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

FORM 10-K
(Mark One)

          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.

          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. o

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

          Market value of shares of Common Stock held by non-affiliates of the registrant, based on the closing price of the Common Stock on June 28, 2002 was approximately $4,351,000. 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 percent 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 percent of the outstanding common stock for purposes of the preceding calculation is based solely on information known by the Company and is as of June 28, 2002. This determination of affiliate status is not a conclusive determination for other purposes.

          As of February 28, 2003, there were 40,676,536 shares of the registrant’s Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Registrant’s 2003 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

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TENFOLD CORPORATION
2002 FORM 10-K AND ANNUAL REPORT

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

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PART I

Item 1.     Business

Overview

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

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

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

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

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

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

          During 2001, we refocused TenFold back to being a technology company. We consolidated operations into one corporate organization to reduce costs and improve our core delivery and operational infrastructure. We significantly reduced our operating costs through headcount reductions, lease renegotiations and terminations, and other cost-control measures. During 2001, we improved customer satisfaction and sold additional products and services to existing customers. We began promoting the

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Universal Application to customers desiring to use it to build applications. In November 2001, we entered into an expanded relationship with Allstate Insurance Company (“Allstate”), which represented our first significant transaction under our new sales and business model.

          During 2002, we continued disciplined execution of this business turnaround and built the business and marketing foundation for our emergence as a growth technology company by continuing to meet customer expectations and establishing new Universal Application sales and marketing channels. We made substantial improvements in our business positioning and operations as part of a comprehensive turnaround effort. These improvements included:

          During 2002, we continued to meet customer expectations and reached important milestones with key customers. These included:

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

          During 2002, we began to enter into VAR relationships around Universal Application-powered applications to which, in most cases, TenFold owns the intellectual property rights. We established the following VAR relationships:

          As a consequence of these and other steps, our business performance continued to improve as reflected in key financial metrics:

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

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

                    Notwithstanding the progress we have made, we continue to face challenges, including the unresolved SkyTel litigation and a difficult sales environment. For more information see “Liquidity and

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Capital Resources,” “Legal Proceedings” and “Factors that May Affect Future Results and Market Price of Stock.” Detailed financial information with respect to TenFold may be found in the audited financial statements in Part IV.

Industry Challenge

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

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

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

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

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

TenFold Technology and Products

          The Universal Application platform makes building complex applications substantially cheaper, easier, and faster than traditional application development methodologies because the Universal Application automates essentially all tasks that applications programmers typically do and because it allows

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organizations to develop applications directly with business people who understand the business objectives.

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

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

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

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

          We believe the Universal Application delivers these benefits:

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

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

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

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

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

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

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          TenFold ComponentWare

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

TenFold Services

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

          Training

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

          Applications Development and Implementation Services

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

          Customer and Technical Support

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

TenFold Customers

          Since we began operation in 1993, we have provided licenses, and applications development, support and training services to over 50 customers (excluding customers of our prior subsidiary, The LongView Group, Inc.) in financial services, insurance, healthcare, and other vertical markets. During 2002, we provided Universal Application technology and supporting services to 21 customers, 16 of whom are currently in production with applications powered by the Universal Application. Our customers continue to enhance their applications, with one customer having two separate Universal Application-powered applications in production. Three customers – a prestigious academic health system, a global financial services firm, and a subsidiary of a major health insurer – have completed their application build projects in recent months, brought their applications into production, and are continuing to rollout the applications. Three of our customers are VARs working closely with TenFold to close new business with existing and new customers. Vertex, our most recent VAR, established in November 2002, successfully closed its first sale of the Universal Application-powered utility industry customer management and billing application to a large water company in the UK.

          Our customers are leaders in financial services, insurance, healthcare and other vertical markets. Companies using Universal Application-powered applications in production today include, among others,

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Abbey National Bank, Allstate Insurance, Barclays Global Investors, Cedars-Sinai Medical Center, Deutsche Bank, Dresdner Bank, Franklin Templeton, iplan networks, JP Morgan Chase, MedCath, and Trinity.

