UNITEDIndex STATESto Financial Statements

TENFOLDIndex CORPORATIONto Financial Statements

FORWARD-LOOKINGIndex STATEMENTSto Financial Statements

PARTIndex Ito Financial Statements

OurIndex business model focuses on providing EnterpriseTenFold and our assistance through time-and-materials consulting, training, and support, to customersFinancial who use their own business teams and our services partners to build and maintain applications. Statements

2004Index Highlightsto Financial Statements

TuningIndex ourto marketingFinancial and sales engine Statements

ManagementIndex (which manages all admission, insurance verification, bed management and discharge and is also known by the acronym, ADT, for Admission, Discharge and Transfer) and Orders Communication (which enables nurses to enterFinancial clinical orders electronically) into production use. Cedars expects to continue to deploy additional important applications components into production in 2005 and 2006. Statements

Alternatively,Index organizations can build custom applications, either internally or with third parties. This approach promises them the functionality, flexibility, and fit they seek, but custom applications development carries a high risk of failure, with most projects exceeding budgets and schedules, and with many projects being cancelled prior to implementation dueFinancial 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. Statements

EnterpriseTenFoldIndex hasto threeFinancial key innovations that make designing, building, testing, deploying, and maintaining an application completely different from traditional programming-oriented technologies: Statements

ChangeIndex is fast, responsive, and significantly lower cost • Since changing an application involves only changing its description, change is extremely fast. • Automated regression testing tools make it possible to fullyFinancial test a new applications version quickly and verify that new features work and that existing features still work as before. • Built-in change management tools automate most of the work in promoting new applications versions into production.Statements

•Index Automatic screen layout to ensureFinancial consistency and quality in both Web and desktop environments;Statements

TenFoldServerIndex includes TenFold Security Library, TenFold Server Manager, TenFold FastConnect, TenFold Messages Library, TenFold Scheduler, TenFold Network Library, TenFold BusinessEngines, and TenFold Messages standard. LogicXpress The LogicXpress part of the TenFold RenderingEngine includes TenFold Language for describing complex applications logic, reports, and processes, and technologies to compile,Financial distribute, and efficiently run that logic portably across the various client and server computers on which you deploy an application. LogicXpress includes TenFold Compiler, TenFold Interpreter, TenFold MetaFile Library, TenFold Language, and TenFold MetaFile standards. TenFold Kernel The TenFoldKernel part of the TenFold RenderingEngine provides rich, portable, data-related functionality and powerful, standard, basic-applications functions to other TenFold RenderingEngine components. TenFoldKernel provides a dictionary-driven, read-write set interface to supported relational databases, and provides optimal performance, guaranteed portability, low development cost, low maintenance cost, and rich functionality to both applications and EnterpriseTenFold. TenFoldKernel includes TenFold Database Library, TenFold OptionsFile Library, TenFold Validation Library, TenFold Knobs&Dials Library, TenFold Error Library, TenFold CommonRoutines Library, and TenFold OperatingSystem Library.Statements

TenFoldIndex Servicesto Financial Statements

BuyingIndex packagedto applicationsFinancial is not a viable solution for replacing most legacy applications for most customers in most industries, as reasonable-fit packaged applications don’t exist. Statements

ResearchIndex andto DevelopmentFinancial Statements

ManagementIndex Consultants, a management consulting firm acquired in 1996 by CSC. From 1994 to 1995,Financial Dr. Harvey was a Senior Manager with Ernst & Young, a public accounting firm. In addition, Dr. Harvey held executive positions with MacNeal Health Services Corporation, a regional health delivery system. Dr. 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. Statements

AvailableIndex Informationto Financial Statements

ItemIndex 2.to PropertiesFinancial Statements

PARTIndex IIto Financial Statements

(2)Index 821,173to availableFinancial for future issuance under the 1993 Flexible Stock Incentive Plan, 2,729,195 available for future issuance under the 1999 Stock Plan, and 1,674,598 available for future issuance under the 1999 Employee Stock Purchase Plan.Statements

RecentIndex Salesto ofFinancial Unregistered Securities Statements

ItemIndex 6.to Selected Financial Data Statements

SupplementaryIndex to Financial Information Statements

ItemIndex 7.to Management’s Discussion and Analysis of Financial Condition and Results of Operations Statements

LitigationIndex Reservesto Financial Statements

ServicesIndex and other revenues increased $204,000, or 1 percent, to $17.2Financial million for the year ended December 31, 2004 as compared to $17.0 million for the year ended December 31, 2003. Services and other revenues for the year ended December 31, 2004 include $8.1 million in revenues, and $150,000 in operating costs, recognized during the quarter ended June 30, 2004, related to the completion of an earlier fixed-price applications development project with Cedars-Sinai Medical Center (“Cedars”). This completed the recognition of these revenues and related costs that were deferred in prior years pending confirmation of the completion of the applications development project and resolution of potential disputes between the parties. The new contractual terms between Cedars and TenFold confirm TenFold’s completion of the earlier project and provide for mutual releases from prior related claims. Since this completed our recognition of this project-related revenue, Cedars did not account for a significant portion of our revenue in subsequent 2004 periods, and we do not expect to recognize similar amounts or expect Cedars to account for a significant portion of our revenues, in future periods. Statements

endedIndex December 31, 2004 completed its use of our time-and-materials consulting services for its current application development project during the quarter ended September 30, 2004. We staffed this project with subcontractor staff that we released upon completion of these services. During Q3 and Q4, the end-user customer for this project engaged directly with us for some short-term time-and-materials consulting services. The other customer project, accounting for 22 percent of our total revenues for the year ended December 31, 2004, is staffed by our employees and is currently expected to beFinancial completed at the end of the first quarter of 2005. We do not currently have a new project in place to replace this project. Statements

DuringIndex theto quarterFinancial ended December 31, 2003, we similarly reduced some variable compensation accrued during the first half of 2003. This reduced operating expenses for the fourth quarter of 2003 by $550,000. Statements

JuneIndex 30, 2004, related to theFinancial successful conclusion of an earlier fixed-price applications development project with Cedars, described above, and payments to reduce some older accrued liability items accrued prior to 2004. Statements

OperatingIndex Expensesto Financial Statements

chargeIndex of $1.1 million is comprised of a charge of $1.5 million for release of the restricted cash, less the reversal of a prior rent accrual of $400,000 no longer needed under the terms of the restructured lease. The adjustments to priorFinancial restructuring estimates primarily resulted from higher facilities lease termination payments, and lower revised estimates of future facilities sublease income payments (in part due to the default of one of our subtenants), than previously estimated. Statements

valuationIndex allowance be established when there is significant uncertainty as to theFinancial realizability of the deferred tax assets. Based on a number of factors, including the size of the prior operating losses, the currently available, objective evidence indicates that it is more likely than not that the net deferred tax assets will not be realized. Statements

•Index We continue to faceFinancial a challenging sales environment, and it is unclear when we can expect to achieve significant sales to new or existing customers, and achieve and sustain positive cash flow from operations.Statements

theIndex effective date of FIN 46R, an enterprise must evaluate its involvement with all entities or legal structures created before February 1, 2003, to determineFinancial whether consolidation requirements of FIN 46R apply to those entities. There is no grandfathering of existing entities. Public companies must apply either FIN 46 or FIN 46R immediately to entities created after January 31, 2003 and no later than the end of the first reporting period that ends after March 15, 2004. The adoption of FIN 46 had no effect on our results of operations and financial position. Statements

FactorsIndex thatto MayFinancial Affect Future Results and Market Price of Stock Statements

ableIndex to successfullyFinancial complete current or new projects. In the past we received customer complaints concerning some of our projects. Although we have substantially changed the business model under which we sold and delivered business that generated customer complaints, we cannot be certain that we will not receive more customer complaints in the future. Additionally, our failure to successfully complete any current or new projects may have a material adverse impact on our financial position and results of operations. We cannot be certain that our business strategy will succeed. Statements

OurIndex growth and success depends on our ability to licenseFinancial EnterpriseTenFold and other software products; however, we have limited experience licensing EnterpriseTenFold or other products to date Statements

WeIndex areto involvedFinancial in litigation and disputes and may in the future be involved in further litigation or disputes that may be costly and time-consuming, and if we suffer adverse judgments, our operating results could suffer Statements

OurIndex failure to attractFinancial and retain highly skilled employees, particularly project managers and other senior technical personnel, could impair our ability to complete projects and expand our business Statements

InternationalIndex politicalto andFinancial economic uncertainty could have an adverse impact on our business and on our operating results Statements

ItemIndex 7A.to QuantitativeFinancial and Qualitative Disclosures about Market Risk Statements

ItemIndex 8.to Financial Statements and Supplementary Data

PartIndex IIIto Financial Statements

PartIndex IVto Financial Statements

3.Index Exhibitsto Financial Statements

Index to Financial Statements

REPORTIndex OFto REGISTEREDFinancial INDEPENDENT PUBLIC ACCOUNTING FIRM Statements

TENFOLDIndex CORPORATIONto Financial Statements

TENFOLDIndex CORPORATIONto Financial Statements

TENFOLDIndex CORPORATIONto Financial Statements

TENFOLDIndex CORPORATIONto Financial Statements

TENFOLDIndex CORPORATIONto Financial Statements

TENFOLDIndex CORPORATIONto Financial Statements

TENFOLDIndex CORPORATIONto Financial Statements

~~SECURITIES~~UNITED ~~AND~~STATES ~~EXCHANGE COMMISSION~~

~~Washington,~~SECURITIES ~~D.C.~~AND ~~20549~~EXCHANGE COMMISSION

~~FORM~~Washington, ~~10-K~~D.C. 20549

~~(Mark~~FORM ~~One)~~10-K

~~x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15~~(dMark One) ~~OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~For~~x ~~the~~ANNUAL ~~year~~REPORT ~~ended~~PURSUANT ~~December~~TO ~~31,~~SECTION ~~2004~~13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

ORFor the year ended December 31, 2006

~~¨ TRANSITION REPORT PURSUANT TO SECTION 13~~ OR ~~15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~For~~¨ ~~the~~TRANSITION ~~transition~~REPORT ~~period~~PURSUANT ~~from to~~ TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~Commission~~For ~~file~~the ~~number~~transition ~~000-25661~~period from to

~~TenFold~~Commission ~~Corporation~~file number 000-25661

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

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

(Exact name of registrant as specified in its charter)

698 West 10000 South

Delaware

83-0302610

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

~~South~~698 ~~Jordan,~~West ~~Utah~~10000 ~~84095~~South

~~(Address~~South ~~of principal executive offices~~Jordan, ~~including~~Utah ~~zip~~84095 ~~code)~~

(~~801)~~Address ~~495-1010~~of principal executive offices, including zip code)

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

~~Securities~~(Registrant’s ~~registered~~telephone ~~pursuant~~number, toincluding ~~Section~~area ~~12(g~~code) ~~of the Act:~~

~~Common~~Securities ~~Stock,~~registered ~~par value~~pursuant ~~$0.001~~to ~~per~~Section 12(g) ~~share~~of the Act:

~~Indicate~~Common 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)Stock, ~~and~~par ~~(2)~~value ~~has~~$0.001 ~~been~~per ~~subject~~share ~~to such filing requirements for the past 90 days. Yes x No ¨~~

Indicate by check mark if ~~disclosure~~the registrant ofis ~~delinquent~~a ~~filers pursuant to Item 405 of Regulation S~~well-Kknown isseasoned ~~not contained herein~~issuer, ~~and~~ ~~will~~as ~~not~~defined ~~be contained, to the best of the registrant’s knowledge,~~ in ~~definitive~~Rule ~~proxy~~405 ~~or information statements incorporated by reference in Part III~~ of the ~~Form~~Securities ~~10-K~~Act. Yes ¨ No x

Indicate by check mark ~~whether~~if the registrant is annot required ~~accelerated~~to ~~filer~~file ~~(as defined~~reports inpursuant ~~Exchange~~to ~~Act~~Section 13 ~~Rule~~or ~~12b-2~~15(d) of the Act. Yes ¨ No x

~~Market~~Indicate ~~value of shares of Common Stock held~~ by ~~non-affiliates~~check ofmark ~~the~~whether ~~registrant, based on~~ the ~~closing price of the Common Stock on June 30, 2004 was approximately $22,307,000. Shares of Common Stock held by each current executive officer and director, and by each person who~~registrant is(1) has ~~known~~filed byall ~~the~~reports ~~registrant~~required to ~~own 10 percent or more of the outstanding Common Stock, have been excluded from this computation in that such persons may~~ be ~~deemed~~filed toby beSection 13 ~~affiliates~~or of15(d) ~~the Company. Share ownership information~~ of ~~certain persons known by~~ the ~~Company~~Securities toExchange ~~own~~Act ~~greater than 10 percent~~ of ~~the~~1934 ~~outstanding~~during ~~common stock for purposes of~~ the preceding ~~calculation~~12 ismonths ~~based~~(or ~~solely~~for onsuch ~~information~~shorter ~~known~~period bythat the ~~Company~~registrant ~~and~~was isrequired asto offile ~~June~~such 30reports), ~~2004.~~and (2) has ~~This~~been ~~determination~~subject ofto ~~affiliate~~such ~~status~~filing isrequirements ~~not~~for ~~a conclusive~~the ~~determination~~past ~~for~~90 ~~other purposes~~days. Yes x No ¨

AsIndicate by check mark if disclosure of ~~January~~delinquent ~~31, 2005,~~filers ~~there~~pursuant ~~were~~to 46Item 405 of Regulation S-K is not contained herein,~~377,219~~ ~~shares~~and ofwill not be contained, to the best of registrant’s ~~Common~~knowledge, ~~Stock~~in ~~outstanding~~definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

~~DOCUMENTS~~Indicate ~~INCORPORATED~~by BYcheck ~~REFERENCE~~mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. (Check one):

~~Portions of~~Large ~~the~~Accelerated ~~Proxy~~Filer ¨ Accelerated ~~Statement for the Registrant’s 2005 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10~~Filer ¨ Non-K.Accelerated Filer x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

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 30, 2006 was approximately $6,611,000. 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 30, 2006. This determination of affiliate status is not a conclusive determination for other purposes.

As of December 31, 2006, there were 46,557,745 shares of the registrant’s Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Registrant’s 2007 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

~~2004~~ TENFOLD ~~FORM~~CORPORATION ~~10-K AND ANNUAL REPORT~~

~~TABLE~~2006 OFFORM ~~CONTENTS~~10-K AND ANNUAL REPORT

		Page
	Forward-Looking Statements	3
PART I.
Item 1.	Business	4
Item 2.	Properties	19
Item 3.	Legal Proceedings	19
Item 4.	Submission of Matters to a Vote of Security Holders	19
PART II.
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases of Equity Securities	20
Item 6.	Selected Financial Data	23
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 8.	Financial Statements and Supplementary Data	43
Item 9.	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	43
Item 9A.	Controls and Procedures	43
Item 9B.	Other Information	43
PART III.
Item 10.	Directors and Executive Officers of the Registrant	44
Item 11.	Executive Compensation	44
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	44
Item 13.	Certain Relationships and Related Transactions	44
Item 14.	Principal Accountant Fees and Services	44
PART IV.
Item 15.	Exhibits, Financial Statement Schedules	45
	Signatures	76

TABLE OF CONTENTS


		Page
	Forward-Looking Statements	3

PART I.
Item 1.	Business	4
Item 1A.	Risk Factors	18
Item 1B.	Unresolved Staff Comments	24
Item 2.	Properties	24
Item 3.	Legal Proceedings	24
Item 4.	Submission of Matters to a Vote of Security Holders	24

PART II.
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	25
Item 6.	Selected Financial Data	28
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	30
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 8.	Financial Statements and Supplementary Data	39
Item 9.	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	39
Item 9A.	Controls and Procedures	39
Item 9B.	Other Information	39

PART III.
Item 10.	Directors and Executive Officers of the Registrant	40
Item 11.	Executive Compensation	40
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	40
Item 13.	Certain Relationships and Related Transactions	40
Item 14.	Principal Accountant Fees and Services	40

PART IV.
Item 15.	Exhibits and Financial Statement Schedules	41
	Signatures	74

In ~~addition to historical information, this Annual Report on Form 10~~FORWARD-KLOOKING ~~contains~~STATEMENTS forward-looking statements that involve risks and uncertainties that could cause our actual results to differ materially from those contained in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors That May Affect Future Results and the Market Price of Stock.” When used in this report, the words “expects,” “intends,” “anticipates,” “should,” “believes,” “will,” “plans,” “estimates,” “may,” “seeks,” “estimates” and similar expressions are generally intended to identify forward-looking statements. You should not place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this Annual Report. We undertake no obligation to publicly release any revisions to the forward-looking statements after the date of this document. You should carefully review the risk factors described in other documents we file from time to time with the Securities and Exchange Commission, including our Quarterly Reports on Form 10-Q.

3In addition to historical information, this Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties that could cause our actual results to differ materially from those contained in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors That May Affect Future Results and the Market Price of Stock.” When used in this report, the words “expects,” “intends,” “anticipates,” “should,” “believes,” “will,” “plans,” “estimates,” “may,” “seeks,” “estimates” and similar expressions are generally intended to identify forward-looking statements. You should not place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this Annual Report. We undertake no obligation to publicly release any revisions to the forward-looking statements after the date of this document. You should carefully review the risk factors described in this Annual Report and in other documents we file from time to time with the Securities and Exchange Commission, including our Quarterly Reports on Form 10-Q.

~~Item~~PART 1.I ~~Business~~

~~Business~~Item ~~Overview~~ 1. Business

~~TenFold~~Business isOverview the provider of EnterpriseTenFold™ (formerly “Universal Application”), a software applications platform that reduces enterprise applications design, development, deployment, and maintenance timeframes and costs. EnterpriseTenFold automates most of what applications programmers typically do, and empowers small teams of business people and information technology (“IT”) professionals to design, build, test, deploy, and maintain complex, transaction-intensive applications, with significantly reduced demand on scarce IT resources as compared to other applications development approaches. Using a small team of business people supplemented with IT professionals for rapid applications development is a significant change from the industry-standard approach that relies on large teams of IT professionals who expend significant numbers of person years of effort to design, program, test, change, and deploy enterprise applications. We believe that with EnterpriseTenFold, customers get high-quality, complex enterprise applications into production faster and at significantly lower cost than with other applications development technologies.

WeTenFold ~~believe~~provides ~~EnterpriseTenFold~~services ~~has~~and ~~two~~technology ~~unique~~for ~~attributes that make~~ building complex, ~~database-intensive~~Service ~~and~~Oriented ~~transaction-intensive~~Architecture ~~applications substantially cheaper~~(“SOA”)-compliant, ~~easier,~~enterprise-scale ~~and faster than traditional~~ applications ~~development methodologies. First, because EnterpriseTenFold automates most of what applications programmers typically do and automatically includes advanced applications functionality, we~~in ~~believe~~significantly ~~customers~~less ~~get~~time ~~more powerful, higher quality applications faster~~ and atcost athan ~~fraction~~it ofwould ~~the~~otherwise ~~cost~~take ofusing traditional ~~programming~~development ~~approaches~~technologies. ~~Second,~~We ~~since~~believe ~~TenFold-powered applications development provides a tool and methodology~~ that ~~business~~with ~~people can~~TenFold’s ~~effectively use~~technology, weEnterpriseTenFold ~~believe~~SOA, itcustomers ~~enables~~will ~~organizations~~also toexperience ~~directly~~significantly ~~leverage~~reduced ~~their~~ongoing applications ~~business~~maintenance ~~experience~~ and ~~insight~~enhancement ~~and~~costs compared to ~~adapt~~what ~~applications~~they ~~easily~~generally toexperience ~~meet~~with ~~changing~~legacy ~~business requirements~~applications.

WeOur ~~believe~~business model focuses on providing applications development services and our EnterpriseTenFold ~~offers~~SOA ~~three~~product, ~~unique~~along ~~benefits~~with product support and training, to ~~its~~customers ~~customer~~who can use a TenFold team or their own business teams to build and maintain applications.

1At the end of 2005, we replaced our former Chief Executive Officer, with long-time TenFold director and shareholder, Robert W. ~~Speed~~Felton. Under ~~EnterpriseTenFold~~his ~~lets~~leadership, awe ~~small~~have ~~team~~changed ofour business ~~people~~model ~~and~~to ITfocus ~~professionals~~on ~~build~~selling ~~and~~larger ~~enhance~~consulting ~~high-quality~~projects, ~~high-performance,~~instead ~~powerful~~of ~~applications~~the ~~very~~smaller ~~quickly.~~prototype ~~EnterpriseTenFold~~application ~~lets~~projects athat ~~trained~~we ~~team~~primarily ~~build~~sold ain ~~complex~~2005. ~~application~~We ~~faster~~believe ~~than~~that ~~with~~providing ~~other~~larger ~~technology~~consulting ~~because~~projects ~~building~~(that include anthe ~~application~~full ~~using~~breadth ~~EnterpriseTenFold~~of ~~requires~~applications ~~only~~consulting ~~describing~~from applications ~~features~~design through production implementation) will be a more successful model for both our customers and ~~functionality~~us. ~~Other~~We ~~applications~~believe ~~development~~that ~~technologies~~some ~~also~~of ~~let~~our ~~you~~earlier ~~build~~customers would have been more successful with their projects with more consulting assistance than they chose to purchase under our prior business model. We made steady progress closing new sales and ~~enhance~~beginning ~~applications~~new consulting projects in 2006, ~~but~~quarter ~~most~~by ~~require~~quarter, ~~large~~to ~~teams~~both ofexisting and ~~programmers~~new customers. We also improved our quarterly operating cash flow from $(1.9) million for Q2 2006, ~~take~~to ~~longer~~$(864,000) for Q3 2006, and ~~are~~to ~~risky~~$21,000 for ~~complex~~Q4 ~~applications~~2006. ~~The~~However, ~~high~~such ~~failure~~sales ~~rate~~have ofnot ~~most~~been ~~complex~~sufficient ~~applications~~to ~~development~~generate ~~projects~~sustained ~~suggests~~positive ~~that~~cash ~~other~~flow ~~applications~~from operations, ~~development~~or ~~technologies~~profitability. ~~often~~As ~~lead~~a toresult, ~~project~~increasing ~~cost~~sales ~~and~~further ~~schedule~~remains ~~overruns~~a key goal, ~~applications~~and ~~quality~~until ~~problems~~we do so, we are likely to continue to experience negative cash flow from operations and ~~sometimes~~losses. ~~project~~If ~~cancellations~~we do not close significant future sales, our existing cash resources will not be sufficient to fund our operations beyond Q2 of 2007.

2.EnterpriseTenFold ~~Quality.~~SOA ~~EnterpriseTenFold~~automates ~~includes~~most ~~the~~of ~~TenFold~~what applications ~~RenderingEngine,~~programmers ~~which~~typically ~~renders~~do, anand ~~application~~empowers ~~from~~small ~~its~~teams ~~description.~~of ~~With~~business ~~EnterpriseTenFold,~~people ~~there~~and isinformation notechnology ~~need~~(“IT”) professionals to ~~write~~design, orbuild, test, ~~newly-written~~deploy, ~~code~~and inmaintain ~~the~~complex, ~~building~~transaction ofand andatabase-intensive ~~application. Thus~~applications, itwith significantly isreduced ~~unlikely~~demand ~~for~~on ~~the~~scarce ~~application~~IT resources as compared to ~~have~~other ~~defects.~~applications Wedevelopment ~~believe~~approaches ~~that~~and technologies. Using a ~~TenFold-powered~~small ~~application~~team ~~works~~of ~~just~~business aspeople ~~you~~supplemented ~~described~~with IT professionals for itrapid toapplications ~~work;~~development itis ~~may~~a significant ~~not~~change dofrom ~~what~~the ~~you~~industry-standard ~~want~~approach ~~but~~that itrelies ~~does~~on dolarge ~~what~~teams ~~your~~of ~~description~~IT ~~says~~professionals ~~for~~who itexpend significant numbers of person years of effort to ~~do.~~design, ~~Consequently~~program, wetest, change, and deploy enterprise applications. We believe that ~~TenFold~~with EnterpriseTenFold SOA, customers get high-~~powered~~quality, ~~systems~~complex ~~are~~enterprise ~~much~~applications ~~higher~~into ~~quality~~production faster and at significantly lower cost than ~~most~~with other applications development technologies.

3.We ~~Power.~~believe ~~The TenFold RenderingEngine contains thousands of features~~ that ~~make~~in ~~any~~EnterpriseTenFold SOA, TenFold~~-powered~~ ~~application~~has ~~much~~developed ~~more~~the ~~functionally-rich~~first, ~~than~~complete ~~the~~universal ~~same~~ application ~~that~~— a ~~programmer-staffed~~complete applications server and development ~~team~~environment ~~could~~that ~~pragmatically~~enables ~~afford~~corporations to custom-build. ~~TenFold-powered~~and ~~applications~~maintain ~~have~~complex, ~~thousands~~database, ~~of clever~~transactional, ~~powerful~~enterprise ~~features~~applications ~~unavailable~~rapidly inwith ~~most~~high ~~other~~quality ~~applications~~and functional richness.

4We believe EnterpriseTenFold SOA has two unique attributes that make building complex, database-intensive and transaction-intensive applications substantially cheaper, easier, and faster than traditional applications development methodologies and tools. First, EnterpriseTenFold SOA uses a model-driven approach that renders modeled applications by combining TenFold’s already programmed universal application with metadata describing a specific application, which means that EnterpriseTenFold SOA already includes most of what applications programmers typically do and automatically provides advanced applications functionality. Because of its model-driven approach, we believe customers get more powerful, higher quality applications faster and at a fraction of the cost of traditional programming approaches. Second, TenFold’s development environment provides a tool and methodology that

~~Business~~ business ~~History~~people can effectively use, which we believe enables organizations to directly leverage their business experience and insight, and to adapt applications easily to meet changing business requirements. Thus, we believe TenFold’s model-driven approach lets a TenFold-trained team do Extremely Rapid Applications Development. As a result, a TenFold-trained team can build applications so quickly that customers experience both trying the application and improving the application in very short turnaround cycles to help ensure what is built is what the business really needs.

We ~~founded~~believe ~~TenFold in 1993. We spent the first several years primarily developing our patented~~ EnterpriseTenFold ~~technology.~~SOA Inoffers 1996, we began using EnterpriseTenFold 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~~standout ofbenefits: ~~2000.~~

~~Starting~~1. inSpeed. ~~the~~EnterpriseTenFold ~~second~~SOA ~~half~~lets a small, trained team of ~~2000~~business people and ~~continuing~~IT ~~through~~professionals ~~today~~build and enhance high-quality, wehigh-performance, ~~have taken~~powerful ~~steps~~applications tomuch ~~refocus~~faster ~~TenFold~~than toother ~~its~~technology ~~roots~~because asbuilding or enhancing a ~~software~~TenFold-powered application using EnterpriseTenFold SOA requires only describing applications ~~platform~~features ~~technology~~and ~~company,~~functionality. ~~deal~~Other ~~with~~applications ~~the~~development ~~liabilities~~technologies ~~that~~also ~~arose~~let asyou abuild ~~result~~and ofenhance ~~the~~applications, ~~interim~~but ~~business~~most ~~model~~require large teams of programmers, take longer, and ~~restore~~are ~~the~~risky ~~company~~for tocomplex ~~sound~~applications ~~business~~because ~~health~~those other technologies require detailed, complex, logic programming. The high failure rate of complex applications development projects suggests that other applications development technologies often lead to project cost and schedule overruns, applications quality problems, and sometimes project cancellations.

~~During~~2. ~~2001,~~Quality. weEnterpriseTenFold ~~refocused~~SOA includes the TenFold ~~back~~RenderingEngine, towhich ~~being~~renders aan ~~technology~~application ~~company.~~from ~~We significantly~~its ~~reduced~~description ~~our~~(or ~~operating~~model). ~~costs~~With EnterpriseTenFold SOA, ~~improved~~there ~~customer~~is ~~satisfaction~~no need to write or test new code in the building of an application. Thus, ~~and~~it ~~sold~~is ~~additional~~less ~~products~~likely ~~and~~for ~~services~~the application to ~~existing~~have ~~customers~~defects or quality problems. We ~~suffered~~believe that a ~~setback~~TenFold-powered ~~following~~application ~~the~~works ~~events~~just ofas ~~September~~you ~~11,~~describe ~~2001~~it to work; it may not do what you want, ~~after~~but ~~which~~it wedoes ~~lost~~do ~~two~~what ofyour ~~our~~description ~~largest customers~~says ~~and~~for ~~restructured~~it ~~TenFold~~to ~~again~~do. InBecause ~~November~~the ~~2001,~~code wethat ~~entered~~every ~~into~~TenFold-powered anapplication ~~expanded~~executes ~~relationship~~is ~~with~~the ~~Allstate~~same ~~Insurance~~well-tested ~~Company~~code ~~(“Allstate”)~~that TenFold provides before a project begins, ~~which~~we ~~represented~~believe ~~our~~TenFold-powered ~~first~~applications ~~significant~~are ~~transaction~~much ~~under~~higher ~~our~~quality ~~new~~than ~~business~~most ~~model~~other applications.

~~During~~3. ~~2002,~~Power. weThe ~~continued~~TenFold ~~our~~RenderingEngine ~~business~~contains ~~turnaround.~~thousands ~~We significantly~~of ~~reduced~~features ~~quarterly~~that ~~cash~~make ~~outflows~~any byTenFold-powered ~~renegotiating~~application ~~several~~more ~~major~~functionally-rich ~~property~~than ~~leases,~~the ~~retiring~~same ~~our~~application ~~entire~~that ~~bank debt at~~ a ~~significant~~programmer-staffed ~~discount~~applications ~~and,~~development ~~continuing~~team ~~operational~~could ~~restructuring~~pragmatically afford to ~~better align capacity with cash flow~~program. We ~~continued~~believe ~~to settle~~TenFold-powered ~~litigation~~applications ~~matters~~have ~~related to our prior business model~~clever, ~~entered~~powerful ~~into~~features anunavailable ~~agreement to settle a shareholder lawsuit that subsequently settled~~ in ~~2003;~~most ~~and,~~other ~~concluded a settlement with the Securities and Exchange Commission without paying any fine or civil penalty or needing to restate our financial statements~~applications.

WeOur ~~established~~business ~~strategic~~model ~~distribution~~focuses ~~alliances~~on ~~and~~providing ~~value~~applications ~~added~~development ~~resellers~~services ~~(“VAR”) relationships to accelerate~~ and ~~broaden~~our ~~market distribution of~~ EnterpriseTenFold atSOA aproduct, ~~significantly~~along ~~lower cost and greater speed than we could achieve on our own. We entered into distribution relationships~~ with ~~Perot~~product ~~Systems Corporation~~support, ~~Sapient Corporation~~ and training, ~~youDevise~~to ~~Limited~~customers (awho UKcan ~~company).~~use ~~We established VAR relationships with PCX Systems, LLC (~~a ~~subsidiary~~TenFold ofteam ~~Cedars-Sinai~~or ~~Medical Center),~~their ~~Vertex~~own (abusiness ~~UK-based~~teams ~~utility~~to ~~sector~~build ~~customer management~~ and ~~billing~~maintain ~~company), and Redi2~~applications. ~~In late 2002, Vertex completed its first sale of a TenFold-powered application.~~

InBusiness ~~2003,~~History we continued our business turnaround. We strengthened our balance sheet by retiring our remaining equipment leasing debt at a substantial discount in February 2003, and in that same month obtained an investment of $700,000 by Robert W. Felton, a long-time TenFold director. In December 2003, we closed a private placement of 5 million shares of restricted common stock, with no warrants, which we sold at $2.00 per share (before related fees and expenses).

~~During~~We Q3founded ~~2003,~~TenFold wein ~~began~~1993. ~~shipping~~We ~~our~~spent the first ~~major~~several ~~new~~years ~~product,~~primarily ~~Tsunami~~developing (aour ~~single~~patented ~~user~~EnterpriseTenFold PCSOA ~~version~~technology. ofIn ~~EnterpriseTenFold)~~1996, ~~which~~ we ~~make~~began ~~available~~using EnterpriseTenFold ~~free~~SOA ~~of charge over the internet~~ to ~~any~~build ~~person~~applications ~~who~~for ~~wants to try it, and we announced the release of the next generation of our EnterpriseTenFold product~~customers.

WeIn ~~continued~~1999, towe ~~build~~completed ~~sales~~our ~~and~~initial ~~marketing~~public ~~processes~~offering. toIn ~~prepare~~1999 ~~for~~and ~~our~~early ~~emergence~~2000, aswe tested a ~~growth~~new ~~technology~~business ~~company~~model ~~through~~that ~~three~~caused ~~complementary~~us ~~sales and marketing related initiatives. We continued~~ to ~~develop relationships~~face ~~with~~significant ~~VAR’s~~financial, ~~systems~~legal, ~~integrators~~ and ~~software~~operational ~~distributors~~issues. WeStarting ~~prototyped~~in alate ~~tactical~~2000, ~~sales~~we ~~model~~took ~~based~~steps onto ~~small,~~resolve ~~initial~~the ~~proof~~financial ofand ~~concept~~legal ~~projects~~liabilities tothat ~~introduce~~arose ~~new~~as ~~customers~~a toresult ~~TenFold.~~of Wethe ~~encouraged~~interim ~~developers~~business tomodel ~~install~~and ~~our~~to ~~free-of-charge,~~restore ~~single-user~~TenFold ~~version~~ to ~~prove~~sound ~~our~~business ~~TenFold technology claims for themselves~~health.

5We raised capital twice during 2003. In February 2003, Robert W. Felton, a long-time TenFold director (and our current Chairman, President, and Chief Executive Officer), made an investment of $700,000 in TenFold, by acquiring restricted TenFold common stock. In December 2003, we closed a $10 million private placement of restricted TenFold common stock.

During 2003 and 2004, we ~~made~~continued ~~progress~~sales and marketing related initiatives including establishing alliance relationships with distributors such as VARs; prototyped a new sales model focusing on ~~each~~selling ofsmall, ~~our~~paid ~~three~~proof-of-concept ~~principal~~projects; ~~initiatives~~initiated ~~intended~~internet access to ~~position~~TenFold technology; introduced TenFold asSupport aSpeedPro, ~~growth~~making ~~software~~expert consultants ~~infrastructure~~available ~~company~~for short-duration projects; and increased marketing and public relations efforts to seek to broaden awareness of and interest in TenFold technology.

~~Identifying~~During 2005, we focused new-customer sales primarily on selling small, proof-of-concept projects as part of our penetrate and ~~establishing~~radiate ~~business~~sales ~~practices~~program. Once we completed an initial project, we attempted to radiate into the account by selling additional services and licenses. The financial impact of the new-account, or “penetrate”, transactions was immaterial to our overall financial ~~resources~~performance. Some of these accounts radiated from proof-of-concept projects to purchase larger production licenses and additional services. However, they were not sufficiently large for ~~handling~~us ~~future~~to ~~growth~~achieve profitability or positive cash flow.

~~During~~At ~~2004, we identified and established business practices and resources to let TenFold manage~~ the ~~high~~end ~~growth~~of 2005, we ~~seek~~replaced toour ~~achieve.~~former WeChief ~~increased~~Executive ~~our operational discipline~~Officer, ~~processes~~with ~~and~~long-time ~~tracking. We believe that most~~ TenFold ~~operational~~director ~~areas~~and ~~can achieve better-than-industry-standard productivity~~shareholder, ~~lower~~Robert ~~cost~~W. ~~per~~Felton. ~~deliverable,~~Under ~~and consequently higher margin contribution~~his leadership, if we ~~use~~have ~~TenFold-powered~~changed ~~applications~~our tobusiness ~~automate~~model ~~them.~~to ~~During~~focus ~~2004,~~on weselling ~~built~~larger ~~highly~~consulting ~~custom~~projects, ~~TenFold-powered~~instead ~~core~~of ~~applications –~~the ~~ContactManager~~smaller ~~and~~prototype ~~CustomerManager~~application –projects tothat ~~improve the way~~ we ~~manage~~primarily ~~our~~sold ~~leads~~in ~~and customers~~2005.

WeDuring ~~introduced~~2006, ~~innovative~~our new ~~services,~~CEO’s ~~such~~initial asgoals ~~our~~were to raise capital for TenFold ~~Support~~to ~~SpeedPro.~~improve ~~Our~~our ~~customers~~financial ~~use~~condition, ~~SpeedPro~~and to ~~get~~increase ~~expert~~sales. ~~consultants~~In ~~for~~March ~~short-duration~~2006, ~~projects.~~we ~~SpeedPro~~completed ~~strengthens~~a ~~customer~~capital ~~allegiance~~raising ~~and~~transaction ~~generates~~for ~~new~~gross ~~revenues~~proceeds ~~and~~of ~~contribution~~approximately in$6.3 ~~TenFold~~million ~~Support~~(before expenses and repayment of $1.1 ~~Although~~million ~~Speed~~of ~~Pro~~interim ~~numbers~~financing ~~are~~obligations). ~~small~~And in December 2006, ~~every~~we ~~customer~~completed ~~who~~an ~~bought~~additional acapital ~~SpeedPro~~raising transaction ~~service~~for ingross ~~2004~~proceeds ~~came~~of ~~back~~approximately ~~for~~$1.3 ~~more~~million (before expenses).

~~TenFold~~During ~~University~~2006, ~~updated~~our ~~its~~CEO ~~curriculum~~spent significant time working with prior and existing customers to re-establish and improve relationships with these customers, ~~training~~and ~~materials~~meeting with many new prospects. We made steady progress closing new sales and ~~classes~~beginning new consulting projects in 2006, quarter by quarter, to both ~~accelerate~~existing ~~customer~~and ~~adoption~~new ofcustomers. We also improved our ~~technology~~quarterly operating cash flow from $(1.9) million for Q2 2006, to $(864,000) for Q3 2006, and to $21,000 for Q4 2006. However, such sales have not been sufficient to generate sustained positive cash flow from operations, or profitability. As a result, increasing sales further remains a key goal.

InDuring Q42006, we released EnterpriseTenFold SOA Personal Edition, a version of our ~~most~~EnterpriseTenFold ~~important~~SOA ~~technology~~product packaged with tutorials to ~~date~~teach potential customers how to build SOA-compliant applications and services without extensive programming, ~~EnterpriseTenFold~~for ~~MarketForce.~~download Weand installation ~~named~~on ~~this~~a ~~release~~personal ~~MarketForce~~computer ~~because~~and itlicensed isfor ~~designed~~anyone to ~~enhance~~evaluate ~~our~~TenFold ~~sales~~technology ~~and~~at ~~marketing~~no bycharge. ~~showcasing~~We believe that making EnterpriseTenFold SOA Personal Edition readily available at no charge will accelerate the ~~benefits~~acceptance of ~~TenFold~~our technology as people try it out and discover the capabilities that it brings to the development process.

