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

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2000

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

For the transition period from _____ to _____

Commission file number 000-25661

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

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

Delaware 83-0302610
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
180 West Election Road
Draper, Utah 84020
(Address of principal executive offices, including zip code)

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

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

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X] No [_]

As of March 31, 2000, there were 35,311,643 shares of the registrant's
Common Stock outstanding.

INDEX
-----

Page
----

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements.
Consolidated Balance Sheets at March 31, 2000 and December
31, 1999.................................................... 3

Consolidated Statements of Operations for the three months
ended March 31, 2000 and March 31, 1999..................... 4

Consolidated Statements of Cash Flows for the three months
ended March 31, 2000 and March 31, 1999..................... 5

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

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 11

Item 3. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 26

PART II. OTHER INFORMATION

Item 2. Use of Proceeds............................................. 26

Item 6. Exhibits and Reports on Form 8-K............................ 27

SIGNATURES................................................................. 28

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

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

March 31, December 31,
---------------- --------------
2000 1999
---------------- --------------
Assets
Current assets:

Cash and cash equivalents..................................................... $ 47,228 $ 58,247
Accounts receivable (net of allowances for doubtful accounts
of $125 and $725, respectively)........................................... 14,761 10,713
Unbilled accounts receivable.................................................. 10,123 4,377
Prepaid expenses and other assets............................................. 1,043 889
Deferred income taxes......................................................... 7,784 2,650
Other assets.................................................................. 135 1,080
---------------- --------------
Total current assets.................................................... 81,074 77,956

Restricted cash............................................................... 111 111
Property and equipment, net................................................... 9,602 9,810
Due from stockholders......................................................... 1,000 1,000
Other assets.................................................................. 1,220 216
Goodwill and other intangibles, net........................................... 22,389 23,539
---------------- --------------
Total assets............................................................ $ 115,396 $ 112,632
================ ==============

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable.............................................................. $ 2,213 $ 2,903
Income taxes payable.......................................................... 918 1,142
Accrued liabilities........................................................... 10,074 16,836
Deferred revenue.............................................................. 7,012 9,066
Current installments of obligations under capital leases...................... 938 926
Current installments of notes payable......................................... 1,911 1,701
Promissory note............................................................... 12,000 12,000
---------------- --------------
Total current liabilities............................................... 35,066 44,574
---------------- --------------

Long-term liabilities:
Deferred income taxes......................................................... 2,749 2,754
Obligations under capital leases, excluding current installments.............. 941 1,175
Notes payable, excluding current installments................................. 2,243 2,289
---------------- --------------
Total long-term liabilities............................................. 5,933 6,218
---------------- --------------

Minority interest.............................................................. 8 -
---------------- --------------

Stockholders' equity:
Common stock, $0.001 par value:
Authorized: 120,000,000 shares
Issued and outstanding shares: 35,311,643 shares at March 31, 2000
and 34,806,602 shares at December 31, 1999................................. 35 35
Additional paid-in capital................................................... 73,263 62,672
Notes receivable from stockholders........................................... (2,115) (1,155)
Deferred compensation........................................................ (4,730) (5,611)
Retained earnings............................................................ 8,009 5,872
Accumulated other comprehensive income....................................... (73) 27
---------------- --------------
Total stockholders' equity.............................................. 74,389 61,840
---------------- --------------
Total liabilities and stockholders' equity.............................. $ 115,396 $ 112,632
================ ==============

See accompanying notes to consolidated financial statements

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

Three Months Ended
March 31,
-----------------------------------
2000 1999
--------------- ----------------
Revenues:

License..................................................................... $ 4,681 $ 5,656
Services.................................................................... 26,994 10,371
--------------- ----------------
Total revenues........................................................ 31,675 16,027
--------------- ----------------

Operating expenses:
Cost of revenues............................................................ 11,718 6,246
Sales and marketing......................................................... 6,844 4,736
Research and development.................................................... 6,424 3,401
General and administrative.................................................. 1,864 820
Amortization of deferred compensation....................................... 351 305
Amortization of goodwill and acquired intangibles........................... 1,151 -
--------------- ----------------
Total operating expenses.............................................. 28,352 15,508
--------------- ----------------
Income from operation....................................................... 3,323 519
--------------- ----------------

Other income (expense):
Interest and other income................................................... 787 159
Interest expense............................................................ (279) (71)
--------------- ----------------
Total other income.................................................... 508 88
--------------- ----------------
Income before income taxes and minority interest............................. 3,831 607

Provision for income taxes................................................... 1,686 234
--------------- ----------------
Net income before minority interest.......................................... 2,145 373

Minority interest............................................................ 8 -
--------------- ----------------
Net income................................................................... $ 2,137 $ 373
=============== ================

Accretion of Series A and B preferred stock.................................. - (248)

Net income available to common stock......................................... $ 2,137 $ 125
=============== ================

Basic earnings per common share.............................................. $ 0.06 $ 0.01
=============== ================
Diluted earnings per common share............................................ $ 0.05 $ 0.00
=============== ================
Weighted average common and common equivalent shares used to calculate
earnings per share:
Basic....................................................................... 34,038 22,765
=============== ================
Diluted..................................................................... 38,864 28,176
=============== ================

See accompanying notes to consolidated financial statements

TENFOLD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

Three Months Ended
March 31,
----------------------
2000 1999
----- -------

Cash flows from operating activities:
Net income..................................................................... $ 2,137 $ 373
Adjustments to reconcile net income to net cash used in operating activities:
Tax benefit from exercise of stock options.................................. 6,820 -
Deferred taxes.............................................................. (5,139) -
Amortization of goodwill and acquired intangibles........................... 1,151 -
Depreciation and amortization............................................... 1,011 541
Allowances for doubtful accounts............................................ (262) -
Amortization of deferred compensation ...................................... 351 305
Minority interest........................................................... 8 -

Changes in operating assets and liabilities:
Accounts receivable......................................................... (3,786) (1,509)
Unbilled accounts receivable................................................ (5,746) (788)
Prepaid expenses and other assets........................................... 520 (302)
Accounts payable............................................................ (690) 272
Income taxes payable........................................................ (224) (404)
Accrued liabilities......................................................... (6,762) 311
Deferred costs.............................................................. - (107)
Deferred revenues........................................................... (2,054) (2,485)
---------- --------
Net cash used in operating activities.............................. (12,665) (3,793)
---------- --------

Cash flows from investing activities:
Additions to property and equipment......................................... (804) (842)
Net increase (decrease) in other assets..................................... (733) -
---------- --------
Net cash used in investing activities.............................. (1,537) (842)
---------- --------

Cash flows from financing activities:
Proceeds from employee stock purchase plan stock issuance................... 2,520 -
Proceeds from issuance of common stock...................................... - 1,976
Exercise of common stock options............................................ 821 369
Proceeds from issuance of notes payable..................................... 576 733
Principal payments on notes payable......................................... (412) (194)
Notes receivable from stockholders.......................................... - (349)
Principal payments on capital lease obligations............................. (222) (82)
---------- --------
Net cash provided by financing activities.............................. 3,283 2,453
---------- --------

Effect of exchange rate changes.................................................. (100) (20)
---------- --------

Net decrease in cash and cash equivalents........................................ (11,019) (2,202)
Cash and cash equivalents at beginning of period................................. 58,247 15,373
---------- --------
Cash and cash equivalents at end of period....................................... $ 47,228 $ 13,171
========== ========

See accompanying notes to consolidated financial statements

TENFOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying unaudited consolidated financial statements included
herein have been prepared by TenFold Corporation (the "Company") pursuant to the
rules and regulations of the Securities and Exchange Commission. In management's
opinion, the interim financial data presented includes all adjustments
(consisting of normal recurring items) necessary for fair presentation. All
intercompany accounts and transactions have been eliminated. 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-month period ended March 31, 2000
are not necessarily indicative of the results that may be expected for any
future period or the year ended December 31, 2000.

