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UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549




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FORM 10-K

(Mark One)



| |     |                                                                                      
| | --- | -------------------------------------------------------------------------------------
| | [X] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934
|
| |     | For the fiscal year ended December 31, 1999                                          

OR



| |      |                                                                                          
| | ---- | -----------------------------------------------------------------------------------------
| | [  ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934
|
| |      | For the transition period from 
	to                                                      

Commission File Number 0-27574

PowerCerv Corporation

(Exact Name of Registrant as Specified in its
Charter)

|                                |  |                                                
|------------------------------- |  | -----------------------------------------------
|                               
|                               
|                               
|                               
|Florida                         |  | 59-3350778                                     
|(State or other jurisdiction of |  | (I.R.S. Employer incorporation or organization)

|                                         |  |           
|---------------------------------------- |  | ----------
|                                        
|                                        
|                                        
|                                        
|400 North Ashley Drive                   |  |           
|Suite 2700                               |  |           
|Tampa, Florida                           |  | 33602     
|(Address of Principal Executive Offices) |  | (Zip Code)

Registrants telephone number, including area
code:  (813) 226-2600

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $.001 per share

Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past 90 days.  Yes  [X]  No 
[   ]

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

The aggregate market value of the
registrants voting stock held by non-affiliates as of
March 21, 2000 was approximately $57,588,780. There were
13,754,187 shares of the registrants common stock, par
value $.001 per share, outstanding on March 21, 2000.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrants definitive Proxy
 Statement for its 2000 Annual Meeting of Shareholders, scheduled
 to be held on June 1, 2000, which Proxy Statement will be
filed no later than 120 days after the close of the
registrants fiscal year ended December 31, 1999, are
incorporated by reference in Part III of this Annual Report
on Form 10-K.









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TABLE OF CONTENTS



|           |                                                                                              |  |  |  |  |  |  | 
|---------- | -------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART 1    
|           | Item 1.Business                                                                             
|           | Item 2.Properties                                                                           
|           | Item 3.Legal Proceedings                                                                    
|           | Item 4.Submission of Matters to a Vote of Security Holders                                  
|PART II   
|           | Item 5.Market Value of the Registrants Common Stock                                        
|           | Item 6.Selected Consolidated Financial Data                                                 
|           | Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations
|           | Item 7A.Quantitative And Qualitative Disclosures About Market Risk                          
|           | Item 8.Financial Statements and Supplementary Data                                          
|           | Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
|PART III  
|           | Item 10.Directors and Executive Officers of the Registrant                                  
|           | Item 11.Executive Compensation                                                              
|           | Item 12.Security Ownership of Certain Beneficial Owners and Management                      
|           | Item 13.Certain Relationships and Related Transactions                                      
|PART IV   
|           | Item 14.Exhibits, Financial Statement Schedules and Reports on Form 8-K                     
|SIGNATURES



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POWERCERV CORPORATION

FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

|           |          |  |                                                                                        |             |  |    | 
|---------- | -------- |  | -------------------------------------------------------------------------------------- | ----------- |  | -- | 
|           |          |  |                                                                                        | Page Number
|           |          |  |                                                                                        |            
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|PART I    
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|           | Item  1  |  | Business                                                                               |             |  | 1  | 
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|           | Item  2  |  | Properties                                                                             |             |  | 12 | 
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|           | Item  3  |  | Legal Proceedings                                                                      |             |  | 12 | 
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|           | Item  4  |  | Submission of Matters to a Vote of Security Holders                                    |             |  | 12 | 
|          
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|PART II   
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|           | Item  5  |  | Market Value of the Registrants Common Stock                                          |             |  | 12 | 
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|           | Item  6  |  | Selected Consolidated Financial Data                                                   |             |  | 14 | 
|          
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|           | Item  7  |  | Managements Discussion and Analysis of Financial Condition
	and Results of Operations |             |  | 15 | 
|          
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|           | Item  7A |  | Quantitative And Qualitative Disclosures About Market Risk                             |             |  | 27 | 
|          
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|           | Item  8  |  | Financial Statements and Supplementary Data                                            |             |  | 27 | 
|          
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|           | Item  9  |  | Changes in and Disagreements with Accountants on Accounting and
	Financial Disclosure  |             |  | 28 | 
|          
|          
|          
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|PART III  
|          
|          
|          
|          
|           | Item  10 |  | Directors and Executive Officers of the Registrant                                     |             |  | 28 | 
|          
|          
|          
|          
|           | Item  11 |  | Executive Compensation                                                                 |             |  | 28 | 
|          
|          
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|          
|           | Item  12 |  | Security Ownership of Certain Beneficial Owners and Management                         |             |  | 28 | 
|          
|          
|          
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|           | Item  13 |  | Certain Relationships and Related Transactions                                         |             |  | 28 | 
|          
|          
|          
|          
|PART IV   
|          
|          
|          
|          
|           | Item  14 |  | Exhibits, Financial Statement Schedules and Reports on Form 
	 8-K                     |             |  | 29 | 
|          
|          
|          
|          
|Signatures |          |  | 51                                                                                     |            

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PART 1

This Annual Report on Form 10-K and the documents
incorporated herein by reference contain forward-looking
statements that have been made pursuant to the provisions of the
Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are based on current expectations,
estimates and projections about PowerCerv Corporations (the
 Company, as further defined below) industry,
managements beliefs and certain assumptions made by the
Companys management. Words such as anticipates,
 expects, intends, plans,
believes, seeks, estimates,
variations of such words and similar expressions are intended to
identify such. These statements are not guarantees of future
performance and are subject to certain risks, uncertainties and
assumptions that are difficult to predict; therefore, actual
results may differ materially from those expressed or forecasted
in any such forward-looking statements. Forward-looking
statements include, without limitation, statements regarding the
extent and timing of future revenues and expenses and customer
demand for the Companys products and services discussed in
Managements Discussion and Analysis of Financial
Condition and Results of Operations. It is important to
note that the Companys actual results could differ
materially from those in such forward-looking statements.




Item  1.     Business

PowerCervs primary mission is to develop, market, license,
implement and support open, modifiable enterprise application
software solutions for mid-size U.S. companies. Today the Company
 focuses on companies with annual revenues between $25 million
and $750 million. Management believes that PowerCerv is one of
the first enterprise application vendor to develop, promote and
license an integrated enterprise application software solution
having a tightly integrated customer relationship management
solution. In addition, the PowerCerv solution is built upon a
common technical architecture, common look and feel, all based on
 a full 32 bit object oriented toolset that is Microsoft and
Sybase centric. The Company refers to its full suite of
integrated Customer Relationship Management (CRM)/ front-office
and Enterprise Resource Planning (ERP)/ back-office enterprise
application software products as ERP Plus. The Companys
enterprise application software solutions consist of integrated
customer relationship management software including SFA Plus as
well as traditional back-office solutions of financials,
distribution, and manufacturing. All these solutions are
integrated to facilitate a seamless front-office/ back-office
solution. PowerCervs application products facilitate the
management of resources and information to allow companies to
reduce order fulfillment times, improve operating efficiencies
and measure critical company performance against defined
objectives. The Companys front-office application products
increase the effectiveness of sales organizations and customer
support centers in primarily two ways. First, PowerCerv SFA
Plusprovides opportunity management for maximum sales
efficiency. Secondly, PowerCerv Support Plusprovides
problem tracking and resolution management. The Company leverages
 available software development tool technology from Microsoft
Corporation and Sybase Inc., the Companys research and
development efforts are directed primarily toward new features in
 its application products. In addition to these suites of
software, the Company has additional tools and technologies that
it sells to expand the transaction intensive suites mentioned.
These additional tools include PowerCerv Intelligence (data
warehouse/OLAP reporting software), remote synchronization
software for SFA Plus and the PowerCerv SDK (Software Development
 Kit).

The Company historically has provided a wide range of
professional technical and business consulting services,
including application analysis, design, development, modification
 integration programming, training and deployment for its
application products.

The Company was incorporated in Florida in January 1995 as a
holding company for its operating subsidiary, which was
incorporated in Florida in April 1992. Unless otherwise
specified, references herein to PowerCerv and
the Company mean PowerCerv Corporation and its
subsidiary.

The Companys principal offices are located at
400 North Ashley Drive, Suite 2700, Tampa, Florida
33602, and its telephone number is (813) 226-2600.
PowerCervs website is located at www.powercerv.com.
Information contained in the website is not a part of this Annual
 Report on Form 10-K.





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Industry Background

The computer revolution has evolved from the air-conditioned,
seven-figure plus mainframe computers running back-office
operations such as payroll and human resource systems, to
distributed, network-based systems with an affordable computer on
 every knowledge-workers desk. All this has occurred in
less than forty years. Contrasted to other industries such as
transportation, medicine, telecommunications or automotive, no
other industry has grown as rapidly. In addition, no other
industry has impacted everyone from the chief executive officer
to the accounting clerk to the schoolteacher as much as the
information industry. This revolution is now
recognized as the information revolution, not the
computer revolution.

The rapid acceptance of 2-tier, 3-tier and n-tier
applications gave birth to the next generation of application
software packages. For many years, application software vendors
sold products that were developed with programming languages such
 as Cobol, and they were implemented on mainframe and
mini-computers generally characterized as proprietary. Each
software vendor was forced to port their applications
 to support the most popular hardware platforms such as IBM
Corporation, Digital Equipment Corporation and others. The
client/server revolution changed that for application software
vendors. The industry went from single vendor, proprietary
architecture and closed systems to open architecture,
multi-vendor, truly open systems. This was a fundamental shift in
 the industry and created opportunities for entrepreneurs in the
application sector.

