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

FORM 10-Q

|(Mark One)                                                                
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|x                                                                         
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|o                                                                         
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|TenFold Corporation (Exact name of registrant as specified in its
charter)
|                                                                          
|Delaware                                                                  
|(State or other jurisdiction of incorporation or organization)            
|                                                                          
|698 West 10000 South                                                      
|South Jordan, Utah 84095                                                  
|(Address of principal executive offices, including zip code)              
|                                                                          
|(801) 495-1010                                                            
|(Registrants telephone number, including area code)                      
|                                                                          
|                                                                          
|                                                                          
|                                                                          

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 o
|----- | ----

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

|Yes o | No x
|----- | ----

As of March 31, 2003, there were 40,676,536 shares of the registrants Common Stock outstanding.

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INDEX

|                              |         |                                                                                                              | Page
|----------------------------- | ------- | ------------------------------------------------------------------------------------------------------------ | ----
|                              |         |                                                                                                              |     
|                              |         | Forward-Looking Statements                                                                                   | 3   
|                              |         |                                                                                                              |     
|PART I.                       |         | FINANCIAL INFORMATION                                                                                        |     
|                              |         |                                                                                                              |     
|                              | Item 1. | Condensed Consolidated Financial Statements                                                                  |     
|                              |         |                                                                                                              |     
|                              |         | Condensed Consolidated Balance Sheets at March 31, 2003 and December 31, 2002                                | 4   
|                              |         |                                                                                                              |     
|                              |         | Condensed Consolidated Statements of Operations for the three months ended March 31, 2003 and March 31, 2002 | 5   
|                              |         |                                                                                                              |     
|                              |         | Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2003 and March 31, 2002 | 6   
|                              |         |                                                                                                              |     
|                              |         | Notes to Condensed Consolidated Financial Statements                                                         | 7   
|                              |         |                                                                                                              |     
|                              | Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations                        | 17  
|                              |         |                                                                                                              |     
|                              | Item 3. | Quantitative and Qualitative Disclosures About Market Risk                                                   | 40  
|                              |         |                                                                                                              |     
|                              | Item 4. | Controls and Procedures                                                                                      | 40  
|                              |         |                                                                                                              |     
|PART II.                      |         | OTHER INFORMATION                                                                                            |     
|                              |         |                                                                                                              |     
|                              | Item 1. | Legal Proceedings                                                                                            | 41  
|                              |         |                                                                                                              |     
|                              | Item 2. | Changes in Securities and Use of Proceeds                                                                    | 41  
|                              |         |                                                                                                              |     
|                              | Item 3. | Defaults Upon Senior Securities                                                                              | 41  
|                              |         |                                                                                                              |     
|                              | Item 6. | Exhibits and Reports on Form 8-K                                                                             | 42  
|                              |         |                                                                                                              |     
|Signature and Certifications. | 43     

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FORWARD-LOOKING STATEMENTS

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

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##### Table of Contents

PART I.          
FINANCIAL INFORMATION

Item 1.            
Condensed Consolidated Financial Statements

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

|                                                                                                              |  | March 31, |         | December 31, |  
|------------------------------------------------------------------------------------------------------------- |  | --------- | ------- | ------------ | -
|                                                                                                              |  |           |         |              |  
|                                                                                                              |  | 2003      |         | 2002         |  
|                                                                                                              |  |           |         |              |  
|Assets                                                                                                        |  |           |         |              |  
|Current assets:                                                                                               |  |           |         |              |  
|Cash and cash equivalents                                                                                     |  | $         | 4,269   |              | $
|Accounts receivable, (net of allowances for doubtful accounts of $296 and $296, respectively)                 |  |           | 907     |              |  
|Unbilled accounts receivable, (net of allowances for doubtful accounts of $0 and $0, respectively)            |  |           | 60      |              |  
|Prepaid expenses and other assets                                                                             |  |           | 213     |              |  
|Income taxes receivable                                                                                       |  |           | 17      |              |  
|Other assets, (net of allowances of $158 and $158, respectively)                                              |  |           | 2,002   |              |  
|                                                                                                              |  |           |         |              |  
|Total current assets                                                                                          |  |           | 7,468   |              |  
|Restricted cash                                                                                               |  |           | 106     |              |  
|Property and equipment, net                                                                                   |  |           | 1,231   |              |  
|Other assets                                                                                                  |  |           |        |              |  
|                                                                                                              |  |           |         |              |  
|Total assets                                                                                                  |  | $         | 8,805   |              | $
|                                                                                                              |  |           |         |              |  
|Liabilities and Stockholders Deficit                                                                         |  |           |         |              |  
|Current liabilities:                                                                                          |  |           |         |              |  
|Accounts payable                                                                                              |  | $         | 1,326   |              | $
|Income taxes payable                                                                                          |  |           | 1,740   |              |  
|Accrued liabilities                                                                                           |  |           | 6,294   |              |  
|Deferred revenue                                                                                              |  |           | 14,884  |              |  
|Current installments of obligations under capital leases                                                      |  |           | 99      |              |  
|Other current liabilities                                                                                     |  |           | 2,000   |              |  
|                                                                                                              |  |           |         |              |  
|Total current liabilities                                                                                     |  |           | 26,343  |              |  
|                                                                                                              |  |           |         |              |  
|Long-term liabilities:                                                                                        |  |           |         |              |  
|Other long-term liabilities                                                                                   |  |           |        |              |  
|                                                                                                              |  |           |         |              |  
|Total long-term liabilities                                                                                   |  |           |        |              |  
|                                                                                                              |  |           |         |              |  
|Contingencies (Note 9)                                                                                        |  |           |         |              |  
|Stockholders deficit:                                                                                        |  |           |         |              |  
|Common stock, $0.001 par value:                                                                               |  |           |         |              |  
|Authorized: 120,000,000 shares                                                                                |  |           |         |              |  
|Issued and outstanding shares: 40,676,536 shares at March 31, 2003 and 37,382,080 shares at December 31, 2002 |  |           | 41      |              |  
|Additional paid-in capital                                                                                    |  |           | 66,646  |              |  
|Deferred compensation                                                                                         |  |           | (94     | )            |  
|Accumulated deficit                                                                                           |  |           | (84,131 | )            |  
|                                                                                                              |  |           |         |              |  
|Total stockholders deficit                                                                                   |  |           | (17,538 | )            |  
|                                                                                                              |  |           |         |              |  
|Total liabilities and stockholders deficit                                                                   |  | $         | 8,805   |              | $
|                                                                                                              |  |           |         |              |  

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

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

|                                                                                                  |  | Three Months Ended March 31, |       
|------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------
|                                                                                                  |  |                              |       
|                                                                                                  |  | 2003                         |       
|                                                                                                  |  |                              |       
|Revenues:                                                                                         |  |                              |       
|License                                                                                           |  | $                            | 3     
|Subscription                                                                                      |  |                              | 6,052 
|Services and other                                                                                |  |                              | 3,313 
|                                                                                                  |  |                              |       
|Total revenues                                                                                    |  |                              | 9,368 
|                                                                                                  |  |                              |       
|Operating expenses:                                                                               |  |                              |       
|Cost of revenues                                                                                  |  |                              | 2,275 
|Sales and marketing                                                                               |  |                              | 225   
|Research and development                                                                          |  |                              | 915   
|General and administrative                                                                        |  |                              | 1,241 
|Special charges                                                                                   |  |                              |      
|                                                                                                  |  |                              |       
|Total operating expenses                                                                          |  |                              | 4,656 
|                                                                                                  |  |                              |       
|Income (loss) from operations                                                                     |  |                              | 4,712 
|                                                                                                  |  |                              |       
|Other income (expense):                                                                           |  |                              |       
|Interest income                                                                                   |  |                              | 14    
|Interest expense                                                                                  |  |                              | (3    
|Other income                                                                                      |  |                              | 78    
|Gain on retirement of debt                                                                        |  |                              | 2,206 
|                                                                                                  |  |                              |       
|Total other income (loss), net                                                                    |  |                              | 2,295 
|                                                                                                  |  |                              |       
|Income (loss) before income taxes                                                                 |  |                              | 7,007 
|Provision (benefit) for income taxes                                                              |  |                              | 12    
|                                                                                                  |  |                              |       
|Net income (loss)                                                                                 |  | $                            | 6,995 
|                                                                                                  |  |                              |       
|Basic earnings (loss) per common share                                                            |  | $                            | 0.18  
|                                                                                                  |  |                              |       
|Diluted earnings (loss) per common share                                                          |  | $                            | 0.18  
|                                                                                                  |  |                              |       
|Weighted average common and common equivalent shares used to calculate earnings (loss) per share: |  |                              |       
|Basic                                                                                             |  |                              | 39,351
|                                                                                                  |  |                              |       
|Diluted                                                                                           |  |                              | 39,628
|                                                                                                  |  |                              |       

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

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

|                                                                                                   |  | Three Months Ended March 31, |       
|-------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------
|                                                                                                   |  |                              |       
|                                                                                                   |  | 2003                         |       
|                                                                                                   |  |                              |       
|Cash flows from operating activities:                                                              |  |                              |       
|Net income (loss)                                                                                  |  | $                            | 6,995 
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |                              |       
|Depreciation and amortization                                                                      |  |                              | 264   
|Impaired assets charge                                                                             |  |                              |      
|Provision for bad debts                                                                            |  |                              |      
|Amortization of deferred compensation                                                              |  |                              | 25    
|Gain on retirement of debt                                                                         |  |                              | (2,206
|Gain on sale of assets                                                                             |  |                              | (30   
|Changes in operating assets and liabilities:                                                       |  |                              |       
|Accounts receivable                                                                                |  |                              | 463   
|Unbilled accounts receivable                                                                       |  |                              | (29   
|Prepaid expenses and other assets                                                                  |  |                              | 89    
|Accounts payable                                                                                   |  |                              | 389   
|Income taxes payable                                                                               |  |                              | (3    
|Accrued liabilities                                                                                |  |                              | (142  
|Deferred revenues                                                                                  |  |                              | (5,444
|Other liabilities                                                                                  |  |                              | (53   
|                                                                                                   |  |                              |       
|Net cash provided by (used in) operating activities                                                |  |                              | 318   
|                                                                                                   |  |                              |       
|Cash flows from investing activities:                                                              |  |                              |       
|Proceeds from sale of property and equipment                                                       |  |                              | 33    
|Additions to property and equipment                                                                |  |                              | (31   
|Decreases to restricted cash                                                                       |  |                              | 32    
|                                                                                                   |  |                              |       
|Net cash provided by investing activities                                                          |  |                              | 34    
|                                                                                                   |  |                              |       
|Cash flows from financing activities:                                                              |  |                              |       
|Proceeds from employee stock purchase plan stock issuance                                          |  |                              |      
|Proceeds from common stock issuance                                                                |  |                              | 666   
|Exercise of common stock options                                                                   |  |                              | 1     
|Repurchase of common stock                                                                         |  |                              |      
|Principal payments on notes payable                                                                |  |                              |      
|Payments of notes receivable from stockholders                                                     |  |                              |      
|Principal payments on obligations under capital leases                                             |  |                              | (588  
|                                                                                                   |  |                              |       
|Net cash provided by (used in) financing activities                                                |  |                              | 79    
|                                                                                                   |  |                              |       
|Effect of exchange rate changes                                                                    |  |                              |      
|                                                                                                   |  |                              |       
|Net increase (decrease) in cash and cash equivalents                                               |  |                              | 431   
|Cash and cash equivalents at beginning of period                                                   |  |                              | 3,838 
|                                                                                                   |  |                              |       
|Cash and cash equivalents at end of period                                                         |  | $                            | 4,269 
|                                                                                                   |  |                              |       
|Supplemental disclosure of cash flow information:                                                  |  |                              |       
|Cash paid for income taxes                                                                         |  | $                            | 13    
|Cash paid for interest                                                                             |  | $                            | 2     

