural actions into portable, executable meta-language that it
transports automatically to the correct computer within the applications network for execution. Universal Application Kernel provides standard data access services, common routines, operating system
independence, standard error handling, and other shared services.

Integrating an Application.Universal Application Integrator connects a Universal Application-based
application to other applications, both within a company and at its customers and suppliers. Whether exchanging files, directly accessing another database, or using real-time messaging,
integration

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developers codelessly describe the path that data follows to interface with typically-inflexible legacy or third party applications. Applications developers can convert and cleanse data along the
way.

Configuring an Application.The Universal Application supports many leading relational databases,
server operating systems, client operating systems, Web servers and browsers, and communications systems. The Universal Application is highly configurable so that it can run on a single computer or
distribute across many computers to provide n-tier processing. Configuration options let customers optimize performance and scalability by configuring to match underlying hardware and
software environment. The Universal Application design simplifies adding support for additional technologies in order to respond to customer or market needs.



TenFold ComponentWare is a family of pre-written applications components that easily plug into the Universal Application to extend its functionality
without programming. For example, PowerBilling provides a robust suite of add-on billing services. PowerAccounting makes it easy for a customer to integrate an application to their general
ledger system.

TenFold Services

We offer basic and advanced applications development training; Universal Application maintenance training; assistance in building, implementing, and maintaining
applications; and customer and technical support.



We offer training so that customers can successfully build, implement, operate, maintain, and evolve their applications. TenFold University offers professional
certification programs to applications developers, end-users, information technology professionals, and training professionals who need to understand the Universal Application, TenFold
ComponentWare, the Universal Application Integrator, and TenFold applications products. Training programs include classroom instruction, detailed
courseware, and on-site training. Under certain circumstances, we also provide Universal Application maintenance training, so that strategic customers and partners can learn about the
internal workings of the Universal Application by working with TenFold's Development department.



We offer services to help customers build, implement, operate and maintain their applications. Applications development services include helping customers
identify requirements and describe their application in the Universal Application. Implementation services include converting and cleansing legacy data, integrating with other applications, running a
parallel application, and managing the implementation project. We use the Universal Application Integrator and often begin implementation services concurrent with applications development to shorten
the time from the start of development to full implementation.



We provide our customers who purchase support services with new releases of the Universal Application as new releases become available and various levels of on
site and telephone support.

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Competition

The competitive landscape for new and legacy-replacement enterprise applications provides these options available to organizations today:





TenFold's largest competitor is "status quo." Organizations continually wrestle with the issue of when to retire legacy applications. In recent years, most
organizations chose to invest large amounts of money to fund maintenance of legacy applications, bearing the quirks and inefficiencies of outdated applications that do not meet new business demands.
Eventually, the benefits and capabilities of the new application outweigh the cost and time disadvantage of erecting the new system, and corporations replace their systems.

Remaining
with the status quo results in continuously increasing costs as maintenance on top of maintenance gets harder, acceptance of barely adequate applications; limitations on
lowering costs; limitations to embracing new technologies; difficulty in adding products or expanding markets; and postpones the inevitable replacement of the application.



Many organizations prefer to obtain an off-the-shelf application from Enterprise Resource Planning ("ERP") vendors or vertical packaged
software vendors. Organizations license software packages to limit the risks associated with new software development projects. However, packaged applications force corporations to conform their
business problems to the packaged solution, often with a poor fit. Organizations can modify a packaged application to solve their business problems, but blended solutions are expensive, slow to
implement, and suffer from poor integration. We believe that the Universal Application generally enhances our customers' ERP solutions, rather than competing directly with them.

Buying
packaged applications is not a viable solution for replacing most legacy applications for most customers in most industries, as reasonable-fit packaged applications
just don't exist.



When organizations contemplate building their own applications, TenFold competes primarily with "old paradigm" applications servers and development platform
vendors. Oracle, IBM, Microsoft, BEA, Computer Associates, and others supply tools to internal IT organizations or to third party consulting firms to build new applications.

Programming
languages such as COBOL, C, and C++ perform well and scale well, but require extraordinarily large project teams to spend multiple years to complete projects. Such projects
are generally the source of statistics that report high failure rates among applications development projects. Visual Basic, SmallTalk, and other personal computer technologies support rapid
applications development and slightly improved productivity for smaller projects, but do not scale to support large numbers of users. Further, they are not more efficient in coding and testing of very
complex applications than existing technologies that do scale.

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Today's
emerging technologies include Java, other component-enabling technologies (COM, DCOM, ActiveX,.NET, et cetera), and Java-related technologies intending to make Java
viable for complex applications (J2EE, EJB, et cetera). Emerging technologies, all of which rely on programmers, have not changed the time and cost of large applications development at this time.
Using such technologies for very large, complex applications development projects is likely to result in continued high failure rates for applications build projects since longer projects and large
numbers of programmers on a project increase risk of failure exponentially, according to most industry pundits.

Consulting
and software integration firms, such as Accenture and EDS, who build applications for hire, are not competitors of TenFold, but potential resellers of the Universal
Application. We intend to develop reseller agreements with strategic consulting and integration partners, and believe that the Universal Application gives resellers a technological advantage for
delivering complex, enterprise applications.

Business History

We founded TenFold in 1993, and spent the first several years primarily engaged in developing our patented Universal Application technology. In 1996, we began
using the Universal Application to develop applications for customers. In 1998, we began reselling vertical applications products that we had developed for our initial customers. In 1999, we completed
our initial public offering. In 1999 and early 2000, we signed several large, fixed-price, build-for-hire contracts with customers, hired many new employees, and launched eight
subsidiaries. Beginning in 2000, we experienced several difficult quarters and faced significant financial, legal, and operational issues. During 2000 and continuing through 2001, we took steps to
address those issues.

Very
strong support from our customers for both TenFold and its Universal Application technology helped management recognize the Universal Application as its core asset and focused
TenFold on the unique benefits that customers derived from the Universal Application. Consequently, TenFold shifted its focus to becoming a Universal Application software product company. In 2002, we
intend to build the business and market foundation for our emergence as a growth technology company by addressing two principal business priorities: continuing to meet customer expectations and
building our Universal Application sales and distribution channels.

Meeting Customer Expectations

During the quarter ended June 30, 2002, we provided Universal Application technology and supporting services to 17 customers, 12 of whom are currently in
production with applications powered by the Universal Application. All 12 of these customers continue to enhance their applications, with 1 customer having 2 separate Universal Application-based
applications in production. Of the remaining five customers, one is a value added reseller working closely with TenFold to close new business with existing and new customers, two are building and
implementing their own application, one is a legacy fixed-price, guaranteed project and one has completed building their application and is working to bring the application into production.

Our
customers are leaders in financial services, insurance, healthcare and other vertical markets. Our customers include, among others, Abbey National Bank, Allstate Insurance, Barclays
Global Investors, Deutsche Bank, Dresdner Bank, Franklin Templeton, iplan networks, JP Morgan Chase, MedCath, and Vertex.

In
addition, we have successfully piloted one of our new approaches to the marketplace by using the Universal Application to support rapid prototypingthe building of a
tested-and-working, high-functionality prototype quickly and the use of that prototype as a foundation for an extensive build project. We completed the rapid
prototyping phase with a new client, Reuter Brooks, and continued on to build a replacement application to support dispatching and tracking of shipments.

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Current Customer Engagements

Allstate.Allstate has been a TenFold customer since September 1999. With TenFold's Universal Application training,
enhancements and support, a division of Allstate successfully built an important application, InterLink, in four months and brought it into production three months later. InterLink allows independent
insurance agents to quote and issue automobile and homeowners insurance policies over the Internet. InterLink is currently in production doing more than 100,000 transactions weekly for multiple lines
of business in many states, with new states being added regularly. TenFold continues to provide Allstate's team with Universal Application services and support.

