<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-Q

(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the quarterly period ended June 30, 2001

                                      OR

[_]  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

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

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

<TABLE>
<S>                                                    <C>
                       Delaware                                     83-0302610
   (State or other jurisdiction of incorporation or    (I.R.S. Employer Identification No.)
                    organization)
</TABLE>

                            180 West Election Road
                              Draper, Utah 84020
         (Address of principal executive offices, including zip code)

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


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

     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 [X] No [_]

     As of June 30, 2001, there were 36,848,605 shares of the registrant's
Common Stock outstanding.
<PAGE>

                                     INDEX
                                     -----

<TABLE>
<CAPTION>
                                                                                                          Page
                                                                                                          ----
<S>                                                                                                       <C>
PART I.           FINANCIAL INFORMATION

         Item 1.  Condensed Consolidated Financial Statements

                  Condensed Consolidated Balance Sheets at June 30, 2001 and
                  December 31, 2000......................................................................    3

                  Condensed Consolidated Statements of Operations for the three and six months
                  ended June 30, 2001 and June 30, 2000..................................................    4

                  Condensed Consolidated Statements of Cash Flows for the six months ended
                  June 30, 2001 and June 30, 2000........................................................    5

                  Notes to Condensed Consolidated Financial Statements...................................    6

         Item 2.  Management's Discussion and Analysis of Financial Condition and Results
                  of Operations..........................................................................   23

         Item 3.  Quantitative and Qualitative Disclosures About Market Risk.............................   50

PART II.          OTHER INFORMATION

         Item 1.  Legal Proceedings......................................................................   51

         Item 6.  Exhibits and Reports on Form 8-K.......................................................   57

SIGNATURES   ............................................................................................   58
</TABLE>

                                       2
<PAGE>

PART I.   FINANCIAL INFORMATION
Item 1.   Condensed Consolidated Financial Statements
                     TENFOLD CORPORATION
          CONDENSED CONSOLIDATED BALANCE SHEETS
                (in thousands, except share data)
                           (unaudited)

<TABLE>
<CAPTION>
                                                                                                    June 30,        December 31,
                                                                                                 ---------------   --------------
                                                                                                      2001              2000
                                                                                                 ---------------   --------------
<S>                                                                                              <C>               <C>
                                           Assets

Current assets:
  Cash and cash equivalents .................................................................    $         9,594   $       13,854
  Accounts receivable, (net of allowances for doubtful accounts
      of $2,945 and $7,338, respectively) ...................................................              3,481            3,451
  Unbilled accounts receivable, (net of allowances for doubtful accounts
      of $1,769 and $2,949, respectively) ...................................................                621              282
  Prepaid expenses and other assets .........................................................              1,363              652
  Deferred income taxes .....................................................................                 --              612
  Income taxes receivable ...................................................................                644              644
  Assets held for sale ......................................................................              2,510            2,944
  Other assets, (net of allowances of $182, and $236 respectively) ..........................                133              256
                                                                                                 ---------------   --------------
      Total current assets ..................................................................             18,346           22,695

  Restricted cash ...........................................................................              8,911            2,598
  Property and equipment, net ...............................................................             12,906           20,234
  Due from stockholders, (net of allowance of $860) .........................................                 40               40
  Other assets ..............................................................................                590              770
  Goodwill and acquired intangibles, net ....................................................                 --           18,938
                                                                                                 ---------------   --------------
      Total assets ..........................................................................    $        40,793   $       65,275
                                                                                                 ===============   ==============

                            Liabilities and Stockholders' Deficit
Current liabilities:
  Accounts payable ..........................................................................    $         2,698   $        9,769
  Income taxes payable ......................................................................              3,007              766
  Accrued liabilities .......................................................................             16,306           12,043
  Deferred revenue ..........................................................................             17,923           35,853
  Current installments of obligations under capital leases ..................................              3,065            3,381
  Current installments of notes payable .....................................................              6,835            3,377
  Other current liabilities .................................................................              2,143              899
                                                                                                 ---------------   --------------
      Total current liabilities .............................................................             51,977           66,088
                                                                                                 ---------------   --------------

Long-term liabilities:
  Deferred income taxes .....................................................................                 --              612
  Obligations under capital leases, excluding current installments ..........................              2,098            3,498
  Notes payable, excluding current installments .............................................                 --            5,284
  Other long-term liabilities ...............................................................                466            1,241
                                                                                                 ---------------   --------------
      Total long-term liabilities ...........................................................              2,564           10,635
                                                                                                 ---------------   --------------

Contingencies (Note 9)

Stockholders' deficit:
  Common stock, $0.001 par value:
  Authorized: 120,000,000 shares
   Issued and outstanding shares: 36,848,605 shares at June 30, 2001
   and 35,735,858 shares at December 31, 2000 ...............................................                 37               36
  Additional paid-in capital ................................................................             66,153           66,170
  Notes receivable from stockholders, (net of allowances of $726, and
   $1,686 respectively) .....................................................................               (442)            (429)
  Deferred compensation .....................................................................             (1,051)          (2,132)
  Accumulated deficit .......................................................................            (77,811)         (74,270)
  Accumulated other comprehensive loss ......................................................               (634)            (823)
                                                                                                 ---------------   --------------
      Total stockholders' deficit ...........................................................            (13,748)         (11,448)
                                                                                                 ---------------   --------------
      Total liabilities and stockholders' deficit ...........................................    $        40,793   $       65,275
                                                                                                 ===============   ==============
</TABLE>

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

                                       3
<PAGE>

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

<TABLE>
<CAPTION>

                                                                            Three Months Ended             Six Months Ended
                                                                                   June 30,                    June 30,
                                                                        ---------------------------   ---------------------------
                                                                            2001          2000            2001           2000
                                                                        ------------- -------------   -------------  ------------
<S>                                                                     <C>           <C>             <C>            <C>
Revenues:
   License .........................................................     $  4,115        $  7,586        $  7,096        $ 12,268
   Services ........................................................       17,335          18,779          25,621          45,772
                                                                         --------        --------        --------        --------
         Total revenues ............................................       21,450          26,365          32,717          58,040
                                                                         --------        --------        --------        --------

Operating expenses:
   Cost of revenues (exclusive of non-cash compensation
      of $97, $114, $160, and $248, respectively) ..................        9,384          16,302          18,606          28,020
   Sales and marketing (exclusive of non-cash compensation
      of $13, $54, $58, and $115, respectively) ....................        1,385           6,453           4,231          13,297
   Research and development (exclusive of non-cash
      compensation of $73, $92, $129, and $190, respectively) ......        3,464           6,333           7,914          12,757
   General and administrative (exclusive of non-cash
      compensation of $154, $56, $166, and $114, respectively) .....        3,018           6,136           7,271           8,000
   Amortization of goodwill and acquired intangibles ...............           --           1,151             962           2,302
   Amortization of deferred compensation ...........................          337             316             513             667
   Special charges .................................................        1,832              --           7,561              --
                                                                         --------        --------        --------        --------
         Total operating expenses ..................................       19,420          36,691          47,058          65,043
                                                                         --------        --------        --------        --------
Income (loss) from operations ......................................        2,030         (10,326)        (14,341)         (7,003)
                                                                         --------        --------        --------        --------

Other income (expense):
   Interest and other income .......................................          400           1,054             833           1,841
   Interest expense ................................................         (394)           (349)           (645)           (628)
   Gain on sale of The LongView Group, Inc. ........................           --              --          13,771              --
                                                                         --------        --------        --------        --------
         Total other income, net ...................................            6             705          13,959           1,213
                                                                         --------        --------        --------        --------
Income (loss) before income taxes and minority interest ............        2,036          (9,621)           (382)         (5,790)

Provision (benefit) for income taxes ...............................          379          (3,134)          3,159          (1,448)
                                                                         --------        --------        --------        --------

Net income (loss) before minority interest .........................        1,657          (6,487)         (3,541)         (4,342)

Minority interest ..................................................           --              (8)             --              --
                                                                         --------        --------        --------        --------

Net income (loss) ..................................................     $  1,657        $ (6,479)       $ (3,541)       $ (4,342)
                                                                         ========        ========        ========        ========


Basic earnings (loss) per common share .............................     $   0.05        $  (0.19)       $  (0.10)       $  (0.13)
                                                                         ========        ========        ========        ========
Diluted earnings (loss) per common share ...........................     $   0.04        $  (0.19)       $  (0.10)       $  (0.13)
                                                                         ========        ========        ========        ========
Weighted average common and common equivalent shares used
   to calculate earnings (loss) per share:

   Basic ...........................................................       35,511          34,392          35,459          34,215
                                                                         ========        ========        ========        ========
   Diluted .........................................................       37,108          34,392          35,459          34,215
                                                                         ========        ========        ========        ========

</TABLE>

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

                                       4
<PAGE>

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


<TABLE>
<CAPTION>
                                                                                                           Six Months Ended
                                                                                                               June 30,
                                                                                                     -----------------------------
                                                                                                          2001           2000
                                                                                                     -------------- --------------
<S>                                                                                                 <C>              <C>
Cash flows from operating activities:
   Net loss........................................................................................        $ (3,541)      $ (4,342)
   Adjustments to reconcile net loss to net cash used in operating activities:.....................

     Tax benefit from exercise of stock options....................................................              --          6,820
     Deferred income tax provision (benefit).......................................................             407         (8,398)
     Amortization of goodwill and acquired intangibles.............................................             962          2,302
     Depreciation and amortization.................................................................           3,258          2,168
     Impaired assets charge........................................................................           3,625             --
     Provision for bad debts.......................................................................              89          4,129
     Amortization of deferred compensation.........................................................             513            667
     Compensation expense related to stock options.................................................              43             --
     Gain on sale of The LongView Group, Inc.......................................................         (13,771)            --

   Changes in operating assets and liabilities:
     Accounts receivable...........................................................................          (1,346)        (2,170)
     Unbilled accounts receivable..................................................................            (479)        (8,508)
     Prepaid expenses and other assets.............................................................            (519)            26
     Accounts payable..............................................................................          (6,726)         2,186
     Income taxes payable..........................................................................           2,257            (98)
     Accrued liabilities...........................................................................           4,616         (5,544)
     Deferred revenues.............................................................................         (12,551)         1,406
     Other liabilities.............................................................................             471             --
                                                                                                           --------       --------
        Net cash used in operating activities......................................................         (22,692)        (9,356)
                                                                                                           --------       --------
Cash flows from investing activities:
     Additions to property and equipment...........................................................              (9)        (8,129)
     Additions to restricted cash..................................................................          (6,424)        (2,840)
     Net proceeds from sale of The LongView Group, Inc.............................................          28,115             --
                                                                                                           --------       --------
        Net cash provided by (used in) investing activities........................................          21,682        (10,969)
                                                                                                           --------       --------
Cash flows from financing activities:
     Proceeds from employee stock purchase plan stock issuance.....................................             458          2,520
     Exercise of common stock options..............................................................              51          1,399
     Proceeds from issuance of notes payable.......................................................              --          5,195
     Principal payments on notes payable...........................................................          (1,826)        (3,910)
     Notes receivable from stockholders............................................................            (140)            --
     Payments of notes receivable from stockholders................................................             127             --
     Principal payments on obligations under capital leases........................................          (1,692)          (480)
                                                                                                           --------       --------
        Net cash provided by (used in) financing activities........................................          (3,022)         4,724
                                                                                                           --------       --------

Effect of exchange rate changes....................................................................            (228)          (276)
                                                                                                           --------       --------

Net decrease in cash and cash equivalents..........................................................          (4,260)       (15,877)
Cash and cash equivalents at beginning of period...................................................          13,854         58,247
                                                                                                           --------       --------
Cash and cash equivalents at end of period.........................................................        $  9,594       $ 42,370
                                                                                                           ========       ========
Supplemental disclosure of cash flow information:
     Cash paid for income taxes....................................................................        $    389       $    212

     Cash paid for interest........................................................................        $    458       $    747
</TABLE>

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

                                       5
<PAGE>

                              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 (the "Company")
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 years' 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
month periods ended June 30, 2001 are not necessarily indicative of the results
that may be expected for any future period or for the year ending December 31,
2001.

     This report should be read in conjunction with the Company's audited
Consolidated Financial Statements for the year ended December 31, 2000 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, that 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.

     The Company's financial statements have been prepared under the assumption
that the Company will continue as a going concern. During the year ended
December 31, 2000, the Company experienced several difficult quarters as a
result of rapid internal growth, delivery challenges and a difficult sales
environment. The delivery challenges prevented the Company from collecting final
payments on certain projects and led to several customer disputes. As the
Company disclosed the customer disputes in its quarterly filings, the sales
environment became increasingly difficult. The substantial operating losses
incurred in the year ended December 31, 2000 further deteriorated its ability to
sell its products and services. In order to better align its expenses with its
revenues, the Company took aggressive steps to restructure its operations
through consolidating its management structure, reducing its workforce and
closing offices. Additionally, the Company raised cash through the sale of
LongView for $29.0 million in March 2001. The Company believes that the strength
of its core technologies, product assets, customer base, and the corrective
actions that the Company is taking, provide a solid foundation for its continued
operation in 2001. Additionally, the Company will continue to seek additional
capital to finance its operations through the sale of non-strategic assets and
other means. However, there can be no assurance that the measures taken to date
or additional measures, if necessary, will prove successful.

2.   Revenue Recognition

     The Company derives revenues from license fees, application development and
implementation services, support, and training services. License revenues
consist of fees for licensing the Universal Application as a tool or as a
developed application, and license fees for the applications that the Company
develops for its customers. The Company also derives license revenues from the
resale of its vertical applications products. Service revenues consist of fees
for application development and implementation, support and training.

     In October 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 97-2, Software Revenue
Recognition, which supersedes SOP 91-1, Software Revenue Recognition.
Additionally, in 1998, the AICPA issued SOP 98-9, Modification

                                       6
<PAGE>

of SOP 97-2 with Respect to Certain Transactions. Effective January 1, 1998, the
Company adopted the provisions of SOP 97-2, as modified by SOP 98-9.

     The Company generally enters into software arrangements that involve
multiple elements, such as software products, enhancements, post-contract
customer support ("PCS"), installation and training. The Company allocates a
portion of the arrangement fee to each undelivered element based on the relative
fair values of the elements. The fair values of an element must be based on
vendor specific objective evidence ("VSOE"). The Company establishes VSOE based
on the price charged when the same element is sold separately. VSOE for services
is based on standard rates for the individuals providing services. These rates
are the same rates charged when the services are sold separately under time-and-
materials contracts. The Company bases VSOE for training on standard rates
charged for each particular training course. These rates are the rates charged
when the training is sold separately for supplemental training courses. For PCS,
VSOE is determined by reference to the renewal rate the Company charges the
customer in future periods. The fee allocated to the delivered software product
is based upon the residual method described in SOP 98-9.

     The Company recognizes license revenues from vertical application product
sales and Universal Application development licenses that do not include
services or where the related services are not considered essential to the
functionality of the software, when the following criteria are met: the Company
has signed a noncancellable license agreement with nonrefundable fees; the
Company has shipped the software product; there are no uncertainties surrounding
product acceptance; the fees are fixed and determinable; and collection is
considered probable. This policy applies both when the vertical application
license or the Universal Application development licenses are sold separately or
when a Universal Application development license is sold with an application
development project. License fees recognized upon achieving these criteria, for
the three months ended June 30, 2001 were $1.2 million as compared to $4.3
million for the three months ended June 30, 2000. License fees recognized upon
achieving these criteria, for the six months ended June 30, 2001 were $1.2
million as compared to $4.8 million for the six months ended June 30, 2000.
Services relating to the Universal Application development licenses only include
post contract customer support services. Services for vertical application
product licenses do not add significant functionality, features, or
significantly alter the software. In addition, similar services are available
from other vendors; there are no milestones or customer specific acceptance
criteria which affect the realizability of the software license fee; and the
software license fee is non-cancelable and non-refundable.

     For software arrangements that include a service element that is considered
essential to the functionality of the software, the Company recognizes license
fees related to the application, and the application development service fees,
over time as the Company performs the services, using the percentage-of-
completion method of accounting and following the guidance in Statement of
Position ("SOP") 81-1, Accounting for Performance of Construction-Type and
Certain Production-Type Contracts. The Company makes adjustments, if necessary,
to the estimates used in the percentage-of-completion method of accounting as
work progresses under the contract and as the Company gains experience. For
presentation purposes within the Condensed Consolidated Statement of Operations,
fixed-price project revenues are split between license and service based upon
the relative fair value of the components.

     For certain projects, the Company limits revenue recognition in the period
to the amount of direct and indirect project costs incurred in the same period,
and postpones recognition of profits until results can be estimated more
precisely. At June 30, 2001, the Company is applying this "zero profit"
methodology to all fixed-price projects. The total project values for ongoing
projects at June 30, 2001 accounted for using the "zero profit" methodology is
approximately $31.4 million. Revenue recognized from projects on this "zero
profit" methodology during the three months ended June 30, 2001 was $16.5
million as compared to $(2.5) million during the three months ended June 30,
2000, while revenue recognized from these projects during the six months ended
June 30, 2001 was $20.9 million as compared to $631,000 during the six months
ended June 30, 2000. Revenue recognized during the three months ended June 30,
2001 on the "zero profit"
                                       7
<PAGE>

methodology for ongoing projects was $2.6 million with equal amounts of cost;
while revenue recognized on completed projects during the same period was $13.9
million including profits recognized upon completion of the related project or
termination of remaining project obligations, with $702,000 of corresponding
costs.

     For time-and-material contracts, the Company generally estimates a profit
range and recognizes the related revenue using the lowest level of profit in the
estimated range. Billings in excess of revenue recognized under time-and-
material contracts are deferred and recognized upon completion of the time-and-
material contract or when the results can be estimated more precisely.

     The Company recognizes support revenue from contracts for ongoing technical
support and product updates ratably over the support period. The Company
recognizes training revenue as it performs the services.

     The Company records billings and cash received in excess of revenue earned
as deferred revenue. The Company's deferred revenue balance at June 30, 2001 was
$17.9 million. The Company's deferred revenue balance generally results from
contractual commitments made by customers to pay amounts to the Company in
advance of revenues earned, and from application of the "zero profit" margin
methodology described above. The Company's unbilled accounts receivable
represents revenue that the Company has earned but which the Company has not yet
billed. The Company bills customers as payments become due under the terms of
the customer's contract. The Company considers current information and events
regarding its customers and their contracts and establishes allowances for
doubtful accounts when it is probable that the Company will be unable to collect
amounts due under the terms of existing contracts.