          During 2002, we earned revenues from 21 customers. Some of our customers accounted for more than 10 percent of our annual revenues. Allstate accounted for 63 percent, and JP Morgan Chase accounted for 12 percent of our revenues for the year ended December 31, 2002. Bonneville Power Administration accounted for 27 percent, Abbey National accounted for 16 percent, and Allstate accounted for 11 percent of our revenues for the year ended December 31, 2001. SkyTel Communications accounted for 16 percent, and Allstate accounted for 15 percent of our revenues for the year ended December 31, 2000.

Sales and Marketing

          Building sales and marketing is critical to our emergence as a growth technology company. During 2002, we pursued three complementary sales and marketing related initiatives. First, we established alliance relationships with VARs, systems integrators and software distributors in the U.S. and international markets. Second, we maintained a small direct sales channel to prosecute specific sales opportunities. Third, we launched technology-related projects intended to enhance our product marketing. These included web-site enhancements and a major project, code named Tsunami, to redesign and repackage our Universal Application technology to enable a 2003 release of a personal version of our technology directly to the IT and business person applications developer community.

          Alliance Initiatives

          During 2001, we began discussions to establish relationships with VARs, system integrators, software distributors, application service providers and others. We believe that such relationships will accelerate and broaden market distribution of Universal Application for us at a significantly lower cost and greater speed than we could achieve on our own. During 2002, we made steady progress in establishing such relationships, as follows:

          We have completed applications products in production in the communications, energy, financial services, healthcare and insurance industries. We are in discussions to establish VAR and other distribution agreements with applications companies that may take ownership of specific vertical market applications product intellectual property and provide direct support, maintenance, and marketing of specific vertical market applications products. During 2002, we made steady progress in establishing VAR relationships as follows:

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          Direct Sales

          We focused our direct sales channel on selling small, paid prototype projects with new accounts in the insurance, retail software, and financial services sectors. In March 2002, Reuter Brooks, a UK-based courier company, entered into a paid prototyping project. In June 2002, Reuter Brooks contracted with us to build a front-to-back office system that provides integrated Web booking, customer queries over the Web, customer relationship management for the sales force and support services, management queries, and links to the main accounting system. We completed this project in September 2002.

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

          In August 2002, Rand Technology, an international electronics parts distributor, acquired a Universal Application development license with the intention of rebuilding their primary, mission-critical application. We are currently supporting their efforts.

          Technology-related Marketing Projects

          During 2002, we began a major project, code named Tsunami, to rewrite all customer facing parts of our Universal Application to enable us to release in 2003, a personal version of our applications platform directly to applications developers, both IT and business users. The goal of the Tsunami project is to make a single user version of our patented Universal Application technology ubiquitously available from our web site and to enhance the usability of the Universal Application so that a business person or an IT person with limited applications development experience can obtain and use Tsunami to build, without substantial training or support, a complex, sophisticated application. During Q1 2003, we have released from Development a demonstration version of this technology and are moving forward toward Beta releases in the first half of 2003.

          During Q3 2002, we added a member sign-on capability to our web site and provided a new Universal Application-powered application, DocuManage, to our customers and partners. DocuManage provides real-time access and searching of TenFold product documentation to customers anytime and anywhere through the internet.

Competition

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

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          Status quo

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

          Buy a Packaged Application (with or without modification)

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

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

          Build New Applications

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

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

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

Patents, Intellectual Property Rights and Licensing

          We rely 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 received three separate patents in the United States. The first patent relates to the Universal Application. The second relates to TenFold AutoTest, our automated testing technology. The third patent relates to our computer-assisted testing of software application components. We have one pending U.S. patent and have additional patents and pending patent applications in other countries. Our trademark portfolio contains 10 U.S. trademark registrations, 23 trademarks registered in other countries and 22 pending applications in the U.S. and other countries. These trademark registrations and applications

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in the U.S. and their counterparts in various foreign jurisdictions provide protection for our proprietary marks including our distinctive TenFold name and logo.