In
November 2001, Allstate added a new Universal Application license for the entire corporation. Over the first two quarters of 2002, TenFold provided substantial time and
materials services to Allstate. In September 2002, TenFold expects to complete the provision of training and time and materials services under the expanded agreement. In July 2002,
Allstate entered into an amendment to its agreement with TenFold that secures for Allstate the right to receive future Universal Application updates. Allstate has notified TenFold that, at this time,
Allstate will not expand its use of the Universal Application to replace its legacy systems. Allstate is continuing to enhance InterLink, using its own business people and TenFold's assistance, to
fully realize the business potential for InterLink.

In
July 2002, TenFold notified Allstate of certain breaches by Allstate of the parties' agreement, as amended. The parties are currently working to resolve these matters.

JP Morgan Chase.TenFold has completed its fixed-price build project at JP Morgan Chase and is working to complete its
FastStart obligations. JP Morgan Chase is in parallel production with Version 1 of the application in its European lending business unit and is seeking to enter its next phase of testing in August.
Additionally, while the parties have not yet entered into a definitive agreement, JP Morgan Chase recently selected TenFold to build securities lending technology that integrates JP Morgan Chase
operations with the Equilend consortium, a consortium intended to provide efficient standards-based processes for automated transactions between borrowers and lenders.

iplan networks.iplan went into production in Argentina with the Universal Application-powered Enterprise Relationship
Manager ("ERM") in September 2001. ERM includes sales management, customer support, incident tracking, and provisioning for the communications industry. We built this application and brought it
into production in nine months. Since bringing ERM into production, we have delivered significant performance enhancements and additional functionality including usage allowance functionality,
enhancements to summarize usage, functionality to process erred usage, multi-currency support, and inflation indexing. We continue to provide limited development services and application support
services to this client.

Cedars-Sinai Medical Center.In April 2002, we replaced our original fixed-price contract with a set of agreements
under which Cedars-Sinai's staff assumed responsibility for completing the build and implementation of Patient Care Expert ("PCX"). PCX is an enterprise wide clinical information system including
patient management, physician order entry, contract management, and patient accounting. Additionally, Cedars-Sinai will be a reseller of PCX through its recently formed subsidiary PCX Systems, LLC.
TenFold continues to provide Universal Application enhancements, support, and other services to Cedars-Sinai, PCX Systems, and their partner, Perot Systems Corporation. In the second quarter of 2002,
the build of PCX was completed and a large department of the medical center is piloting the application. TenFold continues to provide support to ensure successful implementation across the enterprise.

Abbey National Bank.Abbey has had its Universal Application-powered WealthManager application in production since
January 2001. Consistent with our strategic model, and similar to the client relationships described above, Abbey is driving the majority of the enhancement activity relative

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to this product. TenFold provides Abbey with Universal Application enhancements and support to the Abbey development team.

Applications Product Lines

We have two applications products with multiple, production customers. These applications are assets that we manage as product lines by investing in new
functionality, servicing our customers, and encouraging these customers to adopt the Universal Application as a development platform.



Sales and Distribution Channels

We identified building sales and distribution channels as critical to our emergence as a growth technology company. Beginning in the second half of 2001, we began
to build momentum for new sales of our Universal Application technology and related products and services.

We
are focusing our direct sales channel on selling small, paid prototype projects with new accounts in the insurance, retail software, and financial services sectors. This resulted in
two, paid prototype projects in 2001, neither of which went forward, in part due to the adverse economic environment that prevailed in the latter half of 2001. In March 2002, Reuter Brooks, a
UK-based courier company, entered into a paid prototyping project to consider using TenFold as its technical partner in building a new messaging and dispatch control system using the
Universal Application. In June 2002, Reuter Brooks contracted with TenFold to build a front-to-back office system that will provide integrated Web booking, customer
queries over the Web, customer relationship management for the sales force and support services, management queries, and links to the main accounting system.

During
June 2002, Ingenix Inc., a subsidiary of a national health insurer, entered into a contract to internally develop a Universal Application-based application called
Knowledgebase Expert. Knowledgebase Expert is a collection of data relationships and attributes that characterize coding relationships on medical bills (e.g., procedure codes, diagnosis codes,
modified codes) for healthcare billings.

During
2001, we began discussions to establish relationships with VARs, system integrators, software distributors, application service providers and others. We believe that such
relationships will accelerate and broaden market distribution of Universal Application for us at a significantly lower cost and greater speed than we could achieve on our own. In April 2002, we
entered into a strategic alliance with a global systems integrator, Sapient Corporation, to resell the Universal Application globally. In May 2002, we entered into a second strategic alliance
with Perot Systems Corporation focused around accelerated penetration of the healthcare industry.

We
have completed applications products in production in the communications, energy, financial services, healthcare and insurance industries. We are in discussions to establish VAR and
other distribution agreements with applications companies that may take ownership of specific vertical market applications product intellectual property, and will provide direct support, maintenance,
and marketing

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of specific vertical market applications products. In February 2002, we entered our first VAR agreement (with 3Genesis) to resell a Universal Application-based communications industry
application worldwide. In April 2002, we entered a VAR agreement with PCX Systems, LLC, a subsidiary of Cedars-Sinai Medical Center, to resell the Universal Application in connection with their
selling the Patient Care Expert application in the hospital and healthcare provider market globally.

During
the second half of 2001, we began marketing initiatives around the Universal Application, including the rebuilding of our Web site. We built the Web site (www.10Fold.com) using
our Universal Application technology with the objective of providing real-time demonstration of the power of the Universal Application and as an easy access point for information on
TenFold's technology, customers and business. We continue to update our Web site to provide visitors with a Universal Application experience, including application overviews, real-time
product demonstrations, and briefings by our Chief Technology Officer. In addition, during the first quarter of 2002, we launched other focused marketing efforts, including print advertisements in the Wall Street
Journaland targeted mailings.

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Results of Operations

We had second quarter of 2002 revenues of $6.3 million, an operating loss of $2.2 million and a net loss of $2.4 million. This compares to
revenues of $22.3 million, operating income of $2.0 million, and net income of $1.7 million for the same period of 2001.

For
the first half of 2002, we had revenues of $11.8 million, an operating loss of $5.7 million and a net loss of $5.4 million. This compares to revenues of
$34.4 million, an operating loss of $14.3 million and a net loss of $3.5 million for the same period of 2001.

The
following table sets forth, for the periods indicated, the percentage relationship of selected items from TenFold's statements of operations to total revenues.

|                                     |                                                   | Three Months
Ended June 30, |    | Six Months
Ended June 30, |   
|------------------------------------ | ------------------------------------------------- | --------------------------- | -- | ------------------------- | --
|
|Revenues:                            |                                                   |                             |    |                           |   
|                                     | License                                           |                             | 1  | %                         | 18
|                                     | Subscription                                      |                             | 56 | %                         |  
|                                     | Services                                          |                             | 43 | %                         | 82
|                                     |                                                   |                             |    |                           |   
|                                     |                                                   | Total revenues              |    | 100                       | % 
|                                     |                                                   |                             |    |                           |   
|Operating expenses:                  |                                                   |                             |    |                           |   
|                                     | Cost of revenues                                  |                             | 62 | %                         | 47
|                                     | Sales and marketing                               |                             | 10 | %                         | 6 
|                                     | Research and development                          |                             | 22 | %                         | 16
|                                     | General and administrative                        |                             | 32 | %                         | 14
|                                     | Amortization of goodwill and acquired intangibles |                             |   |                           |  
|                                     | Special charges                                   |                             | 9  | %                         | 8 
|                                     |                                                   |                             |    |                           |   
|                                     |                                                   | Total operating expenses    |    | 135                       | % 
|                                     |                                                   |                             |    |                           |   
|Income (loss) from operations        |                                                   | (35                         | )% | 9                         | % 
|Total other income (expense), net    |                                                   | (3                          | )% |                          |   
|                                     |                                                   |                             |    |                           |   
|Income (loss) before income taxes    |                                                   | (38                         | )% | 9                         | % 
|Provision (benefit) for income taxes |                                                   |                            |    | 2                         | % 
|                                     |                                                   |                             |    |                           |   
|Net income (loss)                    |                                                   | (38                         | )% | 7                         | % 
|                                     |                                                   |                             |    |                           |   



Total revenues decreased $16.1 million, or 72 percent, to $6.3 million for the three months ended June 30, 2002, as compared to
$22.3 million for the same period in 2001. For the six months ended June 30, 2002, total revenues decreased $22.6 million, or 66 percent, to $11.8 million as
compared to $34.4 million for the same period in 2001. The decreases in revenues are primarily due to a lower volume of services during the period ended June 30, 2002 resulting from the
completion of fixed-price build projects, completion of time-and-material services and the cancellation of various fixed-price projects.