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):

<TABLE>
<CAPTION>
                                                              Three Months Ended             Six Months Ended
                                                                   June 30,                      June 30,
                                                          ---------------------------  ---------------------------
                                                               2001         2000             2001         2000
                                                          ------------- -------------  --------------  -----------
<S>                                                       <C>             <C>           <C>             <C>
Numerator:
   Numerator for basic earnings (loss) per share - net
    income (loss) available to common stockholders......  $       1,657   $   (6,479)   $      (3,541)  $   (4,342)
                                                          =============   ==========    =============   ==========
   Assumed dilution related to subsidiaries'
    earnings applicable to minority stockholders........             --          (23)              --          (66)
                                                          -------------   ----------    -------------   ----------

 Numerator for diluted earnings (loss) per share........  $       1,657   $   (6,502)   $      (3,541)  $   (4,408)
                                                          =============   ==========    =============   ==========

Denominator:
    Denominator for basic earnings (loss) per share -
     weighted average shares............................         35,511       34,392           35,459       34,215
                                                          =============   ==========    =============   ==========

    Employee stock options..............................          1,597           --               --           --
                                                          -------------   ----------    -------------   ----------
    Denominator for diluted earnings (loss) per share...         37,108       34,392           35,459       34,215
                                                          =============   ==========    =============   ==========

Earnings (loss) per common share:
    Basic earnings (loss) per common share..............  $        0.05   $    (0.19)   $       (0.10)  $    (0.13)
                                                          =============   ==========    =============   ==========
    Diluted earnings (loss) per common share............  $        0.04   $    (0.19)   $       (0.10)  $    (0.13)
                                                          =============   ==========    =============   ==========
</TABLE>

     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

                                       8
<PAGE>

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. Employee stock options of 7,808,000 and 7,286,000 outstanding
during the three and six months ended June 30, 2000, 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.

     Warrants to purchase 1,181,600 shares of common stock in a wholly-owned
subsidiary outstanding during the three and six months ended June 30, 2001 and
2000 that could potentially dilute basic earnings per share were not included in
the computation of diluted earnings per share because to do so would have been
anti-dilutive.

4.   Cash Equivalents

Cash equivalents include all highly liquid investments purchased with remaining
maturities of three or fewer months. Cash equivalents are recorded at cost,
which approximates fair value, and consist primarily of investments in money
market mutual funds, commercial paper, auction rate money market preferred stock
investments, and taxable and non-taxable municipal bonds and notes.

5.   Restricted Cash

     Restricted cash relates to $3.5 million to collateralize letters of credit
that secure the Company's office facilities in Chicago and San Francisco; $2.9
million held in an escrow account as part of the Company's agreement with
Linedata Services related to the sale of The LongView Group, Inc.; $2.1 million
held in an escrow account to secure a lease on office space in South Jordan,
Utah; and $380,000 held in the Company's cash accounts to secure letters of
credit used to secure leases on office space in Atlanta, Georgia and Dallas,
Texas.

6.   Comprehensive Income (Loss)

     The Company 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 income (loss) for the three
and six months ended June 30, 2001 and 2000, ignoring the insignificant impact
of taxes on foreign currency translation, were as follows (in thousands):

<TABLE>
<CAPTION>
                                                               Three Months Ended           Six Months Ended
                                                                    June 30,                    June 30,
                                                          ---------------------------   -------------------------
                                                               2001          2000           2001         2000
                                                          -------------  ------------   ------------   ----------
<S>                                                       <C>           <C>            <C>            <C>
Net income (loss) ..................................       $     1,657   $    (6,479)   $   (3,541)    $ (4,342)

Foreign currency translation .......................                (3)         (176)          189         (276)
                                                           -----------   -----------    ----------     --------

Comprehensive income (loss) ........................       $     1,654   $    (6,655)   $   (3,352)    $ (4,618)
                                                           ===========   ===========    ==========     ========
</TABLE>

7.   Income Taxes

     The provision for income taxes for the three months ended June 30, 2001
relates primarily to foreign taxes. The provision for income taxes for the six
months ended June 30, 2001 includes income taxes on the gain from the sale of
The LongView Group, Inc., foreign taxes, and an adjustment to record a valuation
allowance against all net deferred tax assets. No deferred tax benefit was
recorded during the three or six months ended June 30, 2001 for the Company's
net operating loss carryovers.

                                       9
<PAGE>

     The valuation allowance recorded during the six months ended June 30, 2001
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. Based on a number of
factors, the currently available, objective evidence indicates that it is more
likely than not that the Company's net deferred tax assets will not be realized.

8.   Commitments

     The Company has commitments under long-term operating leases, principally
 for office space and computer equipment. Future minimum lease payments under
 non-cancelable operating lease obligations, in excess of one year, at June 30,
 2001 are as follows (in thousands):

           Year                                                    Amount
           ----                                                 ---------
           Q3-Q4, 2001                                          $    3,627
           2002                                                      9,187
           2003                                                      7,861
           2004                                                      7,608
           2005                                                      7,894
           Thereafter                                               26,960
                                                                ----------
           Total minimum lease commitments                      $   63,137
                                                                =========

     During the three and six months ended June 30, 2001, the Company subleased
a portion of its office space in San Francisco for sublease amounts in excess of
the Company's contractual lease commitment. During the three months ended June
30, 2001, the Company received sublease payments of $582,000 of which $512,000
was recorded as an offset to operating expenses, and $70,000 was recorded as
other income in the Condensed Consolidated Statements of Operations for the
three months ended June 30, 2001. During the six months ended June 30, 2001, the
Company received sublease payments of $1.7 million of which $1.1 million was
recorded as an offset to operating expenses, and $413,000 was recorded as a
prepayment for future periods. The remaining $154,000 was recorded as other
income in the Condensed Consolidated Statements of Operations for the six months
ended June 30, 2001.

     During the year ended December 31, 2000 and the six months ended June 30,
2001, the Company received prepayments on certain sublease agreements, which the
Company recorded as other current liabilities and other long-term liabilities.
At June 30, 2001, the balance of these prepayments was $2.1 million in current
liabilities and $466,000 in long-term liabilities.

     The table of future minimum lease payments above has not been reduced by
future minimum rentals due under subleases of $604,000 for the remainder of 2001
and $493,000 for 2002.

     In May of 2000, the Company signed a 10-year lease for approximately
170,000 square feet of office space in South Jordan, Utah. This lease is part of
a development project. The lease, without any modification to the development
project, commences upon completion of construction and the Company's subsequent
occupancy of the office space, which is estimated to occur in late 2001 or early
2002. It is expected that this lease will be an operating lease. In December of
2000, the Company negotiated an agreement with the developer of the project to
reduce its commitments under this lease obligation by 65,431 square feet. During
the six months ended June 30, 2001, the Company began pursuing options to reduce
this commitment further, including the possible sublease of a significant
portion of this space. As of the date of these financial statements, the Company
continues to negotiate a reduction to this commitment. The future minimum lease
payments under the modified lease are included in the table above.

     The Company currently leases approximately 22,000 square feet in Chicago,
Illinois. As part of this lease agreement, the Company is obligated to expand
its leased space in this facility by

                                       10
<PAGE>

approximately 44,000 square feet beginning October 1, 2001. The minimum lease
payments associated with this obligation are included in the table above. As of
the date of these financial statements, the Company is in the process of
renegotiating this requirement.

     In March 2001, the Company announced plans to close its offices in Atlanta,
Georgia; Irving, Texas; Foster City, California; and Raleigh, North Carolina.
See Note 10 for additional information. The table of future minimum lease
payments above includes payments of approximately $8.6 million for facilities
closed as part of the Company's restructuring activities in the fourth quarter
of 2000, and the first and second quarters of 2001.

     The Company did not incur any additional capital lease obligations during
the six months ended June 30, 2001.

9.   Legal Proceedings and Contingencies

Recently Resolved Customer Disputes

     During the six months ended June 30, 2001, the Company has settled five of
its customer disputes.

     Westfield

     On September 17, 1999, Ohio Farmers Insurance Company doing business as
Westfield Companies ("Westfield"), filed a complaint in the United States
District Court for the District of Ohio seeking $5.8 million from the Company.
The complaint alleged that the Company failed to deliver on contractual
commitments under a license agreement with Westfield and included specific
claims of anticipatory breach of contract, breach of express warranty, and
negligent misrepresentation. The $5.8 million sought from the Company by
Westfield was paid to the Company by Westfield in the first half of 1999 and was
recognized as revenue by the Company during that period. On November 4, 1999,
the Company filed an Answer and Counterclaim denying these allegations and
seeking recovery of $3.9 million that Westfield owed the Company under the
license agreement together with claims for additional damages. Effective April
26, 2001, the parties entered into a Settlement Agreement and Mutual Release in
which the parties agreed to settle and resolve all claims between the two
companies in consideration for each dismissing all claims against the other and
in further consideration of a compromised and confidential payment from the
Company's errors and omissions carrier to Westfield in excess of the self-
insured retention of $25,000 already paid by the Company to cover legal defense
costs. The complaint and counterclaim have been dismissed and all claims have
been released.

     Nielsen

     On June 14, 2000, Nielsen Media Research, Inc. ("Nielsen"), filed a
complaint in the Circuit Court of Cook County, Illinois seeking $4.5 million,
plus out of pocket expenses paid by Nielsen to the Company. The complaint
alleged that the Company failed to deliver on contractual commitments under a
license and services agreement with Nielsen and included specific claims of
breach of contract and violation of the Illinois Consumer Fraud and Deceptive
Practices Act. On August 30, 2000, the Company filed an Answer and Counterclaim
denying Nielsen's claims and seeking recovery of at least $1.7 million that
Nielsen owed the Company under the license agreement, plus the Company's
attorney fees and costs. Effective May 30, 2001, the parties entered into a
Settlement Agreement and Mutual Release in which the parties agreed to settle
and resolve all claims between the two companies in consideration for each
dismissing all claims against the other and in further consideration of a
compromised and confidential payment from the Company's errors and omissions
carrier to Nielsen in excess of the Company's self-insured retention of $100,000
already paid by the Company to cover legal defense costs. The complaint and
counterclaim have been dismissed and all claims have been released.

                                       11
<PAGE>

     Trumbull

     On August 18, 2000, Trumbull Services, L.L.C. ("Trumbull"), filed a demand
for arbitration with the American Arbitration Association seeking a refund of at
least $2.8 million paid by Trumbull to the Company. The demand alleged that the
Company failed to deliver on contractual commitments under the Master Software
License and Service Agreement, (the "Trumbull Agreement"), as amended. Trumbull
claimed it was entitled to a refund of fees paid to the Company from the second
quarter of 1999 through the second quarter of 2000. On September 13, 2000, the
Company filed an Answer and Counterclaim denying Trumbull's allegations and
seeking recovery of approximately $2.0 million in fees that Trumbull owed the
Company under the Trumbull Agreement. On May 10, 2001, TenFold and Trumbull
entered into a Settlement Agreement and Mutual Release in which the parties
agreed to settle and resolve all claims between the two companies in
consideration for each dismissing all claims against the other and in further
consideration of a compromised and confidential payment from the Company's
errors and omissions carrier to Trumbull in excess of the self-insured retention
of $100,000. The arbitration proceeding has been cancelled and all claims have
been released.

     Unitrin

     On October 4, 2000, Unitrin Services Company, Inc. ("Unitrin"), sent the
Company a notice of dispute letter requesting non-binding mediation. Unitrin was
seeking a refund of fees paid by Unitrin to the Company for the PowerPAC
application of approximately $13.3 million, plus other unspecified damages.
Settlement negotiations between the Company and Unitrin continued and on March
8, 2001, the parties entered a Confidential Settlement Agreement and Release,
dismissing all of Unitrin's claims. The Company's errors and omissions insurance
carrier paid the entire amount of the compromised and confidential settlement
sum above the $100,000 of self-insurance retention already paid by the Company
to cover legal defense costs.

     Other

     On April 4, 2001, the Company received a letter from another customer
alleging that the Company had materially breached its contract with that
customer. On May 2, 2001, the Company entered a Termination and Settlement
Agreement with this customer under which the customer agreed to pay the Company
a compromised and confidential settlement amount for services the Company has
provided to this customer. As a result of the Termination and Settlement
Agreement, the Company recognized $2.2 million in revenues from this customer
during the three months ended June 30, 2001 and recognized no revenue from this
customer for the same period in 2000. The Company recognized $2.9 million in
revenues from this customer during the six months ended June 30, 2001 and
recognized no revenue from this customer for the same period in 2000. The $2.2
million revenue recognized during the three months ended June 30, 2001,
represented existing deferred profits on the contract.

Unresolved Customer Disputes

     Although the Company has settled five of its customer disputes, the Company
has four unresolved customer disputes.

     Utica

     On November 9, 2000, Utica Mutual Insurance Company ("Utica"), notified the
Company of its intent to terminate the Software License and Services Agreement
("Utica Agreement") dated November 2, 1998. On December 15, 2000, Utica sent a
letter to the Company proposing that the parties rescind the contract, that the
Company refund all payments made by Utica, and that the Company compensate Utica
for the expenses Utica allegedly incurred in fulfilling its contractual duties.
On December 20, 2000, Utica provided the Company with statutorily required
notice of alleged violations of Utah's Truth in Advertising statute. On January
3, 2001, Utica filed a

                                       12
<PAGE>

complaint against the Company in the Federal District Court of Utah. In its
complaint, Utica asserts claims for breach of contract, breach of warranties and
guarantees, false advertising under a Utah statute, negligent misrepresentation,
and fraud. Utica seeks monetary damages of approximately $15.5 million in fees
and expenses under the contract, plus any additional amount recoverable under
the contractual guarantee, as well as punitive damages, prejudgment interest,
attorneys' fees, and costs. Utica also seeks an injunction against alleged false
advertising by TenFold under a Utah truth-in-advertising statute. On January 23,
2001, the Company filed an Answer denying Utica's claims. On February 27, 2001,
Utica filed a motion for partial summary judgment on its breach of contract
claim seeking an order of rescission. On March 29, 2001, the Company filed its
opposition to Utica's motion for partial summary judgement. On May 1, 2001, the
court heard argument and denied Utica's motion for partial summary judgment,
finding no basis for rescission of the contract. However, the court also made a
finding that the Company had failed to deliver the software application within
the time allowed under the amended contract. A hearing was held on June 15, 2001
to discuss the form of the Order to be used by the court to reflect the denial
of Utica's motion, while preserving the finding of breach for non-delivery. The
court has the matter under advisement.

     Discovery is ongoing and the Company's outside legal counsel continues to
investigate the relevant legal and factual issues. As of June 30, 2001, of the
fees paid by Utica, $1.7 million has not been recognized as revenue and is
included in accrued liabilities together with an accrued loss amount of $582,000
which the Company established during the quarters ended June 30, 2000 and
September 30, 2000 in the normal course of performing its
percentage-of-completion calculations.

     The total revenues recognized by the Company from the Utica Agreement from
November 2, 1998 through June 30, 2001, were $7.6 million. Of this amount, $3.9
million is not subject to the terms of the limited guarantee. The Company
recognized no revenue from the Utica Agreement for the three months ended June
30, 2001, and recognized negative $2.7 million during the same period of 2000.
The Company recognized no revenue from the Utica Agreement for the six months
ended June 30, 2001, and recognized negative $1.6 million during the same period
of 2000.

     Although this matter is still in the early stages of litigation, it is
probable, based on the court's factual finding of breach, that the Company will
suffer a loss on Utica's claims that the Company failed to deliver the software
application within the time allowed under the contract. The Company believes
that the Company's errors and omissions insurance covers damages that may arise
out of Utica's claims that the Company failed to deliver the software
application within the time allowed under the contract, as well as covering the
costs of legal defense, subject to the policies' total limit, and the insurance
carrier's standard reservation of rights. The Company's insurance carrier has
authorized a settlement offer that has been communicated to Utica. If necessary,
the Company will vigorously assert its rights under the Utica Agreement and
defend against Utica's claims. An unfavorable outcome of this matter may have a
material adverse impact on the Company's business, results of operations,
financial position, or liquidity.

     SCEM

     On November 2, 2000, the Company received notice of intent to terminate the
Master Software Licenses and Service Agreement (the "SCEM Agreement") between
the Company and Southern Company Energy Marketing L.P. ("SCEM") due to an
alleged material nonperformance by the Company. SCEM filed a demand for
arbitration with the American Arbitration Association on November 22, 2000
seeking damages for delays in delivering a suite of software applications. The
Company responded in a timely manner to the demand denying that the Company
breached the contract and filed detailed Counterclaims including a breach of
contract claim against SCEM for improper and ineffective termination of the
contract and nonpayment. An arbitration hearing was conducted in Dallas, Texas
during the week of June 18, 2001. SCEM sought damages from the Company of
approximately $10.5 million, while the Company sought recovery of approximately
$6.8 million from SCEM. The arbitrator has until August 23, 2001 to rule on the
parties' claims. Total revenue recognized by the Company during the second
quarter of 1999 through the first quarter


                                       13
<PAGE>

of 2001 was $11.5 million. For the three months ended June 30, 2001, the Company
recognized no revenue from SCEM and recognized $1.6 million from SCEM during the
same period in 2000. The Company recognized no revenue from the SCEM Agreement
for the six months ended June 30, 2001, and recognized $4.5 million during the
same period of 2000.

     It is not possible to predict the outcome of the arbitration proceeding at
this juncture. An unfavorable outcome of this matter may have a material adverse
impact on the Company's business, results of operations, financial position, or
liquidity.

     Crawford

     On December 14, 2000, Crawford & Company ("Crawford") sent a letter to the
Company purporting to give notice of breach under the terms of the Master
Software License and Services Agreement between the Company and Crawford (the
"Crawford Agreement"). Crawford's letter also purports to give notice of
Crawford's election to terminate the Crawford Agreement. Crawford's letter
asserts that the Company failed to deliver the NIMBUS software application
within the agreed schedule for doing so. Although Crawford has not filed a
formal complaint or made a formal demand for arbitration, Crawford is demanding
refund of all fees paid by Crawford under the Crawford Agreement, plus a
performance penalty of $2.0 million. The Crawford Agreement provides that, in
the event of a dispute, the parties must follow a dispute resolution procedure
consisting initially of a three-tiered negotiation process by which settlement
negotiations are elevated to increasingly higher levels of management for 90
days before either party makes a demand for arbitration. The parties met on
January 25, 2001 in the second tier of settlement negotiations. The parties were
unable to reach agreement and exchanged correspondence confirming the topics
discussed at the meeting. The Company is waiting for Crawford to initiate the
third tier of negotiations. The Crawford Agreement further provides that if
resolution is not achieved within the 90-day period, the dispute shall be
determined by binding arbitration upon the initiation of either party. Neither
party has demanded arbitration. For the three months ended June 30, 2001, the
Company recognized no revenue from Crawford and recognized $1.1 million in
revenues from Crawford during the same period in 2000. The Company recognized no
revenue from the Crawford Agreement for the six months ended June 30, 2001, and
recognized $2.1 million during the same period of 2000.