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

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TENFOLD CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.          Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements included herein have been prepared by TenFold Corporation
(TenFold) pursuant to the rules and regulations of the Securities and Exchange Commission. In managements opinion, the interim financial data presented includes all adjustments necessary for a fair presentation. All intercompany
accounts and transactions have been eliminated. Certain reclassifications have been made in the prior periods financial statements to conform to the current periods presentation. Certain information required by generally accepted
accounting principles has been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission. Operating results for the three months ended March 31, 2003 are not necessarily indicative of the results that may be
expected for any future period or for the year ending December 31, 2003.

This report should be read in conjunction with
TenFolds audited Consolidated Financial Statements for the year ended December 31, 2002 included in its Annual Report on Form 10-K filed with the Securities and Exchange Commission.

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

TenFolds financial statements have been prepared under the assumption that TenFold will continue as a going concern. During 2001 and 2002,
TenFold experienced significant challenges as it transitioned from a vertical applications business to an applications platform company. The general downturn in the economy and the events of September 11 caused a worldwide deterioration of demand
for IT services and for application software across many industries. It is uncertain when market demand will fully recover.

In order to improve cash flow, TenFold has taken aggressive steps to restructure its operations through work force reductions, terminating leases or
subleasing facilities, negotiating significantly discounted debt retirements, and other operational cost-saving measures. TenFold has made significant progress reducing operating cash outflows during 2001, 2002 and continuing into 2003. For the
three months ended March 31, 2003, TenFolds quarterly change in cash was $431,000 compared to $(5.3) million for the same period of the prior year.

TenFold has recently accomplished the following:

| |  | During September 2002, TenFold negotiated a termination of the unoccupied portions of its South Jordan, Utah headquarters lease reducing the square footage leased from 105,068
to 22,310 square feet, reducing the term from 11 years to 5 years, and reducing the rental rate per square foot. This reduced TenFolds total base rent obligations (before operating expenses) under this lease by approximately $19 million over
the term of the lease. As part of this transaction, TenFold released to the landlord $1.5 million previously held as restricted cash to support these leases.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | During October 2002, TenFold reduced its workforce by 45% and reduced senior executive compensation, as part of its continuing effort to reduce operating costs and improve cash
flow. This is expected to reduce staff related cash outflows by approximately $2 million quarterly.                                                                                                                                                                                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | During October 2002, TenFold executed an agreement with its primary lender under which TenFold paid a significantly reduced amount to retire its entire bank debt and eliminated
a related lien on its intellectual property.                                                                                                                                                                                                                                                                                                                                                                   

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| |  | During October 2002, TenFold sold its entire equity interest in its wholly owned subsidiary, TenFold Systems UK Limited, to the management of that subsidiary. TenFold has
previously distributed and supported its products in the United Kingdom through TenFold Systems UK Limited. Under the terms of this transaction, TenFold Systems UK Limited will continue to distribute TenFold products in the United Kingdom and
provide local support to its customers. TenFold is providing support for the Universal Application to TenFold Systems UK Limited and is sharing with TenFold Systems UK Limited revenues from existing and future TenFold Systems UK Limited customers.
With the sale of the UK subsidiary, TenFold eliminated significant recurring costs.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | During February 2003, TenFold executed agreements with its two major equipment lessors to buy out and fully retire their equipment lease debt at a substantial discount, and
return substantially all the related equipment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | During February 2003, TenFold sold 3,888,889 shares of common stock to a member of its Board of Directors for a total purchase price of $700,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

Although TenFold
believes it is making good progress towards its goals, and believes TenFold has established a foundation for providing a cash flow positive basis for continuing operations for 2003 as a whole, challenges and risks remain:

| |  | The independent auditors report on TenFolds December 31, 2002 financial statements, included an explanatory paragraph relating to their substantial doubt as to
TenFolds ability to continue as a going concern.                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                    
| |  | TenFold is currently substantially dependent on a small number of large customers for most of its cash inflows.                                                                                                                    
| |   |                                                                                                                                                                                                                                    
| |  | TenFold continues to face a challenging sales environment, and it is unclear when TenFold can expect to achieve significant sales to new customers.                                                                                
| |   |                                                                                                                                                                                                                                    
| |  | TenFold is overdue in paying some creditors who could take actions against TenFold.                                                                                                                                                
| |   |                                                                                                                                                                                                                                    
| |  | Although TenFold has significantly reduced the litigation against the company, and hopes to resolve the remaining matters without significant cost to TenFold, TenFold continues
to be involved in a small number of legal matters.

TenFold believes that it is continuing to
appropriately manage and reduce or eliminate these risks. However, there can be no assurance that TenFold will be successful, and if these risks have a materially adverse affect on its cash flow, it could have insufficient cash flow to continue
operations beyond the near term.

2.          Revenue Recognition

TenFold derives revenues from license fees, subscription fees, applications development and implementation services, support, and training services.
License revenues consist of fees for licensing the Universal Application as a tool, and license fees for the applications that TenFold previously developed and resold. Subscription revenue consists of fees for licensing the Universal Application,
licensing new product releases of TenFolds ComponentWare, and in certain cases providing related time-and-material consulting, training, and support services during a subscription period. Service revenues consist of fees for applications
development and implementation, support and training. Other revenues include fees for reimbursement of out of pocket expenses incurred for customer projects.

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

TenFold generally enters into contracts that involve multiple elements, such as software products,
enhancements, postcontract customer support (PCS), training, and time-and-material services. TenFold allocates a portion of the contract fee to each undelivered element based on the relative fair values of the elements and
allocates the fee for delivered software

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products using the residual method. The fair values of an element must be based on vendor specific objective evidence (VSOE). TenFold 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. TenFold 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 TenFold charges the customer in future periods.

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

For time-and-material contracts, TenFold generally estimates a profit range and
recognizes 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.

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

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

TenFold 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: TenFold has signed a noncancellable license agreement with nonrefundable fees; TenFold 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. 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, TenFold recognizes license fees related to the application, and the application development service fees, over time as TenFold 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. TenFold makes adjustments, if necessary, to the estimates used in
the percentage-of-completion method of accounting as work progresses under the contract and as TenFold gains experience. Fixed-price project revenues are split between license and service based upon the relative fair value of the components.

For certain projects, TenFold limits revenue recognition in the period to the amount of project costs incurred in the
same period, and postpones recognition of profits until results can be estimated more precisely.

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

TenFold records billings and cash received in excess of revenue earned as deferred revenue. TenFolds deferred revenue balance generally
results from contractual commitments made by customers to pay amounts to TenFold in advance of revenues earned, and from application of the zero profit margin methodology described above. TenFolds unbilled accounts receivable
represents revenue that TenFold has earned but which TenFold has not yet billed. TenFold bills customers as payments become due under the terms of the customers contract. TenFold considers current information and events regarding its customers
and their contracts and establishes allowances for doubtful accounts when it is probable that TenFold 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):

|                                                                                                   |  | Three Months Ended March 31, |       
|-------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------
|                                                                                                   |  |                              |       
|                                                                                                   |  | 2003                         |       
|                                                                                                   |  |                              |       
|Numerator:                                                                                         |  |                              |       
|Numerator for basic earnings (loss) per share  net income (loss) available to common stockholders |  | $                            | 6,995 
|                                                                                                   |  |                              |       
|Numerator for diluted earnings (loss) per share                                                    |  | $                            | 6,995 
|                                                                                                   |  |                              |       
|Denominator:                                                                                       |  |                              |       
|Denominator for basic earnings (loss) per share  weighted average shares                          |  |                              | 39,351
|                                                                                                   |  |                              |       
|Employee stock options                                                                             |  |                              | 277   
|                                                                                                   |  |                              |       
|Denominator for diluted earnings (loss) per share                                                  |  |                              | 39,628
|                                                                                                   |  |                              |       
|Earnings (loss) per common share:                                                                  |  |                              |       
|Basic earnings (loss) per common share                                                             |  | $                            | 0.18  
|                                                                                                   |  |                              |       
|Diluted earnings (loss) per common share                                                           |  | $                            | 0.18  
|                                                                                                   |  |                              |       

Employee stock
options of 11,022,757 and 14,520,809 outstanding during the three months ended March 31, 2003 and 2002, respectively, that have a weighted average exercise price of $2.24 and $4.63 per share, respectively, and that could potentially dilute 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 period.

4.          Restricted Cash

Restricted
cash at March 31, 2003 relates to $33,000 held as collateral for TenFolds letter of credit obligations used to secure a lease on office space in Dallas, Texas; and $73,000 held to support various other accounts payable activities.

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5.          Comprehensive Income (Loss)

Comprehensive income (loss) for the three months ended March 31, 2003 and 2002, ignoring the insignificant impact of taxes on foreign currency
translation, were as follows (in thousands):

|                             |  | Three Months Ended March 31, |      
|---------------------------- |  | ---------------------------- | -----
|                             |  |                              |      
|                             |  | 2003                         |      
|                             |  |                              |      
|Net income (loss)            |  | $                            | 6,995
|Foreign currency translation |  |                              |     
|                             |  |                              |      
|Comprehensive income (loss)  |  | $                            | 6,995
|                             |  |                              |      

6.          Stock-Based
Compensation

TenFold applies the intrinsic value-based method of accounting prescribed by Accounting Principles
Board (APB) Opinion No. 25,Accounting for Stock Issued to Employeesand related interpretations including FASB Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensationan Interpretation of
APB Opinion No. 25 issued in March 2000, to account for its stock options. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. SFAS No.
123,Accounting for Stock-Based Compensationestablished accounting and disclosure requirements using a fair value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS No. 123, TenFold has elected to
continue to apply the intrinsic value-based method of accounting described above, and has adopted the disclosure requirements of SFAS No. 123. TenFold has also adopted the disclosure provisions of SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure  an amendment of FASB Statement No. 123, into these financial statements and related notes.