License
revenues decreased $4.1 million, or 99 percent, to $46,000 for the three months ended June 30, 2002, as compared to $4.1 million for the same period
in 2001. For the six months ended June 30, 2002, license revenues decreased $6.9 million, or 98 percent, to $150,000 as compared to $7.1 million for the same period in
2001. The decreases in license revenues are primarily due to the completion or cancellation of fixed-price build projects under which the licenses were recognized as

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costs were incurred on the build projects, and due to license fees in subscription contracts being recognized as subscription revenue.

Subscription
revenues were $3.5 million for the three months ended June 30, 2002 as compared to $0 for the same period in 2001. For the six months ended June 30,
2002, subscription revenues were $6.1 million as compared to $0 for the same period in 2001. Subscription revenues represent revenue from contracts that include a subscription to new product
releases on a "when and if available" basis. We did not have a subscription contract prior to the fourth quarter of 2001.

Service
and other revenues decreased $15.5 million, or 85 percent, to $2.7 million for the three months ended June 30, 2002, as compared to
$18.2 million for the same period in 2001. For the six months ended June 30, 2002, service and other revenues decreased $21.8 million, or 80 percent, to $5.6 million
as compared to $27.3 million for the same period in 2001. Service and other revenues decreased due to lower overall services during the first three and six months ended June 30, 2002 as
compared to the
same periods in 2001, and due to time-and-material revenue from our largest customer being recognized as subscription revenue during the three and six months ended
June 30, 2002.

Revenues
from operations outside of North America were approximately 18 percent of total revenues for the three months ended June 30, 2002 as compared to 32 percent
of total revenues for the same period in the prior year. For the six months ended June 30, 2002, revenues from operations outside of North America were approximately 25 percent as
compared to 29 percent of total revenues for the same period in the prior year. TenFold's long-lived assets continue to be deployed predominantly in the United States.

One
customer accounted for 67 percent of TenFold's total revenues for the three months ended June 30, 2002, compared to three customers accounting for 41 percent,
21 percent, and 10 percent of TenFold's total revenues for the same period in 2001. For the six months ended June 30, 2002, two customers accounted for 61 percent, and
13 percent of TenFold's total revenues, compared to three customers accounting for 30 percent, 18 percent, and 10 percent of TenFold's total revenues for the same period in
2001. No other single customer accounted for more than 10 percent of TenFold's total revenues for the three or six months ended June 30, 2002, or the same periods in 2001.



Cost of Revenues.Cost of revenues consists primarily of compensation and other related costs of
personnel to provide applications development and implementation, support, and training services. Cost of revenues decreased $6.5 million, or 63 percent, to $3.9 million for the
three months ended June 30, 2002, as compared to $10.4 million for the same period in 2001. For the six months ended June 30, 2002, cost of revenues decreased
$12.9 million, or 63 percent, to $7.6 million as compared to $20.5 million for the same period in 2001. The decreases were primarily due to a smaller number of employees
working on customer projects, and support and training activities.

Sales and Marketing.Sales and marketing expenses consist primarily of compensation, travel, and
other related expenses for sales and marketing personnel, as well as advertising and other marketing expenses. Sales and marketing expenses decreased $792,000, or 57 percent, to $607,000 for
the three months ended June 30, 2002, as compared to $1.4 million for the same period in 2001. For the six months ended June 30, 2002, sales and marketing expenses decreased
$3.2 million, or 74 percent, to $1.1 million as compared to $4.3 million for the same period in 2001. The decreases in sales and marketing expenses were primarily due to
having fewer sales and marketing employees in 2002.

Research and Development.Research and development expenses consist primarily of compensation and
other related costs of personnel dedicated to research and development activities. Research and development expenses decreased $2.2 million, or 62 percent, to $1.4 million for the
three months ended

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June 30, 2002, as compared to $3.5 million for the same period in 2001. For the six months ended June 30, 2002, research and development expenses decreased $4.8 million,
or 59 percent, to $3.3 million as compared to $8.0 million for the same period in 2001. Research and development expenses decreased due primarily to having fewer research and
development employees in 2002.

General and Administrative.General and administrative expenses consist primarily of allowances for
doubtful accounts, the costs of executive management, finance and administrative staff, business insurance, and professional fees. General and administrative expenses decreased $1.2 million, or
37 percent, to $2.0 million for the three months ended June 30, 2002, as compared to $3.2 million for the same period in 2001. For the six months ended June 30,
2002, general and administrative expenses decreased $2.6 million, or 34 percent, to $4.9 million as compared to $7.4 million for the same period in 2001. General and
administrative expenses decreased due primarily to having a smaller scale of operations and fewer general and administrative employees in 2002.

Amortization of Goodwill and Acquired Intangibles.We recorded amortization expense of goodwill and
acquired intangibles of $962,000 for the six months ended June 30, 2001, associated with our prior purchase of LongView. We completed the sale of LongView on March 15, 2001. We no longer
have any goodwill or acquired intangibles.

Special Charges.Special charges for the three months ended June 30, 2002 include
restructuring charge adjustments of $562,000. In addition to these adjustments, special charges for the six months ended June 30, 2002 include a $24,000 asset impairment charge. Special charges
for the three months ended June 30, 2001 include a $1.2 million restructuring charge and a $588,000 asset impairment charge. Special charges for the six months ended June 30, 2001
include a $3.9 million restructuring charge and a $3.7 million asset impairment charge.

Restructuring
reserves are included in accounts payable and accrued liabilities at June 30, 2002. Detail of the restructuring charges as of and for the six months ended
June 30, 2002 are summarized below (in thousands):

|Restructuring Charges: |  | Balance at
December 31,
2001 |       | New
Charges |   | Adjustments |  | Utilized |     | Balance at
June 30,
2002
|---------------------- |  | ---------------------------- | ----- | ----------- | - | ----------- |  | -------- | --- | ------------------------
|Employee related       |  | $                            | 106   |             | $ |            |  | $        |    |                         
|Facilities related     |  |                              | 5,521 |             |   |            |  |          | 562 |                         
|                       |  |                              |       |             |   |             |  |          |     |                         
|                       |  | $                            | 5,627 |             | $ |            |  | $        | 562 |                         
|                       |  |                              |       |             |   |             |  |          |     |                         

Asset Impairment Charge.During the three months ended June 30, 2002, we incurred no asset
impairment charges. During the six months ended June 30, 2002, we identified $24,000 of fixed assets that had no future value to us and are no longer in active use, and accordingly recorded an
asset impairment charge of $24,000 for the six months ended June 30, 2002. During the three and six months ended June 30, 2001, we restructured operations to reduce operating expenses,
including closing several facilities, and recorded related asset impairment charges of $588,000 and $3.7 million, respectively, for leasehold improvements, computer equipment, furniture and
fixtures, and other assets that we determined had no future value to us and were no longer in active use.

