TENFOLD CORP /UT, 10-K, 2000-03-09

TENFOLD CORP /UT
10-K, 2000-03-09
COMPUTER PROGRAMMING SERVICES

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

FORM 10-K
(Mark One)

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

For the year ended December 31, 1999

[_] 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 of incorporation (I.R.S. Employer Identification
or organization) No.)

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 [_]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K. [_]

The aggregate market value of shares of Common Stock held by non-affiliates of
the registrant, based on the closing price of the Common Stock on NASDAQ on
January 31, 2000 was approximately $366,873,028. Shares of Common Stock held by
each current executive officer and director, and by each person who is known by
the registrant to own 10% or more of the outstanding Common Stock, have been
excluded from this computation in that such persons may be deemed to be
affiliates of the Company. Share ownership information of certain persons known
by the Company to own greater than 10% of the outstanding common stock for
purposes of the preceding calculation is based solely on information known by
the Company and is as of January 31, 2000. This determination of affiliate
status is not a conclusive determination for other purposes.

As of January 31, 2000, there were 34,910,631 shares of the registrant's Common
Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Registrant's 2000 Annual Meeting of
Stockholders are incorporated by reference into Part III of this Form 10-K.

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TENFOLD CORPORATION
1999 FORM 10-K AND ANNUAL REPORT

TABLE OF CONTENTS
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Page
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PART I.
Item 1. Business...................................................................... 3
Item 2. Properties.................................................................... 21
Item 3. Legal Proceedings............................................................. 22
Item 4. Submission of Matters to a Vote of Security Holders........................... 23
Item 4A. Executive Officers of the Registrant.......................................... 24

PART II.
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.................................................................... 29
Item 6. Selected Financial Data....................................................... 30
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................................... 32
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.................... 49
Item 8. Financial Statements and Supplementary Data................................... 50
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure....................................................... 50

PART III.
Item 10. Directors and Executive Officers of the Registrant............................ 51
Item 11. Executive Compensation........................................................ 51
Item 12. Security Ownership of Certain Beneficial Owners and Management................ 51
Item 13. Certain Relationships and Related Transactions................................ 51

PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............... 52
Signatures.................................................................... 55
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PART I

Item 1. Business

Overview

TenFold is a provider of large-scale e-business applications for market-
leading customers in banking, communications, energy, healthcare, insurance,
investment management and other industries. TenFold delivers dynamic, Web-
centric applications that meet customers' needs in rapidly changing business
environments, and that are flexible to adapt to changing needs over time. We
offer the TenFold Guarantee, the industry's first money-back guarantee for
large-scale software applications. We deliver applications on time, for a fixed
price, and on target--or we refund our customer's money. We also offer the
TenFold Guarantee when customers choose our optional FastStart program to
implement TenFold applications into production.

Our mission is to become the leading provider of industry-specific, or
"vertical," e-business applications in multiple industries. We intend to
accomplish this by developing innovative applications for customers and
reselling these applications to other companies in the same industry. Some of
our customers include Allstate, Ameritech, Barclays Global Investors, Bonneville
Power Administration, Chase Manhattan Bank, Crawford & Company, Franklin
Templeton, HealthSouth, Mercy Health Services, Provident, SkyTel, Southern
Company, Unitrin, and Utica National.

Using our unique TenFold Way methodology, combined with our Universal
Application and TenFold ComponentWare technologies, we deliver innovative
applications for our target industries that are feature-rich, flexible, and high
quality. Often, these applications fill voids where packaged software solutions
lack functionality, lack flexibility, or simply do not exist. Our applications
support multi-tiered and Web-based environments, as well as leading database
platforms and operating systems.

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We believe that our fixed-time, fixed-price business model, our patented
Universal Application, our TenFold ComponentWare technologies, our dynamic
applications products, and our unique TenFold Guarantee provide a significant
benefit to customers who want to reduce risk and achieve rapid time to market
when developing and implementing large-scale e-business applications.

Industry Challenge

Organizations worldwide face increasing pressure to install new software
applications and to replace their outdated applications with new systems as they
seek to increase productivity, participate in e-business, and address changing
business and competitive demands. Recently, many organizations have spent large
amounts of money merely building Web interfaces to existing applications. In
many instances, these companies still need new or replacement applications to
meet their e-business requirements. To obtain new or replacement applications,
companies face a "buy vs. build" dilemma: 1) they can buy packaged software; or
2) they can build custom software, either internally or by hiring a services
firm.

Companies generally turn to independent software vendors, such as Enterprise
Resource Planning (ERP) vendors or vertical software providers, when looking for
packaged applications. In general, packaged applications promise predictable
quality and relatively quick implementation, but lack the flexibility and
customization that many companies need and can force companies to alter their
business processes. In addition, customizing a packaged application can be
costly and time-consuming, and also makes it difficult to accept future software
upgrades.

Alternatively, companies can build custom applications, either internally or
with third parties. This approach may give them the functionality and
flexibility they seek, but it can carry a high risk of failure. According to
research from The Standish Group, a software industry research firm, most large-
scale applications development projects significantly exceed budgets and
schedules. Even after these excesses, many of these projects are canceled
without ever reaching production.

TenFold believes that cost overruns and unsuccessful projects do not
necessarily reflect a lack of skilled personnel, but typically result from the
flawed process and technology used to develop large-scale applications.

Companies often hire software integration or services firms to build and
implement mission-critical applications. These firms generally work on a time-
and-materials basis, require large numbers of consultants who may remain on site
for years, and may exceed budgets and schedules without producing significantly
better results than internal development organizations. In addition, these firms
typically do not offer ongoing product enhancements because they build custom
solutions for a single customer.

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Some services firms offer fixed-time, fixed-price development, often linked to
structured methodologies that shorten development and increase predictability by
breaking large projects into multiple, smaller projects or phases. While this
approach delivers some benefits, it can lead to costly change orders for
customers as their requirements change during applications development. In
addition, these firms generally lack unique technology to significantly improve
applications development time frames.

Today's software purchasers want the best of both the "buy" and "build"
options: the rapid time-to-market and quality benefits of packaged applications,
with the tailored-to-their-business features of custom-built software. They need
flexible solutions that integrate with existing systems and that not only meet
today's business requirements, but can also adapt to meet their changing
requirements over time.

TenFold Solution

TenFold delivers dynamic, Web-centric applications that meet customers' needs in
rapidly changing business environments, and that are flexible to adapt to
changing needs over time. We offer the TenFold Guarantee, the industry's first
money-back guarantee for large-scale software applications. We deliver
applications on time, for a fixed price, and on target--or we refund our
customer's money. We also offer the TenFold Guarantee when customers choose our
optional FastStart program to implement TenFold applications into production. In
addition, we are beginning to license applications that we built for customers
to other companies in the same industries.

Customer Benefits

TenFold delivers applications that include rich functionality, offer
significant flexibility and quality, and solve the complex, expensive, and time-
consuming problems of replacing outdated systems and meeting today's business
challenges. We offer these customer benefits:

Dynamic Applications that Meet True Needs. We deliver dynamic applications
that meet precise business needs today and adapt to rapidly changing needs over
time, rather than force companies to alter their businesses to conform to
packaged applications. We work closely with customers through rapid, multiple
iterations to develop applications that meet true needs.

Guaranteed, Fixed-time, Fixed-price Delivery. Our straightforward promise is
that we successfully deliver large-scale applications on time, for a fixed
price, and on target, or we refund our customer's money. We deliver software
solutions that we believe reduce risk by meeting business requirements quickly,
reliably, and for a fixed price.

Rapid Development. We have re-engineered the process of building large-scale
software applications. Our unique development process, the TenFold Way, lets us
rapidly build sophisticated applications. Our Universal Application and TenFold
ComponentWare

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automate and accelerate applications development and testing, and let us build
large-scale, sophisticated applications quickly and reliably with little or no
programming.

Rapid Implementation. Our optional FastStart program automates much of the
data conversion, data cleanup, applications interfacing, and production testing
needed to attain rapid production. We often begin FastStart concurrent with
applications development to shorten the time from the start of development to
production. We also offer FastStart with a fixed-time, fixed-price guarantee.

Lower Overall Cost. Because TenFold can deliver large-scale applications in
relatively short time frames, we believe that our applications typically cost
less than those offered by competitors. By reducing the overall development and
delivery time frame, we help customers avoid expensive projects that exceed
budgets and schedules. In addition, because we can easily enhance and modify
TenFold applications as customer needs evolve, we believe that our products can
lower the overall cost of owning and operating large-scale applications.

Continuous Innovation and Product Enhancement. We design and build
applications with functionality and capabilities that not only meet the needs of
an individual customer, but are also intended to meet the needs of other
companies in the same vertical industry. We typically maintain intellectual
property rights to the original applications we build, so we can license them as
applications products to other companies. Because we expect many of our
applications to become resalable products, rather than individual solutions for
a single customer, we believe that customers will receive benefits not typically
offered by traditional service providers or custom applications developers such
as continuous innovation and enhancement, regular upgrades, ongoing support,
training, and certification.

TenFold Differentiators

We successfully deliver applications through four key differentiators. While
we believe that each is significant, it is the combination of the four that lets
us build and implement large-scale applications rapidly and lets us offer real
business value to our customers.

The TenFold Way. The TenFold Way is a start-to-finish approach to working
closely with our customers to design, develop, test, deliver, and evolve custom
applications. The TenFold Way organizes a project into phases, each with well-
defined activities and deliverables. The TenFold Way combines continuous
communication and customer feedback with rapid, iterative development to keep
projects on target.

Universal Application. We have invented and patented a unique technology--
the Universal Application--for building complex applications dramatically faster
than current industry practice. The Universal Application is a sophisticated and
powerful applications architecture that reduces design effort and automates and
accelerates applications development and testing. The Universal Application lets
TenFold begin applications development projects having pre-built significant
functionality and having already solved many complex applications design and
implementation problems. Our applications

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developers spend time describing business requirements and desired
functionality--not programming.

TenFold ComponentWare. TenFold ComponentWare is a library of components,
reusable across multiple applications and industries, that lets us add complex,
business-specific functionality to an application and lets us virtually
eliminate applications-specific programming. TenFold ComponentWare includes
capabilities such as billing, scoring, and workflow, as well as integration
engines. Each component contains features to serve many different types of
applications, across multiple vertical industries.

FastStart. FastStart provides both technology and implementation services to
quickly put TenFold applications into production. These services include
converting and cleansing existing data, integrating with other applications,
running a parallel, and managing the implementation project. We offer FastStart
with the same fixed-time, fixed-price, money-back guarantee that we offer for
applications development.

We believe that the integration of our unique applications development process
and innovative technology lets us provide significant business value for our
customers.

TenFold Strategy

Our mission is to become the leading provider of vertical software
applications by pursuing these strategies:

Create Resalable Products from Custom Development Projects. We design and
build applications to meet the needs of original customers, with the intention
to license these applications as packaged applications products within vertical
industries. We often maintain intellectual property rights to applications that
we design and build. For example, we built and delivered an application for
Barclays Global Investors that we have packaged and licensed as TenFold Revenue
Manager to other institutional investment management companies. We expect this
activity to become an increasingly important aspect of our business in the
future.

Organize into Vertical Business Groups. TenFold is 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% to 20% of each subsidiary. We have also
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.

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As of December 31, 1999 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.

For financial information about TenFold's operating segments, see "Note 14 -
Operating Segments" of Notes to Consolidated Financial Statements.

Further Penetrate Multiple Vertical Markets. We build large-scale e-business
applications that address under-served needs in large, multi-billion-dollar
vertical markets. By significantly reducing time to market and offering flexible
and dynamic applications products, we believe we can compete in industries such
as banking, communications, energy, healthcare, insurance, and investment
management, and attract market-leading customers as reference accounts. We
intend to further penetrate these industries by continuing to identify, build,
and sell additional, industry-specific applications.

Enter New Vertical Markets. We believe that we can also offer new and
replacement applications for additional vertical industries in the future. Our
strategy as we enter and compete in new vertical industries is to recruit
industry veterans with substantial domain knowledge and skills, and target sales
and marketing efforts at high-potential prospective customers.

Leverage Innovative Technology. The Universal Application and TenFold
ComponentWare automate and accelerate applications development and testing, and
let us build large-scale, sophisticated applications quickly and reliably. The
Universal Application speeds development, enforces consistency, and enables
extensive, automated testing throughout the applications life cycle. We
continually enhance and update the Universal Application and TenFold
ComponentWare to add functionality, improve performance and scalability, and
increase our applications development productivity. All of our customers benefit
from enhancements to the Universal Application.

Leverage Alternative Distribution Channels. We believe third parties can
successfully use the TenFold Way, the Universal Application, TenFold
ComponentWare, and FastStart to rapidly develop and implement applications. We
plan to establish relationships with applications service providers, value-added
resellers (VARs), and software distributors in the U.S. and international
markets, and we hope to broaden distribution of TenFold products and increase
software license revenues through these third-party relationships. We have a
relationship with Perot Systems Corporation, a systems integrator, to develop
and deliver applications, products, and services to TenFold and Perot Systems
customers using the TenFold Way, the Universal Application, TenFold
ComponentWare, and FastStart. See "Strategic Alliance" for more information
concerning this relationship.

Practice Precision Execution. TenFold employees aspire to a well-defined
company culture and set of core values. We see TenFold as more than our company
name; it is a

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culture statement. Each employee attends an initial "Boot Camp" and ongoing
training to learn the TenFold Way, our technology, and our company values. We
strive for Precision Execution in all facets of our business, and constantly
monitor and improve our individual, team, and company productivity and
performance. We strive to continuously increase employee productivity and
product quality by enhancing our processes and technology.

Technology

A TenFold application is any application that TenFold or others build using
TenFold technology. A TenFold application consists of the Universal Application,
selected components from TenFold ComponentWare, and a description of the desired
functionality and attributes of the specific application. Applications
developers use the Universal Application to build TenFold applications without
programming.

Universal Application

The Universal Application is a carefully layered applications architecture,
written in C and C++ programming languages, that lets applications developers
build an application by describing its semantic--desired functionality and
attributes--without programming. Because describing an application is easier and
faster than traditional programming and does not require programming skills, an
applications development team can typically describe a complex application in
weeks. Once applications developers describe an application or part of an
application, the Universal Application reads the description and becomes the
described application. Thus, for many large, complex applications, the Universal
Application is a complete, already-written, ready-to-execute application lacking
only a specific definition of the desired functionality and attributes. The
Universal Application delivers these benefits:

. little or no programming to create a complex application;

. significant automation of applications development by virtually eliminating
traditional programmer tasks such as writing SQL, writing logic functions,
converting business rules into logic, managing computer-to-computer
communications, and designing user interface screens;

. improved consistency, quality, and performance because programmers often
vary in their ability to achieve a high level of consistency, quality, and
performance;

. carefully layered architecture to facilitate portability, future
maintenance, feature additions, and migration to new or emerging industry
standards;

. demonstrated scalability as customers add users and computing capacity; and

. typically sub-second performance when properly configured.

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Describing an Application Using the Universal Application. Applications
developers use the ApplicationXpress portion of the Universal Application to
describe and test an application. Applications developers describe the semantic-
- -desired features and functionality--of the application without programming.

ApplicationXpress contains the following:

. TenFold Librarian lets applications developers describe the application
that they are building. TenFold Librarian provides menus, transactions, and
screens that applications developers use to describe the application, and
store the application description, or semantic, in the TenFold Dictionary.

. TenFold Dictionary is a relational database that contains the semantic of
the application. The semantic precisely describes the application.

. TenFold Reporter is a powerful reporting system that applications
developers use to define, execute, and manage the production, requesting,
and distribution of reports--including outputs to print, view
interactively, or distribute via e-mail or fax--for an application.

. TenFold AutoTest is an integrated testing system that applications
developers use to test individual applications components as they complete
them, and fully test the completed application.

Executing an Application. When end-users execute a TenFold application,
they are executing the Universal Application which points to the TenFold
Dictionary containing the applications semantic for their application. The
Universal Application automatically reads the applications semantic from the
TenFold Dictionary at the appropriate time and becomes the application described
in the applications semantic.

Configuring an Application. Customers can run the Universal Application on
many leading relational databases, server operating systems, client operating
systems, and communications systems. It is relatively easy for the Universal
Application to support additional technologies and platforms as customers
request them or as they become industry standards.

TenFold ComponentWare

TenFold ComponentWare is a family of pre-written applications components that
easily plug into the Universal Application to extend its functionality without
programming. TenFold ComponentWare delivers these benefits:

. no programming required to add complex processing capabilities to an
application;

. robust applications functionality as each component contains features to
serve many different types of applications, across multiple vertical
industries; and

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. carefully layered architecture to facilitate portability, future
maintenance, feature additions, and migration to new or emerging industry
standards.

FastStart

FastStart provides both technology and implementation services to quickly put
TenFold applications into production. FastStart uses the capabilities of the
Universal Application and TenFold ComponentWare to rapidly:

. convert, cleanse, import, and export data;

. configure applications, including client-based workflows, business rules,
and security;

. conduct parallel testing; and

. create internal and external applications interfaces.

Services

TenFold builds and implements large-scale e-business applications rapidly and
for a fixed price. Our services can be divided into three elements: building
applications, implementing applications, and post-implementation training and
applications services.

Building Applications--The TenFold Way

We call our unique process for rapidly delivering sophisticated applications
the "TenFold Way". We organize projects into phases, each with well-defined
activities and deliverables.

Executive Overview. In the Executive Overview phase, we write and deliver a
30-50 page executive overview that describes the application's scope and
functionality. We use applications research, detailed interviews with end-users
and senior managers familiar with applications needs, and our applications
expertise to prepare the executive overview.

Requirements. In the Requirements phase, we define and confirm requirements
and cross check them for accuracy and completeness. Requirements deliverables
are applications concepts training, an applications concepts manual, a
demonstration script, an acceptance tests book, a reports book, and a database
design book.