The first wave of client/server application software products
introduced to the market was conventional back-office software
for accounting, human resources, manufacturing and order
processing. Vendors such as McCormack & Dodge, Management
Sciences of America, IBM, SSA, Oracle and SAP enjoyed rapid
market acceptance with their back-office software packages.
During the 1980s and the 1990s, many vendors rose and
 fell in this competitive landscape. ASK, SSA, MSA, and McCormack
 & Dodge, each of them a one-time industry leader, all fell
victim to this competitive market. By 1996, SAP, Peoplesoft,
Oracle, and newcomer Baan had emerged on the scene as potential
leaders for enterprise applications. The vast majority of the
leading global 2000 companies were all looking for ways to
control their businesses and gain competitive advantage by
implementing enterprise applications in their businesses. This
enterprise space quickly became dominated by SAP, Oracle,
J.D. Edwards and Peoplesoft. During this time, a trend
started to emerge of smaller companies wanting to realize the
same business benefits as larger companies in implementing
enterprise application software. This emerging market, rapidly
coined the mid-market, emerged as a growth
opportunity or an entrance opportunity for enterprising companies
 having the ability to deliver application software that had the
price performance metrics necessary to be successful in the
mid-market. This middle market is where the Company focuses its
solutions. In 1999, the market for ERP application software was
estimated by AMR Research to be over $16 billion in license
revenues alone.

The PowerCerv Approach

The Companys heritage is rooted in designing and developing
 application solutions for its customers. Early in its history,
PowerCerv became involved in developing applications for
customers for both the front-office customer relationship
management (CRM) and the back-office financials, distribution,
and manufacturing (ERP) operations of the enterprise. PowerCerv
leveraged its expertise in the design and development of n-tier
application systems driven by real-world requirements. During
1995, the Company was a relative newcomer to the enterprise
application software market and sold its software products as
independent software modules primarily on a best of
breed basis to companies of all sizes across all
industries. By early 1996, many of the Companys competitors
 had application products that were either back-office or
front-office but not both. Management of the Company believed
that the enterprise application software market would evolve to
demand an integrated ERP or back-office, and SFA and Customer
Support or front-office software solutions from a single vendor.
In order for most vendors to achieve this strategy, they were
forced to acquire or merge with other vendors whose products
complemented theirs and then attempt to integrate those products
under a common architecture.

PowerCerv made a strategic decision to be the first enterprise
application software vendor to offer an integrated front-office
and ERP, back-office application software solution. When a user
logs into one

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The Company refers to its full suite of integrated front-office
(CRM) and back-office (ERP) enterprise application software
products as its ERP Plus product line. The Companys ERP
Plus application products consist of Manufacturing Plus,
Distribution Plus, Financials Plus, SFA Plus and Support Plus.Many of the Companys customers license the
Companys ERP application products as an integrated suite.
Additionally, each PowerCerv application product can be licensed
as a standalone solution.

In addition to promoting and licensing its ERP application
products, the Company provides a full complement of professional
consulting services that allow the Companys license
customers to maximize the benefits of its ERP application
products. These consulting services include requirements
analysis, application analysis, detailed pre-implementation
consulting, project management, data migration planning,
application customization and modification, integration
programming, system implementation and deployment. In addition to
 the consulting services described above, the Company offers
education and training services on its ERP application products
that provide its license customers with formalized programs to
ensure that its application products are implemented and utilized
 in an efficient and cost-effective manner. The Company also
provides timely, high quality technical support and maintenance
on its ERP application products.

PowerCervs Strategy

The Companys objective is to become a recognized leader in
the mid-size market for companies looking for enterprise
application software solutions with integrated front-office (CRM)
 and back-office (ERP). The Company believes that the mid-size or
 middle market is represented by companies with annual revenues
between $25 million and $750 million. In general, revenue is not
a very reliable metric for targeting an application software
solution; however, as it has become industry standard to do so,
this middle market as defined above best describes our target
market. The Companys strategy to achieve this objective in
this market includes the following key components:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Focus on Integrated CRM and ERP to provide Integrated
	Enterprise Response. The Company announced its Integrated
	Enterprise Response initiative in March of 2000. This initiative
	is a concerted effort by the Company to provide solutions that
	focus on providing tools that enable our customers to respond to
	their changing business environments. Specifically, the software
	solutions that the Company provides focus on allowing the
	Companys customers to respond to their customers,
	suppliers, strategic partners, and their own employees. Response
	is becoming a significant factor in todays accelerated
	e-business world. This focus will allow the Companys
	customers to better manage their virtual supply chain.                                                                                                                                                                                                        
|
| |  | Increase license revenue and market share. The
	Companys primary objective is to increase its license
	revenues and market share in the middle market. The Company
	believes that its CRM and integrated ERP suite of application
	products effectively meet the needs of mid-size companies based
	on technology platforms, functionality, agility and integration
	capabilities. The Company also believes that the market for
	enterprise application vendors is growing significantly based on,
	 among other factors, the continuing acceptance of enterprise
	application software technology as a tool to gain a competitive
	advantage, the migration from mini and mainframe computers and
	even, at this late date, first-time implementations. The Company
	is focused on trying to successfully increase its license
	revenues while closely managing its operating costs. If these
	objectives are achieved, this will result in improved

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | earnings performance. To achieve the Companys strategy to
	increase license revenue and market share, the Company will have
	to continue to enhance its products, recruit and train additional
	 qualified application consulting professionals and recruit and
	train sales and marketing professionals. There can be no
	assurance that the Company will be able to achieve this strategy
	and successfully compete against current and future competitors.
	See also Business  Competition and
	Managements Discussion and Analysis of Financial
	Condition and Results of Operations  Fluctuations in
	Quarterly Activities and Results of Operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | Continue to deliver e-business solutions.In December of
	1999, the Company announced its strategy for delivering
	e-business solutions integrated into its flagship ERP Plus
	product line. The suite, called the eSeries, is an e-business
	software suite that includes eView, eOrder and eStore. The suite
	is designed to help mid-size companies conduct more competitive,
	efficient e-business. The eSeries is integrated with the
	PowerCerv ERP Plus software suite to enable e-commerce by
	delivering enterprise information to remote employees, suppliers
	and customers via the Internet. The Company shipped the first
	component of the eSeries, eView, in December of 1999. eView is
	designed to allow users to remotely view the status of an item in
	 the value chain, anytime, from remote computers. With eView,
	users can query and view enterprise information, including
	customer invoices, credit memos, on-account transactions and
	open-order status. eView also provides customers the opportunity
	to access detailed inventory information with point-in-time
	product availability. eView is designed to enhance customer
	satisfaction by allowing customers to access current enterprise
	information 24 hours a day. eOrder is designed to allow remote
	employees, customers and vendors to conduct secure
	business-to-business transactions via an Intranet or Internet
	connection with others using e-order  opening markets
	that were previously unserviceable due to geographical or time
	zone restrictions. eOrder is designed to enable true
	business-to-business collaboration by giving customers,
	salespeople and employees the ability to review available
	inventory and to place orders online. It then sends email
	confirmations of the initial orders and notifies users once the
	orders have shipped. This enables end-users to extend operations
	beyond their four walls and across the value chain. eOrder
	currently is scheduled for release in Q2 2000. eStore is designed
	 to enable companies to conduct online business directly with
	customers. The integration between eStore and Microsoft Site
	Server  Commerce Edition is designed to enable
	companies to use Web site templates to quickly and
	cost-effectively create online storefronts, and in many cases
	users may never have to design Web sites or individual pages from
	 scratch. These online storefronts include security features.
	eStore currently is scheduled for release during Q3/Q4 2000.
	There can be no assurance that the Company will be able to
	achieve their strategy and successfully compete against current
	and future competitors.
|
| |  | Focused Market Strategy. The Company is focused on
	delivering open, modifiable front-office (CRM) and integrated
	back-office (ERP) enterprise application software solutions to
	mid-size U.S. companies with annual revenues between $25 million
	and $750 million. The Company has focused its resources,
	including product development, marketing and sales efforts, on
	the needs and requirements of companies in this market. A
	significant portion of the Companys ongoing product
	development efforts will focus on building new features and
	functionality that address the particular needs and requirements
	of mid-size U.S. companies. The Company intends to leverage its
	expertise in this area and continues to expect this expertise
	will provide the Company with a competitive advantage.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Streamlined Implementation Methodology.The Company
	continues to put significant resources into its professional
	services organization with a focus on continuing to streamline
	the implementation process of its enterprise application
	products. The Company has had success implementing its products
	in a three to six month time period, on average. Management
	believes that as the Company continues to refine its
	implementation processes, this will give the Company a
	competitive advantage. These implementation processes, however,
	involve complex application software products, require the
	involvement of significant customer resources, and can result in
	significant risks. Delays in implementation by the Company may
	result in customer dissatisfaction or damage to the
	Companys reputation. There can be no assurance that the
	Company will be able to achieve its streamlined implementation
	methodology and successfully implement its enterprise application
	 products within this strategy. If                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

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| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | unsuccessful, this could result in a material adverse effect on
	the Companys business, operating results and financial
	condition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Increase the base of referenceable customers. Several
	customers of the Company are in the process of implementing the
	Companys enterprise application products, and at this time
	a limited number of customers have fully implemented the
	Companys application products. Many of the Companys
	other customers, however, have only implemented one or more of
	the Companys application products. As customers implement
	more of the Companys application products and those
	products become fully installed and operational, the Company
	believes that those customers will be available as sales
	references for the use of all of the Companys products.
	Based on its experience, the Company believes companies selecting
	 enterprise application software systems rely heavily on customer
	 references. The Company is focused on increasing its reference
	base in order to accelerate its license revenues. There is no
	guarantee, however, that customers will serve as references or
	that they will be able to assist the Company with this objective.               
|
| |  | Provide a single-source full implementation solution. The
	Company believes that mid-size companies are less willing to hire
	 multiple vendors for the implementation of one solution due to
	the costs, time factors and project coordination involved in the
	implementation and training. A team of professional service
	providers is generally required to implement Enterprise
	application software solutions. The Companys application
	consulting organization offers a full complement of services that
	 allow the Companys license customers to maximize the
	benefits of the Companys enterprise application software
	products. These services include detailed pre-implementation
	consulting, project management, system implementation, deployment
	 and integration programming, application customization,
	modification and enhancement services, and application education
	and training services. Therefore, customers of the Company can
	rely on one vendor for the full implementation solution.                                                                   
|
| |  | Provide products that use open, industry-standard technology. The Company designs its application products and development
	 tools to adhere to industry-standard development platforms in
	order to meet customers demands for open solutions. The
	Companys products have an open architecture, are flexible
	and modifiable, and operate with several popular operating
	systems, relational databases and communication protocols. All of
	 the Companys application products operate on both
	Microsoft Windows NT, UNIX as well as Linux operating system
	platforms for the server operating system. In addition they
	utilize both Microsoft SQL/Server and Sybase SQL/Server
	relational database management systems. The Company believes that
	 its open systems/open architecture approach represents a
	competitive advantage over other pre-written application products
	 that are written with proprietary development tool sets, for a
	proprietary database, on outdated operating systems and that may,
	 in fact, be ports of older systems with significant limitations.
|
| |  | Achieve high level of customer satisfaction. The Company
	is committed to consistently achieving a high level of customer
	satisfaction with all of its products and services. The Company
	focuses on delivering high quality products that address specific
	 business requirements, are easy to implement, and enable
	increased productivity for the customer. In addition, the Company
	 has a technical support center staffed with subject matter
	experts to assist customers on an on-going basis after the sale.
	There can be no assurances the Company will achieve this
	objective depending on current market conditions that may exist.                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | Additional products, technologies and solutions. The
	Company is regularly engaged in product marketing and business
	development activities designed to enhance the Companys
	current product offerings. From time to time, this may include
	the Company exploring strategic alliances or other forms of
	business relationships with third party technology firms having
	complementary products, technologies or marketing and sales
	strategies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

Products and Services

The Companys application products and services are designed
 to enable the Companys customers to design, deploy and
maintain enterprise application systems.