First Half 2002 Restructuring Charges.During the three and six months ended June 30, 2002, we
incurred restructuring charges of $562,000, related to adjustments made to prior restructuring estimates. The adjustments primarily resulted from higher facilities lease termination payments, and
lower revised estimates of future facilities sublease income payments, than previously estimated.

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First Half 2001 Restructuring Charges.During the three and six months ended June 30, 2001, we
incurred restructuring charges of $1.2 million and $3.9 million, respectively, as part of our efforts to reduce operating expenses.



Net total other income (expense) was $(172,000) for the three months ended June 30, 2002, as compared to $6,000 for the same period in 2001. For the six
months ended June 30, 2002, net total other income (expense) was $(236,000) as compared to $13.6 million for the same period in 2001. Net total other income for the six months ended
June 30, 2001 included a gain of approximately $13.4 million that we recognized on the sale of The LongView Group, Inc. to Linedata Services on March 15, 2001. Interest
income decreased for the three and six months ended June 30, 2002 compared to the same periods in 2001 due to lower cash and cash equivalent balances. Other income decreased for the three and
six months ended June 30, 2002 compared to the same periods in 2001, as we are recognizing less office sublease income in 2002 due to our having included the sublease income in our prior
restructuring accruals.



The provision for income taxes was $7,000 for the three months ended June 30, 2002 as compared to a provision of $379,000 for the same period in 2001. The
benefit for income taxes was $501,000 for the six months ended June 30, 2002 as compared to a provision of $2.8 million for the same period in 2001. The benefit for the six months ended
June 30, 2002 relates primarily to recently enacted tax legislation that enabled reversing accrued Federal alternative minimum taxes from 2001. The provision for the six months ended
June 30, 2001 is primarily for income taxes on the gain from our sale of The LongView Group, Inc. and foreign taxes.

At
June 30, 2002, management has recognized a valuation allowance for the net deferred tax assets related to temporary differences, foreign tax credit carryforwards and net
operating loss carryforwards. The valuation allowance was recorded in accordance with the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for Income
Taxes, which requires that a valuation allowance be established when there is significant uncertainty as to the realizability of the deferred tax assets.

Critical Accounting Policies

The fundamental objective of financial reporting is to provide useful information that allows a reader to comprehend our business activities. To aid in that
understanding, management has identified the "critical accounting policies" below. These policies have the potential to have a more significant impact on our financial statements, either because of
the significance of the financial statement item to which they relate, or because they require judgment and estimation due to the uncertainty involved in measuring, at a specific point in time, events
which are continuous in nature.



We believe risks relating to revenue recognition include the judgment required to determine fixed-price project completion percentages, project profit or loss
projections on fixed-price and time-and-material contracts, and forecasting of fixed-price project end-dates for our one remaining fixed-price project. These
estimates include assumptions as to the remaining effort, the number of personnel assigned to the project, and the complexity of tasks to be completed. Changes in these assumptions may result in
future adjustments to our financial statements.

We
use completion percentage assumptions to determine if a contract is in a loss position. Variances between management's estimates and actual results may result in larger teams and
longer delivery schedules, which impacts the profitability of the project. These variances result in adjustments

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to our results of operations and financial position due to the change in a project's profit or loss projections. We also use these estimates to determine if the project end-date schedule
is within the timeline of the project guarantee. Variances between management's judgment and actual results may result in significant adjustments having to be made to our results of operations and
financial position, including potentially having to refund fees previously paid to us for a project. We are currently in a loss position on our on-going fixed-price contract. At
June 30, 2002, we had accrued $199,000 for estimated losses we expect to incur while completing the project.

We
recognize time-and-materials revenue at the lowest point in the range of estimated profit margin, which represents our best estimate of the profit to be
achieved. Variances may occur if we are unable to collect time-and-material billings or if we grant concessions to time-and-material customers in order
to sell additional business or collect cash under the contract. These variances between management's estimate of the lowest point in the range of estimated profit margin and actual results may result
in a significant adjustment to our results of operations and financial position.

We
continue to review projects each quarter to reassess the status of each project and to verify the related completion percentage and project profit or loss projections. Although we
believe that we have
made all appropriate adjustments to properly reflect the completion percentage and status of contracts in process at June 30, 2002, we cannot be certain that future adjustments will not be
required.



We review asserted litigation claims each quarter to determine the likelihood that the claim will result in a loss. Significant management judgment is required to
conclude on the likely outcome of outstanding litigation. If a loss is probable on a litigation claim, management estimates the loss and we accrue the estimated loss. If a loss is considered probable
but cannot be reasonably estimated, we disclose the contingency in the notes to our financial statements. Losses may result on litigation claims that are not considered probable or are not estimable
at the current time, potentially having a significant impact on future financial results.



We recognize restructuring charges consistent with EITF 94-3. We reduce charges for abandoned facilities with sublease income. Management analyzes
current market conditions including current lease rates in the respective geographic regions, vacancy rates, and costs associated with subleasing when evaluating the reasonableness of future sublease
income. Significant management judgments and estimates must be made and used in calculating future sublease income. Variances between our expected and actual sublease income may result in significant
restructuring charge adjustments in future periods.

Liquidity and Capital Resources

During the first half of 2002, we continued to seek to improve our cash flow through a variety of means, including carefully managing our accounts receivable and
generating additional cash inflows wherever possible from our existing customer base, and continuing to reduce our operating cash outflows wherever possible. We have reduced quarterly operating cash
outflows by over 60% from the first quarter of 2001 to the second quarter of 2002.

Net
cash used in operating activities was $8.6 million for the six months ended June 30, 2002 as compared to $22.7 million for the same period in 2001. The decrease
in cash flows used in operating activities results primarily from the significant restructuring actions we have taken to reduce our operating costs.

Net
cash provided by investing activities was $6.0 million for the six months ended June 30, 2002 as compared to $21.7 million for the same period in 2001. During
the six months ended June 30, 2002,

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we sold two buildings and related land in San Rafael, California for proceeds of $2.4 million (before repayment of related notes payable). The decreases to restricted cash for the six months
ended June 30, 2002, were primarily for $3.5 million we released to landlords in connection with termination of office leases in San Francisco, California, and Chicago, Illinois; and
approximately $500,000 used by our Salt Lake City, Utah landlord for leasehold improvements as required in the related lease. During the six months ended June 30, 2001, we sold The LongView
Group, Inc. to Linedata Services for net proceeds of $28.1 million. The additions to restricted cash for the six months ended June 30, 2001, were for deposits to secure letters of
credit in the amount of $3.5 million, and $2.9 million held in escrow as required by our agreement with Linedata Services.

Net
cash used in financing activities was $3.7 million for the six months ended June 30, 2002 as compared to $3.0 million for the same period in 2001. Net cash used
by financing activities for the six months ended June 30, 2002 was primarily for repayment of notes payable related to our sale of two buildings and related land in San Rafael, California; and
principal payments on other notes and capital leases. Net cash used by financing activities for the six months ended June 30, 2001 resulted primarily from principal payments on notes and
capital leases of $3.5 million.

While
our financial statements have been prepared under the assumption that we will continue as a going concern, the independent auditors' report on our December 31, 2001
financial statements, prepared by KPMG LLP, included an explanatory paragraph relating to their substantial doubt as to our ability to continue as a going concern.

We
have made significant progress reducing operating cash outflows during 2001 and 2002. We reduced quarterly operating cash outflows by over 60% from the first quarter of 2001 to the
second quarter of 2002. However, we have been operationally cash flow negative for the years ended December 31, 2001 and 2000, and the six months ended June 30, 2002. This ongoing
negative cash flow has continued to place a burden on us to obtain cash infusions beyond those generated from normal operations and there can be no assurance that we will be able to generate positive
cash flow in the future.