Had compensation expense for TenFolds stock option plan and the employee stock purchase plan been determined based on the fair value at the
grant date for awards or purchase rights under these plans consistent with the methodology prescribed under SFAS No. 123, Accounting for Stock Based Compensation, TenFolds net income (loss) for the three months ended March 31, 2003 and
2002 would have been as follows (in thousands except per share information):

|                                                                                                                                            |  | Three Months Ended March 31, |       
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------
|                                                                                                                                            |  |                              |       
|                                                                                                                                            |  | 2003                         |       
|                                                                                                                                            |  |                              |       
|Net income (loss) applicable to common stock  as reported                                                                                  |  | $                            | 6,995 
|Add: Stock-based employee compensation expense included in reported net income (loss), net of related tax effects                           |  |                              | 25    
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards,
net of related tax effects |  |                              | (1,191
|                                                                                                                                            |  |                              |       
|Net income (loss) applicable to common stock  pro forma                                                                                    |  | $                            | 5,829 
|                                                                                                                                            |  |                              |       
|Earnings (loss) per common share - as reported:                                                                                             |  |                              |       
|Basic                                                                                                                                       |  | $                            | 0.18  
|Diluted                                                                                                                                     |  | $                            | 0.18  
|Earnings (loss) per common share  pro forma:                                                                                               |  |                              |       
|Basic                                                                                                                                       |  | $                            | 0.15  
|Diluted                                                                                                                                     |  | $                            | 0.15  

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The effect of SFAS 123 on pro forma net income (loss) and net income (loss) per share for the
three months ended March 31, 2003 and 2002 may not be representative of the effects on pro forma results in future years.

7.          Income
Taxes

The provision for income taxes for the three months ended March 31, 2003 relates primarily to foreign taxes
and reversing a portion of our valuation allowance attributable to the current operating income. The benefit for income taxes for the three months ended March 31, 2002 relates primarily to reversing accrued Federal alternative minimum taxes from
2001 due to enacted tax legislation.

The valuation allowance as of March 31, 2003 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.

8.          Commitments

TenFold has commitments under long-term operating leases for office space. Future minimum lease payments under non-cancelable operating lease
obligations, in excess of one year and excluding obligations accrued as part of restructurings, at March 31, 2003 are as follows (in thousands):

|Year                            |  | Amount |      
|------------------------------- |  | ------ | -----
|                                |  |        |      
|Q2-4 2003                       |  | $      | 379  
|2004                            |  |        | 400  
|2005                            |  |        | 411  
|2006                            |  |        | 422  
|2007                            |  |        | 286  
|Thereafter                      |  |        | 0    
|                                |  |        |      
|Total minimum lease commitments |  | $      | 1,898
|                                |  |        |      

Operating lease
commitments for properties that have been restructured are included in accrued liabilities in the Condensed Consolidated Balance Sheet at March 31, 2003. See Note 10 for more information.

TenFold previously had significant capital lease obligations from equipment leases it had entered into in prior years. During the three months ended
March 31, 2003, TenFold executed agreements with its two major equipment lessors to buy out and fully retire their equipment lease debt at a substantial discount, and return substantially all the related equipment. TenFold has recognized the
difference between the amount paid to retire these lease obligations and the carrying amount of the lease obligations as a gain on retirement of debt of approximately $2.2 million in the accompanying Condensed Consolidated Statements of Operations
for the three months ended March 31, 2003.

9.          Legal Proceedings and Contingencies

Unresolved Customer Dispute

TenFold has one unresolved customer dispute.

SkyTel

In
March 2001, SkyTel Communications, Inc. (SkyTel) orally informed TenFold of its intent to terminate the Master Software License and Services Agreement between SkyTel and TenFold (the SkyTel Agreement). On May 15, 2001, SkyTel
sent TenFold a letter purporting to terminate the SkyTel Agreement based on TenFolds alleged material breach of the SkyTel Agreement. SkyTels letter also demands a refund of approximately $11 million paid by SkyTel. On September 24,
2001, SkyTel filed a complaint against TenFold in the First Circuit Court of the First

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Judicial District of Hinds County, Mississippi. SkyTel seeks monetary damages of at least $17.5 million, plus other damages it may prove at trial, together with pre- and
post-judgment interest, attorneys fees and expenses and costs. On November 13, 2001, TenFold filed an answer denying the material allegations of the complaint. TenFold also filed a counterclaim for unpaid fees and SkyTels disclosure of
confidential information. TenFolds counterclaim seeks damages of at least $7 million and punitive damages of at least $10 million. The total contract value involved in this customer dispute is approximately $17.6 million, of which $11.4
million has been received by TenFold to date. During the three months ended March 31, 2003 and 2002, TenFold recognized no revenue from the SkyTel Agreement.

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

As a result of the legal matter noted above, TenFold has provided an allowance for doubtful accounts of $296,000 related to billed accounts
receivable, as of March 31, 2003.

Summary and Insurance

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

On March 1, 2001, TenFold
secured an industry-standard, errors and omissions policy that covers claims made after March 1, 2001. TenFold renewed this policy on March 1, 2002 and again on March 1, 2003. TenFolds new policy excludes contractual related disputes such as
cost and time guarantees, and only covers software errors or omissions that occur after the delivery of software. TenFold believes this policy provides adequate coverage for potential damages related to errors and omissions in TenFolds
delivered software.

Stockholder Matters

On November 6,
2001, a class action complaint alleging violations of the federal securities laws was filed in the United States District Court for the Southern District of New York naming as defendants TenFold, certain of its officers and directors, and certain
underwriters of TenFolds

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initial public offering. An amended complaint was filed on April 24, 2002, which alleges, among other things, that the underwriters of TenFolds initial public offering
and TenFolds officers and directors violated the securities laws by failing to disclose certain alleged compensation arrangements (such as undisclosed commissions or stock stabilization practices) in the offerings registration statement
and by engaging in manipulative practices to artificially inflate the price of TenFolds stock in the after-market subsequent to the initial public offering. Similar complaints have been filed against over 300 other issuers that have had
initial public offerings since 1998. The individual officer and director defendants entered into tolling agreements and, pursuant to a Court Order dated October 9, 2002, were dismissed from the litigation without prejudice. On February 19, 2003, the
Court granted a Motion to Dismiss the Rule 10b-5 claims against 116 defendants, including TenFold. TenFold is vigorously defending this action and expects that the costs of defense and/or resolution exceeding TenFolds self insured retention of
$250,000, will be covered by insurance. Although no assurance can be given that this matter will be resolved in TenFolds favor, TenFold believes that the resolution of this lawsuit will not have a material adverse effect on TenFolds
business, financial position, results of operations or cash flows. If this matter is not covered by insurance and if there is an unfavorable outcome, there may be a material adverse impact on TenFolds business, 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 contained no specific factual allegations. Since February 2001, the SEC has taken testimony from several of
TenFolds independent auditors and current and former customers, executives and staff.

On November 14, 2002,
TenFolds directors voted to approve a settlement of the dispute with the SEC by consenting to entry of a judgment permanently enjoining TenFold from violating a number of anti-fraud and books-and-records provisions of the securities laws.
Following entry by the court of the judgment consented to by TenFold on November 26, 2002, the litigation between TenFold and the SEC ended, and TenFold is now subject to the courts permanent injunction against future violations of the
securities laws. In addition to its settlement with TenFold, the SEC also voluntarily dismissed charges against one of TenFolds former employees. The SEC is continuing its litigation against the three former officers and one current officer of
TenFold. TenFold expects that the costs of the individuals defense will be covered by insurance. If this matter is not covered by insurance, there may be a material adverse impact on TenFolds results of operations, financial position, or
liquidity.

10.        Special Charges

TenFold incurred no special charges during the three months ended March 31, 2003. TenFold incurred $24,000 of asset impairment charges during the
three months ended March 31, 2002.

Asset Impairment Charge. During the three months ended March 31, 2002,
TenFold identified $24,000 of fixed assets that had no future value to TenFold and were no longer in active use, and accordingly recorded an asset impairment charge of $24,000 for the three months ended March 31, 2002.

Restructuring reserves are included in accounts payable and accrued liabilities at March 31, 2003. Detail of the restructuring charges as of and for
the three months ended March 31, 2003 are summarized below (in thousands):

|Restructuring Charges: |  | Balance at  December 31, 2002 |       | New  Charges |   | Adjustments |  | Utilized |   | Balance at March 31, 2003 |  
|---------------------- |  | ----------------------------- | ----- | ------------ | - | ----------- |  | -------- | - | ------------------------- | -
|                       |  |                               |       |              |   |             |  |          |   |                           |  
|Facilities related     |  | $                             | 1,565 |              |   |            |  |          |  |                           |  
|                       |  |                               |       |              |   |             |  |          |   |                           |  
|                       |  | $                             | 1,565 |              | $ |            |  | $        |  |                           | $
|                       |  |                               |       |              |   |             |  |          |   |                           |  

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TenFold has estimated future sublease income which
reduces future facility related charges, including lease obligations. TenFold considered current market conditions including current lease rates in the respective geographic regions, vacancy rates, and costs associated with subleasing when
estimating future sublease income. Variances between expected and actual sublease income have previously and may continue to result in restructuring charge adjustments in future periods.

11.       Operating Segments

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

Revenues from customers outside of North America were approximately 21 percent of total revenues for the three months ended March 31, 2003 as
compared to 34 percent of total revenues for the same period in 2002. TenFolds long-lived assets are deployed in the United States.

Three customers accounted for 63 percent, 13 percent, and 11 percent of TenFolds total revenues for the three months ended March 31, 2003,
compared to three customers accounting for 55 percent, 17 percent, and 11 percent of TenFolds total revenues for the same period in 2002. No other single customer accounted for more than 10 percent of TenFolds total revenues for the
three months ended March 31, 2003 or the same period in 2002.

12.        Recent Accounting Pronouncements

In June 2001, the FASB issued SFAS No. 143 Accounting for Asset Retirement Obligations. SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This Statement applies to legal obligations associated with the retirement of long-lived assets that result from the
acquisition, construction, development and (or) the normal operation of a long-lived asset, except for certain obligations of lessees. TenFold adopted the provisions of SFAS No. 143 on January 1, 2003. The adoption of SFAS No. 143 did not have a
material impact on TenFolds results of operations and financial position.