This report should be read in conjunction with the Company's audited
consolidated financial statements for the year ended December 31, 1999 included
in the Annual Report on Form 10-K filed with the Securities and Exchange
Commission.

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.

2. Earnings Per Share

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

Three Months Ended
March 31,
--------------------------
2000 1999
-------- --------

Numerator:
Numerator for basic earnings per share - net income available to common
stockholders............................................................................. $ 2,137 $ 125
======= =======
Assumed dilution related to subsidiaries' earnings applicable to minority
stockholders............................................................................. (43) -
------- -------

Numerator for diluted earnings per share.................................. $ 2,094 $ 125
======= =======
Denominator:
Denominator for basic earnings per share - weighted average shares....................... 34,038 22,765
======= =======
Employee stock options................................................................... 4,826 5,411
------- -------
Denominator for diluted earnings per share............................................... 38,864 28,176
======= =======
Earnings per common share:
Basic earnings per common share.......................................................... $ 0.06 $ 0.01
======= =======
Diluted earnings per common share........................................................ $ 0.05 $ 0.00
======= =======

Employee stock options of 182,700 outstanding during the three months
ended March 31, 2000 that could potentially dilute basic earnings per share in
the future were not included in the computation of diluted earnings per share
because to do so would have been anti-dilutive for the period.

The computation of diluted earnings per common share for the three months
ended March 31, 1999 excludes the assumed conversion of 6,261,129 shares of
Series A and B convertible preferred stock because the impact of the conversion,
including the assumed elimination of the accretion of such preferred stock,
would be anti-dilutive.

3. Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of
three months or less at the date of acquisition to be cash equivalents. The
Company generally invests its cash and cash equivalents in money market
accounts, commercial paper, and certificates of deposit. The carrying value of
the Company's short-term investments approximates fair value.

4. Comprehensive Income (Loss)

The Company has adopted the provisions of SFAS No. 130, Reporting
Comprehensive Income. SFAS No. 130 establishes standards for reporting
comprehensive income and its components in financial statements. The Company
incurred a foreign currency translation adjustment loss of $100,000, net of tax,
for the three months ended March 31, 2000 compared to a foreign currency
translation adjustment loss of $20,000, net of tax, for the same period in the
prior year. This resulted in comprehensive income of $2.0 million for the three
months ended March 31, 2000 and comprehensive income of $353,000 for the three
months ended March 31, 1999.

5. Lease Commitments

We have commitments under long-term operating leases, principally for
office space and computer equipment. Our future minimum lease payments under
non-cancelable operating lease obligations, in excess of one year, at March 31,
2000 are as follows:

Year Amount
---- ------
Q2 - Q4, 2000 $ 6,840,240
2001 8,177,081
2002 6,781,143
2003 5,507,380
2004 5,101,046
Thereafter 17,770,587
-----------
Total minimum lease commitments $50,177,477
===========

The lease mentioned in Note 11 was excluded from this table as it was
signed subsequent to March 31, 2000.

6. Operating Segments

The Company has adopted the provisions of SFAS No. 131, Disclosure About
Segments of an Enterprise and Related Information. SFAS No. 131 establishes
standards for the reporting by public business enterprises of information about
operating segments, products and services, geographic areas, and major
customers. The method for determining what information to report is based on
the way that management organizes the operating segments within the Company for
making operating decisions and assessing financial performance.

The Company's chief operating decision-maker is considered to be the
Company's CEO. The CEO reviews financial information presented on a consolidated
basis accompanied by disaggregated information about revenues by Vertical
Business Group for purposes of making operating decisions and assessing
financial performance. Revenues from operations outside of North America were
approximately 10 percent of revenues for the three months ended March 31, 2000
and 5 percent of revenues for the same period in the

prior year. The consolidated financial information reviewed by the CEO is
identical to the information presented in the accompanying consolidated
statements of operations. Therefore, the Company operates in a single operating
segment, which is applications products and services.

No material change has occurred since December 31, 1999 in the extent of
the Company's reliance on major customers. The Company's long-lived assets
continue to be deployed predominantly in the United States.

Revenue from our Vertical Business Groups is as follows (in thousands):

Three Months Ended
March 31,
----------------------------
2000 1999
------ ------

Banking
License........................................................... $ - $ 200
Services.......................................................... 2,576 548
------- -------
$ 2,576 $ 748
======= =======
Communications
License........................................................... $ 339 $ 8
Services.......................................................... 1,866 66
------- -------
$ 2,205 $ 74
======= =======
e-Business and Other
License........................................................... $ 213 $ 76
Services.......................................................... 1,263 386
------- -------
$ 1,476 $ 462
======= =======
Energy
License........................................................... $ 911 $ -
Services.......................................................... 4,718 44
------- -------
$ 5,629 $ 44
======= =======
Healthcare
License........................................................... $ 263 $ 27
Services.......................................................... 1,334 593
------- -------
$ 1,597 $ 620
======= =======
Insurance
License........................................................... $ 1,019 $ 4,662
Services.......................................................... 13,414 7,405
------- -------
$14,433 $12,067
======= =======
Investment Management
License........................................................... $ 1,936 $ 683
Services.......................................................... 1,823 1,329
------- -------
$ 3,759 $ 2,012
======= =======
Total
License........................................................... $ 4,681 $ 5,656
Services.......................................................... 26,994 10,371
------- -------
$31,675 $16,027
======= =======

7. Acquisition

On September 30, 1999, the Company entered into a Stock Purchase Agreement
("Agreement") with Barclays California Corporation ("BarCal") whereby the
Company purchased the entire equity interest of BarCal in its wholly-owned
subsidiary, The LongView Group, Inc. ("LongView"). On October 7, 1999, the
acquisition was closed. Accordingly, the operations of LongView have been
included in the accompanying

consolidated statement of operations for the Company since the acquisition was
closed. The acquisition was accounted for under the purchase method of
accounting.

Pursuant to the Agreement, the Company acquired from BarCal all of the
issued and outstanding capital stock of LongView for $22 million, comprised of
$10 million in cash and a $12 million note from the Company to BarCal. The
promissory note is due and payable in installments of $3 million on April 15,
2000 and $9 million on July 15, 2000 and bears interest at 6.5 percent. The
first installment was paid during April 2000.

BarCal has been a customer of LongView since 1998. BarCal has been a
customer of the Company since 1997 and, as such, has various software license
and service agreements with the Company. BarCal signed, on September 30, 1999,
an additional Master Software License and Services Agreement, purchasing from
the Company a multi-project license to the Universal Application and TenFold
ComponentWare products and related technical support services for $4 million.
The Company recorded approximately $3.7 million of license revenue in the fourth
quarter of 1999 and is recording the remaining $300,000 as support revenue,
ratably over the support period.