WeDuring ~~established business processes that are critical to achieving high growth including: Making our software licensing easy~~2006, ~~fast,~~we ~~accurate,~~also ~~and~~continued ~~auditable – improving our ability~~ to ~~comply~~enhance ~~with the new requirements, such as Sarbanes-Oxley; strengthening~~ our ~~sales infrastructure by creating commission plans~~ product, ~~quotas,~~EnterpriseTenFold ~~and accelerators; and~~SOA, ~~developing~~adding ~~a Sales Training program to bring~~ new ~~sales~~features ~~professionals up to speed,~~ and acapabilities ~~SalesBag~~including: ~~and SalesKit containing hard copy and electronic versions of all materials a sales executive needs to sell.~~

~~Broadening~~• ~~awareness~~Enhanced ofTenFoldTools ~~and~~to ~~interest~~improve inapplications ~~TenFold~~development ~~technology~~experts productivity

~~During~~• ~~2004,~~Expanded ~~we increased marketing efforts to broaden awareness of and interest in TenFold technology. Our goal is to reach the market~~Service-~~awareness~~Oriented ~~Tipping~~Architecture Point that launches TenFold as a high-growth, software product company. We made our free Tsunami product the cornerstone of our Tipping Point strategy. With Tsunami, an interested business or IT professional can install TenFold technology over the Internet and by following a script build a complete, enterprise-scale Customer Relationship Management (CRM) or HR application in just a few hours with no prior training. Tsunami introduces people to TenFold technology and metaphors for applications development and demonstrates our Speed, Quality, and Power benefits in just a few hours. Tsunami demonstrates that we can put TenFold technology in the hands of interested people globally, fast and easily, at essentially no cost of sales or distribution to TenFold. Tsunami has broadened interest in TenFold technology more generally. TenFold was awarded the Software and Information Industry Association (“SIIA”) Codie Award for the Best Distributed Computing solution. capabilities

~~During~~• ~~2004,~~Upgraded weweb ~~launched~~services ~~multi-faceted,~~support ~~integrated marketing, including e-mail, direct mail, telemarketing, and limited advertising, largely~~ to ~~support~~include ~~our~~new ~~principal~~standards ~~marketing approach, TenFold Seminars. During 2004, we hosted TenFold Seminars in various areas including the San Francisco Bay area, Seattle, New York City, Chicago, Dallas, Boston, Toronto,~~ and ~~London.~~provide Wecompatibility ~~track~~with ~~the~~more progress of our marketing program by monitoring lead generation. Marketing generated over 3,500 leads in 2004. We also began to use and see the benefit of public relations programs. TenFold Technology was covered in widely read onthird-~~line~~party ~~industry publications – Peter Coffee’s eWeek column, ComputerWorld Canada, Software Reseller News, ADTmag.com, and PCWeek.~~ technologies

6• Extended authentication integration to add Windows single sign-on and Active Directory support

•

Ajax-enabled BrowserClient user interface to greater usability, performance, and customizability

•

Extended software platforms support to include EnterpriseDB database, latest version of the Internet Explorer and FireFox browsers, and recent versions of several RDBMS and operating systems

•

TenFoldServer enhancements that improve applications maintainability and health-monitoring

During 2006, we earned revenues from 39 customers. Some of our customers accounted for 10 percent or more of our annual revenues in 2006. DevonWay (a related person, see Note 17 of the Notes to Financial Statements for more information) accounted for 21 percent, JPMorgan Chase accounted for 16 percent, and Allstate accounted for 10 percent of our revenues for the year ended

~~During 2004~~ December 31, we2006. ~~tuned~~In ~~our~~December ~~marketing~~2006, ~~and~~we ~~sales~~recognized ~~engine~~$1 ~~designed~~million toin ~~convince people~~license ~~that~~revenues ~~our~~from ~~technology~~previously ~~does~~deferred ~~what~~revenue wefrom ~~claim~~a ~~and~~single tolarge ~~help~~license transaction ~~them~~in ~~realize~~2005 ~~the~~from ~~implications of our value proposition~~DevonWay. WeWithout ~~defined~~this ~~and~~revenue, ~~validated~~DevonWay ~~leverageable~~would ~~and~~have ~~replicable~~accounted ~~processes~~ for ~~introducing~~1% ~~new customers to TenFold and closing software license business. Our sales model uses small proof-~~of~~-concept~~ ~~projects as a way of offering customers a low-risk way to test and verify~~ our ~~value~~revenues ~~proposition.~~for Wethe ~~expect~~year toended ~~build on successes of these first deals to radiate into additional~~December 31, ~~larger licenses and services~~2006. ~~Our~~See ~~tactical sales strategy – Penetrate and Radiate – is gaining momentum. Our DirectSales and TeleSales professionals signed more new customers in Q4 than in any quarter in TenFold~~Management’s ~~history.~~Discussion ~~While the numbers are still small~~ and ~~not~~Analysis ~~material to our overall financial results, we observed that half the new accounts that we penetrated during the first three quarters~~ of ~~the~~Financial ~~year~~Condition ~~with a proof-of-concept project bought further licenses~~ and ~~services~~Results ~~and are active~~of ~~customers.~~Operations ~~All~~– of2006 ~~our~~as ~~Penetrate~~Compared ~~projects were successful technologically, not all were successful politically. We are learning from all projects how~~ to ~~present~~2005—Revenues ~~our~~for ~~technology,~~more ~~value proposition, and services better~~information.

AtXanGo ~~the~~accounted ~~close~~for of20 ~~2004~~percent, weJPMorgan ~~had~~Chase accounted ~~six~~for ~~DirectSales~~18 ~~professionals~~percent, and ~~two~~DevonWay ~~part~~accounted for 11 percent of our revenues for the year ended December 31, 2005. Cedars-~~time~~Sinai Medical Center accounted for 50 percent, JPMorgan Chase accounted for 22 percent, and Sapient accounted for 15 ~~TeleSales~~percent ~~professionals~~of our revenues for the year ended December 31, 2004.

~~During~~Revenues ~~2004,~~from wecustomers ~~continued~~outside ~~to leverage~~of ~~other~~North ~~distribution~~America ~~channels~~were toapproximately ~~accelerate~~8 percent ~~and~~of ~~broaden~~total ~~distribution.~~revenues ~~Our~~for ~~largest partners~~2006, ~~Sapient~~11 ~~and~~percent ~~Perot,~~of ~~successfully~~total ~~implemented~~revenues ~~and~~for ~~rolled~~2005, ~~into~~and ~~robust~~20 ~~production~~percent ~~mission~~of ~~critical~~total ~~applications~~revenues infor ~~the~~2004. ~~utility~~Revenues ~~and~~from ~~healthcare~~customers ~~sectors.~~in On the ~~VAR~~United ~~front,~~Kingdom ~~our~~were ~~financial~~7 ~~services~~percent ~~sector~~of ~~VAR,~~total ~~Redi2~~revenues ~~Technologies~~for 2006, ~~which~~9 ~~sells~~percent ~~the~~of ~~TenFold-powered~~total ~~Redi2~~revenues ~~Revenue~~for ~~Manager application~~2005, ~~secured~~and 19 ~~the~~percent ~~financial~~of ~~giant~~total ~~Mellon~~revenues ~~Financial~~for ~~as a customer~~2004. ~~Also,~~Revenues ~~one~~from ofoperations ~~our~~in UKArgentina ~~customers,~~were ~~Vertex,~~1 ~~won~~percent ~~an industry~~of ~~award~~total revenues for ~~their~~2006, ~~TenFold-powered~~2 ~~application~~percent ~~named~~of ~~Alto~~total revenues for 2005, and ~~has~~0.9 ~~established~~percent aof ~~North~~total ~~American~~revenues ~~sales~~for ~~organization~~2004. toOur ~~actively~~long-lived ~~promote~~assets ~~Alto~~are deployed in the United UStates.S.

~~Our~~Customers ~~prospects~~with ~~and~~TenFold-powered ~~customers~~applications ~~represent~~in ~~diverse~~production ~~industries~~today ininclude, ~~which~~among ~~TenFold~~others, ~~technology~~Abbey ~~can~~National ~~add~~Bank, ~~value~~Allstate Insurance, –Barclays ~~banking~~Global Investors, ~~utilities~~Boston Scientific, ~~healthcare~~Cedars-Sinai Medical Center, ~~medical~~Deutsche ~~devices~~Bank, Franklin Templeton, Ingenix (a subsidiary of UnitedHealth Group), Intermountain Power, iplan networks, Isolagen, JPMorgan Chase, MedCath, Medical ~~biotechnology~~Group Insurance Services, ~~manufacturing~~Oppenheimer, ~~software~~Rand Technology, ~~communications~~Trinity Health, ~~among~~University ~~others~~of Utah DIGIT Lab, and Vertex Data Science Limited.

Customers using TenFold-powered applications in production today include, among others, Abbey National Bank, Allstate Insurance, Barclays Global Investors, Cedars-Sinai Medical Center, Deutsche Bank, Dresdner Bank, Franklin Templeton, iplanIndustry ~~networks,~~Challenge JPMorgan Chase, MedCath, Rand Technology, Trinity, and Vertex (a subsidiary of United Utilities). During 2004, we earned revenues from 34 customers including three prestigious TenFold customers who implemented mission critical TenFold-powered applications and successfully rolled them into robust production:

•Organizations ~~JPMorgan~~worldwide ~~Chase~~face ~~rolled~~increasing ~~out~~pressure ~~its~~to ~~TenFold-powered~~replace ~~global~~their ~~securities~~legacy ~~lending~~enterprise ~~application,~~applications ~~SecuritiesLendingExpress~~and ~~(SLX)~~introduce new applications as they seek to ~~both~~increase ~~international~~productivity, ~~and~~cut ~~domestic~~costs, ~~traders.~~introduce ~~During~~new Q1products ~~2004~~and services, weaddress ~~reached~~changing ~~agreement~~regulatory onand ~~the~~competitive ~~key~~demands, ~~terms~~and ofaccess annew ~~agreement~~technology. toHowever, ~~transfer~~organizations ~~ownership~~face daunting odds of ~~SLX~~failure tobecause traditional ~~JPMorgan~~processes ~~Chase.~~for Asbuilding, weintegrating, ~~help~~and ~~them~~deploying ~~become~~complex ~~more~~applications ~~self-reliant~~are ~~maintaining~~costly ~~SLX~~and inrisky. ~~production~~Consequently, wemany ~~expect~~organizations ~~them~~continue to ~~gradually~~make ~~reduce~~substantial ~~their~~investments ~~use~~to ofmaintain ~~time-and-materials~~legacy ~~consulting~~applications ~~services~~that inadequately meet current needs and ~~largely~~do ~~complete~~not ~~the~~address ~~SLX~~new ~~development~~business ~~and~~requirements. ~~implementation~~To ~~project~~obtain bynew ~~the~~or ~~end~~replacement ofapplications, ~~the~~companies ~~first~~choose ~~quarter~~between ofbuying ~~2005~~a packaged software application or building a custom software application.

•Organizations ~~Vertex~~generally turn to independent software vendors, asuch ~~UK-based~~as ~~utility~~Enterprise ~~sector~~Resource ~~customer~~Planning ~~management~~(“ERP”) ~~and~~vendors ~~billing~~or ~~company~~vertical software vendors, ~~took~~when ~~its~~seeking ~~TenFold-powered~~packaged ~~replacement~~applications. ~~customer~~In ~~management~~general, packaged applications promise predictable quality and ~~billing~~relatively ~~application~~quick implementation. However, ~~Generic~~packaged ~~Billing~~applications ~~System~~frequently ~~(GBS),~~require ~~into~~that ~~production~~an ~~for~~organization adapt its ~~initial~~business ~~water~~practices ~~company~~to the ~~customer~~software. ~~During~~ERP Q3systems generally fail to address specific industry problems, wesuch ~~completed~~as ~~the~~patient ~~provision~~management ofor ~~time-and-materials~~securities ~~consulting~~lending; ~~services~~often tocost ~~Vertex’s~~considerably ~~project~~more ~~through~~than ~~our~~planned UKto ~~reseller~~implement; and, ~~youDevise~~once ~~Limited~~installed, ~~which~~are ~~augmented~~difficult ~~the~~to ~~team~~modify ~~supplied~~to byadapt ~~global~~to changing ~~systems~~business ~~integrator Sapient~~needs. ~~Later~~In addition, ~~Vertex~~when ~~requested~~an ~~TenFold’s~~organization ~~assistance~~chooses onthe ~~several~~costly ~~short-term~~and time-~~and-materials~~consuming ~~consulting~~path ~~projects.~~of Ascustomizing ofa ~~year-end~~packaged application, ~~Vertex~~cost ~~had~~and ~~over~~risk 2rise ~~million~~rapidly ~~customers~~and ~~converted~~the ~~over~~organization is generally inhibited from future opportunities to ~~GBS~~upgrade the packaged application when subsequent new releases are available.

•Alternatively, ~~Cedars~~organizations can build custom applications, either internally or with third parties. This approach promises organizations the functionality, flexibility, and fit they seek, but custom applications development carries a high risk of failure, with projects often exceeding 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 enterprise-~~Sinai~~scale applications. ~~Medical~~These ~~Center~~firms ~~has~~generally ~~had~~engage ~~parts~~a large number of ~~its~~consultants ~~PatientCareExpert~~who ~~application~~may inremain ~~steady~~on ~~use~~the ~~since~~project Q3for ~~2002~~years, and may exceed budgets and schedules without producing significantly better results than internal development organizations. In addition, ~~October~~these ~~2004,~~firms ~~Cedars~~typically ~~deployed~~do ~~important~~not ~~additional~~offer ~~components~~ongoing ~~including~~product ~~Patient~~enhancements because they build custom solutions for a single customer.

~~Transaction~~Applications development projects fail because the process of designing, programming, and testing complex applications with ~~Cedars-Sinai~~conventional ~~Medical~~tools ~~Center~~and approaches is very complex and labor intensive. Designing, programming, testing, integrating, and deploying 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.

~~At the close of Q2 2004~~Today, we ~~executed~~there anis ~~important~~a ~~set~~relatively ofnew ~~agreements~~emerging ~~with~~trend, ~~Cedars.~~called ~~The~~SOA ~~financial~~(Service ~~aspects~~Oriented ofArchitecture), ~~this~~which ~~non-recurring~~is ~~transaction~~an information ~~are~~systems ~~discussed~~architectural ~~under~~strategy ~~Management’s~~for ~~Discussion~~building ~~and~~applications ~~Analysis~~by ofcombining ~~Financial~~loosely-coupled ~~Condition~~ and ~~Results~~interoperable ofservices ~~Operations – 2004 as Compared~~ to ~~2003~~support -business ~~Revenues~~process requirements. ~~As part of this set of agreements, Cedars acknowledged completion of~~ TenFold’s ~~prior~~technology ~~application~~is ~~development~~already ~~work~~compatible ~~and~~with ~~TenFold~~this ~~granted~~trend ~~Cedars expanded EnterpriseTenFold license rights to allow greater development~~ and ~~deployment within Cedars and we granted Cedars’ PCX Systems~~, ~~LLC~~should ~~subsidiary the right to expand its Patient Care Expert System with additional health care related modules, and to resell those applications in the health care market. Long term,~~help ~~TenFold~~customers ~~stands~~efficiently ~~to benefit financially if Cedars~~ and ~~its~~productively ~~partner~~move ~~Perot~~toward ~~Health~~such ~~Systems~~an ~~successfully~~architectural ~~commercialize these healthcare applications~~strategy.

~~Some~~TenFold ofTechnology ~~our customers accounted for more than 10 percent of our annual revenues. Cedars-Sinai Medical Center accounted for 50 percent, JP Morgan Chase accounted for 22 percent,~~ and ~~Sapient~~Products accounted for 15 percent of our revenues for the year ended December 31, 2004. See Management’s Discussion and Analysis of Financial Condition and Results of Operations – 2004 as Compared to 2003 - Revenues for more information. Allstate accounted for 41 percent, JP Morgan Chase accounted for 25 percent, and Sapient accounted for 23 percent of our revenues for the year ended December 31, 2003. Allstate accounted for 63 percent and JP Morgan Chase accounted for 12 percent of our revenues for the year ended December 31, 2002.

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~~Revenues~~We ~~from~~believe ~~customers~~TenFold’s ~~outside~~patented ofEnterpriseTenFold ~~North~~presents ~~America~~a ~~were~~significantly ~~approximately~~new 20approach ~~percent~~to ofapplications development. ~~total~~We ~~revenues~~believe ~~for~~that ~~2004,~~this 29approach ~~percent~~reduces ofapplications ~~total~~development ~~revenues~~and ~~for~~maintenance ~~2003,~~cost and 17time ~~percent~~in oftwo ~~total~~ways: ~~revenues~~first, ~~for~~by ~~2002.~~automating ~~Revenues~~tedious, ~~from~~time-consuming, ~~customers~~error-prone ~~in the~~tasks ~~United~~that ~~Kingdom~~programmers ~~were~~would 19generally ~~percent~~do; ofand, ~~total revenues for 2004~~second, 29by ~~percent~~providing ofan applications ~~total~~development ~~revenues~~tool ~~for 2003,~~ and 9methodology ~~percent~~that oflets ~~total~~business ~~revenues~~people ~~for~~actively ~~2002.~~participate ~~Revenues from operations~~ in ~~Argentina~~applications ~~were 0~~development.9 ~~percent~~We ofbelieve ~~total~~that ~~revenues~~EnterpriseTenFold ~~for~~enables ~~2004,~~organizations ~~0.5~~to ~~percent~~directly ofleverage ~~total revenues~~their ~~for~~business ~~2003,~~experience and 8insight ~~percent~~and ofto ~~total~~adapt applications ~~revenues~~easily ~~for~~to ~~2002~~meet changing business requirements.

~~Industry~~EnterpriseTenFold SOA has three key innovations that make designing, building, ~~Challenge~~testing, deploying, and maintaining an application completely different from traditional programming-oriented technologies:

~~Organizations~~Innovation ~~worldwide~~Description ~~face~~TenFoldTools ~~increasing pressure~~• toCan ~~replace~~be ~~their~~used ~~legacy~~by ~~enterprise~~non-technical ~~applications~~business people with relatively little training and ~~introduce~~some ~~new~~help from an experienced TenFoldTools consultant. • Provides a sophisticated applications asdeveloper ~~they~~environment ~~seek~~that is convenient for describing applications requirements. • Is itself a set of easy-to-use ~~increase~~applications ~~productivity~~with security, ~~cut~~concurrency ~~costs~~control, ~~introduce~~audit ~~new~~trails, ~~products~~et ~~and~~cetera. ~~services~~• Is a set of TenFold-powered applications, ~~address~~so ~~changing~~an ~~regulatory~~applications ~~and~~developer ~~competitive~~has ~~demands~~the same intuitive user interface, benefits from the same Quality and ~~access~~Power ~~new technology~~as other applications end-users. ~~But,~~TenFoldDictionary ~~organizations~~• ~~face~~Saves ~~daunting~~the ~~odds~~applications ofdescription ~~failure~~in ~~because~~an ~~traditional~~RDBMS ~~processes~~to ~~for~~make ~~building,~~changing ~~integrating,~~the description easy and ~~deploying~~fast. ~~complex~~• Secures and manages the applications isdescription ~~costly~~just ~~and~~as ~~risky.~~an ~~Consequently,~~RDBMS ~~many~~does ~~organizations~~for ~~continue~~any toapplications ~~make~~database ~~substantial~~data ~~investments to~~such ~~maintain~~as ~~legacy~~invoices or insurance policies. TenFoldRendering-Engine • Reads the applications ~~that~~description ~~inadequately~~and ~~meet~~renders ~~current~~the ~~needs~~application. • Supports using and dochanging ~~not~~an ~~address~~application ~~new~~as ~~business~~you ~~requirements~~describe it. To• ~~obtain~~Scales ~~new~~to orsupport ~~replacement~~tens ~~applications,~~of ~~companies~~thousands ~~choose~~of ~~between~~simultaneous ~~buying~~end-users. a• ~~packaged~~A ~~software~~family ~~application~~of orpre-programmed ~~building~~reusable, model-driven, and metadata-driven technologies that together are a ~~custom software~~universal application. and an application engine.

~~Organizations~~8 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; ERP systems 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.

~~Applications~~These ~~development~~EnterpriseTenFold ~~projects~~SOA ~~fail~~innovations ~~because~~work ~~the~~together ~~process~~to ofautomate ~~building complex applications with conventional tools and approaches is very complicated and labor intensive. Designing~~tedious, ~~programming~~repetitive, ~~testing, integrating,~~ and ~~deploying complex~~error-prone ~~applications~~tasks ~~can~~like bewriting ~~difficult~~SQL, ~~take a long time~~Java, ~~be expensive~~C++, ~~and~~or ~~tie~~VisualBasic ~~up scarce IT resources~~code. ~~This~~We ~~high~~believe ~~cost~~that ~~and~~automating ~~high~~tedious ~~risk~~programming istasks inlets ~~stark contrast to the business need for new~~ applications ~~that~~developers ~~address~~focus ~~current~~their ~~business~~intellect ~~practices~~ and ~~can~~energy beon ~~adapted quickly~~solving ~~and easily to meet~~ the ~~evolving~~ business ~~requirements~~problem instead of afighting ~~dynamic,~~technology ~~highly competitive business environment~~problems.

~~TenFold~~We ~~Technology~~believe ~~and~~this ~~Products~~revolutionary EnterpriseTenFold SOA approach has important implications:

WeImplication ~~believe~~Description ~~TenFold’s~~Requirementsare ~~patented EnterpriseTenFold~~easier,faster, ~~presents~~andmorerewarding a• ~~significantly~~Accelerates ~~new~~the ~~approach~~difficult, totime-consuming, resource intensive, traditional first step in applications development, Requirements. We• ~~believe~~Lets ~~that~~applications ~~this~~developers ~~approach~~describe ~~reduces~~and unambiguously record requirements with TenFoldTools. • Lets applications ~~development~~developers see a running application as they describe requirements. • Lets applications developers build and ~~maintenance~~modify ~~cost~~their application quickly, so they can evolve requirements in concert with developing and ~~time~~trying their application. Powerfeatures makeapplicationsfunctionallyricher • Built-in ~~two~~TenFold ~~ways:~~RenderingEngine ~~first,~~features bymake ~~automating~~applications ~~tedious,~~automatically ~~time~~powerful with a slick Windows user-~~consuming~~interface, ~~error-prone tasks~~a slick browser interface that ~~programmers~~includes ~~would~~Ajax ~~generally~~behavior, ~~do;~~powerful ~~and~~database features like TimeRelation, ~~second~~AuditTrail, byand ~~providing~~more. The meaningand purposeof Testingchanges toeveryone’sbenefit • TenFold RenderingEngine renders a working application, so testing becomes ‘an ~~applications~~exercise ~~development~~to ~~tool~~verify the business solution,’ instead of ‘figure out where it blows up and ~~methodology~~fix ~~that~~it.’ ~~lets~~• With portions of the application running almost at the very start of the project, users can demonstrate it to business people ~~actively~~and ~~participate~~get infeedback ~~applications~~throughout ~~development~~the project, not just at the end when the project should be complete. We• ~~believe~~Automated ~~that~~regression ~~EnterpriseTenFold~~testing ~~enables~~tools ~~organizations~~ let users capture what they want to ~~directly~~automatically ~~leverage~~test ~~their~~and ~~business~~help ~~experience~~them ensure that ongoing applications changes do not impact things that work as they wish. Change is fast,responsive,and ~~insight~~atsignificantlylower cost • Since changing an application involves only changing its description, change is much faster and less costly than alternative reprogramming strategies that are prevalent with traditional technologies and inherent in legacy systems. • Automated regression testing tools make it possible to ~~adapt~~fully test a new applications ~~easily~~version toquickly ~~meet~~and ~~changing~~verify ~~business~~that ~~requirements~~new features work and that existing features still work as before. • Built-in change management tools automate most of the work in promoting new applications versions into production.

9The EnterpriseTenFold SOA value proposition provides three major benefits – Speed, Quality, and Power – to its customers. Speed. EnterpriseTenFold SOA makes building complex applications faster than other technologies so projects can be finished in months, not years. Quality. EnterpriseTenFold SOA addresses eleven key attributes of quality applications. Since TenFold RenderingEngine renders an application from its description, tedious, error-prone, programming-like tasks are avoided in building or enhancing a TenFold-powered application. Thus, we believe the quality of the application is excellent.

Innovation Description TenFoldTools • Provides a sophisticated applications developer interface that is convenient for describing applications requirements. • Is itself a set of easy-to-use applications with security, concurrency control, audit trails, et cetera. • Is a set of TenFold-powered applications, so an applications developer has the same intuitive user interface, benefits from the same Quality and Power ~~as other applications end-users~~. ~~TenFold~~EnterpriseTenFold ~~Dictionary~~SOA • Saves the applications description in an RDBMS to make changing the description easy and fast. • Secures and manages the applications description just as an RDBMS does for any applications database data such as invoices or insurance policies. TenFold Rendering-Engine • Reads the applications description and renders ~~the application. • Supports using and changing~~ an application asfrom ~~you~~its ~~describe~~description ~~it. • Scales to support tens of thousands of simultaneous end-users. These EnterpriseTenFold innovations work together to automate tedious, repetitive,~~ and ~~error-prone~~automatically ~~tasks~~includes ~~like writing SQL~~considerable, rich Java, C++, or VisualBasic code. We believe that automating tedious programming tasks lets applications developers focus their intellect and energy on solving the business problem instead of fighting technology problems. We believe this revolutionary EnterpriseTenFold approach has important implications: Implication Description Requirements are easier, faster, and more rewarding • Accelerates the difficult, timebuilt-~~consuming,~~in ~~resource~~functionality ~~intensive, traditional first step~~ in ~~applications~~the ~~development, Requirements. • Lets users enter and unambiguously record requirements with TenFoldTools. • Lets users see a running~~ application ~~as they enter requirements~~. ~~• Lets users build and modify their application quickly~~Interestingly, socomplex ~~they~~feature ~~can gather~~ requirements in concert with developing and using their actual application. Power features make applications functionally richer • Built-in TenFold RenderingEngine features make applications automatically powerful with slick Windows and browser user-interfaces, ~~powerful~~which ~~database~~traditionally ~~features~~generate ~~like~~complexity ~~TimeRelation, AuditTrail,~~ and ~~more. The meaning and purpose of Testing changes to everyone’s benefit • TenFold RenderingEngine renders~~ a ~~working~~high ~~application,~~likelihood ~~so testing becomes ‘an exercise to verify the business solution,’ instead~~ of ~~‘figure out where it blows up and fix it.’ • With portions of the application running almost at the very start of the~~ project failure, ~~users~~add ~~can~~little ~~demonstrate~~incremental itcost to ~~business~~TenFold ~~people~~applications ~~and get feedback throughout the project~~development, ~~not~~ just atas ~~the~~a spreadsheet ~~end~~requiring ~~when~~more-complex ~~the~~formulas ~~project~~is ~~should~~not besignificantly ~~complete.~~more •costly ~~Automated regression testing tools let users capture what they want~~ to ~~automatically~~build ~~test~~than ~~and~~one ~~help~~with ~~them~~only ~~ensure~~simple ~~that ongoing applications changes do not impact things that work as they wish~~formulas.

10EnterpriseTenFold SOA has been in development for more than 14 years, contains about 3.5 million lines of C, C++, and JavaScript code, and is covered by three issued United States patents. We believe that with EnterpriseTenFold SOA, business people or applications developers with little or no traditional programming skills can collaborate with IT professionals to build and maintain an application by describing the application 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.

We believe EnterpriseTenFold SOA delivers these benefits:

•

Faster development of complex applications because EnterpriseTenFold SOA automates tasks that programmers would otherwise have to do, such as coding SQL, coding logic functions, managing computer-to-computer communications, and coding user interface screens;

•

Longer-lived applications that can survive changes in underlying technologies without requiring applications rewrites, because EnterpriseTenFold SOA insulates applications from many technical changes such as new operating system and database software releases;

•

Relatively easy development of web services as a customer can expose any part of a TenFold-powered application as an industry-standard web service;

•

Reduced maintenance costs because there is little or no code to maintain;

•

Improved quality because EnterpriseTenFold SOA replaces individually-coded logic with already-existing, thoroughly-tested algorithms that provide both basic and sophisticated applications behavior such as security, menus, transaction behavior, and powerful windows and browser user interface features;

•

Greater consistency to look, feel and operation across the entire application, by replacing individually-built screen designs and transactions with a systematic, optimal, standard design and by eliminating the details of screen layout and repetitive transaction behavior from the application developer’s task list;

•

Demonstrated scalability as customers add simultaneous end-users and computing capacity; and

•

Typically sub-second response-time on properly configured hardware for most applications actions, because EnterpriseTenFold SOA is carefully optimized to provide good performance.

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

•

Portability across popular databases such as Oracle, DB2, SQL Server, Sybase, EnterpriseDB, and MySQL;

•

Generation of all SQL statements for accessing and updating data, each highly optimized for each relational database;

•

Automatic screen layout to ensure consistency and quality in both web and desktop environments;

•

Automatic creation of both a Windows and web browser user interface;

•

Built-in support for query and update of time-varying data such as effective-dated employee or insurance policy records;

•

Real-time, server-supplied screen refresh of detail and summary information as underlying data changes;

•

Simplified business rule definition and optimized rule execution for workflow, posting, access control, and other sophisticated rule types;

•

Formal rule abstractions for validation, propagation, population, without requiring application developers to master complex event models;

•

Shared middle-tier caching, deferred query execution, and optimistic concurrency control to minimize database server load;

~~The~~• ~~EnterpriseTenFold value~~Codeless ~~proposition~~integration ~~provides~~with ~~three~~third-party ~~major benefits – Speed, Quality, and Power – to its customers. Speed. EnterpriseTenFold makes building complex~~ applications ~~faster~~via ~~than~~real-time ~~other technologies so projects can be finished in months~~messages, ~~not years. Quality. EnterpriseTenFold addresses eleven key attributes of quality applications. Since TenFold RenderingEngine renders an application from its description~~APIs, ~~tedious,~~or ~~error-prone,~~files ~~programming-like~~based ~~tasks~~on ~~are avoided in building or enhancing~~ a ~~TenFold-powered~~simple ~~application.~~interface ~~Thus~~description ~~the~~including ~~quality~~support offor ~~the~~many ~~application~~different ismessaging ~~excellent.~~layers ~~Power.~~such ~~EnterpriseTenFold~~as ~~renders an application from its description and automatically includes considerable~~Tibco, ~~rich built-in functionality in the application. Interestingly~~TCP/IP, ~~complex feature requirements~~MQSeries, ~~which traditionally generate complexity~~ and aPipes; high likelihood of project failure, add little incremental cost to TenFold applications development. Just as a spreadsheet requiring more-complex formulas is not significantly more costly to build than one with only simple formulas. and

~~EnterpriseTenFold~~• has been in development more than 10 years, contains more than 2.5 million lines of C and C++ code, and is covered by three issued U.S. patents. We believe that with EnterpriseTenFold, business people or applications developers with little or no traditional programming skills can collaborate with IT professionals to build and maintain an application by describing the application without needing to program in C, C++, Java, HTML, Structured Query Language (“SQL”) or other programming languages and without the need to do other programmingApplication-~~like~~level ~~tasks~~data ~~such~~synchronization asbetween ~~designing~~central ~~screens~~servers and ~~writing~~intermittently ~~technical~~connected ~~designs~~laptops.

WeEnterpriseTenFold ~~believe~~SOA ~~EnterpriseTenFold~~is ~~delivers~~composed ~~these~~of ~~benefits:~~components for developing, executing, integrating, and configuring applications.

•Developing ~~Faster~~an ~~development~~Application. ofTenFoldTools ~~complex~~provides ~~transaction~~a sophisticated user interface that lets applications ~~because~~developers ~~EnterpriseTenFold~~describe ~~automates~~an ~~tasks~~application without traditional programming activities. Business people or other applications developers describe the database that ~~programmers~~the ~~would~~application ~~otherwise~~uses ~~have~~and manages, transactions that business end-users use to do ~~such~~each asend-user ~~coding~~activity, ~~SQL~~and rules that control transaction behavior. TenFoldTools is itself a TenFold-powered application, ~~coding~~that ~~logic~~applications ~~functions~~developers use to describe their application. TenFold AutoTest, ~~managing~~a ~~computer-~~portion of TenFoldTools, uses patented techniques to~~-computer~~ ~~communications~~simplify and automate functional and regression testing. TenFold Reporter and TenFoldAnalyzer, each a portion of TenFoldTools, let business people define their own reports and ~~coding~~real-time ~~user~~data ~~interface~~analysis. ~~screens;~~TenFoldTools store the description of their applications objects in a relational database called TenFold Dictionary.

•Executing ~~Longer-lived~~an ~~applications~~Application. ~~that~~TenFold ~~can~~RenderingEngine ~~survive~~is ~~changes~~an executable program, generally deployed in ~~underlying~~various ~~technologies~~configurations ~~without~~on ~~requiring~~multiple ~~applications~~client ~~rewrites~~and server computers, ~~because~~that ~~EnterpriseTenFold~~reads ~~insulates~~an applications description from ~~many~~TenFold ~~technical~~Dictionary ~~changes~~and ~~such~~runs as ~~new~~that ~~operating~~application. ~~system~~TenFold ~~and~~RenderingEngine ~~database~~has ~~software~~these ~~releases;~~four major components:

•Component ~~Reduced~~Description ~~maintenance~~TenFold ~~costs~~Client ~~because~~The ~~there~~TenFoldClient part of the TenFold RenderingEngine typically runs on a client computer and interacts with you as you use a TenFold-powered application. TenFoldClient is ~~little~~a orfeature-rich, nosecure, ~~code~~portable, and graphical, transaction-execution environment that implements transaction requirements that applications developers describe in the TenFold Dictionary. TenFold Server The TenFoldServer part of the TenFold Rendering Engine typically runs on a server computer and provides non-visible applications services. TenFoldServer provides an open-to-industry-standards ~~maintain;~~messaging layer, applications server technologies, and standard business engines, and distributes data-intensive and computing-intensive processing across multiple server computers and multiple distributed databases. LogicXpress The LogicXpress part of the TenFold RenderingEngine includes TenFold Language for describing complex applications logic, reports, and processes, and technologies to compile, distribute, and efficiently run that logic portably across the various client and server computers on which you deploy an application. TenFold Kernel The TenFoldKernel part of the TenFold RenderingEngine provides rich, portable, data-related functionality and powerful, standard, basic-applications functions to other TenFold RenderingEngine components. TenFoldKernel provides a dictionary-driven, read-write set interface to supported relational databases, and provides optimal performance, guaranteed portability, low development cost, low maintenance cost, and rich functionality to both applications and EnterpriseTenFold.

•11 Improved quality because EnterpriseTenFold replaces individually-coded logic with already-existing, thoroughly-tested algorithms that provide both basic and sophisticated applications behavior such as security, menuing, transaction behavior, and powerful windows and browser user interface features;

• Greater consistency to look, feel and operation across the entire application, by replacing individually-built screen designs and transactions with a systematic, optimal, standard design and by eliminating the details of screen layout and repetitive transaction behavior from the application developer’s task list;

• Demonstrated scalability as customers add simultaneous end-users and computing capacity; and

• Typically sub-second response-time on properly configured hardware for most applications actions, because EnterpriseTenFold is carefully optimized to provide good performance.

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

• Portability across popular databases such as Oracle, DB2, SQL Server, Sybase, and MySQL;

• Generation of all SQL statements for accessing and updating data, each highly optimized for each relational database;

LOGO

•Integrating ~~Built~~an Application. TenFoldTools contains integration tools, called TenFoldConnect, that connect a TenFold-inpowered ~~support~~application ~~for~~to ~~query~~other applications, both within a company and ~~update~~at ofits customers and suppliers. Whether exchanging files, directly accessing another database, or using real-time messaging, applications developers codelessly describe the path that data follows to interface with typically-~~varying~~inflexible legacy or third party applications. Applications developers can convert and cleanse data ~~such~~during asits ~~effective~~passage to or from a TenFold-~~dated~~powered ~~employee~~application. ~~records;~~

•Configuring ~~Real-time~~an Application. EnterpriseTenFold supports leading relational databases, server~~-supplied~~ ~~screen~~operating ~~refresh~~systems, client operating systems, web servers and browsers, and communications systems. EnterpriseTenFold is highly configurable so that it can distribute components of ~~detail~~the TenFold RenderingEngine across many computers to provide n-tier processing or run on a single computer. Configuration options let customers tune performance and ~~summary~~scalability ~~information~~by asconfiguring EnterpriseTenFold to match the underlying ~~data~~hardware and software environment. The EnterpriseTenFold architectural design simplifies adding support for additional technologies to respond to customer needs and emerging new technology market changes;.

•TenFold ~~Simplified~~ComponentWare ~~business rule definition and optimized rule execution for workflow, posting, access control, and other sophisticated rule types;~~

•TenFold ~~Formal~~ComponentWare ~~rule~~is ~~abstractions~~a ~~for~~family ~~validation~~of pre-written applications components that easily plug into EnterpriseTenFold to extend its functionality without programming. For example, ~~propagation~~PowerBilling provides a robust suite of billing transactions, ~~population~~engines, ~~without~~and ~~requiring~~features. ~~application~~PowerAccounting ~~developers~~makes it easy to ~~master~~include ~~complex~~accounting-system ~~event~~integration ~~models;~~to application descriptions.