     The Company does not believe that the Company materially breached the
Crawford Agreement. Should Crawford persist in its attempt to terminate the
Crawford Agreement, the Company will vigorously assert its rights under the
Crawford Agreement and defend against Crawford's claims, including recovery of
the amounts that Crawford owes the Company and the remaining amounts due under
the Crawford Agreement totaling at least $1.8 million. An unfavorable outcome of
this matter may have a material adverse impact on the Company's business,
results of operations, financial position, or liquidity.

     SkyTel

     In March 2001, SkyTel Communications, Inc. ("SkyTel") orally informed the
Company of its intent to terminate the Master Software License and Services
Agreement between SkyTel and the Company (the "SkyTel Agreement"). On May 15,
2001, SkyTel sent the Company a letter purporting to terminate the SkyTel
Agreement based on the Company's alleged material breach of the SkyTel
Agreement. SkyTel's letter also demands a refund of approximately $11 million
paid by SkyTel under the SkyTel Agreement. The matter is in its preliminary
stages, and based on the information currently available, the Company will
vigorously assert its rights under the agreement and defend against the
customer's claims, including payment of the amounts that the customer owes the
Company and the remaining amounts due under the agreement totaling at least $
6.2 million. While the Company believe that this potential dispute will be
covered by one of the Company's prior errors and omissions and umbrella
liability policies, if the alleged error or omission did occur, the Company
would need to show that it occurred during the coverage period of the prior
policy. The total contract value of this potentially material customer dispute
is

                                       14
<PAGE>

approximately $17.6 million, of which $11.4 million has been received by the
Company to date. An unfavorable outcome of this matter may have a material
adverse impact on the Company's business, results of operations, financial
position, or liquidity.

     As a result of the legal proceedings and contingencies noted above, the
Company have provided an allowance for doubtful accounts of $1.7 million related
to billed accounts receivable and $1.8 million related to unbilled accounts
receivable at June 30, 2001.

     The Company maintained errors and omissions and umbrella liability
insurance coverage to protect itself in the event of claims for damages related
to the performance of or failure to perform computer-related services that
occurred after March 1, 1998 but prior to March 1, 2001. The Company believes
that this insurance covers the types of alleged damages (but not unpaid or
unbilled accounts receivable) that may be claimed in the legal cases and
customer disputes noted above, as well as covering the costs of legal defense,
subject to the policies' total limit, and the insurance carrier's stated
reservation of rights regarding conditions or findings that might exclude
coverage for a particular matter. The Company has reserved against certain of
the billed and unbilled accounts receivable related to these disputed amounts
for which a loss is considered probable. An unfavorable outcome or claim not
covered by an insurance policy on one or more of these matters may have a
material adverse impact on the Company's business, results of operations,
financial position, or liquidity.

     On November 18, 2000, the Company's excess errors and omissions policy
expired. On March 1, 2001, the Company's primary errors and omissions policy
expired. On March 1, 2001, the Company secured a new, industry standard, errors
and omissions policy that covers claims made after March 1, 2001. The Company'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. The Company believes this policy provides adequate
coverage for potential damages related to errors and omissions in its delivered
software.

     The Company may in the future face other litigation or disputes with
customers, employees, partners, stockholders, or other third parties. Such
litigation or disputes could result in substantial costs and diversion of
resources that would harm the Company's business. An unfavorable outcome of
these matters may have a material adverse impact on the Company's business,
results of operations, financial position, or liquidity.

Stockholder Matters

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

     On October 30, 2000, the Company's motion to consolidate the six complaints
into one class action complaint was granted. On March 7, 2001, the court
appointed lead plaintiffs and lead class counsel. On May 1, 2001, the plaintiffs
filed an amended consolidated complaint that repeats their earlier allegations
while adding additional details regarding the projects on which revenue was
allegedly improperly recognized. The Company filed a motion to dismiss the
amended complaint on June 19, 2001.

     Management and outside legal counsel believe that the defendants have
meritorious defenses to the allegations made in these lawsuits. Because the
matter is in its preliminary stages, the Company's outside legal counsel is not
able to provide an opinion on the probable outcome of the claim and therefore,
no provision for loss has been recorded in the Company's Condensed

                                       15
<PAGE>

Consolidated Financial Statements. Although the Company carries directors and
officers liability insurance that the Company believes is sufficient for such
class action claims, the Company intends to vigorously defend itself and the
Company denies any wrongdoing. An unfavorable outcome of this matter may have a
material adverse impact on the Company's business, results of operations,
financial position, or liquidity.

SEC Inquiry

     On May 26, 2000, the United States Securities and Exchange Commission
("SEC") issued a Formal Order Directing Private Investigation. The Order
contains no specific factual allegations. The Company understands, however, that
the SEC is conducting a non-public fact-finding inquiry into the Company's
revenue recognition decisions on approximately 15 contracts. The Company has
received several document subpoenas from the SEC and the Company has complied or
is in the process of complying with them. The Company has learned that the SEC
has issued subpoenas to the Company's independent auditors and to several of the
Company's current and former customers. In February 2001, the SEC took testimony
from the Company's former Chief Financial Officer. In March 2001, the SEC took
testimony from the Company's Senior Vice President of Applications Products and
the Company's former Senior Vice President, Sales and Marketing who was also the
President of TenFold Insurance, Inc.

     The inquiry is in its preliminary stages and the Company has retained
outside legal counsel to represent the Company concerning the investigation. The
SEC has a number of statutory remedies that it may use in both fraud and
non-fraud (books and records) enforcement proceedings. These remedies 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 the
Company and the its officers. Management and outside legal counsel believe that
the Company has meritorious defenses to any allegations the SEC may make and
intend to continue to cooperate fully with the SEC. However, because the inquiry
is in its preliminary stages, the Company's outside legal counsel is not able to
provide an opinion on the probable outcome of the inquiry. An unfavorable
outcome of this matter may have a material adverse impact on the Company's
business, results of operations, financial position, or liquidity.

10.  Special Charges

     Special charges for the six months ended June 30, 2001 include $3.7 million
in asset impairment charges, and $3.9 million in restructuring charges.

     Asset Impairment Charge. During the six months ended June 30, 2001, the
Company restructured operations to reduce operating expenses. As part of the
restructuring, the Company closed facilities in Atlanta, Georgia; Foster City,
California; Irving, Texas; and Raleigh, North Carolina, Park Ridge, New Jersey;
and Salt Lake City, Utah. The Company had $1.9 million of leasehold
improvements, furniture and fixtures, and other assets in these offices that it
determined had no future value to the Company and are no longer in active use.
In addition the Company determined that $1.3 million of computer equipment was
also similarly impaired as a result of these restructuring activities. The
Company also determined that it would not be able to sell its Marin County land
and building for the amount it had previously expected, and as a result the
Company recorded a further asset impairment charge of $481,000 on this asset.
Accordingly, the Company recorded asset impairment charges of $588,000 and $3.7
million for the three and six months ended June 30, 2001, respectively.

     Second Quarter 2001 Restructuring Charge. During the three months ended
June 30, 2001, the Company incurred a restructuring charge of $1.2 million as
part of its continuing efforts to reduce operating expenses. As part of this
restructuring, the Company decided to vacate a portion of its Salt Lake City,
Utah facilities, terminate its office lease expansion requirement in Chicago,
Illinois, vacate its office in Park Ridge, New Jersey, and reduce its workforce
by 70 individuals. The

                                       16
<PAGE>

restructuring charge was comprised of $300,000 for headcount reductions, and
$900,000 for facilities related costs. As of June 30, 2001 $233,000 had been
paid out on this restructuring accrual.

     The Company determined its restructuring charge in accordance with Emerging
Issues Task Force Issue No. 94-3 ("EITF 94-3") and Staff Accounting Bulletin No.
100 ("SAB 100"). EITF 94-3 and SAB 100 require that the Company commit to an
exit plan before it accrues employee termination costs and exit costs. Before
June 30, 2001, the Company's senior management prepared a detailed exit plan
that included the termination of 70 employees and the termination of certain
facilities leases. The Company is pursuing sublease or termination settlement
arrangements for these facilities.

     In connection with the restructuring actions, the Company terminated the
employment of 70 employees, consisting primarily of administrative employees and
applications development employees in various locations. All employees
associated with these restructuring actions were notified as of June 14, 2001.

     The Company expects to generate annualized savings of approximately $7.9
million ($0.22 per share) as a result of this restructuring in the following
areas: $4.0 million in reduced cost of revenues, $900,000 in reduced sales and
marketing expenses, $1.2 million in reduced research and development expenses,
and $1.8 in reduced general and administrative expenses.

     The second quarter restructuring reserves are included in accrued
liabilities at June 30, 2001. Detail of the restructuring charges as of and for
the three months ended June 30, 2001 are summarized below:

<TABLE>
<CAPTION>
  Second Quarter 2001 Restructuring                          Original                                         Balance at
               Actions:                                       Charge        Reversals        Utilized        June 30, 2001
---------------------------------------                    -----------     -------------    -----------    -----------------
<S>                                                       <C>           <C>               <C>            <C>
Employee related                                           $       340       $        --    $       208       $          132
Facilities related                                                 905                --             25                  880
                                                           -----------     -------------    -----------     ----------------
                                                           $     1,245       $        --    $       233       $        1,012
                                                           ===========     =============    ===========     ================

                                                             Original                                         Balance at
Balance Sheet Components:                                     Charge        Reversals        Utilized        June 30, 2001
---------------------------------------                    ------------    -------------    -----------    -----------------
Accrued liabilities                                        $     1,245       $        --    $       233       $        1,012
                                                           ------------    -------------    -----------    -----------------
                                                           $     1,245       $        --    $       233       $        1,012
                                                           ============    =============    ===========    =================
</TABLE>



     First Quarter 2001 Restructuring Charge. During the three months ended
March 31, 2001, the Company incurred a restructuring charge of $2.7 million as
part of its continuing efforts to reduce operating expenses. As part of this
restructuring, the Company closed offices in Atlanta, Georgia; Foster City,
California; Irving, Texas; and Raleigh, North Carolina, and reduced its
workforce by 38 individuals. The restructuring charge was comprised of $226,000
for headcount reductions, and $2.5 million for facilities related costs. As of
June 30, 2001 $978,000 had been paid out on this restructuring accrual.

     The Company determined its restructuring charge in accordance with EITF
94-3 and SAB 100. EITF 94-3 and SAB 100 require that the Company commit to an
exit plan before it accrues employee termination costs and exit costs. On March
15, 2001, the Company's senior management prepared a detailed exit plan that
included the termination of 38 employees and closure of certain facilities.

     In connection with the restructuring actions, the Company terminated the
employment of 38 employees, consisting primarily of applications development
employees, technical and other support employees, and administrative employees
in all of its locations. All employees associated with these restructuring
actions were notified as of March 31, 2001. At March 31, 2001 the

                                       17
<PAGE>

Company had exited facilities in Atlanta, Georgia; Foster City, California;
Irving, Texas; and Raleigh, North Carolina. As of the date of these financial
statements, the Company has terminated the Atlanta, Georgia lease, and is
pursuing sublease arrangements for the other facilities.

     The Company expects to generate annualized savings of approximately $9
million ($0.26 per share) as a result of this restructuring in the following
areas: $5 million in reduced cost of revenues, $200,000 in reduced sales and
marketing expenses, $3 million in reduced research and development expenses, and
$500,000 in reduced general and administrative expenses.

     The first quarter restructuring reserves are included in accrued
liabilities at June 30, 2001. Detail of the restructuring charges as of and for
the six months ended June 30, 2001 are summarized below:

<TABLE>
<CAPTION>
   First Quarter 2001 Restructuring                        Original                                          Balance at
               Actions:                                     Charge         Reversals       Utilized         June 30, 2001
---------------------------------------                   -----------    -------------    -----------    -------------------
<S>                                                     <C>             <C>             <C>            <C>
Employee related                                          $       226    $          --    $       223    $                 3
Facilities related                                              2,465               --            755                  1,710
                                                          -----------    -------------    -----------    -------------------
                                                          $     2,691    $          --    $       978    $             1,713
                                                          ===========    =============    ===========    ===================

                                                            Original                                         Balance at
Balance Sheet Components:                                    Charge         Reversals      Utilized         June 30, 2001
---------------------------------------                   -----------    -------------    -----------    -------------------
Accrued liabilities                                       $     2,675    $          --    $       962    $             1,713
Accounts payable                                                   16               --             16                     --
                                                          -----------    -------------    -----------    -------------------
                                                          $     2,691    $          --    $       978    $             1,713
                                                          ===========    =============    ===========    ===================
</TABLE>

     Fourth Quarter 2000 Restructuring Charge. During the three months ended
December 31, 2000, the Company incurred a restructuring charge of $1.9 million
as part of a plan to improve operating results by reducing headcount, by closing
duplicative Company facilities in Chicago, Illinois; Dallas, Texas; Salt Lake
City, Utah; and San Francisco, California, and by implementing other measures.
This charge is part of a plan to streamline the Company's efforts to focus on a
return to profitability. The restructuring charge was comprised of $1.1 million
for headcount reductions, and $861,000 for facilities related costs including
penalties associated with the reduction of lease commitments and future lease
payments. As of June 30, 2001 approximately $1.8 million had been paid out on
the restructuring charge.

     The Company determined its restructuring charge in accordance with EITF
94-3 SAB 100. EITF 94-3 and SAB 100 require that the Company commit to an exit
plan before it accrues employee termination costs and exit costs. On November
14, 2000, the Company's senior management prepared a detailed exit plan that
included the termination of 159 employees and closure of certain facilities.

     In connection with the restructuring actions, the Company terminated the
employment of 159 employees, consisting primarily of applications development
employees, technical and other support employees, and administrative employees
in all of its locations. In addition, the Company did not replace approximately
40 employees who resigned voluntarily during October and November 2000. At
December 31, 2000, the Company had terminated all employees associated with
these restructuring actions. As of June 30, 2001, the Company exited a portion
of its facility in Salt Lake City, Utah; exited duplicative offices in Chicago,
Illinois and Dallas, Texas; and terminated a duplicative office lease in San
Francisco, California. The Company has entered into sublease arrangements for
its Dallas, Texas and Chicago, Illinois office space.

     The Company expects to generate annualized savings of approximately $40
million ($1.11 per share) from this restructuring, in the following areas: $30
million in reduced cost of revenues, $3 million in reduced sales and marketing
expenses, $4 million in reduced research and development expenses, and $3
million in reduced general and administrative expenses.

                                       18
<PAGE>

     Restructuring reserves are included in accrued liabilities at June 30,
2001.

<TABLE>
<CAPTION>
    Fourth Quarter 2000                                      Balance at                                              Balance at
   Restructuring Actions:                                December 31, 2000        Reversals        Utilized         June 30, 2001
-----------------------------                           ---------------------    -------------    -----------    -------------------
<S>                                                    <C>                      <C>              <C>            <C>
Employee related                                        $                 141    $          --    $       141    $                --
Facilities related                                                        321               --            170                    151
                                                        ---------------------    -------------    -----------    -------------------
                                                        $                 462    $          --    $       311    $               151
                                                        =====================    =============    ===========    ===================
Balance Sheet                                                Balance at                                              Balance at
Components:                                              December 31, 2000        Reversals        Utilized         June 30, 2001
-----------------------------                           ---------------------    -------------    -----------    -------------------
Accrued liabilities                                     $                 321    $          --    $       170    $               151
Accounts payable                                                          141               --            141                     --
                                                        ---------------------    -------------    -----------    -------------------
                                                        $                 462    $          --    $       311    $               151
                                                        =====================    =============    ===========    ===================
</TABLE>

11.  Operating Segments

     The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 131, Disclosure About Segments of an Enterprise and Related
Information ("SFAS No. 131"). SFAS No. 131 establishes standards for the
reporting by public business enterprises of information about operating
segments, products and services, geographic areas, and major customers. The
method for determining what information to report is based on the way that
management organizes the operating segments within the Company for making
operating decisions and assessing financial performance. The Company's chief
operating decision-maker is considered to be the Company's CEO.

     In the fourth quarter of 1999, the Company implemented a vertical business
strategy. This vertical business strategy involved segmenting the Company's
business along industry lines, through the creation of separate subsidiaries,
and having these subsidiaries evolve into separate operating companies. During
the year ended December 31, 2000, the CEO reviewed financial information
presented on a consolidated basis accompanied by disaggregated information about
revenues by Vertical Business Group for purposes of making operating decisions
and assessing financial performance. Beginning in 2001, the Company's CEO
reviews the Company's financial information on a consolidated basis only. The
consolidated financial information reviewed by the CEO for the three and six
months ended June 30, 2001 are identical to the information presented in the
accompanying consolidated statements of operations. Therefore, the Company
operates in a single operating segment, which is applications products and
services.

     Revenues from operations outside of North America were approximately 32
percent of total revenues for the three months ended June 30, 2001 as compared
to 12 percent of total revenues for the same period in 2000 while revenues from
operations outside of North America were approximately 29 percent of total
revenues for the six months ended June 30, 2001 as compared to 11 percent during
the same period in 2000. The Company's long-lived assets continue to be deployed
predominantly in the United States.

     Three customers accounted for 41 percent, 21 percent, and 10 percent of the
Company's total revenues for the three months ended June 30, 2001, as compared
to three customers accounting for 15 percent, 12 percent, and 12 percent of the
Company's total revenues for the same period in 2000. No other single customer
accounted for more than 10 percent of the Company's total revenues for the three
months ended June 30, 2001 or the same period in 2000. Three customers accounted
for 30 percent, 18 percent, and 10 percent of the Company's total revenue during
the six months ended June 30, 2001 as compared to three customers accounting for
19 percent, 11 percent, and 10 percent of the Company's revenues for the same
period in 2000. No other single customer accounted for more than 10 percent of
the Company's total revenues for the six months ended June 30, 2001 or the same
period in 2000.

                                       19
<PAGE>

12. Acquisition and Disposition

    On September 30, 1999, the Company entered into a Stock Purchase Agreement
("Agreement") with Barclays California Corporation ("BarCal") whereby the
Company purchased the entire equity interest of BarCal in its wholly owned
subsidiary, The LongView Group, Inc. ("LongView"). On October 7, 1999, the
acquisition was closed. On March 15, 2001, the Company 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 the
Company since the acquisition through March 15, 2001. The Condensed Consolidated
Statement of Operations for the six months ended June 30, 2001 includes revenues
of approximately $3.4 million and net income of approximately $370,000 related
to the operations of LongView. The acquisition was accounted for using the
purchase method of accounting.