In connection with the acquisition, the Company recorded a write-off of $2
million for in-process research and development in the fourth quarter of 1999.
The estimated costs to complete the acquired in-process research and development
as of the date of acquisition were $1.2 million. Management believed that the
assumptions used in the LongView in-process research and development analysis
were reasonable at the time of the acquisition. No assurance can be given,
however, that the underlying assumptions used to estimate expected revenues,
development costs or profitability, or the events associated with such projects,
will transpire as estimated. Expenses incurred to date associated with the
development and integration of the in-process research and development projects
are higher than previous estimates. Management believes that projected revenues
from these projects will be higher than previous estimates and that revised
estimates of net cash flows related to these projects are not materially
different than the original net cash flows used to calculate the in-process
research and development write-off. To date, no revenues have been recognized
on these projects.

The following unaudited pro forma financial information presents the
combined results of operations of the Company and LongView for the three months
ended March 31, 1999 as if the acquisition had occurred at the beginning of
calendar 1999, after giving effect to certain adjustments, including, but not
limited to, amortization of goodwill and other intangible assets, and decreased
interest income. The $2 million write-off for acquired in-process research and
development has been excluded from the pro forma results as it is a non-
recurring charge. All amounts are in thousands except per share data.

Three Months
Ended
March 31, 1999
--------------

Total revenues................... $17,230
-------
Net income (loss)................ (566)
-------
Earnings (loss) per share:
Basic......................... $ (0.04)
=======
Diluted....................... $ (0.04)
=======

8. Subsidiary Stock Plans

During 1999, the Company formed six subsidiaries in each of which the
Company holds 20,000,000 issued and outstanding shares of common stock. Each
subsidiary, with approval of its Board of Directors, adopted its own stock plan
during 1999. The terms of the plans are similar to the Company's 1999 Stock
Plan. A total of 3,740,000 shares of common stock of each subsidiary has been
reserved under the Stock Plans of all six subsidiaries. The Company plans to
account for the sale of common stock in the Company's subsidiaries as an equity
transaction.

Outstanding stock options under the respective stock option plans as of
March 31, 2000 range from 2.1 to 3.2 million common stock options. One employee
exercised certain subsidiary stock options during the three months ended March
31, 2000. In connection with this option exercise, the Company loaned the
employee

$960,000, which is included in the consolidated balance sheet under the caption
Notes Receivable from Stockholders. The note receivable is secured by the
related shares.

9. Legal Proceedings

On September 17, 1999, Ohio Farmers Insurance Company doing business as
Westfield Companies (the "Plaintiff"), filed a complaint in the United States
District Court for the District of Ohio seeking $5.8 million from the Company.
The complaint alleges that the Company failed to deliver on contractual
commitments under a license agreement with the Plaintiff and includes specific
claims of anticipatory breach of contract, breach of express warranty, and
negligent misrepresentation. The $5.8 million being sought from the Company by
the Plaintiff was paid to the Company by the Plaintiff in the first half of 1999
and recognized as revenue by the Company over this period. On November 4, 1999,
the Company filed an Answer and Counterclaim denying these claims and seeking
recovery of $3.9 million that Plaintiff owes the Company under the license
agreement together with claims for additional damages. The case is in its
preliminary stages. Based on the information currently available, the Company
believes that it has valid defenses against the Plaintiff's claims and the
Company intends to vigorously defend the case. The Company also intends to
vigorously enforce its rights under the license agreement, including recovery of
the $3.9 million due and owing under the agreement.

The Company's legal counsel has commenced investigation of the facts
pertinent to the claims and counterclaims. Based on their analysis and current
assumptions, the Company's counsel has advised the Company that there is a
reasonable likelihood that the Company will successfully prosecute the Company's
claims and defenses. The Company's counsel has advised the Company that, pending
further investigation and discovery, the prospect that the Company will incur a
loss regarding monies already collected is remote, and that it is too early in
the litigation process to determine the probability of a recovery or loss with
respect to the remaining $3.9 million due under the agreement. The $3.9 million
due and owing under the agreement is included in accounts receivable in the
consolidated balance sheet at March 31, 2000, and there has been no allowance
for loss recorded on this receivable. Due to the high degree of uncertainty
associated with litigation, it is possible that the Company will incur a loss
with respect to the $3.9 million currently due from the Plaintiff. Such loss
could range from zero to $3.9 million. However, at the current time, the amount
of any loss cannot be reasonably estimated. Although the Company believes it
will ultimately prevail against the Plaintiff in the matters explained above, an
unfavorable outcome of these matters may have a material adverse impact on the
Company's financial position and results of operations.

10. Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes
new accounting and reporting standards for companies to report information about
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the balance sheet and measure those instruments at fair
value. For a derivative not designated as a hedging instrument, changes in the
fair value of the derivative are recognized in earnings in the period of change.
The Company must adopt SFAS No. 133 by January 1, 2001. Management does not
believe the adoption of SFAS No. 133 will have a material effect on the
Company's results of operations, financial position or liquidity.

In December 1999, the Securities and Exchange Commission staff released
Staff Accounting Bulletin No. 101, "Revenue Recognition," ("SAB No. 101") to
provide guidance on the recognition, presentation and disclosure of revenue in
financial statements; however, SAB No. 101 does not change existing literature
on revenue recognition. SAB No. 101 explains the staff's general framework for
revenue recognition, stating that four criteria need to be met in order to
recognize revenue. The four criteria, all of which must be met, are the
following:

. There must be persuasive evidence of an arrangement;

. Delivery must have occurred or services must have been rendered;
. The selling price must be fixed or determinable; and
. Collectibility must be reasonably assured.

The Company will adopt SAB No. 101 during the second quarter of 2000. The
Company believes that its current revenue recognition policy is in compliance
with this guidance; however, the Company continues to evaluate the impact, if
any, of SAB No. 101 and any possible, subsequent interpretations of SAB No. 101
on the Company's policies and procedures.

The FASB issued Interpretation No. 44, "Accounting for Certain Transactions
Involving Stock Compensation--an Interpretation of APB Opinion No. 25" ("FIN No.
44") in March 2000. The interpretation clarifies the application of Opinion 25
for only certain issues such as the following: (a) the definition of employee
for purposes of applying Opinion 25, (b) the criteria for determining whether a
plan qualifies as a noncompensatory plan, (c) the accounting consequence of
various modifications to the terms of a previously fixed stock option or award,
and (d) the accounting for an exchange of stock compensation awards in a
business combination. The Company must adopt FIN No. 44 by July 1, 2000.
Management does not believe that the interpretation will have a material effect
on the Company's results of operations, financial position or liquidity.

11. Subsequent Event

On April 28, 2000, the Company signed a 10-year lease for approximately
170,000 square feet of office space in South Jordan, Utah. The lease will
commence upon completion of construction and the Company's subsequent occupancy
of the office space, which is estimated to occur in late 2001.

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements that
involve risks and uncertainties that may cause actual future events or results
to differ materially from those described in the forward-looking statements.
Words such as "expects," "intends," "anticipates," "should," "believes," "will,"
"plans," "estimates," "may," variations of such words and similar expressions
are intended to identify such forward-looking statements. We disclaim any
intention or obligation to revise any forward-looking statements whether as a
result of new information, future developments or otherwise. There are many
factors which could cause actual results to differ materially from those
contained in the forward-looking statements. These factors include: limited
operating history; attraction and retention of employees; variability of
quarterly operating results; dependence on a small number of customers;
customer's fulfillment of various responsibilities; fixed-time, fixed-price
contracts; timing of new product releases; competitive factors; protection of
intellectual property; and risks associated with the integration of LongView
into TenFold's operations. These are representative of factors which could
affect the outcome of the forward-looking statements. In addition, such
statements could be affected by general industry and market conditions and
growth rates, general domestic and international economic conditions including
interest rate and currency exchange rate fluctuations and other factors. Please
also refer to the documents filed by us with the Securities and Exchange
Commission, which identify important risk factors that could cause actual
results to differ from those contained in forward-looking statements. Some of
these factors are described below under the section entitled "Factors That May
Affect Future Results and Market Price of Stock."