          In addition, as part of our confidentiality procedures, we 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 the Universal Application Integrator. We generally retained ownership of the applications products that we developed for customers; however, we have allowed a small number of customers to own rights to the applications we developed for them. In some cases, our contracts obligate us to pay royalties on future sales of specific applications, or prohibit us 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.”

Research and Development

Our technology development organization consists of teams of development engineers and product managers. These teams use a “documentation-centric” development process that includes planning and documenting deliverables in advance, rigorously adhering to coding standards, and performing nightly regression 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. Developers use TenFold AutoTest – our patented integrated testing technology – to perform nightly regression tests on all products, components, and technologies under development or modification. Developers use DocuManage, our web-based documentation management and reference system, to access and maintain product documentation.

          Our development organization produces new versions and releases of our Universal Application technology periodically, and during 2002 completed 8 major technology releases. For much of 2002, in addition to quality improvements and enhancements for new releases in 2002, and early in 2003, we have had significant development activity underway related to our impending major new product initiative, code named Tsunami.

          Research and development expenses were approximately $6.2 million for the year ended December 31, 2002, $12.7 million in 2001; and, $25.7 million in 2000. As of December 31, 2002, we had 21 research and development staff. We intend to continue to make investments in research and development to maintain and enhance the Universal Application, Universal Application integration tools, and TenFold ComponentWare.

Employees

          As of December 31, 2002, we had 73 employees, including 32 in applications development, training and support, 21 in research and development, 3 in sales and marketing, and 17 in finance, administrative, and information technology support functions. None of our employees is represented by a labor union or a collective bargaining agreement and most are at-will employees.

          During the year ended December 31, 2002, our average headcount was 135. In October 2002, we reduced our US workforce by 51 employees. In October 2002, we sold our UK subsidiary to the management of that subsidiary, further reducing headcount by 10 employees.

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Acquisition and Sale of Subsidiaries

          On October 19, 2002, we sold the entire equity interest in our wholly owned subsidiary, TenFold Systems UK Limited, to the management of that subsidiary. Accordingly, the operations of TenFold Systems UK Limited have been included in the accompanying consolidated statements of operations for TenFold for all periods presented through October 19, 2002. We have previously distributed and supported our products in the United Kingdom through TenFold Systems UK Limited. Under the terms of this transaction, TenFold Systems UK Limited will continue to distribute TenFold products in the United Kingdom and provide local support to its customers. We will provide support for the Universal Application to TenFold Systems UK Limited and will share with TenFold Systems UK Limited revenues from existing and future TenFold Systems UK Limited customers.

          On September 30, 1999, we entered into a Stock Purchase Agreement with Barclays California Corporation (“BarCal”) under which we purchased the entire equity interest of BarCal in its wholly owned subsidiary, The LongView Group, Inc. (“LongView”). On October 7, 1999, the acquisition was closed. On March 15, 2001, we sold LongView for $29.0 million to Linedata Services (“Linedata”). Accordingly, the operations of LongView have been included in the accompanying consolidated statements of operations from the acquisition through March 15, 2001. The acquisition was accounted for using the purchase method of accounting.

Executive Officers

The executive officers of TenFold are as follows:

          Nancy M. Harvey joined TenFold in July 2000, and has served as President and Chief Executive Officer since January 2001, and as Chief Financial Officer since November 2002. From July 2000 to December 2000, Ms. Harvey served as TenFold’s Chief Operating Officer. Prior to joining TenFold, Ms. Harvey served in various capacities with Computer Science Corporation’s (“CSC”) Healthcare Group, a large-scale applications development, outsourcing and consulting company, including from 1999 to 2000 as Executive Vice President, from 1998 to 1999 as Chief of Staff and Acting Group Vice President of Finance and Administration, from 1997 to 1998 as a Vice President, and from 1995 to 1997 as a Principal of APM Management Consultants, a management consulting firm acquired in 1996 by CSC. From 1994 to 1995, Ms. Harvey was a Senior Manager with Ernst & Young, a public accounting firm. In addition, Ms. Harvey held executive positions with MacNeal Health Services Corporation, a regional health delivery system. Ms. Harvey holds a BS in biology and chemistry from the College of Creative Studies at the University of California at Santa Barbara, an MBA from the Wharton School of the University of Pennsylvania, a Ph.D. in chemical physics from the University of Minnesota, and was a post-doctoral fellow at the California Institute of Technology.