InitialPrepare and Grazing. In the InitialPrepare phase, we use the
Universal Application to rapidly build the first version of an application,
including end-user responsibilities, menus, transactions, reports, analyses, and
business engines. We build, test,

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and deliver a first release of the application for customer feedback, a process
we call "Grazing," and incorporate this feedback into subsequent releases. End-
users provide better feedback after they have hands-on experience, and their
Grazing comments help us fine-tune the application's design. Interim releases of
TenFold applications are not applications prototypes, but are actual, working
versions of the entire application that customers can install and use.

FinishProject. After multiple Grazing cycles, we conduct the FinishProject
phase to complete the application on schedule and on target. During
FinishProject, the application passes all acceptance tests and we deliver the
completed application to our customers.

Implementing Applications--FastStart--Fixed-Time, Fixed-Price Implementation

We offer FastStart--which is both a process and a technology--to successfully
install TenFold applications into production for a fixed price and on a fixed
schedule. FastStart services include converting and cleansing legacy data,
integrating with other applications, running a parallel, and managing the
implementation project. We often begin FastStart concurrent with applications
development to shorten the time from the start of development to production.

Training and Applications Services

We believe that superior customer service is critical to selling our products
and services to our customers. We offer training and applications support
services so that customers can successfully operate, maintain, and evolve their
applications.

Education and Certification. TenFold Education offers professional
certification programs to TenFold applications developers, end-users,
information technology professionals, and training professionals who need to
understand the TenFold Way, the Universal Application, TenFold ComponentWare,
FastStart, and TenFold applications products. Training programs include
classroom instruction, detailed courseware, and on-site training.

Customer and Technical Support. TenFold Applications Services provides
customers with new releases of their TenFold applications, new releases of the
Universal Application, on-site support immediately following project completion,
additional support when their applications go into production, and applications
consulting to adapt their applications.

Applications Products

Our strategy is to create resalable applications products from custom
development projects. We use the Universal Application to build all the
applications we develop for our customers. We believe that we can license many
of the applications we develop for individual customers as applications products
to other companies in the same vertical industries. While we have derived the
majority of our license revenue to date from custom

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applications that we have developed for specific customers, we have successfully
resold TenFold Revenue Manager, TenFold CardioTrac, TenFold MeterNow!, and
PolicyXpress, and we plan to resell other applications products to other
customers. Current TenFold applications products that we offer to customers are:

TenFold Revenue Manager. TenFold Revenue Manager is a flexible, multi-
currency invoicing and revenue accounting system for institutional investment
managers. TenFold Revenue Manager automates invoicing tasks, ensures accuracy,
and produces complex invoices quickly and reliably so that investment managers
can improve cash flow and reduce operating costs.

TenFold CardioTrac. TenFold CardioTrac is a Web-centric, scalable
cardiovascular outcomes application that captures encounter and outcomes
information, patient demographics, lab data, and other procedure results for
physicians and researchers. TenFold CardioTrac delivers timely, accurate, and
accessible cardiovascular outcome data that healthcare providers can use to
pinpoint effective treatments.

TenFold MeterNow! TenFold MeterNow! integrates multiple sources of customer,
meter, usage, and billing data into one source of consistent, quality data. The
application automatically obtains meter and usage information, validates and
edits the information, and exports settlement-ready data to designated
recipients.

PolicyXpress. PolicyXpress provides a complete solution for policy
administration including Web-based quoting and policy intake, expert
underwriting, and automated policy renewal. Insurers use PolicyXpress to quickly
define new products, including company-specific rates and rules, without
programming.

Landmark. TenFold acquired the Landmark product in conjunction with the
acquisition of The LongView Group. Landmark is a leading institutional portfolio
management and trading desk software application for the investment management
industry. LandMark provides portfolio modeling, electronic trading, and
compliance functionality to many large investment management firms.

We are currently developing a number of other applications with customers that
we expect to license to other companies.

In many cases, the agreement with the original customer for a particular
application requires us to pay that original customer royalties, or restricts in
various ways our rights to resell the application to third parties. In
connection with our strategic relationship with Perot Systems Corporation, under
certain circumstances Perot Systems or their customers will own rights to the
applications that we develop.

Customers

Our current major customers include:

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Insurance Investment Management Energy
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<S> <C> <C>
Allstate Barclays Global Investors Bonneville Power
Crawford & Company Chase Manhattan Administration
Provident Companies Franklin Templeton Southern Company Energy
Royal & SunAlliance Dresdner RCM Global Marketing
Trumbull Services Investors Enron
Unitrin
Utica National
- ----------------------------------------------------------------------------------------------------
Banking Healthcare Communications
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Abbey National HealthSouth SkyTel
Mercy Health Services Ameritech
- ----------------------------------------------------------------------------------------------------
Other
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Heidrick & Struggles
Nielsen Media Research
- ----------------------------------------------------------------------------------------------------
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As of December 31, 1999, we have earned revenues from more than 35 customers.
Some of our customers accounted for more than 10% of total annual revenues
during the past three years. Allstate and Abbey National accounted for 18% and
10% of our annual revenues, respectively, during the year ended December 31,
1999. Unitrin, Provident Companies, Crawford & Company, and Utica National,
accounted for 20%, 15%, 13%, and 10% of our revenues, respectively, for 1998.
Indus International, Unitrin, and Board of Trading Clearing Corp. accounted for
39%, 31%, and 11% of our revenues, respectively, for 1997. Four of our
customers, Provident Companies, Westfield, Utica National, and Unitrin, have
purchased stock in TenFold. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview" for additional
information regarding our revenues from these customers.

Revenues from international customers were approximately 10% and 1% of total
revenues for the years ended December 31, 1999 and 1998 respectively. There
were no revenues from international customers for the year ended December 31,
1997.

We have one contract with an agency of the Federal Government that can be
terminated for convenience at their election. They may cancel any undelivered
portion of the deliverables under the agreement for convenience. In the event
of cancellation they are obligated to pay all monies due and payable through the
date of termination, plus 30% of all future unbilled payments due under the
agreement.

Sales and Marketing

TenFold products and services require a substantial financial commitment by
our customers. Sales cycles typically range from three to twelve months from the
time we initially meet with a prospective customer until the customer hires
TenFold to build an application. Decision-makers are primarily senior executives
of large companies in our target industries. The TenFold Guarantee is an
important selling point to executives experiencing significant problems with
their large-scale applications.

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A significant amount of our business comes from additional projects from
existing customers, referrals from existing customers, and from relationships
within our target industries. To build demand for TenFold products, we identify,
educate, and qualify high-potential sales prospects through a variety of
marketing activities, including attendance at targeted conferences and trade
shows, mailings to senior business and information technology executives,
advertising, private briefings with individual companies, and seminars that
demonstrate our unique capabilities. We have an active public relations program
to create marketplace awareness and communicate our value proposition to key
audiences such as press, analysts, and other industry influencers.

We primarily sell TenFold products and services through our direct sales
force, which includes seasoned applications sales staff. We incent the sales
force based on successful achievement of revenue and other targets. In addition,
we expect to broaden distribution of TenFold products through relationships with
applications service providers, value-added resellers (VARs), and software
distributors in the U.S. and international markets. We have a strategic
relationship with Perot Systems Corporation, a systems integrator, to develop
and deliver applications, products, and services to TenFold and Perot Systems
customers using the TenFold Way, Universal Application, TenFold ComponentWare,
and FastStart. Under the agreement, Perot Systems will provide us with the
opportunity to sign contracts with revenue of $30 million during the first two
years of the agreement. See "Strategic Alliance" for more information concerning
this relationship.

We organize TenFold into Vertical Business Groups, subsidiaries of TenFold,
to tailor our marketing and selling strategies for our target vertical
industries. As each Vertical Business Group grows, gains multiple customers, and
begins to develop resalable products, we add dedicated product marketing and
sales staff with vertical domain expertise and sales experience.

Strategic Alliance

We entered into a strategic alliance agreement with Perot Systems
Corporation, a systems integrator, which became effective May 1, 1999. The
agreement provides for the development and delivery of applications, products,
and services to TenFold and Perot Systems customers using the TenFold Way,
Universal Application, TenFold ComponentWare, and FastStart. The agreement
provides that:

. Perot Systems will provide us with opportunities to subcontract the
delivery of our products and services under Perot Systems customer
contracts and to deliver our products and services directly to
customers identified by Perot Systems;

. If Perot Systems does not provide us with opportunities to contract
for revenue of at least $15 million in each of the two years following
May 1, 1999, Perot Systems will pay us 20% of the shortfall, subject
to reduction in the second year to the extent that the opportunities
to contract for revenue provided in the first or third year following

15
<PAGE>

May 1, 1999 exceed $15 million. We recognized no revenues from the
Perot Systems alliance agreement in 1999.

. If Perot Systems meets certain performance milestones, we will not
separately contract for or pursue business deals or applications
development opportunities with customers or businesses with whom Perot
Systems has an outsourcing relationship, and we will not issue any of
our securities to, provide application development services to, or
provide software licenses to, specific competitors of Perot Systems,
except under specific circumstances;

. If we propose to acquire another business and wish to raise cash in
exchange for an equity interest in the acquired company, we and Perot
Systems will negotiate to determine whether Perot Systems will fund a
portion of the acquisition in cash and receive a proportionate
ownership interest in the acquired business;

. If we spin off a division, we and Perot Systems will negotiate to
determine whether Perot Systems should participate in the spin-off;

. Perot Systems will have the opportunity to purchase up to 1,000,000
shares of our common stock being sold at the initial public offering
price, subject to Perot Systems agreeing not to sell these shares for
180 days after the effective date of the offering. Perot purchased
1,000,000 shares in our initial public offering as contemplated by the
agreement;

. Perot Systems will pay us a license fee if Perot Systems sub-licenses
the Universal Application, TenFold ComponentWare, or FastStart
software to a Perot Systems customer;

. We grant to Perot Systems a perpetual, royalty-free license to use,
copy, modify, and distribute the TenFold Way and FastStart
methodologies; and

. Perot Systems will not develop products using the Universal
Application that are directly competitive with existing TenFold
products, TenFold products under development, or any new TenFold
products, unless Perot Systems already has a new product under
development at the time that we develop a new product.

With respect to applications developed in connection with this strategic
relationship, in some cases Perot Systems or their customers will own rights to
these applications. The term of the agreement is ten years and may be terminated
only for cause, except that after the third year of the agreement either party
may terminate the agreement if Perot Systems does not provide TenFold with the
opportunity to sign contracts during the third year or any subsequent year
providing for revenue of at least $7.5 million, increasing from year to year
based on TenFold revenue growth.

Research and Development

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<PAGE>

Our research and development organization consists of teams of development
engineers and product managers. The research and development organization uses a
"documentation-centric" development process that includes planning and
documenting deliverables in advance, rigorously adhering to coding standards,
and performing nightly acceptance tests of all technology. We continuously
monitor quality, analyze the root-cause of defects, report daily and weekly
status, and regularly communicate individual and team performance and adherence
to schedule and functionality requirements.

Our development infrastructure and processes produce documentation, quality
assurance, platform certification, release management, and delivery capabilities
(in addition to design and implementation functions) for our technology and
products. Notably, we do not employ traditional quality assurance engineers or
technical writers. Developers use TenFold AutoTest--our integrated testing
technology--to perform nightly acceptance tests on all products, components, and
technologies under development. We believe that these approaches yield
significantly higher quality than employing large teams of software testers and
technical documentation writers.

Research and development expenses were approximately $18 million for the
year ended December 31, 1999, $10 million in 1998, and $5 million in 1997. As of
December 31, 1999, we had 156 dedicated research and development staff. We
intend to continue to make substantial investments in research and development
to maintain and enhance the TenFold Way, the Universal Application, TenFold
ComponentWare, TenFold FastStart, and our applications products.

Competition

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 we
compete favorably with respect to these factors and that our focus on providing
high-quality solutions to meet customer business needs and our guaranteed
delivery of fixed-time, fixed-price applications distinguishes us from our
competitors. We compete primarily with the following:

Vertical Packaged Software Vendors. We face competition from packaged
software vendors in our target industries such as Policy Management Systems
Corporation (PMSC) in insurance, and McKesson-HBOC in healthcare. Vertical
packaged software vendors typically have domain expertise and an established
user base within a particular industry and their applications provide industry-
specific functionality.

ERP Packaged Software Vendors. We occasionally face competition from ERP
vendors who are beginning to offer industry-specific applications. Customers
primarily license software packages to limit the risks associated with new
software development and improve time to market. However, packaged ERP
applications often require modification or force

17
<PAGE>

companies to alter their business processes. We believe that TenFold
applications generally complement our customers' ERP solutions, rather than
compete directly with them.

Consulting and Software Integration Firms. We face competition from consulting
and software integration firms, such as Andersen Consulting and EDS, who build
applications for hire. These firms generally work on a time-and-materials basis
and typically do not offer fixed-time, fixed-price services.

Fixed-Time, Fixed-Price Service Firms. We compete with services firms that
offer fixed-time, fixed-price applications development, such as Cambridge
Technology Partners and Sapient. These companies use structured methodologies to
shorten development time frames and often break large projects into multiple,
smaller ones. While this approach delivers some benefits, it can lead to costly
change orders for customers as their requirements change during application
development. We believe that TenFold's unique technology and our money-back
TenFold Guarantee give us an advantage over these competitors for delivering
large, complex applications for a fixed price.

Internal Development. We face competition from internal information
technology (IT) organizations that aim to develop and implement applications.
The skill level of IT professionals varies by customer, and the current IT labor
shortage makes it difficult for companies to attract and retain skilled IT
professionals. In addition, internal IT departments have limited resources and
few have the ability to devote staff exclusively to applications development.

Patents, Intellectual Property Rights, and Licensing

We rely primarily on a combination of patent, copyright, trademark and trade
secret laws, coupled with nondisclosure and other contractual restrictions on
copying and distribution, to protect our proprietary technology. We have been
issued a patent covering our unique technology for rapidly building large-scale
software applications. This patent protects our "method and system for database
application software creation requiring minimal programming." We also have two
patent applications pending before the United States Patent and Trademark Office
and two international patent applications pending under the Patent Cooperation
Treaty. We intend to continue to seek patents on our inventions where
appropriate. We have registered three trademarks in the United States and three
trademarks in international jurisdictions. We also have twenty-two trademark
applications pending in the United States and sixteen trademark applications
pending in international jurisdictions. We will continue to seek protection in
the United States and in various foreign jurisdictions for distinct marks,
including our distinctive TenFold logo.

In addition, as part of its confidentiality procedures, we generally enter
into nondisclosure agreements with our employees, customers, consultants, and
corporate partners, and limit access to and distribution of our software,
documentation, and other proprietary information. We retain ownership of the
Universal Application, TenFold ComponentWare, and TenFold FastStart. We
generally retain ownership of the applications

18
<PAGE>

products that we develop for customers. However, with respect to applications
developed in connection with our strategic relationship with Perot Systems
Corporation, in some cases Perot Systems or their customers will own rights to
these applications. In some cases we are obligated to pay royalties on future
sales of specific applications, or are prohibited from licensing applications
for specified periods of time or to specified third parties.

For information concerning risks associated with intellectual property
rights, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations - 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."

Acquisition

On October 7, 1999 we completed the acquisition of the LongView Group, Inc.
(LongView), developers of a leading institutional portfolio management and
trading desk software application for the investment management industry. The
LongView Group's LandMark product provides portfolio modeling, electronic
trading and compliance functionality to many large investment management firms.
Under the terms of the agreement, we acquired from Barclays California
Corporation ("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 TenFold to BarCal. In addition, we incurred $416,000 in acquisition
related costs. BarCal has been a customer of LongView since 1998. BarCal has
been a customer of TenFold since 1997 and, as such, has various software license
and service agreements with us. Simultaneous with the acquisition, BarCal
purchased a software license and related technical support services from us for
$4 million. We recorded approximately $3.7 million of license revenue in 1999
and are recording the remaining $300,000 as support revenue, ratably over the
support period.

Employees

We believe that our growth and success are attributable in large part to
high-caliber employees and an experienced management team, many with years of
industry experience in building, implementing, and selling mission-critical
applications. We focus on maintaining a strong corporate culture tied to key
values; namely, speed, integrity, customer satisfaction, commitment, employee
growth, long-term strategy, and precision execution. Each employee attends an
initial "Boot Camp" and ongoing training to learn the TenFold Way, our
technology, and our company values. To encourage these company values, we
recognize and reward employees who demonstrate them in their everyday work. We
intend to continue teaching and promoting our values and believe this will
provide us with a sustainable competitive advantage. We offer a work environment
that lets employees make meaningful contributions, as well as incentive programs
to continue to motivate and reward our employees.

As of December 31, 1999, we had 535 employees, including 242 in
applications development, professional services, and support; 156 in research
and development; 70 in

19
<PAGE>

sales and marketing; and 67 in finance, administrative, and information
technology support functions. None of our employees is represented by a labor
union. We believe that our employee relations are good.

20
<PAGE>

Item 2. Properties

Our principal executive offices are located near Salt Lake City, Utah where
we lease approximately 36,000 square feet under a lease that expires in December
2001. We are planning to relocate one of our existing San Francisco, California
offices to a 77,000 square foot office under a eight year lease that begins in
May 2000, adding approximately 65,000 square feet. We expect to sublease
approximately 28,000 square feet of this new space for 24 months and 9,000
square feet for 12 months as part of this relocation. We also plan to open a new
office in Irving, Texas in April 2000 under a five year lease for 23,000 square
feet. We expect to finalize arrangements in the first quarter of 2000 to
purchase two office buildings totaling 14,000 square feet in San Rafael,
California which we plan to use for research and development activities. We plan
to sublease 7,500 square feet of this space for 12 months.

We also currently lease office space (averaging approximately 10,000 square
feet, and typically with 5-year lease terms) in Atlanta, Boston, Chicago,
Dallas, Foster City, Raleigh, Richmond UK, and San Francisco, which we use for
applications development, research and development, sales, and vertical business
management. We also maintain smaller offices (each typically less than 1,000
square feet and with 1 year or less lease terms) in Austin, Cambridge, Eden
Prairie, Park Ridge, London UK, Waltham, and New York, which we use primarily
for sales activities. We believe that our current facilities are adequate to
meet our needs and that additional space will be available as we need it.