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##### Table of Contents



The following table summarizes certain information about the
Companys products:

|                                |  |                                                                                                                                                                                                                                                                                                                       
|------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                |  | Product                                                                                                                                                                                                                                                                                                               
|Product                         |  | Description                                                                                                                                                                                                                                                                                                           
|                                |  |                                                                                                                                                                                                                                                                                                                       
|                                |  |                                                                                                                                                                                                                                                                                                                       
|                               
|                               
|                               
|                               
|PowerCerv Application           |  |                                                                                                                                                                                                                                                                                                                       
|Products                        |  |                                                                                                                                                                                                                                                                                                                       
|Manufacturing Plus              |  | Multiple modules that address manufacturing resource planning,
	scheduling, shop floor control, configuration management and
	performance management.                                                                                                                                                                 
|Distribution Plus               |  | Multiple modules that address order processing, returned goods
	processing, quotation processing, customer profiling, marketing
	and sales, pricing, shipping, freight, invoicing and
	inventory/warehouse management.                                                                                                
|Financials Plus                 |  | Multiple modules that address accounting, financial and business
	management needs including general ledger, accounts payable,
	accounts receivable, purchasing, project accounting, order
	processing and inventory.                                                                                                 
|PowerCerv Business Intelligence |  | PowerCerv Business Intelligence provides the tools necessary to
	turn all the data in your enterprise application into useful
	business information.                                                                                                                                                                  
|                                |  | Comprehensive report writing as well as on line analytical
	processing (OLAP) reporting and integrated internet
	reporting and distribution utilizing both push and pull
	technology.                                                                                                                                 
|SFA Plus                        |  | SFA Plus provides marketing campaign management, sales activity
	planning and management, quoting and pipeline management as well
	as comprehensive contact management.                                                                                                                                               
|Support Plus Support            |  | Support Plus Support provides case management, item registration,
	 serial/lot tracking of registered products, repair information,
	warranty tracking, diagnostic tracking, problem management, case
	logs, case history, repair history, returned material
	authorization processing and tracking, and depot repair.

Services

The Companys service offerings from its Professional
Services Organization consist of the following:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Consulting Services. The Company provides a wide range of
	professional technical and business consulting services for the
	Companys ERP Plus application products. Application product
	 services include a full complement of services that allow the
	Companys customers to maximize the benefits of the
	Companys enterprise application software products. These
	services include application analysis, detailed
	pre-implementation consulting, project management, application
	customization and modification, integration programming, system
	implementation and deployment, and application education and
	training services. PowerCerv consulting services are not included
	 in the price of its software licensing fees.
|
| | The Companys services are provided to end-user customers
	pursuant to written service agreements and statements of
	work. These agreements detail the scope of the consulting
	services to be provided and the applicable hourly billing rates,
	indicate payment and warranty terms, require separately executed
	change orders for any statement of work modifications, identify
	project management personnel responsible, and require weekly
	and/or monthly status meetings between PowerCerv and its
	customers. PowerCerv consulting services are generally billed on
	a time and materials (including travel and living expenses)
	basis.                                                                                      
|
| | Prior to March 31, 1999, the Company had a General (the
	ROI Transaction). See Managements
	Discussion and Analysis of Financial Condition and Results of
	Operations. In connection the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

6



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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ROI Transaction, the Company agreed not to engage in general
        consulting and/or education services unrelated to its application
         products and those of its partners for a period of two years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | Education Services. Education services consist of end-user
         education on the Companys enterprise application software
        products. End-user education involves providing comprehensive
        education and training classes for end-users on the
        implementation and use of the PowerCerv application products in
        an efficient and cost-effective manner. Customized education and
        training programs are also available to meet the end-user
        customers specific requirements. The Company provides its
        customers classroom training in the R&D Facility as well as
        its regional sales offices. In addition, training courses are
        frequently provided at customer sites, using customer facilities
        and equipment, with the Company providing the instructor and
        class materials and in some cases, equipment. Some classes are
        offered on a per-student basis and other classes are offered on a
         negotiated fixed-fee basis.
|
| | Maintenance Services. PowerCerv is committed to providing
        timely, high quality support and maintenance on its ERP Plus
        application products. Maintenance services are generally provided
         pursuant to maintenance agreements between the Company and its
        end-user customers. These agreements entitle customers to hotline
         telephone support during extended business hours, notification
        of product enhancements and upgrades, the enhancements and
        upgrades, functional releases and maintenance releases, technical
         bulletins, replacement of damaged products and access to the
        Companys World Wide Web site (http://www.powercerv.com) and
         electronic bulletin board. The Company currently charges a
        percentage of its product license fee for renewable one-year
        maintenance agreements. Maintenance fees are generally billed
        annually in advance.                                                              

Customers

Since its inception, the Company has more than 3,000 customers
worldwide for its products and services. The Companys
customers include Allied Signal Corporation, CTI PET Systems,
Inc., Chatsworth Products, Inc., Compaq Computer Corporation,
Dolch Computer, F.X. Coughlin Company, JBB (Asia-Pacific) Pty
Ltd., Lorin Industries Inc., Monaco Coach Corporation, Reliance
Electric, Ltd., Rockwell/Dodge Automation Inc., Silicon Valley
Bank, SNS Bank Group N.V., Sony Pictures Entertainment, Inc.,
Southern Indiana Gas & Electric, Textron Financial
Corporation and Unit Parts Company. The Company continues to
focus its marketing and sales efforts primarily on mid-size U.S.
companies with annual revenues between $25 and $750 million.

Marketing, Sales and Distribution

The Company markets and sells its full suite of open, modifiable
front-office CRM and back-office ERP enterprise application
software solutions to mid-size U.S. companies with annual
revenues between $25 million and $750 million. The Companys
 application products are primarily sold through a direct sales
force and, to a lesser extent, through a select network of VARs
(Value Added Resellers), distributors and partners who generally
serve in their respective capacities on a nonexclusive basis. As
of December 31, 1999, the Companys sales and marketing
 organizations had XX full-time employees.

The Company utilizes a direct sales force to sell its enterprise
application software solutions. The sales force is geographically
 dispersed across three regions in the United States with offices
 in major metropolitan areas. The strategy of the Companys
direct sales force is to identify companies in the target market
and engage those accounts in a sales campaign once a target
company has acknowledged its interest in the Companys
enterprise software solutions. The Companys sales force
uses a structured sales methodology to maximize the efficiency of
 its sales resources and maximize its competitiveness.

In the United States, the Company also utilizes select indirect
channels. These indirect channels consist of Strategic
Implementation Partners, VARs and affiliate channel partners.
Strategic Implementation Partners are consulting organizations
that generally do not sell software but may assist organizations
with selection criteria and possibly provide implementation
assistance. VARs are authorized channel partners who generally
sell the Companys application products to manufacturing
companies (generally with annual revenues below $25 million) or
into other market segments on which the Company does not directly
 focus.

7



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The Company employs application consultants to assist the direct
sales force as may be necessary in competitive sales
opportunities, though these consultants primary function is
 to provide customers with implementation services related to
installing, customizing, supporting and maintaining its products.
 The Company employs application consultants that are experienced
 professionals with in-depth knowledge of their particular field
of expertise.

The Company actively and regularly conducts marketing activities
designed to increase its market awareness. These marketing
activities include advertising, direct marketing, telemarketing,
seminar marketing, tradeshow marketing, and public relations
activities to generate leads and gain valuable market exposure.
Additionally, the Company updates industry analysts regularly
with announcements including new customers and updated product
features. The Company maintains a World Wide Web site at http://www.powercerv.com (information contained in the
Website is not a part of this Annual Report or Form 10-K)
that serves as a marketing communication vehicle. The Company
also publishes all of its product and service information on its
World Wide Web site, including a full color version of its
product literature, recent press releases, selected reprinted
press coverage, the Companys training schedule and other
relevant information pertaining to its full suite of products and
 services.

Products are generally shipped as orders are received and,
accordingly, the Company has historically operated with little or
 no backlog. Because of the generally short cycle between order
and shipment, the Company does not believe that its backlog as of
 any particular date is meaningful.

Product Development

During 1999, the Company made substantial investments in internal
 research and development as well as technology advancements. The
 Companys product development efforts are focused primarily
 on continued enhancement of its ERP Plus application products to
 meet the needs and requirements of mid-size companies. The
Company believes its future performance will depend, in large
part, on its ability to maintain and enhance its current product
line to meet the needs of this target market, its development of
new application products, as well as exploiting emerging
technologies. As of December 31, 1999, the Company had 60
full-time employees in its product development group. The Company
 opened a new 15,000 square foot facility in Anderson, South
Carolina on March 23, 1998. Research and development
expenses consist primarily of salaries for employees in the
product development group and a portion of the related overhead.
Research and development expenses are charged to operations as
incurred. Research and development expenditures were
approximately $4.5 million in 1999 and $3.8 million in 1998.