          Alan K. Flake, Jr. joined TenFold in August 2001 as Deputy General Counsel and in February 2002 was named TenFold’s General Counsel. In March 2003, Mr. Flake was also appointed as Senior Vice President, Legal and as Corporate Secretary. Prior to joining TenFold, Mr. Flake served from 2000 to 2001 as Vice President and General Counsel of emWare, Inc., a device-networking software company. Prior to joining emWare, Mr. Flake practiced law from 1990-2000 as a member of the litigation department with Parsons Behle & Latimer, a 130-lawyer firm, where he was elected shareholder/partner in 1997. From 1985 to 1986, Mr. Flake was an assistant to the Circuit Executive of the United States Courts for the D.C. Circuit. Mr.

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Flake holds a BA in international relations with a minor in Japanese from Brigham Young University and received his law degree from the J. Reuben Clark, Jr. Law School at Brigham Young University.

          Jeanne Marie Kiss joined TenFold in November 2001 as a Vice President and has served as Senior Vice President, Operations since September 2002. Prior to joining TenFold, Ms. Kiss served in various capacities with Computer Science Corporation’s (“CSC”) Healthcare Group from 1996 to 2001, including from 1998 to 2001, as Chief Operating Officer of CSC Healthcare. From 1993 to 1996, Ms. Kiss served as Chief Operating Officer of St. Luke’s Roosevelt Hospital Center, an academic medical center in Manhattan, New York. Ms. Kiss holds a Ph.D. in Organizational Development from the Wagner School at New York University and is an adjunct professor at New York Medical College.

          Dudley E. Morris joined TenFold in January 2002 as Vice President, Sales and in February 2002 became Senior Vice President, Business Development. Prior to that time, he served from 1996 to 2002 as a Vice President with Computer Science Corporation’s (“CSC”) Healthcare Group and as a Managing Director of CSC’s Health Consulting Practice. Prior to that, Mr. Morris was a founder and Managing Director of APM, Inc. (“APM”), an independent healthcare consulting firm that was acquired by CSC in 1996. Before founding APM, Mr. Morris was Deputy Commissioner and Chief Operating Officer for the New York City Health Services Administration, at the time, the nation’s largest drug treatment and prevention program. Mr. Morris began his career as a correspondent for Time & Life Magazines. Between 1994 and 1996, he also served in the United States Office of Economic Opportunity in the Office of the President and helped to launch Project Head Start, a national pre-school program. Mr. Morris holds a BA degree in political science from Yale University.

          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, a large database and applications software company, including Executive Vice President 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.

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Item 2.     Properties

          TenFold currently owns no real property. Below is a description of our leased property and the status of each facility at December 31, 2002:

          We have consolidated our operations into one principal executive office located near Salt Lake City, Utah where we lease 22,310 square feet under a lease that expires in September 2007. Our staff currently work at this office, at customer sites, or from home offices. During 2003, we anticipate that we may require a small amount of office space in San Francisco, California primarily for some research and development activities.

          During 2002, we completed a series of agreements with various landlords that eliminated a total of approximately $51 million of long-term lease obligations. This included terminating office leases in Chicago, Illinois; Draper, Utah; Foster City, California; and San Francisco, California; and negotiating a termination of the unoccupied portions of our South Jordan, Utah headquarters lease reducing the square footage leased from 105,068 to 22,310 square feet, reducing the term from 11 years to 5 years, and reducing the rental rate per square foot.