    On March 15, 2001, Argenesis Corporation ("Argenesis"), a wholly owned
subsidiary of the Company entered into a LongView Purchase Agreement
("Agreement") with Linedata Services ("Linedata") whereby Argenesis sold its
entire equity interest in its wholly-owned subsidiary, The LongView Group, Inc.
("LongView"). The transaction closed on March 15, 2001. Beginning March 15,
2001, the financial results of the Company exclude the operating results of
LongView.

    Pursuant to the Agreement, Argenesis sold to Linedata all of the issued and
outstanding capital stock (and any other equity interests) of LongView for $29.0
million in cash proceeds and recognized a gain of approximately $13.8 million.
In connection with this Agreement, the Company deposited $2.9 million in an
interest bearing escrow account to be used for settlement of indemnified claims
that may arise over the eighteen months following sale, and which is included in
restricted cash on the Condensed Consolidated Balance Sheet at June 30, 2001.
The Company also incurred a state income tax liability of approximately $1.5
million on the sale.

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


                                                                  Amount
                                                              --------------
       Total purchase price.....................                     $29,000
            Less costs associated with sale.....                        (885)
                                                              --------------
       Net proceeds from sale...................                      28,115
       Net book value of subsidiary.............
            Current assets......................  $ (1,455)
            Long-term assets....................   (21,441)
            Current liabilities.................     5,745
            Long-term liabilities...............     2,807
                                                  --------------------------
                                                                     (14,344)
                                                              --------------
       Gain on sale.............................                     $13,771
                                                              ==============


13. Subsidiary Stock Plans

    During 1999, the Company formed six subsidiaries in each of which the
Company holds 20,000,000 issued and outstanding shares of common stock.

    Each of the six subsidiaries formed during 1999, with approval of its
respective Board of Directors, adopted its own stock plan during 1999. The terms
of the plans are similar to the Company's 1999 Stock Plan. A total of 3,740,000
shares of common stock of each subsidiary has been reserved under the Stock
Plans for each of the six subsidiaries. The Company accounts for the sale of
common stock in the Company's subsidiaries as an equity transaction.

    The stock underlying each subsidiary option grant is Class A common stock of
the subsidiary. The Company currently holds 10,000,000 shares of Class A common
stock in each subsidiary.

                                       20
<PAGE>

Each subsidiary also has a Class B common stock which is similar to the Class A
common stock, except that the Class B common stockholders as a class are
entitled to elect 80 percent of the subsidiary's directors. The Company
currently holds 100 percent of the Class B common stock authorized and issued by
each of the subsidiaries, or 10,000,0000 shares. The Company has no current
intent to dispose of its Class A and Class B ownership interests in any
subsidiary.

    The subsidiary common stock is not convertible into Company stock. Employees
can sell or transfer the subsidiary common stock, subject to applicable
securities laws and the subsidiary's right of first refusal on any bona-fide
offer to purchase such stock that the employee receives from a third-party.
Exercise of the subsidiary's right of first refusal is at the subsidiary's
choice. The right of first refusal terminates upon the public registration of
the subsidiary's stock. Neither the Company nor any subsidiary is required to
purchase these shares if the employee terminates employment.

    Each subsidiary's Board of Directors determines the fair market value for
its stock at the date of option grant based upon its knowledge of the
subsidiary's financial condition, prospects, success in the marketplace, counsel
from their professional advisors such as outside counsel or independent
appraisers, and other factors.

    The Company has not issued any options to purchase common stock in its
horizontal subsidiary, TenFold Technology, Inc.

    One employee, who is no longer with the Company, exercised stock options for
the purchase of 200,000 shares at a purchase price of $4.80 per share in the
Company's insurance subsidiary during the three months ended March 31, 2000. No
compensation expense has been provided for this option exercise as the exercise
price was equivalent to the estimated fair market value of the insurance
subsidiary stock at the date of grant. The insurance subsidiary provides large-
scale e-business applications for leading customers in the insurance industry.
In connection with this option exercise, the Company loaned the employee
$960,000. During the three months ended December 31, 2000, the Company
established an allowance against this note. As of June 30, 2001, the related
minority interest has been reduced to zero due to net operating losses incurred
subsequent to the exercise of the stock options. During the three months ended
June 30, 2001, the employee resigned from the subsidiary and agreed to transfer
the shares back to the Company; and the Company agreed to cancel the outstanding
loan. As a result of this event, the Company again owns 100 percent of its
insurance subsidiary.

    In March 2001, under the terms of its existing option plan, and in
connection with its sale of The LongView Group, Inc. the Company's Argenesis
subsidiary accelerated vesting of its outstanding stock options. Under the terms
of the existing option plan, optionees had a specified time to exercise their
options, or they would terminate. No optionee chose to exercise their options.
As a result, the options terminated, no Argenesis options remain outstanding and
the Company owns 100 percent of this subsidiary.

    No grants of subsidiary stock options and no issuances of subsidiary stock
occurred during the three and six months ended June 30, 2001.

14. Recent Accounting Pronouncements

    In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS No. 133"). SFAS No. 133 establishes
new accounting and reporting standards for companies to report information about
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the balance sheet and measure those instruments at fair
value. For a derivative not designated as a hedging instrument, changes in the
fair value of the derivative are recognized in earnings in the

                                       21
<PAGE>

period of change. The Company adopted SFAS No. 133 on January 1, 2001. The
adoption of SFAS No. 133 did not have a material effect on the Company's
business, results of operations, financial position, or liquidity. The Company
has no derivatives as of June 30, 2001.

     In September 2000, the FASB issued SFAS No. 140, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities -- a
replacement of FASB Statement No. 125. This standard revises the standards for
accounting for securitizations and other transfers of financial assets and
collateral and requires certain disclosures. This standard is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after March 31, 2001 and for disclosures relating to securitization
transactions and collateral for fiscal years ending after December 15, 2000. The
adoption of SFAS No. 140 did not have a material effect on the Company's
business, results of operations, financial position, or liquidity.

     In July 2001, the FASB issued SFAS No. 141 Business Combinations and SFAS
No. 142 Goodwill 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 would 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. The Company is required to adopt the provisions of SFAS No.
141 immediately, and SFAS No. 142 on January 1, 2002. The Company does not
expect the adoption of SFAS Nos. 141 and 142 will have a material effect on the
Company's business, results of operations, financial position, or liquidity.

                                       22
<PAGE>

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

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. 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; collectibility of final project payments; future
customer revenue; increased employee and consultant costs due to project delays;
limited operating history; ability to achieve cost reductions; customer
complaints concerning our products and services, and the possibility of future
additional complaints; shareholder complaints concerning alleged violation of
securities laws, and the possibility of future additional complaints; possible
de-listing; reduced comprehensive errors and omissions insurance coverage;
attraction, training and retention of employees; variability of quarterly
operating results; dependence on a small number of customers; customer's
fulfillment of various responsibilities; completion of fixed-time, fixed-price
contracts; risks associated with the functionality and timing of new product
releases; longer than expected sales cycles; ability to accurately estimate
resources required for new and existing projects; changes in industry accounting
guidance; competitive factors; uncertainty and volatility associated with
Internet and e-business-related activities; the mix of revenues derived from
license sales as compared to services; protection of intellectual property;
retention of key project and management personnel; maintaining and ending
strategic partnerships; and risks associated with the separation of The LongView
Group, Inc. from TenFold's operations. In addition, 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
"Factors That May Affect Future Results and Market Price of Stock."

Business Overview

     TenFold is the provider of the Universal Application(TM) ("UA") technology
platform, a software environment which simplifies the development, deployment
into production and maintenance of mission-critical, enterprise applications.
The UA enables teams of predominantly business users to design, build, test,
deploy, and maintain complex, transaction-intensive, internet-ready applications
faster and at significantly lower cost than other applications development
technologies.

     The UA is a tightly integrated development and maintenance environment and
a powerful, efficient, scalable run-time environment. This integrated
development and maintenance environment includes: business rules definitions;
automatic Structured Query Language (SQL) generation; automated user interface
generation; Windows and Web-enablement; integrated product testing, report
generation, and data analysis; portability across relational databases,
operating systems and networks; and, code-less means for integrating UA
applications with legacy and 3rd party applications.

     The UA platform has been in development over 8 years, exceeds 2.5 million
lines of C and C++ code, and is protected by two issued patents and a third
patent pending. With the UA,

                                       23
<PAGE>

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, SQL or other
programming languages.

     While there are many companies supplying application development tools,
TenFold believes there is no other integrated applications development platform
supplier with technology capable of addressing the scale and robustness required
by the complex applications which have been built on the Universal Application.

     Several enterprise-scale, mission-critical applications are in production
using the underlying UA technology at companies such as Abbey National Bank,
Allstate, Ameritech, Barclays Global Investors, Vertex and others. Our customers
are deriving previously difficult to realize business benefits from their
applications through the ability to maintain business rules on-the-fly. A major
insurance company, for example, estimates that it will be able to introduce new
insurance rate structures (i.e., business rules) seven times faster than with
other available technologies. Speed to application production and application
maintainability - of both business rules and underlying hardware, operating
system and databases - are the hallmarks of the UA.

     Business History

     From 1993 through 1995, we engaged primarily in the development of our
patented Universal Application technology and derived revenue primarily from
technology development and consulting projects, generally on a
time-and-materials basis. In 1996, we began using our Universal Application to
develop Universal Application-based applications. From 1997 through 2000, we
derived the majority of our revenues from fixed-price, fixed-time applications
development projects in which we offered a money-back guarantee (the "TenFold
Guarantee"). Starting in 1998, we also began reselling vertical applications
products that we had previously developed for other customers. In 1999 and early
2000 we signed several large, fixed-price, build-for-hire contracts with
customers and hired many new employees.

     During the year ended December 31, 2000, we experienced several difficult
quarters. Our guaranteed fixed-price business model and difficulties in
delivering some projects by the guaranteed date led to several customer disputes
and prevented us from collecting final payments on several projects. We
currently have unresolved disputes with four customers.

     As we disclosed these and other previous customer disputes in our quarterly
filings, the sales environment became increasingly difficult for us. The
substantial operating losses we incurred for the year ended December 31, 2000
further deteriorated our ability to sell our products and services. These sales
challenges occurred at a time when industry-wide technology spending appeared to
be slowing, making it even more difficult for us to attract new customers.

     In addition to experiencing lower sales, our operating results were
negatively impacted by our operating structure. We conducted most of our
business operations during 2000 through largely autonomous vertical subsidiaries
in the communications, energy, financial services, healthcare, and insurance
industries. This decentralization structure promoted redundant overhead and
increased our operating costs.

     Current Business Status

     We began to change our business in early 2001, breaking away from our
legacy business model and coincident challenges of the past. During 2001, we
have:

1.   Set a new strategic direction;
2.   Laid the groundwork for future success; and,
3.   Resolved most of the issues that damaged TenFold in recent quarters (and
     established plans for resolving remaining issues).

                                       24
<PAGE>

     Set a New Strategic Direction
     -----------------------------

     During 2001, we evaluated strategic alternatives for exploiting the
substantial value inherent in our technology, selected a new strategic
direction, and changed our business model. We are beginning to realize the value
of our vertical applications portfolio.

     Evaluated Strategic Alternatives - We evaluated three potential,
alternative, strategic options for TenFold: technology platform company;
vertical applications product company; or, systems integration services company.
We have chosen, and we believe that we are solidly positioned, to transform
TenFold into a technology platform company built on our UA technology platform.

     Changed Business Model - Beginning in the fourth quarter of 2000, we no
longer offer the TenFold Guarantee, and we provide new applications development
and implementation services on a time-and-materials basis, rather than on a
fixed-price, fixed-time basis.

     Launched UA Sales - During the first quarter of 2001 we began to more
actively promote the Universal Application to customers desiring to use it to
build their own Universal Application-based applications. In the first half of
2001, one of our customers, a major insurance company, implemented in ten states
an insurance application that it developed using the Universal Application.

     Realizing the Value of Our Vertical Applications Portfolio - Over the past
twelve months, we have completed several best-of-breed applications products for
the communications, energy, financial services, healthcare and insurance
markets. We continue to build other vertical market applications products which
we expect to complete over the next several quarters. During the second quarter
of 2001, we formalized our vertical applications portfolio strategy. We expect
to enter into value added reseller (VAR) agreements with application companies
which will take ownership of the intellectual property, support, maintenance and
marketing of specific vertical market applications products. TenFold expects to
structure these agreements to include up-front and/or ongoing payment streams to
TenFold. We believe this will accelerate broader market distribution at a
significantly lower cost than TenFold could achieve through development of its
own applications marketing and sales, and improve economies of scale in support,
training and maintenance to the benefit of potential customers. We believe that
because this will accelerate and broaden distribution of UA-based applications,
it will also accelerate introduction of the UA.

     We are in active negotiations to divest two of our applications products.
We are also in active discussions with another company to market and distribute
another of our applications products.

     From time to time, we expect to continue to identify unmet vertical
applications market needs, enter into time-and-materials build-for-hire
arrangements, build applications using the UA and exploit the value of the
applications products in the manner described above. We expect these projects to
provide opportunities for us to showcase our technology, to maintain world-class
UA-based applications development expertise, and to generate cash from service
and license revenue and/or from the sale of vertical applications product
assets.

     On March 15, 2001 we announced the sale of The LongView Group, Inc. to
Linedata Services for $29.0 million. As part of our agreement with Linedata, we
placed $2.9 million of the proceeds into an escrow account.

     Laid Groundwork for Future Success
     ----------------------------------

     During 2001, we strengthened our delivery capabilities, dramatically
improved customer relationships and commenced UA sales initiatives.

                                       25
<PAGE>

     Strengthened Delivery Capabilities - During the first quarter of 2001, we
centralized management of our delivery organization. We achieved positive
delivery results during the first half of 2001 as we leveraged our experienced
personnel for each of our customer projects, improved project management
controls, and provided centralized oversight of all on-going projects. The
improvements in our applications delivery process has led to a significant
improvement in our ability to estimate project man-days remaining.

     During the fourth quarter of 2000, we implemented a securities lending
application at two international locations of a large global institutional
investment manager.

     During the first quarter of 2001, we completed some significant product
delivery milestones including implementing TenFold Wealth Manager in production
at a major mortgage lender, and passing a major scalability performance
benchmark for a large customer relationship management outsourcing company that
included demonstrating 2,400 concurrent end-user performance against a 3
terabyte database.

     In the second quarter of 2001, we achieved significant project delivery
milestones for a large property and casualty insurance company, delivered a
billing and settlement application to a major energy and transmission provider,
and implemented customer management and product and order processing application
modules for an international communications company.

     Dramatically Improved Customer Relationships - Strengthened delivery
capabilities have enabled a recent, dramatic improvement in our customer
relationships. Our existing customers have expended significant effort in
assessing the status of TenFold's operations and financial condition, confirming
the status of their projects and validating the business value proposition
inherent in the underlying TenFold technology. Our customers' affirmation of
their commitment to TenFold's technology and our ability to deliver their
business applications has resulted in applications moving (or being scheduled to
move) into production, formal acceptance of TenFold's completion of existing
fixed-price contracts, expansion of license scope and entering into new
time-and-materials based services contracts.

     A substantial portion of our projected 2001 revenue and cash flow is from
existing customers. We have contracts with 17 customers, four of which have
future payments contingent on final project delivery. Payments contingent on
final delivery total $3.7 million and, assuming project deliveries are
successful, we expect to receive these payments principally in the third and
fourth quarters of 2001. We also expect to recognize as revenue in 2001, a
significant portion of our June 30, 2001 deferred revenue balance of $17.9
million, as we complete these and other projects. We recognize the importance of
successfully delivering applications to these four customers and have assigned
our most experienced technology and delivery staff to these projects.

     Commenced Sales Initiatives - During the second quarter of 2001, we took
two important actions to begin to rebuild momentum for new sales of our UA
technology and related products and services. First, we made a commitment to
securing an indirect sales and delivery channel for the UA technology. We are in
active negotiations with information technology and consulting services and
applications products organizations to enter into VAR relationships. We expect
that VAR relationships will be a significant source of revenue growth for
TenFold in 2002 and beyond. Second, we hired a seasoned and talented technology
sales executive to lead our direct sales initiatives of the UA and our vertical
applications products.

     Resolved Historical Issues
     --------------------------

     During 2001, we made significant strides towards resolving many of the
negative issues created by our historical business model. Specific areas of
accomplishment include consolidating operations, restructuring the business,
resolving customer disputes and progressing in other legal matters.

                                       26
<PAGE>

     Consolidated Operations - In January 2001, we consolidated our vertical
business operations into one corporate organization to reduce costs, provide
better focus for employees and to solidify our core delivery and operational
infrastructure.

     Restructured Business - From November 2000 to June 30, 2001, we have
reduced our headcount from approximately 744 to 256, and reduced the number of
principal operating offices from 13 to 4.

     We commenced a restructuring of our business in November 2000 through a
reduction in force of 159 employees and the closure of redundant offices in San
Francisco, California; Chicago, Illinois; and Dallas, Texas. A second
restructuring in March 2001 further reduced the workforce by 58 employees,
including 20 employees who resigned voluntarily, and we closed offices in
Atlanta, Georgia; Irving, Texas; Foster City, California; and Raleigh, North
Carolina. A third restructuring in June 2001 further reduced the workforce by 70
employees.

     We anticipate the impact of the three restructurings to generate annualized
savings of $57 million. As a consequence of our November 2000 restructuring we
reduced annualized operating costs by approximately $40 million. We expect the
March 2001 restructuring to generate additional annualized savings of
approximately $9 million. We expect the June 2001 restructuring to generate
additional annualized savings of approximately $7.9 million.

     In addition to headcount reductions and office closures, we have taken
other aggressive steps to lower operating costs. In March 2001, we issued a
revised travel policy to significantly reduce travel expenses, which for the
year ended December 31, 2000 were approximately 13% of operating costs. We
performed a comprehensive review of our network costs and expect significant
reductions by canceling services in closed offices and other actions. We are
continuing to review expenses for company events, telecommunications,
contractors, and all other expenses with the objective of minimizing operating
expenses in 2001. See "Results of Operations - Special Charges" for additional
information.