In March 2000, the Company released version 9.0 of its ERP Plus
application products on schedule and as planned. The new release
added functionality and features to the Companys
application products. Version 9.0 also further improved the
integration among the Companys ERP and front-office
application products and delivered totally re-written user
manuals and on-line documentation. Technology upgrades to the
latest versions of operating systems, development tools, and
database platforms were also included in Version 9.0 of the
Companys ERP Plus application products.

The Company plans to continue to enhance its ERP Plus application
 products to address the evolving needs of mid-sized U.S.
companies in its target market. In particular, the Company
intends to continue pursuing improved functionality on its
existing application products and to make changes to the base
products to suit customer requirements. The objectives of the
product development group include taking advantage of features in
 the Companys underlying core technologies. These features
include multiple hardware platform support, database
independence, multiple network support and support for various
operating systems

8



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The client/server enterprise software application market is
highly influenced by rapid technological change, adoption of new
industry standards, frequent new product introductions, and
changing customer demands that can render existing products
unmarketable and obsolete. The Companys future success will
 depend upon its ability to enhance its current products and
develop and introduce new products that keep pace with
technological developments, respond to evolving customer
requirements, and achieve market acceptance. In particular, the
Company believes it must continue to respond quickly to its
customers needs for functionality. In the past, the Company
 has experienced delays in the introduction of new products and
product enhancements. There can be no assurance that the Company
will be successful in developing and marketing new products or
product enhancements, addressing changing customer demands or the
 adoption of new industry standards, or that the Company will not
 experience significant delays in the introduction of new
products or product enhancements in the future, any of which
could have a material adverse effect on the Companys
results of operations.

Strategic Alliances

An element of the Companys strategy is the continued
creation and development of strategic alliances with notable
industry participants. The Companys goals in establishing
these relationships are to create marketing alliances that will
endorse and promote the Companys products to a larger
potential customer base than can be reached through the
Companys direct marketing efforts and to assist the Company
 in developing a supply of aftermarket service providers who will
 train personnel to implement the Companys products,
thereby leveraging the Companys resources and reach. The
Company seeks strategic alliances with companies that have
maximum penetration and leading reputations for quality with the
Companys target customers. Many of these relationships are
in the early stages of development and have not yet resulted in
material revenue for the Company. Generally, existing agreements
outlining the Companys alliances do not impose significant
financial obligations or liabilities on either party and have
terms no longer than one year. There can be no assurance that
these relationships will successfully develop to the extent that
they will contribute materially to the Companys financial
results in the future.

To date, the Companys significant alliances include the
following organizations:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Microsoft Corporation. The Company has entered into an
	agreement with Microsoft that encourages the Company to integrate
	 Microsoft products and technologies into the Companys
	solutions. This designates the Company as a Microsoft
	Solution Provider. In addition, the Company receives
	frequent briefings on Microsofts strategic and technical
	product direction, participates in joint marketing activities,
	and receives early access to new software releases. The
	Companys entire suite of products utilizes Microsoft SQL
	Server, Windows NT Server and Windows 95. In addition, the
	Companys solution has received the important Microsoft
	back-office certification.
|
| | IBM Corporation. The Company has, from time to time, and
	anticipates in the future, from time to time, to participate in
	marketing alliances and activities with International Business
	Machines Corp. Specifically, the Company recently announced that
	its ERP Plus product suite has become Server Proven
	on IBM NetFinity Servers with both the Linux and Windows NT
	operating system platforms. In 2000, the Company plans to
	continue to strengthen its relationship with IBM and participate
	in other joint marketing and sales activities.                                                                                                                                     
|
| | Sybase, Inc. The Company has entered into a strategic
	marketing relationship with Sybase. The relationship includes
	joint marketing activities, sponsorship of seminars highlighting
	the Companys applications, press releases announcing the
	availability and performance of the Companys products on
	Sybase platforms, publications of joint success stories and other
	 items of a similar nature. The Companys products utilize
	the Sybase SQL ServerEnterprise Adaptive Server as the foundation
	 RDBMS of its ERP Plus product suite.                                                                                                                                            

9



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| |                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Best Software, Inc. The Company has entered into an
	agreement with Best Software where the Company has agreed to
	re-sell the Best! Imperative Fixed Assets product as a solution
	for customers that need fixed assets as part of their financial
	solution. The Company has integrated the product into the
	Companys Financials Plus solution for customers.
|
| | Brio Technology, Inc. The Company has entered into an
	agreement whereby the Company will private label the BRIO product
	 suite as the basis for its PowerCerv Intelligence Series. The
	Company has added functionality to these products to integrate
	them into the Companys ERP Plus product suite.                                                        
|
| | Taylor Manufacturing System, Inc. The Company has entered
	into a strategic marketing relationship with Taylor Manufacturing
	 Systems where the Company has integrated the Taylor TESS product
	 into the Companys ERP Plus product suite.                                                                                                                     

In addition to the above mentioned relationships, the Company
will, from time to time, enter into relationships with third
parties that it deems strategic, important and useful to
furthering the efforts of the Company.

In addition to those strategic alliances referenced above, the
Company has entered into agreements and relationships with
several of the big five accounting firms on a
regional basis. Under these agreements and relationships,
representatives of the accounting firms promote the
Companys application products to their client base. The
Company provides training to individuals from these firms on
product implementation.

Competition could develop between the Company and certain of the
parties with which it has strategic alliances. There can be no
assurance that the Company would be able to effectively compete
with any such parties in such circumstances.

Competition

The market for enterprise software application products and
services is intensely competitive, rapidly changing and
significantly affected by new product offerings and other market
activities. A number of companies offer products similar to the
Companys products and services, which are targeted at
mid-size U.S. companies. In addition, the Companys market
has no proprietary barriers to entry that could limit competitors
 from developing similar products or selling competing products.
Many of the Companys existing competitors, as well as a
number of potential competitors, have longer operating history,
more established marketing and sales organizations, greater name
recognition, larger R&D and technical organizations,
significantly greater financial and technical resources and a
larger installed base of customers than the Company. As a result,
 these competitors may be able to respond more quickly to new or
emerging technologies and to changes in customer requirements, or
 to devote greater resources to the development, promotion and
sale of their products, than can the Company. There can be no
assurance that the Company will be able to compete successfully
with existing or new competitors or that such competitors will
not offer or develop products that are superior to the
Companys products or that achieve greater market
acceptance.

The Company competes in the enterprise application software and
services market on the following merits: A focus on the mid-size
companies; product functionality; integrated CRM and ERP
application software solution. In addition, the Company competes
on its application software customization capabilities,
single-source implementation solution, quicker time to benefit,
open and industry standard technology platforms, professional
services and total cost of ownership. The Company currently
competes primarily with (i) other vendors of software
focused on the specific needs of mid-size companies, which
include Symix, QAD, Epicor, Baan N.V., J.D. Edwards, and Oracle
and (ii) VARs and system integrators of the larger
enterprise software companies, including SAP AG, Baan N.V.,
Peoplesoft, Inc., and Oracle Corporation, which target both
mid-size or larger companies. In addition, customers who have a
large installed base of legacy systems may resist committing the
time and resources necessary to convert to an open system,
client/server-based software suite of products. Further, as the
enterprise application software and services market continues to
develop, companies with significantly greater resources than the
Company may attempt to increase their presence in the target
market where the Company is focused by acquiring or forming
strategic alliances with competitors of the Company. Increased
competition is likely to result in price reductions and

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Intellectual Property and Other Proprietary Technology

The Company regards its products as proprietary trade secrets and
 confidential information. The Company relies on a combination of
 copyright, trademark and trade secrets laws, employee and
third-party nondisclosure agreements and other industry standard
methods for protecting ownership of its products. The Company has
 no patents. There can be no assurance, however, that in spite of
 these precautions, an unauthorized third party will not use,
copy or reverse engineer portions of the Companys products.
 In addition, the laws of some foreign countries do not protect
the Companys proprietary rights to the same extent as do
the laws of the United States. There can be no assurance that the
 methods used by the Company to protect its products will be
adequate or that the Companys competitors will not
independently develop products that are substantially equivalent
or superior to the Companys products.

The Company licenses its application products to customers under
non-transferable, non-exclusive negotiated license agreements.
The standard form license agreement allows customers to use the
Companys products solely for internal purposes and
specifies the maximum number of servers and concurrent users that
 may use the products. The Company may license product source
code to enable its customers to customize the software to meet
particular requirements. The disclosure of source code increases
the likelihood of misappropriation or other misuse of the
Companys proprietary trade secrets. The Companys
standard license contains confidentiality provisions protecting
the products. In the event of termination of the license, the
end-user customer remains responsible for any unpaid license fees
 and the confidentiality obligations. However, there can be no
assurance that such customers will take adequate precautions to
protect the Companys proprietary trade secrets and
confidential information. There can be no assurance that the
Companys means of protecting its proprietary rights and
confidential information will be adequate.

The Company believes that it has all of the necessary rights to
market its products although there can be no assurance that third
 parties will not assert infringement claims against the Company
in the future. The Company expects that, as the number of
products increase and the functionality of these products further
 overlaps, the likelihood of third parties asserting infringement
 claims against the Company will increase. Any claim, whether or
not it has merit, could result in costly litigation and require
the Company to enter into royalty or other license arrangements.
Such royalty or other license arrangements, if required, may not
be available on terms acceptable to the Company or at all.

Although the Companys competitive position may be affected
by its ability to protect its proprietary rights and confidential
 information, the Company believes that the rapid pace of
technological change in the industry will cause other factors,
such as the technological and creative skills of the
Companys management and technical personnel, name
recognition, the ability to develop, produce, enhance and market
innovative products and services, the timeliness and quality of
support services, and strategic relationships in the industry, to
 be more important in establishing and maintaining a leading
position within the industry than are copyright, trademark and
other legal protections for intellectual property.