•TenFold ~~Shared~~Services ~~middle-tier caching, deferred query execution, and optimistic concurrency control to minimize database server load;~~

•We ~~Codeless~~offer ~~integration~~consulting ~~with~~services ~~third-party~~that provide ~~applications via real~~end-~~time~~to-end ~~messages,~~custom ~~APIs,~~applications ordevelopment ~~files~~solutions ~~based~~and onsystems aintegration; ~~simple~~basic ~~interface~~and ~~description~~advanced ~~including~~applications ~~support~~development ~~for~~training; ~~many~~EnterpriseTenFold ~~different~~maintenance ~~messaging~~training; ~~layers~~and ~~such~~customer assupport. ~~Tibco, TCP/IP, MQSeries, and Pipes;~~

•Training ~~Application-level data synchronization between central servers and intermittently connected laptops; and~~

•TenFold ~~Guided~~University ~~interfaces~~offers training so that customers can learn how to ~~help~~successfully ~~end~~build, implement, operate, maintain, and enhance their applications. Available training services include classroom instruction (with detailed courseware) offered at TenFold locations on a published schedule or at customer locations scheduled on demand, and on-~~users~~site, ~~quickly~~on-the-job ~~master~~training ~~complex~~working ~~business~~alongside ~~processes~~TenFold expert consultants.

~~EnterpriseTenFold~~12 ~~is composed of components for developing, executing, integrating, and configuring applications.~~

Developing an Application. TenFoldTools provides a sophisticated user interface that lets applications developers describe an application without traditional programming activities. Business people or other applications developers describe the database that the application manages, transactions that business end-users use to do each end-user activity, and rules that control transaction behavior. TenFoldTools includes an application, named TenFold Librarian, itself a TenFold-powered 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 let business people define their own reports and real-time data analysis. These applications development tools store the description of their applications objects in a relational database called TenFold Dictionary.

Executing an Application. TenFold RenderingEngine is an executable program, generally deployed in various configurations on multiple client and server computers, that reads an applications description from TenFold Dictionary and runs as that application. TenFold RenderingEngine has these four major components:

Component Description TenFold Client The TenFoldClient part of the TenFold RenderingEngine typically runs on a client computer and interacts with you as you use a TenFold-powered application. TenFoldClient is a feature-rich, secure, portable, and graphical, transaction-execution environment that implements transaction requirements that applications developers describe in the TenFold Dictionary. TenFoldClient includes TenFold Browser UI Library, TenFold Windows UI Library, TenFold TransactionManager, TenFold FrameComposer, TenFold FrameManager, TenFold GraphicInterface Library, TenFold TransactionEngine, and TenFold GraphicInterface standard. TenFold Server The TenFoldServer part of the TenFold Rendering Engine typically runs on a server computer and provides non-visible applications services. TenFoldServer provides an open-to-industry-standards messaging layer, applications server technologies, and standard business engines, and distributes data-intensive and computing-intensive processing across multiple server computers and multiple distributed databases.

~~Integrating~~Consulting ~~an Application.~~Services EnterpriseTenFold integration tools connect a TenFold-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 TenFold-powered application.

~~Configuring~~Our ~~an Application.~~consulting ~~EnterpriseTenFold~~services ~~supports~~offer ~~leading~~expertise ~~relational~~in ~~databases,~~using ~~server operating systems, client operating systems, Web servers and browsers, and communications systems.~~ EnterpriseTenFold isSOA ~~highly configurable so that it can distribute components of EnterpriseTenFold RenderingEngine across many computers~~ to provide nend-~~tier~~to-end ~~processing~~custom orapplications ~~run~~development onsolutions aand ~~single~~systems ~~computer~~integration. ~~Configuration~~Our ~~options~~consultants ~~let~~help customers ~~tune~~design, ~~performance~~develop, ~~and scalability by configuring EnterpriseTenFold to match~~test, ~~underlying~~integrate, ~~hardware~~deploy, ~~and~~operate ~~software environment. EnterpriseTenFold design simplifies adding support for additional technologies to respond to customer needs~~ and ~~emerging~~maintain ~~new~~their ~~technology market changes~~applications.

Implementation services include converting and cleansing legacy data, systems integration, running parallel application testing, and managing the implementation project. We use TenFold ~~ComponentWare~~technology to leverage open standards, such as web services to build, connect, and streamline business processes.

~~TenFold~~Our ~~ComponentWare~~consulting isservices aprovide ~~family~~technology ~~of pre-written applications components that easily plug into EnterpriseTenFold to extend its functionality without programming. For example~~transfer, ~~PowerBilling~~which ~~provides~~helps acustomer ~~robust~~staff ~~suite~~become ofself-sufficient ~~billing~~with ~~transactions,~~TenFold ~~engines,~~technology and ~~features~~tools. ~~PowerAccounting makes it easy to include accounting-system integration to application descriptions.~~

13Customer Support and SpeedPro Consulting

We provide customers who buy support services with new releases of EnterpriseTenFold SOA as new releases become available, telephone technical support for EnterpriseTenFold SOA, and, optionally, telephone applications support for their TenFold-powered application. We make SpeedPro consulting available to customers who maintain a support relationship with TenFold. SpeedPro offers customers a way to obtain the services of a TenFold expert at a moment's notice for immediate help or for short projects.

Competition

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

•

Status quo;

•

Buy a packaged application (with or without modification); and

•

Build a new application using internal IT resources or third-party consulting and software integration firms.

Status quo

TenFold’s largest competitor is “status quo.” Corporations continually wrestle with the issue of when to take on the challenge of building strategic new applications or attempting to retire and replace “legacy” applications. In recent years, most companies chose to invest large amounts of money to maintain legacy applications rather than replace them. 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.

We believe buying packaged applications is not a viable solution for replacing many legacy applications for most customers in most industries, as reasonable-fit packaged applications do not exist.

WeBuild ~~offer~~New ~~basic~~Applications ~~and advanced applications development training; EnterpriseTenFold maintenance training; assistance in building, implementing, and maintaining applications; and customer and technical support.~~

~~Training~~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.

~~Through~~Programming ~~TenFold~~languages ~~University~~such weas ~~offer training~~COBOL, soC++, ~~that~~and ~~customers~~Java ~~can~~perform ~~learn~~well ~~how~~and scale well, but require extraordinarily large project teams to ~~successfully~~spend ~~build,~~multiple ~~implement,~~years to ~~operate~~complete projects. Such projects generally run over budget in time and dollars and frequently fail. Visual Basic, ~~maintain~~SmallTalk, and ~~evolve~~other ~~their~~personal computer technologies support rapid applications. ~~Training~~development ~~includes~~and ~~classroom~~improved ~~instruction,~~productivity ~~detailed~~for ~~courseware~~smaller projects, ~~and~~but ~~on-site~~do ~~training~~not scale to support large numbers of end-users.

~~Applications~~Today’s ~~Development~~typical technologies include J2EE, .NET, and ~~Implementation~~other component-enabling ~~Services~~technologies intending to make programming languages viable for complex applications. Such technologies, all of which rely on programmers, have not significantly reduced 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.

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

~~Customer~~We rely primarily on a combination of patent, copyright, trade secret and ~~Technical~~trademark ~~Support~~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 (US Patent # 6016394) relates to EnterpriseTenFold. The second (US Patent # 6061643) relates to TenFold AutoTest, our automated testing technology. The third patent (US Patent # 6301701) relates to our computer-assisted testing of software application components. We have these patents issued and pending in other countries. Our trademark portfolio contains a variety of U.S. and international trademark registrations and pending trademark applications.

WeIn ~~provide~~addition, as part of our ~~customers~~confidentiality procedures, ~~who~~we ~~purchase~~enter ~~support~~into ~~services~~nondisclosure agreements with ~~new~~our ~~releases~~employees, ofcustomers, ~~EnterpriseTenFold~~consultants, asand ~~new~~corporate ~~releases~~partners, ~~become~~and ~~available~~limit access to and distribution of our software, documentation, and ~~various~~other ~~levels~~proprietary information. We retain ownership of ~~on-site~~EnterpriseTenFold. ~~and~~Under ~~telephone~~our ~~support.~~prior ~~During~~business ~~2004,~~model we ~~added~~generally aretained ~~new~~ownership ~~service,~~of ~~SpeedPro,~~the ~~which~~applications ~~offers~~products ~~TenFold~~that we developed for customers; however, we allowed a ~~way~~small number of customers to ~~buy~~own ~~access~~rights to athe ~~TenFold~~applications ~~expert~~we developed for ~~immediate~~them. In ~~assistance~~some cases, our contracts obligate us to pay royalties on future sales of specific applications, or prohibit us from licensing applications for ~~short-duration~~specified ~~projects~~periods of time or to specified third parties.

~~Competition~~For information concerning risks associated with intellectual property rights, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Factors that May Affect Future Results and Market Price of Stock.”

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

•Our ~~Status~~technology ~~quo;~~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, 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 ~~Buy~~development ainfrastructure ~~packaged~~and ~~application~~processes produce documentation, quality assurance, platform certification, release management, and delivery capabilities (~~with~~in oraddition ~~without~~to ~~modification~~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.

•14 ~~Build a new application using internal IT resources or third-party consulting and software integration firms.~~

Status quo

Buy a Packaged Application (with or without modification)

~~Build~~Our ~~New~~development ~~Applications~~organization regularly produces new versions and releases of our EnterpriseTenFold SOA technology. Our latest major release of EnterpriseTenFold SOA includes many new features that we believe, make building enterprise applications faster, production deployment more robust, and production management more cost-effective.

~~When~~Research ~~companies~~and ~~contemplate~~development ~~building~~expenses ~~their~~were ~~own~~$4.1 ~~applications~~million onfor ~~their~~the ~~own~~year orended ~~with~~December 31, ~~help~~2006, ~~TenFold~~$3.5 ~~competes~~million ~~primarily~~for ~~with~~the ~~suppliers~~year ofended ~~traditional~~December 31, ~~programming~~2005, and ~~technologies~~$3.7 ~~and~~million ~~development~~in ~~tools~~2004. ~~Internal~~As ITof ~~organizations~~December 31, 2006, we had 18 staff engaged in research and ~~third~~development ~~party consulting~~activities. ~~firms~~We ~~frequently~~intend ~~use~~to ~~tools~~continue ~~from~~to ~~Oracle,~~make ~~IBM,~~investments ~~Microsoft,~~in ~~BEA,~~research ~~Computer~~and ~~Associates,~~development to maintain and ~~others~~enhance our technology.

~~Programming~~Employees 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~~As ~~emerging~~of ~~technologies~~December 31, ~~include Java~~2006, ~~other~~we ~~component-enabling~~had ~~technologies (COM~~46 employees, ~~DCOM,~~including ~~ActiveX,~~11 ~~.NET,~~in ~~et cetera)~~consulting, training and ~~Java-related~~support, ~~technologies~~18 ~~intending~~in toresearch ~~make~~and ~~Java~~development, ~~viable~~4 ~~for~~in ~~complex~~sales ~~applications~~and ~~(J2EE~~marketing, ~~EJB,~~and et13 ~~cetera). Emerging~~in ~~technologies~~finance, ~~all of which rely on programmers~~administrative, ~~have not significantly reduced the time~~ and ~~cost~~information oftechnology ~~large~~support ~~applications development at this time~~functions. ~~Using~~During ~~such~~the ~~technologies~~year ~~for~~ended ~~very~~December 31, ~~large~~2006, ~~complex applications development projects is likely to~~our ~~result~~average inheadcount ~~continued~~was ~~high~~46. ~~failure~~None ~~rates~~of ~~for~~our ~~applications~~employees ~~build~~is ~~projects~~represented ~~since~~by ~~longer~~a ~~projects~~labor ~~and~~union ~~large~~or ~~numbers of programmers on~~ a ~~project~~collective ~~increase~~bargaining ~~risk~~agreement ofand ~~failure~~all ~~exponentially~~are ~~according~~at-will ~~to most industry pundits~~employees.

~~Patents,~~Executive ~~Intellectual~~Officers ~~Property Rights and Licensing~~

WeThe ~~rely~~executive ~~primarily~~officers ~~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 (US Patent # 6016394) relates to EnterpriseTenFold. The second (US Patent # 6016643) relates to TenFold ~~AutoTest,~~are ~~our~~as ~~automated~~follows: testing technology. The third patent (US Patent # 6301701) 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 5 U.S. trademark registrations, 8 trademarks registered in other countries and 6 pending applications in the U.S. and other countries.

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 EnterpriseTenFold and TenFold ComponentWare. Under our prior business model we generally retained ownership of the applications products that we developed for customers; however, we 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. We no longer market these applications.


Name	Age	Position(s)
Robert Felton	67	Chairman of the Board of Directors, Chief Executive Officer, and President
Alexei Chadovich	47	Senior Vice President, Research and Development
Samer Diab	38	Senior Vice President, Customer Services
Robert Hughes	47	Chief Financial Officer, Chief of Staff
Robert Trounce	36	Vice President, Consulting
Jeffrey Walker	64	Executive Vice President, Chief Technology Officer
Sally White	46	Vice President, Business Development

~~For~~Robert ~~information~~Felton ~~concerning~~joined TenFold as an executive officer in November 2005, and has served as ~~risks~~Chairman ~~associated~~of ~~with~~the ~~intellectual~~Board ~~property~~of ~~rights~~Directors, ~~see~~Chief ~~“Management~~Executive Officer, and President since that time. Mr. Felton has also served as a member of TenFold’s ~~Discussion~~Board of Directors since March 1997. Mr. Felton is the founder and ~~Analysis~~Chairman of ~~Financial~~DevonWay, ~~Condition~~a software applications company, which he founded in May 2005, and ~~Results~~a customer of ~~Operations~~TenFold. –Mr. Felton ~~Factors~~was the founder of Indus International, a software applications company, and served as Indus’s Chairman, President, and Chief Executive Officer from January 1988 to March 1999 at which point he retired. Mr. Felton also served as a member of the Board of Directors of Indus International since its inception in 1988 until 2002. Prior to that, ~~May~~Mr. Felton ~~Affect~~was ~~Future~~the ~~Results~~founder and CEO ~~Market~~of ~~Price~~Tera Corporation (later renamed Tenera Corporation) from 1974 to 1985. Mr. Felton served in the nuclear submarine force of ~~Stock~~the U.”S Navy from 1962 to 1970. Mr. Felton holds a BS in mechanical engineering from Cornell University and an MS in nuclear engineering from the University of Washington.

15Alexei Chadovich joined TenFold in October 1997, and has served as Senior Vice President of Research & Development since February 2002. Prior to that, Mr. Chadovich held various technical and development management roles at TenFold including Director, Development, Vice President of Universal Application Client, Director of Universal Application Core, Senior Developer, and Architect for Universal Application Client. Prior to joining TenFold, Mr. Chadovich served from 1996 to 1997 as software architect and developer with Corel Corporation, a business and graphics software development company. From 1990 to 1996, Mr. Chadovich served in various software development and architect positions with WordPerfect Corp., a business software development company, and after its merger with Novell Inc. in 1994, a business and networking software development company.

~~Our~~ Prior ~~technology~~to ~~development~~joining ~~organization~~WordPerfect, ~~consists of teams of development engineers and product managers~~Mr. Chadovich ~~These~~held ~~teams~~various ~~use~~software ~~a “documentation-centric”~~ development ~~process~~management ~~that~~positions ~~includes~~with ~~planning~~Kurchatov ~~and~~Atomic ~~documenting~~Energy ~~deliverables~~Institute in ~~advance~~Russia, ~~adhering~~a physics toresearch ~~coding~~institute. ~~standards,~~Mr. Chadovich ~~and~~holds ~~performing~~MS ~~nightly~~in ~~regression~~Computer ~~tests~~Science offrom ~~all~~Moscow ~~technology.~~Institute ~~We continuously monitor quality, analyze the root-cause~~ of ~~defects,~~Electronic ~~report daily and weekly status~~Technology, ~~and regularly communicate individual and team performance and adherence to schedule and functionality requirements~~Russia.

~~Our~~Samer ~~development~~Diab ~~infrastructure~~joined TenFold in June 1994 and ~~processes~~has ~~produce~~served ~~documentation~~as Senior Vice President, ~~quality~~Customer ~~assurance~~Services since August 2006 and as Vice President, ~~platform~~Customer ~~certification~~Services since April 2004. From September 2002 to April 2004, ~~release~~Mr. Diab served as ~~management~~TenFold's Operations Chief of Staff, and ~~delivery~~from ~~capabilities~~October ~~(in~~1999 ~~addition~~ to ~~design~~September ~~and~~2002, ~~implementation~~he ~~functions)~~served ~~for~~as ~~our~~a ~~technology~~Vice ~~and~~President ~~products.~~of ~~Developers~~Applications ~~use~~Development for TenFold ~~AutoTest~~and –a ~~our~~prior ~~patented~~wholly ~~integrated~~owned ~~testing~~subsidiary. ~~technology~~From –June 1994 to ~~perform~~October ~~nightly~~1999, ~~regression~~Mr. Diab ~~tests on~~served ~~all~~in ~~products,~~various technical ~~components,~~ and ~~technologies~~management ~~under~~roles in TenFold's development orand ~~modification~~consulting organizations. ~~Developers~~Prior ~~use~~to ~~DocuManage~~joining TenFold, ~~our~~Mr. Diab ~~web-based~~served ~~documentation~~from ~~management~~1989 to 1994 in various technical, architectural, and ~~reference~~managerial ~~system~~roles in the Applications Division of Oracle Corporation, toa ~~access~~large database and ~~maintain~~applications ~~product~~software ~~documentation~~company. Mr. Diab holds a BS in Electrical Engineering from the California Institute of Technology.

~~Our~~Robert ~~development~~Hughes ~~organization~~joined ~~regularly~~TenFold ~~produces~~in ~~new~~February ~~versions~~1995, and ~~releases~~has served as Chief Financial Officer since January 2006 and as Chief of ~~our~~ ~~EnterpriseTenFold~~Staff ~~technology~~since November 2005. InMr. Hughes ~~addition~~has toalso ~~quality~~served ~~improvements~~as Senior Vice President Finance since December 2000 and ~~enhancements~~Chief ~~for~~Accounting ~~our~~Officer ~~major~~since ~~EnterpriseTenFold~~May ~~MarketForce~~2003. ~~release~~From September 2000 until December 2000, ~~our~~Mr. Hughes ~~development~~served ~~organization~~as ~~produced~~Chief Financial Officer of a ~~major~~TenFold ~~new~~subsidiary. ~~product,~~From ~~MyTenFold~~February 1995 until August 2000, aMr. Hughes ~~single-user~~served as ~~version~~TenFold’s ofChief Financial Officer. Prior to joining TenFold ~~technology~~, ~~that~~Mr. Hughes ~~delivers~~served ~~EnterpriseTenFold~~in onvarious finance and administrative capacities at Oracle Corporation, a ~~personal~~large ~~computer.~~database Weand ~~intend~~applications software company, from 1989 to ~~license~~1995. ~~MyTenFold~~Prior to joining ~~individuals~~Oracle, ~~who~~from ~~want~~1982 to 1989, Mr. Hughes served in various audit positions for KPMG LLP, a ~~complete~~public ~~version~~accounting offirm. ~~EnterpriseTenFold~~Mr. Hughes onholds a ~~Windows~~BA ~~personal~~in ~~computer~~business ~~working~~administration ~~with~~from the ~~RDBMS~~Haas School of ~~their~~Business, ~~choice~~University of California, Berkeley, and is a Certified Public Accountant.

~~Research~~Robert Trounce joined TenFold in February 1998 and ~~development~~has ~~expenses~~served ~~were~~as $3Vice President, Consulting since October 2005.7 ~~million~~From ~~for~~May ~~the~~2005 ~~year~~to ~~ended December~~October 312005, ~~2004, $3~~Mr.5 Trounce ~~million~~served ~~for~~as ~~the~~Client ~~year~~Services ~~ended~~Executive. ~~December~~From 31February 1998 to May 2005, ~~2003~~Mr. Trounce served in various technical, account management and ~~$6.2~~project ~~million~~management roles in ~~2002~~TenFold's applications development and consulting organizations. AsPrior ofto ~~December~~joining 31TenFold, ~~2004,~~Mr. Trounce weserved ~~had~~as 25an ~~staff~~Associate ~~engaged~~Systems inEngineer ~~research~~at Electronic Data Systems, an information technology and ~~development~~business ~~activities~~process outsourcing services company. Mr. Trounce Weholds ~~intend~~a toBS ~~continue~~in toBusiness ~~make~~Management ~~investments~~with inan ~~research~~emphasis ~~and development~~in toManagement ~~maintain~~Information ~~and~~Systems ~~enhance~~from ~~EnterpriseTenFold,~~the ~~EnterpriseTenFold~~Marriott ~~integration~~School ~~tools~~of Management, ~~and~~Brigham ~~TenFold~~Young ~~ComponentWare~~University.

~~Employees~~Jeffrey Walker founded TenFold in February 1993 and has served as Executive Vice President, and Chief Technology Officer since October 1996. He served as its Chairman from TenFold’s inception to November 2005. From TenFold’s inception to October 1996, Mr. Walker served as TenFold’s 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.

AsSally ofWhite ~~December~~joined 31TenFold in May 2000 and has served as Vice President, ~~2004~~Business Development since February 2002. From May 2000 to February 2002, weMs. White ~~had~~served 66as ~~employees~~TenFold's Training Sales Director. Prior to joining TenFold, ~~including~~Ms. White 18held inseveral ~~applications~~management positions ~~development~~with Provant, Inc., a performance improvement training ~~and~~services ~~support~~organization, 25including inDirector ~~research~~of Business Development from 1997 to 1999 and ~~development~~Vice President of Sales Strategies from 1999 to 2000. From 1988 to 1997, 12Ms. White inwas ~~sales~~Vice ~~and~~President ~~marketing,~~of Sales and 11Marketing infor ~~finance~~Innovations, ~~administrative,~~a ~~and~~leadership ~~information~~seminar ~~technology~~company. ~~support~~From ~~functions~~1982 to 1988, Ms. White ~~During~~served as the ~~year~~Director ~~ended~~of ~~December 31~~Marketing, ~~2004,~~then ~~our~~Vice ~~average~~President ~~headcount~~of ~~was~~Sales 68and Marketing for Mrs. Fields ~~None~~Cookies, ofInc. ~~our~~a ~~employees~~global ischain ~~represented~~of premier bycookie ashops. ~~labor~~Ms. White ~~union~~holds orBS ain ~~collective~~communications ~~bargaining agreement~~from Westminster College and ~~most~~an ~~are~~MBA ~~at-will~~from ~~employees~~Alameda College.

~~Executive~~16 ~~Officers~~

The executive officers of TenFold are as follows:

Name	Age	Position(s)
Nancy M. Harvey	51	President, Chief Executive Officer, Chief Financial Officer and Director
Alexei Chadovich	45	Senior Vice President, Research and Development
Samer Diab	36	Vice President, Customer Services
Jeffrey L. Walker	62	Chairman of the Board of Directors, Executive Vice President, Chief Technology Officer

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, Dr. Harvey served as TenFold’s Chief Operating Officer. Prior to joining TenFold, Dr. 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

~~Alexei Chadovich~~Available ~~joined~~Information TenFold in October 1997, and has served as Senior Vice President of Research & Development since February 2002. Prior to that, Mr. Chadovich held various technical and development management roles at TenFold including Director, Development, Vice President of Universal Application Client, Director of Universal Application Core, Senior Developer, and Architect for Universal Application Client. Prior to joining TenFold, Mr. Chadovich served from 1996 to 1997 as software architect and developer with Corel Corporation, a business and graphics software development company. From 1990 to 1996, Mr. Chadovich served in various software development and architect positions with WordPerfect Corp., a business software development company, and after its merger with Novell Inc. in 1994, a business and networking software development company. Prior to joining WordPerfect, Mr. Chadovich held various software development management positions with Kurchatov Atomic Energy Institute in Russia, a physics research institute. Mr. Chadovich holds MS in Computer Science from Moscow Institute of Electronic Technology, Russia.

~~Samer~~Our ~~Diab~~Annual ~~joined~~Report ~~TenFold~~on inForm 10-K, ~~June~~Quarterly ~~1994~~Reports ~~and~~on ~~has served as Vice President~~Form 10-Q, ~~Customer~~Current ~~Services~~Reports ~~since~~on ~~April~~Form 8-K ~~2004.~~and ~~From September~~amendments ~~2002~~ to ~~April~~reports ~~2004,~~filed ~~Mr.~~or ~~Diab~~furnished ~~served~~pursuant asto ~~TenFold’s~~Sections 13(a) ~~Operations~~and ~~Chief~~15(d) of ~~Staff,~~the ~~and~~Securities Exchange ~~from~~Act ~~October~~of ~~1999 to September 2002~~1934, ~~he served~~ as aamended, ~~Vice~~are ~~President~~available free of ~~Applications~~charge ~~Development~~from ~~for~~links ~~TenFold~~on ~~and~~our awebsite ~~prior~~at ~~wholly owned subsidiary~~www.tenfold.com ~~From~~as ~~June 1994~~soon toas ~~October~~reasonably ~~1999,~~practicable ~~Mr.~~after ~~Diab~~such ~~served~~reports inare ~~various~~electronically ~~technical~~filed ~~and~~with, ~~management~~or ~~roles~~furnished into, ~~TenFold’s~~the ~~development~~Securities and ~~consulting~~Exchange ~~organizations~~Commission. Registration ~~Prior~~statements toand ~~joining~~amendments ~~TenFold,~~thereto ~~Mr.~~filed ~~Diab~~pursuant ~~served from 1989~~ to ~~1994 in various technical, architectural, and managerial roles in~~ the ~~Applications~~Securities ~~Division~~Act of ~~Oracle Corporation~~1933, aas ~~large~~amended, ~~database~~are ~~and~~similarly ~~applications~~available ~~software~~from ~~company.~~our Mrwebsite. ~~Diab~~The ~~holds~~information aposted BSon inour ~~Electrical~~web ~~Engineering~~site ~~from~~is ~~the~~not ~~California~~incorporated ~~Institute~~into ofthis ~~Technology~~Annual Report.

~~Jeffrey~~You L.may ~~Walker~~read ~~founded TenFold in February 1993~~ and ~~has~~copy ~~served~~all ~~as its~~or ~~Chairman,~~any ~~Executive~~portion ~~Vice~~of ~~President~~reports, ~~and~~statements ~~Chief~~or ~~Technology~~other ~~Officer~~information ~~since~~we ~~October~~file ~~1996.~~with ~~From~~the ~~TenFold’s~~SEC ~~inception~~at tothe ~~October~~public ~~1996,~~reference ~~Mr.~~facility ~~Walker~~maintained ~~served as TenFold’s Chairman, President, Chief Executive Officer, and Chief Technology Officer.~~by ~~Prior~~the toSEC ~~founding TenFold, from 1991 to 1993, Mr. Walker was an independent consultant. From 1985 to 1991, Mr. Walker held several management positions~~ at ~~Oracle~~100 ~~Corporation,~~F ~~a large database and applications software company~~Street, 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 1986N. ~~Prior to joining Oracle, Mr~~E. ~~Walker founded and served as Chief Executive Officer of Walker Interactive Products~~, ~~an application software company~~Washington, ~~from~~DC ~~1980 to 1985~~20549. ~~Mr. Walker holds a BA in mathematics from Brown University.~~

17Please call the SEC at 1-800-SEC-0330 for more information on the public reference room. You can also find our SEC filings at the SEC’s website at http://www.sec.gov.

~~Our~~Item Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge from links on our website at www1A.~~tenfold.com~~ asRisk soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission. Registration statements and amendments thereto filed pursuant to the Securities Act of 1933, as amended, are similarly available from our website. The information posted on our web site is not incorporated into this Annual Report. Factors

~~You~~We ~~may~~operate ~~read~~in ~~and~~a ~~copy~~rapidly ~~all or any~~changing ~~portion~~environment ofthat ~~reports,~~involves ~~statements~~numerous ~~or other information we file with the SEC at the public reference facility maintained by the SEC at Room 1024~~risks, ~~Judiciary~~some ~~Plaza, 450 Fifth Street, N.W., Washington, DC 20549. Copies~~ of ~~such~~which ~~material~~ are ~~also~~beyond ~~available by~~our ~~mail~~control. ~~from~~The ~~the~~following ~~Public~~discussion ~~Reference~~elaborates ~~Branch~~on some of ~~the~~these ~~SEC at 450 Fifth Street, N~~risks.~~W.,~~ ~~Washington, DC 20549 at prescribed rates.~~

~~Please~~If ~~call~~we ~~the~~are unable ~~SEC~~to atgenerate ~~1-800-SEC-0330~~sufficient ~~for~~cash ~~more~~flow ~~information~~from onoperations, ~~the~~or ~~public~~secure ~~reference~~additional ~~room.~~sources ~~You~~of ~~can~~financing ~~also~~in ~~find~~the ~~our~~future, ~~SEC~~we ~~filings~~will atbe ~~the~~unable ~~SEC’s~~to ~~website~~continue ~~at http://www.sec.gov.~~operations as a going concern

18While our financial statements have been prepared under the assumption that we will continue as a going concern, the independent accounting firm’s report on our December 31, 2006 financial statements, prepared by Tanner LC, included an explanatory paragraph relating to their substantial doubt as to our ability to continue as a going concern. Our business model relies upon generating new sales to existing and new customers. We closed new sales in 2006 and improved our quarterly operating cash flow from $(1.9) million for Q2 2006, to $(864,000) for Q3 2006, and to $21,000 for Q4 2006. However, such sales have not been sufficient to generate sustained positive cash flow from operations, or profitability. As a result, it is unclear if or when we can expect to close significant sales to new or existing customers; and until we repeatedly do so, we are likely to continue to experience negative cash flow from operations and losses. If we do not close significant future sales, our existing cash resources will not be sufficient to fund our operations beyond Q2 2007. Under such circumstances, we would be required to pursue one or a combination of the following remedies: seek additional sources of financing, further reduce operating expenses, sell part or all of our assets, or terminate operations. There can be no assurance that we will be successful achieving sufficient cash flow.

We continue to experience difficulty in securing customer revenue

We have experienced difficulty closing substantial new sales, and it is unclear when or if we can expect to predictably close material sales to new or existing customers. Our prior strategy of selling small, proof-of-concept initial “penetrate” projects, and then seeking to “radiate” into the account by selling additional services and licenses was not successful in generating sufficient sales to achieve profitability or positive cash flow. Under the leadership of our Chief Executive Officer, Robert W. Felton, we changed our business model to focus on selling larger consulting projects. Although we expect to be more successful with this new model, our experience with the new model is limited to this year. Furthermore, our uncertain future may make it less likely for customers to want to do business with us. As a result, there is no assurance that we will be able to convince existing customers or future prospective customers to purchase products or services from us or that any customer revenue that is achieved can be sustained. If we are unable to obtain future customer revenue or outside financing, our operations, financial condition, liquidity, and prospects will be materially and adversely affected, and we would be required to pursue one or a combination of the following remedies: seek additional sources of financing, further reduce operating expenses, sell part or all of our assets, or terminate operations.

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

We believe that a customer’s decision to purchase significant products or services from us can involve a significant commitment of resources and be influenced by customer budget cycles. To successfully sell our products and services, we generally must educate our potential customers regarding the use and benefit of our products and services. Getting new customers to purchase significant licenses or services can require significant time and resources. Consequently, the period between initial contact and the purchase of our products or services can be long and subject to delays associated with the lengthy budgeting, approval, and competitive evaluation processes that typically accompany significant capital expenditures. Sales delays could cause our operating results to vary widely. There can be no assurance that we will not experience sales delays in the future. In addition, we face a challenging sales environment and there can be no assurance that we will have sales in the future.

~~TenFold currently~~We ~~owns~~are nosubstantially ~~real~~dependent ~~property.~~on ~~Below is~~ a ~~description~~small number of ~~our~~customers ~~leased property~~ and the ~~status~~loss of ~~each~~one ~~facility~~or atmore ~~December~~of ~~31,~~these ~~2004:~~customers may cause revenues and cash flow to decline

Location	Sq. Feet	Lease expires	Use
South Jordan , UT	22,310	September 2007	Corporate headquarters, research and development, consulting, support, education, sales, executive and administrative activities.
San Francisco, CA	3,518	Month to month	Research and development, sales, executive and administrative activities.
Chicago, IL	1,000	May 2005	Sales, and consulting activities.
Irving, TX	23,386	April 2005	We no longer occupy this property. We have subleased 15,404 sq. feet of this space for the remaining term.

We have derived, and over the near term we expect to continue to derive, a significant portion of our revenues and cash flow from a limited number of customers. For example, three customers accounted for a total of 47 percent of our total revenues for the year ended December 31, 2006 (individually 21 percent, 16 percent, and 10 percent, respectively). For the year ended December 31, 2005, three customers accounted for a total of 49 percent of total revenue (individually 20 percent, 18 percent and 11 percent, respectively). Significant reductions in the amount of business major customers conduct with us has previously and may in the future, materially and adversely affect our business, results of operations, financial position and liquidity. Replacing the loss of a major customer is unpredictable, and we have not been successful in doing so in the past. Revenues and cash flows from a single customer or a few major customers may constitute a significant portion of our total revenues and cash inflows in a particular period, then decline as the volume of work performed for specific customers decreases as they complete projects. A major customer in one period may not continue to purchase significant licenses or services from us in a subsequent period.

WeThe ~~conduct~~customer ~~much~~accounting offor ~~our operations~~21 ~~from~~percent of our ~~principal~~total ~~executive~~revenues ~~office~~for ~~located~~the ~~near~~year ~~Salt~~ended ~~Lake~~December 31, ~~City~~2006, ~~Utah~~DevonWay, ~~where~~is wea ~~lease~~related ~~22,310~~person. ~~square~~The ~~feet~~revenue ~~under~~from DevonWay ain ~~lease~~2006 ~~that~~was ~~expires~~primarily infrom ~~September~~the ~~2007.~~recognition ~~Our~~of ~~staff~~previously ~~currently~~deferred ~~work~~revenue atfrom ~~this~~a ~~office,~~single atlarge ~~our~~license ~~San~~transaction ~~Francisco~~in ~~and~~2005. ~~Chicago~~We ~~offices,~~do ~~at customer~~not ~~sites,~~expect orDevonWay ~~from~~to ~~home~~account ~~offices.~~for ~~During~~a ~~2005~~significant percentage of our revenues after December 31, we2006. doSee Note ~~not~~17 ~~presently~~of ~~anticipate~~Notes ~~needing~~to ~~material~~Financial ~~additional~~Statements ~~office~~for ~~space~~more information.

Our growth and success depends on our ability to successfully implement our new business ~~Item~~model; 3.however, ~~Legal~~we ~~Proceedings~~have limited experience with the new model

~~See~~Under the leadership of our new Chief Executive Officer, Robert W. ~~Part~~Felton, IVwe changed our business model to focus on selling larger consulting projects, ~~Item~~instead 15of the smaller prototype application projects that we primarily sold in 2005. Although we hope to be more successful with this new model, ~~Note~~our 10experience with the new model is limited to this year. Under this new model, we expect to take on larger, more difficult and complex consulting projects than we typically have in recent years. Under our original fixed-price project business model that we discontinued several years ago, we received customer complaints and lawsuits concerning some of ~~Notes~~our projects. Although we have substantially changed our business model, including no longer offering to ~~Consolidated~~do ~~Financial~~such ~~Statements~~large ~~for~~projects on a ~~description~~fixed-price ofbasis ~~legal~~or providing ~~proceedings~~a money-back guarantee, we cannot be certain that we will not receive customer complaints in the future. Such complaints would likely adversely affect our ability to sell to other customers. If our new strategy for selling and delivering our services and products is unsuccessful, or if we are unable to close significant new business within the time frames anticipated, our revenues and operating results will continue to suffer.

~~Item~~Our 4.historical ~~Submission~~quarterly ofoperating ~~Matters~~results tohave avaried ~~Vote~~significantly ofand ~~Security~~our ~~Holders~~future operating results could vary

~~None~~Historically, our quarterly operating results have varied significantly. For example, during some years, we have had quarterly profits followed by losses in subsequent quarters. Our future operating results may vary significantly in the future as well. Until we achieve and sustain material sales to new or existing customers, we expect to continue to experience negative cash flow from operations and losses.

19Our future prospects are difficult to evaluate

In light of our operating results for recent periods and the continued difficult sales environment we face and in the technology sector in general, it is difficult to evaluate our future prospects. There can be no assurance that we will be able to successfully complete current or new projects. Additionally, our failure to successfully complete any current or new projects may have a material adverse impact on our financial position and results of operations. We cannot be certain that our business strategy will succeed.

~~Item~~Our 5.failure ~~Market~~to ~~for~~attract ~~Registrant’s~~and ~~Common~~retain ~~Equity~~highly skilled employees, ~~Related~~particularly ~~Stockholder~~developers, ~~Matters~~consultants, project managers and other ~~Issuer~~senior ~~Purchases~~technical ofpersonnel, ~~Equity~~could ~~Securities~~impair our ability to complete projects and expand our business

Our ~~common~~Development ~~stock~~organization and isservices ~~quoted~~business are labor intensive. We currently have only a small number of consultants in our consulting organization. We expect to supplement them on ~~the~~projects ~~OTC~~with ~~Bulletin~~members ~~Board~~of ~~under~~our Development organization for projects in the ~~trading~~near ~~symbol~~term. Longer ~~“TENF~~term, our success will depend in large part upon our ability to attract, retain, train, and motivate highly skilled employees, particularly developers, consultants, project managers and other senior technical personnel.~~OB.”~~ ~~Our~~Any ~~high~~failure on our part to do so would impair our ability to develop new technology, adequately manage and ~~low~~complete ~~prices~~existing byprojects, ~~quarter~~bid ~~during~~for ~~2004~~and obtain new projects, and ~~2003~~expand business. There exists significant competition for employees with the skills required to perform the services we offer. Qualified developers, consultants, project managers and senior technical staff are ~~presented~~in ~~below~~great demand and are likely to remain a limited resource for the foreseeable future. ~~These~~Our ~~prices~~current ~~reflect~~financial ~~inter-dealer~~condition, ~~quotations~~and our prior restructurings and related headcount reductions, may ~~not~~make ~~represent~~it ~~actual~~more ~~transactions~~difficult for us to retain and compete for such employees. There can be no assurance that we will be successful in retaining, training, and motivating our employees or in attracting new, highly skilled employees. If we are unsuccessful in this effort or if our employees are unable to achieve expected performance levels, our business will be harmed.