On
March 1, 2002, we renewed our existing errors and omissions insurance policy. However, this policy does not cover our current customer dispute and we can give no assurance that
it will cover future customer claims. See "Legal Proceedings" for more information.

We
continue to seek additional sources of financing such as new sales to existing and new customers, asset sales, or equity financing, to sustain our operations. In February 2002,
we entered into a Common Stock Purchase Agreement (the "Purchase Agreement") with Fusion Capital Fund II, LLC ("Fusion Capital"), in connection with a private equity line financing transaction
pursuant to which we may offer and sell to Fusion Capital up to $10,000,000 of our Common Stock, over a period of up to 40 months. As a condition to Fusion Capital's obligation to make
purchases under the Purchase Agreement, the
Common Stock to be offered and sold to Fusion Capital must be registered in an effective registration statement with the Securities and Exchange Commission. Once the registration statement is
effective, we may make draws under the equity line, and can elect to draw up to $250,000 per month so long as our stock price exceeds $0.25 (below which we may not make draws). Our stock has recently
traded below $0.25 per share and we are considering whether to file the registration statement. The Purchase Agreement required the registration statement to be filed by March 29, 2002.
Consequently, Fusion Capital may elect to cancel the Purchase Agreement.

We
are also pursuing other sources of equity financing, and the possibility of converting some existing debt obligations to equity, to improve our cash position.

If
we are unsuccessful in our efforts to obtain financing, convert debt to equity, or generate sufficient cash flow to continue operations in the near term, we expect our cash balance to
drop below the levels needed to continue operations through the next few months.

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Disclosure about Contractual Obligations and Commercial Commitments

The following table sets forth certain contractual obligations recorded in the condensed consolidated financial statements and summary information is presented in
the following table (in thousands):

|                                   |  | As of June 30, 2002
|---------------------------------- |  | -------------------
|
|Notes Payable                      |  | $                  
|Capital Lease Obligations          |  |                    
|Real Estate Operating Leases       |  |                    
|Other Long Term Obligations        |  |                    
|                                   |  |                    
|Total Contractual Cash Obligations |  | $                  
|                                   |  |                    

Real Estate Lease Obligations

The real estate operating leases above include $5.0 million of restructured real estate lease obligations that have not been reduced by $1.8 million
of sublease income due from sublease tenants. In the Condensed Consolidated Balance Sheet at June 30, 2002, these obligations are included in accounts payable and accrued liabilities, net of
the related sublease income.

In
addition to the Contractual Obligations shown in the table above, we have the following other commitments:

Standby Letters of Credit

During the three months ended June 30, 2002, in connection with our termination of office leases in San Francisco, California, and Chicago, Illinois, we
released to the landlords $3.5 million previously held as restricted cash to support these leases, and terminated the related $3.5 million of stand-by letters of credit. We
have remaining stand-by letters of credit totaling $165,000 which will terminate by December 31, 2003. These letters of credit have not been drawn upon at June 30, 2002.

Guarantees

As of June 30, 2002, we had one remaining guaranteed fixed-price contract, and one other contract subject to a guarantee. We have received cash payments
from these contracts totaling $15.0 million through June 30, 2002 that are subject to potential refund under the related guarantees. We believe that the application and required
deliveries under the contracts will comply with the contractual terms of our customer agreements; however, these guarantees represent a risk to us.

Recent Accounting Pronouncements

In June 2001, the FASB issued SFAS No. 143Accounting for Asset Retirement Obligations. SFAS
No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This
Statement applies to legal obligations
associated with the retirement of long-lived assets that result from the acquisition, construction, development and (or) the normal operation of a long-lived asset, except for
certain obligations of lessees. We are required to adopt the provisions of SFAS No. 143 on January 1, 2003. We are currently evaluating this statement but do not expect that it will have
a material effect on our business, results of operations, financial position, or liquidity.

In
July 2001, the FASB issued SFAS No. 141Business Combinationsand SFAS No. 142Goodwill
and Other Intangible Assets. SFAS No. 141 requires business combinations initiated after June 30, 2001

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to be accounted for using the purchase method of accounting, and broadens the criteria for recording intangible assets separate from goodwill. SFAS No. 142 requires the use of a
non-amortization approach to account for purchased goodwill and certain intangibles. Under a non-amortization approach, goodwill and certain intangibles will not be amortized
into results of operations, but instead will be reviewed for impairment and written down and charged to results of operations only in the periods in which the recorded value of goodwill and certain
intangibles is more than its fair value. We adopted the provisions of SFAS No. 141 immediately, and SFAS No. 142 on January 1, 2002. The adoption of SFAS No. 141 and 142
did not have a material effect on our business, results of operations, financial position, or liquidity.

In
July 2001, the FASB reached final consensus on EITF No. 00-25,Vendor Income Statement Characterization of Consideration Paid to a
Reseller of the Vendor's Products("EITF 00-25"). EITF 00-25 generally requires that consideration, including equity instruments, given to a customer be
classified in a vendor's financial statements not as an expense, but as a reduction to revenue up to the amount of cumulative revenue recognized or to be recognized. In November 2001, the EITF
reached consensus on EITF No. 01-09,Accounting for a Consideration Given by a Vendor to a Customer or Reseller of the Vendor's
Products("EITF 01-09"). EITF 01-09 clarifies and modifies certain items discussed in EITF 00-25. In accordance with the transition guidance
in EITF 00-25, adoption will require reclassification of financial statements for prior periods presented for comparative purposes. We adopted EITF 00-25 and EITF
01-09 on January 1, 2002. The adoption of EITF 00-25 and EITF 01-09 did not have a material effect on our business, results of operations, financial
position, or liquidity.

In
August 2001, the FASB issued SFAS No. 144Accounting for the Impairment or Disposal of Long-Lived Assets.
SFAS No. 144 addresses financial accounting and reporting for the impairment of long-lived assets and for long-lived assets to be disposed of. We adopted the provisions
of SFAS No. 144 on January 1, 2002. The adoption of SFAS No. 144 did not have a material effect on our business, results of operations, financial position, or liquidity.

In
November 2001, the FASB issued an announcement,Income Statement Characterization of Reimbursements Received for Out of Pocket Expense
Incurred. The announcement requires companies to characterize reimbursements received for out of pocket expenses as revenues in the statement of operations. Historically, we
netted reimbursements received for out of pocket expenses against the related expenses in the accompanying condensed consolidated statements of operations. The announcement is to be applied in
financial reporting periods beginning after December 15, 2001 and comparative financial statements for the prior year are to be reclassified to comply with the guidance in
the announcement. We adopted this announcement on January 1, 2002. The adoption of this announcement resulted in increased revenues and expenses by the same amount in each period of $425,000
and $882,000 for the three months ended June 30, 2002 and 2001, respectively, and $559,000 and $1.7 million for the six months ended June 30, 2002 and 2001, respectively.

In
May 2002, the FASB issued SFAS No. 145Rescission of FASB Statements Nos. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. SFAS No. 145 eliminates Statement 4 (and Statement 64, as it amends Statement 4), which requires gains and losses from extinguishments of debt to be
aggregated and, if material, classified as an extraordinary item, net of the related income tax effect. As a result, the criteria in APB Opinion No. 30 will now be used to classify those gains
and losses. SFAS No. 145 amends FASB Statement No. 13 to require that certain lease modifications that have economic effects similar to sale-leaseback transactions are
accounted for in the same manner as sale-leaseback transactions. In addition, SFAS No. 145 makes technical corrections to some existing pronouncements. We are required to adopt the
provisions related to the rescission of Statements 4 and 64 on January 1, 2003, and for all transactions entered into beginning May 15, 2002 adopt the provision related to the amendment
of Statement 13. We are currently evaluating this statement but do not expect that it will have a material effect on our business, results of operations, financial position, or liquidity.