Employees

As of December 31, 1999, the Company had 193 full-time
employees. These employees included 47 in sales, marketing and
related activities, 62 in research and development, 61 in
customer support, training, and consulting services, and 23 in
information technology, finance, administration and human
resources. On March 31, 1999, and in connection with the ROI
 Transaction, approximately 80 employees of the Company were
 effectively transferred to ROI. Approximately 75 of these
employees were from the Companys training and consulting
services group. As of April 1, 1999, the Company had 196
full-time employees. The Companys employees are not
represented by any collective bargaining organization, and the
Company has never experienced a work stoppage. The Company
believes that its relations with employees are good. The loss of

11



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Item  2.     Properties

The Companys corporate headquarters are located in Tampa,
Florida, in a 24,000 square foot facility, including office space
 and customer training facilities, occupied under a lease
expiring August 31, 2000. The Company is actively
negotiating office space for its corporate headquarters in Tampa,
 Florida. The Company leases additional office space in
California, Georgia, Illinois, Minnesota, North Carolina, New
Jersey, South Carolina, and Texas. In connection with the ROI
Transaction, the Company assigned its leases to ROI in the
following locations: Orlando, Florida; Troy, Michigan; Chantilly,
 Virginia; and Houston, Texas. The Company is currently
subleasing certain office space to ROI in Tampa, Florida, and
Minneapolis, Minnesota.




Item  3.     Legal
Proceedings

A complaint was filed on July 24, 1997, in the United States
 District Court for the Middle District of Florida, captioned J.
Conrad Lifsey vs. Harold R. Ross, Gerald R. Wicker, Marc J.
Fratello, Roy E. Crippen, III, Donald B. Hebb, Jr., Thomas S.
Roberts, PowerCerv Corporation, Alex Brown & Sons, Inc.,
Robertson, Stephens & Company, ABS Capital Partners, L.P.,
Summit Investors II, L.P., and Summit Ventures III, L.P. The
complaint purports to be a class action on behalf of those
persons who purchased shares of the Companys common stock
from March 1, 1996 (the date of the Companys initial
public offering of its common stock (IPO)) through
July 24, 1996. The complaint alleges, among other things,
that the defendants violated the Securities Act of 1933 and the
Securities Exchange Act of 1934 in connection with the
Companys IPO and in its subsequent securities filings,
press releases and other public statements. The plaintiff seeks
damages of an unspecified amount, rescission of certain
securities sales and certain other remedies. On March 19,
1998, the defendants filed their motions to dismiss this
complaint. An effect of this motion filing is to postpone any
discovery on this case until after the motions are ruled on by
the Court. On April 5, 1998, the Court ordered the parties
to attend a mediation conference by July 30, 1998. The
parties did not resolve this lawsuit in the mediation conference.
 The Court ordered a second mediation conference for
March 22, 2000, in which the parties were again unable to
resolve this lawsuit. To date, the Court has not issued a ruling
on the Companys motion to dismiss. The defendants continue
to deny any wrongdoing and intend to contest the suit vigorously.

The Company is also subject to miscellaneous legal proceedings in
 the normal course of business. The Company is currently
defending these proceedings and claims and anticipates that it
will be able to resolve these matters in a manner that will not
have a material adverse effect on the Companys consolidated
 financial position.




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

No matters were submitted to a vote of security holders during
the fourth quarter of the year ended December 31, 1999.




PART II




Item  5.     Market Value of
the Registrants Common Stock

The Companys Common Stock, $.001 par value (Common
Stock), is traded on the Nasdaq National Market under the
symbol PCRV. The following table sets forth the range
 of high and low sales prices on the National Market for the
Common Stock during the two previous years. Such quotations
represent inter-dealer prices without retail markup, markdown or
commission and may not necessarily represent actual transactions.

|            |  |      |       |     |  |   |       | 
|----------- |  | ---- | ----- | --- |  | - | ----- | 
|1998        |  | High |       | Low
|            |  |      |       |    
|1st Quarter |  | $    | 4.000 |     |  | $ | 1.625 | 
|           
|           
|           
|           
|2nd Quarter |  |      | 6.313 |     |  |   | 2.750 | 
|           
|           
|           
|           
|3rd Quarter |  |      | 5.250 |     |  |   | 2.500 | 
|           
|           
|           
|           
|4th Quarter |  |      | 3.750 |     |  |   | 1.375 | 

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|            |  |      |       |     |  |   |       | 
|----------- |  | ---- | ----- | --- |  | - | ----- | 
|1999        |  | High |       | Low
|            |  |      |       |    
|1st Quarter |  | $    | 3.875 |     |  | $ | 1.750 | 
|           
|           
|           
|           
|2nd Quarter |  |      | 3.625 |     |  |   | 1.563 | 
|           
|           
|           
|           
|3rd Quarter |  |      | 4.250 |     |  |   | 2.250 | 
|           
|           
|           
|           
|4th Quarter |  |      | 8.375 |     |  |   | 2.250 | 

As of December 31, 1999, the Company had approximately
107 shareholders of record, and the Company believes there
are more than approximately 3,600 beneficial shareholders.
The Company declared no dividends in respect of its Common Stock
in 1998 and 1999. The Company intends to retain any earnings for
use in the business for the foreseeable future.

13



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Item  6.     Selected
Consolidated Financial Data

The following historical selected consolidated financial data of
the Company is qualified by reference to and should be read in
conjunction with the Consolidated Financial Statements and Notes
thereto and with Managements Discussion and Analysis
of Financial Condition and Results of Operations appearing
elsewhere in this Form 10-K. The balance sheet data set
forth below as of December 31, 1999 and 1998 and the
statement of operations data for the 2-year period ended
December 31, 1999 are derived from the Consolidated
Financial Statements of the Company audited by Ernst & Young
LLP, independent certified public accountants, appearing
elsewhere in this report on Form 10-K. The statement of
operations data for the year ended December 31, 1997 are
derived from the Consolidated Financial Statements of the Company
 audited by KPMG LLP, independent certified public accountants,
appearing elsewhere in this report on Form 10-K. The statement of
 operations data set forth below with respect to the year ended
December 31, 1996 and 1995 and the balance sheet data as of
December 31, 1997, 1996 and 1995 are derived from audited
financial statements not included in this form 10-K.

|                                                      |                                     |                                       |        |         |        |         |        |         |        |            |         |        |         |   |        |        |        |   |        |        |        |  
|----------------------------------------------------- | ----------------------------------- | ------------------------------------- | ------ | ------- | ------ | ------- | ------ | ------- | ------ | ---------- | ------- | ------ | ------- | - | ------ | ------ | ------ | - | ------ | ------ | ------ | -
|                                                      |                                     |                                      
|                                                      |                                     | Years Ended December 31,             
|                                                      |                                     |                                      
|                                                      |                                     | 1999(2)                               |        | 1998(2) |        | 1997(2) |        | 1996(2) |        | 1995(1)(2)
|                                                      |                                     |                                       |        |         |        |         |        |         |        |           
|                                                      |                                     |                                      
|                                                      |                                     | (In thousands, except per share data)
|                                                     
|                                                     
|                                                     
|                                                     
|Statement of Operations Data:                         |                                     |                                       |        |         |        |         |        |         |        |            |         |        |         |   |        |        |        |   |        |       
|                                                     
|                                                     
|                                                     
|                                                     
|Revenue:                                              |                                     |                                       |        |         |        |         |        |         |        |            |         |        |         |   |        |        |        |   |        |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | License fees                        |                                       | $      | 9,257   |        |         | $      | 8,342   |        |            | $       | 6,434  |         |   | $      | 11,324 |        |   | $      | 8,258  |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Technology resales                  |                                       |        |        |        |         |        | 858     |        |            |         | 2,385  |         |   |        | 2,860  |        |   |        | 3,368  |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Service fees                        |                                       |        | 11,464  |        |         |        | 8,533   |        |            |         | 9,498  |         |   |        | 23,172 |        |   |        | 16,573 |       
|                                                      |                                     |                                       |        |         |        |         |        |         |        |            |         |        |         |   |        |        |        |   |        |       
|                                                      |                                     | Total revenue                         |        |         | 20,721 |         |        |         | 17,733 |            |         |        | 18,317  |   |        |        | 37,356 |   |        |        | 28,199 |  
|                                                      |                                     |                                       |        |         |        |         |        |         |        |            |         |        |         |   |        |        |        |   |        |       
|Costs and expenses:                                   |                                     |                                       |        |         |        |         |        |         |        |            |         |        |         |   |        |        |        |   |        |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Cost of licenses                    |                                       |        | 994     |        |         |        | 670     |        |            |         | 2,975  |         |   |        | 1,319  |        |   |        | 439    |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Cost of technology resales          |                                       |        |        |        |         |        | 592     |        |            |         | 1,871  |         |   |        | 2,337  |        |   |        | 2,651  |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Cost of services                    |                                       |        | 7,578   |        |         |        | 6,935   |        |            |         | 7,524  |         |   |        | 15,973 |        |   |        | 10,341 |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | General and administrative          |                                       |        | 4,476   |        |         |        | 3,886   |        |            |         | 7,687  |         |   |        | 5,256  |        |   |        | 4,761  |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Sales and marketing                 |                                       |        | 8,022   |        |         |        | 6,103   |        |            |         | 11,075 |         |   |        | 10,730 |        |   |        | 4,829  |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Research and development            |                                       |        | 4,504   |        |         |        | 3,820   |        |            |         | 5,787  |         |   |        | 6,688  |        |   |        | 3,082  |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Work force reduction and other      |                                       |        | 485     |        |         |        |        |        |            |         | 1,010  |         |   |        |       |        |   |        |       |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | In-process research and development |                                       |        |        |        |         |        |        |        |            |         |       |         |   |        | 100    |        |   |        | 6,913  |       
|                                                      |                                     |                                       |        |         |        |         |        |         |        |            |         |        |         |   |        |        |        |   |        |       
|                                                      |                                     | Total costs and expenses              |        |         | 26,059 |         |        |         | 22,006 |            |         |        | 37,929  |   |        |        | 42,403 |   |        |        | 33,016 |  
|                                                      |                                     |                                       |        |         |        |         |        |         |        |            |         |        |         |   |        |        |        |   |        |       
|Operating income (loss)                               |                                     |                                       | (5,338 | )       |        |         | (4,273 | )       |        |            | (19,612 | )      |         |   | (5,047 | )      |        |   | (4,817 | )     
|                                                     
|                                                     
|                                                     
|                                                     
|Other income (expense)                                |                                     |                                       | 260    |         |        |         | 301    |         |        |            | 578     |        |         |   | 674    |        |        |   | (158   | )     
|Operations disposed of during 1999                    |                                     |                                       |        |         |        |         |        |         |        |            |         |        |         |   |        |        |        |   |        |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Revenues                            |                                       |        | 2,464   |        |         |        | 12,238  |        |            |         | 14,769 |         |   |        |        |        |   |        |        |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Costs and expenses                  |                                       |        | 2,240   |        |         |        | 10,074  |        |            |         | 12,111 |         |   |        |        |        |   |        |        |       
|                                                      |                                     |                                       |        |         |        |         |        |         |        |            |         |        |         |   |        |        |        |   |        |       
|                                                      |                                     |                                       | 224    |         |        |         | 2,164  |         |        |            | 2,658   |        |         |   |        |        |        |   |        |       
|                                                     
|                                                     
|                                                     
|                                                     
|Gain on sale of business                              |                                     |                                       | 5,647  |         |        |         |       |         |        |            |        |        |         |   |        |        |        |   |        |       
|                                                      |                                     |                                       |        |         |        |         |        |         |        |            |         |        |         |   |        |        |        |   |        |       
|                                                      |                                     |                                       | 5,871  |         |        |         | 2,164  |         |        |            | 2,658   |        |         |   |        |        |        |   |        |       
|                                                      |                                     |                                       |        |         |        |         |        |         |        |            |         |        |         |   |        |        |        |   |        |       
|Income (loss) before income taxes                     |                                     |                                       | 793    |         |        |         | (1,808 | )       |        |            | (16,376 | )      |         |   | (4,373 | )      |        |   | (4,975 | )     
|                                                     
|                                                     
|                                                     
|                                                     
|Income tax expense (benefit)                          |                                     |                                       |       |         |        |         |       |         |        |            | 1,711   |        |         |   | (1,658 | )      |        |   |       |       
|                                                      |                                     |                                       |        |         |        |         |        |         |        |            |         |        |         |   |        |        |        |   |        |       
|                                                      |                                     | Net income (loss)                     |        | $       | 793    |         |        | $       | (1,808 | )          |         | $      | (18,087 | ) |        | $      | (2,715 | ) |        | $      | (4,975 | )
|                                                      |                                     |                                       |        |         |        |         |        |         |        |            |         |        |         |   |        |        |        |   |        |       
|Basic and diluted net income (loss) per share         |                                     | $                                     | .06    |         |        | $       | (0.13  | )       |        | $          | (1.31   | )      |         | $ | (0.21  | )      |        |   |        |       
|                                                      |                                     |                                       |        |         |        |         |        |         |        |            |         |        |         |   |        |        |        |   |        |       
|Shares used in computing net income (loss) per share: |                                     |                                       |        |         |        |         |        |         |        |            |         |        |         |   |        |        |        |   |        |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Basic                               |                                       |        | 13,322  |        |         |        | 13,817  |        |            |         | 13,839 |         |   |        | 12,950 |        |   |        |        |       
|                                                      |                                     |                                       |        |         |        |         |        |         |        |            |         |        |         |   |        |        |        |   |        |       
|                                                      | Diluted                             |                                       |        | 14,389  |        |         |        | 13,817  |        |            |         | 13,839 |         |   |        | 12,950 |        |   |        |        |       
|                                                      |                                     |                                       |        |         |        |         |        |         |        |            |         |        |         |   |        |        |        |   |        |       