	2004
	HIGH		LOW
First Quarter	$	5.11	$	2.55
Second Quarter	$	2.68	$	0.88
Third Quarter	$	1.76	$	1.05
Fourth Quarter	$	1.35	$	0.60
	2003
	HIGH		LOW
First Quarter	$	0.39	$	0.14
Second Quarter	$	3.00	$	0.30
Third Quarter	$	2.77	$	1.23
Fourth Quarter	$	3.41	$	1.85

A loss of Robert W. Felton, Jeffrey L. Walker, or any other key employee could impair our business

OnOur ~~December~~industry 31is competitive and we are substantially dependent upon the continued service of our existing executive personnel, ~~2004~~especially Robert W. Felton, Chairman, President, and Chief Executive Officer. Furthermore, our products and technologies are complex and we ~~had~~are ~~approximately~~substantially ~~216~~dependent ~~stockholders~~upon ofthe ~~record~~continued service of our ~~common~~senior ~~stock~~technical ~~and~~staff, 46including Jeffrey L. Walker,~~377~~ Executive Vice President,~~219~~ ~~shares~~and Chief Technology Officer. If a key employee resigns to join a competitor or to form a competing company, the loss of the employee and any resulting loss of existing or potential customers to the competing company would harm our ~~common~~business. ~~stock~~We ~~were~~do ~~issued~~not ~~and~~carry ~~outstanding~~key-man life insurance on any of our employees. We have not entered into employment agreements with our executives. 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.

WeIf ~~have~~we ~~never~~fail ~~declared or paid dividends on our common stock. We expect~~ to ~~retain~~adequately ~~any~~anticipate ~~earnings~~employee ~~generated by our operations for the development~~ and ~~growth of~~resource ~~our~~utilization ~~business~~rates, ~~and we do not anticipate paying any dividends to~~ our ~~stockholders~~operating ~~for~~results ~~the~~could ~~foreseeable~~suffer ~~future.~~

~~Equity~~A ~~Compensation~~high ~~Plan~~percentage ~~Information~~of our operating expenses, particularly personnel and rent, are relatively fixed in advance of any particular quarter. As a result, unanticipated variations in the number, or progress toward completion, of our projects or in employee utilization rates did and may continue to cause significant variations in operating results in any particular quarter and could result in quarterly losses. Time-and-materials consulting arrangements can typically be terminated by a customer on short notice. An unanticipated termination of a major project, the delay of a project, or the completion during a quarter of several projects has in the past and may continue to result in under-utilized employees and could, therefore, cause us to suffer quarterly losses or cause adverse results of operations.

~~The~~Our ~~following~~errors ~~table~~and ~~provides~~omissions ~~the~~coverage ~~information about our common stock that~~ may benot ~~issued~~cover ~~upon~~contractual ~~the~~disputes exercise of options and rights under all of our existing equity compensation plans as of December 31, 2004, including the 1993 Flexible Stock Incentive Plan, the 1999 Stock Plan, the 1999 Employee Stock Purchase Plan, and the 2000 Employee Stock Option Plan.

Plan category	Number of securities tobe issued upon exerciseof outstanding options,warrants and rights asof December 31, 2004 (a)		Weighted-averageexercise price ofoutstanding options,warrants and rights (b)		Number of securitiesremaining available forfuture issuance underequity compensationplans as of December 31,2004 (excluding securitiesreflected in column (a)) (c)
Equity compensation plans approved by security holders	18,027,271	(1)	$	2.26	5,224,966	(2)
Equity compensation plans not approved by security holders	2,876,050	(3)	$	1.26	3,890,377	(4)
Total	20,903,321		$	2.12	9,115,343

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

~~(1)~~Our ~~4,591,035~~errors toand beomissions ~~issued~~insurance ~~under~~policy is in the form ~~1993~~of ~~Flexible~~an ~~Stock~~industry ~~Incentive~~standard ~~Plan,~~software errors and 13omissions policy. As such,~~436,236~~ toit beonly ~~issued~~covers ~~under~~software errors and omissions that occur after the ~~1999~~delivery ~~Stock~~of ~~Plan~~software and excludes contractual disputes such as service commitments and cost and time related guarantees. We have previously had contractual disputes related to our guarantees.

~~(3)~~ While ~~Issued~~we ~~under~~have substantially changed our business model and no longer offer a money-back guarantee, no assurance can be given that we will not be subject to these types of claims in the ~~2000~~future. ~~Employee~~In ~~Stock~~the ~~Option~~event ~~Plan~~that liabilities from claims are not covered by or exceed our errors and omissions coverage, our business, results of operations, financial position, or liquidity could be materially and adversely affected.

~~(4)~~If ~~Shares~~our ~~available~~software atcontains ~~December~~defects ~~31,~~or ~~2004~~other ~~under~~limitations, ~~the~~we ~~2000~~could ~~Employee~~face ~~Stock~~product ~~Option~~liability ~~Plan.~~exposure

~~2000~~Because ~~Employee~~of ~~Stock~~our ~~Option~~limited ~~Plan.~~operating ~~Our~~history ~~2000~~and ~~Employee~~our ~~Stock~~small ~~Option~~number ~~Plan was adopted by the Board~~ of ~~Directors in December 2000. A total of 7~~customers,~~000,000~~ ~~shares~~we ~~of common stock~~ have ~~been~~completed ~~reserved~~a ~~for~~limited ~~issuance~~number ~~under the 2000 Stock Option Plan. The 2000 Stock Option Plan provides for the granting~~ of ~~nonstatutory~~projects ~~options~~that toare ~~purchase~~now ~~shares~~in ofproduction. ~~our common stock to employees, excluding~~As ~~officers~~a ~~and members of our Board of Directors. Nonstatutory options do not qualify as an Incentive Stock Option within the meaning of Section 422 of the Internal Revenue Code of 1986~~result, asthere ~~amended.~~may ~~The~~be ~~2000~~undiscovered ~~Employee~~material ~~Stock~~defects ~~Option~~in ~~Plan~~our isproducts ~~administered by~~or ~~the Board of Directors~~technology. ~~The plan administrator determines the terms of options granted under the 2000 Stock Option Plan~~Furthermore, ~~including~~complex ~~the~~software ~~number~~products ofoften ~~shares~~contain ~~subject~~errors toor ~~an option~~defects, ~~the~~particularly ~~exercise~~when ~~price,~~first ~~the~~introduced ~~term~~or ~~and~~when ~~exercisability~~new ofversions ~~options, and any vesting~~ or ~~other~~enhancements ~~restrictions~~are ~~that apply to awards~~released. ~~The~~Despite internal ~~2000~~testing ~~Stock~~and ~~Option~~testing ~~Plan allows us to issue options with an exercise price equal to any price determined appropriate~~ by ~~the~~current ~~administrator.~~and Topotential ~~date~~customers, ~~all~~our ~~options~~current ~~issued~~and ~~under~~future ~~the~~products ~~2000~~may ~~Stock~~contain ~~Option Plan~~serious ~~have had exercise prices equal to the fair market value of the common stock on the date the option was granted~~defects. ~~The~~Serious ~~plan~~defects ~~allows~~or ~~for~~errors ~~payment~~could ofresult ~~the~~in ~~exercise~~lost ~~price~~revenues ~~with cash, check, promissory note,~~ or ~~other shares of TenFold common stock, through~~ a ~~brokered~~delay ~~cashless~~in ~~exercise~~market ~~program~~acceptance, orwhich ~~with~~would ~~any~~damage ~~other~~our ~~form of consideration permitted by the administrator. Options issued under the 2000 Stock Option Plan generally vest over a four-year period~~ reputation and ~~expire ten years from the date of grant~~business.

~~The~~Because ~~2000~~our ~~Stock~~customers ~~Option~~may ~~Plan~~use ~~provides~~our products for ~~automatic~~enterprise-scale ~~adjustment of~~applications, ~~shares~~errors, ~~remaining~~defects, ~~available~~or ~~for~~other ~~issuance~~performance asproblems could ~~well~~result asin ~~adjustment~~financial ofor ~~outstanding~~other ~~awards~~damages into ~~the~~customers. ~~event~~Our ofcustomers ~~any~~could ~~stock~~seek ~~split,~~damages ~~stock~~for ~~dividend,~~these orlosses. ~~similar~~Any ~~change~~successful inclaims ~~our~~for ~~capital~~these ~~structure.~~losses, Into the ~~event~~extent wenot ~~were~~covered ~~to be acquired~~ by ~~a third-party acquiror~~insurance, ~~we would~~could ~~expect~~result ~~that~~in ~~outstanding~~our ~~options~~being ~~would~~obligated beto ~~assumed~~pay bysubstantial damages, ~~our~~which ~~acquiror so that they~~ would ~~convert~~cause ~~into~~operating ~~awards~~results to ~~purchase~~suffer. ~~acquiror~~Although ~~stock~~our ~~(adjusted~~license toagreements ~~reflect~~typically ~~the~~contain ~~terms~~provisions ofdesigned ~~the~~to ~~transaction).~~limit If our ~~acquiror did not agree to assume outstanding awards~~liability, ~~then~~ ~~the~~existing ~~vesting~~or offuture ~~such~~laws ~~awards~~or ~~would~~unfavorable ~~accelerate~~judicial indecisions ~~full~~could ~~prior~~negate tothese ~~the~~limitations ~~closing~~ of liability ~~the~~provisions. ~~acquisition~~A ~~and~~product ~~unexercised~~liability ~~awards~~claim ~~would~~brought ~~terminate~~against ~~upon~~us, ~~the~~even ~~closing.~~if ~~Unless~~not ~~terminated earlier~~successful, ~~the~~would ~~2000~~likely ~~Stock~~be ~~Plan~~time ~~will~~consuming ~~terminate~~and ~~in December 2010~~costly.

21We are involved in one litigation matter, and may in the future be involved in further litigation or disputes that may be costly and time-consuming, and if we suffer adverse outcomes, our operating results could suffer

We are involved in a class action suit against more than 300 issuers involving the underwriters of those issuers’ initial public offerings. Although we currently expect to resolve this matter without significant cost to TenFold, that outcome is not assured, and we may in the future face other litigation or disputes with customers, employees, business partners, stockholders, or other third parties. Such litigation or disputes could result in substantial costs and diversion of resources that would harm our business. An unfavorable outcome of this matter may have a material adverse impact on our business, results of operations, financial position, or liquidity.

See Note 9 “Legal Proceedings and Contingencies” of Notes to Financial Statements for more information concerning our litigation and disputes.

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 large part, upon our proprietary EnterpriseTenFold 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 issued three patents in the United States and intend to continue to seek patents on our technology when appropriate. There can be no assurance that the steps we have taken in this regard will be adequate to deter misappropriation of our proprietary information or that we will be able to detect unauthorized use and take appropriate steps to enforce our intellectual property rights. The laws of some countries may not protect our intellectual property rights to the same extent as do the laws of the United States. Furthermore, litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity. This litigation could result in substantial costs and diversion of resources that would harm our business.

WeTo ~~had~~date, nowe ~~sales~~have not been notified that our products infringe the proprietary rights of ~~unregistered~~third ~~stock~~parties, but ~~during~~there ~~2004~~can be no assurance that third parties will not claim infringement by us with respect to current or future products. ~~Our~~We ~~unregistered~~expect ~~stock~~software ~~sales~~developers ~~during~~will ~~2003~~increasingly ~~are~~be subject to infringement claims as ~~follows:~~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 delivery 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 ~~On February 5, 2003,~~ we ~~entered~~fail ~~into~~to asuccessfully ~~Purchase Agreement with the Robert W. Felton Trust for the sale of 3~~compete,~~888,889~~ ~~shares~~our ofrevenues ~~unregistered~~and ~~common~~market ~~stock~~share atwill abe ~~purchase~~adversely ~~price~~affected ~~of $0.18 per share.~~

•The Onmarket ~~December~~for ~~22,~~our ~~2003~~products and services is highly competitive, and if we ~~entered~~are ~~into~~not asuccessful ~~Securities~~in ~~Purchase~~competing ~~Agreement~~in ~~for~~this ~~the~~market, ~~sale~~our revenues and market share will suffer. Many of 5our competitors have significantly greater financial,~~000,000~~ ~~shares~~technical ofand ~~unregistered~~marketing ~~common~~resources, ~~stock~~generate greater ~~for~~revenues, aand ~~purchase~~have ~~price~~greater ofname $2recognition than we do.00 ~~per~~In ~~share~~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.

22International political and economic uncertainty could have an adverse impact on our business and on our operating results

Revenues from customers outside of North America were approximately 8 percent of total revenues for 2006, and approximately 11 percent of total revenues for 2005. The international political and economic uncertainty caused by the ongoing war on terrorism and other international political developments may adversely impact our ability to continue existing relationships with our foreign customers and to develop new business abroad.

Our stock price may continue to be volatile

Our stock price has fluctuated widely in the past and could continue to do so in the future. Your investment in our stock could lose value. Some of the factors that could significantly affect the market price of our stock, in addition to those mentioned in this section, include: further decreases in our cash resources, changes in our revenue; changes in our customer base including the loss of a major customer; changes in management; variations in our quarterly financial results; problems implementing our business model; reports or earnings estimates published by financial analysts; changes in political, economic and market conditions either generally or specifically to particular industries; and fluctuations in stock prices generally, particularly with respect to the stock prices for other technology companies. A significant drop in our stock price could expose us to the risk of securities class action lawsuits. Defending against such lawsuits could result in substantial costs and divert management’s attention and resources. An unfavorable outcome of such a matter may have a material adverse impact on our business, results of operations, financial position, or liquidity.

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 67 percent of our voting stock (as calculated using the SEC’s conventions). These stockholders acting together 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 ~~selected~~anti-takeover ~~consolidated~~provisions ~~statement~~in ofour ~~operations~~charter ~~data~~documents ~~for the years ended December 31, 2004, 2003, 2002, 2001,~~ and/or ~~2000,~~under ~~and~~Delaware ~~the~~law ~~selected~~could ~~consolidated~~discourage ~~balance~~a ~~sheet~~takeover ~~data as of December 31, 2004, 2003, 2002, 2001, and 2000, are derived~~that ~~from,~~stockholders ~~and~~may ~~are~~consider ~~qualified~~favorable ~~by reference to, our audited financial statements. The historical results are not necessarily indicative of future results.~~

	Year ended December 31,
	2004			2003			2002			2001			2000
	(in thousands, except per share data)
Consolidated Statement of Operations Data:
Revenues:
License	$	359		$	248		$	207		$	8,532		$	12,416
Subscription		—			10,431			15,548			689			—
Services and other		17,234			17,030			12,475			45,692			57,117
Total revenues		17,593			27,709			28,230			54,913			69,533
Operating expenses:
Cost of revenues		5,883			9,454			12,998			30,990			69,151
Sales and marketing		2,861			1,088			1,985			5,556			22,558
Research and development		3,734			3,471			6,229			12,672			25,660
General and administrative		2,315			3,046			7,803			11,113			25,664
Amortization of goodwill and acquired intangibles		—			—			—			962			4,603
Special charges		—			(673	)		2,838			18,876			4,810
Total operating expenses		14,793			16,386			31,853			80,169			152,446
Income (loss) from operations		2,800			11,323			(3,623	)		(25,256	)		(82,913	)
Total other income, net		240			2,456			1,938			12,553			2,152
Income (loss) before income taxes		3,040			13,779			(1,685	)		(12,703	)		(80,761	)
Provision (benefit) for income taxes		(376	)		32			(497	)		2,965			(619	)
Net income (loss)	$	3,416		$	13,747		$	(1,188	)	$	(15,668	)	$	(80,142	)
Basic earnings (loss) per common share	$	0.07		$	0.34		$	(0.03	)	$	(0.44	)	$	(2.29	)
Diluted earnings (loss) per common share	$	0.06		$	0.29		$	(0.03	)	$	(0.44	)	$	(2.29	)
Weighted average shares - basic (1)		46,204			40,634			37,249			35,623			35,035
Weighted average shares - diluted (1)		54,924			47,623			37,249			35,623			35,035
Consolidated Balance Sheet Data (at period end):
Cash and cash equivalents	$	5,225		$	12,236		$	3,838		$	10,969		$	13,854
Total current assets		5,715			13,489			7,654			16,604			19,751
Total assets		6,415			14,417			9,284			27,476			65,275
Total current liabilities		4,098			15,857			34,484			50,942			66,088
Long-term obligations, redeemable preferred and common stock, less current portion		36			—			25			1,878			10,023
Stockholders’ equity (deficit)		2,281			(1,440	)		(25,225	)		(25,344	)		(11,448	)
Working capital (deficit)		1,617			(2,368	)		(26,830	)		(34,338	)		(46,337	)

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.

~~(1)~~23 ~~See Note 4 to the 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.~~

~~The~~Item ~~following tables set forth certain unaudited quarterly results of our operations for 2004 and 2003~~1B. InUnresolved ~~the~~Staff 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. Comments

	Quarter ended
	Mar 31,2003		June 30,2003		Sept 30,2003			Dec 31, 2003		Mar 31,2004			June 30,2004		Sept 30,2004			Dec 31,2004
	(in thousands, except per share data)(unaudited)
Revenues:
License	$	3	$	42	$	11		$	192	$	152		$	108	$	33		$	66
Subscription		6,052		4,379		—			—		—			—		—			—
Services and other		3,313		5,120		4,547			4,050		3,439			10,385		1,723			1,687
Total revenues		9,368		9,541		4,558			4,242		3,591			10,493		1,756			1,753
Operating expenses:
Cost of revenues		2,275		2,240		2,905			2,034		2,187			1,794		1,038			864
Sales and marketing		225		265		298			300		315			581		1,045			920
Research and development		915		982		862			712		824			980		982			948
General and administrative		1,241		773		697			335		578			644		676			417
Special charges		—		—		(673	)		—		—			—		—			—
Total operating expenses		4,656		4,260		4,089			3,381		3,904			3,999		3,741			3,149
Income (loss) from operations		4,712		5,281		469			861		(313	)		6,494		(1,985	)		(1,396	)
Total other income, net		2,295		82		3			76		107			86		23			24
Income (loss) before income taxes		7,007		5,363		472			937		(206	)		6,580		(1,962	)		(1,372	)
Provision (benefit) for income taxes		12		5		—			15		—			4		—			(380	)
Net income (loss)	$	6,995	$	5,358	$	472		$	922	$	(206	)	$	6,576	$	(1,962	)	$	(992	)
Basic earnings (loss) per common share	$	0.18	$	0.13	$	0.01		$	0.02	$	(0.00	)	$	0.14	$	(0.04	)	$	(0.02	)
Diluted earnings (loss) per common share	$	0.18	$	0.11	$	0.01		$	0.02	$	(0.00	)	$	0.12	$	(0.04	)	$	(0.02	)

None.

24Item 2. Properties

TenFold currently owns no real property. Below are descriptions of our leased property and the status of each facility at December 31, 2006:


Location	Sq. Feet	Lease expires	Use
South Jordan , UT	22,310	August 31, 2007	Corporate headquarters, research and development, consulting, support, education, sales, executive and administrative activities.
San Francisco, CA	3,518	April 30, 2007	Research and development, and consulting.

We conduct much of our operations from our corporate headquarters located near Salt Lake City, Utah. Our staff currently work at this office, at our San Francisco office, at customer sites, or from home offices. During 2007, we do not presently anticipate needing material additional office space.

Item 3.

Legal Proceedings

See Part IV, Item 15, Note 9 of Notes to Financial Statements for a description of legal proceedings.

Item 4.

Submission of Matters to a Vote of Security Holders

None.

~~Business~~ PART ~~Overview~~II

~~TenFold~~Item is the provider of EnterpriseTenFold™ (formerly “Universal Application”), a software applications platform that reduces enterprise applications design, development, deployment, and maintenance timeframes and costs5. ~~EnterpriseTenFold~~Market ~~automates~~for ~~most~~Registrant’s ofCommon ~~what applications programmers typically do~~Equity, ~~and~~Related ~~empowers~~Stockholder ~~small~~Matters ~~teams of business people~~ and ITIssuer ~~professionals~~Purchases to design, build, test, deploy, and maintain complex, transaction-intensive applications, with significantly reduced demand on scarce IT resources as compared to other applications development approaches. Using a small team of ~~business~~Equity people supplemented with IT professionals for rapid applications development is a significant change from the industry-standard approach that relies on large teams of IT professionals who expend significant numbers of person years of effort to design, program, test, change, and deploy enterprise applications. We believe that with EnterpriseTenFold, customers get high-quality, complex enterprise applications into production faster and at significantly lower cost than with other applications development technologies. Securities

WeOur ~~believe~~common ~~EnterpriseTenFold~~stock ~~has~~is ~~two~~quoted ~~unique~~on ~~attributes~~the ~~that~~OTC ~~make~~Bulletin ~~building complex,~~Board ~~database-intensive~~under ~~and~~the ~~transaction-intensive~~trading ~~applications~~symbol ~~substantially cheaper, easier, and faster than traditional applications development methodologies~~"TENF.OB." ~~First,~~Our ~~because~~high ~~EnterpriseTenFold automates most of what applications programmers typically do~~ and ~~automatically~~low ~~includes~~prices ~~advanced~~by ~~applications~~quarter ~~functionality,~~during we2006 ~~believe customers get more powerful, higher quality applications faster~~ and at2005 aare presented ~~fraction~~below. ofThese ~~the~~prices ~~cost~~reflect ~~of traditional programming approaches. Second, since TenFold~~inter-~~powered~~dealer ~~applications~~quotations ~~development provides a tool~~ and ~~methodology~~may ~~that~~not ~~business~~represent ~~people~~actual ~~can effectively use, we believe it enables organizations to directly leverage their business experience and insight and to adapt applications easily to meet changing business requirements~~transactions.

Our business model focuses on providing EnterpriseTenFold and our assistance through time-and-materials consulting, training, and support, to customers who use their own business teams and our services partners to build and maintain applications.


	2006
	HIGH		LOW
First Quarter	$	0.45	$	0.20
Second Quarter	$	0.50	$	0.21
Third Quarter	$	0.32	$	0.15
Fourth Quarter	$	0.41	$	0.15

	2005
	HIGH		LOW
First Quarter	$	0.99	$	0.36
Second Quarter	$	0.59	$	0.34
Third Quarter	$	0.41	$	0.31
Fourth Quarter	$	0.40	$	0.21

~~Critical~~On ~~Accounting~~December 31, ~~Policies~~2006, we had approximately 243 stockholders of record of our common stock and 46,557,745 shares of our common stock were issued and outstanding.

~~The~~We ~~fundamental~~have ~~objective~~never ofdeclared ~~financial~~or ~~reporting~~paid isdividends toon ~~provide useful information that allows a reader to comprehend~~ our ~~business~~common ~~activities~~stock. ToWe ~~aid~~expect to inretain ~~that~~any ~~understanding,~~earnings ~~management~~generated ~~has~~by ~~identified~~our ~~the~~operations ~~“critical~~for ~~accounting policies” below. These policies have~~ the ~~potential~~development toand ~~have~~growth aof ~~more significant impact on~~ our ~~financial statements~~business, ~~either~~and ~~because~~we ofdo ~~the~~not ~~significance~~anticipate ofpaying ~~the~~any ~~financial~~dividends ~~statement item~~ to ~~which~~our ~~they~~stockholders ~~relate,~~for ~~or because they require judgment and estimation due to~~ the ~~uncertainty~~foreseeable ~~involved in measuring, at a specific point in time, events which are continuous in nature~~future.

~~Revenue~~Equity ~~Recognition~~Compensation ~~and Project~~Plan ~~Profitability~~Information

WeThe ~~believe risks relating to~~following ~~revenue~~table ~~recognition~~provides ~~primarily include~~ the ~~judgment~~information ~~required~~about toour ~~determine~~common ~~project~~stock ~~profit~~that ormay ~~loss~~be ~~projections~~issued onupon ~~time-and-material~~the ~~contracts.~~exercise Weof ~~recognize~~options ~~time-~~and~~-materials~~ ~~revenue~~rights atunder ~~the~~all ~~lowest point in the range~~ of ~~estimated~~our ~~profit~~existing ~~margin,~~equity ~~which represents~~compensation ~~our~~plans ~~best~~as ~~estimate~~ of ~~the~~December 31, ~~profit~~2006, toincluding 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.~~1993 ~~These~~Flexible ~~variances~~Stock ~~between~~Incentive ~~management’s~~Plan, ~~estimate of~~ the 1999 ~~lowest~~Stock ~~point~~Plan, in the ~~range~~1999 ofEmployee ~~estimated~~Stock ~~profit~~Purchase ~~margin~~Plan, and ~~actual~~the ~~results~~2000 ~~may~~Employee ~~result~~Stock inOption ~~a significant adjustment to our results of operations and financial position~~Plan.

Previously, risks relating to revenue recognition also included the judgment and estimation 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 TenFold converted its remaining on-going legacy fixed-price contracts to time-and-materials arrangements. As a result, TenFold had no significant on-going fixed-price contracts at December 31, 2004 and December 31, 2003.

Plan category

Number of securities to

be issued upon exercise

of outstanding options

as of December 31, 2006

(a)

Weighted-average

exercise price of

outstanding options

(b)

Number of securities remaining
available for future issuance
under equity compensation plans
as of December 31, 2006
(excluding securities reflected in
column (a))

(c)

Equity compensation

plans approved by

security holders

19,295,821(1)

$1.32

8,775,890(2)

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

~~Restructuring~~(1) ~~Charges~~5,115,535 to be issued under the 1993 Flexible Stock Incentive Plan, and 14,180,286 to be issued under the 1999 Stock Plan.

We(2) ~~recognize restructuring charges consistent with EITF 94-3~~290,673 ~~prior~~available tofor ~~January~~future 1,issuance ~~2003~~under ~~and~~the ~~consistent~~1993 ~~with~~Flexible ~~SFAS~~Stock ~~146~~Incentive ~~beginning on January 1~~Plan, ~~2003. For amounts accrued at December 31~~6, ~~2002~~985,145 weavailable ~~reduce current charges~~ for ~~abandoned~~future ~~facilities~~issuance ~~with~~under ~~sublease income. Management analyzes current market conditions including current lease rates in~~ the ~~respective~~1999 ~~geographic~~Stock ~~regions~~Plan, ~~vacancy~~and ~~rates~~1,500,072 ~~and~~available ~~costs~~for ~~associated~~future ~~with~~issuance ~~subleasing~~under ~~when evaluating~~ the ~~reasonableness~~1999 ofEmployee ~~future~~Stock ~~sublease~~Purchase ~~income~~Plan. 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~~(3) ofIssued ~~Operations~~under the 2000 Employee Stock Option Plan.

~~The~~(4) ~~following~~Shares ~~table~~available ~~sets~~at ~~forth~~December 31, ~~for~~2006 ~~the~~under ~~periods indicated,~~ the ~~percentage relationship~~2000 ofEmployee ~~selected~~Stock ~~items~~Option ~~from our statements of operations to total revenues~~Plan.

	Years Ended December 31,
	2004		2003		2002
Revenues:
License	2	%	1	%	1	%
Subscription	—		38	%	55	%
Services and other	98	%	61	%	44	%
Total revenues	100	%	100	%	100	%
Operating expenses:
Cost of revenues	34	%	34	%	46	%
Sales and marketing	16	%	4	%	7	%
Research and development	21	%	12	%	22	%
General and administrative	13	%	11	%	28	%
Special charges	—		(2	)%	10	%
Total operating expenses	84	%	59	%	113	%
Income (loss) from operations	16	%	41	%	(13	)%
Total other income, net	1	%	9	%	7	%
Income (loss) before income taxes	17	%	50	%	(6	)%
Provision (benefit) for income taxes	(2	)%	—		(2	)%
Net income (loss)	19	%	50	%	(4	)%

2000 Employee Stock Option Plan. The Board of Directors adopted our 2000 Employee Stock Option Plan in December 2000. A total of 7,000,000 shares of common stock have been reserved for issuance under the 2000 Stock Option Plan. The 2000 Stock Option Plan provides for the granting of nonstatutory options to purchase shares of our common stock to employees, excluding officers and members of our Board of Directors. Nonstatutory options do not qualify as an Incentive Stock Option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended. The Board of Directors administers the 2000 Employee Stock Option Plan. The plan administrator determines the terms of options granted under the 2000 Stock Option Plan, including the number of shares subject to an option, the exercise price, the term and exercisability of options, and any vesting or other restrictions that apply to awards. The 2000 Stock Option Plan allows us to issue options with an exercise price equal to any price determined appropriate by the administrator. To date, all options issued under the 2000 Stock Option Plan have had exercise prices equal to the fair market value of the common stock on the date the option was granted. The plan allows for payment of the exercise price with cash, check, promissory note, or other shares of TenFold common stock, through a brokered cashless exercise program, or with any other form of consideration permitted by the administrator. Options issued under the 2000 Stock Option Plan generally vest over a four-year period and expire ten years from the date of grant.

~~2004~~The 2000 Stock Option Plan provides for automatic adjustment of shares remaining available for issuance as ~~Compared~~well as adjustment of outstanding awards in the event of any stock split, stock dividend, or similar change in our capital structure. In the event we were to ~~2003~~be acquired by a third-party acquiror, we would expect that outstanding options would be assumed by our acquiror so that they would convert into awards to purchase acquiror stock (adjusted to reflect the terms of the transaction). If our acquiror did not agree to assume outstanding awards, then the vesting of such awards would accelerate in full prior to the closing of the acquisition and unexercised awards would terminate upon the closing. Unless terminated earlier, the 2000 Stock Plan will terminate in December 2010.

~~Revenues~~26

Total revenues decreased $10.1 million or 37 percent, to $17.6 million for the year ended December 31, 2004, as compared to $27.7 million for the year ended December 31, 2003.

~~Excluding~~Recent ~~the~~Sales ~~effect~~ of ~~this~~Unregistered ~~Cedars~~Securities transaction, we would have had total revenues of $9.5 million, and a net loss of $4.5 million for the year ended December 31, 2004. The increase in services and other revenues during the year ended December 31, 2004 from this transaction, was partially offset by decreases in revenues from certain other customers who are purchasing less time-and-materials consulting from us over time as they complete their current application development projects and become more self-sufficient. Services and other revenues for the year ended December 31, 2003 include $1.5 million from the reduction over time of a guarantee on one prior fixed-price contract, and $600,000 recognized upon completion of training obligations associated with a contract signed in 2002.

~~License~~On ~~revenues~~March 29, ~~increased $111~~2006,~~000~~ towe ~~$359,000~~entered into a Securities Purchase Agreement for the ~~year~~sale ~~ended~~of ~~December 31~~1,500,000 ~~2004~~shares of unregistered convertible preferred stock and warrants. The preferred shares are convertible into 20,315,805 asshares ~~compared~~of common stock. The warrants are to ~~$248~~purchase 10,~~000~~157,899 ~~for~~shares ~~the~~of ~~year~~common ~~ended~~stock ~~December~~at 31an exercise price of $0.62 per share, ~~2003~~with a 5-year term. The transaction generated gross ~~increase~~proceeds inof ~~license~~approximately ~~revenues~~$6.3 ismillion ~~primarily~~(before ~~due~~expenses toof ~~the~~approximately ~~amortization~~$227,000, and repayment of ~~the~~$1.1 ~~revenue~~million ~~from~~of ainterim ~~project~~financing ~~related~~obligations). ~~license~~Several ~~sold~~members inof ~~late~~our ~~2003~~Board ~~into~~of ~~revenues~~Directors ~~during~~(or ~~early~~investment ~~2004,~~entities associated with them) and an Executive ~~increase~~Officer participated in the ~~volume~~transaction, ofproviding ~~new~~approximately ~~license~~$4.7 ~~sales~~million ~~during~~of ~~2004~~the asgross ~~compared~~proceeds toraised: ~~2003.~~

We• ~~had~~Robert noW. ~~subscription~~Felton ~~revenues~~Trust ~~for~~invested ~~the year ended December 31, 2004, as compared to~~ $~~10.4~~2 million. ~~for~~We ~~the~~repaid ~~year ended December 31~~$709,000 ~~2003.~~of ~~Subscription~~interim ~~revenues~~financing ~~represent revenue from contracts that include a subscription~~ to ~~new product releases on a “when and if available” basis~~Mr. ~~For certain contracts~~Felton, ~~including~~our ~~a subscription to future software products when and if they become available~~Chairman, we recognize the fees for the software products ratably over the subscription term beginning with delivery of the first software product. For contracts that include a service element for which the fair value is undeterminablePresident, and ~~the~~Chief ~~contract~~Executive ~~includes a subscription to new product releases on a “when and if available basis~~Officer,” wefrom ~~recognize~~ the ~~entire~~proceeds ~~contract fee ratably over the subscription period as subscription revenue. During the quarter ended June 30, 2003, our existing subscription contracts reached the end~~ of ~~their subscription periods, and we recognized~~ the ~~final~~capital ~~remaining subscription revenue for these contracts~~raising.

~~Revenues~~• ~~from~~First ~~customers~~Media ~~outside~~TF ofHoldings ~~North~~LLC, ~~America~~an ~~were approximately~~investment 20entity ~~percent~~associated ofwith ~~total~~TenFold ~~revenues~~Director ~~for~~Ralph ~~2004~~W. asHardy ~~compared~~Jr., toinvested 29$2 ~~percent of total revenues for the same period in 2003~~million. ~~Revenues~~We ~~from~~repaid ~~customers~~$205,000 ~~in the United Kingdom were 19 percent~~ of ~~total~~interim ~~revenues~~financing ~~for 2004 as compared~~ to 29First ~~percent~~Media ofTF ~~total revenues~~Holdings ~~for~~LLC ~~2003. The decrease in percent on total revenues~~ from the ~~United~~proceeds ~~Kingdom during 2004 is primarily the result~~ of the ~~completion~~capital ~~during the quarter ended September 30, 2004, of a UK consulting project we commenced in 2002~~raising. Revenues from operations in Argentina were 0.9 percent of total revenues for 2004 and 0.5 percent of total revenues for 2003. At December 31, 2004, our long-lived assets are deployed in the United States.

~~Three~~• ~~customers~~TenFold ~~accounted~~Director ~~for~~Steven 50H. ~~percent~~Coltrin ~~(Cedars)~~invested $500,000. 22We ~~percent~~used ~~and~~$206,000 ~~15 percent~~ of ~~our~~the ~~total~~proceeds ~~revenues~~of ~~for~~ the ~~year~~capital ~~ended~~raising ~~December 31, 2004, compared~~ to ~~three~~pay ~~customers~~accounts ~~accounting~~payable ~~for~~due 41to ~~percent~~his firm, 25Coltrin ~~percent~~& ~~and 23 percent of our total revenues for the year ended December 31~~Associates, ~~2003. No other single customer accounted~~ for ~~more~~marketing ~~than 10~~and ~~percent~~public ofrelations ~~our~~work ~~total~~provided ~~revenues~~to ~~for~~TenFold ~~the~~in ~~year~~earlier ~~ended December 31, 2004 or 2003~~periods.

~~Our~~• ~~revenues~~Samer ~~from~~Diab, ~~the~~Senior ~~two~~Vice ~~customers accounting for 22 percent and 15 percent of our total revenues for the year ended December 31~~President, ~~2004,~~Customer ~~which is primarily time-and-materials consulting revenue~~Services, ~~has~~invested ~~decreased over time as these customers complete their current application development projects and become more self-sufficient~~$230,000. ~~The customer accounting for 15 percent of our total revenues for the year~~

27The other purchasers under the Securities Purchase Agreement were GMS Family Investors LLC, Jon M. Huntsman, Ronald Mika and Rationalwave Onshore Equity Fund L.P.

We also repaid $205,000 of interim financing to Wasatch Investments LLC, an investment entity associated with TenFold Director Robert E. Parsons, Jr., from the proceeds of the capital raising.

On December 19, 2006, we completed a private placement and received gross proceeds of approximately $1.3 million (before expenses of approximately $90,000) from the sale to six private investors of (i) 312,009 shares of Preferred Stock convertible into 4,225,809 shares of common stock, and (ii) warrants to purchase 2,112,904 shares of common stock at an exercise price of $0.62 per share, with a 5 year term. The sale of preferred stock and warrants was pursuant to a Securities Purchase Agreement, dated December 18, 2006, by and between TenFold and the Daniel S. & Stephanie A. Martin Living Trust, Jonathan Andron, Rationalwave Onshore Equity Fund, L.P., David Kaplan, Lawrence Kaplan, and Stanley Kaplan.

We had no sales of unregistered stock during 2005 or 2004.

All sales of unregistered securities listed above were made to “accredited investors” pursuant to the exemption from registration provided in Rule 506, which is part of Regulation D under the Securities Act of 1933.

Other than as set forth above, the proceeds of the March and December preferred stock offerings have been used for general corporate purposes.

~~During~~Item the quarter ended December 31, 2004, we recognized from previously deferred revenues, service revenues of approximately $261,000 for work performed and from a reduction of our estimate of work remaining on a customer project6. WeSelected doFinancial ~~not expect to recognize significant revenues in future periods for this customer project.~~ Data

WeThe ~~believe~~selected ~~that~~statement ~~period~~of operations todata ~~period~~for ~~comparisons~~the ~~between~~years ~~license~~ended December 31, ~~subscription~~2006, ~~and~~2005, ~~services~~2004, ~~revenues~~2003, ~~are~~and ~~not~~2002, ~~necessarily indicative~~and ofthe ~~future~~selected ~~performance~~balance ~~given~~sheet ~~the~~data ~~nature~~as of ~~our~~December 31, ~~product~~2006, ~~and~~2005, ~~services~~2004, ~~offerings~~2003, and ~~the~~2002, ~~relative~~are ~~emphasis~~derived wefrom, ~~apply~~and are qualified by reference to, ~~these~~our ~~offerings~~audited financial instatements. ~~any~~The ~~given~~historical ~~period~~results are not necessarily indicative of future results.

We continue to actively sell to new customers. In 2004, we completed a small but growing number of new, small tactical sales transactions. However, these new sales are not material to our overall financial results, and we continue to face a challenging sales environment. As a result, it is unclear when we can expect to achieve significant sales to new or existing customers, and until we do so we are likely to continue to experience losses.