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In
July 2002, the FASB issued SFAS No. 146Accounting for Costs Associated with Exit or Disposal Activities. SFAS
No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring).SFAS No. 146 requires recognition of a liability for a cost associated with an exit or disposal activity when the liability is incurred, as opposed to
when the entity commits to an exit plan under EITF No. 94-3. We are required to adopt the provisions of SFAS No. 146 for exit or disposal activities that are initiated after
December 31, 2002. We are currently evaluating the impact of this statement on our future business, results of operations, financial position, or liquidity.

Factors that May Affect Future Results and Market Price of Stock

We operate in a rapidly changing environment that involves numerous risks, some of which are beyond our control. The following discussion highlights some of these
risks.



While our financial statements have been prepared under the assumption that we will continue as a going concern, the independent auditors' report on our
December 31, 2001 financial statements, prepared by KPMG LLP, included an explanatory paragraph relating to their substantial doubt as to our ability to continue as a going concern. Our
business model relies upon generating new sales to existing and new customers and receiving payments from existing customers. If we do not generate sufficient new sales and receive payments from
existing customers, we will be required to pursue one or a combination of the following remedies: seek additional sources of financing, further reduce operating expenses, sell part or all of our
assets, or terminate operations. We were unable to raise additional capital during the year ended December 31, 2001, or the six months ended June 30, 2002. We will continue to seek
additional capital to finance our operations through 2002. However, there can be no assurance that these efforts will prove successful.



In light of our operating results for recent periods and the national economic downturn in the technology sector, it is difficult to evaluate our future
prospects. There can be no assurance that we will be able to successfully complete any current or new projects. In the past we received customer complaints concerning some of our projects. Although we
have substantially changed the business model under which we sold and delivered business which generated customer complaints, we cannot be certain that we will not receive more customer complaints in
the future. Additionally, our failure to successfully complete any current or new projects may have a material adverse impact on our financial position and results of operations. We cannot be certain
that our business strategy will succeed.



We believe that some prospective customers are delaying and canceling purchase decisions as a result of the litigation and customer disputes against us, the
decline in our stock price, our financial condition including our operating losses for the last several quarters, our lack of new capital, and the national economic downturn in the technology sector.
There is no assurance that we will be able to convince prospective customers to purchase products or services from us or that any customer revenue that is achieved can be sustained. If we are unable
to obtain future customer revenue, our operations, financial condition, liquidity, and prospects will be materially and adversely affected, and we will be required to pursue one or a combination of
the following remedies: seek additional sources of financing, further reduce operating expenses, sell part or all of our assets, or terminate operations.

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There can be no assurance that additional financing sources will be available to us when needed or that we will be able to execute the other potential remedies sufficiently to continue operations.



While we maintain errors and omissions insurance coverage for claims related to customer contract disputes within the coverage scope and term, given the nature
and complexity of the factors affecting the estimated liabilities, actual liabilities may exceed or be outside the scope of our current errors and omissions coverage. We can give no assurance that our
insurance carrier will extend coverage to any of the current claims. In addition, no assurance can be given that we will not be subject to material additional liabilities and significant additional
litigation relating to errors and omissions for existing claims and future claims.

Our
new errors and omissions insurance policy, which we renewed on March 1, 2002, is in the form of an industry standard software errors and omissions policy. As such, it only
covers software errors and omissions that occur after the delivery of software and excludes contractual disputes such as cost and time related guarantees. We have previously had contractual disputes
related to our guarantees. While we have substantially changed our business model and no longer offer the TenFold Guarantee, no assurance can be given that we will not be subject to these types of
claims in the future. In the event that liabilities from claims are not covered by or exceed our errors and omissions coverage, our business, results of operations, financial position, or liquidity
could be materially and adversely affected.



We have derived, and over the near term we expect to continue to derive, a significant portion of our revenues and cash flow from a limited number of large
customers. For the six months ended June 30, 2002, Allstate accounted for 61 percent of our total revenues. If Allstate significantly reduces the amount of business it conducts with us,
our business, results of operations, financial position and liquidity could be materially and adversely affected. The loss of any of our large customers, without their replacement by new large
customers, could have an adverse effect on our revenues and cash flow. We lost several customers during the years ended December 31, 2001 and 2000. In the future, revenues from a single
customer or a few large customers may constitute a significant portion of our total revenues and cash inflows in a particular quarter. The volume of work performed for specific customers is likely to
vary from year to year, and a major customer in one year may not purchase licenses or services from us in a subsequent year. In addition, if a customer is involved in a corporate reorganization or
business combination, that fact may delay a decision to hire us or cause the customer to choose not to purchase licenses or services in a given year. Replacing the loss of a large customer is
unpredictable, as we have not signed a significant contract with a new customer in over a year. Fifty-six percent of our 2001 revenues were derived from three customers; the largest of the
three customers in 2001 is not expected to produce significant revenue or cash flow during 2002. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" generally for more information concerning our customers and revenues.



Because of our limited operating history and our small number of customers, we have completed a limited number of projects that are now in production. As a
result, there may be undiscovered material defects in our products or technology. Furthermore, complex software products often contain errors or defects, particularly when first introduced or when new
versions or enhancements are released. Despite internal testing and testing by current and potential customers, our current and future products may

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contain serious defects. Serious defects or errors could result in lost revenues or a delay in market acceptance, which would damage our reputation and business.

Because
our customers may use our products for mission-critical applications, errors, defects, or other performance problems could result in financial or other damages to customers. Our
customers could seek damages for these losses. Any successful claims for these losses, to the extent not covered by insurance, could result in us being obligated to pay substantial damages, which
would cause operating results to suffer. Although our license agreements typically contain provisions designed to limit our exposure to product liability claims, existing or future laws or unfavorable
judicial decisions could negate these limitations of liability provisions. A product liability claim brought against us, even if not successful, would likely be time consuming and costly.



We are currently involved in a dispute with a former customer and an SEC investigation. Additionally, two consolidated complaints have been filed alleging that
TenFold and certain officers have violated federal securities laws. We may in the future face other litigation or disputes with customers, employees, business partners, stockholders, or other third
parties. Such litigation or disputes could result in substantial costs and diversion of resources that would harm our business. An unfavorable outcome of these matters may have a material adverse
impact on our business, results of operations, financial position, or liquidity. See "Legal Proceedings" for more information.



Our settlements with Perot Systems and Cedars-Sinai require that we perform and meet certain obligations. If we are unable to or do not perform or meet these
obligations, Perot Systems and Cedars-Sinai may re-instate or re-assert their respective claims against us. If either Perot Systems or Cedars-Sinai were to
re-instate or re-assert their respective claims, an unfavorable outcome of the matter may have a material adverse impact on our business, results of operations, financial
position, or liquidity.



Our Common Stock is currently traded on the Nasdaq SmallCap Market ("Nasdaq") under the symbol "TENF." As we have been informed by Nasdaq in a February 14,
2002 letter and a May 6, 2002 letter, we have failed to meet certain of Nasdaq's continued listing requirements and, as a result of this failure to comply with these listing criteria, our
Common Stock could be de-listed from Nasdaq. Nasdaq's continued listing requirements include a series of financial tests relating to market capitalization, net income, net tangible assets,
public float, number of market makers and shareholders, and a $1.00 minimum share price. If we are not able to obtain an exception to the continued listing requirements or meet the continued listing
requirements and our stock is de-listed from Nasdaq, there would likely be a substantial reduction in the liquidity of any investment in our common stock. This lack of liquidity also may
make it more difficult for us to raise capital in the future. There can be no assurance that an active trading market will be sustained in the future.