14



---



##### Table of Contents



|           |                                                                         |                                       |  |         |  |         |  |         |  |            |  |  |  |  |  |  |  |  |   |        |  
|---------- | ----------------------------------------------------------------------- | ------------------------------------- |  | ------- |  | ------- |  | ------- |  | ---------- |  |  |  |  |  |  |  |  | - | ------ | -
|           |                                                                         |                                      
|           |                                                                         | Years Ended December 31,             
|           |                                                                         |                                      
|           |                                                                         | 1999(2)                               |  | 1998(2) |  | 1997(2) |  | 1996(2) |  | 1995(1)(2)
|           |                                                                         |                                       |  |         |  |         |  |         |  |           
|           |                                                                         |                                      
|           |                                                                         | (In thousands, except per share data)
|          
|          
|          
|          
|Pro forma: |                                                                         |                                       |  |         |  |         |  |         |  |            |  |  |  |  |  |  |  |  |   |       
|          
|          
|          
|          
|           | Income (loss) before income taxes as reported                           |                                       |  |         |  |         |  |         |  |            |  |  |  |  |  |  |  |  | $ | (4,975 | )
|          
|          
|          
|          
|           | Income tax expense (benefit)                                            |                                       |  |         |  |         |  |         |  |            |  |  |  |  |  |  |  |  |   | (550   | )
|           |                                                                         |                                       |  |         |  |         |  |         |  |            |  |  |  |  |  |  |  |  |   |       
|           | Net income (loss)                                                       |                                       |  |         |  |         |  |         |  |            |  |  |  |  |  |  |  |  | $ | (4,425 | )
|           |                                                                         |                                       |  |         |  |         |  |         |  |            |  |  |  |  |  |  |  |  |   |       
|           | Basic and diluted net income (loss) per share                           |                                       |  |         |  |         |  |         |  |            |  |  |  |  |  |  |  |  | $ | (0.52  | )
|           |                                                                         |                                       |  |         |  |         |  |         |  |            |  |  |  |  |  |  |  |  |   |       
|           | Shares used in computing basic and diluted net income
	(loss) per share |                                       |  |         |  |         |  |         |  |            |  |  |  |  |  |  |  |  |   | 8,451  |  
|           |                                                                         |                                       |  |         |  |         |  |         |  |            |  |  |  |  |  |  |  |  |   |       

|                                        |  |                      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|--------------------------------------- |  | -------------------- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                        |  |                     
|                                        |  | December 31,        
|                                        |  |                     
|                                        |  | 1999                 |         | 1998 |  | 1997 |         | 1996 |  | 1995
|                                        |  |                      |         |      |  |      |         |      |  |     
|                                        |  |                     
|                                        |  | (Table in thousands)
|                                       
|                                       
|                                       
|                                       
|Balance Sheet Data:                     |  |                      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|                                       
|                                       
|                                       
|                                       
|Cash and cash equivalents               |  | $                    | 6,224   |      |  | $    | 6,594   |      |  | $    | 6,360   |   |  | $ | 14,637  |   |  | $ | 1       |  
|                                       
|                                       
|                                       
|                                       
|Working capital                         |  |                      | 8,792   |      |  |      | 7,387   |      |  |      | 7,885   |   |  |   | 21,619  |   |  |   | (1,308  | )
|                                       
|                                       
|                                       
|                                       
|Total assets                            |  |                      | 16,557  |      |  |      | 15,730  |      |  |      | 18,687  |   |  |   | 36,351  |   |  |   | 15,292  |  
|                                       
|                                       
|                                       
|                                       
|Long-term debt, less current portion    |  |                      |        |      |  |      |        |      |  |      |        |   |  |   |        |   |  |   | 8,932   |  
|                                       
|                                       
|                                       
|                                       
|Convertible preferred stock             |  |                      |        |      |  |      |        |      |  |      |        |   |  |   |        |   |  |   | 5,500   |  
|                                       
|                                       
|                                       
|                                       
|Redeemable preferred stock              |  |                      |        |      |  |      |        |      |  |      |        |   |  |   |        |   |  |   | 5,500   |  
|                                       
|                                       
|                                       
|                                       
|Retained earnings (accumulated deficit) |  |                      | (38,936 | )    |  |      | (39,729 | )    |  |      | (37,921 | ) |  |   | (19,834 | ) |  |   | (17,119 | )
|                                       
|                                       
|                                       
|                                       
|Shareholders equity (deficit)          |  |                      | 11,153  |      |  |      | 11,275  |      |  |      | 12,957  |   |  |   | 30,992  |   |  |   | (15,990 | )






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Prior to May 15, 1995, the Company elected to be treated as
	a small business corporation (S Corporation) for income tax
	purposes. The pro forma income taxes have been calculated using
	the statutory tax rates in effect during the applicable periods,
	as if the Company was taxable as a C  Corporation. The pro
	forma income taxes also assume the adoption of Statement of
	Financial Accounting Standards No. 109, Accounting for
	Income Taxes,for all periods presented above.
|   
|(2) | Effective March 31, 1999, the Company sold its general
	consulting/general education business (consulting services other
	than its application-related services) to a third party. The
	results of operations for 1998 and 1997 have been reclassified to
	 conform with the current years presentations. The Company
	did not segregate between application-related services and
	general consulting/general education revenues prior to 1997.                                           






|         |                                                                                       
|-------- | --------------------------------------------------------------------------------------
|Item  7. | Managements Discussion and Analysis of Financial
	Condition and Results of Operations

Overview

The Company is focused on delivering open, modifiable ERP and
front-office enterprise application software solutions to
mid-size U.S. companies with annual revenues between $25 million
and $750 million. The Company has focused its resources,
including product development, marketing and sales efforts, on
the needs and requirements of companies in this market. The
Companys revenues currently consist primarily of software
license fees and fees for service, primarily relating to the
Companys application including consulting, education and
maintenance and support.

The Company was organized in April 1992, and through calendar
year 1994 a substantial part of the Companys revenue was
derived from technology resales and consulting and education
services. The Company began selling its own license product in
the fourth quarter of 1993. Since then, the Company has brought
several additional applications to the market. Service fees
remain the Companys largest single revenue source, although
 the Companys strategy is to seek to increase revenue
generated from licensing its ERP Plus application
products. On March 31, 1999 the company sold its general
consulting and general education business (consulting and
educations services other than its application-related services)
to a third party. The

15



---



##### Table of Contents





License fees represents revenue from licensing the Companys
 ERP Plus application products and royalties earned on the
 Companys ERP application products and related intellectual
 properties. Service fees represent revenue from implementing the
 Companys ERP application products, consulting services,
education services and maintenance and support services.