	Year ended December 31,
	2006			2005			2004			2003			2002
	(in thousands, except per share data)
Statement of Operations Data:
Revenues:
License	$	1,424		$	515		$	359		$	248		$	207
Subscription		—			—			—			10,431			15,548
Services and other		3,574			5,195			17,234			17,030			12,475

Total revenues		4,998			5,710			17,593			27,709			28,230

Operating expenses:
Cost of revenues		2,778			2,940			5,883			9,454			12,998
Sales and marketing		812			2,896			2,861			1,088			1,985
Research and development		4,100			3,531			3,734			3,471			6,229
General and administrative		2,818			2,986			2,315			3,046			7,803
Special charges		—			—			—			(673	)		2,838

Total operating expenses		10,508			12,353			14,793			16,386			31,853

Income (loss) from operations		(5,510	)		(6,643	)		2,800			11,323			(3,623	)

Total other income, net		92			137			240			2,456			1,938

Income (loss) before income taxes		(5,418	)		(6,506	)		3,040			13,779			(1,685	)
Provision (benefit) for income taxes		(235	)		(1,072	)		(376	)		32			(497	)

Net income (loss)		(5,183	)		(5,434	)		3,416			13,747			(1,188	)
Deemed dividend related to warrants issued with preferred stock and beneficial conversion feature on preferred stock		(2,207	)		—			—			—			—

Net income (loss) applicable to common shareholders	$	(7,390	)	$	(5,434	)	$	3,416		$	13,747		$	(1,188	)

Basic earnings (loss) per common share	$	(0.16	)	$	(0.12	)	$	0.07		$	0.34		$	(0.03	)

Diluted earnings (loss) per common share	$	(0.16	)	$	(0.12	)	$	0.06		$	0.29		$	(0.03	)

Weighted average shares—basic (1)		46,518			46,423			46,204			40,634			37,249

Weighted average shares—diluted (1)		46,518			46,423			54,924			47,623			37,249


Balance Sheet Data (at period end):
Cash and cash equivalents	$	3,601		$	1,344		$	5,225		$	12,236		$	3,838
Total current assets		4,461			1,716			5,715			13,489			7,654
Total assets		4,676			2,142			6,415			14,417			9,284
Total current liabilities		2,778			5,078			4,098			15,857			34,484
Long-term obligations, redeemable preferred and common stock, less current portion		—			10			36			—			25
Stockholders' equity (deficit)		1,898			(2,946	)		2,281			(1,440	)		(25,225	)
Working capital (deficit)		1,683			(3,362	)		1,617			(2,368	)		(26,830	)

~~Operating~~(1) ~~Expenses~~See Note 4 to the 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.

~~Cost~~28 of Revenues. Cost of revenues consists primarily of compensation and other related costs of personnel and contractors to provide applications development and implementation, support, and training services. Cost of revenues decreased $3.6 million, or 38 percent, to $5.9 million for the year ended December 31, 2004 compared to $9.5 million for the year ended December 31, 2003. The decreases in cost of revenues are primarily due to having fewer staff (particularly subcontractors) working on customer projects as these customers complete their current application development projects and become more self-sufficient.

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 $1.8 million, or 163 percent, to $2.9 million for the year ended December 31, 2004 as compared to $1.1 million for the year ended December 31, 2003. These increases in sales and marketing expenses are primarily due to expanding sales staffing and increasing marketing activities. See Tuning our marketing and sales engine and Broadening awareness of and interest in TenFold technology above for more information.

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 $263,000, or 8%, to $3.7 million for the year ended December 31, 2004, as compared to $3.5 million for the year ended December 31, 2003.

General and Administrative. General and administrative expenses consist primarily of the costs of executive management, finance and administrative staff, business insurance, and professional fees. General and administrative expenses decreased $731,000, or 24 percent, to $2.3 million for the year ended December 31, 2004 as compared to $3.0 million for the year ended December 31, 2003. The decreases in general and administrative expenses are primarily due to lower variable compensation accruals and lower legal expenses.

During the quarter ended March 31, 2004, we reduced some variable compensation accrued during 2003, to lower levels that we believe better reflect our estimates. This reduced operating expenses for the first quarter of 2004 by $219,000.

~~Special~~Supplementary ~~Charges.~~Financial WeInformation incurred no special charges during the year ended December 31, 2004. Special charges for the year ended December 31, 2003 of $(673,000) include restructuring charge adjustments of $(578,000) and asset loss impairment adjustments of ($95,000).

~~Restructuring~~The ~~reserves~~following ~~are~~tables ~~included~~set inforth ~~accounts~~certain ~~payable~~unaudited ~~and~~quarterly ~~accrued~~results ~~liabilities~~of atour ~~December~~operations ~~31,~~for ~~2004~~2006 and 2005. ~~Detail~~In the opinion of management, this information has been prepared on the ~~restructuring~~same ~~charges~~basis as ofthe audited financial statements and ~~for~~all ~~the~~necessary ~~year~~adjustments, ~~ended~~consisting ~~December~~only 31of normal recurring adjustments, ~~2004~~have ~~are~~been ~~summarized~~included in the amounts stated below (to present fairly the quarterly information when read in ~~thousands):~~conjunction with the audited 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.

Restructuring Charges:	Balance atDecember 31,2003			NewCharges			Adjustments			Utilized				Balance at December 31,2004
	Quarter ended
Facilities related	$	531		$	—		$	—		$	(399	)		$	132
	Mar 31,2005				June 30,2005				Sept 30,2005				Dec 31,2005			Mar 31,2006			June 30,2006			Sept 30,2006			Dec 31,2006
	$	531		$	—		$	—		$	(399	)		$	132
	(in thousands, except per share data)(unaudited)
Revenues:
License	$	93			$	223			$	124			$	75		$	87		$	54		$	176		$	1,107
Services and other		1,515				1,478				1,368				834			512			656			931			1,475
Total revenues		1,608				1,701				1,492				909			599			710			1,107			2,582
Operating expenses:
Cost of revenues		994				757				707				482			586			634			704			854
Sales and marketing		714				846				667				669			191			270			216			135
Research and development		943				876				824				888			1,123			1,094			1,073			810
General and administrative		631				592				637				1,126			612			409			1,207			590
Total operating expenses		3,282				3,071				2,835				3,165			2,512			2,407			3,200			2,389
Income (loss) from operations		(1,674	)			(1,370	)			(1,343	)			(2,256	)		(1,913	)		(1,697	)		(2,093	)		193
Total other income, net		99				20				12				6			(11	)		45			28			30
Income (loss) before income taxes		(1,575	)			(1,350	)			(1,331	)			(2,250	)		(1,924	)		(1,652	)		(2,065	)		223
Provision (benefit) for income taxes		1				6				(990	)			(89	)		—			—			—			(235	)
Net income (loss)		(1,576	)			(1,356	)			(341	)			(2,161	)		(1,924	)		(1,652	)		(2,065	)		458
Deemed dividend related to warrants issued with preferred stock and beneficial conversion feature		—				—				—				—			(1,761	)		—			—			(446	)
Net income (loss) applicable to common shareholders	$	(1,576	)		$	(1,356	)		$	(341	)		$	(2,161	)	$	(3,685	)	$	(1,652	)	$	(2,065	)	$	12
Basic earnings (loss) per common share	$	(0.03	)		$	(0.03	)		$	(0.01	)		$	(0.05	)	$	(0.08	)	$	(0.04	)	$	(0.04	)	$	0.00
Diluted earnings (loss)per common share	$	(0.03	)		$	(0.03	)		$	(0.01	)		$	(0.05	)	$	(0.08	)	$	(0.04	)	$	(0.04	)	$	0.00

We29 have estimated future sublease income which reduces future facility related charges, including lease obligations. We considered current market conditions including current lease rates in the respective geographic regions, vacancy rates, and costs associated with subleasing when estimating future sublease income. Variances between expected and actual sublease income have previously and may continue to result in restructuring charge adjustments in future periods.

Total Other Income, net

Net total other income was $240,000 for the year ended December 31, 2004, as compared to $2.5 million for the year ended December 31, 2003. Net total other income for the year ended December 31, 2003 included a gain of approximately $2.2 million that we recognized on the retirement of capital lease obligations at a significant discount to their carrying value.

Provision for Income Taxes

The benefit for income taxes was $376,000 for the year ended December 31, 2004 as compared to a provision of $32,000 for the year ended December 31, 2003. The benefit for income taxes for the year ended December 31, 2004 relates primarily to reversing accruals for foreign and state taxes that were no longer deemed necessary. The provision for income taxes for the year ended December 31, 2003 relates primarily to foreign taxes.

At December 31, 2004, we had established a valuation allowance of $36.9 million for the net deferred tax assets related to temporary differences, foreign tax credit carryforwards and projected net operating loss carryforwards. The valuation allowance was recorded in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 109, Accounting for Income Taxes, which requires that a valuation allowance be established when there is significant uncertainty as to the realizability of the deferred tax assets. Based on a number of factors, including the size of the prior operating losses, the currently available, objective evidence indicates that it is more likely than not that the net deferred tax assets will not be realized.

Balance Sheet Items

Accounts Payable. We had accounts payable of $265,000 at December 31, 2004 compared to $1.1 million at December 31, 2003. The decrease in accounts payable relates primarily to payments of older accounts payable including amounts due to our United Kingdom subcontractor for its work on a large project.

Accrued Liabilities. We had accrued liabilities of $1.4 million at December 31, 2004 compared to $5.4 million at December 31, 2003. The decrease results primarily from a reduction during the quarter ended

~~Deferred~~Item ~~revenues. We had deferred revenues of $1.1 million at December 31, 2004 compared to $~~7.6 ~~million~~Management’s atDiscussion ~~December~~and ~~31,~~Analysis ~~2003. The decrease results primarily from the recognition~~ of ~~previously~~Financial ~~deferred~~Condition ~~revenues~~and ~~during~~Results ~~the quarter ended June 30, 2004, upon our successful conclusion~~ of an earlier fixed-price applications development project with Cedars described above. We had a deferred revenue balance of $1.1 million at December 31, 2004 that we expect to recognize as revenues in future periods, but the timing of recognition is uncertain. As a result, we do not expect to recognize revenues or profits from deferred revenues during 2005 at the same levels that we experienced during 2004. Operations

~~2003~~Business asOverview ~~Compared to 2002~~

~~Revenues~~TenFold provides services and technology for building complex, Service Oriented Architecture (“SOA”)-compliant, enterprise-scale applications in significantly less time and cost than it would otherwise take using traditional development technologies. We believe that with TenFold’s technology, EnterpriseTenFold SOA, customers will also experience significantly reduced ongoing applications maintenance and enhancement costs compared to what they generally experience with legacy applications.

~~Total~~Our ~~revenues~~business ~~decreased~~model ~~$521,000,~~focuses oron 2providing ~~percent~~applications development services and our EnterpriseTenFold SOA product, toalong ~~$27.7~~with ~~million~~product ~~for~~support ~~the~~and training, ~~year~~to ~~ended~~customers ~~December~~who ~~31,~~can ~~2003,~~use asa ~~compared~~TenFold toteam ~~$28.2~~or ~~million~~their ~~for~~own ~~the~~business ~~year~~teams ~~ended~~to ~~December~~build ~~31,~~and ~~2002~~maintain applications.

~~License~~Critical ~~revenues~~Accounting ~~increased~~Policies $41,000, or 20 percent, to $248,000 for the year ended December 31, 2003, as compared to $207,000 for the year ended December 31, 2002. The increase in license revenues was due to some recent small new license sales.

~~Subscription~~The ~~revenues~~fundamental ~~decreased~~objective ~~$5.1~~of ~~million,~~financial orreporting 33is ~~percent,~~ to ~~$10.4~~provide ~~million~~useful ~~for~~information ~~the~~that ~~year~~allows ~~ended~~a ~~December~~reader ~~31, 2003, as compared~~ to ~~$15.5~~comprehend ~~million~~our ~~for~~business ~~the year ended December 31, 2002~~activities. ~~Subscription~~To ~~revenues~~aid ~~represent~~in ~~revenue from contracts~~ that ~~include~~understanding, amanagement ~~subscription~~has toidentified ~~new~~the ~~product releases on a~~ “~~when~~critical ~~and~~accounting ~~if available~~policies” ~~basis~~below. ~~For~~These ~~certain~~policies ~~contracts,~~have ~~including~~the apotential ~~subscription~~ to ~~future~~have ~~software~~a ~~products~~more ~~when~~significant ~~and~~impact ifon ~~they~~our ~~become~~financial ~~available~~statements, weeither ~~recognize~~because ~~the fees~~of ~~for~~ the ~~software~~significance ~~products ratably over the subscription term beginning with delivery~~ of the ~~first~~financial statement ~~software~~item ~~product.~~to ~~For contracts that include a service element for~~ which ~~the~~they ~~fair value is undeterminable~~relate, ~~and~~or ~~the~~because ~~contract~~they ~~includes~~require ~~a subscription~~judgment ~~to new product releases on a “when~~ and ifestimation ~~available basis,” we recognize the entire contract fee ratably over the subscription period as subscription revenue. The decrease in subscription revenues was~~ due to the ~~completion~~uncertainty ~~of the~~involved ~~amortization~~in ofmeasuring, ~~our~~at ~~deferred~~a ~~subscription~~specific ~~revenues~~point ~~during~~in ~~the second quarter of 2003~~time, ~~when~~events ~~our~~which ~~existing~~are ~~subscription~~continuous ~~contracts~~in ~~reached the end of their subscription periods~~nature.

~~Service~~Revenue ~~and~~Recognition ~~other revenues increased $4.5 million, or 37 percent, to $17.0 million for the year ended December 31, 2003, as compared to $12.5 million for the year ended December 31, 2002. Service~~ and ~~other~~Project ~~revenues~~Profitability increased in part due to providing a higher volume of time-and-materials services during 2003 as compared to 2002. Services and other revenues for the year ended December 31, 2003 also included $1.5 million from the reduction over time of a guarantee on one contract, and $600,000 recognized upon completion of training obligations associated with a contract signed in 2002.

~~Revenues~~We ~~from~~believe ~~operations~~risks ~~outside~~relating ofto ~~North~~revenue ~~America~~recognition ~~were~~include ~~29 percent of total revenues for~~ the ~~year~~judgment ~~ended~~required ~~December~~to ~~31,~~determine ~~2003~~project asprofit ~~compared~~or toloss 17projections ~~percent~~on intime-and-material ~~2002~~contracts. ~~The~~We ~~2003~~recognize time-and-materials ~~2002~~revenue ~~revenues~~at ~~from~~the ~~operations~~lowest ~~outside~~point ~~of North America were attributable to four customers. Revenues from operations~~ in the ~~United~~range ~~Kingdom were 29 percent~~ of estimated ~~total~~profit ~~revenues~~margin, ~~for~~which ~~2003,~~represents ~~and~~our 9best ~~percent~~estimate of ~~total~~the ~~revenues~~profit ~~for~~to ~~2002~~be achieved. ~~The~~Variances ~~increase~~may inoccur ~~percent~~if onwe ~~total~~are ~~revenues~~unable ~~from~~to ~~the~~collect ~~United~~time-and-materials ~~Kingdom~~billings ~~during~~or ~~2003~~if ~~was~~we ~~primarily~~grant ~~due~~concessions to atime-and-materials ~~large~~customers ~~consulting~~in ~~project~~order weto ~~commenced~~sell additional inbusiness ~~November~~or ~~2002~~collect incash under the ~~United~~contract. ~~Kingdom working~~As ~~with~~we ~~our~~occasionally ~~global~~provide ~~systems~~services ~~integrator~~on ~~partner,~~a ~~Sapient,~~fixed ~~and~~price ~~with~~basis, ~~our~~risks UKrelating ~~reseller,~~to ~~youDevise~~revenue ~~Limited,~~recognition toalso ~~provide~~include ~~expertise~~the judgment and ~~consulting~~estimation ~~services~~required to ~~support~~determine ~~Sapient’s~~fixed-price ~~GBS implementation~~ project ~~for~~completion percentages, ~~Vertex.~~and ~~Revenues~~fixed-price ~~from~~project ~~operations~~profit ~~in Argentina~~or ~~were~~loss 0projections.5 ~~percent~~Variances ofbetween ~~total~~management’s ~~revenues~~estimates ~~for 2003,~~ and 8actual ~~percent~~results ofmay ~~total~~result ~~revenues~~in ~~for~~significant ~~2002.~~adjustments Atto ~~December~~our ~~31,~~results ~~2003, all~~ of ~~TenFold’s~~operations ~~long-lived~~and ~~assets~~financial ~~were deployed in the United States~~position.

~~Three~~Stock-Based ~~customers~~Compensation accounted for 41 percent, 25 percent and 23 percent of our total revenues for 2003, compared to two customers accounting for 63 percent and 12 percent of our total revenues for the year ended December 31, 2002. No other single customer accounted for more than 10 percent of our total revenues for the year ended December 31, 2003 or 2002.

30In accordance with SFAS 123(R), we measure compensation cost for stock awards at fair value and recognize compensation over the service period for awards expected to vest. The estimation of stock awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised. We consider many factors when estimating expected forfeitures, including types of awards, employee roles, and historical experience. Actual results, and future changes in estimates, may differ substantially from our current estimates. See Note 18 of Notes to Financial Statements for more information.

Litigation Reserves

~~Cost~~Results of ~~Revenues.~~Operations Cost of revenues decreased $3.5 million, or 27 percent, to $9.5 million for the year ended December 31, 2003, as compared to $13.0 million for the year ended December 31, 2002. The decreases were primarily due to a smaller number of personnel working on customer projects, and support and training activities.

~~Sales~~The ~~and~~following ~~Marketing.~~table ~~Sales~~sets ~~and marketing expenses decreased $897~~forth,~~000,~~ ~~or 45 percent, to $1.0 million~~ for the ~~year~~periods ~~ended December 31~~indicated, ~~2003, as compared to $2.0 million for~~ the ~~year~~percentage ~~ended~~relationship ~~December~~of ~~31,~~selected ~~2002.~~items ~~The~~from ~~decreases~~our instatements ~~sales~~of ~~and~~operations ~~marketing expenses were primarily due~~ to ~~having~~total ~~fewer sales and marketing employees in 2003~~revenues.

Research and Development. Research and development expenses decreased $2.7 million, or 44 percent, to $3.5 million for the year ended December 31, 2003, as compared to $6.2 million for the year ended December 31, 2002. Research and development expenses decreased due primarily to having fewer research and development employees in 2003.


	Years Ended December 31,
	2006		2005		2004
Revenues:
License	28	%	9	%	2	%
Services and other	72	%	91	%	98	%

Total revenues	100	%	100	%	100	%

Operating expenses:
Cost of revenues	56	%	51	%	34	%
Sales and marketing	16	%	51	%	16	%
Research and development	82	%	62	%	21	%
General and administrative	56	%	52	%	13	%

Total operating expenses	210	%	216	%	84	%


Income (loss) from operations	(110	)%	(116	)%	16	%
Total other income, net	2	%	2	%	1	%

Income (loss) before income taxes	(108	)%	(114	)%	17	%
Provision (benefit) for income taxes	(4	)%	(19	)%	(2	)%

Net income (loss)	(104	)%	(95	)%	19	%

Deemed dividend related to warrants issued with preferred stock and beneficial conversion feature on preferred stock	(44	)%	—		—

Net income (loss) applicable to common shareholders	(148	)%	(95	)%	19	%

~~General~~2006 ~~and Administrative. General and administrative expenses decreased $4.8 million, or 61 percent, to $3.0 million for the year ended December 31, 2003,~~ as ~~compared~~Compared to ~~$7.8~~2005 million for the year ended December 31, 2002. General and administrative expenses decreased due primarily to having a smaller scale of operations and fewer general and administrative employees, voluntary executive compensation reductions, lower legal expenses from the settlement of legal matters, and reduced financing related expenses in 2003.

~~Special~~Revenues Charges. Special charges for the year ended December 31, 2003 of $(673,000) included restructuring charge adjustments of $(578,000) and asset loss impairment adjustments of ($95,000). Special charges for the year ended December 31, 2002 of $2.8 million included restructuring charges of $2.0 million and $851,000 of asset impairment charges.

~~Asset~~Total ~~Impairment~~revenues ~~Charges.~~decreased ~~During year ended December 31~~$712,000 ~~2003,~~or we12 ~~recorded asset loss provision adjustments of $(95~~percent,~~000)~~ to ~~eliminate~~$5.0 ~~remaining estimated~~million ~~asset~~for ~~loss~~the ~~accruals~~year ~~that~~ended December 31, ~~were~~2006, noas ~~longer~~compared ~~necessary~~to ~~upon~~$5.7 ~~our~~million ~~completing~~for the ~~return~~year ofended ~~previously~~December 31, ~~leased equipment~~2005.

~~During~~Services ~~year~~and ~~ended~~other ~~December~~revenues ~~31,~~decreased ~~2002~~$1.6 million, weor ~~identified~~31 ~~$851~~percent,~~000~~ ~~of fixed assets that had no future value~~ to us$3.6 ~~and~~million ~~were~~for nothe ~~longer~~year inended ~~active use~~December 31, ~~and accordingly~~2006 ~~recorded~~as ancompared ~~asset~~to ~~impairment charge of~~ $~~851,000~~5.2 million for the year ended December 31, ~~2002~~2005. ~~This~~The ~~charge~~decrease ~~included~~in ~~the~~services ~~impairment~~and ofother ~~the~~revenues ~~leased~~is ~~equipment~~primarily ~~assets~~due ~~that~~to wedecreases ~~returned~~in torevenues ~~our~~from certain ~~two~~customers ~~major~~who ~~prior~~purchased ~~equipment~~less ~~lessors~~services ~~pursuant~~from tous ~~agreements reached~~over ~~with~~time ~~these~~as ~~lessors~~they ~~subsequent~~completed totheir ~~December~~application ~~31,~~development ~~2002,~~projects. ~~under~~Although ~~which~~ we ~~bought~~have ~~out~~sold and ~~fully~~begun ~~retired~~new ~~the~~consulting ~~related~~projects ~~equipment~~in ~~lease~~2006, ~~debt~~they ~~and~~are ~~returned~~not ~~substantially~~as ~~all~~large ~~the~~as ~~related~~these ~~equipment.~~particular prior projects.

~~Restructuring~~License ~~Charges~~revenues increased $909,000, or 177 percent, to $1.4 ~~During~~million for the year ended December 31, ~~2003~~2006 as compared to $515,000 wefor ~~recorded~~the ~~restructuring~~year ~~charge~~ended ~~adjustments~~December 31, of2005. The 2006 license revenue includes $~~(578~~1 million from DevonWay,~~000)~~ a related person, that was deferred from 2005, because the license agreement contained a discount that could not be determined at the inception of the agreement. We used the end of the estimated economic life to ~~reduce~~recognize ~~previously~~the ~~accrued~~revenue ~~restructuring~~because ~~charges~~we ~~for~~did ~~negotiated~~not ~~reductions~~have invendor ~~remaining~~specific ~~lease~~objective ~~payments~~evidence ~~due~~of fair value (“VSOE”) for ~~unoccupied~~the ~~properties~~related post-contract customer support, ~~and~~due to ~~reflect~~the ~~higher~~discount, ~~sublease~~and therefore ~~income~~we ~~received~~did ~~than previously~~not allocate the revenue until the discount was known at the end of the estimated economic life. Although we recognized the revenue in 2006, we received the cash from the transaction in 2005.

During ~~the year ended December 31~~2005, ~~2002,~~ we ~~incurred~~entered ~~restructuring~~into ~~charges~~agreements ofwith ~~$2.0~~a ~~million~~new customer, ~~including $1.1 million~~DevonWay, ~~related~~ to ~~termination~~provide oflicenses, ~~the~~consulting ~~unoccupied~~services, ~~portions~~technical ofsupport ~~our South Jordan~~services, ~~Utah~~and training. ~~headquarters~~Our ~~lease~~Chairman, CEO and ~~$836~~President,~~000,~~ ~~related~~Robert ~~to adjustments made to prior restructuring estimates~~W. ~~The~~ ~~termination~~Felton, ofis the ~~unoccupied~~founder ~~portions~~and owner of ~~the~~DevonWay. ~~South~~All ~~Jordan~~disinterested ~~lease~~members ~~reduced~~of ~~the~~our ~~square~~Board ~~footage~~of ~~leased~~Directors ~~from~~approved ~~105,068~~of tothese ~~22,310~~related ~~square~~person ~~feet,~~transactions ~~reduced~~and ~~the~~our ~~term~~general ~~from~~ongoing 11business ~~years~~relationship towith DevonWay. 5Our ~~years,~~revenues ~~and~~from ~~reduced~~DevonWay for the ~~rental~~year ~~rate~~ended ~~per~~December 31, ~~square~~2006, ~~foot.~~and ~~This~~December 31, ~~reduced~~2005, ~~our~~are ~~total base~~license ~~rent~~revenues ~~obligations~~of ~~(before operating expenses) under this lease by approximately~~ $191.0 million ~~over~~and ~~the~~$160,000, ~~term~~respectively, ofand ~~the~~services ~~lease.~~and Asother ~~part~~revenue of ~~this transaction~~$55,000 weand ~~released to the landlord~~ $1439,000, respectively.5 ~~million~~See Note ~~previously~~17 ~~held~~of asthe ~~restricted~~Notes ~~cash~~ to ~~support~~Financial ~~these leases.~~Statements ~~The~~for ~~restructuring~~more information.

WeThree ~~determined~~customers accounted for 21 percent, 16 percent and 10 percent of our ~~restructuring~~total ~~charges~~revenues infor ~~accordance~~the ~~with~~year ended ~~Emerging~~December 31, ~~Issues~~2006, ~~Task~~compared ~~Force~~to ~~Issue~~three ~~No.~~customers ~~94-3~~accounting ~~(“EITF~~for ~~94-3”)~~20 percent, 18 percent and ~~Staff~~11 ~~Accounting~~percent ~~Bulletin No.~~of ~~100~~our ~~(“SAB~~total ~~100”).~~revenues ~~EITF~~for ~~94-3~~the ~~and~~year ~~SAB~~ended ~~100~~December 31, ~~require~~2005. ~~that~~No weother ~~commit~~single tocustomer anaccounted ~~exit~~for ~~plan~~10 ~~before~~percent weor ~~accrue~~more ~~employee~~of ~~termination~~our ~~costs~~total revenues ~~and~~for ~~exit~~the ~~costs~~year ended December 31, 2006 or 2005.

~~Restructuring~~The ~~reserves~~revenue ~~are~~from ~~included~~the incustomer ~~accounts~~accounting ~~payable~~for ~~and~~21 ~~accrued~~percent ~~liabilities~~of atour ~~December~~total revenues for the year ended December 31, ~~2003.~~2006, ~~Detail~~DevonWay, ofwas ~~the~~primarily ~~restructuring~~from ~~charges~~the asrecognition of ~~and~~previously ~~for the~~deferred ~~year~~license ~~ended~~revenue ~~December~~from ~~31,~~a ~~2003~~single ~~are~~transaction ~~summarized~~in ~~below~~2005. ~~(in~~We ~~thousands):~~do not expect DevonWay to account for a significant percentage of our revenues after December 31, 2006.

Restructuring Charges:	Balance atDecember 31,2002		NewCharges		Adjustments			Utilized			Balance at December 31,2003
Employee related	$	—	$	—	$	—		$	—		$	—
Facilities related		1,565		—		(578	)		(456	)		531
	$	1,565	$	—	$	(578	)	$	(456	)	$	531

We continue to actively market to new and existing customers. We have sold and begun several new consulting projects recently in 2006. However, such sales have not been sufficient to generate sustained positive cash flow from operations or profitability. We continue to face a challenging sales environment. As a result, it is unclear if or when we can expect to close significant sales to new or existing customers, and until we repeatedly do so we are likely to continue to experience negative cash flow from operations and losses.

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

~~During~~Cost ~~the~~of Revenues. ~~quarter~~Cost ~~ended~~of ~~December~~revenues 31consists primarily of compensation and other related costs of personnel and contractors to provide applications development and implementation consulting, ~~2003~~support, weand ~~reduced~~training ~~some~~services. ~~variable~~Cost ~~compensation~~of ~~accrued~~revenues decreased ~~during~~$162,000, ~~the~~or ~~first~~6 ~~half~~percent, ofto ~~2003~~$2.8 million for the year ended December 31, 2006 as compared to ~~lower~~$2.9 ~~levels~~million ~~that~~for wethe ~~believe~~year ~~better~~ended ~~reflect~~December 31, ~~our~~2005. ~~estimates~~The decrease in cost of revenues is primarily due to ~~our~~having ~~financial~~fewer ~~performance~~staff ~~and~~working ~~cash~~on ~~position~~customer projects ~~for~~in ~~2003~~2006. The decrease was partially offset by an increase in stock-based compensation expense in 2006 as a ~~whole~~result of SFAS 123(R). ~~This~~See ~~reduced~~Note ~~operating~~18 ~~expenses~~of ~~for~~Notes ~~the~~to ~~fourth~~Financial ~~quarter~~Statements offor ~~2003~~more byinformation ~~$550,000~~on stock-based compensation expenses.

~~Total~~Sales ~~Other~~and ~~Income~~Marketing. ~~(Expense)~~Sales and marketing expenses consist primarily of compensation, ~~net~~travel, and other related expenses for sales and marketing personnel; and marketing seminars, public relations, advertising and other marketing expenses. Sales and marketing expenses decreased $2.1 million, or 72 percent, to $812,000 for the year ended December 31, 2006 as compared to $2.9 million for the year ended December 31, 2005. The decreases in sales and marketing expenses are due to our discontinuing most discretionary marketing programs in late 2005 in connection with the change in sales focus under our new Chief Executive Officer, Robert W. Felton, and to conserve our financial resources; as well as from a decrease in sales and marketing headcount.

~~Net~~Research ~~total~~and ~~other~~Development. ~~income~~Research ~~was~~and ~~$2.5~~development ~~million~~expenses ~~for~~consist ~~the~~primarily ~~year~~of ~~ended~~compensation ~~December~~and ~~31, 2003,~~other asrelated ~~compared~~costs of personnel dedicated to ~~$1.9~~research ~~million~~and ~~for~~development ~~the~~activities. ~~year~~Research ~~ended~~and ~~December~~development 31expenses increased $569,000, ~~2002.~~or ~~Net~~16%, ~~total~~to ~~other~~$4.1 ~~income~~million for the year ended December 31, ~~2003~~2006, ~~included~~as acompared ~~gain~~to of $23.25 million ~~that we recognized on the retirement of capital lease obligations at a significant discount to their carrying value. Net total other income~~ for the year ended December 31, ~~2002~~2005. ~~included~~The aincrease ~~gain~~in ofresearch ~~$2.4~~and ~~million~~development ~~that~~expenses weis ~~recognized~~due onto ~~the~~recognition ~~retirement~~ of ~~debt,~~stock-based ~~and~~compensation expense ain ~~loss~~2006 ofas ~~$279,000~~a onresult ~~our sale~~ of ~~TenFold~~SFAS ~~Systems UK Limited on October 19~~123(R), ~~2002.~~which ~~Interest~~was ~~income~~partially ~~decreased~~offset ~~for~~by ~~2003~~a asdecrease ~~compared~~from tohaving ~~2002~~fewer ~~due~~staff toworking ~~lower~~on ~~cash~~research and ~~cash~~development ~~equivalent~~activities ~~balances~~ in ~~2003.~~2006 ~~Interest~~compared ~~expense~~to ~~decreased~~2005. ~~for~~See ~~2003~~Note as18 ~~compared~~of toNotes ~~2002 due~~ to ~~lower~~Condensed ~~notes~~Financial ~~payable~~Statements ~~and~~for ~~obligations~~more information ~~under~~on ~~capital~~stock-based ~~lease~~compensation ~~balances in 2003~~expenses.

~~Provision~~General and Administrative. General and administrative expenses consist primarily of the costs of executive management, finance and administrative staff, business insurance, and professional fees. General and administrative expenses decreased $168,000, or 6 percent, to $2.8 million for ~~Income~~the ~~Taxes~~year ended December 31, 2006 as compared to $3.0 million for the year ended December 31, 2005. The decrease is due primarily to general and administrative expenses for 2005 including severance costs for our prior CEO, as well as from lower general and administrative staffing in 2006 compared to 2005. The decreases in general and administrative costs were partially offset by an increase in stock-based compensation expense in 2006 associated with SFAS 123(R). See Note 18 of Notes to Financial Statements for more information on stock-based compensation expenses.

~~The provision for income taxes was $~~32~~,000~~ for the year ended December 31, 2003 as compared to a benefit of $497,000 for 2002. The provision for income taxes for the year ended December 31, 2003 relates primarily to foreign taxes. The net income tax benefit for the year ended December 31, 2002, relates primarily to reversing accrued Federal alternative minimum taxes from 2001 due to tax legislation enacted in 2002. No tax benefit was recorded during 2002 for TenFold’s net operating losses.

At December 31, 2003, we had established a valuation allowance of $38.0 million for the net deferred tax assets related to temporary differences, foreign tax credit carryforwards and projected net operating loss carryforwards. The valuation allowance was recorded in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 109, Accounting for Income Taxes, which requires that a

~~Liquidity~~Total ~~and~~Other ~~Capital~~Income, ~~Resources~~net

AsNet oftotal ~~December~~other ~~31,~~income ~~2004, our principal source of liquidity~~ was ~~our cash and cash equivalents of~~ $~~5.2~~92,000 ~~million.~~for ~~During~~ the year ended December 31, ~~2004~~2006, weas ~~funded~~compared ~~purchases~~to ~~of computer equipment of~~ $76137,000 ~~with~~for ~~capital~~the ~~leases.~~year ended December 31, 2005.

~~Net~~Provision ~~cash used in operating activities was $7.3 million~~ for ~~the~~Income ~~year~~Taxes ended December 31, 2004 as compared to $868,000 for 2003. The increase in cash flow used in operating activities results primarily from decreases in cash inflows from time-and-materials consulting projects as these customers complete their application development projects and become more self-sufficient, increased investments we have made in sales and marketing related activities, and payments we made to reduce some older accounts payable and accrued liability items accrued in earlier quarters, including amounts due to our United Kingdom subcontractor for its work on a large project.

~~Net~~The ~~cash~~benefit ~~provided~~for byincome ~~investing~~taxes ~~activities~~ was $10235,000 for the year ended December 31, ~~2004~~2006 as compared to a benefit of $241.1 million for the year ended December 31,~~000~~ 2005. The benefit for ~~2003~~income taxes for the years ended December 31, 2006 and 2005 relate primarily to reversing accruals for state taxes that were no longer deemed necessary.

~~Net~~At ~~cash~~December 31, ~~provided by financing activities was $273~~2006,~~000~~ ~~for~~we ~~the~~had established ~~year~~a ~~ended~~valuation ~~December~~allowance ~~31,~~of ~~2004 as compared to~~ $940.21 million for ~~2003.~~the ~~Net~~net ~~cash~~deferred ~~provided~~tax byassets ~~financing~~related ~~activities~~to ~~for~~temporary ~~the year ended December 31~~differences, ~~2004~~foreign ~~included $146,000~~tax ~~from~~credit ~~employee~~carryforwards ~~stock option exercises~~ and ~~$142,000~~projected ofnet ~~proceeds~~operating ~~from~~loss ~~employee~~carryforwards. ~~stock~~The ~~purchase~~valuation ~~plan~~allowance ~~stock~~was ~~issuances.~~recorded ~~Net~~in ~~cash~~accordance with ~~provided~~the byprovisions ~~financing~~of ~~activities~~Statement ~~for~~of ~~the~~Financial ~~year~~Accounting ~~ended~~Standards ~~December~~(“SFAS”) 31No. 109, ~~2003~~Accounting ~~was~~for ~~primarily~~Income ~~from~~Taxes, ~~the~~which ~~proceeds~~requires ofthat ~~common~~a ~~stock sales.~~valuation Inallowance ~~February~~be ~~2003,~~established wewhen ~~sold~~there ~~3,888,889~~is ~~shares~~significant ofuncertainty ~~common~~as ~~stock~~ to athe realizability ~~member~~ of ~~our~~the ~~Board~~deferred oftax ~~Directors~~assets. ~~for~~Based on a ~~total~~number ~~purchase price~~ of ~~$700~~factors,~~000.~~ Inincluding ~~December~~the ~~2003,~~size ~~we closed a private placement~~ of 5the ~~million~~prior ~~shares~~operating ~~of common stock~~losses, ~~with~~the nocurrently ~~warrants~~available, ~~which~~ weobjective ~~sold~~evidence atindicates ~~$2.00~~that ~~per~~it ~~share~~is ~~(before~~more ~~related~~likely ~~fees~~than ~~and~~not ~~expenses).~~that ~~During~~ the ~~three~~net ~~months~~deferred ~~ended~~tax ~~March~~assets ~~31,~~will ~~2003~~not be ~~we made payments of $588,000 to retire capital lease obligations at a significant discount~~realized.

~~Our~~Deemed ~~deferred~~dividend ~~revenue~~related ~~balance generally results from contractual commitments made by customers~~ to ~~pay~~convertible ~~amounts~~preferred tostock us in advance of revenues earned. We had deferred revenues balances of $1.1 million at December 31, 2004 and $7.6 million at December 31, 2003. When over time we recognize these deferred revenue balances as revenues in the statement of operations, we will not have corresponding increases in cash, as the related cash amounts have previously been received by us. Our unbilled accounts receivable represents revenue that we have earned but which we have not yet billed.

WeAs ~~raised~~a ~~capital~~result ~~during~~of ~~2003~~the towarrants ~~strengthen~~sold ~~our~~with the convertible preferred stock and the beneficial conversion feature inherent in the conversion rights and ~~balance~~preferences ~~sheet.~~of ~~During~~the ~~2004~~convertible preferred stock issued in March and December 2006, we ~~have~~recognized ~~managed~~non-cash ~~our~~deemed ~~accounts~~dividends ~~receivable~~totaling ~~and~~$2,207,000 ~~generated~~in ~~additional~~2006. ~~cash~~The ~~inflows~~deemed ~~wherever~~dividends ~~possible~~were ~~from~~calculated ~~our~~based ~~existing~~on ~~customer~~the ~~base.~~conversion ~~However,~~price ~~challenges~~compared ~~and~~to ~~risks~~the ~~remain:~~market price on the date of issuance of the convertible preferred shares.

•Balance WeSheet ~~have~~Items derived a significant portion of our cash inflows from time-and-materials consulting services from a limited number of large customers. These large customers have reduced their purchases of our time-and-materials consulting services over time as they complete projects and become more self-sufficient. One customer completed its use of our time-and-material consulting services for its current application development project during the quarter ended September 30, 2004. Another customer time-and-materials consulting engagement is expected to be completed at the end of the first quarter of 2005. We do not currently have a new project in place to replace this project. These reductions have materially reduced our cash inflows during 2004 and our expected cash inflows in 2005.