Overview

TenFold is a leading provider of large-scale e-business applications for
market-leading customers in banking, communications, energy, healthcare,
insurance, investment management and other industries. From 1993 through 1995,
we engaged primarily in the development of our Universal Application technology
and derived revenue primarily from technology development and consulting
projects, generally on a time and materials basis. In 1996, we began using our
Universal Application to develop large-scale, complex applications. In 1997 and
in subsequent years, we derived the majority of our license and service revenues
from fixed-price, fixed-time applications development projects. Starting in
1998, we also began

reselling vertical applications products that we had previously developed for
other customers.

We derive our revenues from license fees, application development and
implementation services, support services, and training services. License
revenues consist of fees for licensing our Universal Application and license
fees for the applications that we develop for our customers. We also derive
license revenues from the resale of our vertical applications products. Service
revenues consist of fees for applications development and implementation,
support and training. We recognized revenues consistent with 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 for 1999 and 2000.

For software arrangements that include a service element that is essential
to the functionality of the software, we recognize license fees related to the
application, and the application development service fees, over time as we
perform the services, using the percentage-of-completion method of accounting.
We determine our proposed fixed price for a project using a formal estimation
process that takes into account the project's timetable, complexity, technical
environment, risks and other available alternatives. Members of our senior
management team approve each fixed price proposal. We make adjustments to the
original estimates used in the percentage-of-completion method of accounting as
work progresses under the contract and as we gain experience. On a limited
basis, we also provide application development and implementation services on a
time and materials basis. We recognize revenue on our time and material
contracts as we perform the services.

We recognize license revenues from applications products sales and
Universal Application development licenses, whether sold separately or with an
application development project, that do not include related services that are
essential to the functionality of the software, when the following criteria are
met: we have a signed non-cancelable license agreement with non-refundable fees;
we have shipped the software product; there are no uncertainties surrounding
product acceptance; the fees are fixed and determinable; and collection is
considered probable.

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

In mid-1998, we began offering the TenFold Guarantee, the industry's first
money-back guarantee for large scale software applications, under which we
recognize revenue using the percentage-of-completion method of accounting. As a
result, in some of our contracts we have guaranteed that we will complete our
projects within a fixed-time period or we will refund the fees paid. This
guarantee also requires the customer to fulfill various responsibilities within
a specified time period, including reviewing and approving requirements,
providing timely feedback, and providing adequate staffing or the guarantee is
voided. Accordingly, we treat this guarantee as a conditional guarantee. If
necessary, we make provisions for estimated refunds or losses on uncompleted
contracts on a contract by contract basis and recognize the provisions in the
period in which the refunds or losses become probable and we can reasonably
estimate them.

The timing and amount of cash received from customers can vary
significantly depending on specific contract terms and can therefore have a
significant impact on the amount of deferred revenue and unbilled accounts
receivable in any given period. We record billings and cash received in excess
of revenue earned as deferred revenue. Our deferred revenue balance at March 31,
2000 was $7.0 million, which we expect to recognize as revenue within the next
twelve months. Our deferred revenue balance generally results from contractual
commitments made by customers to pay amounts to us in advance of revenues
earned. Our unbilled accounts receivable represents revenue that we have earned
but which we have not yet billed. We bill customers for this revenue as payments
become due under the terms of the customer's contract. Our unbilled accounts
receivable balance at March 31, 2000 was $10.1 million and we expect to bill and
collect this amount within twelve months.

We are organized into discrete Vertical Business Groups, subsidiaries of
TenFold, to tailor marketing, selling, product development, and business
strategies for our target vertical industries. As each

Vertical Business Group grows in size, gains multiple customers, and develops
multiple, resalable applications products, it achieves increasing autonomy. We
offer employee incentives tied to the performance of these Vertical Business
Groups. We have granted to employees, and plan to continue to grant, options to
acquire capital stock of these subsidiaries. We expect these grants over time to
total approximately 15 percent to 20 percent of each subsidiary. We have offered
and may offer in the future, Vertical Business Group equity to strategic
industry partners. These subsidiaries may raise capital independently through an
initial public offering, private placement or other means, or be spun off from
TenFold.

As of March 31, 2000, we had formed six subsidiaries from which we are
conducting or expect to conduct our vertical business operations in the banking,
communications, energy, healthcare, insurance, and investment management
industries. We are in the process of preparing intercompany agreements to cover
technology licensing and shared services between TenFold and these subsidiaries,
and between the subsidiaries themselves. We are also in the process of
transferring many of our employees to these subsidiaries.

On September 30, 1999, we entered into a definitive agreement to acquire
The LongView Group, Inc ("LongView"). The closing of the transaction occurred on
October 7, 1999. TenFold's acquisition of LongView was reported in a Form 8-K
filed on October 14, 1999, as amended.

Results of Operations

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

Three Months
Ended March 31,
----------------------------------
2000 1999
----------- -----------

Revenues:
License.......................................................... 15% 35%
Services......................................................... 85% 65%
----------- -----------
Total revenues................................................ 100% 100%
----------- -----------

Operating expenses:
Cost of revenues................................................. 37% 39%
Sales and marketing.............................................. 22% 30%
Research and development......................................... 20% 21%
General and administrative....................................... 6% 5%
Amortization of deferred compensation............................ 1% 2%
Amortization of goodwill and acquired intangibles................ 4% 0%
----------- -----------
Total operating expenses...................................... 90% 97%
----------- -----------
Income from operations............................................. 10% 3%
----------- -----------

Other income, net............................................. 2% 1%
----------- -----------

Income before income taxes and minority interest................... 12% 4%
Provision for income taxes......................................... 5% 1%
----------- -----------
Net income before minority interest................................ 7% 2%
Minority interest.................................................. 0% 0%
----------- -----------
Net income......................................................... 7% 2%
=========== ==========

Revenues

Total revenues increased to $31.7 million for the three months ended March
31, 2000 as compared to $16.0 million for the same period in 1999. License
revenues decreased to $4.7 million for the three months as compared to $5.7
million for the same period in 1999, while service revenues increased to $27.0
million as compared to $10.4 million for the same period in 1999. License
revenues represented 15 percent of total revenues during the three months ended
March 31, 2000 as compared to 35 percent during the three months ended March 31,
1999. License revenues decreased for the three months ended March 31, 2000
compared to the same period in 1999 due primarily to the fact that we sold more
Universal Application development licenses in the 1999 period. Service revenues
increased for the three months ended March 31, 2000 compared to the same period
in 1999 due to an increase in the number of customer projects.

Revenues from international customers were approximately 10 percent of
total revenues for the three months ended March 31, 2000 as compared to 5
percent for the same period in 1999.

One customer accounted for more than 10 percent of our revenues for the
three months ended March 31, 2000, compared to three customers each accounting
for more than 10 percent of our revenues for the same period in 1999.