21
<PAGE>

Item 3. 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 us. The
complaint alleges that we 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 us by the Plaintiff was
paid to us by the Plaintiff in the first half of 1999. On November 4, 1999, we
filed our Answer and Counterclaim denying these claims and seeking recovery of
$3.9 million that the Plaintiff owes us under the license agreement together
with claims for additional damages. The case is in its preliminary stages. Based
on the information currently available, we believe that we have valid defenses
against Plaintiff's claims and we intend to vigorously defend the Plaintiff's
claims. We also intend to vigorously enforce our rights under the license
agreement, including recovery of the $3.9 million due and owing under the
agreement.

Our legal counsel has commenced investigation of the facts pertinent to the
claims and counterclaims. Based on their analysis and current assumptions, our
counsel has advised us that there is a reasonable likelihood that we will
successfully prosecute our claims and defenses. They have advised us that,
pending further investigation and discovery, the prospect that we 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 our accounts receivable in our
consolidated balance sheet at December 31, 1999, 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 we 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 we believe we will ultimately
prevail against the Plaintiff in the matters explained above, an unfavorable
outcome of these matters may have a material adverse impact on our financial
position and results of operations.

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<PAGE>

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

None

23
<PAGE>

Item 4A. Executive Officers of the Registrant

The officers of the Company are as follows:

<TABLE>
<CAPTION>
Name Age Position(s)
---- --- -----------
<S> <C> <C>
Gary D. Kennedy (1)....................... 46 President, Chief Executive Officer, and Director
Jeffrey L. Walker (1)..................... 57 Chairman, Executive Vice President, and Chief Technology
Officer
William M. Conroy (1)..................... 40 Executive Vice President and Chief Operating Officer
Max P. Brough............................. 58 Senior Vice President and Chief Information Officer
Robert P. Hughes (1)...................... 40 Senior Vice President and Chief Financial Officer
Glen D. Mella............................. 42 Senior Vice President of Marketing and Alliances
Sameer E. Shalaby (1)..................... 31 Senior Vice President of Development
Adam Slovik............................... 32 Senior Vice President of Worldwide Applications
Development
Laurence F. Stevens....................... 45 Senior Vice President of Technical Products
Richard W. VanderDrift.................... 53 Senior Vice President of Applications Products
Jeffrey J. Anderson....................... 44 President of TenFold Healthcare, Inc.
Scott E. Calder........................... 47 President TenFold New Ventures
Donald R. Jefferis (1).................... 37 President of TenFold Energy, Inc.
John M. Kealey............................ 41 President of TenFold Communications, Inc.
Bernard C. Mazon (1)...................... 50 President of TenFold Insurance, Inc.
Michele W. McGovern (1)................... 38 President of TenFold Investment Management, Inc.
Charles R. Stucki......................... 36 President of TenFold Financial Services, Inc.
</TABLE>

(1) Denotes Executive Officer

Gary D. Kennedy joined TenFold in September 1996 as its President and Chief
Executive Officer. Prior to joining TenFold, from 1993 to 1996, Mr. Kennedy
served a three-year mission in Brazil for The Church of Jesus Christ of Latter-
day Saints. From 1990 to 1993, except during periods of personal illness, he
served as President, Chief Executive Officer, and Chairman of PRC Incorporated,
a systems integrator company and wholly owned subsidiary of Black & Decker, an
appliance and tool company. Prior to joining PRC Incorporated, Mr. Kennedy
served in various sales and management positions at Oracle Corporation, a
database software company, from 1982 until 1990, including President of Oracle
USA during 1990. Prior to joining Oracle, Mr. Kennedy served as Marketing
Manager for Intel Corporation, a semiconductor company. Mr. Kennedy holds a BA
in finance from the University of Utah and an MBA from Northwestern University,
Kellogg Graduate School of Management. In 1999, he joined the Board of
Directors at overstock.com, an Internet shopping service. In 1999, Mr. Kennedy
joined the Board of Directors at Idea Xchange, an on-line knowledge acquisition
company.

Jeffrey L. Walker founded TenFold in February 1993 and has served as its
Chairman, Executive Vice President, and Chief Technology Officer since October
1996. From TenFold's inception to October 1996, Mr. Walker served as TenFold's
Chairman, President, Chief Executive Officer, and Chief Technology Officer.
Prior to founding TenFold, from 1991 to 1993, Mr. Walker was an independent
consultant. From 1985 to 1991, Mr. Walker held several management positions at
Oracle Corporation, including Executive Vice President

24
<PAGE>

from 1987 to 1991, General Manager Applications Division from 1985 to 1991,
Chief Financial Officer from 1987 to 1991, and Senior Vice President of
Marketing during 1986. Prior to joining Oracle, Mr. Walker founded and served as
Chief Executive Officer of Walker Interactive Products, an application software
company, from 1980 to 1985. Mr. Walker holds a BA in mathematics from Brown
University.

William M. Conroy joined TenFold in November 1997 and has served as its
Executive Vice President and Chief Operating Officer since October 1998. From
November 1997 to October 1998, Mr. Conroy served as TenFold's Senior Vice
President of Sales. Prior to joining TenFold, from 1986 to 1997, Mr. Conroy held
several sales and management positions at Oracle Corporation, a database
software company, including Group Vice President in the U.S. Sales Division in
1996 and 1997, and Area Vice President of Sales from 1990 to 1996. Prior to
joining Oracle, Mr. Conroy worked at IBM in various account management
positions. Mr. Conroy holds a BA in marketing from Bowling Green State
University.

Max P. Brough joined TenFold in April 1998 as its Senior Vice President and
Chief Information Officer. Prior to joining TenFold, from 1996 to 1998 and from
1980 to 1985, Mr. Brough served as Director of Information Technology for the
University of Utah. From 1993 to 1996, Mr. Brough served a three-year mission in
Baton Rouge, Louisiana for The Church of Jesus Christ of Latter-day Saints. From
1985 to 1993, Mr. Brough served as Vice President of Information Systems at
First Health, Inc., a health benefits company. Mr. Brough holds a BS in
education from the University of Utah.

Robert P. Hughes joined TenFold in February 1995 as its Chief Financial
Officer and has served as a Senior Vice President of TenFold since October 1998.
Prior to joining TenFold, Mr. Hughes served in various finance and
administrative capacities at Oracle Corporation, a database software company,
from 1989 to 1995, including Senior Director of USA Revenue Administration and
Accounting from 1993 to 1995, Director of Revenue Accounting, Credit and
Collections from 1992 to 1993, and Director of Internal Audit from 1989 to 1992.
Prior to joining Oracle, from 1982 to 1989, Mr. Hughes served in various audit
positions for KPMG LLP, a public accounting firm, including Audit Manager. Mr.
Hughes holds a BA in business administration from the Haas School of Business,
University of California, Berkeley, and is a Certified Public Accountant.

Glen D. Mella joined TenFold in January 1997 as its Vice President of
Marketing and has served as TenFold's Senior Vice President of Marketing and
Alliances since October 1998. Prior to joining TenFold, from 1996 to 1997, Mr.
Mella served as Vice President of Marketing for CyberPath Inc., a provider of
electronic data interface solutions for the Internet. From 1994 to 1996, Mr.
Mella served as Vice President of Marketing for Novell, Inc., a network software
company. From 1993 to 1994, Mr. Mella served as Vice President of Marketing
Communications for WordPerfect Corporation, a business and office software
products company. From 1991 to 1993, Mr. Mella served as Marketing Director for
Dial Corporation, a personal and household products company. From 1987 to 1991,
Mr. Mella served as a Product Manager for the Frito-Lay division of PepsiCo., a
beverage and foods company. Mr. Mella holds a BS in business management from
Brigham Young University and an MBA from Northwestern University, Kellogg
Graduate School of Management.

25
<PAGE>

Sameer E. Shalaby joined TenFold in August 1993 and has served as its
Senior Vice President of Development since October 1999. From August 1993 to
October 1999, Mr. Shalaby served in various development and technical capacities
at TenFold, including its Vice President of Technical Architecture. Prior to
joining TenFold, from 1991 to 1993, Mr. Shalaby served in various development
and technical capacities in the Network Products Division at Oracle Corporation,
a database software company. From 1988 to 1989, Mr. Shalaby served as a Software
Engineer at Security Survival Distributed Systems, a network infrastructure and
applications company. During 1988, Mr. Shalaby served as a member of NASA's
Advanced Technology Unit's Technical Staff at PRC Incorporated, a systems
integrator company and wholly owned subsidiary of Black & Decker, an appliance
and tool company. Mr. Shalaby holds a BS in electrical engineering and computer
science from The George Washington University and an MS in electrical
engineering and computer science from the Massachusetts Institute of Technology.

Adam Slovik joined Jeffrey L. Walker to found TenFold in February 1993 and
has served as its Senior Vice President of Worldwide Applications Development
since October 1998. From February 1993 to October 1998, Mr. Slovik served in
various development and technical capacities at TenFold, including its Vice
President of Applications Architecture. Prior to joining TenFold, Mr. Slovik
served in various development and technical capacities in the Applications
Division of Oracle Corporation, a database software company, from 1988 to 1992,
including Product Manager from 1991 to 1992, Architect from 1990 to 1991, Senior
Development Manager from 1989 to 1990, and Senior Developer from 1988 to 1989.
Mr. Slovik holds a BS in electrical engineering from the California Institute of
Technology.

Laurence F. Stevens joined TenFold in October 1998 as its Senior Vice
President of Technical Products. Prior to joining TenFold, Mr. Stevens held
several management positions at Oracle Corporation, a database software company,
including Vice President of Product Strategy for the On-Line Analytical
Processing Products Division from 1994 to 1998, Vice President of Multimedia and
Document Products from 1993 to 1994, Vice President of Office Products from 1989
to 1992, Product Marketing Director from 1987 to 1989, New Products Director
from 1986 to 1987, and Senior Product Manager from 1985 to 1986. Mr. Stevens
holds a BA in economics from the University of Kansas.

Richard W. VanderDrift joined TenFold in November 1996 and has served as
its Senior Vice President of Applications Products since October 1998. From
November 1997 to October 1998, Mr. VanderDrift served as TenFold's Vice
President of ComponentWare. From November 1996 to November 1997, Mr. VanderDrift
served as TenFold's Vice President of Applications. Prior to joining TenFold,
from 1992 to 1996, Mr. VanderDrift served as President of Squire Systems, a
software company he founded. From 1987 to 1992 Mr. VanderDrift held various
management positions at Oracle Corporation, a database software company,
including Vice President of Applications from 1988 to 1991, and Vice President
of Financial Applications Research and Development from 1991 to 1992. Mr.
VanderDrift holds a BA in business from the University of Texas, Austin and an
MBA from the Haas School of Business, University of California, Berkeley.

26
<PAGE>

Jeffrey J. Anderson joined TenFold in February 2000 as President of TenFold
Healthcare Inc., a subsidiary of TenFold. Before joining TenFold, from 1998 to
2000, Mr. Anderson was the corporate senior vice president at Superior
Consultant, a provider of information technology services to the healthcare
industry, with worldwide responsibility for business development, client
satisfaction and strategic service groups. In addition, Mr. Anderson served from
1997 to 1998 as Senior Vice President at Medaphis Healthcare Information
Technology, a healthcare information products and services company, and, from
1995 to 1997, Corporate Vice President at Science Applications International
Corporation, a diversified high technology research and engineering company.
From 1989 to 1995, Mr. Anderson was an executive at McKesson HBOC, a
comprehensive healthcare products and services provider. Mr. Anderson received a
BA in planning and management from the University of California, Davis, and
holds a master's degree in systems management from the University of Southern
California.

Scott E. Calder joined TenFold in March 1999 as the President of TenFold
New Ventures. Prior to joining TenFold, from 1985 to 1999, Mr. Calder held
several management positions at Mainstream Data, Inc., an information services
company which he co-founded, and its successor company, WavePhore Networks,
Inc., including Chief Executive Officer from 1992 to 1998, President from 1990
to 1992, and Executive Vice president and Chief Operating Officer from 1985 to
1990. Mr. Calder also served as a director of Mainstream from 1988 to 1998. From
1982 to 1985, Mr. Calder served as Vice President of Marketing at Bonneville
Telecommunications Company, a satellite video and data communications services
company. Prior to joining Bonneville, from 1979 to 1982, Mr. Calder served as a
consultant at Bain and Company, a management consulting firm. Mr. Calder holds
BA degrees in English and economics from the University of Utah and an MBA from
the Harvard University Graduate School of Business.

Donald R. Jefferis joined TenFold in August 1999 as the President of
TenFold Energy, Inc., a subsidiary of TenFold. Prior to joining TenFold, from
1996 to 1999 Mr. Jefferis served as Vice President and Chief Information Officer
of Southern Company Energy Marketing, a joint venture between Southern Energy,
Inc. and Vastar Resources, Inc. providing risk management services and products
to the energy industry. Prior to joining Southern, Mr. Jefferis served as a
Senior Manager and Director of Arthur Andersen's Energy Risk Management
Practice; Mr. Jefferis was employed by Arthur Andersen, a public accounting
firm, from 1984 to 1996. Mr. Jefferis holds a BS in accounting from Michigan
State University.

John M. Kealey joined TenFold in June 1999 as President of the TenFold
Communications Group, recently incorporated as TenFold Communications, Inc., a
subsidiary of TenFold. Prior to joining TenFold, from 1997 to 1999, Mr. Kealey
was a senior consultant for the Continuous Learning Group, a performance
management consulting firm, where Mr. Kealey led the firm's merger and
acquisition integration practice. From 1994 to 1996 Mr. Kealey served as
President and COO of MobilComm, Inc. (formerly Metromedia Paging Services), a
provider of wireless telecommunications services. From 1992 to 1994, Mr. Kealey
was President of Metromedia Paging Services, a subsidiary of SBC Communications,
Inc.

27
<PAGE>

providing wireless communication services. Mr. Kealey is a Certified Public
Accountant and holds an MBA from Washington University in St. Louis, Missouri.

Bernard C. Mazon joined TenFold in July 1998 and has served as the
President of TenFold Insurance Systems Group, recently incorporated as TenFold
Insurance Systems, Inc., a subsidiary of TenFold, since October 1998. From July
1998 to October 1998, Mr. Mazon served as TenFold's Vice President of Sales for
the Insurance Group. Prior to joining TenFold, from 1994 to 1998, Mr. Mazon
served as Executive Vice President in the Financial Services Group at Computer
Sciences Corporation, an information technology and services company. Mr. Mazon
served as Executive Vice President Group Manager (Information Services) at
Policy Management Systems Corporation, a provider of enterprise applications and
services (PMSC), from 1987 to 1994. Mr. Mazon holds a BA in business from
Duquesne University.

In February 1997, in connection with Mr. Mazon's role as Executive Vice
President Group Manager (Information Services) at PMSC, Mr. Mazon, and four
other executive officers of PMSC, entered into a stipulation and consent to
final judgment of permanent injunction with the Securities and Exchange
Commission. Mr. Mazon consented to the entry of a final judgment permanently
restraining and enjoining him from violating the internal control provisions of
the Securities Exchange Act of 1934 and ordering him to pay civil penalties in
the amount of $20,000. The SEC alleged in its complaint that, from January 1991
through March 1993, PMSC and various of its employees engaged in a number of
improper accounting practices which materially misstated PMSC's results of
operations. Mr. Mazon neither admits nor denies the allegations contained in the
SEC's complaint.

Michele W. McGovern joined TenFold in July 1997 and has served as President
of the TenFold Investment Management Group, recently incorporated as TenFold
Investment Management, Inc., a subsidiary of TenFold, since July 1998. From July
1997 to July 1998, Ms. McGovern served as Vice President of TenFold's Investment
Management Group. Prior to joining TenFold, from 1988 to 1997, Ms. McGovern
founded and served as President of McGovern Group, a technology project
management consulting firm serving the investment management industry. From 1987
to 1988, Ms. McGovern served as Assistant Controller in the International
Banking Group at Wells Fargo Bank. From 1984 to 1987, Ms. McGovern served as an
audit manager in the investment management practice at Pricewaterhouse Coopers
LLP. Ms. McGovern is a Certified Public Accountant and holds a BS in finance and
accounting from Northeastern University.

Charles R. Stucki joined TenFold in June 1997 and has served as the
President of the TenFold Banking and Credit Group, recently incorporated as
TenFold Financial Services, Inc., a subsidiary of TenFold, since October 1998.
From June 1997 to October 1998, Mr. Stucki served as TenFold's Vice President of
WorldWide Applications Development. Prior to joining TenFold, Mr. Stucki served
as a principal at McKinsey & Company Inc., a business consulting company, from
1996 to 1997, and as an associate from 1990 to 1996. Mr. Stucki served as a
staff auditor at Arthur Andersen & Company, a public accounting firm, from 1986
to 1988. Mr. Stucki holds a BS in accounting from Brigham Young University and
an MBA from the Harvard University Graduate School of Business.

28
<PAGE>

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

The Company's Common Stock is traded publicly on the Nasdaq National Market
under the symbol "TENF". The following table lists the high and low per share
sales prices for the Common Stock as reported by the Nasdaq National Market for
the calendar quarters indicated:

High Low
1999
Second Quarter (commencing May 20, 1999).......... 32.75 21.50
Third Quarter..................................... 39.50 22.75
Fourth Quarter.................................... 44.125 17.00

As of February 1, 2000, there were 34,910,631 shares of the Common Stock
outstanding, held by approximately 268 holders of record not including those
holding shares in street or nominee name.

The Company has never declared or paid cash dividends on its capital stock.
The Company currently intends to retain any earnings for use in its business and
does not anticipate paying any cash dividends in the foreseeable future. The
payment of dividends is also restricted under line of credit arrangements with
the Company's lender. Future dividends, if any, will be determined by the
Company's Board of Directors.