          During 2001, we closed offices in Atlanta, Georgia; Foster City, California; Irving, Texas; New York, New York; Park Ridge, New Jersey; and Raleigh, North Carolina. We subsequently terminated the Atlanta, Georgia lease, and subsequently subleased approximately 15,404 sq. feet of the lease in Irving, Texas. We also canceled an expansion requirement in Chicago, Illinois that would have commenced on October 1, 2001.

          During 2000, we closed offices in Dallas, Texas; and Chicago, Illinois, and subsequently subleased these offices.

          During the year ended December 31, 2000, we acquired two office buildings totaling 14,000 square feet and adjoining property in San Rafael, California. We did not occupy any of this space during the year ended December 31, 2001. We sold these buildings in January 2002, for an amount equal to their net book value.

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Item 3.     Legal Proceedings

          See Part IV, Item 15, Note 10 of Notes to Consolidated Financial Statements for a description of legal proceedings.

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

          None

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PART II

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

          Our common stock trades on the OTC Bulletin Board Market under the trading symbol “TENF.OB.” Our high and low prices by quarter during 2002 and 2001 are presented as follows:

          On December 31, 2002, we had approximately 227 stockholders of record of our common stock and 37,382,080 shares of our common stock were issued and outstanding. On February 28, 2003, we had 40,676,536 shares of common stock outstanding.

          We have never declared or paid dividends on our common stock. We expect to retain any earnings generated by our operations for the development and growth of our business, and we do not anticipate paying any dividends to our stockholders for the foreseeable future.

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Item 6.     Selected Financial Data

          The selected consolidated statement of operations data for the years ended December 31, 2002, 2001, 2000, 1999, and 1998, and the selected consolidated balance sheet data as of December 31, 2002, 2001, 2000, 1999, and 1998, are derived from, and are qualified by reference to, TenFold’s audited financial statements. The historical results are not necessarily indicative of future results.

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Supplementary Financial Information

          The following tables set forth certain unaudited quarterly results of operations of TenFold for 2002 and 2001. 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.

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

Business Overview

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

          The Universal Application platform has been in development more than 10 years, contains more than 2.5 million lines of C and C++ code, and is protected by three issued U.S. patents (see “Patents, Intellectual Property Rights and Licensing” for more information). With the Universal Application, business people or applications developers with little or no traditional programming skills can build and maintain an application without needing to program in C, C++, Java, HTML, SQL or other programming languages and without the need to do other programming-like tasks such as designing screens and writing requirements documents.

          The Universal Application platform makes building complex applications substantially cheaper, easier, and faster than traditional application development methodologies because the Universal Application automates essentially all tasks that applications programmers typically do and because it allows organizations to develop applications directly with business people who understand the business objectives. Consequently, we are focusing our business toward providing the Universal Application, and our assistance through time-and-materials consulting and training, to customers who use their own business teams and our systems implementation partners to build applications.

          Our customers are leaders in financial services, insurance, healthcare, and other vertical markets. Since we began operation in 1993, we have provided licenses, and applications development, support and training services to over 50 customers (excluding customers of our prior subsidiary, The LongView Group, Inc.). Several Universal Application-powered, enterprise-scale, mission-critical applications are in production at companies such as Abbey National Bank, Allstate, Ameritech, Barclays Global Investors, Cedars-Sinai Medical Center, iplan networks, and JP Morgan Chase. Our customers are deriving significant benefits from their applications, including the ability to maintain business rules on-the-fly. For example, one of our customers determined that it can introduce new multi-state insurance rate structures (i.e., business rules) in hours versus weeks. Speed to application production and application maintainability are the hallmarks of the Universal Application. They translate into speed to market and real time competitive advantage.

Business History

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

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million operating loss in the fourth quarter of 2000.We faced lawsuits by unhappy customers and disappointed shareholders. We were the subject of an investigation by the SEC.