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

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 increased to
$11.7 million for the three months ended March 31, 2000 compared to $6.2 million
for the same period in 1999. Cost of revenues as a percentage of total revenues
was 37 percent for the three months ended March 31, 2000 as compared to 39
percent for the same period in 1999. The increase in absolute dollars between
periods was mainly due to an increase in the number of customer projects.

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 increased to $6.8 million for the three months ended March
31, 2000 as compared to $4.7 million for the same period in 1999. Sales and
marketing expenses as a percentage of total revenues were 22 percent for the
three months ended March 31, 2000 as compared to 30 percent for the same period
in 1999. The increases in sales and marketing expenses in absolute dollars was
primarily the result of hiring additional sales and marketing personnel and
expanding advertising and other marketing programs in connection with the growth
of our business. The decrease in expenses as a percentage of total revenues was
primarily due to timing of advertising expenses. We anticipate that sales and
marketing expenses will be higher as a percentage of total revenue later in
calendar 2000 than were incurred during the three months ended March 31, 2000.
Additionally, we anticipate that sales and marketing expenses will continue to
increase in absolute dollars as the Company continues to grow.

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 increased
to $6.4 million for the three months ended March 31, 2000 as compared to $3.4
million for the same period in 1999. Research and development expenses as a
percentage of total revenues were 20 percent for the three months ended March
31, 2000 as compared to 21 percent for the same period in 1999. Research and
development expenses grew in absolute dollars due primarily to the addition of
personnel required to support expanded development efforts.

General and Administrative. General and administrative expenses consist
primarily of the costs of executive management and finance and administrative
staff, recruiting, business insurance, and professional fees. General and
administrative expenses increased to $1.9 million for the three months ended
March 31, 2000 as compared to $820,000 for the same period in 1999. General and
administrative expenses as a percentage of total revenues were 6 percent for
the three months ended March 31, 2000 as compared to 5 percent for the same
period in 1999. The increase in absolute dollars was primarily the result of
hiring additional finance and administrative personnel to manage and support the
increased complexity and scale of our operations. We believe that our general
and administrative expenses will continue to increase in absolute dollars as a
result of the need to add additional finance and administrative staff to support
growing operations and from costs related to being a publicly-held company.

Amortization of Deferred Compensation. Deferred compensation, along with
the associated amortization, resulted from the grant of stock options when
there is a difference between the exercise price of certain stock option grants
and the deemed fair value of the common stock at the time of such grants.
Certain grants during 1997, 1998, and 1999 were issued at a price which differed
from the deemed fair value at the grant date. We are amortizing these amounts
over the vesting periods of the applicable options, resulting in amortization
expense of $351,000 for the three months ended March 31, 2000 as compared to
$305,000 for the same period of 1999.

Amortization of Goodwill and Acquired Intangibles. Amortization of goodwill
and acquired intangibles resulted from the acquisition of LongView Group, Inc.
("LongView"). The remaining intangible assets after the write-off of in-process
research and development, totaled $24.6 million and are being amortized over the
expected lives of the goodwill and intangibles. These lives range from five to
seven years. We recorded amortization expense of intangibles of $1.2 million
for the three months ended March 31, 2000. We did not incur any amortization
of goodwill and acquired intangibles for the same period of 1999 because the
LongView acquisition did not occur until October 7, 1999.

Total Other Income, net. Net other income increased to $508,000 for the
three months ended March 31, 2000 compared to $88,000 for the same period in
1999. This increase mainly resulted from an increase in interest and other
income of $628,000 resulting from higher cash and cash equivalent balances in
the first three months of 2000 as compared to similar periods in 1999. These
balances mainly increased due to our initial public offering in May 1999.
Interest income in both years was partially offset by interest expense resulting
from notes payable and capital leases.

Provision for Income Taxes. The provision for income taxes was $1.7 million
for the three months ended March 31, 2000 as compared to $234,000 for the same
period of 1999. The effective tax rate of 44 percent during the three months
ended March 31, 2000 increased from the 38.5 percent effective tax rate during
the same period of 1999 due to the non-tax deductibility of the amortization of
goodwill and acquired intangibles associated with the LongView acquisition.

Minority Interest. Minority interest was $8,000 for the three months
ended March 31, 2000 as compared to $0 in the same period of 1999. This amount
represents the minority stockholders' proportionate interest in the net income
of the Company's subsidiaries. In future periods, as employees exercise common
stock options in the Company's subsidiaries, this amount is anticipated to
increase. We intend to account for the sale of common stock in our
subsidiaries as an equity transaction.

Liquidity and Capital Resources

Prior to our initial public offering in May 1999, we financed our
operations primarily through cash flows from operations, private sales of
capital stock totaling $13.4 million, and, to a lesser extent, various types of
equipment loans and lease lines of credit. Effective May 20, 1999, we completed
an initial public offering of our common stock, resulting in net cash proceeds
to TenFold of $34.2 million.

On January 18, 1999, we entered into an unsecured Revolving Line of Credit
providing for borrowings of up to $5.0 million. On December 29, 1999 we modified
and extended the unsecured Revolving Line of Credit to provide for borrowings of
up to $15 million. The line of credit expires on November 15, 2000. Borrowings
under the line of credit bear interest at rates which vary from prime rate to
prime rate less 1 percent or LIBOR plus 100 to 250 basis points. The actual
interest rate is determined quarterly by certain financial ratios. The line of
credit includes covenants relating to the maintenance of certain financial
ratios and cash balances and limits the payment of dividends. We had no
outstanding borrowings on this line as of March 31, 2000.

Net cash used in operating activities was $12.7 million for the three
months ended March 31, 2000 as compared to $3.8 million in the same period of
1999. Net cash used in investing activities was $1.5 million for the three
months ended March 31, 2000 as compared to $842,000 in the same period of 1999.
Net cash provided by financing activities was $3.3 million for the three months
ended March 31, 2000 as compared to $2.5 million in the same period of 1999. The
increase in cash flows used in operating activities was due to changes in
operating accounts, primarily a decrease in accrued liabilities and increases in
accounts receivable and unbilled accounts receivable. Additionally, the Company
recognized a tax benefit associated with the exercise of certain stock options.
This tax benefit was recorded as an increase in additional paid-in capital. We
expect to fully utilize the deferred tax assets associated with these stock
options during calendar 2000.

The increase in net cash used in investing activities was due primarily to
deposits made during the three months ended March 31, 2000 on additional office
space, equipment and furniture. Most of these deposits related to new office
space in San Francisco and Dallas. Net cash provided by financing activities for
the three month periods ended March 31, 2000 and 1999 resulted from the issuance
of common stock and the issuance of notes payable.

We believe that our current cash and cash equivalent balances, anticipated
cash flows from operations, and available credit facilities will be sufficient
to meet our capital requirements for at least the next twelve months. However,
there can be no assurance that we will be successful in generating anticipated
levels of cash from operations or borrowings. If we are unable to generate
sufficient cash flow from operations, or additional equipment loans or equipment
and working capital lines of credit, we may be required to scale down our
operations and expansion plans, refinance all or a portion of our existing
indebtedness, or obtain other sources of financing earlier than planned, any of
which could have a material adverse effect on our business, results of
operations, and financial condition. There can be no assurance that any such
refinancing would be available on commercially reasonable terms, or at all, or
that any other financing could be obtained.