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

In July 2002, the FASB issued SFAS No. 146 Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs
Incurred in a Restructuring). SFAS No. 146 requires recognition of a liability for a cost associated with an exit or disposal activity when the liability is incurred, as opposed to when the entity commits to an exit plan under EITF No. 94-3.
TenFold adopted the provisions of SFAS No. 146 for exit or disposal activities initiated after December 31, 2002. The adoption of SFAS No. 146 did not have a material impact on TenFolds results of operations and financial position.

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In November 2002, the EITF reached a consensus on Issue No. 00-21, Revenue Arrangements
with Multiple Deliverables. EITF Issue No. 00-21 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets. The provisions of EITF Issue
No. 00-21 will apply to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. TenFold is currently evaluating the effect that the adoption of EITF Issue No. 00-21 will have on TenFolds results of
operations and financial position.

In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Guarantees of Indebtedness to Others, an Interpretation of FASB Statements No. 5, 57, and 107 and a rescission of FASB Interpretation No. 34. This Interpretation elaborates on the
disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees issued. The Interpretation also clarifies that a guarantor is required to recognize, at inception of a guarantee, a liability
for the fair value of the obligation undertaken. The initial recognition and measurement provisions of the Interpretation are applicable to guarantees issued or modified after December 31, 2002. The disclosure requirements are effective for
financial statements of interim or annual periods ending after December 15, 2002. The adoption of Interpretation No. 45 did not have a material impact on TenFolds results of operations and financial position.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure  an amendment of
FASB Statement No. 123. SFAS No. 148 amends SFAS No. 123, Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In
addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the
method used on reported results. The disclosure provisions of SFAS No. 148 are effective for fiscal years ending after December 15, 2002 and have been incorporated into these financial statements and related notes.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51. This
Interpretation addresses the consolidation by business enterprises of variable interest entities as defined in the Interpretation. The Interpretation applies immediately to variable interests in variable interest entities created after January 31,
2003, and to variable interests in variable interest entities obtained after January 31, 2003. The adoption of Interpretation No. 46 did not have a material impact on TenFolds results of operations and financial position.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. SFAS No.
149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. This Statement is effective for contracts entered into or modified after June 30, 2003, with certain exceptions, and for hedging relationships designated after June 30, 2003.
TenFold is currently evaluating the effect that the adoption of SFAS No. 149 will have on TenFolds results of operations and financial position.

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

Business Overview

TenFold is the provider of the Universal Application technology, a software applications platform that reduces enterprise application
development, deployment, and maintenance timeframes and costs. The Universal Application automates most of what applications programmers typically do, and enables small teams of predominantly non-technical business people to design, build, test,
deploy, and maintain complex, transaction-intensive applications, with limited demand on scarce IT resources. Using a small team of mostly business people for rapid applications development is a radical change from the industry standard approach
that relies on large teams of IT professionals who expend significant person years of effort to design, program, test, change, and deploy enterprise applications. Customers get high-quality, complex enterprise applications into production faster and
at significantly lower cost with the Universal Application than with other applications development technologies.

We
believe the Universal Application platform has two unique attributes that make building complex, database-intensive and transaction-intensive applications substantially cheaper, easier, and faster than traditional applications development
methodologies. First, because the Universal Application automates most of what applications programmers typically do and automatically includes advanced applications functionality, customers get more powerful, higher quality applications faster and
at a fraction of the cost of traditional programming approaches. Second, since Universal Application-powered applications development provides a tool and methodology that business people can effectively use, it enables organizations to directly
leverage their business experience and insight and to adapt applications easily to meet changing business requirements.

We believe that the Universal Application platform offers three unique benefits to its customer.

| | 1. | Speed. The Universal Application platform lets a team of mostly non-technical business people build and enhance high-quality, high-performance, powerful applications very
quickly. Other applications development technologies both old and new also let you build and enhance applications, but most require programmers, take longer, and are less suitable for more-complex applications. (Although the high failure rate of
most complex applications development projects suggests that other applications development technologies, both old and new, are risky and often lead to project cost and schedule overruns, applications quality problems, and sometimes project
cancellations.)
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 2. | Quality. The Universal Application platform renders an application from its definition. So, no one writes code nor tests code in the building of an application. Thus, it
is highly unlikely for there to be defects in an application, just as it is highly unlikely for there to be defects in a spreadsheet. (A spreadsheet or Universal Application-powered system always works  just as you described for it to work; it
may not do what you want but it does do what your description says for it to do.) Universal Application-powered systems are much higher quality than most other applications.                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 3. | Power. The Universal Application rendering engine contains thousands of features that make any Universal Application-powered system much more functionally-rich than any
other application that a programmer-staffed applications development team could pragmatically afford to build. Universal Application-powered systems have thousands of clever, powerful features that you wont find in most other
applications.                                                                                                                                                                                                                                                                        

TenFolds business model focuses on providing the Universal Application, and
our assistance through time-and-materials consulting and training, to customers who use their own business teams and our systems implementation partners to build and maintain applications.

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While there are many companies supplying applications development tools, we know of no other
applications platform supplier with technology powerful enough to address the scale and robustness of the complex applications that we and our customers have built and taken into production using Universal Application.

Business History

We founded TenFold in 1993. We spent the first several years primarily
developing our patented Universal Application technology. In 1996, we began using Universal Application to build applications for customers. In 1999, we completed our initial public offering. In 1999 and early 2000, we tested a new business model
which included selling large custom application development projects with a unique-in-the-industry money back guarantee, and simultaneously structuring the company to launch and build on an accelerated time frame eight separate vertical
market facing applications product companies. Beginning in 2000, we experienced several difficult quarters and faced significant financial, legal, and operational issues. We incurred substantial, increasing losses from operations in the last three
quarters of 2000, including a $55 million operating loss in the fourth quarter of 2000.

Starting in the second half of
2000 and continuing through today, we have taken steps to refocus TenFold to its roots as a Universal Application technology company, deal with the liabilities that arose as a result of the interim business model, and restore the company to sound
business health.

During 2001, we refocused TenFold back to being a technology company. We consolidated operations
into one corporate organization to reduce costs and improve our core delivery and operational infrastructure. We significantly reduced our operating costs through headcount reductions, lease renegotiations and terminations, and other cost-control
measures. During 2001, we improved customer satisfaction and sold additional products and services to existing customers. We began promoting the Universal Application to customers desiring to use it to build applications. In November 2001, we
entered into an expanded relationship with Allstate Insurance Company (Allstate), which represented our first significant transaction under our new sales and business model.

During 2002, we continued disciplined execution of our business turnaround and built the business and marketing foundation for our emergence as a
growth technology company by continuing to meet customer expectations and establishing new Universal Application sales and marketing channels. We made substantial improvements in our business positioning and operations as part of a comprehensive
turnaround effort. We significantly reduced quarterly cash outflows with the goal of providing a cash flow positive basis for continuing operations by: renegotiating several major property leases reducing immediate cash obligations and reducing our
long-term obligations by over $51 million in the aggregate; retiring our entire bank debt by making payment of a  substantially reduced amount; and, continuing operational restructuring to better align capacity with current cash flow. We
continued to settle legacy litigation matters, bringing to a total of ten the number of disputes related to our interim business model that were satisfactorily settled without any admission of fault or payment by TenFold except for the
self-insurance retentions, entered into an agreement to settle a shareholder lawsuit that settled in 2003, and, concluded a settlement with the Securities and Exchange Commission without paying any fine or civil penalty or needing to restate our
financial statements.

During 2002, we continued to meet customer expectations and reached important milestones with
key customers. We provided Universal Application technology and supporting services to 21 customers, 16 of whom have Universal Applicationpowered applications in production. Since we began operation in 1993, we have provided licenses, and
applications development, support and training services to over 50 customers in financial services, insurance, healthcare, and other vertical markets. Many of our customers are leaders in these markets.

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We made steady progress in establishing strategic distribution alliances and value added
resellers (VAR) relationships that we believe will accelerate and broaden market distribution of Universal Application for us at a significantly lower cost and greater speed than we could achieve on our own. During 2002, we entered into
distribution relationships including :

| |  | a strategic alliance with a global systems integrator, Sapient Corporation;                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------
| |  | a strategic alliance with Perot Systems Corporation, focused around accelerated penetration of the healthcare industry; and, with
| |  | TenFold Systems UK Limited, which will distribute TenFold products and provide services to UK customers.                         

During 2002, we began to enter into VAR relationships around Universal Application-powered applications. Under these VAR relationships:

| |  | 3Genesis will resell a Universal Application-powered customer management, billing, and financial management application in the communications industry worldwide;                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | PCX Systems, LLC (PCX Systems), a subsidiary of Cedars-Sinai Medical Center, will resell Universal Application in connection with the sale of the Patient Care Expert
application in the hospital and healthcare provider market globally;                                                                                                                                                   
| |  | Redi2 Corporation will resell TenFold Revenue Manager to investment managers;                                                                                                                                                                                                                                                                                                                  
| |  | Vertex, a UK-based utility sector customer management and billing company will resell the utility and telecommunications industries focused customer management and billing
application, Generic Billing System (GBS), to their customers and others in the utility and telecommunications industries. Subsequently, Vertex completed its first sale of GBS to a large water company in the UK.

As a consequence of these and other steps, our business performance in 2002 continued to improve as reflected in key financial
metrics: quarterly change in cash improved from $(5.3) million for Q1 2002 to $1.4 million for Q4 2002. Operating losses were reversed. In Q4, we earned an operating profit of $2.1 million, compared to operating losses $(3.5) million for Q1 2002,
$(2.2) million for Q2 2002 and $(14,000) for Q3 2002. With the benefit of a non-recurring, non-operating gain of approximately $2.4 million on retirement of debt, net income for Q4 2002 was $4.3 million, compared to prior quarter net losses of
$(3.0) million for Q1 2002, $(2.4) million for Q2 2002 and $(77,000) for Q3 2002.

Q1 2003 Highlights

In Q1 2003, we continued to complete key steps of our business turnaround. In February 2003, we reached agreement with our two major equipment
leasing vendors to buy out and retire their remaining equipment leasing debt of approximately $2.9 million at a substantial discount. We have no further material equipment leases and no further bank debt.

In February 2003, we reached agreement with Fusion Capital to terminate an unused $10 million equity line. In February 2003, Robert W. Felton, a
long-time TenFold director, made an investment of $700,000 in TenFold, by acquiring unregistered TenFold common stock.