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

Current Business Status

          We took disciplined steps to address significant operating, financial, and legal issues. During 2001 and 2002, we initiated and largely completed a far-reaching turnaround and positioned TenFold to emerge as a growth technology company. We set clear strategic direction as a technology company and took the following steps:

          Resolved Historical Issues

          Through 2001 and 2002, we resolved nearly all of the issues which arose in 2000. We restructured our business, strengthened our delivery, and resolved numerous customer disputes and other legal matters.

Restructured Business – From November 2000 to December 31, 2002, we reduced our headcount from approximately 744 to 73, reduced the number of principal operating offices from 13 to 1, renegotiated facilities and equipment leases, retired bank debt at a substantial discount, marketed unused properties for sale, and tightened operational expense management.

          We commenced a restructuring of our business in November 2000 through a reduction in work force and closure of redundant offices in Chicago, Illinois; Dallas, Texas; and San Francisco, California. During 2001 and 2002, we continued to reduce the workforce and closed or reduced offices in Atlanta, Georgia; Chicago, Illinois; Foster City, California; Irving, Texas; New York, New York; Park Ridge, New Jersey; Raleigh, North Carolina; Richmond, UK; Salt Lake City, Utah; and San Francisco, California. As of December 31, 2002, our principal real estate obligation is a 5-year lease for our South Jordan, Utah headquarters space. In January 2002, we sold two buildings we had owned in San Rafael, California, for an amount equal to their net book value.

          These restructurings and other cost reduction actions we have taken have reduced quarterly operating cash outflows by over 80% from the first quarter of 2001 to the fourth quarter of 2002. We estimate that the cumulative impact of successful lease renegotiations and terminations has reduced long-term real estate obligations by over $63 million.

          During 2001 and 2002, we restructured our financial obligations with three equipment lessors and our notes payable obligations to our primary lender. In October 2002, we paid a substantially reduced amount to retire our entire bank debt and an associated lien on our intellectual property. In February 2003, we reached agreement with our two major equipment leasing vendors to buy out and retire their remaining equipment leasing debt of approximately $2.9 million at a substantial discount.

          Strengthened Delivery Capabilities – During 2001 and 2002, we took steps to strengthen our field services delivery and development organizations. We improved delivery performance during 2001 as we leveraged our experienced personnel for each of our customer projects, improved project management controls, and provided centralized oversight of all on-going projects. The improvements in our applications delivery process led to a significant improvement in our ability to estimate project man-days remaining and to meet customer expectations.

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          Resolved Legal Matters – During 2001, we favorably resolved eight customer disputes. In none of these settlement agreements did any party admit liability. Our errors and omissions insurance carrier paid the entire amount of the compromised and confidential settlement sums above the self-insurance retention we paid to cover legal defense costs. In one case, the customer paid us for services we had provided. During 2002, we resolved disputes with a customer and a business partner by entering into productive forward-looking agreements under new business terms. With the resolution of these disputes, we now have only one unresolved customer dispute, that with the SkyTel Corporation. We have been in dialog with SkyTel for months, but have encountered delays due to its encumbrance in the WorldCom bankruptcy proceedings.

          In September 2002, we entered into an agreement to settle a shareholder lawsuit. This matter was fully settled in 2003 with all payments made by our insurer except for the self-insurance retention we paid to cover legal defense costs, and no admission of liability by TenFold or the other defendants.

          In November 2002, we concluded a settlement with the SEC related to matters under investigation since May 2000. We incurred no fines or civil penalties and were not required to restate our financial statements.

          Secured Business and Enhanced Customer Satisfaction

          During 2001 and 2002, we steadily improved our delivery performance and consequently enhanced customer satisfaction.

          During 2001, we centralized management of our delivery organization, made substantial headway on important projects, and completed significant product delivery milestones including: implementing TenFold Wealth Manager in production at a major mortgage lender; passing a major scalability performance benchmark for a large customer relationship management outsourcing company; completing a billing and settlement application for a major energy and transmission supplier; and, implementing Enterprise Relationship Manager, an end-to-end business infrastructure application designed exclusively for next-generation Internet and communications service providers, for a communications company.