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Historically, our operating results have varied significantly. For example, during some years, we have had quarterly profits followed by losses in subsequent
quarters. Our future operating results may continue to vary significantly. Furthermore, there can be no assurance that we will not continue to suffer losses in the future.



Prior
to 2001, an important element of our strategy was to enter into fixed-price, fixed-time contracts, rather than time-and-materials contracts.
These contracts involved risk because in certain instances they required us to absorb possible cost overruns and, if we failed to meet our performance obligations, may have required us to satisfy our
performance guarantee. Historically, we offered the "TenFold Guarantee" by which we guaranteed that we would complete our projects within a fixed time or the customer had the option to return the
software and receive a refund of any fees paid under the contract. For fixed-price contracts, we recognized license fees related to the application and the application development service fees over
time as we performed the services, using the percentage-of-completion method of accounting. Our failure to accurately estimate the resources required for a project or our
failure to complete our contractual obligations in a manner consistent with the project plan has caused us to have lower margins or to suffer a loss on some projects, which has negatively impacted our
operating results. In specific circumstances, we were required to commit unanticipated additional resources to complete projects. Beginning in the fourth quarter of 2000, we no longer offer the
TenFold Guarantee as a standard part of our contracts. As of June 30, 2002, we had one remaining guaranteed fixed-price contract, and one other contract subject to a guarantee. We have received
cash payments from these contracts totaling $15.0 million through June 30, 2002 that are subject to potential refund under the related guarantees.



We currently have one remaining fixed-price contract. We have experienced delays on this project. In an effort to complete the project, we have added additional
employee and consulting personnel. There is no assurance that we will complete this fixed-price project or that this project will not require additional personnel. Our failure to accurately estimate
the resources required for a fixed-price project or our failure to complete our contractual fixed-price obligations in a manner consistent with the project plan would likely cause us to have lower
margins or to suffer a loss on the project, which would negatively impact our operating results, financial condition and liquidity. Our revenue recognition policy requires us to make periodic
adjustments to our project estimates used in the percentage-of-completion method of accounting (which includes the "zero profit" methodology) as work progresses under the
contracts and as we gain experience. Although we believe that we made all appropriate adjustments to properly reflect the completion percentage and status of this contract in process, we cannot be
certain that future adjustments will not be required. See "Legal Proceedings" for information about litigation and disputes related to some of our projects.



A high percentage of our operating expenses, particularly personnel and rent, are relatively fixed in advance of any particular quarter. As a result,
unanticipated variations in the number, or progress toward completion, of our projects or in employee utilization rates did and may continue to cause significant variations in operating results in any
particular quarter and could result in quarterly losses.

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An unanticipated termination of a major project, the delay of a project, or the completion during a quarter of several major projects has in the past and may continue to result in under-utilized
employees and could, therefore, cause us to suffer quarterly losses or adverse results of operations.



We believe that a customer's decision to purchase our software involves a significant commitment of resources and is influenced by customer budget cycles. To
successfully sell our products, we generally must educate our potential customers regarding the use and benefit of our products, which can require significant time and resources. Consequently, the
period between initial contact and the purchase of our products is often long and subject to delays associated with the lengthy budgeting, approval, and competitive evaluation processes that typically
accompany significant capital expenditures. Our sales cycles are lengthy and variable, typically ranging between three to twelve months from initial contact
with a potential customer to the signing of a contract. In addition, the national economic downturn and the events of September 11, 2001 have caused current and potential customers to delay or
change their purchasing decisions. Sales delays could cause our operating results to vary widely. We have recently experienced sales delays due to longer than expected sales cycles, which we believe
contributed to lower than expected revenues. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" generally for more information concerning our customers and
revenues. There can be no assurance that we will not experience sales delays in the future. In addition, we face a challenging sales environment and there can be no assurance that we will have sales
in the future.



We have developed software applications for companies in a small number of vertical industries. Our reliance on customers from particular industries subjects our
business to the economic conditions impacting those industries, including those industries' demand for information technology resources. If we continue to rely on a small number of vertical industries
as a major source of revenues, and those industries suffer adverse economic conditions, there will likely be a significant reduction in the demand for our products, causing revenues to suffer. For
example, the events of September 11, 2001 have adversely affected some of our customers in the insurance and financial services industries. Although we intend to seek to diversify our customer
base, there can be no assurance that we will be able to do so in the near term or at all.



An element of our business strategy includes divesting vertical applications products or lines of business. If we are unable to successfully implement this
strategy or within the time frames anticipated, our results could suffer. Unfortunately, the events of September 11, 2001 directly impacted companies in the securities and insurance industries,
which are the most likely to have an interest in acquiring rights to our vertical applications. If companies in these industries continue to preserve cash and slow their business expansion plans, our
divestiture strategy could be adversely affected.



As we change our business strategy to licensing the Universal Application, the success of our business is dependent, in part, upon our ability to license the
Universal Application. If our strategy for marketing the Universal Application is unsuccessful, or if we are unable to license the Universal

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Application successfully or within the time frames anticipated, our revenues, and operating results will suffer.



Our industry is competitive and we are substantially dependent upon the continued service of our existing executive personnel, especially Nancy M. Harvey,
President and Chief Executive Officer. Furthermore, our products and technologies are complex and we are substantially dependent upon the continued service of our senior technical staff, including
Jeffrey L. Walker, Chairman of the Board of Directors, Executive Vice President, and Chief Technology Officer. If a key employee resigns to join a competitor or to form a competing company, the
loss of the employee and any resulting loss of existing or potential customers to the competing company would harm our business. We do not carry key man life insurance on any of our key employees. We
have entered into an employment agreement with our President and Chief Executive Officer, Nancy M. Harvey. We have entered into employment agreements with certain other key executive officers.
However, such agreements do not ensure their continued service to TenFold. In the event of the loss of key personnel, there can be no assurance that we would be able to prevent their unauthorized
disclosure or use of our technical knowledge, practices, or procedures.



Our
business is labor intensive. Our success will depend in large part upon our ability to attract, retain, train, and motivate highly skilled employees, particularly project managers
and other senior technical personnel. Any failure on our part to do so would impair our ability to adequately manage and complete existing projects, bid for and obtain new projects, and expand
business. There exists significant competition for employees with the skills required to perform the services we offer. Qualified project managers and senior technical staff are in great demand and
are likely to remain a limited resource for the foreseeable future. The collapsing of our vertical business group structure along with our restructuring and related headcount reductions, may make it
more difficult for us to retain and compete for such employees. In addition, many of the stock options that we granted to employees are priced in excess of the current market price of our common
stock. There can be no assurance that we will be successful in retaining, training, and motivating our employees or in attracting new, highly skilled employees. If we are unsuccessful in this effort
or if our employees are unable to achieve expected performance levels, our business will be harmed.



Our success is dependent, in part, upon our proprietary Universal Application technology and other intellectual property rights. If we are unable to protect and
enforce these intellectual property rights, our competitors will have the ability to introduce competing products that are similar to ours, and our revenues, market share, and operating results will
suffer. To date, we have relied primarily on a combination of patent, copyright, trade secret, and trademark laws, and nondisclosure and other contractual restrictions on copying and distribution to
protect our proprietary technology. We have been issued three patents in the U.S. and intend to continue to seek patents on our technology when appropriate. There can be no assurance that the steps we
have taken in this regard will be adequate to deter misappropriation of our proprietary information or that we will be able to detect unauthorized use and take appropriate steps to enforce our
intellectual property rights. The laws of some countries may not protect our intellectual property rights to the same extent as do the laws of the United States.

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Furthermore, litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to
defend against claims of infringement or invalidity. This litigation could result in substantial costs and diversion of resources that would harm our business.