The Company's registration statement (Registration No. 333-74057) under the
Securities Act of 1933, for the Company's initial public offering, became
effective and commenced on May 20, 1999. The Company's offering proceeds, net of
aggregate expenses of approximately $4.7 million, were $34.2 million. The
Company has used a portion of the proceeds for the payment of $10 million for a
portion of the purchase price of The LongView Group, Inc., which closed on
October 7, 1999. The remainder of the net proceeds has been used to purchase
temporary investments consisting of cash and cash equivalents. None of the net
offering proceeds were paid directly or indirectly to directors, officers,
general partners, holders of 10% or more of any class of equity securities, or
beneficial owners or any affiliates.

29
<PAGE>

Item 6. Selected Financial Data

The selected consolidated statement of operations data for the years ended
December 31, 1999, 1998, 1997 and 1996, and the selected consolidated balance
sheet data as of December 31, 1999, 1998, and 1997, are derived from, and are
qualified by reference to, TenFold's audited financial statements. The selected
consolidated statement of operations data for the years ended December 31, 1995,
and the selected consolidated balance sheet data as of December 31, 1996, and
1995, are derived from TenFold's unaudited consolidated financial statements.
The historical results are not necessarily indicative of future results.

<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
(in thousands, except share and per share data)
<S> <C> <C> <C> <C> <C>
Consolidated Statement of Operations Data:
Revenues:
License............................................... $ 47,088 $ 13,382 $ 5,244 $ 271 $ 128
Services.............................................. 45,341 26,785 8,879 2,744 1,420
---------- ---------- ---------- ---------- ----------
Total revenues.................................. 92,429 40,167 14,123 3,015 1,548

Operating expenses:
Cost of revenues...................................... 30,460 14,529 4,661 370 302
Sales and marketing................................... 24,540 11,070 2,765 87 -
Research and development.............................. 18,085 9,690 4,739 2,289 1,774
General and administrative............................ 5,231 2,882 1,364 396 178
Amortization of deferred compensation................. 1,427 153 34 - -
In process research and development................... 2,000 - - - -
Amortization of goodwill and acquired intangibles..... 1,064 - - - -
Other charge.......................................... - - 1,449 - -
---------- ---------- ---------- ---------- ----------
Total operating expenses........................ 82,807 38,324 15,012 3,142 2,254
---------- ---------- ---------- ---------- ----------
Income (loss) from operations................................ 9,622 1,843 (889) (127) (706)
---------- ---------- ---------- ---------- ----------
Interest and other income, net............................... 981 375 179 28 52
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes............................ 10,603 2,218 (710) (99) (654)
Provision (benefit) for income taxes......................... 4,736 495 (110) - (141)
---------- ---------- ---------- ---------- ----------
Net income (loss)............................................ $ 5,867 $ 1,723 $ (600) $ (99) $ (513)
========== ========== ========== ========== ==========
Accretion of Series A and B redeemable
preferred stock.......................................... (391) (915) (274) - -
---------- ---------- ----------- ---------- ----------
Net income (loss) applicable to common stock................. $ 5,476 $ 808 $ (874) $ (99) $ (513)
========== ========== =========== ========== ==========
Basic earnings (loss) per share.............................. $ 0.19 $ 0.04 $ (0.04) $ (0.00) $ (0.03)
========== ========== ========== ========== ==========
Diluted earnings (loss) per share............................ $ 0.16 $ 0.03 $ (0.04) $ (0.00) $ (0.03)
========== ========== ========== ========== ==========
Weighted average shares - basic (1)................... 29,278 21,551 21,542 20,285 20,047
========== ========== ========== ========== ==========
Weighted average shares - diluted (1)................. 34,384 26,663 21,542 20,285 20,047
========== ========== ========== ========== ==========
Consolidated Balance Sheet Data (at period end)
Cash and cash equivalents.................................... $ 58,247 $ 15,373 $ 9,022 $ 1,211 $ 723
Total current assets......................................... 77,956 23,966 10,443 1,376 846
Total assets................................................. 112,632 30,309 12,044 1,890 963
Total current liabilities.................................... 44,574 12,236 2,921 585 561
Long-term obligations, redeemable preferred and
common stock, less current portion....................... 3,464 14,240 8,640 - -
Stockholders' equity......................................... 61,840 3,748 483 1,305 403
</TABLE>

(1) See Note 13 of Notes to Consolidated Financial Statements for an
explanation of the determination of the method used to determine the number
of shares used in computing net earnings (loss) per share.

30
<PAGE>

Supplementary Financial Information

The following tables set forth certain unaudited quarterly results of
operations of TenFold for 1999 and 1998. In the opinion of management, this
information has been prepared on the same basis as the audited consolidated
financial statements and all necessary adjustments, consisting only of normal
recurring adjustments, have been included in the amounts stated below to present
fairly the quarterly information when read in conjunction with the audited
consolidated financial statements and notes thereto included elsewhere in this
Annual Report on Form 10-K. The quarterly operating results are not necessarily
indicative of future results of operations.

<TABLE>
<CAPTION>
Quarter ended (unaudited)
------------------------------------------------------------------------------------------------
Mar 31 June 30 Sept 30 Dec 31 Mar 31 June 30 Sept 30 Dec 31
1998 1998 1998 1998 1999 1999 1999 1999
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
(in thousands, except share and per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
License....................... $ 1,259 $ 1,515 $ 4,089 $ 6,519 $ 5,656 $ 7,511 $ 10,261 $ 23,660
Services...................... 3,940 6,104 6,946 9,795 10,371 11,526 13,209 10,236
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
Total revenues............... 5,199 7,619 11,035 16,314 16,027 19,037 23,470 33,896
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
Operating expenses:
Cost of revenues.............. 2,176 2,761 4,370 5,222 6,246 6,339 7,365 10,510
Sales and marketing........... 1,442 2,127 2,942 4,559 4,736 5,843 6,386 7,575
Research and development...... 1,807 2,349 2,442 3,092 3,401 4,046 4,404 6,234
General and administrative.... 471 507 539 1,365 820 865 1,217 2,329
Amortization of
deferred compensation....... 13 11 11 118 305 384 376 362
In process research
and development............. - - - - - - - 2,000
Amortization of goodwill
and acquired intangibles.... - - - - - - - 1,064
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
Total operating expenses.... 5,909 7,755 10,304 14,356 15,508 17,477 19,748 30,074
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
Income (loss) from operations.... (710) (136) 731 1,958 519 1,560 3,722 3,822
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
Interest and other income (net).. 102 110 113 50 88 162 324 406
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
Income (loss) before
income taxes................ (608) (26) 844 2,008 607 1,722 4,046 4,228

Provision (benefit) for
income taxes................ (207) (9) 287 424 234 662 1,558 2,282
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
Net income (loss)........... $ (401) $ (17) $ 557 $ 1,584 $ 373 $ 1,060 $ 2,488 $ 1,946
========== ========== ========== ========== ========== ========== ========== ===========

Accretion of Series A
and B preferred stock....... (218) (225) (232) (240) (248) (143) - -
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------

Net income (loss) applicable
to common stock............. $ (619) $ (242) $ 325 $ 1,344 $ 125 $ 917 $ 2,488 $ 1,946

Basic earnings (loss)
per common share............ $ (0.03) $ (0.01) $ 0.01 $ 0.06 $ 0.01 $ 0.03 $ 0.08 $ 0.06
========== ========== ========== ========== ========== ========== ========== ===========
Diluted earnings (loss)
per common share............ $ (0.03) $ (0.01) $ 0.01 $ 0.05 $ - $ 0.03 $ 0.07 $ 0.05
========== ========== ========== ========== ========== ========== ========== ===========
</TABLE>

31
<PAGE>

Item 7 Management's Discussion and Analysis of Financial Condition and Results
of Operations

Forward-Looking Statements

This Annual Report on Form 10-K 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,"
"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;
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. Since 1997
we have derived the majority of our license and service revenues from fixed-
price, fixed-time applications development projects. In 1998 and 1999, 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,

32
<PAGE>

support and training. We recognize 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 1998 and 1999.

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, and risks. Members of our senior management team approve each fixed
price proposal. 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 noncancellable license agreement with nonrefundable fees;
we have shipped the software product; there are no uncertainties surrounding
product acceptance; the fees are fixed and determinable; and collection is
considered probable.

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.

33
<PAGE>

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 December 31, 1999 was $4.4 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% to 20% 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.

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 .

Some of our customers have purchased stock in TenFold Corporation.
Westfield Companies and Utica National Insurance Group purchased 250,000 and
70,000 shares of common stock, respectively, in our initial public offering. In
December 1998, Provident Companies and Unitrin each purchased 200,000 shares of
common stock from us at a purchase price of $5.00 per share and entered into
additional license and service agreements with us. In the additional license
agreement with Provident Companies, we provide an expanded application license.
In the additional license and service agreement with Unitrin, we provide an
expanded application license, a Universal Application development license, and
implementation and training services. We subsequently determined that the fair
market value of a share of common stock at December 30, 1998 equaled $9.88. As a
result, we allocated approximately $2.0 million from the contractual value of
each of these licensing and service agreements to the common stock transactions.
We allocated the remaining contractual balance, a total of $6.1 million, to
license and service revenue. We recorded $2.8 million of the total $6.1 million
as revenue in 1998, $2.3 million in 1999 and we expect to record the remaining
revenue in 2000. During 1999, Provident, Unitrin, Utica, and Westfield accounted
for 3%, 3%, 6%, and 9% of our total revenues, respectively. During 1998,
Provident, Unitrin, Utica, and Westfield accounted for 15%, 20%, 10%, and 1% of
our total revenues, respectively. During 1997,

34
<PAGE>

Unitrin accounted for 31% of our total revenues. Provident, Utica, and Westfield
were not customers during 1997.

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.

<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------
1999 1998 1997
----------- ----------- ---------
<S> <C> <C> <C>
Revenues:
License.............................................................. 51% 33% 37%
Services............................................................. 49% 67% 63%
----------- ----------- ---------
Total revenues.................................................... 100% 100% 100%

Operating expenses:
Cost of revenues..................................................... 33% 36% 33%
Sales and marketing.................................................. 27% 28% 20%
Research and development............................................. 20% 24% 34%
General and administrative........................................... 6% 7% 10%
Amortization of deferred compensation................................ 2% - -
In process research and development.................................. 2% - -
Amortization of goodwill and acquired intangibles.................... 1% - -
Other charge......................................................... - - 10%
----------- ----------- ---------
Total operating expenses.......................................... 90% 95% 106%
----------- ----------- ---------

Income (loss) from operations............................................. 10% 5% (6%)
Other income (net)........................................................ 1% 1% 1%
----------- ----------- ---------
Income (loss) before income taxes......................................... 11% 6% (5%)
Provision (benefit) for income taxes...................................... 5% 1% (1%)
----------- ----------- ---------
Net income (loss)................................................. 6% 4% (4%)
=========== =========== =========
</TABLE>

Revenues

Total revenues increased to $92.4 million for the year ended December 31,
1999 from $40.2 million and $14.1 million for 1998 and 1997, respectively. The
growth in total revenues resulted from an increase in the number and size of
customer contracts. License revenues as a percentage of total revenues were 51%
for the year ended December 31, 1999, as compared to 33% for 1998 and 37% for
1997. License revenue as a percentage of total revenue increased for the year
ended December 31, 1999 over the prior year as a result of an increase in the
number of Universal Application development licenses and vertical applications
products sold. Service revenues increased to $45.3 million for the year ended
December 31, 1999, from $26.8 million and $8.9 million for 1998 and 1997,
respectively. Service revenues as a percentage of revenue were 49% for the year
ended December 31, 1999, as compared to 67% for 1998 and 63% for 1997. The
increase in service revenues in absolute dollars resulted from an increase in
the size and number of customer contracts.

Revenues from international customers were approximately 10% and 1% of
total revenues for the year ended December 31, 1999 and 1998 respectively. There
were no revenues generated from international customers for the year ended
December 31, 1997.

35
<PAGE>

Two customers each accounted for more than 10% of our revenues for the year
ended December 31, 1999, compared to four customers each accounting for more
than 10% of our revenues for 1998. Three customers each accounted for more than
10% of our revenues in 1997.

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
$30.5 million for the year ended December 31, 1999, from $14.5 million and $4.7
million for 1998 and 1997, respectively. Cost of revenues as a percentage of
total revenues was 33% for the year ended December 31, 1999, compared to 36% for
1998 and 33% for 1997. The increases in cost of revenues in absolute dollars
were due to the increase in the size and number of customer contracts. The
decrease in cost of revenues as a percentage of total revenues in 1999 was due
to the decrease in the service revenue percentage of total revenues.

Sales and Marketing. Sales and marketing expenses consist primarily of
compensation, travel and other related expenses for sales and marketing
personnel, as well as advertising and other marketing expenses. Sales and
marketing expenses increased to $24.5 million for the year ended December 31,
1999 from $11.1 million and $2.8 million for 1998 and 1997, respectively. Sales
and marketing expenses as a percentage of total revenues were 27% for the year
ended December 31, 1999 as compared to 28% for 1998 and 20% for 1997. The
increases in sales and marketing expenses in absolute dollars were 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.

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 $18.1 million for the year ended December 31, 1999 from $9.7 million and $4.7
million for 1998 and 1997, respectively. Research and development expenses as a
percentage of total revenues were 20% for the year ended December 31, 1999,
compared to 24% for 1998 and 34% for 1997. Research and development expenses
grew in absolute dollars due primarily to the addition of personnel required to
support expanded development efforts, but decreased as a percentage of total
revenues as we have been able to leverage these research and development efforts
over an increasing revenue and customer base.

General and Administrative. General and administrative expenses consist
primarily of the costs of executive management and finance and administrative
staff, recruiting, business insurance, provisions for bad debts, and
professional fees. General and administrative expenses increased to $5.2 million
for the year ended December 31, 1999 from $2.9 million and $1.4 million for 1998
and 1997, respectively. General and administrative expenses as a percentage of
total revenues were 6% for 1999 compared to 7% for 1998, and 10% for 1997. The
increases in general and administrative expenses in absolute dollars were
primarily the result of hiring additional finance and administrative personnel
to manage and support the

36
<PAGE>

increased scale of our operations. We expect 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
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. 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 $1.4 million for the year ended December 31, 1999, as compared to $153,000
for 1998 and $34,000 for 1997.

In Process Research and Development. In process research and development
resulted from the acquisition of LongView. 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 its 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.

In the opinion of management and the appraiser, the acquired in-process
research and development had not yet reached technological feasibility and had
no alternative future uses. Accordingly, we recorded a write-off of $2 million
in the fourth quarter of 1999.

The estimated costs to complete the acquired in-process research and
development as of the date of acquisition was $1.2 million. Of the total
estimated costs to complete the acquired in-process research and development, we
have incurred $590,000 as of December 31, 1999.

Amortization of Goodwill and Acquired Intangibles. Amortization of goodwill
and acquired intangibles resulted from the acquisition of LongView. The
remaining intangible assets after the write-off of in-process research and
development, totaled $24.6 million and are being amortized over a five to seven
year period. We recorded amortization expense of intangibles of $1.1 million for
1999. We did not incur any amortization of goodwill and acquired intangibles in
1998 or 1997.

Other Charge. During March 1997, we entered into a transaction where we
sold 1,460,399 shares of Series A preferred stock and a software license to
Indus International ("Indus"). In the same transaction, our majority stockholder
sold 1,460,400 shares of our common stock to Indus. Simultaneously, we granted
Indus an option to exchange the 1,460,400 shares of common stock for an equal
number of Series A preferred stock. Indus exercised this exchange option during
1997. Indus paid a total of $8.0 million as consideration for this transaction,
of which $2.5 million was received by the majority stockholder and we received
$5.5 million. Based on an independent valuation of our common and preferred
stock, we allocated the $8.0 million paid by Indus based on the respective fair
values of the preferred and common shares. Based on these valuations, we
allocated $1.4 million to the Series A preferred stock and option, and $5.5
million to revenue. As a result of the transaction, the majority stockholder
received a premium of $1.4 million on the sale of common shares. We have
reflected that premium as an other charge in our statement of operations.

Total Other Income, net. Net total other income increased to $981,000 for
the year ended December 31, 1999 as compared to $375,000 and $179,000 for 1998
and 1997, respectively. The increase in net total other income between these
periods was the result of higher cash

37
<PAGE>

and cash equivalent balances resulting primarily from the initial public
offering. The increase in interest income in 1999 was partially offset by
increased interest expense resulting from notes payable and capital leases for
fixed asset financing.

Provision/(Benefit) for Income Taxes. The provision for income taxes was
$4.7 million for the year ended December 31, 1999 as compared to $495,000 for
1998. The provision for income taxes was a net benefit of $110,000 for 1997. Our
effective tax rate was 45% for 1999, 22% for 1998 and 15% for 1997. The increase
in our effective tax rate is primarily due to greater earnings and nondeductible
purchased intangibles. The effective tax rate differs from the statutory income
tax rate in each year primarily due to the use of research and development
credits, nondeductible purchased intangibles, and other permanent differences
between the tax and financial accounting treatment of various items. Our
effective tax rate may vary from period to period based on our future expansion
into areas with varying country or state income tax rates, or due to additional
purchased intangibles.

Liquidity and Capital Resources

Prior to our initial public offering, 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. On May 21, 1999, we completed an initial public offering
of our common stock, resulting in net cash proceeds to TenFold of $34.2 million.
The proceeds are currently held in cash and cash equivalents which total $58.2
million at December 31, 1999.

On January 18, 1999, we entered into an unsecured Revolving Line of Credit
providing for borrowings of up to $5 million. We had no borrowings under this
line of credit during 1999. 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% 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 have not borrowed against this
line as of December 31, 1999.