In-Process Research and Development

In connection with the LongView acquisition, the Company recorded a
write-off of $2 million for in-process research and development in the fourth
quarter of 1999. An independent valuation of LongView was used to evaluate the
acquired in-process research and development technology. The fair value assigned
to purchased in-process research and development was determined by estimating
the costs to develop the purchased in-process research and development into
commercially viable products and discounting the resulting net cash flows
related to these projects. At the date of the acquisition, the acquired in-
process research and development had not yet reached technological feasibility
and had no alternative future uses.

In developing these cash flow projections, revenues were forecasted
based on estimates of relevant market sizes and growth factors, expected trends
in technology, and the nature and expected timing of new product introductions
by LongView and it competitors. LongView's projected revenues are dependent upon
successful introduction of the in-process research and development projects.
Operating expenses and resulting profit margins were forecasted based on the
characteristics and cash flow generating potential of the acquired in-process
research and development. Appropriate adjustments were made to operating income
to derive net cash flow.

In determining the operating cash flows related exclusively to in-
process research and development, management has considered the contribution of
both prior technologies (as demonstrated by prior products) and existing
technology or know-how that is generic among most or all products. Where
appropriate, the operating income estimates for each project have been
apportioned between in-process research and development and the appropriate
intangible asset (i.e., existing technology). The operating income apportionment
factor was determined on the basis of an analysis of the specific contribution
of each element of existing technology to the subject in-process research and
development, the estimated effect of this contribution on the profitability of
the subject in-process project, and the relative importance of the existing
technology to the product's ultimate customer.

The discount rate for in-process research and development considers
the following risk elements (in addition to the baseline business and market
risks considered as part of the current product discount rate); risk of
successfully completing the in-process research and development project, risk
that market demand will exist in the future for the in-process research and
development product, risk that the forecasted cost structure will be possible,
and the risk that as yet unknown competitive products will emerge. An after-tax
rate of 27.5 percent was applied to the in-process research and development
projects.

The revenues earned by the in-process research and development
products represent the return on

all of the assets acquired under the agreement. The cash flows generated by the
new products must provide a return on each asset purchased that is consistent
with the value and the relative risk of the asset. To separately value in-
process research and development, the value and required rate of return for
other identifiable assets must be determined. The required return on these other
assets is charged to (deducted from) the cash flows generated by the projects
shown in the in-process research and development model to determine the
incremental cash flows specifically attributable to the in-process research and
development project.

The estimated costs to complete the acquired in-process research and
development as of the date of acquisition was $1.2 million. We believed that the
foregoing assumptions used in the LongView in-process research and development
analysis were reasonable at the time of the acquisition. No assurance can be
given, however, that the underlying assumptions used to estimate expected
revenues, development costs or profitability, or the events associated with such
projects, will transpire as estimated. Expenses incurred to date associated with
the development and integration of the in-process research and development
projects are higher than our previous estimates. We believe that our projected
revenues from these projects will be higher than our previous estimates and that
our revised estimates of net cash flows related to these projects are not
materially different than the original net cash flows used to calculate the in-
process research and development write-off. To date, no revenues have been
recognized as these projects.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes
new accounting and reporting standards for companies to report information about
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the balance sheet and measure those instruments at fair
value. For a derivative not designated as a hedging instrument, changes in the
fair value of the derivative are recognized in earnings in the period of change.
We must adopt SFAS No. 133 by January 1, 2001. We do not believe the adoption of
SFAS No. 133 will have a material effect on our results of operations, financial
position or liquidity.

. There must be persuasive evidence of an arrangement;
. Delivery must have occurred or services must have been rendered;
. The selling price must be fixed or determinable; and
. Collectibility must be reasonably assured.

We will adopt SAB No. 101 during the second quarter of 2000. We
believe that our current revenue recognition policy is in compliance with this
guidance; however, we continue to evaluate the impact, if any, of SAB No.101 and
any possible, subsequent interpretations of SAB No. 101 on our policies and
procedures.

The FASB issued Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation--an Interpretation of APB Opinion No.
25" ("FIN No. 44") in March 2000. The interpretation clarifies the application
of Opinion 25 for only certain issues such as the following: (a) the definition
of employee for purposes of applying Opinion 25, (b) the criteria for
determining whether a plan qualifies as a noncompensatory plan, (c) the
accounting consequence of various modifications to the terms of a previously
fixed stock option or award, and (d) the accounting for an exchange of stock
compensation awards in a business combination. We must adopt FIN No. 44 by July
1, 2000. We do not believe that the interpretation will have a material effect
on our results of operations, financial position or liquidity.

Factors That May Affect Future Results and Market Price of Stock

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

We have a limited operating history and consequently our future prospects are
difficult to evaluate.

We were founded in 1993 and have a limited operating history. As a result,
it is difficult to evaluate our future prospects. We have only a limited number
of applications completed and currently in use and there can be no assurance
that we will be able to complete any current or new projects. We cannot be
certain that our business strategy will succeed.

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

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

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

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

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

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

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

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

. delays in introducing new applications.

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

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

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

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

We plan to significantly increase our operating expenses to broaden our
service and customer support capabilities, expand sales and marketing
operations, develop new distribution channels, and fund greater levels of
research and development. Our operating expenses are largely based on
anticipated revenue trends and a high percentage of our operating expenses,
particularly personnel and rent, are relatively fixed in advance of any
particular quarter. As a result, unanticipated variations in the number, or
progress toward completion, of our projects or in employee utilization rates may
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 could result in under-utilized employees and could, therefore,
cause us to suffer quarterly losses or adverse results of operations.

If we experience project delays, quarterly operating results could suffer and
our stock price could fall.

Because we recognize service revenues over the period we develop an
application, project delays could have a significant negative impact on
operating results. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Overview" for a discussion of our revenue
recognition policies. These delays could be caused by a number of factors that
are outside of our control. For example, because our development methodology
requires significant involvement by customer personnel during several key phases
of the development cycle, delays could be caused by customers failing to meet
their contractual obligations, including reviewing and approving requirements,
providing timely feedback, and providing adequate staffing. Delays could also be
caused by customers being distracted by information technology issues they face,
by corporate reorganizations or business combinations in which they are
involved, or other factors. Furthermore, delays could be caused by
misinterpretations of, or changes in, customer requirements, or by a loss of
personnel or members of a particular project team. We have experienced delays
for these and other reasons in the past and there can be no assurance that we
will not experience delays in the future.

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

We believe that a customer's decision to purchase our software involves a
significant commitment of resources and is influenced by customer budget cycles.
To successfully sell our products, we generally must educate our potential
customers regarding the use and benefit of our products, which can require
significant time and resources. Consequently, the period between initial contact
and the purchase of our products is often long and subject to delays associated
with the lengthy budgeting, approval, and competitive evaluation processes that
typically accompany significant capital expenditures. Our sales cycles are
lengthy and variable, typically ranging between three to twelve months from
initial contact with a

potential customer to the signing of a contract. Sales delays could cause our
operating results to vary widely.

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

Although we plan to expand and diversify our customer base, as a result of
our limited operating history, we have derived, and over the near term we expect
to continue to derive, a significant portion of our revenues from a limited
number of large customers. The loss of any of these large customers, without
their replacement by new large customers, would have an adverse effect on our
revenues. In the future, revenues from a single customer or a few large
customers may constitute a significant portion of our total revenues in a
particular quarter. The volume of work performed for specific customers is
likely to vary from year to year, and a major customer in one year may not hire
us to develop applications in a subsequent year. In addition, if a customer is
involved in a corporate reorganization or business combination, it may delay a
decision to hire us or cause the customer to choose not to hire us to develop
applications in a given year. See "Management Discussion and Analysis of
Financial Condition and Results of Operations - Revenues" for more information
concerning our customers and revenues.