Beginning January 1, 1998, the Company has recognized
revenue in accordance with the American Institute of Certified
Public Accountants (AICPA) Statement of
Position 97-2, Software Revenue Recognition (SOP
97-2), as amended by Statement of Position 98-4 (SOP
98-4), Deferral of the Effective Date of a Provision of
SOP 97-2.Revenue is recognized from licenses of the
Companys software products when the contract has been
executed, the product(s) has been shipped, collectibility is
probable and the software license fees are fixed or determinable.
 In the event that the contract provides for multiple elements
(e.g., software products, postcontract customer support,
consulting services), the total fee is allocated to these
elements based on vendor-specific objective evidence
of fair value. If any portion of the license fees is subject to
forfeiture, refund or other contractual contingencies, the
Company will postpone revenue recognition until these
contingencies have been removed. Historically, product returns
and allowances have been immaterial. For those periods in which
the Company marketed its development tools and third party
technology resales, license revenue was recognized following the
procedures above except that these products are generally
licensed via shrinkwrap license agreements. The Company generally
 accounts for consulting and education services separate from
software license fees for those multi-element arrangements where
services are a separate element and are not essential to the
customers functionality requirements and there is
vendor-specific objective evidence of fair value for
these services. If any portion of the license fees is subject to
forfeiture, refund or other contractual contingencies, the
Company will postpone revenue recognition until these
contingencies have been removed. Historically, product returns
and allowances have been immaterial. Consulting and education
revenue is recognized as the services are performed. Revenue from
 support and maintenance activities is recognized ratably over
the term of the maintenance period and the unrecognized portion
is recorded as deferred revenue. Prior to January 1, 1998,
the Company recognized revenue in accordance with the American
Institute of Certified Public Accountants Statement of
Position 91-1, Software Revenue Recognition.

The AICPA published further guidance on applying the provisions
of SOP 97-2 and SOP 98-4 in SOP 98-9 (SOP 98-9), Modification of SOP 97-2, Software Revenue Recognition,
With Respect to Certain Transactions. Additionally, the
 AICPA issued technical questions and answers on financial
accounting and reporting issues related to SOP 97-2 in January
1999. The Company began applying the provisions of SOP 98-9
on a prospective basis for new software transactions entered into
 beginning in the first quarter of 1999. The adoption of this
guidance did not have a material impact on the Companys
financial condition or results of operations and did not have a
significant impact on its current licensing or revenue
recognition practices.

The Companys primary focus in 1999 was to expand upon its
1998 plan to emphasize the Companys commitment to give its
customers an integrated suite of front-office and back-office
solutions. As part of this focus, the Company sold its general
consulting and general education business. In addition to the
employees that left the Company in Connection with the ROI
Transaction (that primarily worked in the Companys general
consulting business), the Company had a work force reduction of
11 people in the first quarter of 1999 that resulted in the
Company recording a charge of $485,000. During 1999, the Company
made a substantial investment in sales and marketing and also
concentrated its research and development efforts on enhancing
its Enterprise Application Software Solutions to better enable
users to leverage the power of the Internet for business
operations in the new e-economy.

The discussion in this report contains forward-looking statements
 that involve risks and uncertainties. The Companys future
actual results may differ materially from the results discussed
herein, including those in the forward-looking statements.
Factors that could cause or contribute to such differences
include, but are not

16



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##### Table of Contents





Results of Operations

The following table sets forth, for the periods indicated,
certain financial data regarding the Companys revenues
derived from license fees, technology resales, and service fees:

Revenue:

|                            |  |                                  |        |        |  |      |      |        |  |      |       |   |  |  |     |    |  |   |       |  
|--------------------------- |  | -------------------------------- | ------ | ------ |  | ---- | ---- | ------ |  | ---- | ----- | - |  |  | --- | -- |  | - | ----- | -
|                            |  |                                 
|                            |  | For the Years Ended December 31,
|                            |  |                                 
|                            |  |                                 
|                            |  | ($ in thousands)                
|                            |  | 1999                             |        | Change |  | 1998 |      | Change |  | 1997
|                            |  |                                  |        |        |  |      |      |        |  |     
|License fees                |  | $                                | 9,257  |        |  |      | 11   | %      |  | $    | 8,342 |   |  |  | 30  | %  |  | $ | 6,434 |  
|                           
|                           
|                           
|                           
|Percentage of total revenue |  |                                  | 45     | %      |  |      |      |        |  |      | 47    | % |  |  |     |    |  |   | 35    | %
|                           
|Technology resales          |  | $                                | 0      |        |  |      | (100 | %)     |  | $    | 858   |   |  |  | (64 | %) |  | $ | 2,385 |  
|                           
|                           
|                           
|                           
|Percentage of total revenue |  |                                  | 0      | %      |  |      |      |        |  |      | 5     | % |  |  |     |    |  |   | 13    | %
|                           
|Service fees                |  | $                                | 11,464 |        |  |      | 34   | %      |  | $    | 8,533 |   |  |  | (10 | %) |  | $ | 9,498 |  
|                           
|                           
|                           
|                           
|Percentage of total revenue |  |                                  | 55     | %      |  |      |      |        |  |      | 48    | % |  |  |     |    |  |   | 52    | %
|                           

License Fees. The Companys license fees are derived
primarily from licensing the Companys application products,
 and to a lesser extent, from licensing its development tools. In
 addition, any royalty fees earned are included in license fees.
The Company establishes its licensing fees using a tiered pricing
 approach based on the number of concurrent servers and users.
Source code licenses are available at an additional cost.

License fees increased 30% from 1997 to 1998 primarily due to an
increase in the number of license transactions for the
Companys ERP application software products. Management
believes this increase is attributable to the Companys
successful execution of its focused marketing and sales strategy
during 1998. This increase in license fees revenue was offset by
lower revenue from licensing of the Companys development
tools, which were discontinued in early July 1998 due to the
Companys focus on application sales. During late December
1997 and through January 1998, the Company initiated a new plan
to increase license revenues from its application products. Under
 this plan, the Company has focused its marketing and sales
efforts on licensing its ERP Plus solutions, comprised of
back-office and front-office application products, to mid-size
U.S. companies in a defined target market. The decision to
implement this strategy is the result of the Companys
assessment of the market for enterprise application software
solutions, its existing suite of products, and its operational
and development strengths. Management believes the Companys
 implementation of this plan will help in accomplishing its
strategic objective to increase license revenues from its
application products; however, there can be no assurance that the
 Company will achieve this objective or that the Companys
license revenues will increase in accordance with
managements expectations.

License fees increased 11% from 1998 to 1999 primarily due to an
increase in the number of license transactions for the
Companys ERP application software products. Management
believes this increase is attributable to the Companys
focused marketing and sales strategy initiated during 1998 and
the additional investment the Company made to strengthen its
marketing and sales organizations in the first quarter of 1999.
The Company believes this investment offset the decrease in
demand for ERP software during 1999. During 1999 the ERP software
 industry was impacted by the concern regarding Year 2000
readiness. Management believes that customers and potential
 customers purchasing patterns were affected in a number of
 ways. Many companies expended significant resources to upgrade
their systems. Those expenditures resulted in reduced funds
available for purchasing current software products, such as the
Company offers.

Technology resales. Technology resales are derived from
licensing complementary client/server and internet development
tools developed by other independent software vendors. The market
 for technology resales and related services is very competitive
and is more price-sensitive than are the Companys
application product license fees and related services markets. In
 connection with the Companys decision to discontinue sales
 of its development tools, during 1998 the Company also has
significantly reduced its emphasis on

17



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##### Table of Contents





Service fees. The Companys service fees consist of
revenue from consulting, education, and support and maintenance
services for the Companys applications software licenses.
Consulting services are primarily provided on a time and
materials basis, education services are generally priced on a
per-student basis and annual support and maintenance service fees
 are based on a percentage of the related license fees. During
1998, service fees declined 10% over 1997 due primarily to a
decrease in the number of billable consultants as a result of
closing certain unprofitable service areas, the Companys
December 1997 work force reduction, and higher than expected
consultant turnover. Also, in conjunction with the work force
reduction, employees who were transitioned from non-billable to
billable positions within the Company were not billable to
customers until the latter part of the March 31, 1998
quarter, following additional education and training. An
additional factor impacting revenue from service fees was
non-billable time spent by consultants in the Companys ERP
Plusinternal application training program, which was
undertaken during the second and third quarters of 1998. During
1999, service fees increased by 34% over 1998. The primary
factors contributing to this increase were productivity
improvements, a broader applications base and a higher level of
customizations and multi-plant implementations. The Company
believes that as revenue from licensing its application products
increases, the demand for application consulting services (and
related revenue) will correspondingly increase, as will service
fees for maintenance and support. However; there can be no
assurance that license revenue will continue to increase or that
if it does increase, revenue from service fees will
correspondingly increase.