Net cash provided by operating activities was $19.3 million for the year
ended December 31, 1999 compared to $6.1 million for 1998 and $822,000 for 1997.
Net cash used in investing activities was $13.2 million for the year ended
December 31, 1999 compared to $5.5 million for 1998 and $1.4 million for 1997.
Net cash provided by financing activities was $36.7 million for the year ended
December 31, 1999 compared to $5.7 million for 1998 and $8.4 million for 1997.
The increase in net cash used in investing activities was due primarily to the
acquisition of LongView in October 1999. Net cash provided by financing
activities in 1999 resulted primarily from the proceeds of the initial public
offering.

On October 7, 1999, upon the closing of the LongView acquisition, we
remitted $10 million to BarCal and recorded a promissory note of $12 million on
our balance sheet. The

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promissory note, together with accrued interest at 6.5%, is due and payable in
installments of $3 million on April 15, 2000 and $9 million on July 15, 2000.

We believe that the net proceeds from our initial public offering, together
with pre-existing cash balances, anticipated cash flows from operations, and
available credit facilities should 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.

Recent Accounting Pronouncements

The FASB recently issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards for 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 statement of financial
position 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
in 2001. We do not believe the adoption of SFAS No. 133 will have a material
effect on our financial position or our results of operations.

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

TenFold was founded in 1993 and has 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 our results are below the expectations of securities market
analysts, our stock price will likely decline

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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:

. 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, 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 our employee and resource utilization rates,
our 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 our 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

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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 underutilized employees and
could, therefore, cause us to suffer quarterly losses or adverse results of
operations.

If we experience project delays, our 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 our
operating results. See "Management 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 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 our
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 our 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

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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

Forty seven percent of our revenues were derived from software applications
we developed for companies in the insurance industry during 1999, and, sixty
five percent during 1998. 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
our 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 litigation matter. See Item 3. "Legal
Proceedings" 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.

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 our business.

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Our products have not been extensively tested to determine the extent to
which they are scalable -- 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 scalable 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 our 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 our 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
increased approximately 130% in 1999 from $40.2 million in 1998 to $92.4 million
in 1999. Our staff increased from 318 full-time employees at December 31, 1998
to 535 full-time employees at December 31, 1999. Our ability to manage this
growth effectively will require us to continue to develop and improve our
operational, financial, and other internal systems, as well as our business
development capabilities, and to train, motivate, and manage our employees. 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 its failure to meet the managerial challenges posed by the development and
operation of such an organization would harm our business.

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

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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.

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
our existing projects, bid for and obtain new projects, and expand our 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.

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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 timeframes anticipated,
our revenues, growth, and operating results will suffer. Some customers have
prohibited us from marketing the applications developed for them generally or
for specified periods of time or to specified third parties or have required
that we pay them a royalty on licenses of the application to third parties.
Customers may continue to make similar demands in the future. Furthermore, there
can be no assurance that we will be able to develop software applications that
can be marketed generally within a particular industry without the need for
significant modification. Our current product plans include the introduction of
multiple resalable products in the near term. 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. For a discussion
of our relationship with Perot Systems see "Business--Strategic Alliance".

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 industries 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, 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, and issues

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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.

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

In 1999, 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 are devoting
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 recognized no revenues from the
Perot relationship in 1999.

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 TenFold 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.

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

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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 64% 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 52% 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 antitakeover provisions in our charter documents and under Delaware law
could discourage a takeover that stockholders may consider favorable

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

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Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk. As of December 31, 1999, we had cash and cash
equivalents of approximately $58.2 million. Substantially all of the cash
equivalents consist of highly-liquid investments with remaining maturities at
the date of purchase of less than ninety days. These investments are subject to
interest rate risk and will decrease in value if market interest rates increase.
A hypothetical increase or decrease in market interest rates by 10% from the
December 31, 1999 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 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% increase or decrease in the
exchange rate between the U.S. dollar and the British pound from the December
31, 1999 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.

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Item 8. Financial Statements and Supplementary Data

The response to this item is submitted as a separate section of this Form
10-K. See Item 14.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None

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Part III

Certain information required by Part III is omitted from this Report on
Form 10-K since we will file a definitive Proxy pursuant to Regulation 14A of
the Securities Exchange Act of 1934, as amended (the "Proxy Statement"), not
later than 120 days after the end of the fiscal year covered by this Report, and
certain information included in the Proxy Statement is incorporated herein by
reference.

Item 10. Directors and Executive Officers of the Registrant

(a) Executive Officers

Please refer to the section entitled "Executive Officers of the Registrant"
in Part I, Item 4A hereof.

(b) Directors

The information required by this Item is incorporated by reference to the
section entitled "Election of Directors" in the Proxy Statement.

Disclosure of Delinquent Filers Pursuant to Item 405 of Regulation S-K

The information required by this Item is incorporated by reference to the
section entitled "Section 16 (a) Beneficial Ownership Reporting Compliance" in
the Proxy Statement.

Item 11. Executive Compensation

The information required by this Item is incorporated by reference to the
section entitled "Executive Compensation" in the Proxy Statement. The
information specified in Item 402(k) and (l) of Regulation S-K and set forth in
the Company's Proxy Statement is not incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The information required by this Item is incorporated by reference to the
section entitled "Security Ownership of Certain Beneficial Owners and
Management" in the Proxy Statement.

Item 13. Certain Relationships and Related Transactions

The information required by this Item is incorporated by reference to the
section entitled "Certain Transactions" in the Proxy Statement.

51
<PAGE>

Part IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a) 1. Financial Statements and Notes to Consolidated Financial Statements

The following financial statements are filed as part of this report:

TENFOLD CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors' Report........................................................................... F-1
Consolidated Balance Sheets as of December 31, 1999 and 1998........................................... F-2
Consolidated Statements of Operations for the three years ended December 31, 1999...................... F-3
Consolidated Statements of Changes in Stockholders' Equity and Comprehensive Income
(Loss) for the three years ended December 31, 1999..................................................... F-4
Consolidated Statements of Cash Flows for the three years ended December 31, 1999...................... F-5
Notes to Consolidated Financial Statements............................................................. F-6
</TABLE>

(a) 2. Financial Statement Schedule

The following financial statement schedule is filed as a part of this
report:

Schedule II - Valuation and Qualifying Accounts for the years ended
December 31, 1999, 1998 and 1997

All other schedules are omitted because they are not required or the
required information is shown in the financial statements or notes thereto.

(a) 3. Exhibits

The following is a list of exhibits required by Item 601 of Regulation S-K
filed as part of this Form 10-K. Where so indicated by footnote, exhibits which
were previously filed are incorporated by reference. For exhibits incorporated
by reference, the location of the exhibit in the previous filing is indicated in
parentheses.

Number Description
- ------
3.2** Fourth Amended and Restated Certificate of Incorporation of
TenFold .(1)
3.3** Bylaws of TenFold, as currently in effect.(1)
3.4** Amendment to Bylaws dated March 2, 1999.(5)
4.1** Reference is made to Exhibits 3.2 and 3.3.(5)
4.2** Specimen Stock Certificate.(1)
4.3** Amended and Restated Investors' Rights Agreement dated
November 24, 1997, as amended, by and among TenFold, Gary D.
Kennedy, Jeffery L. Walker, the Walker Children's Trust and the
Investors (as defined therein). (1)

52
<PAGE>

4.4** Amended and Restated Co-Sale Agreement dated November 24, 1997
by and among Gary D. Kennedy, the Walker Children's Trust,
Jeffrey L. Walker and the Investors (as defined therein). (1)
10.1** Software License Agreement dated March 4, 1997 between TenFold
and the Indus Group, Inc. (2)(5)
10.2** Series B Preferred Stock Purchase Agreement dated November 24,
1997 between TenFold and Winter Harbor L.L.C. (1)
10.3** Amended and Restated Voting Agreement dated November 24, 1997
among TenFold, Jeffrey L. Walker, the Walker Children's Trust,
Gary D. Kennedy, Indus International, Inc. and Winter Harbor
L.L.C. (1)
10.4** First Amended and Restated Voting Agreement dated March 4, 1997
among TenFold, Gary D. Kennedy and Jeffrey L. Walker. (1)
10.5** Office Lease at 180 W. Election Road, Draper, Utah dated
November 12, 1996 between TenFold and Draper Park North. (2)
10.6**# Employment Agreement dated September 1, 1996 between TenFold
(formerly known as KeyTex Corporation) and Gary D. Kennedy. (1)
10.7**# Restricted Stock Purchase Agreement dated September 1, 1996
between TenFold (formerly known as KeyTex Corporation) and Gary
D. Kennedy. (1)
10.8**# Letter Agreement dated March 3, 1999 between TenFold and
Bernard C. Mazon.(1)
10.9** Form of Indemnification Agreement between TenFold and an
executive officer and its directors.(1)
10.10**# 1993 Flexible Stock Incentive Plan, as amended.(2)
10.11**# 1999 Stock Plan.(1)
10.12**# 1999 Employee Stock Purchase Plan.(1)
10.13+** Strategic Alliance Agreement effective May 1, 1999 between
Perot Systems Corporation and TenFold. (3)(5)
11* Computation of Shares used in Computing Basic and Diluted Net
Income Per Share
21 List of subsidiaries
23.1 Consent of KPMG LLP
27.1 Financial Data Schedule.

* Incorporated by reference to "Notes to Consolidated Financial
Statements" herein
** Previously filed.
# Indicates management contract or
compensatory plan or arrangement
1) Filed on March 8, 1999 as an exhibit to the Company's Registration Statement
on Form S-1 and incorporated by reference
2) Filed on April 20, 1999 as an exhibit to Amendment 1 to the Company's
Registration Statement on Form S-1 and incorporated by reference
3) Filed on April 23, 1999 as an exhibit to Amendment 2 to the Company's
Registration Statement on Form S-1 and incorporated by reference
4) Filed on April 30, 1999 as an exhibit to Amendment 3 to the Company's
Registration Statement on Form S-1 and incorporated by reference
5) Filed on May 18, 1999 as an exhibit to Amendment 4 to the Company's
Registration Statement on Form S-1 and incorporated by reference
+ Confidential treatment requested as to certain portions of this agreement

(a) Reports on Form 8-K

On October 14, 1999, the Company filed a current report on Form 8-K with
the Securities and Exchange Commission disclosing the acquisition of The
LongView Group, Inc.

53
<PAGE>

On December 21, 1999 the Company filed an amendment to the current report
on Form 8-K, giving effect to the merger with The LongView Group ("LongView").
The Company at that time filed audited financial statements of LongView for the
11 months ended December 31, 1998 (LongView changed its fiscal year end from
January 31 to December 31), the unaudited financial statements for the nine
months ended September 30, 1999 and the audited financial statements of LongView
for the fiscal year ended January 31, 1998 together with pro forma financial
information regarding the acquisition.

54
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, on March 1, 2000.

Dated: March 1, 2000 TenFold Corporation
------------- By: /s/ Robert P. Hughes
----------------------------
Robert P. Hughes
Senior Vice President, Chief
Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

Dated: March 1, 2000 /s/ Jeffrey L. Walker
------------- ----------------------------------
Jeffrey L. Walker, Chairman of the Board, Executive
Vice President and Chief Technology Officer

Dated: March 1, 2000 /s/ Gary D. Kennedy
------------- ----------------------------------
Gary D. Kennedy, President, Chief Executive Officer
and Director

Dated: March 1, 2000 /s/ Robert P. Hughes
------------- ----------------------------------
Robert P. Hughes
Senior Vice President and Chief Financial Officer

Dated: March 1, 2000 /s/ Stan G. Hanks
------------- ----------------------------------
Stan G. Hanks
Corporate Controller

Dated: March 1, 2000 /s/ H. Raymond Bingham
------------- ----------------------------------
H. Raymond Bingham
Director

Dated: March 1, 2000 /s/ Robert W. Felton
------------- ----------------------------------
Robert W. Felton
Director

Dated: March 1, 2000 /s/ Ralph W. Hardy, Jr.
------------- ----------------------------------
Ralph W. Hardy, Jr.
Director

Dated: March 1, 2000 /s/ Kay R. Whitmore
------------- ----------------------------------
Kay R. Whitmore
Director

55
<PAGE>

REPORT OF INDEPENDENT AUDITORS

Board of Directors
TenFold Corporation

We have audited the consolidated finanicial statements of TenFold
Corporation and subsidiaries as listed in Item 14a of the accompanying index. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule as listed in Item 14a of the
accompanying index. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of TenFold
Corporation and subsidiaries as of December 31, 1999 and 1998, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1999, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.

/s/ KPMG LLP

Salt Lake City, Utah
February 4, 2000, except
as to Note 16, which
is as of February 19, 2000

F-1
<PAGE>

TENFOLD CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
December 31,
---------------------------
1999 1998
------------ ------------
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents..................................................... $ 58,247 $ 15,373
Accounts receivable, (net of allowance for doubtful accounts
of $725 in 1999 and $500 in 1998).......................................... 10,713 2,434
Unbilled accounts receivable.................................................. 4,377 3,258
Due from stockholders......................................................... - 1,976
Prepaid expenses and other assets............................................. 889 389
Other receivables............................................................. 1,080 -
Deferred income taxes......................................................... 2,650 536
------------ ------------
Total current assets................................................... 77,956 23,966

Restricted cash............................................................... 111 -
Property and equipment, net................................................... 9,810 6,157
Due from stockholders......................................................... 1,000 -
Other assets.................................................................. 216 186
Goodwill and other intangibles, net........................................... 23,539 -
------------ ------------
Total assets........................................................... $ 112,632 $ 30,309
============ ============

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable.............................................................. $ 2,903 $ 941
Income taxes payable.......................................................... 1,142 498
Accrued liabilities........................................................... 16,836 3,306
Deferred revenue.............................................................. 9,066 6,248
Current installments of obligations under capital leases..................... 926 525
Current installments of notes payable......................................... 1,701 718
Promissory note............................................................... 12,000 -
------------ ------------
Total current liabilities.............................................. 44,574 12,236

Long-term liabilities:
Deferred income taxes......................................................... 2,754 85
Obligations under capital leases, excluding current installments.............. 1,175 1,116
Notes payable, excluding current installments................................. 2,289 1,593
------------ ------------
Total long-term liabilities............................................ 6,218 2,794

Redeemable preferred stock........................................................ - 9,555
Redeemable common stock........................................................... - 1,976

Stockholders' equity:
Common stock, $0.001 par value:
Authorized: 120,000,000 shares; issued and outstanding:
34,806,602 shares in 1999 and 25,074,404 shares in 1998.................... 35 25
Additional paid-in capital.................................................... 62,672 5,906
Notes receivable from stockholders............................................ (1,155) (329)
Deferred compensation......................................................... (5,611) (2,258)
Retained earnings............................................................. 5,872 396
Accumulated other comprehensive income........................................ 27 8
------------ ------------
Total stockholders' equity............................................. 61,840 3,748
------------ ------------
Total liabilities and stockholders' equity............................. $ 112,632 $ 30,309
============ ============
</TABLE>
See accompanying notes to consolidated financial statements

F-2
<PAGE>

TENFOLD CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
License........................................................ $ 47,088 $ 13,382 $ 5,244
Services....................................................... 45,341 26,785 8,879
------------ ------------ ------------
Total revenues............................................. 92,429 40,167 14,123
------------ ------------ ------------
Operating expenses:
Cost of revenues............................................... 30,460 14,529 4,661
Sales and marketing............................................ 24,540 11,070 2,765
Research and development....................................... 18,085 9,690 4,739
General and administrative..................................... 5,231 2,882 1,364
Amortization of deferred compensation.......................... 1,427 153 34
In process research and development............................ 2,000 - -
Amortization of goodwill and acquired intangibles.............. 1,064 - -
Other charge................................................... - - 1,449
------------ ------------ ------------
Total operating expenses................................... 82,807 38,324 15,012
------------ ------------ ------------
Income (loss) from operations...................................... 9,622 1,843 (889)

Other income (expense):
Interest and other income...................................... 1,521 395 179
Interest expense............................................... (540) (20) -
------------ ------------ ------------
Total other income......................................... 981 375 179
------------ ------------ ------------
Income (loss) before income taxes.................................. 10,603 2,218 (710)
Provision (benefit) for income taxes............................... 4,736 495 (110)
------------ ------------ ------------
Net income (loss).................................................. $ 5,867 $ 1,723 $ (600)
============ ============ ============

Accretion of Series A and B preferred stock........................ (391) (915) (274)
------------ ------------ ------------
Net income (loss) applicable to common stock....................... $ 5,476 $ 808 $ (874)
============ ============ ============

Basic earnings (loss) per common share............................. $ 0.19 $ 0.04 $ (0.04)
============ ============ ============
Diluted earnings (loss) per common share........................... $ 0.16 $ 0.03 $ (0.04)
============ ============ ============
Weighted average common and common equivalent
shares used to calculate earning (loss) per share:
Basic.......................................................... 29,278 21,551 21,542
============ ============ ============
Diluted........................................................ 34,384 26,663 21,542
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements

F-3
<PAGE>

TENFOLD CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except share data)