We have historically derived a significant portion of our revenues from
customers in the insurance industry.

Software applications we developed for companies in the insurance industry
represented 46 percent of our total revenues during the three months ended March
31, 2000. Our reliance on customers from a particular industry subjects our
business to the economic conditions impacting that industry, including the
industry's demand for information technology resources. If we continue to rely
on the insurance industry, or any one industry as a major source of revenues,
and that industry suffers adverse economic conditions, there will likely be a
significant reduction in the demand for our products, causing revenues to
suffer. Although we intend 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.

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

We are currently involved in one significant litigation matter. See
Note 9 in the accompanying Notes to Consolidated Financial Statements for more
information concerning this matter. We may in the future face other litigation
or disputes with customers, employees, partners, or other third parties. Such
litigation or disputes could result in substantial costs and diversion of
resources which would harm our business. An unfavorable outcome of these matters
may have a material adverse impact on our financial position and results of
operations.

We offer fixed-price, fixed-time contracts that we guarantee.

An important element of our strategy is to enter into fixed-price, fixed-
time contracts, rather than time and materials contracts. These contracts
involve risk because they require us to absorb possible cost overruns and, if we
fail to meet our performance obligations, may require us to satisfy our
performance guarantee. We guarantee that we will complete our projects within a
fixed time or the customer has the option to return the software and receive a
refund of any fees paid under the contract. For fixed-price contracts, we
recognize license fees related to the application and the application
development service fees over time as we perform the services, using the
percentage of completion method of accounting. Our failure to accurately
estimate the resources required for a project or our failure to complete our
contractual obligations in a manner consistent with the project plan would
likely cause us to have lower margins or to suffer a loss on the project, which
would negatively impact our operating results. In specific circumstances, we
have been required to commit unanticipated additional resources to complete
projects. We will likely experience similar situations in the future. In
addition, for specific projects, we may fix the price before the requirements
are finalized. This could result in a fixed price that turns out to be too low,
which would cause us to suffer a loss on the project and would negatively impact
our operating results.

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

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.

Our products have not been extensively tested to determine the extent to
which they are scaleable - capable of being used effectively by large numbers of
users simultaneously. Because customers may require that our products be capable
of simultaneous use by large numbers of users, if it turns out that our

products are not scaleable to the required extent, our growth and market share
would be materially adversely affected.

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 limitation of liability provisions. A product liability claim brought
against us, even if not successful, would likely be time consuming and costly.

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

Our growth and new projects have placed significant demands on our
management and other resources. If we are unable to manage our growth and
projects effectively, this inability could have a material adverse effect on the
quality of our services and products, our ability to retain key personnel, and
our business, financial condition, and results of operations. Our revenues
during the three months ended March 31, 2000 increased approximately 98 percent
when compared with the same period in 1999. Our staff increased from 351 full-
time employees at March 31, 1999 to 587 full-time employees at March 31, 2000.
Our ability to manage this growth effectively will require us to continue to
develop and improve our operational, financial, and other internal systems, as
the well as our business development capabilities, and to train, motivate, and
manage our employees. In addition, our future success will depend in large part
on our ability to continue to set fixed-price fees accurately, maintain high
rates of employee utilization, and maintain project quality.

An element of our business strategy involves organizing our business along
industry lines, and evolving these business units into separate operating
companies. Our success in executing this strategy will depend to a large extent
on our ability to create and manage this complex organizational structure,
including our ability to establish and implement the appropriate management
structure, compensation programs, and financial reporting systems. Our
management has limited experience in managing an organization of this nature,
and our failure to meet the managerial challenges posed by the development and
operation of such an organization would harm our business.

A loss of Gary D. Kennedy, 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 Gary D.
Kennedy, 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,
Executive Vice President and Chief Technology Officer; Sameer Shalaby, Senior
Vice President of Architecture Development; and Adam Slovik, Senior Vice
President of Worldwide Applications Development. 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. None of our key employees, other than Mr. Kennedy, has signed an
employment agreement or an agreement not to compete with TenFold upon
termination of employment. Even in the case of Mr. Kennedy, his employment
agreement does not assure his 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. There can be no assurance that we will be
successful in attracting a sufficient number of highly-skilled employees in the
future, or that we will be successful in retaining, training, and motivating the
employees we are able to attract. If our employees are unable to achieve
expected performance levels, our business will be harmed.

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

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

We may not be able to successfully develop applications for new vertical
industries in which we have limited experience.

We intend to expand our business into new vertical industries. If we are
unsuccessful in developing applications that meet the needs of companies in
these markets or if our applications are not

competitive, our operating results will suffer. We have limited experience in
developing software applications for companies outside of the industries we have
targeted to date and there can be no assurance that we will be able to
successfully develop these applications in the future. In addition, we will face
competition from companies that have significantly greater experience in
developing applications for the industries we intend to target and that have
greater name recognition than we do.

If we are unsuccessful in implementing our vertical business strategy, our
ability to grow our business will be impaired.

Our vertical business strategy involves segmenting our business along
industry lines, likely through the creation of separate subsidiaries, and having
these subsidiaries evolve into separate operating companies. We offer employee
incentives, including stock options in the subsidiaries, to attract, motivate,
and retain quality staff. We have offered and may offer in the future, equity
in the subsidiaries to strategic industry partners. These subsidiaries may raise
capital independently through an initial public offering, private placement or
other means, or be spun off from TenFold. We believe that the successful
implementation of this strategy will be important in order for us to achieve
significant growth. We may face significant challenges in implementing this
strategy, including the segmentation and valuation of the various subsidiaries,
the selection of strategic industry partners, issues relating to conflicts of
interest among the subsidiaries, their stockholders and TenFold, and potential
charges and expenses resulting from any repurchases of equity interests in the
subsidiaries. Our failure to successfully address these challenges could cause
this business strategy to fail, which would impair our ability to grow our
business.

Future events could affect previous valuations of subsidiaries.

Our subsidiaries grant options to certain employees. The exercise price
for all option grants is equal to the fair market value of the subsidiaries'
common stock. As none of the subsidiaries are publicly traded, the
determination of fair market value is made by the subsidiaries' boards of
directors based upon the board's knowledge of the subsidiaries' financial
condition, prospects, success in the marketplace, counsel from its professional
advisors such as outside counsel or independent appraisers, and other factors.

Before TenFold Corporation was publicly traded, we recognized deferred
compensation, along with the associated amortization, from the granting of
certain stock options when there was a difference between the exercise price of
certain stock option grants and the deemed fair value of the common stock at the
time of such grants. Future events could occur that could challenge the board
of directors previous determination of fair value. As a result, certain of the
subsidiaries' stock option grants could be deemed to have been granted at less
than fair market value. Such a determination would create deferred compensation
and associated amortization expense and change our reported financial results.

If we fail to generate substantial revenues from our relationship with Perot
Systems Corporation, our operating results may suffer.

We entered into a strategic relationship with Perot Systems Corporation, a
systems integrator, to develop and deliver applications, products, and services
to TenFold and Perot Systems customers. We plan to devote significant resources
to the development of this relationship. As a result, if we fail to generate
substantial revenues from this relationship, whether due to the failure of the
relationship or our inability to staff the opportunities presented, our
operating results may suffer. We have not recognized substantial revenues
from the Perot relationship to date.