Companies using Universal Application-powered applications in production today include, among others, Abbey National Bank, Allstate Insurance,
Barclays Global Investors, Cedars-Sinai Medical Center, Deutsche Bank, Dresdner Bank, Franklin Templeton, iplan networks, JP Morgan Chase, MedCath, and Trinity. One customer has two separate Universal Application-powered applications in production.
Specific customer updates include:

| |  | Allstate, a customer since September 1999, continues to rollout its Universal Application-powered internet-enabled policy rating application to more states and lines of
business. This application is currently in production doing more than 175,000 transactions weekly for multiple lines of business in many states. In July 2002, we notified Allstate of certain breaches by Allstate of our Agreement, as amended. We are
working with Allstate to resolve these matters and continue to provide support and consulting services to Allstate.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Under a time-and-materials agreement, we continue to assist JP Morgan Chase as it rolls                                                                                                                                                                                                                                                                                                                                                                                                                                                              

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| |   | the global securities lending application, Securities Lending Express (SLX) application into production and decommissions multiple legacy systems.                                                                                                                                                                                                                                                                
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We continue to provide support to iplan networks of Argentina, which has had the Universal Application-powered Enterprise Relationship Manager application that includes sales
management, customer support, incident tracking, and provisioning tailored to the communications industry in production since September 2001.                                                                                        
| |  | As part of our ongoing relationship with Vertex, a UK-based utility sector customer management and billing company, we provide support, training and other professional services.
We continue to work with Vertex as they progress on the implementation of the Universal Application-powered customer management and billing application, Generic Billing System (GBS), for their initial water company customer.
| |  | As part of our continuing relationships with the global systems integrator Sapient, and with our UK reseller, TenFold Systems UK Limited, we provide expertise and consulting
services to support Sapients GBS implementation project for Vertex.                                                                                                                                                                  

We have continued our
emphasis on building sales and marketing to support our emergence as a growth technology company through three complementary sales and marketing related initiatives.

| |  | First, we are using alliance relationships with VARs, systems integrators and software distributors in the U.S. and international markets to broaden and accelerate our
distribution. We have an agreement with Sapient to provide significant services to support their implementation of  GBS  for Vertexs first GBS customer. We are delivering these services in part by working with our UK Reseller,
TenFold Systems UK Limited.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Second, we are using our small direct sales channel to prosecute specific sales opportunities focusing on selling small, paid VersionOne projects with new accounts in the
insurance, software, and financial services sectors as a low-risk first step for potential customers to test Universal Application for their application needs. In Q1 2003, one of those customers acquired a deployment license to put their first
Universal Application-powered system into production.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | Third, we are making steady headway in advancing our major project, code named Tsunami, announced in Q4 2002. During 2002, we launched Tsunami to entirely redesign and rewrite
all customer facing parts of our Universal Application technology. The goal of the Tsunami project is to make a single user version of our patented Universal Application technology ubiquitously available from our web site and to enhance the
usability of the Universal Application so that a business person or an IT person with limited applications development experience can obtain and use Tsunami to build, without substantial training or support, a complex, sophisticated application.
During Q1, we met our goal of releasing the Tsunami demonstration and we have conducted numerous demonstrations of Tsunami to audiences in many different cities. Generally, feedback has been an extremely positive reaction to this new product and
product strategy. We are intending to release beta copies of Tsunami to various groups of employees, industry participants, customers, and prospects during Q2 2003 and expect to release a general availability version in July 2003.

Industry Challenge

Organizations worldwide face
increasing pressure to replace their legacy enterprise applications and introduce new applications as they seek to increase productivity, cut costs, address changing business and competitive demands, and access new technology. But, organizations
face daunting odds of failure because the process for building and integrating complex applications is costly and risky. Consequently, many organizations continue to make substantial investments to maintain legacy applications that inadequately meet
current needs and do not address new business requirements. To obtain new or replacement applications, companies choose between buying a packaged software application or building a custom software application.

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Organizations generally turn to independent software vendors, such as Enterprise Resource
Planning (ERP) vendors or vertical software vendors, when seeking packaged applications. In general, packaged applications promise predictable quality and relatively quick implementation. However, packaged applications frequently require
that an organization adapt its business practices to the software; generally fail to address specific industry problems, such as patient management or securities lending; often cost considerably more than planned to implement; and, once installed,
are difficult to modify to adapt to changing business needs. In addition, when an organization chooses the costly and time-consuming path of customizing a packaged application, cost and risk rise rapidly and the organization is generally inhibited
from future opportunities to upgrade the packaged application when subsequent new releases are available.

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

Applications development projects fail because the process of building
complex applications with conventional tools and approaches is very complicated and labor intensive. Programming and testing complex applications can be difficult, take a long time, be expensive, and tie up scarce IT resources. This high cost and
high risk is in stark contrast to the business need for new applications that address current business practices and can be adapted quickly and easily to meet the evolving business requirements of a dynamic, highly competitive business environment.

We believe TenFolds patented Universal Application presents a radically new approach to applications
development. This approach dramatically reduces applications development and maintenance cost and time in two ways: first, by automating essentially all tasks that programmers would generally do; and, second, by providing an applications development
tool and methodology that business people can effectively utilize, it enables organizations to directly leverage their business experience and insight and to adapt applications easily to meet changing business requirements.

TenFold Technology and Products

The Universal Application platform makes
building complex applications substantially cheaper, easier, and faster than traditional application development methodologies because the Universal Application automates essentially all tasks that applications programmers typically do and because
it allows organizations to develop applications directly with business people who understand the business objectives.

Consequently, we are focusing our business toward providing the Universal Application, and our assistance through time-and-materials consulting and training, to customers who use their own business teams to build applications.

The Universal Application value proposition has two principal components: it dramatically reduces the cost and time to build complex
database-intensive and transaction-intensive applications and produces higher quality of applications; and, it dramatically reduces the cost and effort of maintaining an application while increasing the speed and ease by which new functionality can
be added.

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The Universal Application platform has been in development more than 10 years, contains more than
2.5 million lines of C and C++ code, and is protected by three issued U.S. patents. With the Universal Application, business people or applications developers with little or no traditional programming skills can build and maintain an application by
describing the applications desired data and functionality without needing to program in C, C++, Java, HTML, Structured Query Language (SQL) or other programming languages and without the need to do other programming-like tasks
such as designing screens and writing technical designs.

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

We believe the Universal Application delivers these benefits:

| |  | Faster development of complex transaction applications because the Universal Application automates tasks that programmers would otherwise have to do such as coding SQL, coding
logic functions, managing computer-to-computer communications, and coding user interface screens;                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Longer-lived applications that can survive changes in underlying technologies without requiring applications rewrites, because the Universal Application insulates applications
from many technical changes such as new operating system and database software releases;                                                  
| |  | Reduced maintenance costs because there is little or no code to maintain;                                                                                                                                                                                                                                                 
| |  | Improved quality because the Universal Application replaces individually-coded logic with already-existing, thoroughly-tested algorithms that provide both basic and
sophisticated applications behavior such as security, menuing, transaction behavior, and powerful windows and browser user interface features.       
| |  | Greater consistency to look, feel and operation across the entire application, by replacing individually-built screen designs and transactions with a systematic, optimal,
standard design and by eliminating the details of screen layout and repetitive transaction behavior from the application developers task list;
| |  | Demonstrated scalability as customers add simultaneous end-users and computing capacity; and                                                                                                                                                                                                                              
| |  | Typically sub-second response-time on properly configured hardware for most applications actions, because the Universal Application is carefully optimized to provide good
performance.                                                                                                                                   

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

| |  | Portability across popular databases such as Oracle, DB2, SQL Server, and Sybase;                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------
| |  | Generation of all SQL statements for accessing and updating data, each highly optimized for each relational database;                      
| |  | Automatic screen layout to ensure consistency and quality in both Web and desktop environments;                                            
| |  | Built-in support for query and update of time-varying data such as effective-dated employee records;                                       
| |  | Real-time, server-supplied screen refresh of detail and summary information as underlying data changes;                                    
| |  | Simplified business rule definition and optimized rule execution for workflow, posting, access control, and other sophisticated rule types;

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| |  | Formal rule abstractions for validation, propagation, population, without requiring application developers to master complex event models;                                                                                         
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Shared middle-tier caching, deferred query execution, and optimistic concurrency control to minimize database server load;                                                                                                         
| |  | Codeless integration with third-party applications via real-time messages, APIs, or files based on a simple interface description including support for many different messaging
layers such as Tibco, TCP/IP, MQSeries, and Pipes;
| |  | Application-level data synchronization between central servers and intermittently connected laptops; and                                                                                                                           
| |  | Guided interfaces to help end-users quickly master complex business processes.                                                                                                                                                     

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

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

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

Integrating an Application. Universal Application integration tools connect a Universal Application-powered application to other
applications, both within a company and at its customers and suppliers. Whether exchanging files, directly accessing another database, or using real-time messaging, integration developers codelessly describe the path that data follows to interface
with typically-inflexible legacy or third party applications. Applications developers can convert and cleanse data during its passage to or from a Universal Application-powered system.

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

TenFold ComponentWare

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

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to customize accounting-system integration to application descriptions.

TenFold Services

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

Training

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

Applications Development and Implementation Services

We offer services to help customers build, implement, operate and maintain their applications. Applications development services include helping
customers identify requirements and describe their application using the Universal Application. Implementation services include converting and cleansing legacy data, integrating with other applications, running parallel application testing, and
managing the implementation project.

Customer and Technical Support

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

Competition

The
competitive landscape for new and legacy-replacement enterprise applications is split among the options available to corporations today. These options are:

| |  | Status quo;                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------
| |  | Buy a packaged application (with or without modification); and                                               
| |  | Build a new application using internal IT resources or third-party consulting and software integration firms.

Status quo

TenFolds largest competitor is status quo. Corporations continually wrestle with the issue of when to retire legacy
applications. In recent years, most companies chose to invest large amounts of money to fund maintenance of legacy applications, bearing the quirks and inefficiencies of outdated applications that do not meet new business demands. Remaining with the
status quo results in: continuously increasing costs as maintenance on top of maintenance gets harder; acceptance of barely adequate applications; limitations on lowering costs; limitations to embracing new technologies; and, difficulty in adding
products or expanding markets. Status quo postpones the inevitable replacement of the application.

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Buy a Packaged Application (with or without modification)

Many corporations prefer to obtain an off-the-shelf application from ERP or vertical packaged software vendors. Corporations license software
packages to limit the risks associated with new software development projects. However, packaged applications force corporations to conform their business problems to the packaged solution, often with a poor fit. Corporations can modify a packaged
application to solve their business problems, but such blended solutions are expensive, slow to implement, and suffer from poor integration.

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

Build New Applications

When companies contemplate building their own applications on their own or with help, TenFold competes primarily with suppliers of traditional
programming technologies and development tools. Internal IT organizations and third party consulting firms frequently use tools from Oracle, IBM, Microsoft, BEA, Computer Associates, and others.