<TABLE>
<CAPTION>
Additional Comprehensive
Common Stock Paid-in Income Deferred
-----------------------
Shares Amount Capital (Loss) Compensation
---------- ---------- ----------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996.............................. 24,650,104 $ 25 $ 1,093 $ -
---------- ---------- ----------- ----------------
Conversion of Common Stock for Series A redeemable
convertible preferred stock........................... (1,460,400) (1) - -
Common stock issued upon exercise of options.............. 414,000 - 17 -
Deferred compensation related to grants of stock options.. - - 251 (251)
Amortization of deferred compensation..................... - - - 34
Accretion of redeemable convertible preferred stock....... - - (274) -
Net loss.................................................. $ [(600)]
Foreign currency translation.............................. - - - 1 -
------------
Comprehensive loss........................................ - - - $ [(599)] -
---------- ---------- ----------- ============ ----------------
Balance at December 31, 1997.............................. 23,603,704 24 1,087 (217)
---------- ---------- ----------- ----------------
Common stock issued upon exercise of options.............. 1,260,700 1 326 -
Common stock issued for cash.............................. 210,000 0 2,000 -
Notes receivable from stockholders........................ - - - -
Deferred compensation related to grants of stock options.. - - 2,230 (2,230)
Amortization of deferred compensation..................... - - - 153
Cancellation of stock options............................. - - (36) 36
Accretion of redeemable convertible preferred stock....... - - - -
Tax benefit from exercise of stock options................ - - 664 -
Tax charge related to the reallocation of revenue to
equity.................................................... - - (365) -
Net income................................................ $ [1,723]
Foreign currency translation.............................. - - - 7 -
------------
Comprehensive income...................................... - - - $ [1,730] -
---------- ---------- ----------- ============ ----------------
Balance at December 31, 1998.............................. 25,074,404 25 5,906 (2,258)
---------- ---------- ----------- ----------------
Common stock issued upon exercise of options.............. 986,868 1 1,184 -
Common stock issued upon IPO, net of issuance
costs of $4,668...................................... 2,284,201 3 34,349 -
Conversion of preferred stock............................. 6,261,129 6 9,940 -
Conversion of redeemable common stock..................... 200,000 - 1,976 -
Notes receivable from stockholders........................ - - - -
Deferred compensation related to grants of stock options.. - - 5,915 (5,915)
Amortization of deferred compensation..................... - - - 1,427
Cancellation of stock options............................. - - (1,135) 1,135
Accretion of redeemable convertible preferred stock....... - - - -
Tax benefit from exercise of stock options................ - - 4,537 -
Net income................................................ $ [5,867] -
Foreign currency translation.............................. - - - 19 -
------------
Comprehensive income...................................... - - - $ [5,886] -
---------- ---------- ----------- ============ ----------------
Balance at December 31, 1999.............................. 34,806,602 $ 35 $ 62,672 $ (5,611)
========== ========== =========== ================

Notes Retained Accumulated
Receivable Earnings Other Total
from (Accumulated Comprehensive Stockholders'
Stockholders Deficit) Income Equity
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996.............................. $ - $ 188 $ - $ 1,306
------------ ------------ ------------ -------------
Conversion of Common Stock for Series A redeemable
convertible preferred stock........................... - - - (1)
Common stock issued upon exercise of options.............. - - - 17
Deferred compensation related to grants of stock options.. - - - -
Amortization of deferred compensation..................... - - - 34
Accretion of redeemable convertible preferred stock....... - - - (274)
Net loss.................................................. - (600) - (600)
Foreign currency translation.............................. - - 1 1
Comprehensive loss........................................ - - - -
------------ ------------ ------------ -------------
Balance at December 31, 1997.............................. - (412) 1 483
------------ ------------ ------------ -------------
Common stock issued upon exercise of options.............. - - - 327
Common stock issued for cash.............................. - - - 2,000
Notes receivable from stockholders........................ (329) - - (329)
Deferred compensation related to grants of stock options.. - - - -
Amortization of deferred compensation..................... - - - 153
Cancellation of stock options............................. - - - -
Accretion of redeemable convertible preferred stock....... - (915) - (915)
Tax benefit from exercise of stock options................ - - - 664
Tax charge related to the reallocation of revenue to
equity.................................................... - - - (365)
Net income................................................ 1,723 1,723
Foreign currency translation.............................. - - 7 7

Comprehensive income...................................... - - - -
------------ ------------ ------------ -------------
Balance at December 31, 1998.............................. (329) 396 8 3,748
------------ ------------ ------------ -------------
Common stock issued upon exercise of options.............. - - - 1,185
Common stock issued upon IPO, net of issuance
costs of $4,668...................................... - - - 34,352
Conversion of preferred stock............................. - - - 9,946
Conversion of redeemable common stock..................... - - - 1,976
Notes receivable from stockholders........................ (826) - - (826)
Deferred compensation related to grants of stock options.. - - - -
Amortization of deferred compensation..................... - - - 1,427
Cancellation of stock options............................. - - - -
Accretion of redeemable convertible preferred stock....... - (391) - (391)
Tax benefit from exercise of stock options................ - - - 4,537
Net income................................................ - 5,867 - 5,867
Foreign currency translation.............................. - - 19 19

Comprehensive income...................................... - - - -
------------ ------------ ------------ -------------
Balance at December 31, 1999.............................. $ (1,155) $ 5,872 $ 27 $ 61,840
============ ============ ============ =============
</TABLE>

See accompanying notes to consolidated financial statements

F-4
<PAGE>

TENFOLD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1999 1998 1997
--------- -------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).......................................................... $ 5,867 $ 1,723 $ (600)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation............................................................ 2,801 1,146 305
Provision for bad debts ................................................ 763 500 -
Change in deferred income taxes......................................... (1,092) (302) -
Tax benefit from exercise of stock options.............................. 4,537 664 -
Tax charge related to the reallocation of revenue to equity ............ - (365) -
Amortization of deferred compensation associated with stock options 1,427 153 34
Amortization of goodwill and acquired intangibles....................... 1,064 - -
Write-off of acquired in-process research and development............... 2,000 - -
Changes in operating assets and liabilities:
Accounts receivable................................................. (7,702) (1,785) (984)
Unbilled accounts receivable........................................ (1,119) (3,258) -
Prepaid expenses.................................................... (374) (266) (123)
Other assets........................................................ 39 (154) 1
Accounts payable.................................................... 1,906 597 245
Accrued liabilities................................................. 9,912 2,479 781
Income taxes........................................................ 644 498 (239)
Deferred revenues................................................... (1,341) 4,498 1,402
--------- -------- ---------
Net cash provided by operating activities........................ 19,332 6,128 822
--------- -------- ---------
Cash flows from investing activities:
Purchase of LongView (net of cash acquired)................................ (8,714) - -
Additions to property and equipment........................................ (4,476) (5,464) (1,393)
--------- -------- ---------
Net cash used in investing activities............................ (13,190) (5,464) (1,393)
--------- -------- ---------
Cash flows from financing activities:
Proceeds from issuance of preferred stock, less issuance costs............. - - 8,365
Proceeds from issuance of common stock..................................... 34,352 25 -
Receipt of amounts due from stockholders................................... 1,976 - -
Proceeds from issuance of redeemable common stock.......................... - 1,976 -
Exercise of common stock options........................................... 1,185 327 17
Due from stockholders...................................................... (1,000) - -
Notes receivable from stockholders......................................... (826) (329) -
Proceeds from notes payable................................................ 2,809 2,425 -
Principal payments on notes payable........................................ (1,130) (114) -
Proceeds from sales-leaseback.............................................. - 1,424 -
Principal payments on capital lease obligations............................ (653) (54) -
--------- -------- ---------
Net cash provided by financing activities........................ 36,713 5,680 8,382
--------- -------- ---------
Effect of exchange rate changes................................................. 19 7 1
--------- -------- ---------
Net increase in cash and cash equivalents....................................... 42,874 6,351 7,812
Cash and cash equivalents at beginning of year.................................. 15,373 9,022 1,210
--------- -------- ---------
Cash and cash equivalents at end of year........................................ $ 58,247 $ 15,373 $ 9,022
========= ======== =========
Supplemental disclosure of cash flow information:
Cash paid for income taxes................................................. $ 651 $ - $ 129
Cash paid for interest..................................................... 351 20 -

Issuance of common stock in exchange for receivable due from
stockholder................................................................ $ - $ 1,976 $ -
Deferred compensation related to grants of stock options................... 5,915 3,264 251
Equipment purchased with capital leases.................................... 1,063 272 -
</TABLE>

See accompanying notes to consolidated financial statements

F-5
<PAGE>

TENFOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1999

1 Organization and Summary of Significant Accounting Policies

Organization

TenFold Corporation (the "Company"), develops, markets, supports, and
resells large-scale software applications. The Company provides the majority of
its services on a fixed-price and fixed-time basis. The Company was incorporated
in the state of Delaware in February 1993.

Basis of Presentation

The consolidated financial statements include the accounts of the Company
and its subsidiaries. All intercompany accounts and transactions have been
eliminated. The 1998 financial statements have been reclassified to conform to
the current year's presentation.

Revenue Recognition

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

In October 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 97-2, Software Revenue
Recognition, which supersedes SOP 91-1, Software Revenue Recognition.
Additionally, in 1998 the AICPA issued SOP 98-9 Modification of SOP 97-2 with
Respect to Certain Transactions. Effective January 1, 1998, the Company adopted
the provisions of SOP 97-2 as modified by SOP 98-9. Revenue was recognized in
accordance with SOP 97-2 as modified by SOP 98-9, in 1998 and 1999, and SOP 91-1
in prior years.

SOP 97-2 generally requires revenue earned on software arrangements
involving multiple elements such as software products, enhancements,
post-contract customer support, installation and training to be allocated to
each element based on the relative fair values of the elements. The fair value
of an element must be based on evidence which is specific to the vendor. The
revenue allocated to software products is generally recognized upon delivery of
the products unless services provided are considered essential to functionality
of the software.

F-6
<PAGE>

TENFOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The revenue allocated to post contract customer support is generally
recognized ratably over the support period. Training revenues are recognized as
services are performed.

For software arrangements that include a service element that is essential
to the functionality of the software, the Company recognizes license and service
fees over time as services are performed, using the percentage-of-completion
method of accounting based on costs incurred relative to total estimated costs.
Full provision is made for any anticipated losses in the period such losses are
identified. In limited situations, the Company also provides application
development and implementation services on a time and materials basis. The
Company recognizes revenue on time and material contracts as services are
performed. License fees recognized using the percentage-of-completion method,
for the years ended December 31, 1999, 1998, and 1997 were $15.8 million, $9.6
million, and $4.5 million, respectively.

The Company recognizes license revenues from vertical 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: the Company has signed a noncancellable license agreement with
nonrefundable fees; the Company has shipped the software product; there are no
uncertainties surrounding product acceptance; the fees are fixed and
determinable; and collection is considered probable. License fees recognized
upon achieving these criteria, for the years ended December 31, 1999, 1998, and
1997, were $31.3 million, $3.7 million, and $700,000, respectively.

In mid 1998, the Company began offering the TenFold Guarantee, the
industry's first money-back guarantee for large scale software applications
under which the Company recognizes revenue using the percentage-of-completion
method of accounting. As a result, in certain contracts the Company has
guaranteed project completion within a fixed time period or the customer may
return the software and receive a refund of fees paid. This guarantee also
requires the customer to fulfill certain responsibilities within a specified
time period, including reviewing and approving requirements, providing timely
feedback and providing adequate staffing; or the guarantee is voided.
Accordingly, this guarantee is considered a conditional money-back guarantee. If
necessary, the Company makes provisions for estimated refunds or losses on
uncompleted contracts on a contract by contract basis and recognizes the
provisions in the period in which such refunds or losses become probable and can
be reasonably estimated.

F-7
<PAGE>

TENFOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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. The Company records cash received in excess of
revenue earned as deferred revenue. The deferred revenue balance at December 31,
1999 was $9.1 million and $6.2 million at December 31, 1998. The Company's
deferred revenue balance generally results from contractual commitments made by
customers to pay amounts to the Company in advance of revenues earned. Unbilled
accounts receivable represents revenue that the Company has earned but not yet
billed for. The Company bills customers for this revenue as payments become due
under the terms of the customer's contract. The unbilled accounts receivable
balance at December 31, 1999 of $4.4 million is expected to be billed and
collected within twelve months.

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. Restricted cash relates
to cash held in the Company's accounts to secure a lease on office space in
Boston, MA.

Due from Stockholder

The due from stockholders amount in current assets on the consolidated
balance sheet in 1999 represents personal loans to management, secured by stock
in the Company. The amount in 1998 represents an outstanding balance resulting
from a sale of 200,000 shares of common stock on December 28, 1998. The amount
was received in January 1999.

Property and Equipment

Property and equipment, including leasehold improvements, are stated at
cost. Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, generally three to five years, or the life of the
lease, whichever is shorter.

Accounting for Impairment of Long-Lived Assets

F-8
<PAGE>

TENFOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of their carrying amount or fair value less cost to
sell.

Cost of Revenues

Cost of revenues consists primarily of compensation and other related costs
of services personnel. Costs of license revenues, including product packaging,
documentation, and reproduction have not been significant.

Research and Development Costs

Research and development expenses consist primarily of costs for
development and enhancement of the Universal Application and TenFold
ComponentWare. Software development costs incurred between achieving technology
feasibility and release of the product to our customers have been insignificant
and therefore have been expensed as incurred.

Income Taxes

The Company records income taxes using the asset and liability method.
Deferred income tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement basis
amounts of existing assets and liabilities and their respective income tax
bases. Future tax benefits, such as net operating loss carryforwards and tax
credits, are recognized to the extent that realization of such benefits are more
likely than not. Deferred income tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred income tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. The Company
has adopted various stock option plans as described in note 11. The tax
reduction resulting from these plans in excess of compensation expense is
credited to paid in capital pursuant to the provisions of APB 25.

Stock-Based Compensation

F-9
<PAGE>

TENFOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company adopted the footnote disclosure provisions of SFAS No. 123,
Accounting for Stock-Based Compensation. SFAS No. 123 encourages entities to
adopt a fair-value based method of accounting for stock options or similar
equity instruments. However, it also allows an entity to continue measuring
compensation cost for stock-based compensation using the intrinsic-value method
of accounting prescribed by Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees. The Company has elected to continue to
apply the provisions of APB 25 and provide pro forma footnote disclosures
required by SFAS No. 123. Deferred compensation is recognized ratably over the
vesting period.

Foreign Currency Translation

For non-U.S. operations, the functional currency is the applicable local
currency. The translation of the functional currencies into U.S. dollars is
performed for balance sheet accounts using current exchange rates in effect at
the balance sheet date and for revenue and expense accounts using average rates
of exchange prevailing during the reporting period. Adjustments resulting from
the translation of foreign currency financial statements are included in
accumulated other comprehensive income as a component of stockholders' equity.
Gains or losses resulting from foreign currency transactions are included in the
results of operations and have not been significant to date.

Use of Estimates

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements. Actual
results could differ from these estimates.

Advertising

Advertising costs are expensed as incurred. Advertising costs amounted to
$864,000 in 1999 and $460,000 in 1998. The Company did not incur advertising
costs in 1997.

Warranty

The Company provides reserves for warranty costs expected to be incurred.
To date the Company has not incurred significant warranty costs.

Financial Instruments

F-10
<PAGE>

TENFOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The carrying value of accounts receivable, unbilled accounts receivable,
accounts payable, and accrued expenses approximates their estimated fair value
due to the relative short maturity of these instruments. The carrying value of
promissory notes and notes payable approximate fair value.

Goodwill and Other Purchased Intangibles

Goodwill and other purchased intangibles represent the excess of the
purchase price over the fair value of the assets acquired in connection with the
acquisition of the LongView Group, Inc. on October 7, 1999. Goodwill and
substantially all other purchased intangibles are being amortized on a
straight-line basis over lives ranging from five to seven years. As of December
31, 1999 accumulated amortization of goodwill and other identifiable intangible
assets was $1,064,000.

Comprehensive Income

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 gain of $19,000 in 1999,
$7,000 in 1998 and $1,000 in 1997. This resulted in comprehensive income of
$5,886,000 in 1999, $1,730,000 in 1998, and $599,000 in 1997.

Recent Accounting Pronouncements

The FASB recently issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards for 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 statement of financial
position 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 in 2001. The Company does not believe the adoption of SFAS No. 133 will
have a material effect on the financial position or results of operations of the
Company.

2. 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

F-11
<PAGE>

TENFOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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%. The Company
also incurred acquisition costs of $416,000 relating to the acquisition. The
Company assumed net liabilities other than research and development of
approximately $4 million.

Simultaneous with the acquisition, BarCal purchased a software license and
related technical support services from the Company for $4 million. The Company
recorded approximately $3.7 million of license revenue in 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.
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.

F-12
<PAGE>

TENFOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The estimated costs to complete the acquired in-process research and
development as of the date of acquisition was $1.2 million. Of the total
estimated costs to complete the acquired in-process research and development,
we have incurred $590,000 as of December 31, 1999.

A total purchase price and final allocation among the tangible and
intangible assets and liabilities acquired (including acquired in-process
technology) is summarized as follows (in thousands):

<TABLE>
<S> <C>
Cash consideration............................................... $22,000
Acquisition costs................................................ 416
-------------
Total purchase price........................................ $22,416
=============
</TABLE>

Purchase price allocation (in thousands):

F-13
<PAGE>

TENFOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Amortization
Amount Period
------------- ----------------
<S> <C> <C>
Net liabilities assumed......................................... $ (4,187)
Intangible assets:
Goodwill........................................................ 16,303 5 years
Existing technology............................................. 2,000 5 years
Assembled workforce............................................. 700 5 years
Customer list................................................... 5,600 7 years
In-process research and development............................. 2,000 Expensed
-------------
Total................................................. $22,416
=============
</TABLE>

The following unaudited pro forma financial information (in thousands,
except per share amounts) presents the combined results of operations of the
Company and LongView for 1999 and 1998 as if the acquisition had occurred at the
beginning of 1998, after giving effect to certain adjustments, including, but
not limited to, amortization of goodwill and other intangible assets, decreased
interest income, and entries to conform LongView to the Company's accounting
policies. 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.

<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Total revenues................................................... $95,905 $44,031
---------- ----------
Net income (loss)................................................ 44 (7,595)
---------- ----------
Earnings (loss) per share:
Basic................................................... $ 0.00 $ (0.35)
========== ==========
Diluted................................................. $ 0.00 $ (0.28)
========== ==========
</TABLE>

3. Property and Equipment

Property and equipment consist of the following (in thousands):

<TABLE>
<CAPTION>
December 31,
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
Computer equipment under capital lease........................... $2,994 $1,695
Computer equipment............................................... 5,850 3,427
Software......................................................... 1,397 571
Furniture and fixtures........................................... 2,114 1,107
Leasehold improvements........................................... 1,629 354
Office equipment................................................. 1,042 531
---------- ----------
Total cost.................................................... 15,026 7,685
Less accumulated depreciation and amortization................... (5,216) (1,528)
---------- ----------
$9,810 $6,157
========== ==========
</TABLE>

Accumulated amortization under capital leases amounted to approximately
$883,000 and $191,000 in 1999 and 1998, respectively.