Resolving Customer Disputes - In the first half of 2001, we have favorably
resolved five customer disputes, one in Q1 and four in Q2, as follows:

         Unitrin - On March 8, 2001, we entered a Confidential Settlement
         Agreement and Release with Unitrin Services Company, Inc. ("Unitrin")
         dismissing all of Unitrin's claims. Our errors and omissions insurance
         carrier paid the entire amount of the compromised and confidential
         settlement sum above the $100,000 of self-insurance retention we
         already paid to cover legal defense costs.

         Trumbull - On May 10, 2001, we entered into a Settlement Agreement and
         Mutual Release with Trumbull Services LLC dismissing all claims each
         party had against the other. Our errors and omissions insurance carrier
         paid the entire amount of the compromised and confidential settlement
         sum above the $100,000 of self-insurance retention we already paid to
         cover legal defense costs.

         Westfield - Effective April 26, 2001, we entered into a Settlement and
         Mutual Release with Ohio Farmers Insurance Company, doing business as
         Westfield Companies, dismissing all claims each party had against the
         other. Our errors and omissions insurance carrier paid a confidential
         settlement sum above the $25,000 of self-insurance retention already
         paid by us to cover legal defense costs.

         Nielsen - Effective May 30, 2001, we entered into a Confidential
         Settlement Agreement and Release with Nielsen Media Research, Inc.
         dismissing all claims each party had against the other. Our errors and
         omissions insurance carrier paid the entire amount of the compromised
         and confidential settlement sum above the $100,000 of self-insurance

                                       27
<PAGE>

         retention we already paid to cover legal defense costs.

         Unnamed Customer - As we have previously disclosed, on April 4, 2001,
         we received a letter from a customer alleging that we had materially
         breached our contract with that customer. On May 2, 2001, we entered a
         Termination and Settlement Agreement with this customer under which the
         customer agreed to pay TenFold a compromised and confidential
         settlement amount for services we have provided to this customer.

         In none of these settlement agreements did any party admit liability.
     Our errors and omissions insurance carrier paid the entire amount of the
     compromised and confidential settlement sum above the self-insurance
     retention we paid to cover legal defense costs. With the resolution of
     these five disputes, we now have four unresolved disputes with customers.
     See "Legal Proceedings" for additional information.

     Progressing on other Legal Matters - There are two other legal matters
worthy of summary:

         Stockholder Matters - On or after August 12, 2000, six complaints were
         filed in the United States District Court of Utah alleging that we and
         certain of our officers violated certain federal securities laws. On
         October 30, 2000, our motion to consolidate the six complaints into one
         class action complaint was granted. On March 7, 2001, the court
         appointed lead plaintiffs and lead class counsel. On May 1, 2001, the
         plaintiffs filed an amended consolidated complaint. TenFold filed a
         motion to dismiss the amended complaint on June 19, 2001. Because the
         matter is in its preliminary stages, our outside legal counsel is not
         able to provide an opinion on the probable outcome of the claim and
         therefore, no provision for loss has been recorded in our Condensed
         Consolidated Financial Statements. See "Legal Proceedings" for
         additional information.

         SEC Inquiry - During the year ended December 31, 2000, the United
         States Securities and Exchange Commission commenced a non-public,
         fact-finding inquiry into TenFold. We have received several document
         subpoenas from the SEC and we have complied or are in the process of
         complying with them. Because this inquiry is still in the early stages,
         management is unsure of the scope or the likely outcome of this
         inquiry. See "Legal Proceedings" for additional information.

Revenue Recognition

     We derive our revenues from license fees, application development and
implementation services, support, and training services. License revenues
consist of fees for licensing the Universal Application as a tool or as a
developed application, and license fees for the applications that we develop for
our customers. We also derive license revenues from the resale of our vertical
applications products. Service revenues consist of fees for application
development and implementation, support and training.

     In October 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 97-2, Software Revenue
Recognition, which supersedes SOP 91-1, Software Revenue Recognition.
Additionally, in 1998, the AICPA issued SOP 98-9, Modification of SOP 97-2 with
Respect to Certain Transactions. Effective January 1, 1998, we adopted the
provisions of SOP 97-2, as modified by SOP 98-9.

     We generally enter into software arrangements that involve multiple
elements, such as software products, enhancements, post-contract customer
support ("PCS"), installation and training. We allocate a portion of the
arrangement fee to each undelivered element based on the relative fair values of
the elements. The fair values of an element must be based on vendor specific
objective evidence ("VSOE"). We establish VSOE based on the price charged when
the same element is sold separately. VSOE for services is based on standard
rates for the individuals providing services. These rates are the same rates
charged when the services are sold separately

                                       28
<PAGE>

under time-and-materials contracts. We base VSOE for training on standard rates
charged for each particular training course. These rates are the rates charged
when the training is sold separately for supplemental training courses. For PCS,
VSOE is determined by reference to the renewal rate that we charge the customer
in future periods. The fee allocated to the delivered software product is based
upon the residual method described in SOP 98-9.

     We recognize license revenues from vertical application product sales and
Universal Application development licenses that do not include services or where
the related services are not considered essential to the functionality of the
software, when the following criteria are met: we have signed a noncancellable
license agreement with nonrefundable fees; we have shipped the software product;
there are no uncertainties surrounding product acceptance; the fees are fixed
and determinable; and collection is considered probable. This policy applies
both when the vertical application license or the Universal Application
development licenses are sold separately or when a Universal Application
development license is sold with an application development project. License
fees recognized upon achieving these criteria, for the three months ended June
30, 2001 were $1.2 million as compared to $4.3 million for the three months
ended June 30, 2000. License fees recognized upon achieving these criteria, for
the six months ended June 30, 2001 were $1.2 million as compared to $4.8 million
for the six months ended June 30, 2000. Services relating to the Universal
Application development licenses only include post contract customer support
services. Services for vertical application product licenses do not add
significant functionality, features, or significantly alter the software. In
addition, similar services are available from other vendors; there are no
milestones or customer specific acceptance criteria which affect the
realizability of the software license fee; and the software license fee is
non-cancelable and non-refundable.

     The following table sets forth, for the periods indicated, the revenue
recognized by type (in thousands):

<TABLE>
<CAPTION>
                                                                                Three Months ended           Six Months
                                                                                     June 30,              ended June 30,
                                                                               ---------------------    ---------------------
                                                                                 2001         2000         2001       2000
                                                                               ---------------------    ---------------------
 <S>                                                                           <C>          <C>         <C>          <C>
 Products:
   Universal Application development license revenue                            $     --    $     --     $     --    $     --
   Vertical application product license revenue                                    1,182       4,275        1,182       4,787
 Solutions:
   Percentage-of-completion license revenue                                        2,933       3,311        5,914       7,481
                                                                               ---------------------    ---------------------
                                    Total license revenues                      $  4,115    $  7,586     $  7,096    $ 12,268


 Percentage-of-completion service revenue                                         13,589      17,167       18,492      42,541
 Time-and-materials service revenue                                                2,641          --        4,927          --
 Maintenance revenue                                                                 865       1,094        1,714       1,943
 Training revenue                                                                    240         518          488       1,288
                                                                               ---------------------    ---------------------
                                   Total services revenues                      $ 17,335    $ 18,779     $ 25,621    $ 45,772
                                                                               ---------------------    ---------------------
                                              Total revenues                    $ 21,450    $ 26,365     $ 32,717    $ 58,040
                                                                               =====================    =====================
</TABLE>

     For software arrangements that include a service element that is considered
essential to the functionality of the software, we recognize license fees
related to the application, and the application development service fees, over
time as we perform the services, using the percentage-of-completion method of
accounting and following the guidance in Statement of Position ("SOP") 81-1,
Accounting for Performance of Construction-Type and Certain Production-Type
Contracts. We determined our proposed fixed price for a project using a formal
estimation process that takes into account the project's timetable, complexity,
technical environment, risks, and other available alternatives. Members of our
senior management team approve each proposal. We make adjustments, if necessary,
to the estimates used in the percentage-of-completion method of accounting as
work progresses under the contract and as we gain experience. For presentation
purposes within the Condensed Consolidated Statement of Operations, fixed-price
project revenues are split between license and service based upon the relative
fair value of the components. In 2001, we intend to provide new application
development and implementation

                                       29
<PAGE>

services on a time-and-materials basis, rather than on a fixed-price basis. In
addition, we have converted certain of, and expect to convert more of, our
existing fixed-time, fixed-price application development and implementation
contracts to a time-and-materials basis.

     For certain projects, we limit revenue recognition in the period to the
amount of direct and indirect project costs incurred in the same period, and
postpone recognition of profits until results can be estimated more precisely.
Beginning with the three months ended June 30, 2000 we applied this "zero
profit" methodology to two existing projects. We added two additional existing
projects and one new project to the "zero profit" methodology during the three
months ended September 30, 2000. At December 31, 2000, we applied this "zero
profit" methodology to all fixed-price projects except those relating to our
Revenue Manager and LongView applications. At June 30, 2001, we are applying
this "zero profit" methodology to all fixed-price projects. The total project
values for ongoing projects at June 30, 2001 that we accounted for using the
"zero profit" methodology is approximately $31.4 million. Revenue recognized
from projects on this "zero profit" methodology during the three months ended
June 30, 2001 was $16.5 million as compared to $(2.5) million during the three
months ended June 30, 2000, while revenue recognized from these projects during
the six months ended June 30, 2001 was $20.9 million as compared to $631,000
during the six months ended June 30, 2000. Revenue recognized during the three
months ended June 30, 2001 on the "zero profit" methodology for ongoing projects
was $2.6 million with equal amounts of cost; while revenue recognized on
completed projects during the same period was $13.9 million including profits
recognized upon completion of the related project or termination of remaining
project obligations, with $702,000 of corresponding costs.

     In mid-1998, we began offering the TenFold Guarantee, a money-back
guarantee for large-scale software applications. As a result, in some of our
contracts, we have guaranteed that we will complete our projects within a fixed
time period or we will refund the fees paid. This guarantee also requires the
customer to fulfill various responsibilities within a specified time period,
including reviewing and approving requirements, providing timely feedback, and
providing adequate staffing, or the guarantee is voided. Accordingly, we treat
this guarantee as a conditional guarantee. We recognize revenue under contracts
with performance guarantees using the percentage-of-completion method of
accounting. If necessary, we make provisions for estimated refunds or losses on
uncompleted contracts on a contract-by-contract basis and recognize the refunds
or losses in the period in which the refunds or losses become probable and we
can reasonably estimate them. Beginning in the fourth quarter of 2000, we no
longer offer a performance guarantee as a standard part of our contracts.

     We completed and delivered, four days late, a project milestone for a
customer. Under the terms of this legacy fixed-price guarantee contract, the
customer could potentially allege breach and demand repayment of funds
previously paid under the guarantee and refuse to pay remaining amounts under
the contract. We continue toward completion of the project while the customer
continues testing the application. We have six remaining interim milestones due
throughout the next few months. Some of these interim milestones will be delayed
and the customer could potentially allege breach and demand repayment of funds
previously paid under the guarantee and refuse to pay remaining amounts under
the contract. While the outcome is unknown, we have recognized no revenue from
this contract during the three months ended June 30, 2001, and recognized $1.5
million during the same period of 2000. We recognized no revenue from this
contract for the six months ended June 30, 2001, and recognized $2.6 million
during the same period of 2000. Additionally, we recorded a loss accrual for the
estimated remaining costs to complete the contract obligations under the
fixed-price contract of $1.1 million at June 30, 2001. We have received
approximately $2.8 million in payments from the customer that could potentially
be covered by the guarantees.

     We have two other customers with guarantees in their fixed-price contracts.
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. Missing any of the deliveries for the three
customers may have a material adverse impact on our business, results of
operations, financial position, or liquidity.

                                       30
<PAGE>

     For time-and-material contracts, we generally estimate a profit range and
recognize the related revenue using the lowest probable level of profit
estimated in the range. Billings in excess of revenue recognized under
time-and-material contracts are deferred and recognized upon completion of the
time-and-material contract or when the results can be estimated more precisely.

     We recognize support revenue from contracts for ongoing technical support
and product updates ratably over the support period. We recognize training
revenue as we perform the services.

Other Matters

     The timing and amount of cash received from customers can vary
significantly depending on specific contract terms and can therefore have a
significant impact on the amount of deferred revenue and unbilled accounts
receivable in any given period. We record billings and cash received in excess
of revenue earned as deferred revenue. Our deferred revenue balance at June 30,
2001 was $17.9 million. We expect to recognize most of this amount as revenue
within the next twelve months. Our deferred revenue balance generally results
from contractual commitments made by customers to pay amounts to us in advance
of revenues earned, and from application of the "zero profit" margin methodology
described above. Our unbilled accounts receivable represents revenue that we
have earned but which we have not yet billed. We bill customers as payments
become due under the terms of the customer's contract. We consider current
information and events regarding our customers and their contracts and establish
allowances for doubtful accounts when it is probable that we will be unable to
collect amounts due under the terms of existing contracts.

     During the year ended December 31, 2000, we conducted our vertical business
operations through subsidiaries in the communications, energy, financial
services, healthcare, insurance, and investment management industries. During
the first quarter of 2001, we consolidated vertical business operations into one
corporate organization to provide better focus for employees and to solidify our
core delivery and operational infrastructure.

                                       31
<PAGE>

Results of Operations

     We had second quarter of 2001 revenues of $21.5 million and net income of
$1.7 million. For the first half of 2001 our revenues totaled $32.7 million and
our net loss totaled $3.5 million.

     Our financial results for the second quarter of 2001 improved significantly
over those for the prior two quarters. Revenues of $21.5 million for the second
quarter of 2001 compared favorably to revenues of $(14.1) million for the fourth
quarter of 2000 and $11.3 million for the first quarter of 2001. Second quarter
2001 operating profits of $2.0 million compared favorably to operating losses of
$54.9 million for the fourth quarter of 2000 and $16.4 million for the first
quarter of 2001. Net income of $1.7 million for the second quarter of 2001
compared favorably to net losses of $54.6 million for the fourth quarter of 2000
and $5.2 million for the first quarter of 2001.

     Our operating expenses have continued to decline compared to the prior two
quarters due primarily to our restructuring efforts. Second quarter 2001
operating expenses of $19.4 million compared favorably to operating expenses of
$40.7 million for the fourth quarter of 2000 and $27.6 million for the first
quarter 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.

<TABLE>
<CAPTION>
                                                                 Three Months             Six Months
                                                                Ended June 30,           Ended June 30,
                                                          -------------------------  -------------------------
                                                               2001         2000         2001           2000
                                                          -------------------------  -------------------------
<S>                                                           <C>          <C>           <C>           <C>
Revenues:
     License ..............................................      19%           29%           22%          21%
     Services .............................................      81%           71%           78%          79%
                                                             ------       -------       -------       ------
         Total revenues ...................................     100%          100%          100%         100%
                                                             ------       -------       -------       ------

Operating expenses:
     Cost of revenues .....................................      44%           62%           57%          48%
     Sales and marketing ..................................       6%           25%           13%          23%
     Research and development .............................      16%           24%           24%          22%
     General and administrative ...........................      14%           23%           22%          14%
     Amortization of goodwill and acquired intangibles ....       -             4%            3%           4%
     Amortization of deferred compensation ................       2%            1%            2%           1%
     Special charges ......................................       9%            -            23%           -
                                                             ------       -------       -------       ------
         Total operating expenses .........................      91%          139%          144%         112%
                                                             ------       -------       -------       ------

Income (loss) from operations .............................       9%          -39%          -44%         -12%
Total other income, net ...................................       -             3%           43%           2%
                                                             ------       -------       -------       ------
Income (loss) before income taxes and minority interest ...       9%          -36%           -1%         -10%
Provision (benefit) for income taxes ......................       1%          -11%           10%          -3%
                                                             ------       -------       -------       ------
Net income (loss) before minority interest ................       8%          -25%          -11%          -7%
Minority interest .........................................       -             -             -            -
                                                             ------       -------       -------       ------
Net income (loss) .........................................       8%          -25%          -11%          -7%
                                                             ======       =======       =======       ======
</TABLE>

     Revenues

     Total revenues decreased $4.9 million, or 19 percent, to $21.5 million for
the three months ended June 30, 2001, as compared to $26.4 million for the same
period in 2000, while total revenues decreased $25.3 million, or 44 percent, to
$32.7 million for the six months ended June 30, 2001, as compared to $58.0
million for the same period in 2000. The decrease in revenues is primarily due
to lower sales, and limiting revenue recognition on certain fixed-price projects
to costs incurred. Revenue recognized during the three months ended June 30,
2001 on the "zero profit" methodology for ongoing projects was $2.6 million with
equal amounts of cost; while revenue recognized on completed projects during the
same period was $13.9 million including

                                       32
<PAGE>

profits recognized upon completion of the related project or termination of
remaining project obligations, with $702,000 of corresponding costs.

     License revenues decreased $3.5 million, or 46 percent, to $4.1 million for
the three months ended June 30, 2001 as compared to $7.6 million for the same
period in 2000, while license revenues decreased $5.2 million, or 42 percent, to
$7.1 million for the six months ended June 30, 2001 as compared to $12.3 million
for the same period in 2000. License revenues represented 19 percent of total
revenues during the three months ended June 30, 2001 as compared to 29 percent
for the same period in 2000, and 22 percent of total revenues during the six
months ended June 30, 2001 as compared to 21 percent for the same period in
2000. We recognize license revenues from vertical application product sales and
some Universal Application development license sales when we have a signed
noncancellable license agreement with fixed and determinable nonrefundable fees,
we have shipped the product, and there are no uncertainties surrounding
acceptance of the product or collection of the stated fees. Due primarily to the
reasons for lower overall revenues described above, license sales for these
products were lower for the three and six months ended June 30, 2001 than for
the same periods in 2000.

     Service revenues decreased $1.4 million, or 8 percent, to $17.3 million for
the three months ended June 30, 2001 as compared to $18.8 million for the same
period in 2000, while service revenues decreased $20.2 million, or 44 percent,
to $25.6 million for the six months ended June 30, 2000 as compared to $45.8
million for the same period in 2000. Service revenues decreased for the three
and six months ended June 30, 2001 compared to the same periods in 2000 due
primarily to the reasons for lower overall revenues described above.

     Revenues from international customers were approximately 32 percent of
total revenues for the three months ended June 30, 2001 as compared to 12
percent for the same period in 2000. Revenues from international customers were
approximately 29 percent of total revenues for the six months ended June 30,
2001 as compared to 11 percent for the same period in 2000.