Programming languages such as COBOL, C, and C++ perform well and scale well, but require extraordinarily large project teams to spend multiple years
to complete projects. Such projects generally run over budget in time and dollars and frequently fail. Visual Basic, SmallTalk, and other personal computer technologies support rapid applications development and improved productivity for smaller
projects, but do not scale to support large numbers of end-users.

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

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Results of Operations

We had first
quarter 2003 revenues of $9.4 million, operating income of $4.7 million, and net income of $7.0 million. This compares to revenues of $5.6 million, an operating loss of $3.5 million, and a net loss of $3.0 million for the same period of 2002.

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

|                                     |  | Three Months ended March 31, |    
|------------------------------------ |  | ---------------------------- | ---
|                                     |  |                              |    
|                                     |  | 2003                         |    
|                                     |  |                              |    
|Revenues:                            |  |                              |    
|License                              |  |                              |   
|Subscription                         |  |                              | 65 
|Services and other                   |  |                              | 35 
|                                     |  |                              |    
|Total revenues                       |  |                              | 100
|Operating expenses:                  |  |                              |    
|Cost of revenues                     |  |                              | 24 
|Sales and marketing                  |  |                              | 3  
|Research and development             |  |                              | 10 
|General and administrative           |  |                              | 13 
|Special charges                      |  |                              |   
|                                     |  |                              |    
|Total operating expenses             |  |                              | 50 
|                                     |  |                              |    
|Income (loss) from operations        |  |                              | 50 
|Total other income, net              |  |                              | 25 
|                                     |  |                              |    
|Income (loss) before income taxes    |  |                              | 75 
|Provision (benefit) for income taxes |  |                              |   
|                                     |  |                              |    
|Net income (loss)                    |  |                              | 75 
|                                     |  |                              |    

Revenues

Total revenues increased $3.8 million, or 68 percent, to $9.4 million for the three months ended March 31, 2003, as compared to $5.6 million for the
same period in 2002. The increase in revenues is primarily due to a higher volume of subscription revenues and services during the first three months of 2003 as compared to the same period in 2002.

Subscription revenues were $6.1 million for the three months ended March 31, 2003, as compared to $2.6 million for the same period in 2002.
Subscription revenues represent revenue from contracts that include a subscription to new product releases on a when and if available basis. For certain contracts, including a subscription to future software products when and if they
become available, we recognize the fees for the software products ratably over the subscription term beginning with delivery of the first software product. For contracts that include a service element for which the fair value is undeterminable, and
the contract includes a subscription to new product releases on a when and if available basis, we recognize the entire contract fee ratably over the subscription period as subscription revenue. The increase in subscription revenues
during the first three months of 2003 as compared to the same period of 2002, is due to higher amortization of deferred subscription revenue from the build-up of revenues from timeandmaterial services provided over time during the
subscription period, and the sale of an additional subscription contract. We expect our deferred subscription revenues of $4.0 million at March 31, 2003, to be amortized to subscription revenues through a portion of the second quarter of
2003.

Services and other revenues increased $445,000, or 16 percent, to $3.3 million for the three months ended March
31, 2003 as compared to $2.9 million for the same period in 2002. Service and other revenues increased due to providing a higher volume of time-and-material services during the first three months of 2003 as compared to the same period of
2002.

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Operating Expenses

Cost of Revenues.Cost of revenues consists primarily of compensation and other related costs of personnel to provide applications
development and implementation, support, and training services. Cost of revenues decreased $1.5 million, or 39 percent, to $2.3 million for the three months ended March 31, 2003 compared to $3.7 million for the same period in 2002. The decrease was
primarily due to a smaller number of employees working on customer projects, and support and training activities.

Sales and Marketing.Sales and marketing expenses consist primarily of compensation, travel, and other related expenses for sales and
marketing personnel, as well as advertising and other marketing expenses. Sales and marketing expenses decreased $301,000, or 57 percent, to $225,000 for the three months ended March 31, 2003 as compared to $526,000 for the same period in 2002. The
decrease in sales and marketing expenses was primarily due to having fewer sales and marketing employees in 2003.

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 $980,000, or 52 percent, to $915,000 for the three months ended March 31, 2003, as compared to $1.9 million for the same period in 2002. Research and
development expenses decreased due primarily to having fewer research and development employees in 2003.

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 $1.6 million, or 57 percent, to $1.2 million for the three months ended March 31, 2003 as
compared to $2.9 million for the same period in 2002. General and administrative expenses decreased due to having a smaller scale of operations and fewer general and administrative employees, lower legal expenses from the settlement of legal
matters, and reduced financing related expenses during the first three months of 2003 as compared to the same period of 2002.

Special Charges.We incurred no special charges during the three months ended March 31, 2003. We incurred $24,000 of asset impairment
charges during the three months ended March 31, 2002.

Asset Impairment Charge. During the three months ended
March 31, 2002, we identified $24,000 of fixed assets that had no future value to us and were no longer in active use, and accordingly we recorded an asset impairment charge of $24,000 for the three months ended March 31, 2002.

Restructuring reserves are included in accounts payable and accrued liabilities at March 31, 2003. Detail of the restructuring charges as
of and for the three months ended March 31, 2003 are summarized below (in thousands):

|Restructuring Charges: |  | Balance at  December 31, 2002 |       | New  Charges |   | Adjustments |  | Utilized |   | Balance at March 31, 2003 |  
|---------------------- |  | ----------------------------- | ----- | ------------ | - | ----------- |  | -------- | - | ------------------------- | -
|                       |  |                               |       |              |   |             |  |          |   |                           |  
|Facilities related     |  | $                             | 1,565 |              |   |            |  |          |  |                           |  
|                       |  |                               |       |              |   |             |  |          |   |                           |  
|                       |  | $                             | 1,565 |              | $ |            |  | $        |  |                           | $
|                       |  |                               |       |              |   |             |  |          |   |                           |  

We have estimated
future sublease income which reduces future facility related charges, including lease obligations. We considered current market conditions including current lease rates in the respective geographic regions, vacancy rates, and costs associated with
subleasing when estimating future sublease income. Variances between expected and actual sublease income have previously and may continue to result in restructuring charge adjustments in future periods.

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Total Other Income, net

Net total other income was $2.3 million for the three months ended March 31, 2003, as compared to $(64,000) for the same period in 2002. Net total
other income for the three months ended March 31, 2003 included a gain of approximately $2.2 million that we recognized on the retirement of capital lease obligations at a significant discount to their carrying value. Interest income decreased for
the three months ended March 31, 2003 as compared to the same period in 2002 due to lower cash and cash equivalent balances in 2003. Interest expense decreased for the three months ended March 31, 2003 as compared to the same period in 2002 due to
lower notes payable and obligations under capital lease balances in 2003, due to their retirement in Q4 2002 and Q1 2003.

Provision for Income Taxes

The provision for income taxes was $12,000 for the three months ended March 31, 2003 as compared to a benefit of $508,000 for the same period in
2002. The provision for the three months ended March 31, 2003 relates primarily to foreign taxes and reversing a portion of our valuation allowance attributable to the current operating income. The benefit for the three months ended March 31, 2002
relates primarily to enacted tax legislation that enabled reversing accrued Federal alternative minimum taxes from 2001.

At March 31, 2003, management has recognized a valuation allowance for the net deferred tax assets related to temporary differences, foreign tax
credit carryforwards and net operating loss carryforwards. The valuation allowance was recorded in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes, which
requires that a valuation allowance be established when there is significant uncertainty as to the realizability of the deferred tax assets. 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.

Critical Accounting Policies

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

Revenue Recognition and Project Profitability

We believe risks relating to revenue recognition primarily include the judgment required to determine project profit or loss projections on
time-and-material contracts. We recognize time-and-materials revenue at the lowest point in the range of estimated profit margin, which represents our best estimate of the profit to be achieved. Variances may occur if we are unable to collect
time-and-material billings or if we grant concessions to time-and-material customers in order to sell additional business or collect cash under the contract. These variances between managements estimate of the lowest point in the range of
estimated profit margin and actual results may result in a significant adjustment to our results of operations and financial position.

Previously, risks relating to revenue recognition also included the judgment required to determine fixed-price project completion percentages,
fixed-price project profit or loss projections, and forecasting of fixed-price project end-dates. However, during the year ended December 31, 2002 we converted our remaining on-going legacy fixed-price contracts to time-and-materials arrangements.
As a result, we have no significant on-going fixed-price contracts at March 31, 2003.

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Litigation Reserves

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

Restructuring Charges

We recognize restructuring charges consistent with EITF 94-3, prior to January 1,2003 and consistent with SFAS 146 beginning on January 1, 2003. For
amounts accrued at December 31, 2002,  we reduce current charges for abandoned facilities with sublease income. Management analyzes current market conditions including current lease rates in the respective geographic regions, vacancy rates, and
costs associated with subleasing when evaluating the reasonableness of future sublease income. Significant management judgments and estimates must be made and used in calculating future sublease income. Variances between expected and actual sublease
income have previously and may continue to result in restructuring charge adjustments in future periods.

Liquidity and Capital Resources

During 2002 and continuing into 2003, we improved our cash flow through a variety of means, including carefully managing our accounts receivable and
generating additional cash inflows wherever possible from our existing customer base, and continuing to reduce our operating cash outflows wherever possible, including negotiating the elimination or reduction of liabilities, and further
restructuring of our operations, with the goal of providing a cash flow positive basis for continuing operations. For the three months ended March 31, 2003, our quarterly change in cash was $431,000 compared to $(5.3) million for the same period in
2002.

Net cash provided by operating activities was $318,000 for the three months ended March 31, 2003 as compared to
$(5.1) million for the same period in 2002. The increase in cash flow provided by operating activities results primarily from the significant restructuring and other actions we have taken during 2002 and continuing into 2003 to improve cash
flow.

Net cash provided by investing activities was $34,000 for the three months ended March 31, 2003 as compared to
$2.5 million for the same period in 2002. During the three months ended March 31, 2002, we sold two buildings and related land in San Rafael, California for proceeds of $2.4 million (before repayment of related notes payable).

Net cash provided by financing activities was $79,000 for the three months ended March 31, 2003 as compared to $(2.3) million for the same
period in 2002. Net cash provided by financing activities for the three months ended March 31, 2003 included net cash proceeds of $666,000 from the sale of 3,888,889 shares of common stock to a member of our Board of Directors. During the three
months ended March 31, 2003 we made payments of approximately $588,000 to retire capital lease obligations at a significant discount. Net cash used by financing activities for the three months ended March 31, 2002 was primarily for repayment of
notes payable related to our sale of two buildings and related land in San Rafael, California.