F-14
<PAGE>

TENFOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

<TABLE>
<CAPTION>
December 31,
-----------------------
1999 1998
---------- --------
<S> <C> <C>
Accrued compensation............................................... $ 9,977 $ 2,043
Other accrued expenses............................................. 6,859 1,263
---------- --------
$16,836 $ 3,306
========== ========
</TABLE>

Accrued compensation consists of accrued bonuses and commissions, while
accrued expenses consist of accrued benefits costs, payroll withholdings for
employee contributions to the Company's employee stock purchase plan, accrued
sales tax, and accrued value added taxes.

5. Notes Payable

Notes payable consists primarily of three year notes collateralized by
fixed assets with monthly payment terms. At December 31, 1999, the Company's
notes payable had an average interest rate of 7.9%. The aggregate maturities for
long-term debt for the three years ending December 31, 2000, 2001, and 2002 are
$1.7 million, $1.7 million, and $591,000, respectively. The fair values of the
Company's notes payable at December 31, 1999, approximate the carrying amounts.

6. Promissory Note

As a result of the acquisition of LongView, the Company signed a promissory
note for $12 million, which requires payments of $3 million on April 15, 2000
and $9 million on July 15, 2000 in each case together with interest from
September 30, 1999 at the rate of 6.5% per annum.

7. Line of Credit

On January 18, 1999, the Company entered into an unsecured Revolving Line
of Credit providing for borrowings of up to $5 million. On December 29, 1999,
the Company extended the 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% 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

F-15
<PAGE>

TENFOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

relating to the maintenance of certain financial ratios and cash
balances and limits the payment of dividends. The Company had not borrowed
against this line as of December 31, 1999.

8. Lease Commitments

The Company leases office space and equipment under non-cancelable lease
agreements, which expire at various dates through 2008. These leases generally
require the Company to pay all executory costs such as maintenance and
insurance. Future minimum lease payments under non-cancelable leases as of
December 31, 1999 are as follows (in thousands):

<TABLE>
<CAPTION>
Total Operating Capital
------------ ------------ ------------
<S> <C> <C> <C>
2000.............................................. $ 5,921 $ 4,913 $ 1,008
2001.............................................. 4,774 3,765 1,009
2002.............................................. 2,600 2,395 205
2003.............................................. 1,121 1,121 -
2004.............................................. 720 720 -
Thereafter........................................ 1,325 1,325 -
------------ ------------ ------------
Total minimum lease payments.................... $ 16,461 $14,239 $ 2,222
============ ============
Less: Amount representing interest.............................................. (121)
------------
Present value of net minimum capital lease payments............................. 2,101
Less: Current installments of obligations under capital leases.................. (926)
------------
Obligations under capital leases, excluding current installments................ $ 1,175
============
</TABLE>

Total rental expense under operating leases was approximately $3,716,000,
$1,420,000, and $514,000 for 1999, 1998 and 1997, respectively. Rent expense in
1998 and 1997 is net of sublease income of approximately $158,000 and $221,000,
respectively. The Company did not have sublease income in 1999.

At December 31, 1999, 1998, and 1997, the Company issued stand-by letters
of credit for $359,000, $406,000 and $100,000, respectively, as security for the
Company's office leases. These letters of credit will terminate by December 31,
2003. These letters of credit had not been drawn upon at December 31, 1999,
1998, and 1997.

The Company sold certain fixed assets for $1.4 million in 1998. The assets
were leased back from the purchaser over a period of 3 years. There was no gain
or loss on this transaction and the resulting lease is being accounted for as a
capital lease.

9. Commitments and Contingencies

F-16
<PAGE>

TENFOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company has entered into agreements with certain of its customers
requiring the Company to make royalty payments ranging from 1.3% to 15% of
specified future revenues. These royalties will become payable by the Company if
and when application products developed for these customers are subsequently
re-sold to other customers, generally with the assistance of the original
customer. Through December 31, 1999, the Company had incurred royalties of
$12,500, which are included in the 1999 accrued liabilities on the Consolidated
Balance Sheet.

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 by the Plaintiff was
paid to the Company by the Plaintiff in the first half of 1999. On November 4,
1999, the Company filed an Answer and Counterclaim denying these claims and
seeking recovery of $3.9 million that the 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 the Company's accounts
receivable on the Company's consolidated balance sheet at December 31, 1999, 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

F-17
<PAGE>

TENFOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

On April 22, 1999, the Company entered into a strategic alliance agreement
with Perot Systems Corporation, a systems integrator, which provides for the
development and delivery of applications, products, and services to TenFold and
Perot Systems customers. Perot Systems agreed to provide the Company with
opportunities to contract for revenue of at least $15 million of products and
services in each of the two years following May 1, 1999 or pay 20% of the
shortfall, subject to certain specific provisions. The Company recognized no
revenue from the relationship with Perot Systems in 1999. Perot Systems agreed
not to develop new products using the Company's technology that are directly
competitive with the Company's existing products, unless Perot Systems already
has a new product under development. The Company granted Perot Systems the right
to license its technology, the right to participate in future business
acquisitions and potential division spin offs under certain circumstances, and
the right to purchase up to 1,000,000 shares of common stock in the Company's
initial public offering. Perot Systems exercised this right and purchased this
common stock. If Perot Systems meets certain performance milestones, the Company
agreed not to pursue business deals with Perot Systems customers, businesses, or
competitors, except under specific circumstances.

10. Income Taxes

The components of the provision for income taxes are presented below (in
thousands):

December 31,
------------------------------------
1999 1998 1997
------------ ---------- ----------
<S> <C> <C> <C>
Provision (benefit) for income taxes:
Current:
Federal....................................... $ 946 $ 567 $ (111)
State......................................... 345 79 1
------------ ---------- ----------
Total current........................... 1,291 646 (110)

Deferred:
Federal....................................... (834) (439) -
State......................................... (258) (11) -
------------ ---------- ----------
Total deferred.......................... (1,092) (450) -

Charge in lieu of taxes attributable
to employee stock plans....................... 4,537 664 -
Tax charge related to the reallocation
of revenue to equity.......................... - (365) -
------------ ---------- ----------
Total.............................................. $ 4,736 $ 495 $ (110)
============ ========== ==========
</TABLE>

F-18
<PAGE>

TENFOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The 1998 tax charge related to the reallocation of revenue to equity for
financial reporting purposes resulted from a transaction the Company entered
into for the sale of common and redeemable common stock simultaneously with the
sale of software products and services. This transaction created a difference as
indicated above for the difference between the contractual value (tax basis) and
fair value (book basis) of common stock and redeemable common stock on the
transaction date. The tax impact of this transaction was recorded as a debit to
paid-in-capital.

The table below reconciles the U.S. federal statutory income tax rate (35%
for 1999, 34% for 1998 and 1997) to the recorded income tax provision (in
thousands):

<TABLE>
<CAPTION>
1999 1998 1997
------------ ---------- ----------
<S> <C> <C> <C>
Tax at U.S. statutory rates................................... $ 3,711 $ 754 $ (241)
State tax, net of federal tax benefit......................... 675 113 -
Tax exempt interest income.................................... (111) - -
Effect of graduated tax rate.................................. (100) - -
Meals & entertainment......................................... 108 88 39
Purchased intangibles......................................... 963 - -
Credits for research activities............................... (284) (253) (441)
Change in valuation allowance................................. (277) (272) 502
Other......................................................... 51 65 31
------------ ---------- ----------
Provision for income taxes................... $ 4,736 $ 495 $ (110)
============ ========== ==========
</TABLE>

The Company's deferred tax assets are comprised of the following (in
thousands):

<TABLE>
<CAPTION>
December 31,
----------------------
1999 1998
---------- ----------
<S> <C> <C>
Deferred tax assets:
Reserves and accruals.................................... $ 359 $ 202
Allowance for receivables................................ 309 190
Stock option compensation................................ 659 68
Credits for research activities.......................... 695 600
Differences in timing of revenue recognition............. 2,347 -
State loss carryovers.................................... 388 -
Foreign loss carryovers.................................. - 277
Deferred state taxes..................................... 33 -
---------- ----------
Total deferred tax assets.......................... 4,790 1,337
Valuation allowance...................................... (1,083) (701)
---------- ----------
Net deferred tax assets............................ $3,707 $ 636
========== ==========
Deferred tax liabilities:
</TABLE>

F-19
<PAGE>

TENFOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

<TABLE>
<S> <C> <C>
Accelerated depreciation................................. $ 253 $ 185
Purchased intangibles.................................... 3,558 -
---------- ----------
Total deferred tax liabilities $ 3,811 $ 185
---------- ----------
Total net deferred tax asset (liabilities)......... $ (104) $ 451
========== ==========
Recorded as:
Deferred income tax asset - current.................... $ 2,650 $ 536
Deferred income tax liability - long-term.............. (2,754) (85)
---------- ----------
Total net deferred tax asset (liabilities)......... $ (104) $ 451
========== ==========
</TABLE>

The increase in deferred tax assets and liabilities is primarily due to an
acquired subsidiary. As of December 31, 1999, the Company had state net
operating loss carryforwards of approximately $4,000,000 that carryforward for
five years from inception ($588,000 expire in 2000, $343,000 expire in 2001,
$1,537,000 expire in 2002 and $1,532,000 expire in 2003). In addition, as of
December 31, 1999, the Company had state credit carryforwards for increasing
research activities of approximately $695,000. The state credits will carryover
until exhausted.

During the year ended December 31, 1999, the valuation allowance increased
approximately $382,000. The increase is the net result of reducing the allowance
for foreign loss carryovers of $277,000, increasing the allowance for the
current year's state research credits of $271,000, and increasing the allowance
for state net operating loss carryovers of an acquired subsidiary of $388,000.
Any future reductions to the valuation allowance for state research credits will
be reported in operations, whereas any reductions to the valuation allowance for
state net operating loss carryovers will be reported against the goodwill of an
acquired subsidiary.

11. Redeemable Convertible Preferred Stock, Redeemable Common Stock, and
Stockholders' Equity

Initial Public Offering

The Company's registration statement (Registration No. 333-74057) under the
Securities Act of 1933, for the Company's initial public offering, became
effective May 20, 1999. The Company's offering proceeds, net of aggregate
expenses of approximately $4.7 million, were $34.2 million. The Company used a
portion of the proceeds for the payment of $10 million for the acquisition of
LongView, which closed on October 7, 1999. The remainder of the net proceeds
have been invested in cash and cash equivalents.

F-20
<PAGE>

TENFOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock Split

In December 1996, the Board of Directors approved a two-for-one stock split
of the Company's common stock. The stock split was completed on February 2, 1997
in the form of a 100% stock dividend. Accordingly, all references to applicable
share and per share data, stock option data, and prices of the Company's common
stock, for all periods presented, have been retroactively restated to reflect
the stock split.

Redeemable Common Stock

On December 30, 1998, the Company issued 200,000 shares of Redeemable
Common Stock at a contractual purchase price of $5.00 per share and concurrently
entered into additional license and service agreements with the purchaser of the
shares. The Company subsequently determined that the fair market value of a
share of redeemable common stock equaled $9.88, and allocated $2 million of the
amounts paid in the licensing and service agreements to the purchase of the
shares. The redemption rights terminated upon the completion of the initial
public offering.

Redeemable Convertible Preferred Stock

On March 4, 1997, the Company established a series of voting preferred
shares designated as Series A Preferred Stock, consisting of 2,920,799 shares
with $0.001 par value. On November 24, 1997, the Company increased the
authorized number of common shares to 44,000,000, and established a series of
voting preferred shares designated as Series B Preferred Stock, consisting of
3,340,330 shares with $0.001 par value, increasing the number of authorized
preferred shares to 6,261,129.

During March 1997, the Company entered into a transaction wherein the
Company sold 1,460,399 shares of Series A Preferred Stock and a software license
to a third party. The software license granted the third party the right to
develop applications using the Company's Universal Application. The license
restricted the Company from developing and licensing applications with similar
industry-specific functionality as this third party's existing applications
products (as of the effective date of the license agreement) within the
particular industry that this third party operates, and restricted the Company
from licensing the Universal Application to certain named competitors of the
third party. These licensing restrictions terminated in the Company's initial
public offering. In the March 1997 transaction, the majority stockholder of the
Company sold 1,460,400 shares of common stock of the Company to the third-party.
Simultaneously, the

F-21
<PAGE>

TENFOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Company granted the third party an option to exchange the 1,460,400 shares of
common stock for an equal number of shares of Series A Preferred Stock. This
conversion option was exercised during 1997. The third-party paid a total of
$8.0 million as consideration for this transaction, of which $2.5 million was
received by the majority stockholder and $5.5 million was received by the
Company. Based on an independent valuation of the Company's common and preferred
stock, the Company allocated the total consideration paid by the third party of
$8 million based on the respective fair values of the preferred and common
shares. Based on these valuations, the Company allocated $1.4 million to the
Series A Preferred Stock and option, and $5.5 million to revenue. As a result of
the transaction, the majority stockholder received a premium of $1.4 million on
the sale of common shares. The Company has reflected that premium as an other
charge in the 1997 Consolidated Statement of Operations.

In November 1997, the Company issued 3,340,330 shares of Series B Preferred
Stock resulting in net proceeds to the Company of approximately $7 million.

In connection with the Company's initial public offering, the Company's
Series A and B Preferred Stock were automatically converted into common stock.

<TABLE>
<CAPTION>
Series A Series B Redeemable
Preferred Stock Preferred Stock Common Stock
--------------------------- --------------------------- --------------------------
Shares Amount Shares Amount Shares Amount
------------- ----------- ------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1996...... - $ - - $ - - $ -

Issuance of Series A
redeemable convertible
preferred stock, net of
issuance costs of $52.......... 1,460,399 1,380 - - - -

Conversion of Common Stock
for Series A redeemable
convertible preferred stock.... 1,460,400 1 - - - -

Issuance of Series B
redeemable convertible
preferred stock, net of
issuance costs of $30.......... - - 3,340,330 6,985 - -

Accretion of redeemable
convertible preferred stock.... - 227 - 47 - -
------------- ----------- ------------- ----------- ------------ -----------
Balance at December 31, 1997....... 2,920,799 1,608 3,340,330 7,032 - -
------------- ----------- ------------- ----------- ------------ -----------
Redeemable common stock
issued for cash................ - - - - 200,000 1,976

Accretion of redeemable
convertible preferred stock.... - 328 - 587 - -
</TABLE>

F-22
<PAGE>

<TABLE>
<S> <C> <C> <C> <C> <C> <C>
------------- ----------- ------------- ----------- ------------ -----------
Balance at December 31, 1998....... 2,920,799 1,936 3,340,330 7,619 200,000 1,976
------------- ----------- ------------- ----------- ------------ -----------
Conversion of redeemable common
stock.............................. - - - - (200,000) (1,976)

Accretion of redeemable
convertible preferred stock.... - 129 - 262 - -

Conversion of preferred stock
into common stock.............. (2,920,799) (2,065) (3,340,330) (7,881) - -
------------- ----------- ------------- ----------- ------------ -----------
Balance at December 31, 1999....... - $ - - $ - - $ -
============= =========== ============= =========== ============ ===========
</TABLE>

Restricted Stock

On October 31, 1996, the Company sold 4,530,104 shares of common stock to
the Chief Executive Officer ("CEO ") for an aggregate price of $1 million
pursuant to a restricted stock purchase agreement entered into in connection
with an employment agreement between the Company and the CEO dated September 1,
1996. Of the total shares sold, 906,021 shares are currently subject to a
repurchase right at $0.22 per share in favor of the Company that expires over
time.

On February 2, 1998, the Company allowed two other officers to exercise
options on a total of 300,000 shares of common stock in advance of their
vesting, subject to the Company's right to repurchase these shares if the
officers leave the Company before the shares are fully vested. Of the total
shares exercised, 120,000 shares are currently subject to a repurchase right in
a range from $0.02 to $0.22 per share in favor of the Company that expires over
time.

Warrants

During 1999, the Company sold 1,181,600 warrants to a customer. Each
warrant entitles the holder to purchase one share of Class A Common Stock at
$2.12 per share in the Company's subsidiary, TenFold Energy, Inc. None of these
warrants, which expire December 31, 2002, were exercised as of December 31,
1999. The proceeds of $189,000 were credited to stockholders' equity.

Stock Plans

1999 Stock Plan. The Company's 1999 Stock Plan was adopted by the Board of
Directors and approved by the stockholders in March 1999. A total of 6,500,000
shares of common stock has been reserved for issuance under the 1999 Stock Plan,
plus an automatic annual increase on the first day of 2000, 2001, 2002, 2003,
and 2004. This automatic annual increase will be equal to the lesser of
1,000,000 shares or 3% of the Company's outstanding common stock on the last day
of the immediately preceding year, or such lesser number of shares as the

F-23
<PAGE>

TENFOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Board of Directors determines. The 1999 Stock Plan provides for the granting to
employees, including officers and directors, of incentive stock options within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, and
for the granting to employees and consultants, including nonemployee directors,
of nonstatutory stock options and stock purchase rights. The Company has
historically granted only nonqualified stock options. The 1999 Stock Plan is
administered by the Board of Directors and the Board Compensation Committee, and
with respect to option grants to purchase up to 10,000 shares to any one
employee, option grants may be approved by a separate committee of the board.
The plan administrator determines the terms of options and stock purchase rights
granted under the 1999 Stock Plan, including the number of shares subject to an
option or purchase right, the exercise or purchase price, and the term and
exercisability of options. The options generally vest over a five-year period
and expire ten years from the date of grant. Unless terminated earlier, the 1999
Stock Plan will terminate in March 2009.