If we are unable to expand our international operations, our growth will
suffer.

Although we currently have limited international operations, our ability to
achieve revenue growth in the future will depend in part on our ability to
develop international sales. Although we may invest significant resources to
establish additional sales and service operations outside the United States and
to enter additional international markets, there can be no assurance that these
efforts will be successful. In

order to successfully establish international sales, we must establish foreign
operations, add an international sales and support organization, hire additional
personnel, and recruit international distributors. To the extent that we are
unable to do so in a cost-effective manner, our growth and operating results
could be materially adversely affected. In addition, our guarantee may not be
appropriate in some international markets for various reasons, including
business practices in these markets. As a result, we may not be able to derive
value from the TenFold Guarantee in these markets.

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

Our success is dependent, in part, upon our proprietary Universal
Application technology and other intellectual property rights. If we are unable
to protect and enforce these intellectual property rights, our competitors will
have the ability to introduce competing products that are similar to ours, and
our revenues, market share and operating results will suffer. To date we have
relied primarily on a combination of patent, copyright, trade secret, and
trademark laws, and nondisclosure and other contractual restrictions on copying
and distribution to protect our proprietary technology. We have been granted
one patent and applied for two additional patents in the United States and
intend to continue to seek patents on our technology where appropriate. There
can be no assurance that the steps we have taken in this regard will be adequate
to deter misappropriation of our proprietary information or that we will be able
to detect unauthorized use and take appropriate steps to enforce our
intellectual property rights. The laws of some foreign 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 which would harm our business.

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

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

The market for our products and services is highly competitive, and if we
are not successful in competing in this market, our growth and market share will
suffer. We believe that we currently compete principally with consulting and
software integration firms, application software vendors, and internal
information systems groups. Many of these competitors have significantly
greater financial, technical and marketing resources, generate greater revenues,
and have greater name recognition than we do. In addition, there are relatively
low barriers to entry into our markets and we have faced, and expect to continue
to face, additional competition from new entrants into our markets.

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

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

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

We may fail to properly integrate our LongView acquisition, which could
cause our business to suffer.

While we analyzed carefully the LongView acquisition, we cannot ensure
that it will result in long-term benefits to us or our stockholders, or that our
management will be able to manage the acquired businesses effectively. In
addition, growth through acquisition involves a number of risks. If any of the
following events occur with the LongView acquisition, it could seriously harm
our business, operating results, and financial condition:

. we have difficulty combining previously separate businesses into
a single unit;

we fail to realize anticipated benefits, such as cost savings and
. revenue enhancements;

. we discover unknown liabilities after the acquisition;

. we do not properly train LongView employees on our technology and
our culture;

. we are unable to retain key personnel;

. we have difficulty assimilating LongView's products; and

. we fail to retain LongView's customers

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 62% of our outstanding common
stock. Furthermore, Jeffrey L. Walker, Chairman, Executive Vice President and
Chief Technology Officer, and the Walker Children's Trust, in the aggregate,
currently beneficially own approximately 50% of our outstanding common stock.
Mr. Walker, acting alone or with others, would be able to decide or
significantly influence all matters requiring approval by our stockholders,
including the election of directors and the approval of mergers or other
business combination transactions. This concentration of ownership may have the
effect of delaying or preventing a merger or other business combination
transaction, even if the transaction would be beneficial to our other
stockholders.

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

Provisions of our Certificate of Incorporation, Bylaws, stock
incentive plans and Delaware law may discourage, delay, or prevent a merger or
acquisition that a stockholder may consider favorable.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk. As of March 31, 2000, we had cash and cash equivalents
of $47.2 million. 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, 2000 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.

Foreign Currency Exchange Rate Risk. A portion of our operations consists
of applications development and sales activities in the United Kingdom. As a
result, our financial results could be affected by factors such as a change in
the foreign currency exchange rate between the U.S. dollar and the British
pound, or by weak economic conditions in the United Kingdom. When the U.S.
dollar strengthens against the British pound, the value of revenues in the
United Kingdom decreases. When the U.S. dollar weakens against the British
pound, the value of revenues in the United Kingdom increases. The monetary
assets and liabilities in our foreign subsidiary which are impacted by foreign
currency fluctuations are cash, accounts receivable, fixed assets, accounts
payable, deferred revenue, and certain accrued liabilities. A hypothetical 10
percent increase or decrease in the exchange rate between the U.S. dollar and
the British pound from the March 31, 2000 rate would cause the fair value of
such monetary assets and liabilities in the United Kingdom to change by an
insignificant amount. We are not currently engaged in any foreign currency
hedging activities.

PART II. OTHER INFORMATION

Item 2. Use of Proceeds.

Our registration statement (Registration No. 333-74057) under the
Securities Act of 1933, for our initial public offering, became effective on
May 20, 1999. Our offering proceeds, net of aggregate expenses of
approximately $4.7 million, were $34.2 million. As of March 31, 2000, we used
approximately $34.2 million of those proceeds as follows (in millions):

Construction of plant, building and facilities $ -
Purchase and installation of machinery and equipment -
Purchases of real estate -
Acquisition of The LongView Group, Inc. 10.0
Repayment of indebtedness -
Working capital -
Purchase of temporary investments 24.2
-----
$34.2
=====

See Note 7 of Notes to Consolidated Financial Statements for a more
detailed discussion of our acquisition of The LongView Group, Inc. and payments
made or to be made in connection with this acquisition. The foregoing amounts
represent our best estimate of our use of the proceeds for the period indicated.
We invested the net proceeds used for the purchase of temporary investments in
cash, cash equivalents, and short-term investments. None of our net offering
proceeds were paid directly or indirectly to our directors, officers, general
partners, holders of 10 percent or more of any class of equity securities, or
any of our affiliates.

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

(a) Exhibits

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

10.1 Purchase and Sale Agreement at 171 and 181 San Carlos Drive, San
Rafael County, California between 181 Investors and TenFold
Corporation.
10.2 Office Lease at 600 Las Colinas Boulevard, Irving, Texas between
W9/CGN Real Estate Limited Partnership and TenFold Corporation
10.3 Office Lease at 150 California Street in San Francisco, California
between EOP-150 California Street, L.L.C. and TenFold Corporation
10.4 Office Lease at approximately 10000 South 900 West in South Jordan,
Utah between Boyer Jordan Valley 1 L.C. and TenFold Corporation
11* Computation of Shares used in Computing Basic and Diluted Net Income
Per Share
27 Financial Data Schedule.

* Incorporated by reference to "Notes to Consolidated Financial Statements"
herein

(b) Reports on Form 8-K

None

SIGNATURES

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

TenFold Corporation

By: /s/ Robert P. Hughes
----------------------------------
Robert P. Hughes
Senior Vice President and
Chief Financial Officer

Date: May 5, 2000

TenFold Corporation
Exhibit Index

Exhibit 10.1 Purchase and Sale Agreement at 171 and 181 San Carlos Drive, San Rafael County, California
between 181 Investors and TenFold Corporation
Exhibit 10.2 Office Lease at 600 Las Colinas Boulevard, Irving, Texas between W9/CGN Real Estate Limited
Partnership and TenFold Corporation
Exhibit 10.3 Office Lease at 150 California Street in San Francisco, California between EOP-150 California
Street, L.L.C. and TenFold Corporation
Exhibit 10.4 Office Lease at approximately 10000 South 900 West in South Jordan, Utah between Boyer Jordan
Valley 1 L.C. and TenFold Corporation