Our deferred revenue
balance generally results from contractual commitments made by customers to pay amounts to us in advance of revenues earned. We had deferred revenues balances of $14.9 million at March 31, 2003 and $20.3 million at December 31, 2002. When over time
we recognize these deferred revenue balances as revenues in the statement of operations, we will not have corresponding increases in cash, as the related cash amounts have previously been received by us. Our unbilled accounts receivable represents
revenue that we have earned but which we have not yet billed.

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In order to improve cash flow, we have taken aggressive steps to restructure our operations
through work force reductions, terminating leases or subleasing facilities, negotiating significantly discounted debt retirements, and other operational cost-saving measures. We have made significant progress reducing operating cash outflows during
2001, 2002 and continuing into 2003. We seek to keep our cash outflows at or below our expected on-going cash inflows (from primarily two large customers), and to eliminate or significantly reduce our existing and contingent liabilities. We believe
that by achieving neutral to positive on-going cash flow from operations and significantly reduced liabilities, we can provide a solid base from which TenFold can grow again.

Working toward those goals, we have recently accomplished the following:

| |  | During September 2002, we negotiated a termination of the unoccupied portions of our South Jordan, Utah headquarters lease reducing the square footage leased from 105,068 to
22,310 square feet, reducing the term from 11 years to 5 years, and reducing the rental rate per square foot. This reduced our total base rent obligations (before operating expenses) under this lease by approximately $19 million over the term of the
lease. As part of this transaction, we released to the landlord $1.5 million previously held as restricted cash to support these leases.                                                                                                                                                                        
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | During October 2002, we reduced our workforce by 45% and reduced senior executive compensation, as part of our continuing effort to reduce operating costs and improve cash flow.
This is expected to reduce staff related cash outflows by approximately $2 million quarterly.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | During October 2002, we executed an agreement with our primary lender under which we paid a significantly reduced amount to retire our entire bank debt and eliminated a related
lien on our intellectual property.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | During October 2002, we sold our entire equity interest in our wholly owned subsidiary, TenFold Systems UK Limited, to the management of that subsidiary. We have previously
distributed and supported our products in the United Kingdom through TenFold Systems UK Limited. Under the terms of this transaction, TenFold Systems UK Limited will continue to distribute TenFold products in the United Kingdom and provide local
support to its customers. We are providing support for the Universal Application to TenFold Systems UK Limited and are sharing with TenFold Systems UK Limited revenues from existing and future TenFold Systems UK Limited customers. With the sale of
our UK subsidiary, we eliminated significant recurring costs.
| |  | During February 2003, we executed agreements with our two major equipment lessors to buy out and fully retire their equipment lease debt at a substantial discount, and return
substantially all the related equipment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | During February 2003, we sold 3,888,889 shares of common stock to a member of our Board of Directors for a total purchase price of $700,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

Although we believe we are making good progress towards our goals, and believe we have established a foundation for providing a cash
flow positive basis for continuing operations for 2003 as a whole, challenges and risks remain:

| |  | 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, 2002
financial statements, included an explanatory paragraph relating to their substantial doubt as to our ability to continue as a going concern.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We are currently substantially dependent on a small number of large customers for most of our cash inflows.                                                                                                                                                                                                             
| |  | We continue to face a challenging sales environment, and it is unclear when we can expect to achieve significant sales to new customers.                                                                                                                                                                                
| |  | We are overdue in paying some creditors who could take actions against us.                                                                                                                                                                                                                                              

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| |  | Although we have significantly reduced the litigation against us, and hope to resolve the remaining matters without significant cost to TenFold, we continue to be involved in a
small number of legal matters.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We believe that we are continuing to appropriately manage and
reduce or eliminate these risks. However, there can be no assurance that we will be successful, and if these risks have a materially adverse affect on our cash flow, we could have insufficient cash flow to continue operations beyond the near term.

See Factors that May Affect Future Results and Market Price of Stock for more information about
risks facing TenFold.

Disclosure about Contractual Obligations and Commercial Commitments

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

|                                   |  | As of March 31, 2003 |      
|---------------------------------- |  | -------------------- | -----
|                                   |  |                      |      
|Contractual Obligations            |  | Less than 1 year     |      
|                                   |  |                      |      
|Capital Lease Obligations          |  | $                    | 99   
|Real Estate Operating Leases       |  |                      | 1,545
|                                   |  |                      |      
|Total Contractual Cash Obligations |  | $                    | 1,644
|                                   |  |                      |      

Real Estate
Lease Obligations

The real estate operating leases above include $1.7 million of restructured real estate lease
obligations which have not been reduced by sublease income of $827,000 due from sublease tenants. In the Condensed Consolidated Balance Sheet at March 31, 2003, these obligations are included in accrued liabilities, net of the related sublease
income. At March 31, 2003, we were in default under these leases for late payment of lease payments. The landlords have demanded past due payments totaling approximately $200,000. We are attempting to negotiate early terminations of these
leases.

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

Standby Letters of Credit

We had a stand-by letter of credit for $66,000, used to secure a lease on office space in Dallas, Texas, that decreased according to its original
terms to $33,000 on January 1, 2003, and which will terminate by December 31, 2003. This letter of credit was drawn down by the landlord by approximately $30,000 during April 2003; and as a result we may need replenish the amount drawn.

Guarantees

As of March 31, 2003, we had two remaining contracts subject to guarantees. We have received cash payments under one contract totaling $9.5 million
through March 31, 2003 that are subject to potential refund under the related guarantee. During the year ended December 31, 2002, we converted the remaining work under the other contract to a time-and-materials arrangement, and reduced the guarantee
from over $5 million to $1.5 million. We also revised the terms of this contracts guarantee such that the $1.5 million guarantee will expire upon the earlier to occur of successful completion of certain acceptance tests, the customer
implementing the

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application in production, or December 31, 2003. We have currently maintained a related deferred revenue balance of $1.5 million at March 31, 2003, which is included in our
consolidated deferred revenue balance at March 31, 2003 in the accompanying Condensed Consolidated Balance Sheet.

We believe that the application and required deliveries under the contracts will comply with the contractual terms of our customer
agreements; however, these guarantees represent a risk to us.

Recent Accounting Pronouncements

In June 2001, the FASB issued SFAS No. 143 Accounting for Asset Retirement Obligations. SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This Statement applies to legal obligations associated with the retirement of long-lived assets that result from the
acquisition, construction, development and (or) the normal operation of a long-lived asset, except for certain obligations of lessees. We adopted the provisions of SFAS No. 143 on January 1, 2003. The adoption of SFAS No. 143 did not have a material
impact on our results of operations and financial position.

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

In July 2002, the
FASB issued SFAS No. 146 Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS No. 146 requires recognition of a liability for a cost associated with an exit or
disposal activity when the liability is incurred, as opposed to when the entity commits to an exit plan under EITF No. 94-3. We adopted the provisions of SFAS No. 146 for exit or disposal activities initiated after December 31, 2002. The adoption of
SFAS No. 146 did not have a material impact on our results of operations and financial position.

In November 2002, the
EITF reached a consensus on Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. EITF Issue No. 00-21 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products,
services and/or rights to use assets. The provisions of EITF Issue No. 00-21 will apply to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. We are currently evaluating the effect that the adoption of EITF
Issue No. 00-21 will have on our results of operations and financial position.

In November 2002, the FASB issued
Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Guarantees of Indebtedness to Others, an Interpretation of FASB Statements No. 5, 57, and 107 and a rescission of FASB Interpretation No.
34. This Interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees issued. The Interpretation also clarifies that a guarantor is required to
recognize, at inception of a guarantee, a liability for the

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fair value of the obligation undertaken. The initial recognition and measurement provisions of the Interpretation are applicable to guarantees issued or modified after
December 31, 2002. The disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. The adoption of Interpretation No. 45 did not have a material impact on our results of operations and
financial position.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation 
Transition and Disclosure  an amendment of FASB Statement No. 123. SFAS No. 148 amends SFAS No. 123, Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported results. The disclosure provisions of SFAS No. 148 are effective for fiscal years ending after December 15, 2002 and have been incorporated into these financial
statements and related notes.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51. This Interpretation
addresses the consolidation by business enterprises of variable interest entities as defined in the Interpretation. The Interpretation applies immediately to variable interests in variable interest entities created after January 31, 2003, and to
variable interests in variable interest entities obtained after January 31, 2003. The adoption of Interpretation No. 46 did not have a material impact on our results of operations and financial position.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. SFAS No. 149 amends
and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS No. 133, Accounting
for Derivative Instruments and Hedging Activities. This Statement is effective for contracts entered into or modified after June 30, 2003, with certain exceptions, and for hedging relationships designated after June 30, 2003. We are currently
evaluating the effect that the adoption of SFAS No. 149 will have on our results of operations and financial position.

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 secure additional sources of financing, we will 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, 2002 financial statements, prepared by Tanner+Co, included an explanatory paragraph relating to their substantial doubt as to our ability to continue as a going
concern. Our business model relies upon generating new sales to existing and new customers and receiving payments from existing customers. If we do not generate sufficient new sales and receive payments from existing customers, we will be required
to pursue one or a combination of the following remedies: seek additional sources of financing, further reduce operating expenses, sell part or all of our assets, or terminate operations. There can be no assurance that we will be successful
achieving sufficient cash flow.

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| | If we file for bankruptcy protection, either voluntarily or involuntarily, or sell all or substantially all our assets, it is unlikely that our existing stockholders would
receive any value for their stock
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We are overdue in paying some creditors, including
landlords of our unoccupied office leases. We are in active discussions to reduce or eliminate these liabilities. If we are unsuccessful in maintaining sufficient cash flow, or in certain circumstances as a result of actions that could be taken by a
group of unsecured creditors, we might be forced to into the bankruptcy process. If we become a debtor in bankruptcy for these or any other reasons, it is unlikely that our existing stockholders would receive any value for their stock.

If we are unable to maintain sufficient cash flow to continue to operate as an independent company, we may be required to
consider selling all or substantially all of our assets. If we sell our assets in such circumstances, it is unlikely that the proceeds from such sale would be sufficient to fully satisfy our obligations to our creditors, and therefore it is unlikely
that our existing stockholders would receive any value for their stock.

Our future prospects are difficult to
evaluate

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

We continue to experience difficulty in securing future customer revenue

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

Our errors and omissions coverage may not cover contractual disputes

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

Our new errors and omissions insurance policy, which we renewed on March 1, 2002 and again on March 1, 2003,
is in the form of an industry standard software errors and omissions policy. As such, it only covers software errors and omissions that occur after the delivery of software and excludes contractual disputes such as cost and time related guarantees.
We have previously had contractual disputes related to our guarantees. While we have substantially changed our business model and no longer offer the TenFold Guarantee, no assurance can be given that we will not be subject to these types of claims
in the future. In the event that liabilities from claims are not covered by or exceed our errors and omissions coverage, our business, results of operations, financial position, or liquidity could be materially and adversely affected.