Subsidiary Stock Plan. During 1999, TenFold Corporation formed six
subsidiaries in each of which TenFold Corporation holds 20,000,000 issued and
outstanding shares of common stock, representing 100% of the currently
outstanding stock of each subsidiary. Each subsidiary has adopted its own stock
plan during 1999 with approval of its Board of Directors. The terms of the plans
are similar to the 1999 Stock Plan of TenFold Corporation. A total of 3,740,000
shares of common stock of each subsidiary has been reserved under the Stock
Plans of five of the six subsidiaries. The sixth subsidiary has not yet reserved
any shares for its stock plan.

As of December, 31, 1999, TenFold Insurance, Inc., a subsidiary, has
granted a total of 2,250,000 options to employees at an option exercise price of
$4.80 per share. Tenfold Energy Inc., a subsidiary also had granted a total of
1,000,000 options to employees at an option, price of $1.30 per share. As of
December 31, 1999, none of the options granted by these two subsidiaries had
been exercised.

1993 Flexible Stock Incentive Plan. The Company's 1993 Flexible Stock
Incentive Plan was adopted by the board of directors and approved by the
Company's stockholders in February 1993. A total of 10,000,000 shares of common
stock are reserved for issuance under the 1993 Stock Plan. The 1993 Stock Plan
is administered by the Board of Directors and the Board Compensation Committee,
and with respect to option grants to purchase up to 10,000 shares to any one
employee, option grants may be approved by a separate committee of the board.
The 1993 Stock Plan provides for the issuance of incentive stock options to
employees, including officers and employee directors, and of nonqualified stock
options, stock purchase rights, stock bonus awards, and stock appreciation
rights to employees, including officers and directors, consultants and
non-employee directors. The options generally vest over a five-year period and
expire ten years from the date of grant. Unless terminated

F-24
<PAGE>

TENFOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

earlier, the 1993 Stock Plan will terminate in February 2003. To date, the
Company has not issued any stock bonus or stock appreciation rights under the
1993 stock plan.

1999 Employee Stock Purchase Plan. The Company's 1999 Employee Stock
Purchase Plan was adopted by the Board of Directors and approved by the
stockholders in March 1999. A total of 1,000,000 shares of common stock has been
reserved for issuance under the purchase plan. In addition, the number of shares
reserved for issuance under the purchase plan automatically increases on the
first day of each of the Company's fiscal years beginning in 2000, 2001, 2002,
2003 and 2004 equal to the lesser of 300,000 shares, 0.75% of the Company's
outstanding common stock on the last day of the immediately preceding fiscal
year, or such lesser number of shares as the Board of Directors shall determine.
The purchase plan, which is intended to qualify under Section 423 of the
Internal Revenue Code, will be implemented in two six-month offering periods
each year, with new offering periods (other than the first offering period)
commencing on February 1 and August 1 of each year. The first offering period
commenced on the date of the initial public offering and ended on January 31,
2000. No shares of stock had been purchased under this plan as of December 31,
1999.

The purchase plan is administered by the Board of Directors or by a
committee appointed by the Board. Employees (including officers and employee
directors) of the Company, or of any majority-owned subsidiary designated by the
Board, are eligible to participate in the purchase plan if they are employed by
the Company or any such subsidiary for at least 20 hours per week and more than
five months per year. The purchase plan permits eligible employees to purchase
common stock through payroll deductions of up to 10% of an employee's
compensation, at a price equal to 85% of the lower of the fair market value of
the common stock at the beginning of the offering period or at the end of such
period. No employee may purchase more than 3,000 shares of common stock under
the purchase plan in any single offering period. No employee may purchase shares
in an offering period if the purchase would cause such employee to own stock or
hold outstanding stock options equal to or in excess of 5% of the total voting
power of all classes of TenFold stock. In addition, no employee shall be granted
an option under the purchase plan if the option would permit an employee to
purchase stock under all employee stock purchase plans of the Company at a rate
that exceeds $25,000 of fair market value of the stock for each calendar year in
which the option is outstanding. An employee has the option of increasing or
decreasing the percentage of payroll deductions once or of discontinuing the
deduction during the offering period. The Company has elected to follow
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees ("APB25") in accounting for its employee stock purchase plan. Under
APB25, the plan is considered non-compensatory.

Stock option activity under the Company's 1999 and 1993 stock option plans
are as follows:

F-25
<PAGE>

TENFOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

<TABLE>
<CAPTION>
Weighted
Average
Option Exercise Price
Shares Per Share
----------- --------------
<S> <C> <C>
Outstanding at December 31, 1996................................. 2,777,000 $ 0.13
Granted..................................................... 2,531,000 $ 0.84
Exercised................................................... 414,000 $ 0.05
Canceled.................................................... 440,800 $ 0.23
----------- ------
Outstanding at December 31, 1997................................. 4,453,200 $ 0.53
Granted..................................................... 4,070,000 $ 3.88
Exercised................................................... 1,260,700 $ 0.26
Canceled.................................................... 845,200 $ 1.71
----------- ------
Outstanding at December 31, 1998................................. 6,417,300 $ 2.36
----------- ------
Granted .................................................... 2,640,800 $15.27
Exercised .................................................. 986,868 $ 1.21
Canceled ................................................... 1,165,112 $ 5.09
----------- ------
Outstanding at December 31, 1999 ................................ 6,906,120 $ 7.00
=========== ======
</TABLE>

At December 31, 1999, 1998, and 1997, 714,840, 384,200, and 592,200 options
were vested and exercisable, respectively, under the stock option plans.
Included in the table above were options granted to consultants which were
recorded at their estimated fair value. To date, the number of options granted
to consultants and the related fair value of such options has been
insignificant.

The following table summarizes information about stock options under the
plans outstanding at December 31, 1999:

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------- ----------------------------

Weighted
Average Weighted Weighted
Options Remaining Average Number Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices at 12/31/99 Life Price at 12/31/99 Price
------------------ --------------- --------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
$ 0.02 to $ 0.05............ 116,900 5.34 Years $ 0.03 59,300 $ 0.03
0.22 to 0.89............ 1,551,350 7.36 Years 0.54 301,950 0.46
1.78 to 4.49............ 2,813,370 8.41 Years 3.57 342,370 3.95
5.00 to 12.60........... 1,635,100 9.18 Years 9.53 11,220 5.00
21.56 to 35.22........... 789,400 9.70 Years 27.72 - -
--------------- --------------- -------------- -------------- -------------
$ 0.02 to $ 35.22........... 6,906,120 8.46 Years $ 7.00 714,840 $ 2.17
=============== =============== ============== ============== =============
</TABLE>

The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees ("APB 25") in accounting for its
option plans. Had compensation expense for the Company's stock option plan and
the employee stock purchase plan been determined based on the fair value

F-26
<PAGE>

TENFOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

at the grant date for awards or purchase rights under these plans consistent
with the methodology prescribed under SFAS No. 123, Accounting for Stock Based
Compensation, the Company's net income (loss) for the years ended December 31,
would have been as follows (in thousands except per share information):

<TABLE>
<CAPTION>
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
Net income (loss) applicable to common stock - as reported.......... $5,476 $ 808 $ (874)
======== ======= =======
Pro forma net income (loss) applicable to common stock.............. $ 723 $ 435 $ (922)
======== ======= =======
Net income (loss) per share - as reported:

Basic.......................................................... $ 0.19 $0.04 $(0.04)
======== ======= =======
Diluted........................................................ $ 0.16 $0.03 $(0.04)
======== ======= =======
Pro forma net income (loss) per share:

Basic.......................................................... $ 0.02 $0.02 $(0.04)
======== ======= =======
Diluted........................................................ $ 0.02 $0.02 $(0.04)
======== ======= =======
</TABLE>

The effect of SFAS 123 on pro forma net loss and net loss per share
disclosed for 1999, 1998, and 1997 may not be representative of the effects on
pro forma results in future years.

The weighted-average fair value of the options granted under the plans in
1999, 1998, and 1997 was $13.64, $3.22, and $0.71, respectively. The fair value
of these options was estimated at the date of grant using the Black-Scholes
model in 1999 and the minimum value method in 1998 and 1997 with the following
weighted-average assumptions for 1999, 1998, and 1997: risk-free interest rate
of 6.80% in 1999, 6.81% in 1998, and 6.86% in 1997; a dividend yield of 0%, a
volatility factor of 108.5% for 1999 and 0% in 1998 and 1997, and a weighted-
average expected life of 7 years. The weighted-average fair value of employee
stock purchase rights granted under the employee stock purchase plan in 1999 was
$7.01. The fair value for the employee stock purchase rights was estimated using
the Black-Scholes model with the following assumptions for 1999: risk-free
interest rate of 5.97%, dividend yield of 0%, an expected life of 6 months, and
the same volatility factors as used for the stock option plans.

During 1999, 1998 and 1997, the Company recorded deferred compensation
pursuant to APB 25 of $5.9 million, $2.2 million and $251,000, respectively,
relating to stock options which were granted in a range of prices between $0.45
and $5.00, which were below the estimated fair market value of the underlying
common stock. The Company recognized compensation expense of $1.4 million in
1999, $153,000 in 1998 and $34,000 in 1997.

12. Retirement Plan

F-27
<PAGE>

TENFOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company established a 401(k) retirement savings plan for employees in
January 1996. All employees age 21 and over are eligible to participate. Each
participant may elect to have amounts deducted from his or her compensation and
contributed to the plan. The Company matches 20% of the first 6% of the
employees contributions, up to a maximum of $2,000 per employee per year. Total
Company contributions for 1999, 1998 and 1997 were approximately $237,000,
$157,000 and $57,000, respectively.

13. Earnings Per Share

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

<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Numerator:
Net income (loss)...................................... $ 5,867 $ 1,723 $ (600)
Accretion of Series A and B preferred stock............ (391) (915) (274)
------------- ------------- -------------
Numerator for basic earnings per
share-income available to common
stockholders........................................ $ 5,476 $ 808 $ (874)
============= ============= =============
Numerator for diluted earnings per share-
income available to common stockholders
after assumed dilutive conversions.................. $ 5,476 $ 808 $ (874)
============= ============= =============
Denominator:
Denominator for basic earnings
per share-weighted-average shares................... 29,278 21,551 21,542
============= ============= =============

Employee stock and options............................. 5,106 5,112 -
------------- ------------- -------------
Denominator for diluted earnings per share-adjusted
weighted-average shares and assumed conversions........ 34,384 26,663 21,542
============= ============= =============
Earnings (loss) per common share:
Basic earnings (loss) per common share................. $ 0.19 $ 0.04 $ (0.04)
============= ============= =============
Diluted earning (loss) per common share................ $ 0.16 $ 0.03 $ (0.04)
============= ============= =============
</TABLE>

The computation of diluted earnings per common share during 1998 and 1997
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. No Series A or B preferred stock were outstanding at December 31,
1999.

F-28
<PAGE>

TENFOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Employee stock and options of 7,397,768 outstanding during the year ended
December 31, 1997 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.

14. 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% of revenues for 1999, 1% for 1998, and none for 1997.
Substantially all of the revenues from operations outside of North America were
in the Banking and Credit segment. 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: applications products and services.

Revenue information for different products and services is as follows (in
thousands):

<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------
Banking 1999 1998 1997
----------- ---------- ----------
<S> <C> <C> <C>
License................................................ $ 2,676 $ - $ -
Services............................................... $ 6,593 - -
----------- ---------- ----------
$ 9,269 $ - $ -
=========== ========== ==========
Communications
License................................................ $ 5,105 $ 456 $ 229
Services............................................... 846 2,362 496
----------- ---------- ----------
$ 5,951 $ 2,818 $ 725
=========== ========== ==========
Energy
License................................................ $ 7,110 $ - $ 2,750
Services............................................... 3,830 1,264 3,348
----------- ---------- ----------
$ 10,940 $ 1,264 $ 6,098
=========== ========== ==========
</TABLE>

F-29
<PAGE>

TENFOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

<TABLE>
<S> <C> <C> <C>
Healthcare
License................................................ $ 867 $ 351 $ -
Services............................................... 3,683 751 -
----------- ---------- ----------
$ 4,550 $ 1,102 $ -
=========== ========== ==========

Insurance
License................................................ $ 20,981 $ 9,524 $ 1,698
Services............................................... 22,422 16,427 2,790
----------- ---------- ----------
$ 43,403 $ 25,951 $ 4,488
=========== ========== ==========
Investment Management
License................................................ $ 9,302 $ 2,318 $ 561
Services............................................... 4,062 2,902 1,742
----------- ---------- ----------
$ 13,364 $ 5,220 $ 2,303
=========== ========== ==========
Other
License................................................ $ 1,047 $ 733 $ 6
Services............................................... 3,905 3,079 503
----------- ---------- ----------
$ 4,952 $ 3,812 $ 509
=========== ========== ==========
Total
License................................................ $ 47,088 $ 13,382 $ 5,244
Services............................................... 45,341 26,785 8,879
----------- ---------- ----------
$ 92,429 $ 40,167 $ 14,123
=========== ========== ==========
</TABLE>

15. Concentration of Credit Risk

Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of cash investments and trade
receivables. The Company has cash investment policies that limit investments to
investment grade securities. The Company's customers are generally large
companies in the banking and credit, communications, energy, healthcare,
insurance, and investment management industries. The Company does not require
collateral from its customers. The following table provides customer
concentration for the three years ended December 31, 1999, 1998 and 1997.

<TABLE>
<CAPTION>
December 31,
------------------------------------
1999 1998 1997
---------- --------- ---------
<S> <C> <C> <C>
Customer A......................................................... 18% - -
Customer B......................................................... 10% - -
Customer C......................................................... - 20% 31%
Customer D......................................................... - 15% -
Customer E......................................................... - 13% -
Customer F......................................................... - 10% -
Customer G......................................................... - - 39%
Customer H......................................................... - - 11%
</TABLE>

16. Subsequent Events

F-30
<PAGE>

TENFOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On February 4, 2000 the Company signed a five year lease, commencing April
1, 2000, for approximately 23,000 square feet of office space in Irving, Texas.

On February 8, 2000, the Company signed a purchase commitment for two
office buildings in San Rafael California, totaling 14,000 square feet. The
buildings will be used for research and development activities and are expected
to be occupied during the current year. The Company anticipates subleasing
approximately 7,500 square feet of this space for a one year term.

On February 19, 2000, the Company signed an eight year lease, commencing
May 2000, for approximately 77,000 square feet of office space in San Francisco,
California. The Company anticipates subleasing 28,000 square feet of this space
for 2 years, and 9,000 square feet for 1 year.

F-31
<PAGE>

Schedule II

TENFOLD CORPORATION
Valuation and Qualifying Accounts
For the years ended December 31, 1999, 1998, and 1997
(in thousands)

Allowance for Doubtful Balance at Additions Receivables
Accounts Beginning of Charged Charged Balance at
Year to Expenses to Allowance End of Year
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Year ended December 31, 1997 - - - -
============ =========== ============ ===========
Year ended December 31, 1998 - $ 500 - $ 500
============ =========== ============ ===========
Year ended December 31, 1999 $ 500 $ 763 $ (538) $ 725
============ =========== ============ ===========
</TABLE>

<TABLE>
<CAPTION>
Deferred Tax Valuation Balance at
Accounts Beginning of Balance at
Year Additions Reductions End of Year
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Year ended December 31, 1997 $ 471 $ 547 $ (45) $ 973
============ =========== ============ ===========
Year ended December 31, 1998 $ 973 $ 238 $ (510) $ 701
============ =========== ============ ===========
Year ended December 31, 1999 $ 701 $ 659 $ (277) $ 1,083
============ =========== ============ ===========
</TABLE>

F-32
<PAGE>

TENFOLD CORPORATION
EXHIBIT INDEX

Number
------
Description
11* Computation of Shares used in Computing Basic and Diluted Net
Income Per Share
21 List of subsidiaries
23.1 Consent of KPMG LLP
27.1 Financial Data Schedule.

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

<PAGE>

Exhibit 21

Subsidiaries of the Registrant

Subsidiary
----------
TenFold Energy, Inc.
TenFold Insurance, Inc.
TenFold Communications, Inc.
TenFold Financial Services, Inc.
TenFold Investment Management, Inc.
TenFold Healthcare, Inc.
The LongView Group

<PAGE>

Exhibit 23.1

Consent of Independent Public Accountants

Independent Accountants' Consent

The Board of Directors
TenFold Corporation:

We consent to incorporation by reference in the registration statement No.
333-74057 on Form S-8 of TenFold Corporation of our report dated February 4,
2000, except as to note 16 which is as of February 19, 2000, relating to the
consolidated balance sheets of TenFold Corporation and subsidiaries as of
December 31, 1999 and 1998, and the related results of operations, stockholders'
equity and comprehensive income (loss), and cash flows for each of the years in
the three-year period ended December 31, 1999, and related schedule, which
report appears in the December 31, 1999, annual report on Form 10-K of TenFold
Corporation.

/s/ KPMG LLP

Salt Lake City, Utah
March 7, 2000

<PAGE>

<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> USD

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 58,247
<SECURITIES> 0
<RECEIVABLES> 11,438
<ALLOWANCES> 725
<INVENTORY> 0
<CURRENT-ASSETS> 77,956
<PP&E> 15,026
<DEPRECIATION> 5,216
<TOTAL-ASSETS> 112,632
<CURRENT-LIABILITIES> 44,574
<BONDS> 0
0
0
<COMMON> 35
<OTHER-SE> 61,805
<TOTAL-LIABILITY-AND-EQUITY> 112,632
<SALES> 92,429
<TOTAL-REVENUES> 92,429
<CGS> 30,460
<TOTAL-COSTS> 30,460
<OTHER-EXPENSES> 51,584
<LOSS-PROVISION> 763
<INTEREST-EXPENSE> 540
<INCOME-PRETAX> 10,603
<INCOME-TAX> 4,736
<INCOME-CONTINUING> 5,867
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,867
<EPS-BASIC> 0.19
<EPS-DILUTED> 0.16

</TABLE>