•Notes Wepayable. ~~continue~~In toDecember ~~invest~~2005, inwe ~~specific~~executed ~~marketing~~promissory ~~initiatives~~notes ~~intended~~due to ~~drive~~three ~~TenFold~~members ~~toward~~of ~~the~~our ~~‘Tipping~~Board ~~Point’~~of byDirectors ~~creating~~(or ~~awareness~~investment ~~and~~entities associated ~~generating~~with ~~leads~~those Directors), asfor ~~well~~a astotal of $600,000. During the ~~cost~~quarter ofended ~~new~~March 31, ~~direct~~2006, ~~sales~~we ~~staff~~executed additional similar notes totaling $500,000 to ~~convert~~our ~~those~~Chief ~~leads~~Executive Officer, Robert W. Felton. We repaid these notes in full in March 2006, upon completing the March equity financing transaction. See Notes 7 and 11 of the Notes to ~~sales~~Financial Statements for more information.

33Deferred revenues. We had deferred revenues of $1.4 million at December 31, 2006 compared to $2.2 million at December 31, 2005. The decrease results primarily from recognizing as revenue during the year ended December 31, 2006, a $1 million license payment we received from DevonWay in August 2005. For accounting purposes we deferred revenue recognition of this revenue until December 2006, the end of the estimated economic life of the release of EnterpriseTenFold provided to DevonWay, because the license agreement contained a discount that could not be determined at inception of the agreement, as discussed above. This decrease was partially offset by a prepayment of $344,000 we received during the three months ended December 31, 2006 for a consulting project starting in early 2007, in exchange for our continuing this customers’ existing discounted time-and-materials consulting rate for the new project.

•2005 Weas ~~may~~Compared ~~need~~ to ~~seek~~2004 additional capital to support our operations until our cash flow from sales to new or existing customers provides sufficient cash flow, and that capital may or may not be available on acceptable terms.

WeRevenues are cognizant of these challenges and risks and appreciate that we must generate cash from operations, business transactions, or capital raising to ensure sufficient liquidity for the coming year and to support our growth. We are focusing on selling new, larger license deals with current customers who have experienced our value proposition, exploring distribution agreements, and continuing discussions with investment bankers about the possibility of raising capital. However, there can be no assurance that we will be successful, and these risks may have a materially adverse affect on our future cash flow and operations. At our present levels of revenue generation and cash consumption, we will not have sufficient resources to continue as a going concern through 2005, as we would exhaust our cash balances by mid 2005.

~~See~~Total ~~“Factors~~revenues ~~that~~decreased ~~May~~$11.9 ~~Affect~~million ~~Future~~or ~~Results~~68 ~~and~~percent, ~~Market~~to ~~Price~~$5.7 ofmillion ~~Stock”~~ for ~~more~~the ~~information~~year ~~about~~ended December 31, ~~risks~~2005, ~~facing~~as ~~TenFold~~compared to $17.6 million for the year ended December 31, 2004.

~~Disclosure~~Services ~~about~~and ~~Contractual~~other ~~Obligations~~revenues decreased $12 million, or 70 percent, to $5.2 million for the year ended December 31, 2005 as compared to $17.2 million for the year ended December 31, 2004. Services and other revenues for the year ended December 31, 2004 include $8.1 million in revenues, and $150,000 in operating costs, recognized during the quarter ended June 30, 2004, related to the completion of an earlier fixed-price applications development project with Cedars-Sinai Medical Center (“Cedars”). This completed the recognition of these revenues and related costs that were deferred in prior years pending confirmation of the completion of the applications development project and resolution of potential disputes between the parties. Excluding the effect of this Cedars transaction, we would have had total revenues of $9.5 million, and a net loss of $4.5 million for the year ended December 31, 2004.

~~The~~In ~~following~~addition ~~table~~to ~~sets~~the ~~forth~~decrease ~~certain~~related ~~contractual~~to ~~obligations~~the ~~recorded~~Cedars transaction, services and other revenues decreased due to decreases in ~~the~~revenues ~~audited~~from ~~consolidated~~certain ~~financial~~customers ~~statements~~who purchased less time-and-materials consulting from us over time as they completed their applications development projects. One customer completed its use of ~~December~~our 31time-and-materials consulting services for its applications development project during the quarter ended September 30, 2004. ~~and~~Another large ~~summary~~customer’s ~~information~~time-and-materials isconsulting ~~presented~~engagement inwas substantially completed during the ~~following~~quarter ~~table~~ended ~~(in~~March 31, ~~thousands):~~2005. These decreases were partially offset by consulting revenues from new customers.

Contractual Obligations	Total		Lessthan 1year		1-3years		4-5years	Morethan 5years
Long-term debt	$	—		—		—	—	—
Capital lease obligations		65		28		37	—	—
Operating lease obligations		1,384		660		724	—	—
Purchase obligations		211		211		—	—	—
Other long term liabilities reflected on the registrant’s Balance Sheet under GAAP		—		—		—	—	—
Total	$	1,660	$	899	$	761	—	—

During 2005, we entered into agreements with a new customer, DevonWay, to provide licenses, consulting services, technical support services, and training, for approximately $1.6 million. A long-time member of our Board of Directors and our recently elected Chairman, CEO and President, Robert W. Felton, is the founder and owner of DevonWay. All disinterested members of our Board of Directors approved of these related person transactions and our general ongoing business relationship with DevonWay. Our revenues from DevonWay for the year ended December 31, 2005, were license revenues of $160,000, and services and other revenue of $439,000. See Note 17 of the Notes to Financial Statements for more information.

~~The~~Although ~~real~~customers ~~estate~~purchased licenses with contract ~~operating~~values ~~leases~~totaling ~~above~~$1.5 ~~include~~million (including a $~~240,000~~1 ofmillion ~~restructured~~license ~~real~~sold ~~estate~~to ~~lease~~DevonWay) ~~obligations~~for ~~that~~the ~~have~~year ~~not~~ending ~~been~~December 31, ~~reduced~~2005, bywe recorded license revenues for accounting purposes of $~~128~~515,000, ofup ~~sublease~~from ~~income~~$359,000 ~~due~~for ~~from~~the ~~sublease~~year ~~tenants~~ending December 31, 2004. For Inaccounting purposes, the ~~Consolidated~~amounts ~~Balance~~allocated ~~Sheet~~to atindividual ~~December~~contract ~~31,~~elements ~~2004,~~(such ~~these~~as ~~obligations~~licenses) ~~are included~~may differ from the amounts stated in ~~accounts~~the ~~payable~~contract ~~and~~for ~~accrued~~those ~~liabilities~~individual elements, ~~net~~and the timing of their recognition as revenue may be later than the period ~~related~~in ~~sublease~~which ~~income~~they are sold. See ~~Notes~~Note 73 ~~and 18~~ of the Notes to ~~Consolidated~~ Financial Statements for more information.

WeThree ~~previously~~customers ~~had~~accounted ~~legacy~~for ~~fixed-price~~20 percent, ~~contracts~~18 ~~containing~~percent ~~guarantees.~~and ~~With~~11 percent of our total revenues for the ~~conclusion~~year ended December 31, 2005, compared to three customers accounting for 50 percent (Cedars), 22 percent and 15 percent of our total revenues for the ~~transaction~~year ~~with~~ended December 31, ~~Cedars-Sinai~~2004. ~~Medical~~No ~~Center~~other ~~described~~single ~~above,~~customer weaccounted nofor ~~longer~~10 ~~have~~percent ~~any~~or ~~contracts~~more ~~subject~~of toour atotal ~~guarantee~~revenues for the year ended December 31, 2005 or 2004.

~~Recent~~The ~~Accounting~~customer ~~Pronouncements~~accounting for 20 percent of our total revenues for the year ended December 31, 2005, completed its use of our time-and-materials consulting services for its application development project during the quarter ended December 31, 2005. The customer accounting for 18 percent of our total revenues for the year ended December 31, 2005, substantially completed its application development project during the quarter ended March 31, 2005. The customer accounting for 11 percent of our total revenues for the year ended December 31, 2005, DevonWay, is a related person, as noted above.

In34 December 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46 (“FIN 46R”) (revised December 2003), Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51 (“ARB 51”), which addresses how a business enterprise should evaluate whether it has a controlling interest in an entity through means other than voting rights and accordingly should consolidate the entity. FIN 46R replaces FASB Interpretation No. 46 (“FIN 46”), which was issued in January 2003. Before concluding that it is appropriate to apply ARB 51 voting interest consolidation model to an entity, an enterprise must first determine that the entity is not a variable interest entity (“VIE”). As of

OnOperating ~~December~~Expenses 18, 2003, the SEC issued Staff Accounting Bulletin No. 104, Revenue Recognition (“SAB 104”), which supercedes SAB 101, Revenue Recognition in Financial Statements. SAB 104’s primary purpose is to rescind accounting guidance contained in SAB 101 related to multiple element revenue arrangements, which was superceded as a result of the issuance of EITF 00-21, Accounting for Revenue Arrangements with Multiple Deliverables. SAB 104 does not have a material impact on our financial position or results of operations.

InCost ~~December~~of ~~2004, the FASB issued SFAS No~~Revenues. ~~153,~~Cost ~~Exchanges~~ of ~~Nonmonetary~~revenues ~~Assets,~~consists ~~which~~primarily ~~amends~~of ~~Accounting~~compensation ~~Principles~~and ~~Board~~other ~~(APB)~~related ~~Opinion~~costs ~~No.~~of ~~29,~~personnel ~~Accounting~~and ~~for~~contractors ~~Nonmonetary~~to ~~Transactions.~~provide ~~The~~applications ~~guidance~~development inand ~~APB~~implementation ~~Opinion~~consulting, 29support, ~~is based on the principle that exchanges of nonmonetary assets should be~~and ~~measured~~training ~~based~~services. onCost ~~the fair value~~ of ~~the~~revenues ~~assets~~decreased ~~exchanged~~$2.9 ~~The~~million, ~~guidance~~or in50 ~~APB Opinion 29~~percent, ~~however, included certain exceptions~~ to ~~that principle~~$2.9 ~~SFAS~~million ~~153~~for ~~amends APB Opinion 29 to eliminate~~ the ~~exception~~year ~~for~~ended ~~nonmonetary~~December 31, ~~exchanges~~2005 ofas ~~similar productive~~compared ~~assets~~to ~~and~~$5.9 ~~replaces~~million ~~it with a general exception~~ for ~~exchanges~~the ofyear ~~nonmonetary~~ended ~~assets~~December 31, ~~that do not have commercial substance~~2004. AThe ~~nonmonetary~~decrease ~~exchange~~in ~~has~~cost ~~commercial substance if the future cash flows~~ of ~~the~~revenues ~~entity~~was primarily ~~are~~due ~~expected~~ to ~~change significantly~~having as a ~~result~~smaller ofstaff ~~the~~(particularly ~~exchange.~~subcontractors) ~~SFAS~~working ~~153~~on iscustomer ~~effective~~projects ~~for~~as ~~fiscal~~these ~~periods~~customers ~~beginning~~completed ~~after~~their ~~June~~current ~~15,~~application ~~2005~~development projects. WeIn doparticular, ~~not~~the ~~expect~~UK project that ~~the~~ended ~~adoption~~during ofthe ~~SFAS~~quarter ~~153~~ended September 30, ~~will~~2004 ~~have~~was astaffed ~~material~~with ~~impact~~subcontractors onwho ~~our~~we ~~financial~~released ~~position~~upon orcompletion ~~results~~ of ~~operations~~the services.

InSales ~~December~~and ~~2004, the FASB issued SFAS No~~Marketing. ~~123R,~~ ~~Share-Based~~Sales ~~Payment,~~and ~~which~~marketing ~~requires~~expenses ~~companies~~consist toprimarily ~~measure~~of ~~and recognize~~ compensation, ~~expense~~travel, ~~for~~and ~~all~~other ~~stock-based~~related ~~payments~~expenses ~~at fair value. SFAS 123R is effective~~ for ~~all~~sales ~~interim~~and ~~periods~~marketing ~~beginning~~personnel; ~~after~~and ~~June~~marketing 15seminars, ~~2005~~public ~~and~~relations, ~~thus,~~advertising ~~will~~and beother ~~effective for~~marketing ~~us beginning with the third quarter of 2005~~expenses. ~~Early~~Sales ~~adoption is encouraged~~ and ~~retroactive~~marketing expenses ~~application~~increased of$35,000, ~~the~~or ~~provisions~~1 ofpercent, ~~SFAS 123R~~ to ~~the~~$2.9 ~~beginning~~million offor the ~~fiscal~~ year ~~that~~ended ~~includes~~December 31, ~~the~~2005 ~~effective~~as ~~date~~compared isto ~~permitted, but not required~~$2.9 Wemillion ~~are currently~~for ~~evaluating~~ the ~~impact~~year ofended ~~SFAS~~December 31, ~~123R~~2004. ~~and~~In ~~expect~~connection with the ~~adoption~~change toin ~~have~~sales afocus ~~material~~under ~~impact on~~ our ~~financial~~new ~~position~~Chief ~~and~~Executive Officer, ~~results~~Robert ~~of operations~~W. ~~See~~Felton, ~~Stock-Based~~and ~~Compensation in Note 3 of our Notes~~ to ~~Consolidated~~conserve ~~Financial Statements for more information related to the pro forma effects on~~ our ~~reported~~financial ~~net~~resources, ~~income~~we ~~and~~discontinued ~~net~~most ~~income~~discretionary ~~per~~marketing ~~share~~spending ofin ~~applying~~December ~~the fair value recognition provisions of the previous SFAS 123, Accounting for Stock-Based Compensation, to stock-based employee compensation~~2005.

35Research and Development. Research and development expenses consist primarily of compensation and other related costs of personnel dedicated to research and development activities. Research and development expenses decreased $203,000, or 5%, to $3.5 million for the year ended December 31, 2005, as compared to $3.7 million for the year ended December 31, 2004.

General and Administrative. General and administrative expenses consist primarily of the costs of executive management, finance and administrative staff, business insurance, and professional fees. General and administrative expenses increased $671,000, or 29 percent, to $3.0 million for the year ended December 31, 2005 as compared to $2.3 million for the year ended December 31, 2004. The increase in general and administrative expenses for the year ended December 31, 2005 was primarily due to the recognition of estimated severance related charges related to the departure of our prior CEO totaling $670,000, including an estimated option modification charge of $157,000.

Total Other Income, net

Net total other income was $137,000 for the year ended December 31, 2005, as compared to $240,000 for the year ended December 31, 2004.

Provision for Income Taxes

The benefit for income taxes was $1.1 million for the year ended December 31, 2005 as compared to a benefit of $376,000 for the year ended December 31, 2004. The benefit for income taxes for the years ended December 31, 2005 and 2004 relate primarily to reversing accruals for foreign and state taxes that were no longer deemed necessary.

At December 31, 2005, we had established a valuation allowance of $39.1 million for the net deferred tax assets related to temporary differences, foreign tax credit carryforwards and projected net operating loss carryforwards.

Liquidity and Capital Resources

Net cash used in operating activities was $4.4 million for the year ended December 31, 2006 as compared to $4.5 million for 2005. The decrease in cash flow used in operating activities results from decreases in cash outflows from reduced expenses, which was largely offset by decreases in cash inflows from certain large customers.

WeNet ~~operate~~cash used in ainvesting ~~rapidly~~activities ~~changing~~was ~~environment~~$31,000 ~~that~~for ~~involves~~the ~~numerous~~year ~~risks~~ended December 31, ~~some~~ of2006 ~~which~~as ~~are~~compared to ~~beyond~~net ~~our~~cash ~~control.~~used ~~The~~in ~~following~~investing ~~discussion~~activities ~~highlights some~~ of ~~these~~$17,000 ~~risks~~for 2005.

IfNet wecash ~~are~~provided ~~unable~~by financing activities was $6.7 million for the year ended December 31, 2006 as compared to ~~generate~~$604,000 ~~sufficient~~for 2005. Net cash ~~flow~~provided ~~from~~by ~~operations~~financing for the year ended December 31, or2006, ~~secure~~included ~~additional~~$7.3 ~~sources~~million of net proceeds from the sale of convertible preferred stock and warrants, $500,000 from issuance of notes payable, less $1.1 million in principal payments on notes payable which were repaid in full upon closing our capital raising transaction in March 2006. Net cash provided by financing activities for the year ended December 31, 2005 wealso ~~would~~included be$600,000 ~~unable~~from the issuance of notes payable to ~~continue~~three ~~operations~~members asof aour ~~going~~Board ~~concern~~of Directors (or investment entities associated with those Directors). See Note 7 of the Notes to Financial Statements for more information.

~~While~~Our ~~our~~deferred ~~financial~~revenue ~~statements~~balance ~~have~~generally ~~been~~results ~~prepared~~from ~~under~~contractual ~~the~~commitments ~~assumption~~made ~~that we will continue as a going concern, the independent accounting firm’s report on our December 31, 2004 financial statements, prepared~~ by ~~Tanner+Co,~~customers ~~included an explanatory paragraph relating~~ to ~~their~~pay ~~substantial~~amounts ~~doubt as~~ to ~~our~~us ~~ability~~in ~~to continue~~advance asof arevenues ~~going concern~~earned. ~~Our business model relies upon generating new sales to existing and new customers.~~ We ~~raised capital during 2003 to strengthen our balance sheet. During 2004, we have carefully managed our accounts receivable and~~had ~~generated~~deferred ~~additional~~revenue ~~cash~~balances ~~inflows~~of ~~wherever possible from our existing customer base~~$1.4 ~~However,~~million ~~for~~at ~~the year ended~~ December 31, ~~2004~~2006 ~~net~~and ~~cash used in operations was~~ $72.32 million. Ifat ~~we do not generate significant new sales to existing and new customers~~December 31, or2005. ~~raise additional capital~~When, inover ~~the near term~~time, we ~~will~~recognize bethese ~~required~~deferred torevenue ~~pursue~~balances ~~one~~as orrevenues ain ~~combination of~~ the ~~following~~statement ~~remedies: significantly reduce operating expenses, sell part or all~~ of ~~our assets~~operations, orwe ~~terminate~~will ~~operations.~~not Ifhave ~~we sell our~~corresponding ~~assets~~increases in ~~such circumstances~~cash, itas ~~is unlikely that~~ the ~~proceeds~~related ~~from~~cash ~~such~~amounts ~~sale~~have ~~would~~previously bebeen ~~sufficient~~received toby ~~fully~~us. ~~satisfy~~Our ~~our~~unbilled ~~obligations~~accounts toreceivable ~~our~~represents ~~creditors,~~revenue ~~and therefore it is unlikely~~ that ~~our~~we ~~existing~~have ~~stockholders~~earned ~~would~~but ~~receive~~which ~~any value for their stock. There can be no assurance that~~ we ~~will~~have benot ~~successful~~yet ~~achieving sufficient cash flow~~billed.

WeAs ~~continue~~of toDecember 31, ~~experience~~2006, ~~difficulty~~our principal source of liquidity was our cash and cash equivalents of $3.6 million. Although we made progress in ~~securing~~2006 closing ~~future~~new ~~customer~~sales ~~revenue~~and improving our cash flow, such sales have not been sufficient to generate sustained positive cash flow from operations, or profitability. As a result, significant challenges and risks remain:

~~Although~~• inWe ~~2004 we~~ have ~~completed a small but growing number of new, small tactical sales transactions, these new sales are~~ not ~~material~~been ~~to our overall financial results, and we continue to face a challenging sales environment. As a result, there is no assurance that we will be~~ able to ~~convince~~generate ~~future~~positive ~~prospective~~cash ~~customers~~flow ~~to purchase products or services~~ from usoperations orfor ~~that~~the ~~any~~four ~~customer~~years ~~revenue~~ended ~~that~~December is31, ~~achieved can be sustained~~2006. IfOur wenet ~~are~~cash ~~unable~~used toin ~~obtain~~operating ~~future customer~~activities ~~revenue~~was or$4.4 ~~outside~~million ~~financing,~~for ~~our~~the ~~operations,~~year ~~financial~~ended ~~condition,~~December ~~liquidity~~31, ~~and prospects will be materially and adversely affected~~2006, and we$4.5 ~~will~~million befor ~~required to pursue one or a combination of~~ the ~~following~~year ~~remedies:~~ended ~~significantly~~December ~~reduce operating expenses~~31, ~~sell part or all of our assets, or terminate operations~~2005.

~~Our~~• ~~sales~~During ~~cycle~~2004 ~~can~~and be2005, ~~lengthy~~we ~~and~~derived ~~subject~~a tosignificant ~~delays~~portion of our cash inflows from time-and-materials consulting services performed for a limited number of large customers for whom we were completing enterprise applications development projects. As these ~~delays~~customers ~~could~~completed ~~cause~~their projects, they reduced their purchases of time-and-materials consulting services, which materially reduced our ~~operating~~cash ~~results~~inflows. toAlthough ~~suffer~~we have sold and begun new consulting projects in 2006, they are not as large as these particular prior projects.

• We ~~believe~~have ~~that~~experienced adifficulty ~~customer’s~~closing ~~decision~~substantial tonew ~~purchase~~sales, ~~significant~~and ~~products~~it oris ~~services~~unclear ~~from~~when usor ~~can~~if ~~involve~~we acan ~~significant~~expect ~~commitment~~to ofpredictably ~~resources~~close ~~and~~material ~~be influenced~~sales byto ~~customer~~new ~~budget~~or ~~cycles.~~existing Tocustomers, ~~successfully~~and ~~sell~~to ~~our~~achieve ~~products~~ and ~~services,~~sustain wepositive ~~generally~~cash ~~must~~flow ~~educate~~from ~~our~~operations. ~~potential~~Under ~~customers regarding~~ the ~~use~~leadership ~~and benefit~~ of our ~~products~~new ~~and~~Chief ~~services~~Executive Officer, Robert W. ~~Recently~~Felton, we ~~have~~changed ~~been~~our ~~able~~business model to ~~demonstrate~~focus ~~new account~~on ~~penetration~~selling ~~through~~larger ~~small~~consulting projects, ~~introductory~~instead ~~proof-~~of~~-concept~~ ~~projects~~the ~~including~~smaller ~~small~~prototype ~~development~~application ~~and~~projects ~~deployment~~that ~~licenses~~we ~~and~~primarily ~~limited~~sold ~~consulting~~in ~~services~~2005. ~~However,~~Although ~~historically,~~we ~~getting~~expect ~~new customers~~ to ~~purchase~~be ~~significant~~more ~~licenses~~successful orwith ~~services has~~this ~~required~~new ~~significant time and resources. Consequently~~model, ~~the~~our ~~period~~experience ~~between~~with ~~initial contact and~~ the ~~purchase~~new ofmodel ~~our~~is ~~products~~limited ~~or services can be long and subject~~ to ~~delays~~this ~~associated~~year. ~~with~~We ~~the~~closed ~~lengthy~~new ~~budgeting,~~sales ~~approval,~~in 2006 and ~~competitive~~improved ~~evaluation processes~~our ~~that~~quarterly ~~typically~~operating ~~accompany~~cash ~~significant~~flow ~~capital~~from ~~expenditures~~$(1.9) ~~Historically,~~million ~~our~~for ~~sales~~Q2 ~~cycles have been lengthy and variable~~2006, ~~typically ranging between three~~ to ~~twelve~~$(864,000) ~~months~~for ~~from~~Q3 ~~initial~~2006, ~~contact~~and ~~with a potential customer~~ to ~~the~~$21,000 ~~signing~~for ofQ4 ~~a contract~~2006. ~~Sales~~However, ~~delays~~such ~~could~~sales ~~cause~~have ~~our~~not ~~operating~~been ~~results~~sufficient to ~~vary~~generate ~~widely.~~sustained ~~There~~positive ~~can~~cash beflow nofrom ~~assurance~~operations, ~~that~~or profitability. If we ~~will~~do not ~~experience~~close ~~sales~~significant ~~delays in the~~ future. ~~In addition~~sales, weour ~~face~~existing acash ~~challenging~~resources ~~sales~~will ~~environment~~not ~~and there can~~ be nosufficient ~~assurance~~to ~~that~~fund ~~we will~~our ~~have~~operations ~~sales~~beyond inQ2 ~~the future~~2007.

~~Our~~There ~~future~~can ~~prospects~~be ~~are~~no assurance ~~difficult~~that we will be successful closing sufficient new sales and an inability to ~~evaluate~~ do so would have a materially adverse affect on our future cash flow and operations.

InSee ~~light~~“Risk ofFactors” ~~our operating results~~ for ~~recent periods~~more ~~and~~information ~~the~~about ~~continued~~risks ~~difficult~~facing ~~sales environment in the technology sector, it is difficult to evaluate our future prospects~~TenFold. ~~There can be no assurance that we will be~~

WeDisclosure ~~are~~about ~~substantially~~Contractual ~~dependent~~Obligations ~~on a small number of large customers and the loss of one or more of these customers may cause revenues and cash flow to decline~~

WeThe ~~have~~following ~~derived,~~table ~~and~~sets ~~over~~forth ~~the~~certain ~~near~~contractual ~~term~~obligations werecorded ~~expect~~in tothe ~~continue~~audited tofinancial ~~derive,~~statements aas ~~significant portion~~ of ~~our revenues and cash flow from a limited number of large customers. For example, three customers accounted for 50 percent, 22 percent and 15 percent of our total revenues for the year ended~~ December 31, ~~2004.~~2006 ~~Significant reductions in the amount of business large customers conduct with us has previously~~ and ~~may in the future, materially and adversely affect our~~summary ~~business,~~information ~~results of operations, financial position and liquidity. Replacing the loss of a large customer~~ is ~~unpredictable.~~presented ~~Revenues and cash flows from a single customer or a few large customers may constitute a significant portion of our total revenues and cash inflows~~ in ~~a particular period, then decline as~~ the ~~volume~~following oftable ~~work performed for specific customers is likely to vary from period to period, and a major customer~~ (in ~~one~~thousands): ~~period may not continue to purchase licenses or services from us in a subsequent period.~~

The revenue from the customer (Cedars) who accounted for 50 percent of our total revenues for the year ended December 31, 2004 was primarily from a non-recurring transaction during the second quarter of 2004. As a result, we do not expect Cedars to account for a significant percentage of our revenues after December 31, 2004. See Management’s Discussion and Analysis of Financial Condition and Results of Operations – Revenues for more information.


Contractual Obligations	Total		Less than 1 year		1-3 years	4-5 years	More than 5 years
Long-term debt		$—		—	—	—	—
Capital lease obligations		10		10	—	—	—
Operating lease obligations		326		326	—	—	—
Notes payable		—		—	—	—	—
Purchase obligations		9		9	—	—	—
Other long term liabilities reflected on the registrant’s Balance Sheet under GAAP		—		—	—	—	—

Total		$345	$	345	—	—	—

~~Our~~Recent ~~revenues~~Accounting ~~from~~Pronouncements the two customers accounting for 22 percent and 15 percent of our total revenues for the year ended December 31, 2004, which is primarily time-and-materials consulting revenue, has decreased over time as these customers complete their current application development projects and become more self-sufficient. The customer accounting for 15 percent of our total revenues for the year ended December 31, 2004 completed its use of our time-and-material consulting services for its current application development project during the quarter ended September 30, 2004. We staffed this project with subcontractor staff that we released upon completion of these services. During Q3 and Q4, the end-user customer for this project engaged directly with us for some short-term time-and-materials consulting services. The other customer project, accounting for 22 percent of our total revenues for the year ended December 31, 2004, is staffed by our employees and is currently expected to be completed at the end of the first quarter of 2005. We do not currently have a new project in place to replace this project.

WeOn ~~have~~January 1, ~~previously recognized~~2006, ~~significant~~we ~~deferred~~adopted ~~revenues~~SFAS 123(R), Share-Based Payment, which ~~will~~requires ~~not~~the bemeasurement ~~available~~and inrecognition ~~future~~of ~~periods~~compensation expense for all share-based payment awards made to our employees and directors, including employee stock options and employee stock purchases related to the Employee Stock Purchase Plan, based on estimated fair values. See Note 18 of Notes to Financial Statements for more information.

~~Our~~On ~~deferred~~January 1, ~~revenue~~2006, ~~balance~~we ~~generally~~adopted ~~results~~SFAS ~~from~~No. 154, ~~contractual~~Accounting ~~commitments~~Changes ~~made~~and byError ~~customers~~Corrections. SFAS toNo. 154 ~~pay~~is ~~amounts~~a toreplacement usof inAPB ~~advance~~No. 20, ofAccounting ~~revenues~~Changes, ~~earned~~and SFAS No. 3, WeReporting ~~had~~Accounting ~~deferred~~Changes ~~revenues~~in ofInterim $1Financial Statements.1 ~~million~~SFAS atNo. 154 ~~December~~provides ~~31,~~guidance ~~2004~~on ~~compared to~~the ~~$7.6~~accounting ~~million~~for atand ~~December~~reporting ~~31,~~of accounting ~~2003~~changes and error corrections. ~~The~~It ~~decrease~~establishes ~~results~~retrospective ~~primarily~~application ~~from~~as the ~~recognition~~required ofmethod ~~previously~~for ~~deferred~~reporting ~~revenues~~a ~~during~~change ~~the~~in ~~quarter~~accounting ~~ended~~principle. ~~June~~SFAS ~~30,~~No. 154 ~~2004,~~provides ~~upon~~guidance ~~our~~for ~~successful~~determining ~~conclusion~~whether ofretrospective anapplication ~~earlier~~of ~~fixed-price~~a change ~~applications~~in ~~development project~~accounting ~~with~~principle ~~Cedars~~is ~~described~~impracticable ~~above.~~and Wehow ~~had~~to report a ~~deferred~~change ~~revenue~~in ~~balance~~such ofcircumstances. $1SFAS No.1 154 ~~million~~also atprovides ~~December~~that ~~31,~~a ~~2004~~change ~~that~~in wemethod ~~expect~~of todepreciating ~~recognize~~or asamortizing ~~revenues~~a inlong-lived ~~future~~non-financial ~~periods,~~asset ~~but~~be ~~the~~accounted ~~timing~~for ofas ~~recognition~~a ischange ~~uncertain.~~in estimate Aseffected by a ~~result,~~change wein doaccounting ~~not~~principle, ~~expect~~and ~~to recognize~~also ~~revenues~~provides orthat ~~profits~~correction ~~from~~of ~~deferred~~errors ~~revenues~~in ~~during~~previously ~~2005~~issued atfinancial ~~the~~statements ~~same~~should ~~levels~~be ~~that~~termed wea ~~experienced~~“restatement.” ~~during~~SFAS ~~2004,~~No. 154 ~~and~~is ~~will~~effective ~~likely~~for ~~experience~~accounting ~~losses~~changes ~~until~~and corrections ~~this~~of ~~decrease~~errors ismade ~~offset~~in byfiscal ~~revenue~~years ~~from~~beginning ~~other~~after ~~sources.~~December 15, 2005

37In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Instruments, which amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and SFAS No. 140 Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No. 155 allows financial instruments that have embedded derivatives to be accounted for as a whole (eliminating the need to bifurcate the derivative from its host) if the holder elects to account for the whole instrument on a fair value basis. SFAS No. 155 also clarifies and amends certain other provisions of SFAS No. 133 and SFAS No. 140. This statement is effective for all financial instruments acquired or issued in financial years beginning after September 15, 2006. We do not expect our adoption of this new standard to have a material impact on our financial position, results of operations or cash flows.

In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets to simplify accounting for separately recognized servicing assets and servicing liabilities. SFAS No. 156 amends SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. Additionally, SFAS No. 156 applies to all separately recognized servicing assets and liabilities acquired or issued after the beginning of an entity’s fiscal year that begins after September 15, 2006, although early adoption is permitted. We do not expect our adoption of this new standard to have a material impact on our financial position, results of operations or cash flows.

AsIn weJune ~~change~~2006, ~~our~~the ~~business~~FASB ~~strategy~~ratified toEmerging ~~licensing~~Issues ~~EnterpriseTenFold~~Task ~~and~~Force ~~other~~Issue, ~~software~~or ~~products~~EITF, ~~the~~No. 06-3, ~~success~~How ofTaxes Collected ~~our~~from ~~business~~Customers isand ~~dependent,~~Remitted to Governmental Authorities Should Be Presented in ~~part,~~the ~~upon~~Income ~~our~~Statement ~~ability~~(That toIs, ~~license~~Gross ~~those~~versus ~~products~~Net Presentation). IfEITF ~~our~~No. 06-3 ~~strategy~~requires that, for interim and annual reporting periods beginning after ~~marketing~~December 15, ~~EnterpriseTenFold~~2006, we disclose our policy related to the presentation of sales taxes and similar assessments related to our ~~other~~revenue ~~products~~transactions. Early adoption is ~~unsuccessful,~~permitted. orIn ifour statements of operations, we ~~are~~present ~~unable~~revenue tonet ~~license~~of ~~EnterpriseTenFold~~sales taxes and~~/or~~ ~~other~~any ~~products~~similar ~~successfully,~~assessments. orEITF ~~within~~No. 06-3 ~~the~~had ~~time~~no ~~frames~~effect ~~anticipated,~~on our ~~revenues~~financial position and ~~operating~~ results ~~will~~of ~~suffer~~operations.

~~Our~~In ~~historical~~July ~~quarterly~~2006, ~~operating~~the FASB ~~results~~issued ~~have~~Interpretation ~~varied~~No. 48, ~~significantly~~Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109 (“FIN 48”) which prescribes a recognition threshold and measurement attribute, as well as criteria for subsequently recognizing, de-recognizing and measuring uncertain tax positions for financial statement purposes. FIN 48 also requires expanded disclosure with respect to the uncertainty in income tax assets and liabilities. FIN 48 is effective for fiscal years beginning after December 15, 2006 and is required to be recognized as a change in accounting principle through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. We do not expect our ~~future~~adoption ~~operating~~of this new standard to have a material impact on our financial position, results ~~could~~of ~~vary~~operations or cash flows.

~~Historically~~On September 13, ~~our quarterly~~2006, ~~operating~~the ~~results~~Securities ~~have~~and ~~varied~~Exchange ~~significantly.~~Commission ~~For~~released ~~example~~Staff Accounting Bulletin 108, ~~during~~Considering ~~some~~the ~~years,~~Effects ~~including~~of ~~this~~Prior ~~year~~Year Misstatements in Current Year Financial Statements ("SAB 108"), wewhich ~~have~~provides ~~had~~guidance ~~quarterly~~on how ~~profits~~the ~~followed~~effects byof ~~losses~~the carryover or reversal of prior year misstatements should be considered in ~~subsequent~~quantifying ~~quarters~~a current year misstatement. ~~Our~~SAB 108 ~~future~~calls ~~operating~~for ~~results~~the ~~may~~quantification ~~continue~~of toerrors ~~vary~~using ~~significantly.~~both a balance sheet and income statement approach ~~Until~~based weon ~~achieve~~the ~~significant~~effects ~~sales~~of tosuch ~~new~~errors oron ~~existing~~each ~~customers~~of the company's financial statements and the related financial statement disclosures. SAB 108 is effective for financial statements issued for the fiscal year ending after November 15, we2006. Adoption ~~expect~~of toSAB 108 ~~continue~~did tonot ~~experience~~have ~~losses~~a significant impact on our results of operations or financial condition.

IfIn ~~our~~September ~~software~~2006, ~~contains~~the FASB ~~defects~~issued orSFAS ~~other~~No. 157 ~~limitations~~Fair Value Measurements, wewhich ~~could~~defines ~~face~~fair ~~product~~value, ~~liability~~establishes ~~exposure~~a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 is effective in fiscal years beginning after November 15, 2007. We are currently evaluating the impact of adopting the provisions of SFAS No. 157.

~~Because~~In ofSeptember ~~our~~2006, ~~limited~~the ~~operating~~FASB ~~history~~issued SFAS No. 158, Employer’s Accounting for Defined Benefit Pension and ~~our~~Other ~~small~~Postretirement ~~number~~Plans (an amendment of ~~customers~~FASB Statements No. 87, we88, ~~have~~106, ~~completed~~and a132R). ~~limited~~SFAS No. 158 ~~number~~requires an employer to recognize in its statement of ~~projects~~financial ~~that~~position ~~are~~an ~~now~~asset infor ~~production.~~a As plan’s over funded status or a ~~result~~liability for a plan’s under funded status, ~~there~~measure ~~may~~a beplan’s ~~undiscovered~~assets ~~material~~and ~~defects~~its inobligations ~~our~~that ~~products~~determine its orfunded ~~technology.~~status ~~Furthermore,~~as ~~complex~~of ~~software~~the ~~products~~end ~~often~~of ~~contain~~the ~~errors~~employer’s orfiscal ~~defects~~year (with limited exceptions), ~~particularly~~and ~~when~~recognize ~~first~~changes ~~introduced~~in orthe ~~when~~funded ~~new~~status ~~versions~~of ora ~~enhancements~~defined ~~are~~benefit ~~released~~postretirement plan in the year in which the changes occur. ~~Despite internal~~SFAS ~~testing~~No. 158 ~~and~~is ~~testing~~effective in byfiscal ~~current~~years ~~and~~beginning ~~potential~~after ~~customers~~December 15, ~~our~~2006. ~~current~~As ~~and~~we ~~future~~do ~~products~~not ~~may~~have ~~contain~~any ~~serious~~defined ~~defects.~~benefit ~~Serious~~postretirement ~~defects~~plans, orwe ~~errors~~do ~~could~~not ~~result~~expect inour ~~lost~~adoption ~~revenues~~of orthis new standard to have a ~~delay~~material inimpact ~~market~~on ~~acceptance~~our financial position, ~~which~~results ~~would~~of ~~damage~~operations ~~our~~or ~~reputation~~cash ~~and business~~flows.