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| | We are substantially dependent on a small number of large customers, including our primary customer, Allstate, and the loss of one or more of these customers may cause
revenues and cash flow to decline
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We have derived, and over the near term we expect to
continue to derive, a significant portion of our revenues and cash flow from a limited number of large customers. For the three months ended March 31, 2003, Allstate accounted for 63 percent of our total revenues, and JP Morgan Chase accounted for
13 percent. If Allstate or JP Morgan Chase significantly reduces the amount of business it conducts with us, our business, results of operations, financial position and liquidity could be materially and adversely affected. The loss of any of our
large customers, without their replacement by new large customers, could have an adverse effect on our revenues and cash flow. We have lost some customers during the last several years. In the future, revenues from a single customer or a few large
customers may constitute a significant portion of our total revenues and cash inflows in a particular quarter. The volume of work performed for specific customers is likely to vary from year to year, and a major customer in one year may not purchase
licenses or services from us in a subsequent year. In addition, if a customer is involved in a corporate reorganization or business combination, that fact may delay a decision to hire us or cause the customer to choose not to purchase licenses or
services in a given year. Replacing the loss of a large customer is unpredictable, as we have not signed a significant contract with a new customer in over a year. Fifty-six percent of our 2001 revenues were derived from three customers; the largest
of the three customers in 2001 did not produce significant revenue or cash flow during 2002. See Managements Discussion and Analysis of Financial Condition and Results of Operations generally for more information concerning our
customers and revenues.

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.

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

We are currently involved in litigation with a
former customer and in a class action suit against more than 300 issuers involving the underwriters of those issuers initial public offerings. We may in the future face other litigation or disputes with customers, employees, business partners,
stockholders, or other third parties. Such litigation or disputes could result in substantial costs and diversion of resources that would harm our business. An unfavorable outcome of these matters may have a material adverse impact on our business,
results of operations, financial position, or liquidity. See Note 9 to the financial statements for more information.

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| | Our settlements with Perot Systems and Cedars-Sinai require that if we do not meet certain obligations their claims may be re-instated or re-asserted, and if this were to
happen and we suffer adverse judgments, our operating results could suffer
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | Our historical quarterly operating results have varied significantly and our future operating results could vary
| | ----------------------------------------------------------------------------------------------------------------

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 operating results may continue to vary significantly. Furthermore, there can be no assurance that we will not continue to suffer losses in the future.

If we fail to adequately anticipate employee and resource utilization rates, our operating results could suffer

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 has in the past and may continue to result in under-utilized employees and could, therefore,
cause us to suffer quarterly losses or adverse results of operations.

Our sales cycle is lengthy and subject to
delays and these delays could cause our operating results to suffer

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

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

We have developed software applications for companies in a small number of vertical industries. Our reliance on customers from particular
industries subjects our business to the economic conditions impacting those industries, including those industries demand for

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

| | Our growth and success depends on our ability to license the Universal Application; however, we have limited experience licensing the Universal Application to
date
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

As we change our business strategy to licensing the Universal Application, the success
of our business is dependent, in part, upon our ability to license the Universal Application. If our strategy for marketing the Universal Application is unsuccessful, or if we are unable to license the Universal Application successfully or within
the time frames anticipated, our revenues, and operating results will suffer.

| | 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, Chairman of the Board of
Directors, Executive Vice President, and Chief Technology Officer. If a key employee resigns to join a competitor or to form a competing company, the loss of the employee and any resulting loss of existing or potential customers to the competing
company would harm our business. We do not carry key man life insurance on any of our key employees. We have entered into an employment agreement with our President and Chief Executive Officer, Nancy M. Harvey. However, the agreement does not ensure
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.

| | 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

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have relied primarily on a combination of patent, copyright, trade secret, and trademark laws, and nondisclosure and other contractual restrictions on copying and distribution
to protect our proprietary technology. We have been issued three patents in the U.S. and intend to continue to seek patents on our technology when appropriate. There can be no assurance that the steps we have taken in this regard will be adequate to
deter misappropriation of our proprietary information or that we will be able to detect unauthorized use and take appropriate steps to enforce our intellectual property rights. The laws of some countries may not protect our intellectual property
rights to the same extent as do the laws of the United States. 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 revenues 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 revenues and market share will suffer. Many of our competitors have significantly greater financial, technical and marketing resources, generate greater
revenues, and have greater name recognition than we do. In addition, there are relatively low barriers to entry into our markets and we have faced, and expect to continue to face, additional competition from new entrants into our markets.

| | International political and economic uncertainty could have an adverse impact on our business and on our operating results
| | --------------------------------------------------------------------------------------------------------------------------

Revenues from customers outside of North America were approximately 21 and 34 percent of total revenues for the three months ended March
31, 2003 and 2002, respectively. The international political and economic uncertainty caused by the ongoing war on terrorism may adversely impact our ability to continue existing relationships with our foreign customers and to develop new business
abroad.

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

| | 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 58 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 44 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

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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/or 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 March 31, 2003, we had cash and cash equivalents of $4.3 million, and restricted cash of $106,000.
Substantially 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 March 31, 2003 rates would cause the fair value of these cash 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

Our operations include some transactions with customers and partners in the United Kingdom. Some of these transactions are
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 receivables or payables denominated in British pounds decreases. When the U.S. dollar weakens against the British pound, the value of receivables or payables
denominated in British pounds increases. The monetary activities which are impacted by foreign currency fluctuations are cash, accounts receivable, accounts payable, and certain accrued liabilities. A hypothetical 10 percent increase or decrease in
the exchange rate between the U.S. dollar and the British pound from the March 31, 2003 rate would cause the fair value of such monetary assets and liabilities denominated in British pounds to change by approximately $57,000. We are not currently
engaged in any foreign currency hedging activities.

Item 4.            
Controls and Procedures

Within the 90 days prior to the date of this report, the Company
carried out an evaluation, under the supervision and with the participation of the Companys management, including the Companys Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the
Companys disclosure controls and procedures, as defined in Exchange Act Rule 15d-14(c). Based upon that evaluation, the Companys Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls
and procedures are effective in enabling the Company to record, process, summarize and report information required to be included in the Companys periodic SEC filings within the required time period. There have been no significant changes in
the Companys internal controls or in other factors that could significantly affect internal controls subsequently to the date the Company carried out its evaluation.

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PART II.            
OTHER INFORMATION

Item 1.     
Legal Proceedings

See Part I, Item 1, Note 9 of Notes to Condensed Consolidated Financial
Statements for a description of legal proceedings.

Item 2.     
Changes in Securities and Use of Proceeds

On February 5, 2003, we sold 3,888,889 shares of
unregistered common stock to Robert W. Felton, a long-time member of our Board of Directors, for a total purchase price of $700,000.

On February 26, 2002, we entered into a common stock purchase agreement with Fusion Capital Fund II, LLC (Fusion Capital), pursuant to
which Fusion Capital agreed to purchase in cash, on each trading day during the term of the agreement, $12,500 of our common stock up to an aggregate, under certain conditions, of $10 million. We issued 632,911 shares to Fusion Capital as part of
its commitment fee, and up to 316,456 additional shares were issuable to Fusion Capital in the future as part of its commitment fee. As a condition to Fusion Capitals obligation to make purchases under the Purchase Agreement, the Common Stock
to be offered and sold to Fusion Capital had to be registered in an effective registration statement with the Securities and Exchange Commission. Once the registration statement became effective, we could make draws under the equity line, and could
elect to draw up to $250,000 per month so long as our stock price exceeded $0.25 (below which we may not make draws). Our stock recently traded below $0.25 per share and we did not file the registration statement. On February 29, 2003, we reached an
agreement with Fusion Capital to terminate the common stock purchase agreement. TenFold paid Fusion Capital a termination fee of $75,000 and cancelled all 632,911 commitment shares.

Item
3.     
Defaults Upon Senior Securities

TenFold was previously in default to its two major
equipment lessors for late payment of lease payments. TenFold had leases payable to these lessors totaling approximately $2.9 million. During February 2003, TenFold executed agreements with these lessors to buy out and fully retire their equipment
lease debt at a substantial discount, and return substantially all the related equipment.

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Item 6.     
Exhibits and Reports on Form 8-K

|(a) | Exhibits
|--- | --------



|Number  |  | Description                                                                                                                                                                       
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |  |                                                                                                                                                                                   
|4.5**   |  | Termination Agreement between TenFold and Fusion Capital Fund II, LLC dated as of February 26, 2003.                                                                              
|10.27** |  | Stock Issuance Agreement and Release, dated as of February 5, 2003, between TenFold and the Robert W. Felton Trust.                                                               
|10.28   |  | Amendment No. 3 to Employment Agreement between TenFold and Nancy M. Harvey.                                                                                                      
|11*     |  | Computation of Shares used in Computing Basic and Diluted Net Income (Loss) Per Share.                                                                                            
|99.1    |  | Certification by the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.

*   Incorporated by reference to Notes to Condensed Consolidated Financial Statements herein
     ** Filed as exhibit bearing same number to Form 10-K for the year ended December 31, 2002

|(b) | Reports on Form 8-K
|--- | -------------------

On
February 18, 2002, the Company filed a Current Report on Form 8-K with the Securities and Exchange Commission disclosing that it had dismissed its independent accountants KPMG LLP and engaged the services of Tanner + Co. as the companys new
independent accountants for its last fiscal year ended December 31, 2002 and its current fiscal year ending December 31, 2003.

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SIGNATURES

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

TENFOLD
CORPORATION

|/s/ NANCY M. HARVEY                                                                          | 
|-------------------------------------------------------------------------------------------- | 
|                                                                                             | 
|Nancy M. Harvey President, Chief Executive Officer, and Chief Financial Officer May 13, 2003 | 

CERTIFICATIONS

I,
Nancy M. Harvey, certify that:

1.I have reviewed this quarterly report on Form 10-Q of TenFold Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:

(a)          designed such disclosure controls and procedures to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b)          evaluated the effectiveness of the
registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and

(c)          presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date.

5. I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of registrants board of
directors (or persons performing the equivalent function):

(a)          all significant deficiencies in the design or operation
of internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls;
and

(b)          any fraud, whether or
not material, that involves management or other employees who have a significant role in the registrants internal controls.

6. I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

|/s/ NANCY M. HARVEY                                                                          | 
|-------------------------------------------------------------------------------------------- | 
|                                                                                             | 
|Nancy M. Harvey President, Chief Executive Officer, and Chief Financial Officer May 13, 2003 | 

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