     Three customers accounted for 41 percent, 21 percent, and 10 percent of our
revenues for the three months ended June 30, 2001, compared to three customers
accounting for 15 percent, 12 percent, and 12 percent of our revenues for the
same period in 2000. No other single customer accounted for more than 10 percent
of our revenues for the three months ended June 30, 2001 or the same period in
2000. Three customers accounted for 30 percent, 18 percent, and 10 percent of
our revenues for the six months ended June 30, 2001, compared to three customers
accounting for 19 percent, 11 percent, and 10 percent of our revenues for the
same period in 2000. No other single customer accounted for more than 10 percent
of our revenues for the six months ended June 30, 2001 or the same period in
2000.

     We believe that period to period comparisons between license and services
revenues are not necessarily indicative of future performance given the nature
of our product and services offerings, the relative emphasis we apply to these
offerings in any given period, and changes in our business model.

Operating Expenses

     Cost of Revenues. Cost of revenues consists primarily of compensation and
other related costs of personnel to provide application development and
implementation, support, and training services. Cost of revenues decreased $6.9
million, or 42 percent, to $9.4 million for the three months ended June 30, 2001
compared to $16.3 million for the same period in 2000, while cost of revenues
decreased $9.4 million, or 34 percent, to $18.6 million for the six months ended
June 30, 2001 compared to $28.0 million for the same period in 2000. Cost of
revenues as a percentage of total revenues was 44 percent for the three months
ended June 30, 2001 as compared to 62 percent for the same period in 2000, while
cost of revenues as a percentage of total revenues was 57 percent for the six
months ended June 30, 2001 as compared to 48 percent for the same period in
2000. The decrease in absolute dollars between periods was primarily due to
having fewer

                                       33
<PAGE>

employees working on customer projects, support and training due to the
reduction in our workforce associated with our restructuring actions and
employee attrition. Cost of revenues decreased as a percentage of total revenues
for the three months ended June 30, 2001 due to profits recognized upon
completion of the related project or termination of remaining project
obligations during the quarter, as described above under Revenues.

     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 $5.1 million, or 79 percent, to $1.4 million for
the three months ended June 30, 2001 as compared to $6.5 million for the same
period in 2000, while sales and marketing expenses decreased $9.1 million, or 68
percent, to $4.2 million for the six months ended June 30, 2001 as compared to
$13.3 million for the same period in 2000. Sales and marketing expenses as a
percentage of total revenues were 6 percent for the three months ended June 30,
2001 as compared to 25 percent for the same period in 2000, while sales and
marketing expenses as a percentage of total revenues were 13 percent for the six
months ended June 30, 2001 as compared to 23 percent for the same period in
2000. The decrease in sales and marketing expenses in absolute dollars, and as a
percentage of total revenues, was due to having fewer sales and marketing
employees and our allocation of our resources towards completion of our
application development projects rather than to sales and marketing activities.

     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
$2.9 million, or 45 percent, to $3.5 million for the three months ended June 30,
2001 as compared to $6.3 million for the same period in 2000, while research and
development expenses decreased $4.8 million, or 38 percent, to $7.9 million for
the six months ended June 30, 2001 as compared to $12.8 million for the same
period in 2000. Research and development expenses as a percentage of total
revenues were 16 percent for the three months ended June 30, 2001 as compared to
24 percent for the same period in 2000, while research and development expenses
as a percentage of total revenues were 24 percent for the six months ended June
30, 2001 as compared to 22 percent for the same period in 2000. Research and
development expenses decreased in absolute dollars due primarily to having fewer
research and development employees during the three and six months ended June
30, 2001, than in the same periods of 2000.

     General and Administrative. General and administrative expenses consist
primarily of allowances for doubtful accounts, the costs of executive
management, finance and administrative staff, recruiting, business insurance,
and professional fees. General and administrative expenses decreased $3.1
million, or 51 percent, to $3.0 million for the three months ended June 30, 2001
as compared to $6.1 million for the same period in 2000, while general and
administrative expenses decreased $0.7 million, or 9 percent, to $7.3 million
for the six months ended June 30, 2001 as compared to $8.0 million for the same
period in 2000. General and administrative expenses as a percentage of total
revenues were 14 percent for the three months ended June 30, 2001 as compared to
23 percent for the same period in 2000, while general and administrative
expenses as a percentage of total revenues were 22 percent for the six months
ended June 30, 2001 as compared to 14 percent for the same period in 2000. The
decrease in absolute dollars and as a percentage of total revenues during the
three months ended June 30, 2001 compared to the same period in 2000 was
primarily due to lower provisions for doubtful accounts during the current
period.

     Amortization of Goodwill and Acquired Intangibles. Amortization of goodwill
and acquired intangibles resulted from the acquisition of The LongView Group,
Inc. ("LongView"). The remaining intangible assets, after the write-off of in
process research and development, totaled $24.6 million and were amortized over
the expected lives of the goodwill and intangibles until we sold LongView on
March 15, 2001. These lives ranged from five to seven years. We recorded
amortization expense of goodwill and acquired intangibles of $0 and $962,000 for
the

                                       34
<PAGE>

three and six months ended June 30, 2001, respectively, as compared to $1.2
million for the three months ended June 30, 2000, and $2.3 million for the six
months ended June 30, 2000.

     On March 15, 2001 we announced the sale of The LongView Group, Inc. to
Linedata Services for $29.0 million in cash. See Note 12 of "Notes to Condensed
Consolidated Financial Statements" for additional information. As a result, we
did not incur any further charges for amortization of goodwill and acquired
intangibles related to LongView after March 15, 2001.

     Amortization of Deferred Compensation. Deferred compensation, along with
the associated amortization, results from the granting of stock or stock options
when there is a difference between the purchase or exercise price and the deemed
fair value of the common stock at the time of such grants. Certain grants during
1997, 1998, 1999 and 2001 were issued at a price that was less than the deemed
fair value at the grant date. We are amortizing these amounts over the vesting
periods of the applicable options, resulting in amortization expense of $337,000
for the three months ended June 30, 2001 as compared to $316,000 for the same
period in 2000, and amortization expense of $513,000 for the six months ended
June 30, 2001 as compared to $667,000 for the same period in 2000. When
employees who were granted these options leave TenFold, we reduce the associated
deferred compensation. The decrease in amortization expense for the six months
ended June 30, 2001 compared to the same period of 2000, is due to employees
leaving TenFold, and was partially offset by an increase in amortization expense
related to a restricted stock grant made in 2001 that has deferred compensation
of $280,000 associated with it.

     Special Charges. Special charges for the six months ended June 30, 2001
include $3.7 million in asset impairment charges, and $3.9 million in
restructuring charges.

     Asset Impairment Charge. During the six months ended June 30, 2001, we
restructured operations to reduce operating expenses. As part of the
restructuring, we closed facilities in Atlanta, Georgia; Foster City,
California; Irving, Texas; and Raleigh, North Carolina, Park Ridge, New Jersey;
and Salt Lake City, Utah. We had $1.9 million of leasehold improvements,
furniture and fixtures, and other assets in these offices that we determined had
no future value to us and are no longer in active use. In addition we determined
that $1.3 million of computer equipment was also similarly impaired as a result
of these restructuring activities. We also determined that we would not be able
to sell our Marin County land and building for the amount we had previously
expected, and as a result we recorded a further asset impairment charge of
$481,000 on this asset. Accordingly, we recorded asset impairment charges of
$588,000 and $3.7 million for the three and six months ended June 30, 2001,
respectively.

     Second Quarter 2001 Restructuring Charge. During the three months ended
June 30, 2001, we incurred a restructuring charge of $1.2 million as part of our
continuing efforts to reduce operating expenses. As part of this restructuring,
we decided to vacate a portion of our Salt Lake City, Utah facilities, terminate
our office lease expansion requirement in Chicago, Illinois, vacate our office
in Park Ridge, New Jersey, and reduce our workforce by 70 individuals. The
restructuring charge was comprised of $300,000 for headcount reductions, and
$900,000 for facilities related costs. As of June 30, 2001 $233,000 had been
paid out on this restructuring accrual.

     We determined our restructuring charge in accordance with Emerging Issues
Task Force Issue No. 94-3 ("EITF 94-3") and Staff Accounting Bulletin No. 100
("SAB 100"). EITF 94-3 and SAB 100 require that we commit to an exit plan before
we accrue employee termination costs and exit costs. Before June 30, 2001, our
senior management prepared a detailed exit plan that included the termination of
70 employees and the termination of certain facilities leases. We are pursuing
sublease or termination settlement arrangements for these facilities.

     In connection with the restructuring actions, we terminated the employment
of 70 employees, consisting primarily of administrative employees and
applications development employees in

                                       35
<PAGE>

various locations. All employees associated with these restructuring actions
were notified as of June 14, 2001.

     We expect to generate annualized savings of approximately $7.9 million as a
result of this restructuring in the following areas: $4.0 million in reduced
cost of revenues, $900,000 in reduced sales and marketing expenses, $1.2 million
in reduced research and development expenses, and $1.8 in reduced general and
administrative expenses.

     The second quarter restructuring reserves are included in accrued
liabilities at June 30, 2001. Detail of the restructuring charges as of and for
the three months ended June 30, 2001 are summarized below:

<TABLE>
<CAPTION>

  Second Quarter 2001 Restructuring          Original                                        Balance at
               Actions:                       Charge       Reversals        Utilized        June 30, 2001
---------------------------------------    -----------    -------------    -----------    -------------------
<S>                                        <C>            <C>              <C>            <C>
Employee related                                $  340         $    -         $  208               $  132
Facilities related                                 905              -             25                  880
                                                ------         ------         ------               ------
                                                $1,245         $    -         $  233               $1,012
                                                ======         ======         ======               ======

                                             Original                                          Balance at
Balance Sheet Components:                     Charge        Reversals        Utilized        June 30, 2001
---------------------------------------    -----------    -------------    -----------    -------------------
Accrued liabilities                             $1,245         $    -         $  233               $1,012
                                                ------         ------         ------               ------
                                                $1,245         $    -         $  233               $1,012
                                                ======         ======         ======               ======
</TABLE>


     First Quarter 2001 Restructuring Charge. During the three months ended
March 31, 2001, we incurred a restructuring charge of $2.7 million as part of
our continuing efforts to reduce operating expenses. As part of this
restructuring, we closed offices in Atlanta, Georgia; Foster City, California;
Irving, Texas; and Raleigh, North Carolina, and reduced our workforce by 38
individuals. The restructuring charge was comprised of $226,000 for headcount
reductions, and $2.5 million for facilities related costs. As of June 30, 2001
$978,000 had been paid out on this restructuring accrual.

     We determined our restructuring charge in accordance with EITF 94-3 and SAB
100. EITF 94-3 and SAB 100 require that we commit to an exit plan before we
accrue employee termination costs and exit costs. On March 15, 2001, our senior
management prepared a detailed exit plan that included the termination of 38
employees and closure of certain facilities.

     In connection with the restructuring actions, we terminated the employment
of 38 employees, consisting primarily of applications development employees,
technical and other support employees, and administrative employees in all of
our locations. All employees associated with these restructuring actions were
notified as of March 31, 2001. At March 31, 2001 we had exited facilities in
Atlanta, Georgia; Foster City, California; Irving, Texas; and Raleigh, North
Carolina. As of the date of these financial statements, we have terminated the
Atlanta, Georgia lease, and are pursuing sublease arrangements for the other
facilities.

     We expect to generate annualized savings of approximately $9 million as a
result of this restructuring in the following areas: $5 million in reduced cost
of revenues, $200,000 in reduced sales and marketing expenses, $3 million in
reduced research and development expenses, and $500,000 in reduced general and
administrative expenses.

     The first quarter restructuring reserves are included in accrued
liabilities at June 30, 2001. Detail of the restructuring charges as of and for
the six months ended June 30, 2001 are summarized below:

<TABLE>
<CAPTION>
   First Quarter 2001 Restructuring          Original                                         Balance at
               Actions:                       Charge       Reversals        Utilized        June 30, 2001
<S>                                         <C>           <C>              <C>            <C>
</TABLE>

                                       36
<PAGE>

<TABLE>
---------------------------------------    -----------    -------------    -----------    -------------------
<S>                                        <C>            <C>              <C>            <C>
Employee related                               $  226         $    -          $  223            $    3
Facilities related                              2,465              -             755             1,710
                                               ------         ------          ------            ------
                                               $2,691         $    -          $  978            $1,713
                                               ======         ======          ======            ======

                                             Original                                          Balance at
Balance Sheet Components:                     Charge        Reversals        Utilized        June 30, 2001
---------------------------------------    -----------    -------------    -----------    -------------------
Accrued liabilities                            $2,675         $    -          $  962            $1,713
Accounts payable                                   16              -              16                 -
                                               ------         ------          ------            ------
                                               $2,691         $    -          $  978            $1,713
                                               ======         ======          ======            ======
</TABLE>

     Fourth Quarter 2000 Restructuring Charge. During the three months ended
December 31, 2000, we incurred a restructuring charge of $1.9 million as part of
a plan to improve operating results by reducing headcount, by closing
duplicative Company facilities in Chicago, Illinois; Dallas, Texas; Salt Lake
City, Utah; and San Francisco, California, and by implementing other measures.
This charge is part of a plan to streamline our efforts to focus on a return to
profitability. The restructuring charge was comprised of $1.1 million for
headcount reductions, and $861,000 for facilities related costs including
penalties associated with the reduction of lease commitments and future lease
payments. As of June 30, 2001 approximately $1.8 million had been paid out on
the restructuring charge.

     We determined our restructuring charge in accordance with EITF 94-3 SAB
100. EITF 94-3 and SAB 100 require that we commit to an exit plan before we
accrue employee termination costs and exit costs. On November 14, 2000, our
senior management prepared a detailed exit plan that included the termination of
159 employees and closure of certain facilities.

     In connection with the restructuring actions, we terminated the employment
of 159 employees, consisting primarily of applications development employees,
technical and other support employees, and administrative employees in all of
our locations. In addition, we did not replace approximately 40 employees who
resigned voluntarily during October and November 2000. At December 31, 2000, we
had terminated all employees associated with these restructuring actions. As of
June 30, 2001, we exited a portion of our facility in Salt Lake City, Utah;
exited duplicative offices in Chicago, Illinois and Dallas, Texas; and
terminated a duplicative office lease in San Francisco, California. We have
entered into sublease arrangements for our Dallas, Texas and Chicago, Illinois
office space.

     We expect to generate annualized savings of approximately $40 million from
this restructuring, in the following areas: $30 million in reduced cost of
revenues, $3 million in reduced sales and marketing expenses, $4 million in
reduced research and development expenses, and $3 million in reduced general and
administrative expenses.

     Restructuring reserves are included in accrued liabilities at June 30,
2001.


<TABLE>
<CAPTION>
    Fourth Quarter 2000               Balance at                                              Balance at
   Restructuring Actions:         December 31, 2000        Reversals        Utilized        June 30, 2001
-----------------------------    ---------------------    -------------    -----------    -------------------
<S>                              <C>                      <C>              <C>            <C>
Employee related                           $141                $  -            $141                $  -
Facilities related                          321                   -             170                 151
                                           ----                ----            ----                ----
                                           $462                $  -            $311                $151
                                           ====                ====            ====                ====

                                      Balance at                                              Balance at
Balance Sheet Components:         December 31, 2000        Reversals        Utilized        June 30, 2001
-----------------------------    ---------------------    -------------    -----------    -------------------
Accrued liabilities                        $321                $  -            $170                $151
Accounts payable                            141                   -             141                  --
                                           ----                ----            ----                ----

                                           $462                $  -            $311                $151
                                           ====                ====            ====                ====
</TABLE>

     Total Other Income, net

                                       37
<PAGE>

Net total other income decreased $699,000, or 99 percent, to $6,000 for the
three months ended June 30, 2001 compared to $705,000 for the same period in
2000, while net other income increased $12.7 million, to $14.0 million for the
six months ended June 30, 2001 compared to $1.2 million for the same period in
2000. The decrease for the three months ended June 30, 2001 as compared to the
same period in 2000 was due primarily to the recognition during the three months
ended June 30, 2000 of $540,000 of other income related to a fee paid to us by
Perot Systems. The increase for the six months ended June 30, 2001 as compared
to the same period in 2000, was primarily due to a gain of approximately $13.8
million on the sale of The LongView Group, Inc. to Linedata Services on March
15, 2001. See Note 12 of "Notes to Condensed Consolidated Financial Statements"
for additional information.

     Provision for Income Taxes

     The provision for income taxes was $379,000 for the three months ended June
30, 2001 as compared to a benefit of $3.1 million for the same period of 2000,
while the provision for income taxes was $3.2 million for the six months ended
June 30, 2001 as compared to a benefit of $1.4 million for the same period of
2000. The provision for the three months ended June 30, 2001 is primarily for
foreign taxes, while 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., foreign taxes, and an adjustment to record a valuation allowance against
the remaining net tax assets.

     At June 30, 2001, management 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. Based on a number of factors, the
currently available, objective evidence indicates that it is more likely than
not that the net deferred tax assets will not be realized.

     Minority Interest

     Minority interest was $0 for the three months ended June 30, 2001 as
compared to $(8,000) for the same period in 2000, while minority interest was $0
for the six months ended June 30, 2001 as compared to $0 for the same period in
2000. These amounts represent the minority stockholders' proportionate interest
in the net income (loss) of our subsidiaries. As of June 30, 2001 we have no
minority interest holders of our subsidiaries' stock.

Liquidity and Capital Resources

     We have funded our operations to date primarily through cash flows from
operations, through cash generated from our initial public offering in May 1999,
the private sale of securities, and through the use of lines of credit and
equipment leases. During the six months ended June 30, 2001 we also used
proceeds from our sale of The LongView Group, Inc. to help fund operations.

     Net cash used in operating activities was $22.7 million for the six months
ended June 30, 2001 as compared to $9.4 million net cash used in operating
activities during the six months ended June 30, 2000. The increase in cash flows
used in operating activities was due primarily to lower cash inflows from lower
new sales and revenues.

     Net cash provided by investing activities was $21.7 million for the six
months ended June 30, 2001 as compared to net cash used of $11.0 million during
the six months ended June 30, 2000. During the three months ended March 31,
2001, we sold The LongView Group, Inc. to Linedata Services for $29.0 million.
The additions to restricted cash for the six months ended June 30, 2001, are
primarily 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.

                                       38
<PAGE>

     Net cash used in financing activities was $3.0 million for the six months
ended June 30, 2001 as compared to $4.7 million net cash provided by financing
activities during the six months ended June 30, 2000. 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, which were
partially offset by proceeds of $458,000 from the issuance of shares under the
employee stock purchase plan.