~~Because~~On ~~our~~December 21, ~~customers~~2006, ~~may~~the ~~use~~FASB ~~our~~issued ~~products~~FASB ~~for mission~~Staff Position (FSP) Emerging Issues Task Force ("EITF") 00-~~critical~~19-2, ~~applications~~"Accounting for Registration Payment Arrangements," ~~errors~~which requires an issuer to account for a contingent obligation to transfer consideration under a registration payment arrangement in accordance with FASB Statement No. 5, ~~defects~~Accounting for Contingencies and FASB Interpretation 14, orReasonable ~~other~~Estimation ~~performance~~of ~~problems~~the ~~could~~Amount ~~result~~of Loss. Registration payment arrangements are frequently entered into in connection with issuance of unregistered financial orinstruments, ~~other~~such ~~damages~~as toequity ~~customers~~shares or warrants. ~~Our~~A ~~customers~~registration ~~could~~payment ~~seek~~arrangement ~~damages~~contingently ~~for~~obligates ~~these~~the ~~losses.~~issuer ~~Any~~to ~~successful~~make ~~claims~~future ~~for~~payments ~~these~~or ~~losses,~~otherwise transfer consideration to another party if the ~~extent~~issuer ~~not covered~~fails byto ~~insurance,~~file a ~~could~~registration ~~result~~statement inwith ~~our~~the ~~being~~SEC ~~obligated~~for the resale of specified financial instruments or fails to ~~pay~~have ~~substantial~~the ~~damages,~~registration ~~which~~statement ~~would~~declared ~~cause~~effective ~~operating~~within ~~results~~a tospecific ~~suffer~~period. ~~Although~~The ~~our~~FSP ~~license~~requires ~~agreements~~issuers ~~typically~~to ~~contain~~make ~~provisions~~certain ~~designed~~disclosures tofor ~~limit~~each ~~our~~registration ~~liability,~~payment ~~existing~~arrangement or ~~future~~group of similar arrangements. ~~laws~~The orFSP ~~unfavorable~~is ~~judicial~~effective ~~decisions~~immediately ~~could~~for ~~negate~~registration ~~these~~payment ~~limitations~~arrangements ofand ~~liability~~financial ~~provisions~~instruments entered into or modified after the FSP's issuance date. AFor ~~product~~previously ~~liability~~issued ~~claim~~registration ~~brought~~payment ~~against~~arrangements usand financial instruments subject to those arrangements, ~~even~~the ifFSP ~~not~~is ~~successful~~effective for financial statements issued for fiscal years beginning after December 15, ~~would~~2006. ~~likely~~We bedo ~~time~~not ~~consuming~~expect ~~and~~our ~~costly~~adoption of this new standard to have a material impact on our financial position, results of operations or cash flows.

~~Our~~38 ~~errors and omissions coverage may not cover contractual disputes~~

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

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

WeItem are involved in a dispute with a former customer as part of its resolution of its bankruptcy proceeding and in a class action suit against more than 300 issuers involving the underwriters of those issuers’ initial public offerings7A. WeQuantitative have also been named as one of many defendants in a lawsuit related to the death of a patient at Cedars-Sinai Medical Center, one of our customers. We may in the future face other litigation or disputes with customers, employees, business partners, stockholders, or other third parties. Such litigation or disputes could result in substantial costs and ~~diversion~~Qualitative ofDisclosures ~~resources~~about ~~that~~Market would harm our business. An unfavorable outcome of these matters may have a material adverse impact on our business, results of operations, financial position, or liquidity. See “Legal Proceedings” generally for more information concerning our litigation and disputes. Risk

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

~~Although~~As of December 31, 2006, we ~~have~~had ~~settled~~cash ~~our~~and ~~disputes~~cash ~~with~~equivalents ~~Perot~~of ~~Systems~~$3.6 million, and ~~Cedars-Sinai~~restricted cash of $74,000. ~~and~~Substantially ~~during~~all ~~2004~~of ~~entered~~the ~~into~~cash ~~revised~~equivalents ~~agreements with~~consist ~~Cedars-Sinai~~of ~~that~~highly ~~confirm~~liquid ~~our~~investments ~~completion~~with ofremaining ~~the~~maturities ~~earlier~~at ~~project~~the ~~and~~date ~~provide~~of ~~for~~purchase ~~mutual~~of ~~releases~~less ~~from~~than ~~prior~~ninety ~~related~~days. ~~claims,~~These ~~our~~investments ~~agreements~~are ~~still~~subject ~~require~~to ~~that~~interest werate ~~perform~~risk and ~~meet~~will ~~certain~~decrease ~~obligations.~~in Ifvalue weif market ~~are~~interest ~~unable~~rates toincrease. A hypothetical increase or dodecrease ~~not~~in ~~perform~~market orinterest ~~meet these~~rates ~~obligations,~~by ~~Perot~~10 ~~Systems~~percent ~~and~~from ~~Cedars-Sinai~~the ~~may~~December 31, ~~re-instate~~2006 orrates ~~re-assert~~would ~~their~~cause ~~respective~~the ~~prior~~fair ~~claims~~value ~~against~~of ~~us.~~these Ifcash ~~either~~investments ~~Perot~~to ~~Systems~~change orby ~~Cedars-Sinai~~an ~~were~~insignificant toamount. ~~re-instate~~We ordo ~~re-assert~~not invest ~~their~~in ~~respective~~any ~~claims,~~financial anderivatives ~~unfavorable~~or ~~outcome~~any ofother ~~the matter~~complex ~~may~~financial ~~have~~instruments. aTenFold ~~material~~does ~~adverse~~not ~~impact~~own onany ~~our~~equity ~~business~~investments. Therefore, ~~results~~we ofdo ~~operations,~~not ~~financial~~currently ~~position,~~have orany ~~liquidity~~direct equity price risk.

IfCurrency weRisk ~~fail to adequately anticipate employee and resource utilization rates, our operating results could suffer~~

AOur ~~high~~operations ~~percentage~~include some transactions with customers and partners in the United Kingdom. Some of ~~our~~these ~~operating~~transactions ~~expenses~~are denominated in British pounds. For example, ~~particularly~~we ~~personnel~~have ~~and~~had projects in the United Kingdom for which we received payment from our customer in British ~~rent~~pounds, ~~are~~and ~~relatively~~paid ~~fixed~~a incontractor ~~advance~~we ofused ~~any~~in ~~particular~~British ~~quarter~~pounds. As a result, ~~unanticipated~~our ~~variations~~financial results could be affected by factors such as a change in the ~~number~~foreign currency exchange rate between the U.S. dollar and the British pound, or ~~progress~~by ~~toward~~weak ~~completion~~economic conditions in the United Kingdom. When the U.S. dollar strengthens against the British pound, ofthe ~~our~~value ~~projects~~of receivables or payables denominated in ~~employee~~British ~~utilization~~pounds ~~rates~~decreases. ~~did~~When ~~and~~the ~~may~~U.S. ~~continue~~dollar toweakens ~~cause~~against ~~significant~~the British pound, the value of ~~variations~~receivables inor ~~operating~~payables ~~results~~denominated in ~~any~~British ~~particular~~pounds ~~quarter~~increases. ~~and~~The ~~could~~monetary ~~result~~activities inwhich ~~quarterly~~are ~~losses.~~impacted ~~Time-and-materials~~by ~~consulting~~foreign ~~arrangements~~currency ~~can~~fluctuations ~~typically~~are becash, ~~terminated~~accounts byreceivable, aaccounts ~~customer~~payable, onand ~~short~~certain ~~notice~~accrued liabilities. AnA ~~unanticipated~~hypothetical ~~termination~~10 ofpercent increase aor ~~major~~decrease ~~project,~~ in the ~~delay~~exchange ofrate abetween ~~project,~~the orU.S. dollar and the ~~completion~~British ~~during~~pound afrom ~~quarter~~the ofDecember 31, ~~several~~2006 ~~projects~~rate ~~has~~would incause the ~~past~~fair ~~and~~value ~~may~~of ~~continue~~such tomonetary ~~result~~assets and liabilities denominated in ~~under-utilized~~British ~~employees~~pounds ~~and~~to ~~could,~~change ~~therefore,~~by ~~cause~~an insignificant usamount. toWe ~~suffer~~are ~~quarterly~~not ~~losses~~currently orengaged ~~adverse~~in ~~results~~any offoreign ~~operations~~currency hedging activities.

AItem ~~loss of Nancy M~~8. ~~Harvey,~~Financial ~~Jeffrey~~Statements L.and ~~Walker,~~Supplementary ~~or any other key employee could impair our business~~ Data

~~Our industry is competitive and~~The weresponses ~~are~~to ~~substantially~~this ~~dependent~~item ~~upon the continued service of our existing executive personnel, especially Nancy M. Harvey, President, Chief Executive Officer and Chief Financial Officer. Furthermore, our products and technologies~~ are ~~complex~~submitted ~~and~~in ~~we are~~other ~~substantially~~sections ~~dependent upon the continued service~~ of ~~our~~this ~~senior~~Form ~~technical staff, including Jeffrey L~~10-K. ~~Walker,~~See ~~Chairman~~Item 6 offor ~~the~~Supplementary ~~Board of Directors, Executive Vice President, and Chief Technology Officer~~Data. IfSee aItem 15 ~~key~~for employee resigns to join a competitor or to form a competing company, the loss of the employee and any resulting loss of existing or potential customers to the competing company would harm our business. We do not carry key-man life insurance on any of our key employees. We have entered into an employment agreement with our President, Chief Executive Officer, and Chief Financial ~~Officer, Nancy M~~Statements. Harvey. However, the agreement does not ensure continued service to TenFold. In the event of the loss of key personnel, there can be no assurance that we would be able to prevent their unauthorized disclosure or use of our technical knowledge, practices, or procedures.

39Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and our Chief Financial Officer, after evaluating the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 (Exchange Act) Rules 13a-15(e) or 15d-15(e)) as of the end of the period covered by this annual report, have concluded that our disclosure controls and procedures are effective based on their evaluation of these controls and procedures required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.

Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.

Other Information

None.

Our services 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~~Part ~~personnel.~~III Any failure on our part to do so would impair our ability to adequately manage and complete existing projects, bid for and obtain new projects, and expand business. There exists significant competition for employees with the skills required to perform the services we offer. Qualified project managers and senior technical staff are in great demand and are likely to remain a limited resource for the foreseeable future. Our prior restructurings and related headcount reductions, may make it more difficult for us to retain and compete for such employees. There can be no assurance that we will be successful in retaining, training, and motivating our employees or in attracting new, highly skilled employees. If we are unsuccessful in this effort or if our employees are unable to achieve expected performance levels, our business will be harmed.

IfCertain information required by Part III is omitted from this Report on Form 10-K since we ~~cannot~~will ~~protect~~file a ordefinitive ~~enforce~~Proxy ~~our~~pursuant ~~intellectual~~to ~~property~~Regulation ~~rights~~14A of the Securities Exchange Act of 1934, ~~our~~as ~~competitive~~amended ~~position~~(the ~~would~~“Proxy beStatement”), ~~impaired~~not ~~and~~later wethan ~~may~~120 ~~become~~days ~~involved~~after inthe ~~costly~~end of the fiscal year covered by this Report, and ~~time-consuming~~certain information included in ~~litigation~~the Proxy Statement is incorporated herein by reference.

~~Our~~Item ~~success is dependent, in part, upon our proprietary EnterpriseTenFold technology and other intellectual property rights~~10. IfDirectors ~~we are unable to protect~~ and ~~enforce~~Executive ~~these~~Officers 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 issued three patents in the U.S. and intend to continue to seek patents on our technology when appropriate. There can be no assurance that the steps we have taken in this regard will be adequate to deter misappropriation of our proprietary information or that we will be able to detect unauthorized use and take appropriate steps to enforce our intellectual property rights. The laws of some countries may not protect our intellectual property rights to the same extent as do the laws of the United States. Furthermore, litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity. This litigation could result in substantial costs and diversion of resources that would harm our business. Registrant

To(a) ~~date,~~Executive weOfficers 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.

IfThe weinformation ~~fail~~required by this Item is incorporated by reference to ~~successfully~~the ~~compete,~~section ~~our~~entitled ~~revenues~~“Executive Officers” in Part I of this Form 10-K and ~~market~~by ~~share~~reference ~~will~~to bethe ~~adversely~~Section ~~affected~~entitled “Code of Ethics” in the Proxy Statement.

~~The market for our products and services is highly competitive, and if we~~(b) ~~are~~Directors not successful in competing in this market, our revenues and market share will suffer. Many of our competitors have significantly greater financial, technical and marketing resources, generate greater revenues, and have greater name recognition than we do. In addition, there are relatively low barriers to entry into our markets and we have faced, and expect to continue to face, additional competition from new entrants into our markets.

40The information required by this Item is incorporated by reference to the sections entitled “Board of Directors” and “Nominations” in the Proxy Statement.

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.

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item is incorporated by reference to the section entitled “Equity Compensation Plan Information” in Part II of this Form 10-K and 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.

Item 14.

Principal Accountant Fees and Services

The information required by this Item is incorporated by reference to the section entitled “Independent Registered Public Accountants” in the Proxy Statement.

~~Revenues from customers outside of North America~~ ~~were~~Part ~~approximately~~IV 20 percent of total revenues for 2004. The international political and economic uncertainty caused by the ongoing war on terrorism may adversely impact our ability to continue existing relationships with our foreign customers and to develop new business abroad.

~~Our~~Item ~~stock~~15. ~~price~~Exhibits, ~~may~~Financial ~~continue~~Statement ~~to be volatile~~ Schedules.

~~Our stock price has fluctuated widely in the past and could continue to do so in the future~~1. ~~Your~~Financial ~~investment~~Statements ~~in our stock could lose value. Some of the factors that could significantly affect the market price of our stock are discussed in these Risk Factors~~ and ~~elsewhere~~Notes in this 10-K, and also include: variations in our quarterly financial results; changes in our revenue; changes in our customer base including the loss of a major customer; changes in management; reports or earnings estimates published by financial analysts; changes in political, economic and market conditions either generally or specifically to ~~particular~~Financial ~~industries;~~Statements and fluctuations in stock prices generally, particularly with respect to the stock prices for other technology companies. A significant drop in our stock price could expose us to the risk of securities class action lawsuits. Defending against such lawsuits could result in substantial costs and divert management’s attention and resources. An unfavorable outcome of such a matter may have a material adverse impact on our business, results of operations, financial position, or liquidity.

NoThe ~~corporate~~following ~~actions~~financial ~~requiring~~statements ~~stockholder~~are ~~approval~~filed ~~can~~as ~~take~~part ~~place without the approval~~ of this ~~our~~report: ~~controlling stockholders~~

~~The executive officers, directors, and entities affiliated with them, in the aggregate, beneficially own approximately 57 percent of our outstanding~~ ~~common~~TENFOLD ~~stock.~~CORPORATION Jeffrey L. Walker, Chairman, Executive Vice President and Chief Technology Officer, and the Walker Children’s Trust, in the aggregate, currently beneficially own approximately 39 percent of our outstanding common stock. Mr. Walker, acting with others, would be able to decide or significantly influence all matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other business combination transactions. This concentration of ownership may have the effect of delaying or preventing a merger or other business combination transaction, even if the transaction would be beneficial to our other stockholders.

~~The~~INDEX ~~anti-takeover~~TO ~~provisions~~FINANCIAL inSTATEMENTS ~~our charter documents and/or under Delaware law could discourage a takeover that stockholders may consider favorable~~

Provisions of our certificate of incorporation, bylaws, stock incentive plans and Delaware law may discourage, delay, or prevent a merger or acquisition that a stockholder may consider favorable.


		Page
Report of Independent Registered Public Accounting Firm		44
Balance Sheets as of December 31, 2006 and 2005		45
Statements of Operations for each of the years in the three year period ended December 31, 2006		46
Statements of Changes in Stockholders' Equity for each of the years in the three year period ended December 31, 2006		47
Statements of Cash Flows for each of the years in the three year period ended December 31, 2006		48
Notes to Financial Statements		49

412. 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, 2006, 2005, and 2004		73

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

~~Interest~~3. ~~Rate~~Exhibits. ~~Risk~~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.

As of December 31, 2004, we had cash and cash equivalents of $5.2 million, and restricted cash of $74,000. Substantially all of the cash equivalents consist of highly liquid investments with remaining maturities at the date of purchase of less than ninety days. These investments are subject to interest rate risk and will decrease in value if market interest rates increase. A hypothetical increase or decrease in market interest rates by 10 percent from the December 31, 2004 rates would cause the fair value of these cash investments to change by an insignificant amount. 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.


Number		Description
3.2**		Fourth Amended and Restated Certificate of Incorporation of TenFold. (1)

3.3**		Amended and Restated Certificate of Designations of Convertible Preferred Class A Stock. (18)

3.4**		Bylaws of TenFold. (15)

4.1**		Reference is made to Exhibits 3.2, 3.3, and 3.4. (1) and (3)

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, Jeffrey L. Walker, the Walker Children’s Trust and the Investors (as defined therein). (1)

4.4**		Form of Securities Purchase Agreement dated December 22, 2003, between Registrant and purchasers of stock (12)

4.5**		Form of Amendment No. 1 to Securities Purchase Agreement dated December 22, 2003, between Registrant and purchasers of stock (13)

4.6**		Form of Securities Purchase Agreement dated March 29, 2006, between Registrant and purchasers of securities. (16)

4.7**		Form of Warrant issued pursuant to the Securities Purchase Agreement, dated March 29, 2006, between Registrant and purchasers of securities. (16)

4.8**		Form of Securities Purchase Agreement dated December 18, 2006, between Registrant and purchasers of securities. (18)

4.9**		Form of Warrant issued pursuant to the Securities Purchase Agreement, dated December 18, 2006, between Registrant and purchasers of securities. (18)

10.1**		Form of Indemnification Agreement between TenFold and an executive officer and its directors. (1)

10.2**#		1993 Flexible Stock Incentive Plan, as amended. (2)

10.3**#		1999 Stock Plan, as amended. (8)

10.4**#		1999 Employee Stock Purchase Plan, as amended. (8)

10.5**#		2000 Employee Stock Option Plan. (5)

10.6**		Restructuring Agreement effective December 8, 2000 between Perot Systems Corporation and TenFold. (5)

10.7**		Lease Agreement effective April 28, 2000 between Boyer Jordan Valley 1, L.C. and TenFold. (4)

10.8**		First Amendment to Lease Agreement effective November 30, 2000 between Boyer Jordan Valley 1, L.C. and TenFold. (5)

10.9**		Second Amendment to Lease Agreement between Boyer Jordan Valley 1, L.C. and TenFold. (9)

10.10**		Third Amendment to Lease Agreement Between Boyer Jordan Valley 1, L.C. and TenFold. (10)

10.11**#		Employment Agreement between TenFold and Nancy M. Harvey. (6)

10.12**#		Amendment to Employment Agreement TenFold Corporation and Nancy M. Harvey. (8)

10.13**#		Amendment No. 2 to Employment Agreement between TenFold and Nancy M. Harvey. (9)

10.14**#		Amendment No. 3 to Employment Agreement between TenFold and Nancy M. Harvey. (12)

10.15**#		Amendment No. 4 to Employment Agreement between TenFold and Nancy M. Harvey. (14)

10.16**#		Restricted Stock Bonus Agreement Between TenFold and Nancy M. Harvey. (7)

10.17**		Master Software License and Services Agreement, dated September 27, 1999, as amended, between TenFold and Allstate Insurance Company. (9)

10.18**		Stock Issuance Agreement and Release, dated as of February 5, 2003, between TenFold and the Robert W. Felton Trust. (11)

10.19**		Placement Agent Agreement dated December 12, 2003 between Registrant and Brean Murray & Co., Inc. (13)

10.20**		Separation Agreement and Release dated as of May 19, 2006, between TenFold and Nancy M. Harvey. (17)

11*		Computation of Shares used in Computing Basic and Diluted Net Income (Loss) Per Share.

~~Currency~~42 ~~Risk~~

Our operations include some transactions with customers and partners in the United Kingdom. Some of these transactions are denominated in British pounds. For example, we have had projects in the United Kingdom for which we received payment from our customer in British pounds, and paid a contractor we used in British pounds. As a result, our financial results could be affected by factors such as a change in the foreign currency exchange rate between the U.S. dollar and the British pound, or by weak economic conditions in the United Kingdom. When the U.S. dollar strengthens against the British pound, the value of receivables or payables denominated in British pounds decreases. When the U.S. dollar weakens against the British pound, the value of receivables or payables denominated in British pounds increases. The monetary activities which are impacted by foreign currency fluctuations are cash, accounts receivable, accounts payable, and certain accrued liabilities. A hypothetical 10 percent increase or decrease in the exchange rate between the U.S. dollar and the British pound from the December 31, 2004 rate would cause the fair value of such monetary assets and liabilities denominated in British pounds to change by $11,000. We are not currently engaged in any foreign currency hedging activities.

The responses to this item are submitted in other sections of this Form 10-K. See Item 6 for Supplementary Data. See Item 15 for Financial Statements.



23.1		Consent of Tanner LC.

31.1		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~Item~~* 9.Incorporated ~~Changes~~by Inreference ~~and~~to ~~Disagreements~~“Notes ~~with~~to ~~Accountants on Accounting and~~ Financial ~~Disclosure~~Statements” herein

On** ~~February~~Previously 10, 2003, we dismissed our independent accountant, KPMG LLP (“KPMG”), and engaged the services of Tanner + Co. (“Tanner”) as our new independent accountant for our fiscal year ending December 31, 2002 and our current fiscal year ending December 31, 2004. The Audit Committee of our Board of Directors approved the dismissal of KPMG and the appointment of Tanner as of February 10, 2003. For more information, see our Current Report on Form 8-K, filed ~~February 18, 2003.~~

~~Item~~# ~~9A.~~Indicates ~~Controls~~management ~~and~~contract ~~Procedures~~or compensatory plan or arrangement

An1) ~~evaluation~~Filed ~~was~~on ~~performed~~March ~~under the supervision and with the participation of the Company’s management~~8, ~~including~~1999 ~~Nancy~~as ~~Harvey~~an ~~(Chief~~exhibit ~~Executive~~to ~~Officer and Chief Financial Officer), of~~ the ~~effectiveness of the design and operation of the~~ Company’s ~~disclosure~~Registration ~~controls~~Statement ~~and procedures as of December 31, 2004. Based~~ on ~~that~~Form ~~evaluation,~~S-1 ~~Dr. Harvey concluded that the Company’s disclosure controls~~ and ~~procedures~~incorporated ~~are effective in ensuring that information required to be disclosed~~ by the Company in reports it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported as specified in the rules and forms of the Securities and Exchange Commissionreference. There have been no material changes in the Company’s internal controls over financial reporting or in other factors reasonably likely to affect the internal controls over financial reporting during the quarter ended December 31, 2004.

~~Item~~2) 9BFiled on April 20, 1999 as an exhibit to Amendment No. ~~Other~~1 ~~Information~~to the Company’s Registration Statement on Form S-1 and incorporated by reference.

~~None~~3) Filed on May 18, 1999 as an exhibit to Amendment No. 4 to the Company’s Registration Statement on Form S-1 and incorporated by reference.

434) Filed on May 5, 2000 as an exhibit to the Company’s Quarterly Report on Form 10-Q and incorporated by reference.

5)	Filed on April 12, 2001 as an exhibit to the Company’s Annual Report on Form 10-K and incorporated by reference.

6)	Filed on May 21, 2001 as an exhibit to the Company’s Quarterly Report on Form 10-Q and incorporated by reference.

7)	Filed on July 27, 2001 as an exhibit to the Company’s Quarterly Report on Form 10-Q and incorporated by reference.

8)	Filed on April 15, 2002 as an exhibit to the Company’s Annual Report on Form 10-K and incorporated by reference.

9)	Filed on August 14, 2002 as an exhibit to the Company’s Quarterly Report on Form 10-Q and incorporated by reference.

10)	Filed on November 19, 2002 as an exhibit to the Company’s Quarterly Report on Form 10-Q and incorporated by reference.

11)	Filed on March 31, 2003 as an exhibit to the Company’s Annual Report on Form 10-K and incorporated by reference.

12)	Filed on May 13, 2003 as an exhibit to the Company’s Quarterly Report on Form 10-Q and incorporated by reference.

13)	Filed on December 23, 2003 as an exhibit to the Company’s Report on Form 8-K and incorporated by reference.

14)	Filed on March 22, 2004 as an exhibit to the Company’s Report on Form 10-K and incorporated by reference.

15)	Filed on August 15, 2005 as an exhibit to the Company’s Quarterly Report on Form 10-Q and incorporated by reference.

16)	Filed on March 31, 2006 as an exhibit to the Company’s Report on Form 10-K and incorporated by reference.

17)	Filed on May 25, 2006 as an exhibit to the Company’s Report on Form 8-K and incorporated by reference.

18)	Filed on December 22, 2006 as an exhibit to the Company’s Report on Form 8-K and incorporated by reference.

~~Certain information~~ ~~required~~REPORT byOF ~~Part~~INDEPENDENT ~~III~~REGISTERED isPUBLIC ~~omitted~~ACCOUNTING ~~from~~FIRM 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~~Board ~~10.~~of Directors and ~~Executive~~Stockholders ~~Officers of the Registrant~~

~~(a)~~TenFold ~~Executive~~Corporation: ~~Officers~~

~~The~~We have audited the ~~information~~balance ~~required~~sheets byof ~~this~~TenFold ~~Item~~Corporation isas ~~incorporated~~of byDecember 31, ~~reference~~2006 toand 2005 and the ~~section~~related ~~entitled~~statements ~~“Executive~~of ~~Officers”~~operations, stockholders equity and cash flows for each of the three years in ~~Part~~the Iperiod ended December 31, 2006. In connection with our audits of ~~this~~the ~~Form~~financial ~~10-K~~statements, ~~and~~we byalso ~~reference~~have toaudited the ~~Section~~financial ~~entitled~~statement ~~“Code~~schedule as of ~~Ethics”~~December 31, 2006 and 2005 and for the three years then ended as listed in Item 15.2 of the ~~Proxy~~accompanying ~~Statement~~index. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (bUnited States). ~~Directors~~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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. 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.

~~The~~In ~~information~~our ~~required~~opinion, bythe ~~this~~financial statements ~~Item~~referred isto ~~incorporated~~above bypresent ~~reference~~fairly, toin all material respects, the financial position of TenFold Corporation as of December 31, 2006 and 2005, and the results of their operations and their cash flows for the three years ended ~~sections~~December 31, ~~entitled~~2006, ~~“Board~~in conformity with accounting principles generally accepted in the United States of ~~Directors”~~America. Also in our opinion, the related financial statement schedule as of and ~~“Nominations”~~for the three years ended December 31, 2006, when considered in relation to the ~~Proxy~~basic ~~Statement~~financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

~~(c)~~The ~~Section~~accompanying 16financial statements and schedule referred to above have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has used significant balances of its cash in operating activities and at present levels of cash consumption will not have sufficient resources to meet operating needs. This raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements and schedule do not include any adjustments that might result from the outcome of this uncertainty.

~~The~~/s/ ~~information~~Tanner LC ~~required by this Item is incorporated by reference to the section entitled “Section 16 (a) Beneficial Ownership Reporting Compliance” in the Proxy Statement.~~

Salt ~~Item~~Lake ~~11.~~City, ~~Executive~~Utah ~~Compensation~~

~~The~~February 20, ~~information~~2007 ~~required by this Item is incorporated by reference to the section entitled “Executive Compensation” in the Proxy Statement.~~

~~Item~~44 ~~12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters~~

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.

Item 14. Principal Accountant Fees and Services

The information required by this Item is incorporated by reference to the section entitled “Independent Public Accountants” in the Proxy Statement.

~~Item~~TENFOLD ~~15.~~CORPORATION ~~Exhibits, Financial Statement Schedules.~~

1.BALANCE ~~Financial~~SHEETS ~~Statements and Notes to Consolidated Financial Statements~~

~~The~~(in ~~following~~thousands, ~~financial~~except ~~statements~~share ~~are~~data) ~~filed as part of this report:~~

TENFOLD CORPORATION


	December 31,
	2006			2005
Assets
Current assets:
Cash and cash equivalents	$	3,601		$	1,344
Accounts receivable, (net of allowances for doubtful accounts of $0 and $9, respectively) (includes related person receivable of $0 and $25, respectively)		680			209
Unbilled accounts receivable, (net of allowances for doubtful accounts of $0 and $0, respectively)		34			2
Prepaid expenses and other assets		146			161

Total current assets		4,461			1,716

Restricted cash		74			74
Property and equipment, net		141			352

Total assets	$	4,676		$	2,142

Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	172		$	483
Income taxes payable		8			250
Accrued liabilities		1,142			1,492
Deferred revenue		1,446			2,218
Current installments of obligations under capital leases		10			35
Notes payable – related persons		—			600

Total current liabilities		2,778			5,078

Long-term liabilities:
Obligations under capital leases, excluding current installments		—			10

Total long-term liabilities		—			10

Commitments and contingencies
Stockholders' equity (deficit):
Convertible preferred stock, $0.001 par value:
Authorized: 2,000,000 shares
Issued and outstanding shares: 1,812,009 shares at December 31, 2006 and 0 shares at December 31, 2005 .		2			—
Common stock, $0.001 par value:
Authorized: 120,000,000 shares
Issued and outstanding shares: 46,557,745 shares at December 31, 2006 and 46,445,749 shares at December 31, 2005		47			46
Additional paid-in capital		86,429			76,411
Deferred compensation		–			(6	)
Accumulated deficit		(84,580	)		(79,397	)

Total stockholders' equity (deficit)		1,898			(2,946	)

Total liabilities and stockholders' equity	$	4,676		$	2,142

~~INDEX~~The TOaccompanying ~~CONSOLIDATED~~notes ~~FINANCIAL~~to ~~STATEMENTS~~financial statements are an integral part of these financial statements

		Page
Report of Registered Independent Public Accounting Firm		48
Consolidated Balance Sheets as of December 31, 2004 and 2003		49
Consolidated Statements of Operations for each of the years in the three year period ended December 31, 2004		50
Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for each of the years in the three year period ended December 31, 2004		51
Consolidated Statements of Cash Flows for each of the years in the three year period ended December 31, 2004		52
Notes to Consolidated Financial Statements		53

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, 2004, 2003, and 2002

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

~~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~~TENFOLD ~~previously~~CORPORATION ~~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. (1)
3.4**		Amendment to Bylaws dated March 2, 1999. (3)
4.1**		Reference is made to Exhibits 3.2, 3.3, and 3.4. (1) and (3)
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, Jeffrey L. Walker, the Walker Children’s Trust and the Investors (as defined therein). (1)
4.4**		Form of Securities Purchase Agreement dated December 22, 2003, between Registrant and purchasers of stock (12)
4.5**		Form of Amendment No. 1 to Securities Purchase Agreement dated December 22, 2003, between Registrant and purchasers of stock (13)
10.1**		Form of Indemnification Agreement between TenFold and an executive officer and its directors. (1)
10.2**#		1993 Flexible Stock Incentive Plan, as amended. (2)
10.3**#		1999 Stock Plan, as amended. (8)
10.4**#		1999 Employee Stock Purchase Plan, as amended. (8)
10.5**#		2000 Employee Stock Option Plan. (5)
10.6**		Restructuring Agreement effective December 8, 2000 between Perot Systems Corporation and TenFold. (5)
10.7**		Lease Agreement effective April 28, 2000 between Boyer Jordan Valley 1, L.C. and TenFold. (4)
10.8**		First Amendment to Lease Agreement effective November 30, 2000 between Boyer Jordan Valley 1, L.C. and TenFold. (5)
10.9**		Second Amendment to Lease Agreement between Boyer Jordan Valley 1, L.C. and TenFold. (9)
10.10**		Third Amendment to Lease Agreement Between Boyer Jordan Valley 1, L.C. and Tenfold. (10)
10.11**#		Employment Agreement between TenFold and Nancy M. Harvey. (6)
10.12**#		Amendment to Employment Agreement TenFold Corporation and Nancy M. Harvey. (8)
10.13**#		Amendment No. 2 to Employment Agreement between TenFold and Nancy M. Harvey. (9)
10.14**#		Amendment No. 3 to Employment Agreement between TenFold and Nancy M. Harvey. (12)
10.15**#		Amendment No. 4 to Employment Agreement between TenFold and Nancy M. Harvey. (14)
10.16**#		Restricted Stock Bonus Agreement Between TenFold and Nancy M. Harvey. (7)
10.17**		Master Software License and Services Agreement, dated September 27, 1999, as amended, between TenFold and Allstate Insurance Company. (9)
10.18**		Stock Issuance Agreement and Release, dated as of February 5, 2003, between TenFold and the Robert W. Felton Trust. (11)
10.19**		Placement Agent Agreement dated December 12, 2003 between Registrant and Brean Murray & Co., Inc. (13)
11*		Computation of Shares used in Computing Basic and Diluted Net Income (Loss) Per Share.
23.1		Consent of Tanner + Co.
31		Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

STATEMENTS OF OPERATIONS

46(in thousands, except per share data)


	Year Ended December 31,
	2006			2005			2004
Revenues:
License	$	1,424		$	515		$	359
Services and other		3,574			5,195			17,234

Total revenues		4,998			5,710			17,593

Operating expenses:
Cost of revenues		2,778			2,940			5,883
Sales and marketing		812			2,896			2,861
Research and development		4,100			3,531			3,734
General and administrative		2,818			2,986			2,315

Total operating expenses		10,508			12,353			14,793

Income (loss) from operations		(5,510	)		(6,643	)		2,800

Other income (expense):
Interest income		109			60			92
Interest expense		(21	)		(7	)		(10	)
Other income		4			84			158

Total other income, net		92			137			240

Income (loss) before income taxes		(5,418	)		(6,506	)		3,040
Benefit for income taxes		(235	)		(1,072	)		(376	)

Net income (loss)	$	(5,183	)	$	(5,434	)	$	3,416

Deemed dividend related to warrants issued with preferred stock and beneficial conversion feature on preferred stock		(2,207	)		—			—

Net income (loss) applicable to common shareholders	$	(7,390	)	$	(5,434	)	$	3,416

Basic earnings (loss) per common share	$	(0.16	)	$	(0.12	)	$	0.07

Diluted earnings (loss) per common share	$	(0.16	)	$	(0.12	)	$	0.06

Weighted average common and common equivalent shares used to calculate earnings (loss) per share:
Basic		46,518			46,423			46,204

Diluted		46,518			46,423			54,924

The accompanying notes to financial statements are an integral part of these financial statements

*		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 No. 1 to the Company’s Registration Statement on Form S-1 and incorporated by reference.
3)		Filed on May 18, 1999 as an exhibit to Amendment No. 4 to the Company’s Registration Statement on Form S-1 and incorporated by reference.
4)		Filed on May 5, 2000 as an exhibit to the Company’s Quarterly Report on Form 10-Q and incorporated by reference.
5)		Filed on April 12, 2001 as an exhibit to the Company’s Annual Report on Form 10-K and incorporated by reference.
6)		Filed on May 21, 2001 as an exhibit to the Company’s Quarterly Report on Form 10-Q and incorporated by reference.
7)		Filed on July 27, 2001 as an exhibit to the Company’s Quarterly Report on Form 10-Q and incorporated by reference.
8)		Filed on April 15, 2002 as an exhibit to the Company’s Annual Report on Form 10-K and incorporated by reference.
9)		Filed on August 14, 2002 as an exhibit to the Company’s Quarterly Report on Form 10-Q and incorporated by reference.
10)		Filed on November 19, 2002 as an exhibit to the Company’s Quarterly Report on Form 10-Q and incorporated by reference.
11)		Filed on March 31, 2003 as an exhibit to the Company’s Annual Report on Form 10-K and incorporated by reference.
12)		Filed on May 13, 2003 as an exhibit to the Company’s Quarterly Report on Form 10-Q and incorporated by reference.
13)		Filed on December 23, 2003 as an exhibit to the Company’s Report on Form 8-K and incorporated by reference.
14)		Filed on March 22, 2004 as an exhibit to the Company’s Report on Form 10-K and incorporated by reference.

47 TENFOLD CORPORATION

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except share data)


	Common Stock			Convertible Preferred Stock			Additional Paid-in Capital			Deferred Compensation			Accumulated Deficit			Total Stockholders' Equity (Deficit)
	Shares	Amount		Shares	Amount		Additional Paid-in Capital			Deferred Compensation			Accumulated Deficit			Total Stockholders' Equity (Deficit)
Balance at December 31, 2003	45,969,524	$	46	—	$	—	$	75,936		$	(43	)	$	(77,379	)	$	(1,440	)

Common stock issued upon exercise of options	297,639		—	—		—		146			—			—			146
Common stock issued for ESPP and other	110,056		—	—		—		142			—			—			142
Amortization of deferred compensation	—		—	—		—		—			17			—			17
Cancellation of stock options	—		—	—		—		(6	)		6			—			—
Net income	—		—	—		—		—			—			3,416			3,416

Balance at December 31, 2004	46,377,219	$	46	—		—	$	76,218		$	(20	)	$	(73,963	)	$	2,281

Common stock issued for ESPP and other	68,530		—	—		—		36			—			—			36
Amortization of deferred compensation	—		—	—		—		—			171			—			171
Deferred compensation related to modification of stock options	—		—	—		—		157			(157	)		—			—
Net loss	—		—	—		—		—			—			(5,434	)		(5,434	)

Balance at December 31, 2005	46,445,749	$	46	—		—	$	76,411		$	(6	)	$	(79,397	)	$	(2,946	)

Common stock issued upon exercise of options	6,000		—	—		—		1			—			—			1
Common stock issued for ESPP and other	105,996		1	—		—		19			—			—			20
Amortization of deferred compensation	—		—	—		—		(6	)		6			—			—
Issuance of convertible preferred stock and warrants.	—		—	1,812,009		2		7,292			—			—			7,294
Compensation expense related to grants of stock options	—		—	—		—		2,712			—			—			2,712
Net loss	—		—	—		—		—			—			(5,183	)		(5,183	)

Balance at December 31, 2006	46,557,745	$	47	1,812,009	$	2	$	86,429		$	—		$	(84,580	)	$	1,898

The accompanying notes to financial statements are an integral part of these financial statements

~~Board~~ TENFOLD ofCORPORATION ~~Directors and Stockholders~~

~~TenFold~~STATEMENTS ~~Corporation:~~OF CASH FLOWS

We have audited the consolidated balance sheets of TenFold Corporation and subsidiaries as of December 31, 2004 and 2003 and the related consolidated statements of operations, stockholders equity and cash flows for each of the three years (in ~~the~~thousands) period ended December 31, 2004. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as of December 31, 2004 and 2003 and for the three years then ended as listed in Item 15.1 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 standards of the Public Company Accounting Oversight Board (United States). 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.