To
date, we have not been notified that our products infringe the proprietary rights of third parties, but there can be no assurance that third parties will not claim infringement by us
with respect to current or future products. We expect software developers will increasingly be subject to infringement claims as the number of products and competitors in our industry segment grows
and the functionality of products in different industry segments overlaps. Any of these claims, with or without merit, could be
time-consuming to defend, result in costly litigation, divert management's attention and resources, cause product shipment delays, or require us to enter into royalty or licensing
agreements. These royalty or licensing agreements, if required, may not be available on terms acceptable to us, or at all. A successful claim against us of product infringement and our failure or
inability to license the infringed or similar technology on favorable terms would harm our business.



The market for our products and services is highly competitive, and if we are not successful in competing in this market, our revenues and market share will
suffer. Many of our competitors have significantly greater financial, technical and marketing resources, generate greater revenues, and have greater name recognition than we do. In addition, there are
relatively low barriers to entry into our markets and we have faced, and expect to continue to face, additional competition from new entrants into our markets.



Revenues from customers located in the United Kingdom and Argentina were 28% and 26% of total revenues during 2001 and for the six months ended June 30,
2002, respectively. The international political and economic uncertainty caused by the events of September 11, 2001 and the ongoing war on terrorism may adversely impact our ability to continue
existing relationships with our foreign customers and to develop new business abroad.

Furthermore,
Argentina's default on its debt and the political and economic upheaval resulting from that country's four-year recession may adversely impact our ability to
continue our relationship with, or even collect amounts due from, our customer in Argentina.



The executive officers, directors, and entities affiliated with them, in the aggregate, beneficially own approximately 62 percent of our outstanding common
stock. Jeffrey L. Walker, Chairman, Executive Vice President and Chief Technology Officer, and the Walker Children's Trust, in the aggregate, currently beneficially own approximately 47 percent
of our outstanding common stock. Mr. Walker, acting with others, would be able to decide or significantly influence all matters requiring approval by our stockholders, including the election of
directors and the approval of mergers or other business
combination transactions. This concentration of ownership may have the effect of delaying or preventing a merger or other business combination transaction, even if the transaction would be beneficial
to our other stockholders.

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Provisions of our certificate of incorporation, bylaws, stock incentive plans and Delaware law may discourage, delay, or prevent a merger or acquisition that a
stockholder may consider favorable.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk.As of June 30, 2002, we had cash and cash equivalents of $4.2 million and
$2.0 million in restricted cash. All of the cash equivalents consist of highly-liquid investments with remaining maturities at the date of purchase of less than ninety days. These investments
are subject to interest rate risk and will decrease in value if market interest rates increase. A hypothetical increase or decrease in market interest rates by 10 percent from the
June 30, 2002 rates would cause the fair value of these investments to change by an insignificant amount. Risk is mitigated through limits regarding investment concentration in particular
securities and institutions, and investments in varying maturities. We do not invest in any financial derivatives or any other complex financial instruments. An increase or decrease in interest rates
would not significantly increase or decrease our interest expense on debt obligations, as the majority of our debt obligations have fixed interest rates. TenFold does not own any equity investments.
Therefore, we do not currently have any direct equity price risk.

Currency Risk. A portion of our operations consists of applications development and sales activities in the United Kingdom. These
transactions are primarily denominated in British pounds. As a result, our financial results could be affected by factors such as a change in the foreign currency exchange rate between the U.S. dollar
and the British pound, or by weak economic conditions in the United Kingdom. When the U.S. dollar strengthens against the British pound, the value of revenues in the United Kingdom decreases. When the
U.S. dollar weakens against the British pound, the value of revenues in the United Kingdom increases. The monetary assets and liabilities in our foreign subsidiary which are impacted by foreign
currency fluctuations are cash, accounts receivable, accounts payable, and certain accrued liabilities. A hypothetical 10 percent increase or decrease in the exchange rate between the U.S.
dollar and the British pound from the June 30, 2002 rate would cause the fair value of such monetary assets and liabilities in the United Kingdom to change by approximately $75,000. We are not
currently engaged in any foreign currency hedging activities.

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PART II. OTHER INFORMATION

Item 1.    Legal Proceedings

See Part I, Item 1, Note 8 of Notes to Condensed Consolidated Financial Statements for a description of legal proceedings.

Item 2. Changes in Securities and Use of Proceeds

On February 26, 2002, we entered into a common stock purchase agreement with Fusion Capital Fund II, LLC ("Fusion Capital"), pursuant to which Fusion
Capital has agreed to purchase in cash, on each trading day during the term of the agreement, $12,500 of our common stock up to an aggregate, under certain conditions, of $10 million. We have
issued 632,911 shares to Fusion Capital as part of its commitment fee, and up to 316,456 additional shares are issuable to Fusion Capital in the future as part of its commitment fee. Under the common
stock purchase agreement, the purchase price per share is equal to the lesser of: the lowest sale price of our common stock on the purchase date; or the average of the three lowest closing sale prices
of our common stock during the ten consecutive trading days prior to the date of a purchase by Fusion Capital. As a condition to Fusion Capital's obligation to make purchases under the Purchase
Agreement, the Common Stock to be offered and sold to Fusion Capital must be registered in an effective registration statement with the Securities and Exchange Commission. Once the registration
statement is effective, we may make draws under the equity line, and can elect to draw up to $250,000 per month so long as our stock price exceeds $0.25 (below which we may not make draws). Our stock
has recently traded below $0.25 per share and we are considering whether to file the registration statement. The Purchase Agreement required the registration statement to be filed by March 29,
2002. Consequently, Fusion Capital may elect to cancel the Purchase Agreement.

Based
upon representations and warranties made by Fusion Capital in the common stock purchase agreement, including representations and warranties with respect to its investment intent
and financial sophistication, the shares of common stock issued and to be issued to Fusion Capital have been issued and are expected to be issued, as applicable, in reliance on the exemption from
registration contained
in Section 4(2) of the Securities Act of 1933, as amended. Any proceeds from Fusion Capital we receive under the common stock purchase agreement will be used for working capital and general
corporate purposes.

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

TenFold's annual meeting of stockholders was held on June 19, 2002, in Sandy, Utah. A total of 32,275,288 shares (approximately 86% of all shares entitled
to vote at the meeting) were represented by proxy or ballot at the meeting. The matters voted upon at the meeting, and the votes cast with respect to each were:



There
were no broker non-votes for the matters voted upon.

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Item 6. Exhibits and Reports on Form 8-K

|Number |  | Description                                                                                                                                      
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|10.1   |  | Lease Termination Agreement between TenFold Corporation and EOP-150 California Street, L.L.C.                                                    
|10.2   |  | Lease Agreement between TenFold Corporation and EOP-150 California Street, L.L.C.                                                                
|10.3   |  | Lease Termination Agreement between TenFold Corporation and 200 South Wacker Drive, L.L.C.                                                       
|10.4   |  | Amendment to Lease Agreement between TenFold Corporation and Boyer Jordan Valley 1, L.C.                                                         
|10.5#  |  | Amendment to Employment Agreement between TenFold Corporation and Nancy M. Harvey.                                                               
|10.6   |  | Amendment to Employment Agreement between TenFold Corporation and Michelle Moratti.                                                              
|10.7** |  | Master Software License and Services Agreement, as amended, between TenFold Corporation and Allstate Insurance Company.                          
|11*    |  | Computation of Shares used in Computing Basic and Diluted Net Income (Loss) Per Share.                                                           
|99.1   |  | Certification By Chief Executive Officer Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002
|99.2   |  | Certification By Chief Financial Officer Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

| |  | TENFOLD CORPORATION
| |  | -------------------
| |  | By:                
| |  | By:                
| |  | By:                

Date:
August 14, 2002

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