     On January 18, 1999, we entered into a Revolving Line of Credit (the
"Credit Facility") providing for borrowings of up to $5.0 million. The Credit
Facility included covenants relating to the maintenance of certain financial
ratios and cash balances and limiting the payment of dividends. Through a series
of modifications, we increased the availability under the Credit Facility to
$15.0 million and established the ability to issue letters of credit against
this availability. We agreed to secure outstanding letters of credit with
compensating cash balances upon default or expiration of the Credit Facility.
During 2000, we obtained letters of credit of approximately $3.5 million related
to office leases and $2.0 million to secure a performance bond. On November 15,
2000 our ability to borrow under the Credit Facility expired. We had no
borrowings under the Credit Facility. On December 1, 2000, we received notice of
a right to cure, referencing failure to provide the lender with cash collateral
to secure the outstanding letters of credit and our failure to meet and maintain
certain financial covenants described in the Credit Facility. Upon receiving
this notice, we commenced negotiations with the lender to satisfy the right to
cure. On January 19, 2001 we allowed the lender to secure a perfected lien under
its security agreement. On February 23, 2001, we further modified the Credit
Facility with a Modification and Forbearance Agreement. This agreement provides
us with a limited waiver of defaults and forbearance of remedies. The limited
waiver and forbearance of remedies applies to the cash collateral and financial
covenant requirements. The waiver had an expiration date of the earlier of May
31, 2001 or on the occurrence of an event of default on any of our obligations
to the lender, including a $2.4 million property loan and $6.3 million in notes
payable outstanding at December 31, 2000. The Agreement also allows for cross
default on all of our obligations with the bank. The cash collateral agreement
required us to bring the balance of a restricted cash collateral account to $3.5
million prior to June 30, 2001. On March 16, 2001, we complied with the
requirements of the cash collateral agreement and, using $3.5 million of the
cash proceeds received from the sale of LongView, increased the balance in the
restricted cash collateral account to $3.5 million. On April 2, 2001 we extended
the waiver expiration date in the Modification and Forbearance Agreement from
May 31, 2001 to January 1, 2002. As the waiver expiration date is within 12
months of the date of these financial statements, we have classified the amounts
outstanding to the lender as current liabilities in the Condensed Consolidated
Balance Sheet at June 30, 2001. We expect to enter into further discussions with
the lender regarding these requirements and other matters prior to the waiver
expiration date. Additional cash collateral amounts may be required upon
expiration of the waiver to secure a $2 million performance bond.

Recent Accounting Pronouncements

     In September 2000, the FASB issued SFAS No. 140, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities -- a
replacement of FASB Statement No. 125. This standard revises the standards for
accounting for securitizations and other transfers of financial assets and
collateral and requires certain disclosures. This standard is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after March 31, 2001 and for disclosures relating to securitization
transactions and collateral for fiscal years ending after December 15, 2000. The
adoption of SFAS No. 140 did not have a material effect on our business, results
of operations, financial position, or liquidity.

     In July 2001, the FASB issued SFAS No. 141 Business Combinations and SFAS
No. 142 Goodwill 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

                                       39
<PAGE>

of operations, but instead would 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 are required
to adopt the provisions of SFAS No. 141 immediately, and SFAS No. 142 on January
1, 2002. We do not expect the adoption of SFAS Nos. 141 and 142 will have a
material effect on our 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.

     If we are unable to generate sufficient cash flow from operations, or from
     other sources, we may be unable to continue operations as a going concern.

     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, 2000 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, based upon our historical operating performance,
our financial position at December 31, 2000 and our involvement in significant
legal proceedings. We believe that the strength of our core technologies,
product assets, customer base, and the corrective actions that we have taken and
are taking, provide a solid foundation for our continued operation in 2001.
Additionally, we will continue to seek additional capital to finance our
operations through the remainder of 2001. However, there can be no assurance
that the measures taken to date or additional measures, if necessary, will prove
successful.

     If we do not complete our existing projects, we may not receive final
     payments, which would impair our ability to continue operations.

     We believe that if we fail to complete our delivery commitments on our
existing contracts, our customers may withhold their final payments. In most
cases, the amounts associated with final delivery are significant. If we do not
receive final payments on existing contracts, our operations, financial
condition, liquidity, and prospects could 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, and re-evaluate the TenFold business
model. 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.

     We may continue to experience difficulty in securing future customer
     revenue.

     We believe that some prospective customers may be delaying and canceling
purchase decisions as a result of the litigation and customer disputes against
us, the decline in our stock price, and our financial results for the last
several quarters. 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 could 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,
and re-evaluate the TenFold business model. 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.

     We may not be able to secure additional sources of financing when needed.

      Our business model relies upon generating new sales and receiving payments
from existing

                                       40
<PAGE>

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, and re-evaluate the TenFold
business model. 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 potential
remedies sufficiently to continue operations.

     Our failure to achieve cost reductions would negatively impact quarterly
     operating results.

     On November 14, 2000, we announced headcount reductions, consolidation of
facilities, and implementation of other measures in order to streamline our
efforts to focus on a return to profitability. On March 15, 2001 we announced
plans to close additional offices in Atlanta, Georgia; Foster City, California;
Irving, Texas; and Raleigh, North Carolina, and to further reduce our workforce.
On June 14, 2001 we announced plans to further reduce our workforce. We expect
that the reduction of headcount, the consolidation of facilities, and the other
measures will reduce total operating expenses during calendar 2001 and in future
periods. Our success in realizing the benefits intended by such actions is
impacted by the timing of our execution of these measures. There can be no
assurance that we will be successful in our efforts to reduce operating expenses
in future periods.

     We may continue to incur increased employee and consulting costs due to
     project delays on fixed-price contracts.

     We have experienced delays on some of our fixed-price customer projects. In
an effort to complete these projects, we have added additional employee and
consulting personnel to the projects. Each of these resources creates an
increased cost on the project. To the extent that the cost of such additions in
personnel are not contemplated in the contract price, the profit, if any, for
the projects would be adversely affected. There is no assurance that we will
complete these fixed-price customer contracts or that the projects will not
require additional personnel. If we cannot complete these customer projects or
if these customer projects continue to require additional personnel, our
business, results of operations, financial condition and liquidity would be
materially affected.

     Our existing errors and omissions coverage may not cover all existing
     claims.

     While we believe that our errors and omissions insurance coverage is
adequate to cover current claims related to customer disputes that arise
directly from our customer contracts, given the nature and complexity of the
factors affecting the estimated liabilities, the actual liabilities may exceed
our current errors and omissions coverage. In addition, our errors and omissions
insurance carrier has issued reservations of rights letters relating to each of
our existing claims. We can give no assurance that our insurance carrier will
not assert its rights under any of these letters to deny coverage. 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. In the event that liabilities
from such claims exceed our errors and omissions coverage, our business, results
of operations, financial position, or liquidity could be materially and
adversely affected.

     Our new errors and omissions insurance policy coverage does not cover
     contractual disputes.

     The errors and omissions insurance policy that we secured on March 1, 2001
is in the form of an industry standard software errors and omissions policy. As
such, the policy excludes contractual related disputes such as cost and time
related guarantees, and only covers software errors and omissions that occur
after the delivery of software. We have previously had these types of
contractual disputes related to our guarantees. No assurance can be given that
we will

                                       41
<PAGE>

not be subject to these types of claims in the future, which would not be
covered by our current errors and omissions insurance policy, and could
therefore have a material effect on our business, results of operations,
financial position, or liquidity.

     We are involved in litigation and disputes and may in the future be
     involved in further litigation or disputes which may be costly and time-
     consuming, and if we suffer adverse judgements our operating results could
     suffer.

     We are currently involved in significant litigation and customer disputes.
Additionally, one consolidated complaint has been filed alleging that TenFold
and certain officers have violated federal securities laws. See Note 9 of "Notes
to Condensed Consolidated Financial Statements" for more information concerning
these matters. We may in the future face other litigation or disputes with
customers, employees, 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.

     Our agreements with Perot Systems may restrict our sources of additional
     financing.

     Under agreements we reached with Perot Systems on December 8, 2000, we are
required to make six monthly payments of $441,000 each to Perot Systems
beginning on January 15, 2001. However, because of recent TenFold management
changes and TenFold's continuing restructuring, we continue to be in active
discussions with Perot Systems to consider the scope of our future relationship.
Therefore, we have not yet made these payments. Our failure to make these
payments in a timely manner to Perot Systems has made effective a stipulation in
the original strategic alliance agreement which prohibits us from licensing our
technology or selling an equity interest in TenFold or any of our affiliates to
certain Perot Systems competitors. Our inability to license our technology or
sell an equity interest in TenFold or any of our affiliates to certain potential
customers or investors may inhibit our ability to raise capital, if necessary,
to continue operations.

     Our future prospects are difficult to evaluate.

     In light of our operating results for recent periods, it is difficult to
evaluate our future prospects. We have only a limited number of applications
completed and currently in use and there can be no assurance that we will be
able to successfully complete any current or new projects. We have received
customer complaints concerning some of our projects. 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.

     Our stock may be subject to de-listing.

     Our Common Stock is currently traded on the Nasdaq National Market
("Nasdaq") under the symbol "TENF." Due to the recent decline in the share price
of our Common Stock and our operating losses, we have failed to meet certain of
Nasdaq's continued listing requirements and, as a result of this failure to
comply with said listing criteria, our Common Stock could be de-listed from
Nasdaq. Nasdaq 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. On May 25, 2001, we received a Nasdaq staff determination, indicating
that we failed to comply with certain Nasdaq listing requirements respecting the
minimum net tangible assets requirement of $4,000,000 and the $1.00 minimum bid
price requirement. We were further notified that, as a result of our non-
compliance with the foregoing listing criteria, our securities are subject to
de-listing from Nasdaq. We determined to appeal this Nasdaq staff's decision and
requested an oral hearing before a Nasdaq Listing Qualifications Panel on June
28, 2001. At the June 28 hearing, our executive management

                                       42
<PAGE>

presented their plan to regain compliance with the Nasdaq continued listing
criteria, and requested that the Panel grant TenFold adequate time in which to
implement the Plan. The Panel has not rendered its determination as of the date
of this filing. Depending upon the Panel's determination, our stock could remain
listed on Nasdaq, or it could be de-listed. If, as a result of the Panel's
determination, 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.

     There are many factors that may cause fluctuations in our quarterly
     financial results, and if results are below the expectations of securities
     market analysts, our stock price will likely decline.

     Recently and in the past, the software industry has experienced significant
downturns. This occurs particularly when general economic conditions decline and
spending on management information systems decreases. Our business, financial
condition, and operating results may continue to fluctuate substantially from
quarter-to-quarter as a consequence of general economic conditions in the
software industry. In addition, our revenues and operating results may continue
to vary significantly from quarter-to-quarter due to a number of factors that
affect our business and the software industry, including:

          .    the number, size, and scope of projects in which we are engaged;

          .    the contractual terms and degree of completion of our projects;

          .    any delays or changes in customer requirements incurred in
               connection with new or existing projects;

          .    the accuracy of our estimates of the resources required to
               complete ongoing, as well as new, projects;

          .    the adequacy of provisions for losses associated with fixed-price
               contracts;

          .    the adequacy of allowances for doubtful billed and unbilled
               accounts receivable;

          .    the timing of sales of our products and services; and

          .    delays in introducing new applications.

     Due to these factors, some of which are discussed in more detail elsewhere
in this section, we believe that quarter-to-quarter comparisons of our operating
results are not a good indication of our future performance. In future quarters,
our operating results may continue to be below the expectations of securities
market analysts and investors. In this event, the price of our common stock will
likely fall.

     Our historical quarterly operating results have varied significantly and
     future adverse quarterly operating results could cause our stock price to
     fall.

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

     If we fail to accurately estimate the resources required for a new
     fixed-price project, or the resources required to complete existing
     fixed-price projects, quarterly operating results could suffer and our
     stock price could fall.

                                       43
<PAGE>

     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. 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 contract and as we gain experience. Although we believe that we made
all appropriate adjustments to properly reflect the completion percentage and
status of contracts in process, we cannot be certain that future adjustments
will not be required. See Note 9 of "Notes to Condensed Consolidated Financial
Statements" for information about litigation and disputes related to some of our
projects.

     If we fail to adequately anticipate employee and resource utilization
     rates, quarterly operating results could suffer and our stock price could
     fall.

     Our operating expenses are largely based on anticipated revenue trends and
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. An unanticipated termination of a major project, the
delay of a project, or the completion during a quarter of several major projects
did and may continue to result in under-utilized employees and could, therefore,
cause us to suffer quarterly losses or adverse results of operations.

     We have experienced project delays, causing our quarterly operating results
     to suffer and our stock price to fall.

     Because we recognize service revenues on fixed-price obligations over the
period we develop an application, project delays have had and may continue to
have a significant negative impact on operating results. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Revenue Recognition" for a discussion of our revenue recognition policies. We
have recently and in the past experienced delays. See "Management Discussion and
Analysis of Financial Condition and Results of Operations - Revenues" for more
information concerning our customers and revenues. There can be no assurance
that we will not experience project delays in the future.

     Our sales cycle is lengthy and subject to delays and these delays could
     cause our quarterly operating results to suffer and our stock price to
     fall.

     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. 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 Discussion
and Analysis of Financial Condition and Results of Operations - Revenues" for
more information concerning our customers and revenues. There can be no
assurance that we will not experience sales delays in the future.

                                       44
<PAGE>

     We are dependent on a small number of large customers and the loss of one
     or more of these customers may cause revenues to continue to decline.

     As a result of our limited operating history, we have derived, and over the
near term we expect to continue to derive, a significant portion of our revenues
from a limited number of large customers. The loss of any of these large
customers, without their replacement by new large customers, has had and may
continue to have an adverse effect on our revenues. For example, we lost several
customers during the year ended December 31, 2000. In the future, revenues from
a single customer or a few large customers may constitute a significant portion
of our total revenues 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 hire us to develop applications 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 hire us to develop applications in a given year. See "Management
Discussion and Analysis of Financial Condition and Results of Operations -
Revenues" for more information concerning our customers and revenues.

     We have historically derived a significant portion of our revenues from
     customers in a small number of vertical industries.

     We 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. 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.

     Our historical guaranteed fixed-price, fixed-time contracts have had and
     may continue to have an adverse impact on our financial results.

     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 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. We will likely experience similar
situations in the future. Beginning in the fourth quarter of 2000, we no longer
offer the TenFold Guarantee as a standard part of our contracts.

     If we are unable to successfully market our services on a
     time-and-materials basis, our future operating results could suffer.

     An element of our prior strategy was to enter into fixed-price, fixed-time
contracts, and to provide the TenFold Guarantee as a standard part of our
contracts. Beginning in the fourth quarter of 2000, we no longer offer
fixed-price, fixed-time contracts or the TenFold Guarantee. We now offer our
services on a time-and-materials basis. Although we believe that our prior
guaranteed fixed-price offering was only one element of what motivated customers
to work with

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us, we do not yet have much experience marketing our services on a time-and-
materials basis. If we are unsuccessful marketing our services on a time-and-
materials basis, or are forced to reduce our rates for such services, or are
required to provide significant concessions to convert existing fixed-price
projects to time-and-materials based projects, it may have a material adverse
impact on our business, results of operations, financial position, or liquidity.

     If we are unable to successfully divest our vertical applications products,
     our future financial results could suffer.

     An element of our business strategy is to develop and then divest vertical
applications lines of business. Our ability to divest such assets in accordance
with management's plans is critical to providing us with additional liquidity as
we complete our restructuring to a UA technology led enterprise. If we are
unable to successfully implement this strategy or within the time frames
anticipated, our revenues, growth, and operating results will suffer.

     If our software contains defects or other limitations, we could face
     product liability exposure.

     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 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.

     Our failure to manage our organizational structure could impair our
     business.

     Historically, our growth and new projects placed significant demands on our
management and other resources. With our recent closing of offices and
reductions in force, we may be unable to manage our organization and projects
effectively. This inability could have a material adverse effect on our ability
to deliver applications in the required timeframes, the quality of our services
and products, our ability to retain key personnel, our business, our financial
condition, and our results of operations. Our ability to manage our current
organizational structure effectively will require us to continue to develop and
improve our operational, financial, and other internal systems, as well as our
business development capabilities, and to train, motivate, and manage our
employees, and to maintain project quality.

     A loss of Nancy M. Harvey, Jeffrey L. Walker, or any other key employee
     could impair our business.

     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,

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Chairman of the Board of Directors, Executive Vice President, and Chief
Technology Officer; Sameer E. Shalaby, Senior Vice President of Development; and
Adam Slovik, Senior Vice President of Applications Products. 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 recently entered into an employment
agreement with our President and Chief Executive Officer, Nancy M. Harvey. We
are currently in the process of negotiating employment agreements with 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 failure to attract and retain highly skilled employees, particularly
     project managers and other senior technical personnel, could impair our
     ability to complete projects and expand our business.

     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 growth and success depends on our ability to resell applications
     products; however, we have limited experience reselling applications
     products to date and our current and future agreements with our customers
     may limit our ability to resell applications products in the future.

     The success of our business is dependent, in part, upon our ability to
develop software applications for customers that we can resell to other
customers or resellers in the same industry without significant modification. If
we are unable to develop and license these applications successfully or within
the time frames anticipated, our revenues, growth, and operating results will
suffer. Some customers have prohibited us from marketing the applications
developed for them generally or for specified periods of time or to specified
third parties, or have required that we pay them a royalty on licenses of the
application to third parties. Customers may continue to make similar demands in
the future. Furthermore, there can be no assurance that we will be able to
develop software applications that can be marketed generally within a particular
industry without the need for significant modification. Our current product
plans include the introduction of multiple resalable products in the near term.

     Our growth and success depends on our ability to sell the Universal
     Application; however, we have limited experience selling the Universal
     Application to date.

     The success of our business is dependent, in part, upon our ability sell
the Universal Application. If we are unable to license the Universal Application
successfully or within the time frames anticipated, our revenues, growth, and
operating results will suffer.

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     If we cannot protect or enforce our intellectual property rights, our
     competitive position would be impaired and we may become involved in costly
     and time-consuming litigation.

     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 granted two
patents and applied for one additional patent in the United States and intend to
continue to seek patents on our technology where 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.
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.

     If we fail to successfully compete, our growth and market share will be
     adversely affected.

     The market for our products and services is highly competitive, and if we
are not successful in competing in this market, our growth and market share will
suffer. We believe that we currently compete principally with vertical software
providers, ERP packaged software providers, consulting and software integration
firms, e-Services consultants, and internal information technology
organizations. Many of these 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.