	Year Ended December 31,
	2006			2005			2004
Cash flows from operating activities:
Net income (loss)	$	(5,183	)	$	(5,434	)	$	3,416
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		242			305			356
Provision (reversal) to bad debt reserve		—			(19	)		33
Amortization of deferred compensation		—			171			17
Stock-based compensation expense		2,712			—			—
(Gain) loss on sale of property and equipment		—			2			(62	)
Changes in operating assets and liabilities:
Accounts receivable		(471	)		40			672
Unbilled accounts receivable		(32	)		82			(19	)
Prepaid expenses and other assets		15			15			77
Accounts payable		(311	)		218			(862	)
Income taxes payable, net		(242	)		(1,090	)		(388	)
Accrued liabilities		(350	)		86			(4,010	)
Deferred revenue		(772	)		1,156			(6,524	)

Net cash used in operating activities		(4,392	)		(4,468	)		(7,294	)

Cash flows from investing activities:
Additions to property and equipment		(31	)		(19	)		(52	)
Additions to restricted cash		—			—			(1	)
Proceeds from sale of property and equipment		—			2			63

Net cash provided by (used in) investing activities		(31	)		(17	)		10

Cash flows from financing activities:
Proceeds from employee stock purchase plan stock issuance		20			36			142
Proceeds from issuance of convertible preferred stock and warrants		7,294			—			—
Exercise of common stock options		1			—			146
Principal payments on obligations under capital lease		(35	)		(32	)		(15	)
Proceeds from issuance of notes payable		500			600			—
Principal payments on notes payable		(1,100	)		—			—

Net cash provided by financing activities		6,680			604			273

Net increase (decrease) in cash and cash equivalents		2,257			(3,881	)		(7,011	)
Cash and cash equivalents at beginning of year		1,344			5,225			12,236

Cash and cash equivalents at end of year	$	3,601		$	1,344		$	5,225

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	7		$	19		$	24
Cash paid for interest		21			4			3
Non cash investing and financing activities:
Deferred compensation related to grants of stock or stock options	$	—		$	157		$	—
Equipment purchased under capital leases		—			16			76

InThe ~~our~~accompanying ~~opinion,~~notes ~~the~~to ~~consolidated~~ financial statements ~~referred~~are toan ~~above~~integral ~~present~~part ~~fairly, in all material respects, the financial position~~ of ~~TenFold~~these Corporation and subsidiaries as of December 31, 2004 and 2003, and the results of their operations and their cash flows for the three years ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial ~~statement~~ ~~schedule as of and for the three years ended December 31, 2004, 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.~~

~~The~~48 accompanying consolidated financial statements and schedule referred to above have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has used significant balances of its cash in operating activities and at present levels of cash consumption will not have sufficient resources to meet operating needs. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Tanner+Co.

Salt Lake City, Utah

February 28, 2005

~~CONSOLIDATED~~ TENFOLD ~~BALANCE~~CORPORATION ~~SHEETS~~

~~(in~~NOTES ~~thousands,~~TO ~~except~~FINANCIAL ~~share~~STATEMENTS ~~data)~~

	December 31,
	2004			2003
Assets
Current assets:
Cash and cash equivalents	$	5,225		$	12,236
Accounts receivable, (net of allowances for doubtful accounts of $29 and $0, respectively)		240			942
Unbilled accounts receivable, (net of allowances for doubtful accounts of $3 and $0, respectively)		74			58
Prepaid expenses and other assets		162			243
Other assets		14			10
Total current assets		5,715			13,489
Restricted cash		74			73
Property and equipment, net		626			855
Total assets	$	6,415		$	14,417
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	265		$	1,127
Income taxes payable		1,340			1,728
Accrued liabilities		1,406			5,416
Deferred revenue		1,062			7,586
Current installments of obligations under capital leases		25			—
Total current liabilities		4,098			15,857
Long-term liabilities:
Obligations under capital leases, excluding current installments		36			—
Total long-term liabilities		36			—
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.001 par value:
Authorized: 120,000,000 shares Issued and outstanding shares: 46,377,219 shares at December 31, 2004 and 45,969,524 shares at December 31, 2003		46			46
Additional paid-in capital		76,218			75,936
Deferred compensation		(20	)		(43	)
Accumulated deficit		(73,963	)		(77,379	)
Total stockholders’ equity (deficit)		2,281			(1,440	)
Total liabilities and stockholders’ equity	$	6,415		$	14,417

1. Nature of Operations

~~The~~TenFold ~~accompanying~~provides services and technology for building complex, Service Oriented Architecture (“SOA”)-compliant, enterprise-scale applications in ~~notes~~significantly less time and cost than it would otherwise take using traditional development technologies. We believe that with TenFold’s technology, EnterpriseTenFold SOA, customers will also experience significantly reduced ongoing applications maintenance and enhancement costs compared to ~~consolidated~~what ~~financial~~they ~~statements~~generally ~~are~~experience anwith ~~integral~~legacy ~~part~~applications. ofOur ~~these~~business ~~financial~~model ~~statements~~focuses on providing applications development services and our EnterpriseTenFold SOA product, along with product support and training, to customers who can use a TenFold team or their own business teams to build and maintain applications.

49TenFold sells its products and services primarily to customers in the United States, but it currently has a small number of customers outside the United States.

TenFold was incorporated in the state of Delaware in February 1993.

2. Going Concern and Liquidity

Our financial statements have been prepared under the assumption that TenFold will continue as a going concern. The independent auditors’ opinion on our December 31, 2006 financial statements includes an explanatory paragraph relating to our ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

As of December 31, 2006, our principal source of liquidity was our cash and cash equivalents of $3.6 million. Although we made progress in 2006 closing new sales and improving our cash flow, such sales have not been sufficient to generate sustained positive cash flow from operations, or profitability. As a result, significant challenges and risks remain:

•

We have not been able to generate positive cash flow from operations for the four years ended December 31, 2006. Our net cash used in operating activities was $4.4 million for the year ended December 31, 2006, and $4.5 million for the year ended December 31, 2005.

•

During 2004 and 2005, we derived a significant portion of our cash inflows from time-and-materials consulting services performed for a limited number of large customers for whom we were completing enterprise applications development projects. As these customers completed their projects, they reduced their purchases of time-and-materials consulting services, which materially reduced our cash inflows. Although we have sold and begun new consulting projects in 2006, they are not as large as these particular prior projects.

•

We have experienced difficulty closing substantial new sales, and it is unclear when or if we can expect to predictably close material sales to new or existing customers, and to achieve and sustain positive cash flow from operations. Under the leadership of our new Chief Executive Officer, Robert W. Felton, we changed our business model to focus on selling larger consulting projects, instead of the smaller prototype application projects that we primarily sold in 2005. Although we expect to be more successful with this new model, our experience with the new model is limited to this year. We closed new sales in 2006 and improved our quarterly operating cash flow from $(1.9) million for Q2 2006, to $(864,000) for Q3 2006, and to $21,000 for Q4 2006. However, such sales have not been sufficient to generate sustained positive cash flow from operations, or profitability. If we do not close significant future sales, our existing cash resources will not be sufficient to fund our operations beyond Q2 2007.

~~CONSOLIDATED~~TENFOLD ~~STATEMENTS~~CORPORATION ~~OF OPERATIONS~~

~~(in~~NOTES ~~thousands,~~TO ~~except~~FINANCIAL ~~per~~STATEMENTS ~~share data)~~

	Year Ended December 31,
	2004			2003			2002
Revenues:
License	$	359		$	248		$	207
Subscription		—			10,431			15,548
Services and other		17,234			17,030			12,475
Total revenues		17,593			27,709			28,230
Operating expenses:
Cost of revenues		5,883			9,454			12,998
Sales and marketing		2,861			1,088			1,985
Research and development		3,734			3,471			6,229
General and administrative		2,315			3,046			7,803
Special charges		—			(673	)		2,838
Total operating expenses		14,793			16,386			31,853
Income (loss) from operations		2,800			11,323			(3,623	)
Other income (expense):
Interest income		92			50			215
Interest expense		(10	)		(173	)		(638	)
Other income		158			373			367
Gain on retirement of debt		—			2,206			2,393
Gain (loss) on sale of subsidiaries		—			—			(399	)
Total other income, net		240			2,456			1,938
Income (loss) before income taxes		3,040			13,779			(1,685	)
Provision (benefit) for income taxes		(376	)		32			(497	)
Net income (loss)	$	3,416		$	13,747		$	(1,188	)
Basic earnings (loss) per common share	$	0.07		$	0.34		$	(0.03	)
Diluted earnings (loss) per common share	$	0.06		$	0.29		$	(0.03	)
Weighted average common and common equivalent shares used to calculate earnings (loss) per share:
Basic		46,204			40,634			37,249
Diluted		54,924			47,623			37,249

There can be no assurance that we will be successful closing sufficient new sales and an inability to do so would have a materially adverse affect on our future cash flow and operations.

~~The~~3. ~~accompanying notes~~Significant toAccounting ~~consolidated~~Policies ~~financial statements are an integral part of these financial statements~~

50Basis of Presentation

As used herein, “TenFold,” the “Company,” “we,” “our” and similar terms refer to TenFold Corporation, unless the context indicates otherwise.

Use of Estimates

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

We believe risks relating to revenue recognition 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-materials billings or if we grant concessions to time-and-materials customers in order to sell additional business or collect cash under the contract. As we occasionally provide services on a fixed price basis, risks relating to revenue recognition also include the judgment and estimation required to determine fixed-price project completion percentages, and fixed-price project profit or loss projections. Variances between management’s estimates and actual results may result in significant adjustments to our results of operations and financial position.

For a license agreement that we executed in August 2005 that contained a discount that could not be determined at the inception of the agreement, we recognized the related license revenue in December 2006 the end of the estimated economic life of the release of EnterpriseTenFold provided to the customer. We used the end of the estimated economic life to recognize the revenue because we did not have vendor specific objective evidence of fair value (“VSOE”) for the related post-contract customer support, due to the discount, and therefore we could not allocate the revenue until the discount was known at the end of the estimated economic life. For accounting purposes, management estimated that the economic life was 16 months after considering factors such as the rapid pace of technological change in the software industry generally and particularly in TenFold’s market, the pace at which TenFold produces new releases of TenFold technology with substantial technological improvements, and the pace at which TenFold’s customers adopt new releases of TenFold technology.

~~CONSOLIDATED~~TENFOLD ~~STATEMENTS~~CORPORATION ~~OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)~~

~~(in~~NOTES ~~thousands,~~TO ~~except~~FINANCIAL ~~share~~STATEMENTS ~~data)~~

					AdditionalPaid-inCapital			NotesReceivableFromStockholders			DeferredCompensation			AccumulatedDeficit			AccumulatedOtherComprehensiveIncome (Loss)			TotalStockholders’Equity (Deficit)
	Common Stock
	Shares		Amount
Balance at December 31, 2001	36,812,462		$	37	$	66,112		$	(377	)	$	(579	)	$	(89,938	)	$	(599	)	$	(25,344	)
Common stock issued upon exercise of options	74,315			—		23			—			—			—			—			23
Common stock issued for ESPP	39,817			—		14			—			—			—			—			14
Restricted common stock issued	672,911			—		249			—			—			—			—			249
Restricted stock repurchase	(217,425	)		—		(119	)		—			—			—			—			(119	)
Amortization of deferred compensation	—			—		—			—			164			—			—			164
Cancellation of stock options	—			—		(326	)		—			326			—			—			—
Changes in and payments of notes receivable, net	—			—		—			233			—			—			—			233
Allowance for notes receivable from stockholders	—			—		—			144			—			—			—			144
Net loss	—			—		—			—			—			(1,188	)		—			(1,188	)
Currency translation loss recognized	—			—		—			—			—			—			599			599
Balance at December 31, 2002	37,382,080		$	37	$	65,953		$	—		$	(89	)	$	(91,126	)	$	—		$	(25,225	)
Common stock issued upon exercise of options	283,988			—		173			—			—			—			—			173
Common stock issued for ESPP	47,478			—		6			—			—			—			—			6
Restricted common stock issued	8,888,889			9		9,741			—			—			—			—			9,750
Restricted stock cancelled	(632,911	)		—		—			—			—			—			—			—
Amortization of deferred compensation	—			—		—			—			109			—			—			109
Cancellation of stock options	—			—		(9	)		—			9			—			—			—
Deferred compensation related to grants of stock options	—			—		72			—			(72	)		—			—			—
Net income	—			—		—			—			—			13,747			—			13,747
Balance at December 31, 2003	45,969,524		$	46	$	75,936		$	—		$	(43	)	$	(77,379	)	$	—		$	(1,440	)
Common stock issued upon exercise of options	297,639			—		146			—			—			—			—			146
Common stock issued for ESPP and other	110,056			—		142			—			—			—			—			142
Amortization of deferred compensation	—			—		—			—			17			—			—			17
Cancellation of stock options	—			—		(6	)		—			6			—			—			—
Net income	—			—		—			—			—			3,416			—			3,416
Balance at December 31, 2004	46,377,219		$	46	$	76,218		$	—		$	(20	)	$	(73,963	)	$	—		$	2,281

Revenue Recognition

~~The~~We ~~accompanying~~derive revenues from license fees, applications development and implementation consulting services, support, and training services. License revenues ~~notes~~consist toof ~~consolidated~~fees ~~financial~~for ~~statements~~licensing ~~are~~EnterpriseTenFold (formerly known as Universal Application) as an ~~integral~~applications ~~part~~development tool. Service revenues consist of ~~these~~fees ~~financial~~for ~~statements~~applications development and implementation consulting, support and training. Other revenues include fees for reimbursement of out of pocket expenses incurred for customer projects.

51We follow the provisions of Statement of Position (“SOP”) 97-2, Software Revenue Recognition, as modified by SOP 98-9, Modification of SOP 97-2 with Respect to Certain Transactions, and SOP 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts, in recognizing revenue under each of our contracts.

We generally enter into contracts that involve multiple elements, such as software products, post-contract customer support (“PCS”), training, and time-and-material services. For accounting purposes, we allocate a portion of the contract fee to each undelivered element based on the relative fair values of the elements and allocate the fee for delivered software products using the residual method. The fair values of an element must be based on VSOE. We establish VSOE based on the price charged when the same element is sold separately. For consulting services, we base VSOE on the rates charged when the services are sold separately under time-and-materials contracts. We base VSOE for training on the rates charged when training is sold separately for supplemental training courses. For PCS, VSOE is determined by reference to the renewal rate we charge the customer in future periods.

As a result, the amounts allocated to individual contract elements (such as license, consulting, training and support) for accounting purposes may differ from the amounts stated in the contract for those individual elements, but not in total.

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

For fixed-price contracts, we recognize revenue using the percentage-of-completion method of accounting and following the guidance in Statement of Position (“SOP”) 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts. We make adjustments, if necessary, to the estimates used in the percentage-of-completion method of accounting as work progresses under the contract and as we gain experience.

We recognize support revenue from contracts for ongoing technical support and unspecified product updates ratably over the support period.

We recognize training revenue as we perform the services.

We recognize license revenues from EnterpriseTenFold licenses that do not include services or where the related services are not considered essential to the functionality of the software, when the following criteria are met: we have signed a noncancellable license agreement with nonrefundable fees; we have delivered the software product; there are no uncertainties surrounding product acceptance; the fees are fixed and determinable; and collection is considered probable. This policy applies both when the licenses are sold separately or when an EnterpriseTenFold license is sold with an applications development project. Services relating to the licenses typically include post contract customer support services, general time-and-materials consulting, and training; and do not add significant functionality, features, or significantly alter the software. In addition, similar services are available from other vendors; there are no milestones or customer specific acceptance criteria which affect the realizability of the software license fee; and the software license fee is non-cancelable and non-refundable.

~~CONSOLIDATED~~TENFOLD ~~STATEMENTS~~CORPORATION ~~OF CASH FLOWS~~

~~(in~~NOTES ~~thousands)~~TO FINANCIAL STATEMENTS

	Year Ended December 31,
	2004			2003			2002
Cash flows from operating activities:
Net income (loss)	$	3,416		$	13,747		$	(1,188	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		356			766			2,621
Provision (reversal) to bad debt reserve		33			6			(70	)
Amortization of deferred compensation		17			109			164
Impaired assets charge		—			—			851
Provision for stockholder notes receivable		—			—			146
Gain on retirement of debt		—			(2,206	)		(2,393	)
Gain on sale of property and equipment		(62	)		(113	)		(21	)
Loss on sale of subsidiaries		—			—			399
Changes in operating assets and liabilities:
Accounts receivable		672			422			594
Unbilled accounts receivable		(19	)		(27	)		(23	)
Prepaid expenses and other assets		77			2,051			(540	)
Accounts payable		(862	)		190			102
Income taxes payable, net		(388	)		2			(533	)
Accrued liabilities		(4,010	)		(1,020	)		(7,242	)
Deferred revenue		(6,524	)		(12,742	)		(2,892	)
Other current and long-term liabilities		—			(2,053	)		415
Net cash used in operating activities		(7,294	)		(868	)		(9,610	)
Cash flows from investing activities:
Additions to property and equipment		(52	)		(178	)		(846	)
(Additions) decreases to restricted cash		(1	)		65			5,944
Proceeds from sale of property and equipment		63			137			2,212
Net cash provided by investing activities		10			24			7,310
Cash flows from financing activities:
Proceeds from employee stock purchase plan stock issuance		142			6			14
Exercise of common stock options		146			173			23
Principal payments on obligations under capital lease		(15	)		(687	)		(1,567	)
Principal payments on notes payable		—			—			(3,761	)
Proceeds from issuance of restricted stock		—			9,750			249
Repurchase of restricted stock		—			—			(119	)
Receipt of amounts due from stockholders		—			—			334
Notes receivable from stockholders		—			—			41
Net cash provided by (used in) financing activities		273			9,242			(4,786	)
Effect of exchange rate changes		—			—			(45	)
Net increase (decrease) in cash and cash equivalents		(7,011	)		8,398			(7,131	)
Cash and cash equivalents at beginning of year		12,236			3,838			10,969
Cash and cash equivalents at end of year	$	5,225		$	12,236		$	3,838
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	24		$	32		$	65
Cash paid for interest		3			8			489
Non cash investing and financing activities:
Deferred compensation related to grants of stock or stock options	$	—		$	72		$	—
Equipment purchased under capital leases		76			—			—

For software arrangements that include a service element that is considered essential to the functionality of the software, we recognize license fees related to the application, and the applications development service fees, over time as we perform the services, using the percentage-of-completion method of accounting and following the guidance in Statement of Position (“SOP”) 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts. We make adjustments, if necessary, to the estimates used in the percentage-of-completion method of accounting as work progresses under the contract and as we gain experience. Fixed-price project revenues are split between license and service based upon the relative fair value of the components.

~~The~~For ~~accompanying notes~~certain projects, we limit revenue recognition in the period to ~~consolidated~~the ~~financial~~amount ~~statements~~of ~~are~~project ancosts ~~integral~~incurred ~~part~~in the same period, resulting in zero profit during the period, and postpone recognition of ~~these~~profits ~~financial~~until ~~statements~~results can be estimated more precisely.

52For certain contracts for which reasonably dependable estimates cannot be made or for which inherent hazards make estimates doubtful, we recognize revenue under the completed-contract method of contract accounting.

For license agreements that contain a discount that cannot be determined at the inception of the agreement, we recognize the related license revenue at the end of the estimated economic life of the release of the software version provided to the customer. We use the end of the estimated economic life to recognize the revenue when we do not VSOE for the related post-contract customer support, due to the discount, and therefore we cannot allocate the revenue until the discount is known at the end of the estimated economic life.

We record billings and cash received in excess of revenue earned as deferred revenue. Our deferred revenue balance generally results from contractual commitments made by customers to pay amounts to us in advance of revenues earned. Our unbilled accounts receivable represents revenue that we have earned but which we have not yet billed. We bill customers as payments become due under the terms of the customer’s contract. We consider current information and events regarding our customers and their contracts and establish allowances for doubtful accounts when it is probable that we will be unable to collect amounts due under the terms of existing contracts.

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


	Year ended December 31,
	2006		2005		2004
EnterpriseTenFold license revenue	$	1,424	$	515	$	209
Other license revenue		—		—		150

Total license revenues	$	1,424	$	515	$	359

Percentage-of-completion and completed-contract service revenue	$	92	$	803	$	8,426
Time-and-materials service revenue		1,587		2,102		6,478
Maintenance revenue		1,596		1,567		1,638
Training revenue		195		456		234
Reimbursed expenses and other revenues		104		267		458

Total services and other revenues	$	3,574	$	5,195	$	17,234

Total revenues	$	4,998	$	5,710	$	17,593

~~NOTES~~TENFOLD TOCORPORATION ~~CONSOLIDATED FINANCIAL STATEMENTS~~

1.NOTES ~~Nature~~TO ofFINANCIAL ~~Operations~~STATEMENTS

~~TenFold~~Cash isEquivalents the provider of EnterpriseTenFold™, a software applications platform (formerly “Universal Application”) that reduces enterprise applications design, development, deployment, and maintenance timeframes and costs. EnterpriseTenFold automates most of what applications programmers typically do, and empowers small teams of business people and IT professionals to design, build, test, deploy, and maintain complex, transaction-intensive applications. TenFold also offers services for developing and implementing applications, training, and customer and technical support.

~~TenFold~~Cash ~~sells~~equivalents ~~its~~include ~~products~~all ~~and~~highly-liquid ~~services~~investments ~~primarily~~purchased towith ~~customers~~remaining inmaturities ~~the~~of ~~United~~three ~~States~~or fewer months. Cash equivalents are recorded at cost, ~~but~~which itapproximates ~~currently~~fair ~~has~~value, aand ~~small~~consist ~~number~~primarily of ~~customers~~investments ~~outside~~in ~~the~~money ~~United~~market ~~States~~mutual funds, which at times, exceed federally insured limits. We have not experienced any losses in such accounts. We believe that we are not exposed to any significant credit risk on cash equivalents.

~~TenFold~~Accounts ~~was~~Receivable ~~incorporated in~~(Billed ~~the~~and ~~state~~Unbilled) ~~of Delaware in February 1993.~~

2Our billed accounts receivable are recorded when invoiced and represent claims against third parties that will be settled in cash. ~~Going~~Our ~~Concern~~unbilled accounts receivable represents revenue that we have earned but which we have not yet billed. The carrying value of our receivables, net of the allowance for doubtful accounts, represents their estimated net realizable value. We estimate our allowances for doubtful accounts based on historical collection trends, the age of outstanding receivables, customers’ financial condition and ~~Liquidity~~creditworthiness, and existing economic conditions. If events or changes in circumstances indicate that specific receivable balances may be impaired, further consideration is given to the collectibility of those balances and the allowance is adjusted accordingly. We charge off accounts receivable against the allowance for doubtful accounts when an account is deemed to be uncollectible.

~~Our~~Financial ~~financial~~Instruments statements have been prepared under the assumption that TenFold will continue as a going concern. The independent auditors’ opinion on our December 31, 2004 financial statements includes an explanatory paragraph relating to our ability to continue as a going concern.

AsThe ~~of December 31, 2004, our principal source of liquidity was our cash and~~carrying ~~cash~~values ~~equivalents~~ of ~~$5.2~~accounts ~~million. Our net cash used in operating activities was $7.3 million for the year ended December 31~~receivable, ~~2004~~unbilled asaccounts ~~compared to $868~~receivable,~~000~~ ~~for~~accounts 2003. The increase in cash flow used in operating activities during 2004 results primarily from decreases in cash inflows from time-and-material consulting projects as these customers complete their current application development projects and become more self-sufficientpayable, ~~increased~~accrued ~~investments we have made in sales and marketing related activities~~liabilities, and ~~payments~~income wetaxes ~~made to reduce some older accounts~~ payable, ~~and~~approximate ~~accrued~~their ~~liability~~estimated ~~items~~fair ~~accrued~~values ~~in earlier quarters, including amounts~~ due to ~~our~~the ~~United~~relative ~~Kingdom~~short ~~subcontractor~~maturity ~~for~~of ~~its~~these ~~work on a large project~~instruments.

WeRestricted ~~raised~~Cash capital during 2003 to strengthen our balance sheet. During 2004, we have carefully managed our accounts receivable and generated additional cash inflows wherever possible from our existing customer base. However, challenges and risks remain:

•Restricted ~~We have derived a significant portion of our~~ cash ~~inflows from time-and-materials consulting services from a limited number~~ of $74,000 ~~large~~at ~~customers.~~December 31, ~~These~~2006 ~~large customers have reduced their purchases of our time-~~and~~-materials~~ consulting services over time as they complete projects and become more self-sufficient. One customer completed its use of our time-and-material consulting services for its current application development project during the quarter ended September 30December 31, ~~2004.~~2005 ~~Another customer time-and-materials consulting engagement~~ is ~~expected~~maintained to besupport ~~completed~~various ataccounts ~~the~~payable ~~end of the first quarter of 2005~~activities. We do not ~~currently~~expect ~~have a new project in place~~ to ~~replace~~require ~~this~~additional ~~project.~~restricted ~~These reductions have materially reduced our~~ cash ~~inflows during 2004 and our expected cash inflows~~ in ~~2005~~2007.

•Property ~~We continue to invest in specific marketing initiatives intended to drive TenFold toward the ‘Tipping Point’ by creating awareness~~ and ~~generating~~Equipment ~~leads, as well as the cost of new direct sales staff to convert those leads to sales.~~

•Property Weand equipment, ~~continue~~including toleasehold ~~face~~improvements, aare ~~challenging~~stated ~~sales~~at ~~environment~~cost, ~~and~~as itadjusted for impairment charges. See Note 5 for more information. Depreciation is ~~unclear~~computed ~~when~~using wethe ~~can~~straight-line ~~expect~~method toover ~~achieve~~the ~~significant~~estimated ~~sales~~useful tolives ~~new~~of orthe ~~existing~~assets, ~~customers~~generally three to five years, ~~and~~or ~~achieve~~the ~~and~~life ~~sustain~~of ~~positive~~the ~~cash~~lease, ~~flow~~whichever ~~from~~is ~~operations~~shorter.

53Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures for major renewals and betterments that extend the useful lives of existing equipment are capitalized and depreciated. On retirement or disposition of property and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the statement of operations.

Accounting for Impairment of Long-Lived Assets

We review our long-lived assets, including goodwill, 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 un-discounted 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 estimated fair value of the assets. Fair value is determined utilizing cash flow analyses, and other market valuations.

~~NOTES~~TENFOLD TOCORPORATION ~~CONSOLIDATED FINANCIAL STATEMENTS~~

•NOTES WeTO ~~may~~FINANCIAL ~~need~~STATEMENTS to seek additional capital to support our operations until our cash flow from sales to new or existing customers provides sufficient cash flow, and that capital may or may not be available on acceptable terms.

WeCost ~~are cognizant~~ of ~~these~~Revenues challenges and risks and appreciate that we must generate cash from operations, business transactions, or capital raising to ensure sufficient liquidity for the coming year and to support our growth. We are focusing on selling new, larger license deals with current customers who have experienced our value proposition, exploring distribution agreements, and continuing discussions with investment bankers about the possibility of raising capital. However, there can be no assurance that we will be successful, and these risks may have a materially adverse affect on our future cash flow and operations. At our present levels of revenue generation and cash consumption, we will not have sufficient resources to continue as a going concern through 2005, as we would exhaust our cash balances by mid 2005.

3Cost of revenues consists primarily of compensation and other related costs of services personnel, and contractor and distributor costs related to customer projects. ~~Significant~~Costs ~~Accounting~~of ~~Policies~~license revenues, including product packaging, documentation, and reproduction have not been significant.

~~Basis of~~Advertising ~~Presentation~~

~~The~~Advertising ~~consolidated~~costs ~~financial~~are ~~statements include~~expensed ~~the~~as ~~accounts of TenFold and its subsidiaries~~incurred. ~~All~~Advertising ~~intercompany~~costs ~~accounts~~amounted ~~and~~to ~~transactions~~$0 ~~have~~in ~~been eliminated. As used herein~~2006, ~~“TenFold~~$14,”000 ~~the~~in ~~“Company~~2005,” ~~“we,” “our”~~ and ~~similar terms refer to TenFold Corporation~~$112,000 ~~unless~~in ~~the context indicates otherwise~~2004.

~~Use~~Research ~~of Estimates~~and Development Costs

~~The~~Research ~~preparation~~and development expenses consist primarily of ~~financial~~costs ~~statements~~for ~~in conformity~~development ~~with~~and ~~accounting~~enhancement ~~principles~~of ~~generally~~our ~~accepted~~EnterpriseTenFold intechnologies. ~~the~~In ~~United~~accordance ~~States~~with ~~requires~~Financial ~~management~~Accounting toStandards ~~make~~Board ~~estimates~~(“FASB”) ~~and~~Statement ~~assumptions~~of Financial Accounting Standards No. 86, ~~including~~Accounting for ~~example,~~the ~~estimated~~Costs ~~project~~of ~~costs~~Computer ~~and~~Software ~~profitability~~to ~~and~~be ~~accounts~~Sold, ~~receivable~~Leased, ~~allowances.~~or ~~These assumptions~~Otherwise ~~affect~~Marketed ~~the~~(“SFAS ~~reported~~86”), ~~amounts~~development ofcosts ~~assets~~incurred ~~and~~in ~~liabilities~~the research and ~~disclosure~~development of ~~contingent~~new ~~assets~~software ~~and~~products ~~liabilities~~to atbe ~~the~~sold, ~~date~~leased ofor otherwise ~~the~~marketed ~~financial~~are ~~statements~~expensed ~~and~~as ~~the~~incurred ~~reported~~until ~~amounts~~technological offeasibility ~~revenues~~has ~~and~~been ~~expenses~~established. ~~during~~We ~~the~~achieve ~~reporting~~technological ~~period~~feasibility through a working model. ~~Actual results~~We ~~could~~have ~~differ~~charged ~~from~~our ~~these~~software ~~estimates~~development costs to research and development expense in the accompanying Statements of Operations.

WeWarranty 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,~~We ~~risks~~provide ~~relating~~reserves tofor ~~revenue~~warranty ~~recognition also~~costs ~~included~~expected ~~the judgment and estimation required~~ to ~~determine~~be ~~fixed-price project completion percentages, fixed-price project profit or loss projections, and forecasting of fixed-price project end-dates~~incurred. ~~However,~~To ~~during the year ended December 31~~date, ~~2002~~ ~~TenFold~~we ~~converted~~have ~~its~~not ~~remaining~~incurred ~~on-going~~significant ~~legacy~~warranty ~~fixed-price contracts to time-and-materials arrangements~~costs. As a result, ~~TenFold~~we ~~had~~have nonot ~~significant~~recorded ~~on-going~~a ~~fixed-price~~liability ~~contracts~~for atwarranty ~~December~~costs ~~31,~~as ~~2004~~of ~~and~~ December 31, ~~2003~~2006.

WeIncome ~~review~~Taxes 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.

54We record 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 is more likely than not.

Stock-Based Compensation

Effective January 1, 2006, we adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, (“SFAS 123(R)”) which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options and employee stock purchases related to the Employee Stock Purchase Plan (“ESPP”) based on estimated fair values. In accordance to this standard, we recognize the compensation cost of all share based awards on a straight-line basis over the vesting period of the award. Prior to January 1, 2006, we accounted for those plans under the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations, as permitted by FASB Statement No. 123, Accounting for Stock-Based Compensation (“Statement 123”).

Plan category

Number of securities to

be issued upon exercise

of outstanding options

as of December 31, 2006

(a)

Weighted-average

exercise price of

outstanding options

(b)

Number of securities remaining
available for future issuance under
equity compensation plans as of
December 31, 2006 (excluding
securities reflected in column (a))

(c)

Equity compensation

plans not approved by

security holders

2,873,050(3)

3,893,377(4)

~~NOTES~~TENFOLD TOCORPORATION ~~CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~Revenue~~Recent ~~Recognition~~ Accounting Pronouncements

WeOn ~~derive revenues from license fees~~January 1, ~~subscription fees~~2006, ~~applications~~ ~~development~~we ~~and~~adopted ~~implementation~~SFAS ~~services, support, and training services. License revenues consist of fees for licensing EnterpriseTenFold~~ 123(~~formerly known as Universal Application~~R), asShare-Based ~~an applications development tool~~Payment, ~~and~~which ~~license~~requires ~~fees for~~the ~~applications~~measurement ~~that we previously developed~~ and ~~resold.~~recognition ~~Subscription revenue consists~~ of ~~fees~~compensation expense for all ~~licensing~~share-based ~~EnterpriseTenFold,~~payment ~~licensing~~awards ~~new~~made ~~product~~to ~~releases~~our ofemployees ~~TenFold’s~~and ~~ComponentWare~~directors, ~~and~~including inemployee ~~certain~~stock ~~cases~~options ~~providing related time-~~and~~-material consulting,~~ ~~training,~~employee ~~and~~stock ~~support~~purchases ~~services~~related ~~during~~to athe ~~subscription~~Employee ~~period.~~Stock ~~Service~~Purchase ~~revenues~~Plan, ~~consist~~based ofon ~~fees~~estimated ~~for~~fair ~~applications development and implementation, support and training~~values. ~~Other~~See ~~revenues~~Note ~~include~~18 ~~fees for reimbursement~~ of ~~out~~Notes ofto ~~pocket expenses~~Financial ~~incurred~~Statements for ~~customer~~more ~~projects~~information.

WeOn ~~follow~~January 1, ~~the~~2006, ~~provisions~~we ofadopted SFAS No. 154, Accounting Changes and Error Corrections. ~~Statement~~SFAS No. 154 is a replacement of ~~Position~~APB ~~(“SOP”)~~No. 20, ~~97-2~~Accounting Changes, ~~Software~~and ~~Revenue~~SFAS ~~Recognition~~No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS No. 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application as ~~modified~~the byrequired ~~SOP~~method ~~98-9,~~for ~~Modification~~reporting a change in accounting principle. SFAS No. 154 provides guidance for determining whether retrospective application of ~~SOP~~a change ~~97-2~~in ~~with~~accounting ~~Respect~~principle is impracticable and how to ~~Certain~~report ~~Transactions,~~a ~~and~~change ~~Statement~~in such circumstances. SFAS No. 154 also provides that a change in method of ~~Position~~depreciating ~~(“SOP”)~~or 81amortizing a long-1,lived ~~Accounting~~non-financial asset be accounted for as a change in ~~Performance~~estimate ofeffected ~~Construction-Type~~by ~~and~~a ~~Certain~~change ~~Production-Type~~in ~~Contracts~~accounting principle, inand ~~recognizing~~also ~~revenue~~provides ~~under~~that ~~each~~correction of ~~our~~errors ~~contracts~~in previously issued financial statements should be termed a “restatement.” SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005

WeIn ~~generally~~February ~~enter~~2006, ~~into~~the ~~contracts~~FASB ~~that~~issued ~~involve~~SFAS ~~multiple elements~~No. 155, Accounting ~~such~~for asCertain ~~software~~Hybrid ~~products~~Instruments, ~~enhancements,~~which ~~post-contract~~amends ~~customer~~SFAS ~~support (“PCS”)~~No. 133, ~~training,~~Accounting ~~and~~for ~~time-and-material~~Derivative ~~services.~~Instruments Weand ~~allocate~~Hedging aActivities, ~~portion~~and ofSFAS ~~the~~No. 140 ~~contract~~Accounting ~~fee~~for toTransfers ~~each~~and ~~undelivered~~Servicing ~~element based on the relative fair values~~ of ~~the~~Financial ~~elements~~Assets and Extinguishments ~~allocate~~of ~~the~~Liabilities. ~~fee~~SFAS ~~for delivered software products using the residual method~~No. 155 ~~The~~allows ~~fair~~financial ~~values~~instruments ofthat anhave ~~element~~embedded ~~must~~derivatives to be ~~based~~accounted onfor ~~vendor~~as ~~specific~~a ~~objective~~whole ~~evidence~~ (~~“VSOE”).~~eliminating Wethe ~~establish~~need ~~VSOE~~to ~~based~~bifurcate on the ~~price~~derivative ~~charged~~from ~~when~~its ~~the~~host) ~~same~~if ~~element~~the isholder ~~sold~~elects ~~separately.~~to ~~VSOE~~account for ~~services~~the whole isinstrument ~~based~~ on ~~standard rates~~a ~~for~~fair ~~the~~value ~~individuals~~basis. ~~providing~~SFAS ~~services~~No. 155 ~~These~~also ~~rates~~clarifies ~~are~~and ~~the~~amends ~~same~~certain ~~rates~~other ~~charged~~provisions ~~when~~of ~~the~~SFAS ~~services~~No. 133 ~~are sold separately under time-~~and~~-materials~~ ~~contracts~~SFAS No. 140. WeThis ~~base~~statement ~~VSOE~~is effective for ~~training~~all onfinancial ~~standard~~instruments ~~rates~~acquired ~~charged~~or ~~for~~issued ~~each~~in ~~particular~~financial ~~training course.~~years ~~These~~beginning ~~rates~~after ~~are~~September 15, ~~the~~2006. ~~rates~~We ~~charged~~do ~~when~~not ~~the~~expect ~~training~~our isadoption ~~sold~~of ~~separately~~this ~~for~~new ~~supplemental~~standard ~~training~~to ~~courses.~~have ~~For~~a ~~PCS,~~material ~~VSOE~~impact ison ~~determined~~our byfinancial ~~reference~~position, toresults ~~the~~of ~~renewal~~operations ~~rate~~or wecash ~~charge the customer in future periods~~flows.

~~For~~In ~~certain~~March ~~contracts~~2006, ~~including~~the aFASB ~~subscription~~issued SFAS No. 156, Accounting for Servicing of Financial Assets to ~~future~~simplify ~~software~~accounting ~~products~~for separately recognized ~~when~~servicing assets and ifservicing ~~they~~liabilities. ~~become~~SFAS ~~available,~~No. 156 weamends ~~recognize~~SFAS ~~the~~No. 140, ~~fees~~Accounting for ~~the~~Transfers ~~software~~and ~~products~~Servicing ~~ratably~~of ~~over~~Financial ~~the~~Assets ~~subscription~~and ~~term~~Extinguishments ~~beginning~~of ~~with~~Liabilities. ~~delivery~~Additionally, ofSFAS ~~the~~No. 156 ~~first~~applies ~~software~~to ~~product.~~all ~~For~~separately recognized ~~contracts~~servicing ~~that~~assets ~~include~~and aliabilities ~~service~~acquired ~~element~~or ~~for~~issued ~~which~~after the ~~fair~~beginning ~~value~~of ~~is undeterminable,~~an ~~and~~entity’s ~~the~~fiscal ~~contract~~year ~~includes~~that abegins ~~subscription~~after toSeptember 15, ~~new~~2006, ~~product~~although ~~releases~~early onadoption ais ~~“when~~permitted. ~~and~~We ifdo ~~available~~not ~~basis,”~~expect weour ~~recognize~~adoption ~~the~~of ~~entire~~this ~~contract~~new ~~fee~~standard ~~ratably~~to have ~~over~~a ~~the~~material ~~subscription~~impact ~~period~~on asour

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