          During 2002, we continued to meet customer expectations and reached important milestones with key customers. These included:

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          Established Foundation for Growth

          During 2001 and 2002, we steadily laid the groundwork for future growth by establishing new sales and marketing channels.

          During 2001, we began to more actively promote the Universal Application to customers desiring to use it to build applications. In November 2001, we entered into an expanded relationship with Allstate Insurance Company (“Allstate”), which represented our first significant transaction under our new sales and business model.

          During 2002, we pursued two key, complementary efforts to close current sales and build a solid foundation for future sales. First, we established alliance relationships with VARs, systems integrators and software distributors in the U.S. and international markets. Second, we directly prosecuted specific sales opportunities.

          During 2001, we began discussions to establish relationships with VARs, system integrators, software distributors, application service providers and others. We believe that such relationships will accelerate and broaden market distribution of Universal Application for us at a significantly lower cost and greater speed than we could achieve on our own. During 2002, we made steady progress in establishing such relationships, as follows:

          We have completed applications products in production in the communications, energy, financial services, healthcare and insurance industries. We are in discussions to establish VAR and other distribution agreements with applications companies that may take ownership of specific vertical market applications product intellectual property, and will provide direct support, maintenance, and marketing of specific vertical market applications products. During 2002, we made steady progress in establishing VAR relationships as follows:

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          We focused our direct sales channel on selling small, paid prototype projects with new accounts in the insurance, retail software, and financial services sectors. In March 2002, Reuter Brooks, a UK-based courier company, entered into a paid prototyping project. In June 2002, Reuter Brooks contracted with us to build a front-to-back office system that provides integrated Web booking, customer queries over the Web, customer relationship management for the sales force and support services, management queries, and links to the main accounting system. We completed this project in September 2002.

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

          In August 2002, Rand Technology, an international electronics parts distributor, acquired a Universal Application development license with the intention of rebuilding their primary, mission-critical application. We are currently supporting their efforts.

          Enhanced Technology

          While there are many companies supplying applications development tools, we believe there is no other applications platform supplier with the technology capable of addressing the scale and robustness of applications built using Universal Application. This is a mature, proven, in-production technology. In 2002, we launched an ambitious project, code-named Tsunami, to redesign and repackage our technology to enable a 2003 release of our technology directly to the end-user. We also developed new Universal Application-powered applications for our own and customer use.

          During 2002, we began a major project, code named Tsunami, to rewrite all customer facing parts of our Universal Application to enable us to release, in 2003, a personal version of our applications platform directly to applications developers, including both IT and business persons. The goal of the Tsunami project is to make a single user version of our patented Universal Application technology ubiquitously available from our web site and to enhance the usability of the Universal Application so that a business person or an IT person with limited applications development experience can obtain and use Tsunami to build, without substantial training or support, a complex, sophisticated application. During Q1 2003, we have released from Development a demonstration version of this technology and are moving forward toward Beta releases in the first half of 2003.

          During Q3 2002, we added a member sign-on capability to our web site and provided a new Universal Application-powered application, DocuManage, to our customers and partners. DocuManage provides real-time access and searching of TenFold product documentation to customers anytime and anywhere through the internet.

          Current Business Performance

          Our business performance continued to improve as reflected in key financial metrics:

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

          In February 2003, we reached agreement with Fusion Capital to terminate an unused $10 million equity line for a termination payment of $75,000. Fusion returned all 632,911 commitment shares previously issued to Fusion. In February 2003, Robert W. Felton, a long-time TenFold director, acquired 3,888,889 shares of TenFold common stock for an investment of $700,000.

          Notwithstanding the progress we have made, however, we continue to face challenges, including the ability to maintain or generate sufficient operating capital.

Critical Accounting Policies

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

          Revenue Recognition and Project Profitability

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

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

          Litigation Reserves

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

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          Restructuring Charges

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

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 revenues.