     We believe that the principal competitive factors in our markets include
quality of services and products, functionality, speed of development and
implementation, price, project management capability, and technical and business
expertise. We believe that our ability to compete also depends in part on a
number of competitive factors outside our control, including the ability of our
competitors to hire, retain, and motivate project managers and other senior
technical staff, the development by others of software and services that are
competitive with our products and services, and the extent of our responsiveness
to customer needs. There can be no assurance that we will be able to compete
successfully with our competitors.

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<PAGE>

     If we fail to release new versions of our products or product enhancements
     in a timely manner to accommodate technological change, our ability to grow
     our business will suffer.

     The market in which we compete is characterized by rapid technological
change, including new versions of operating systems, relational databases or new
hardware technologies. We may need to modify our products to accommodate these
changes. Our revenues and market share will decline if we fail to release new
versions of our products or product enhancements in a timely manner or if these
products and product enhancements fail to achieve market acceptance when
released. In addition, customers may defer or forego purchases of our products
if our competitors or major hardware, systems, or software vendors introduce or
announce new products or product enhancements.

     No corporate actions requiring stockholder approval can take place without
     the approval of our controlling stockholders.

     The executive officers, directors, and entities affiliated with them, in
the aggregate, beneficially own approximately 60 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 48 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.

     The anti-takeover provisions in our charter documents and under Delaware
     law could discourage a takeover that stockholders may consider favorable.

     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.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

        Interest Rate Risk. As of June 30, 2001, we had cash and cash
equivalents of $9.6 million and $8.9 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, 2001 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. 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, deferred revenue, 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, 2001 rate would
cause the fair value of such monetary assets and liabilities in the United
Kingdom to change by approximately $31,000. We are not currently engaged in any
foreign currency hedging activities.

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PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

Recently Resolved Customer Disputes

     During the six months ended June 30, 2001, we have settled five of our
customer disputes.

     Westfield

     On September 17, 1999, Ohio Farmers Insurance Company doing business as
Westfield Companies ("Westfield"), filed a complaint in the United States
District Court for the District of Ohio seeking $5.8 million from us. The
complaint alleged that we failed to deliver on contractual commitments under a
license agreement with Westfield and included specific claims of anticipatory
breach of contract, breach of express warranty, and negligent misrepresentation.
The $5.8 million sought from us by Westfield was paid to us by Westfield in the
first half of 1999 and was recognized as revenue by us during that period. On
November 4, 1999, we filed an Answer and Counterclaim denying these allegations
and seeking recovery of $3.9 million that Westfield owed us under the license
agreement together with claims for additional damages. Effective April 26, 2001,
the parties entered into a Settlement Agreement and Mutual Release in which the
parties agreed to settle and resolve all claims between the two companies in
consideration for each dismissing all claims against the other and in further
consideration of a compromised and confidential payment from our errors and
omissions carrier to Westfield in excess of our self-insured retention of
$25,000 already paid by TenFold to cover legal defense costs. The complaint and
counterclaim have been dismissed and all claims have been released.

     Nielsen

     On June 14, 2000, Nielsen Media Research, Inc. ("Nielsen"), filed a
complaint in the Circuit Court of Cook County, Illinois seeking $4.5 million,
plus out of pocket expenses paid by Nielsen to us. The complaint alleged that we
failed to deliver on contractual commitments under a license and services
agreement with Nielsen and included specific claims of breach of contract and
violation of the Illinois Consumer Fraud and Deceptive Practices Act. On August
30, 2000, we filed an Answer and Counterclaim denying Nielsen's claims and
seeking recovery of at least $1.7 million that Nielsen owed us under the license
agreement, plus our attorney fees and costs. Effective May 30, 2001, the parties
entered into a Settlement Agreement and Mutual Release in which the parties
agreed to settle and resolve all claims between the two companies in
consideration for each dismissing all claims against the other and in further
consideration of a compromised and confidential payment from our errors and
omissions carrier to Nielsen in excess of our self-insured retention of $100,000
already paid by us to cover legal defense costs. The complaint and counterclaim
have been dismissed and all claims have been released.

     Trumbull

     On August 18, 2000, Trumbull Services, L.L.C. ("Trumbull"), filed a demand
for arbitration with the American Arbitration Association seeking a refund of at
least $2.8 million paid by Trumbull to us. The demand alleged that we failed to
deliver on contractual commitments under the Master Software License and Service
Agreement, (the "Trumbull Agreement"), as amended. Trumbull claimed it was
entitled to a refund of fees paid to us from the second quarter of 1999 through
the second quarter of 2000. On September 13, 2000, we filed an Answer and
Counterclaim denying Trumbull's allegations and seeking recovery of
approximately $2.0 million in fees that Trumbull owed us under the Trumbull
Agreement. On May 10, 2001, TenFold and Trumbull entered into a Settlement
Agreement and Mutual Release in which the parties agreed to settle and resolve
all claims between the two companies in consideration for each dismissing all
claims against the other and in further consideration of a compromised and
confidential payment from our errors and omissions carrier to Trumbull in excess
of our self-

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insured retention of $100,000. The arbitration proceeding has been cancelled and
all claims have been released.

     Unitrin

     On October 4, 2000, Unitrin Services Company, Inc. ("Unitrin"), sent us a
notice of dispute letter requesting non-binding mediation. Unitrin was seeking a
refund of fees paid by Unitrin to us for the PowerPAC application of
approximately $13.3 million, plus other unspecified damages. Settlement
negotiations between TenFold and Unitrin continued and on March 8, 2001, the
parties entered a Confidential Settlement Agreement and Release, dismissing all
of Unitrin's claims. Our errors and omissions insurance carrier paid the entire
amount of the compromised and confidential settlement sum above the $100,000 of
self-insurance retention already paid by us to cover legal defense costs.

     Other

     On April 4, 2001, we received a letter from another customer alleging that
we had materially breached our contract with that customer. On May 2, 2001, we
entered a Termination and Settlement Agreement with this customer under which
the customer agreed to pay TenFold a compromised and confidential settlement
amount for services we have provided to this customer. As a result of the
Termination and Settlement Agreement, we recognized $2.2 million in revenues
from this customer during the three months ended June 30, 2001 and recognized no
revenue from this customer for the same period in 2000. We recognized $2.9
million in revenues from this customer during the six months ended June 30, 2001
and recognized no revenue from this customer for the same period in 2000. The
$2.2 million revenue recognized during the three months ended June 30, 2001,
represented existing deferred profits on the contract.

Unresolved Customer Disputes

     Although we have settled five of our customer disputes, we have four
unresolved customer disputes.

     Utica

     On November 9, 2000, Utica Mutual Insurance Company ("Utica"), notified us
of its intent to terminate the Software License and Services Agreement ("Utica
Agreement") dated November 2, 1998. On December 15, 2000, Utica sent a letter to
us proposing that the parties rescind the contract, that we refund all payments
made by Utica, and that we compensate Utica for the expenses Utica allegedly
incurred in fulfilling its contractual duties. On December 20, 2000, Utica
provided us with statutorily required notice of alleged violations of Utah's
Truth in Advertising statute. On January 3, 2001, Utica filed a complaint
against us in the Federal District Court of Utah. In its complaint, Utica
asserts claims for breach of contract, breach of warranties and guarantees,
false advertising under a Utah statute, negligent misrepresentation, and fraud.
Utica seeks monetary damages of approximately $15.5 million in fees and expenses
under the contract, plus any additional amount recoverable under the contractual
guarantee, as well as punitive damages, prejudgment interest, attorneys' fees,
and costs. Utica also seeks an injunction against alleged false advertising by
TenFold under a Utah truth-in-advertising statute. On January 23, 2001, we filed
an Answer denying Utica's claims. On February 27, 2001, Utica filed a motion for
partial summary judgment on its breach of contract claim seeking an order of
rescission. On March 29, 2001, we filed our opposition to Utica's motion for
partial summary judgement. On May 1, 2001, the court heard argument and denied
Utica's motion for partial summary judgment, finding no basis for rescission of
the contract. However, the court also made a finding that TenFold had failed to
deliver the software application within the time allowed under the amended
contract. A hearing was held on June 15, 2001 to discuss the form of the Order
to be used by the court to reflect the denial of Utica's motion, while
preserving the finding of breach for non-delivery. The court has the matter
under advisement.

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     Discovery is ongoing and our outside legal counsel continues to investigate
the relevant legal and factual issues. As of June 30, 2001, of the fees paid by
Utica, $1.7 million has not been recognized as revenue and is included in
accrued liabilities together with an accrued loss amount of $582,000 which we
established during the quarters ended June 30, 2000 and September 30, 2000 in
the normal course of performing our percentage-of-completion calculations.

     The total revenues recognized by us from the Utica Agreement from November
2, 1998 through June 30, 2001, were $7.6 million. Of this amount, $3.9 million
is not subject to the terms of the limited guarantee. We recognized no revenue
from the Utica Agreement for the three months ended June 30, 2001, and
recognized negative $2.7 million during the same period of 2000. We recognized
no revenue from the Utica Agreement for the six months ended June 30, 2001, and
recognized negative $1.6 million during the same period of 2000.

     Although this matter is still in the early stages of litigation, it is
probable, based on the court's factual finding of breach, that TenFold will
suffer a loss on Utica's claims that we failed to deliver the software
application within the time allowed under the contract. We believe that our
errors and omissions insurance covers damages that may arise out of Utica's
claims that we failed to deliver the software application within the time
allowed under the contract, as well as covering the costs of legal defense,
subject to the policies' total limit, and the insurance carrier's standard
reservation of rights. Our insurance carrier has authorized a settlement offer
that has been communicated to Utica. If necessary, we will vigorously assert our
rights under the Utica Agreement and defend against Utica's claims. An
unfavorable outcome of this matter may have a material adverse impact on our
business, results of operations, financial position, or liquidity.

     SCEM

     On November 2, 2000, we received notice of intent to terminate the Master
Software Licenses and Service Agreement (the "SCEM Agreement") between us and
Southern Company Energy Marketing L.P. ("SCEM") due to an alleged material
nonperformance by us. SCEM filed a demand for arbitration with the American
Arbitration Association on November 22, 2000 seeking damages for delays in
delivering a suite of software applications . We responded in a timely manner to
the demand denying that we breached the contract and filed detailed
Counterclaims including a breach of contract claim against SCEM for improper and
ineffective termination of the contract and nonpayment. An arbitration hearing
was conducted in Dallas, Texas during the week of June 18, 2001. SCEM sought
damages from TenFold of approximately $10.5 million, while TenFold sought
recovery of approximately $6.8 million from SCEM. The arbitrator has until
August 23, 2001 to rule on the parties' claims. Total revenue recognized by us
during the second quarter of 1999 through the first quarter of 2001 was $11.5
million. For the three months ended June 30, 2001, we recognized no revenue from
SCEM and recognized $1.6 million from SCEM during the same period in 2000. We
recognized no revenue from the SCEM Agreement for the six months ended June 30,
2001, and recognized $4.5 million during the same period of 2000.

     It is not possible to predict the outcome of the arbitration proceeding at
this juncture. An unfavorable outcome of this matter may have a material adverse
impact on our business, results of operations, financial position, or liquidity.

     Crawford

     On December 14, 2000, Crawford & Company ("Crawford") sent a letter to us
purporting to give notice of breach under the terms of the Master Software
License and Services Agreement between us and Crawford (the "Crawford
Agreement"). Crawford's letter also purports to give notice of Crawford's
election to terminate the Crawford Agreement. Crawford's letter asserts that we
failed to deliver the NIMBUS software application within the agreed schedule for
doing so. Although Crawford has not filed a formal complaint or made a formal
demand for arbitration, Crawford is demanding refund of all fees paid by
Crawford under the Crawford Agreement, plus a performance penalty of $2.0
million. The Crawford Agreement provides that, in the event of a

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dispute, the parties must follow a dispute resolution procedure consisting
initially of a three-tiered negotiation process by which settlement negotiations
are elevated to increasingly higher levels of management for 90 days before
either party makes a demand for arbitration. The parties met on January 25, 2001
in the second tier of settlement negotiations. The parties were unable to reach
agreement and exchanged correspondence confirming the topics discussed at the
meeting. We are waiting for Crawford to initiate the third tier of negotiations.
The Crawford Agreement further provides that if resolution is not achieved
within the 90-day period, the dispute shall be determined by binding arbitration
upon the initiation of either party. Neither party has demanded arbitration. For
the three months ended June 30, 2001, we recognized no revenue from Crawford and
recognized $1.1 million in revenues from Crawford during the same period in
2000. We recognized no revenue from the Crawford Agreement for the six months
ended June 30, 2001, and recognized $2.1 million during the same period of 2000.

     We do not believe that we materially breached the Crawford Agreement.
Should Crawford persist in its attempt to terminate the Crawford Agreement, we
will vigorously assert our rights under the Crawford Agreement and defend
against Crawford's claims, including recovery of the amounts that Crawford owes
us and the remaining amounts due under the Crawford Agreement totaling at least
$1.8 million. An unfavorable outcome of this matter may have a material adverse
impact on our business, results of operations, financial position, or liquidity.

     SkyTel

     In March 2001, SkyTel Communications, Inc. ("SkyTel") orally informed us of
its intent to terminate the Master Software License and Services Agreement
between SkyTel and us (the "SkyTel Agreement"). On May 15, 2001, SkyTel sent us
a letter purporting to terminate the SkyTel Agreement based on our alleged
material breach of the SkyTel Agreement. SkyTel's letter also demands a refund
of approximately $11 million paid by SkyTel under the SkyTel Agreement. The
matter is in its preliminary stages, and based on the information currently
available, we will vigorously assert our rights under the agreement and defend
against the customer's claims, including payment of the amounts that the
customer owes us and the remaining amounts due under the agreement totaling at
least $ 6.2 million. While we believe that this potential dispute will be
covered by one of our prior errors and omissions and umbrella liability
policies, if the alleged error or omission did occur, we would need to show that
it occurred during the coverage period of the prior policy. The total contract
value of this potentially material customer dispute is approximately $17.6
million, of which $11.4 million has been received by us to date. An unfavorable
outcome of this matter may have a material adverse impact on our business,
results of operations, financial position, or liquidity.

     As a result of the legal proceedings and contingencies noted above, we have
provided an allowance for doubtful accounts of $1.7 million related to billed
accounts receivable and $1.8 million related to unbilled accounts receivable at
June 30, 2001.

     We maintained errors and omissions and umbrella liability insurance
coverage to protect ourselves in the event of claims for damages related to the
performance of or failure to perform computer-related services that occurred
after March 1, 1998 but prior to March 1, 2001. We believe that this insurance
covers the types of alleged damages (but not unpaid or unbilled accounts
receivable) that may be claimed in the legal cases and customer disputes noted
above, as well as covering the costs of legal defense, subject to the policies'
total limit, and the insurance carrier's stated reservation of rights regarding
conditions or findings that might exclude coverage for a particular matter. We
have reserved against certain of the billed and unbilled accounts receivable
related to these disputed amounts for which a loss is considered probable. An
unfavorable outcome or claim not covered by an insurance policy on one or more
of these matters may have a material adverse impact on our business, results of
operations, financial position, or liquidity.

     On November 18, 2000, our excess errors and omissions policy expired. On
March 1, 2001,

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<PAGE>

our primary errors and omissions policy expired. On March 1, 2001, we secured a
new, industry standard, errors and omissions policy that covers claims made
after March 1, 2001. Our 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. We believe this policy provides adequate
coverage for potential damages related to errors and omissions in our delivered
software.

     We may in the future face other litigation or disputes with customers,
employees, 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.

Stockholder Matters

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

     On October 30, 2000, our motion to consolidate the six complaints into one
class action complaint was granted. On March 7, 2001, the court appointed lead
plaintiffs and lead class counsel. On May 1, 2001, the plaintiffs filed an
amended consolidated complaint that repeats their earlier allegations while
adding additional details regarding the projects on which revenue was allegedly
improperly recognized. TenFold filed a motion to dismiss the amended complaint
on June 19, 2001.

     Management and outside legal counsel believe that the defendants have
meritorious defenses to the allegations made in these lawsuits. Because the
matter is in its preliminary stages, our outside legal counsel is not able to
provide an opinion on the probable outcome of the claim and therefore, no
provision for loss has been recorded in our Condensed Consolidated Financial
Statements. Although we carry directors and officers liability insurance that we
believe is sufficient for such class action claims, we intend to vigorously
defend ourselves and we deny any wrongdoing. An unfavorable outcome of this
matter may have a material adverse impact on our business, results of
operations, financial position, or liquidity.

SEC Inquiry

     On May 26, 2000, the United States Securities and Exchange Commission
("SEC") issued a Formal Order Directing Private Investigation. The Order
contains no specific factual allegations. We understand, however, that the SEC
is conducting a non-public fact-finding inquiry into our revenue recognition
decisions on approximately 15 contracts. We have received several document
subpoenas from the SEC and we have complied or are in the process of complying
with them. We have learned that the SEC has issued subpoenas to our independent
auditors and to several of our current and former customers. In February 2001,
the SEC took testimony from our former Chief Financial Officer. In March 2001,
the SEC took testimony from our Senior Vice President of Applications Products
and our former Senior Vice President, Sales and Marketing who was also the
President of TenFold Insurance, Inc.

     The inquiry is in its preliminary stages and we have retained outside legal
counsel to represent us concerning the investigation. The SEC has a number of
statutory remedies that it may use in both fraud and non-fraud (books and
records) enforcement proceedings. These remedies include various forms of
injunctive relief, monetary penalties, and orders barring

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<PAGE>

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 us
and our officers. Management and outside legal counsel believe that we have
meritorious defenses to any allegations the SEC may make and intend to continue
to cooperate fully with the SEC. However, because the inquiry is in its
preliminary stages, our outside legal counsel is not able to provide an opinion
on the probable outcome of the inquiry. An unfavorable outcome of this matter
may have a material adverse impact on our business, results of operations,
financial position, or liquidity.

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<PAGE>

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits


 Number       Description
 ------       -----------

  10.1#       Employment Agreement Between TenFold Corporation and Donald R.
              Jefferis
  10.2#       Restricted Stock Bonus Agreement Between TenFold Corporation and
              Nancy M. Harvey
  10.3#       Separation of Employment and Engagement as a Consultant Agreement
              Between TenFold Corporation, TenFold Insurance Inc., and Bernard
              C. Mazon
  11*         Computation of Shares used in Computing Basic and Diluted Net
              Income Per Share


   * Incorporated by reference to "Notes to Condensed Consolidated Financial
Statements" herein
   # Indicates management contract or compensatory plan or arrangement


(b)      Reports on Form 8-K

         None

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<PAGE>

                                  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:      /s/ Donald R. Jefferis
                                                  ------------------------------
                                                     Donald R. Jefferis
                                                     Chief Financial Officer

         Date:  July 26, 2001

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