Costs and expenses

The following table sets forth, for the periods indicated,
certain financial data regarding the Companys costs
associated with its license fees, technology resales, and
services:

Cost of revenue:

|                           |  |                                  |       |        |  |      |      |        |  |      |       |   |  |  |     |    |  |   |       |  
|-------------------------- |  | -------------------------------- | ----- | ------ |  | ---- | ---- | ------ |  | ---- | ----- | - |  |  | --- | -- |  | - | ----- | -
|                           |  |                                 
|                           |  | For the Years Ended December 31,
|                           |  |                                 
|                           |  |                                 
|                           |  | ($ in thousands)                
|                           |  | 1999                             |       | Change |  | 1998 |      | Change |  | 1997
|                           |  |                                  |       |        |  |      |      |        |  |     
|Cost of licenses           |  | $                                | 994   |        |  |      | 48   | %      |  | $    | 670   |   |  |  | (77 | %) |  | $ | 2,975 |  
|                          
|                          
|                          
|                          
|Gross profit percentage    |  |                                  | 89    | %      |  |      |      |        |  |      | 92    | % |  |  |     |    |  |   | 54    | %
|                          
|Cost of technology resales |  | $                                | 0     |        |  |      | (100 | %)     |  | $    | 592   |   |  |  | (68 | %) |  | $ | 1,871 |  
|                          
|                          
|                          
|                          
|Gross profit percentage    |  |                                  | 0     | %      |  |      |      |        |  |      | 31    | % |  |  |     |    |  |   | 22    | %
|                          
|Cost of services           |  | $                                | 7,578 |        |  |      | 9    | %      |  | $    | 6,935 |   |  |  | (8  | %) |  | $ | 7,524 |  
|                          
|                          
|                          
|                          
|Gross profit percentage    |  |                                  | 34    | %      |  |      |      |        |  |      | 19    | % |  |  |     |    |  |   | 21    | %
|                          

Cost of Licenses. The cost of licenses consists primarily
of production costs, royalties associated with modules of the
Companys application products, the cost associated with
resales made by VARs and the amortization of intangible
assets. The cost of licenses decreased 77% from 1997 to 1998 due
to lower amortization of intangible assets and lower royalties.
The cost of licenses increased 48% from 1998 to 1999 as a result
of higher license revenue and the higher expense associated with
increased VAR sales in 1999.

Cost of Technology Resales. The cost of technology resales
 consists primarily of costs associated with resales of
complementary client/server and internet development tools
developed by independent software vendors. The cost of technology
 resales decreased in 1998 and 1999 compared to the prior year
because of the decrease in technology resales revenue described
previously in this section.

Cost of Services. The cost of services consists primarily
of compensation and travel costs associated with providing
consulting, product support and maintenance, technical services
and education. The cost of services decreased 8% from 1997 to
1998 due to a decrease in the number of consultants as a result
of closing certain unprofitable service areas and the
Companys December 1997 work force reduction. The cost of
services increased 9% from 1998 to 1999 due to the increase in
volume of revenue for services.

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The decrease in gross profit percentage from 21% during 1997 to
19% during 1998 resulted from lower service revenue resulting in
lower productivity. The increase in gross profit percentage from
19% during 1998 to 34% in 1999 was a result of higher revenue
resulting in higher productivity and efficiencies.

The following table sets forth, for the periods indicated,
certain financial data regarding the Companys operating
expenses:

Operating expenses

|                                   |  |                                  |       |        |  |      |    |        |  |      |       |   |  |  |     |    |  |   |        |  
|---------------------------------- |  | -------------------------------- | ----- | ------ |  | ---- | -- | ------ |  | ---- | ----- | - |  |  | --- | -- |  | - | ------ | -
|                                   |  |                                 
|                                   |  | For the Years Ended December 31,
|                                   |  |                                 
|                                   |  |                                 
|                                   |  | ($ in thousands)                
|                                   |  | 1999                             |       | Change |  | 1998 |    | Change |  | 1997
|                                   |  |                                  |       |        |  |      |    |        |  |     
|General and administrative         |  | $                                | 4,476 |        |  |      | 15 | %      |  | $    | 3,886 |   |  |  | (49 | %) |  | $ | 7,687  |  
|                                  
|                                  
|                                  
|                                  
|Percentage of total revenue        |  |                                  | 22    | %      |  |      |    |        |  |      | 22    | % |  |  |     |    |  |   | 42     | %
|                                  
|Sales and marketing                |  | $                                | 8,022 |        |  |      | 31 | %      |  | $    | 6,103 |   |  |  | (45 | %) |  | $ | 11,075 |  
|                                  
|                                  
|                                  
|                                  
|Percentage of total revenue        |  |                                  | 39    | %      |  |      |    |        |  |      | 34    | % |  |  |     |    |  |   | 60     | %
|                                  
|Research and development           |  | $                                | 4,504 |        |  |      | 18 | %      |  | $    | 3,820 |   |  |  | (34 | %) |  | $ | 5,787  |  
|                                  
|                                  
|                                  
|                                  
|Percentage of license fees revenue |  |                                  | 49    | %      |  |      |    |        |  |      | 46    | % |  |  |     |    |  |   | 90     | %
|                                  

General and administrative (G&A). G&A
expenses include general compensation, communications,
accounting, human resources, legal and related facilities
expenses. The decrease in G&A expenses from 1997 to 1998 is
primarily due to the Companys implementation of the
financial operating plan consistent with its marketing and sales
focus which included a work force reduction. The increase in
G&A expenses from 1998 to 1999 is primarily related to higher
outside legal expenses associated with the class action
litigation as referenced in note 10(b), Commitments and
Contingencies, settlement of certain outstanding litigation
matters and higher bad debt expenses.

Sales and Marketing. Sales and marketing expenses
primarily consist of compensation paid to sales and marketing
personnel, costs of marketing programs, and related communication
 costs. Sales and marketing expenses decreased as a percentage of
 total revenue to 34% during 1998 as a result of the
Companys implementation of its financial operating plan and
 the Companys restructuring of its marketing and sales
organizations. During December 1997, the Company recorded a charge
of $1,010,000 for work force reductions and other charges with the
intent to significantly reduce operating expenses and the usage of
cash. The charge included severance and related costs associated with
50 employees, a charge for impairment of property and equipment, costs
related to office downsizing or closings, and other costs. During 1998, the Company recruited a senior vice
president of marketing and senior vice president of direct sales,
 transitioned a marketing executive into channel sales,
centralized its marketing organization in the Companys
Tampa headquarters, and increased the number of U.S. regional
sales offices and regional sales vice presidents from three to
six. Sales and marketing expenses increased as a percentage of
total revenue in 1999 to 39% from 34% in 1998. This was a result
of the Companys accelerated investments in its marketing
and sales organizations. These investments included hiring
additional personnel in the direct sales organization, including
regional vice presidents, field sales representatives and
pre-sales specialists, a change in the Companys commission
structure designed to drive growth in ERP Plus application
product sales, investments in marketing programs focused on
 increasing awareness of the Company and its products and
expansion of the Companys marketing and telemarketing
organization. There can be no assurance that these investments
will result in continued higher revenues for the Company

Research and development (R&D). R&D
costs consist primarily of compensation and related facilities,
software and equipment costs associated with developing,
maintaining and enhancing the Companys products.
Historically, the Company has not capitalized any internal R&D
costs as the costs incurred during the period between the point
in time that technological feasibility is established and that a
product is released to the market have been insignificant. In
1999, the Company capitalized $300,000 in R&D costs paid to a
 third party for the conversion of certain existing software from
 one architecture to another. R&D costs decreased 34% from
1997 to 1998 due to the Companys implementation of the 1998
 financial operating plan and related workforce reduction.
R&D costs increased 18% from 1998 to 1999 primarily due to
increased personnel costs.

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Work Force Reduction and Other Charges

During December 1997, the Company recorded a charge related to a
work force reduction and other related expenses totaling
$1,010,000. This amount included severance and related costs of
$411,000, a charge related to impairment of property and
equipment of $192,000, costs of $113,000 related to office
downsizing or closings, and other costs totaling $294,000.

During the first quarter of 1999, the Company recorded a charge
related to a work force reduction and other related expenses
totaling $485,000. This amount included severance and related
costs of $391,000 and costs of $94,000 related to office
downsizing or closings. As of December 31, 1999,
approximately $45,000 remains in accrued liabilities for payments
 to be made during the first quarter of fiscal 2000.

Income Tax Expense (Benefit)

For the year ended December 31, 1999 the Company recorded no
 income tax expense, since its net operating loss carryforwards
substantially offset any taxable income realized during the
period. As of December 31, 1999 the Company has a deferred
tax asset of $9.6 million, which has been fully reserved. The
decision to fully reserve the deferred income tax asset was based
 on the uncertainty as to the ultimate realization of the asset
due to the Companys continued losses from operations. Any
realization of the Companys net deferred tax asset will
reduce the Companys effective tax rate in future periods.

Liquidity and Capital Resources

At December 31, 1999, 1998 and 1997, the Company had
available cash and cash equivalents of $6.2 million, $6.6 million
 and $6.4 million respectively, and working capital of $8.8
million, $7.4 million and $7.9 million, respectively.

On March 29, 1999, the Company entered into an agreement
with its bank for a $10 million credit facility (1999 Line
of Credit). The 1999 Line of Credit consists of a
commitment for a revolving line of credit totaling $5 million,
with an additional $5 million of uncommitted funding. The first
$2 million of the 1999 Line of Credit is unsecured, with an
interest rate equal to the 90-day floating LIBOR rate plus 150 or
 200 basis points, based on the Companys tangible net
worth. The 1999 Line of Credit requires the Company to maintain
certain financial ratios. Draws from $2 million to $5 million
will be conditioned upon the Companys compliance with an
additional financial ratio, or alternatively, may be secured by
the Companys accounts receivable and inventory. Draws in
excess of $5 million will be subject to terms agreed to at the
time of the draw. The 1999 Line of Credit expires on May 30,
 2000. The Company intends to renew this line of credit upon
expiration. At December 31, 1999, no balance was outstanding
 on the 1999 Line of Credit.

Net cash provided by (used in) operating activities for the years
 ended December 31, 1999, 1998 and 1997 was $(7.6) million,
$0.3 million and $(7.6) million, respectively. The increase in
1999 was the result of the operating loss for the year, managements decision to invest a substantial portion of the
 proceeds from the sale of its general consulting business and
the higher receivable at the end of the year from the higher
sales volume. The significant improvement from 1997 to 1998 was
largely the result of the Companys implementation of its
1998 financial operating plan and associated work force
reduction. Use of cash in 1997 was primarily the result of the
Companys net losses during that year.

Net cash provided by (used in) investing activities for the years
 ended December 31, 1999, 1998 and 1997 totaled $6.5
million, $(0.2) million and $(0.7) million, respectively. Such
uses generally were for purchases of furniture, fixtures, and
communication and computer equipment. In 1998, the net cash used
was reduced by $0.5 million cash received as a result of the
Company exercising a put option related to its $1.5 million
investment made in 1996. In 1999, the net cash provided was the
$6.7 million received from the sale of its general consulting and
 general education business as well as $0.5 million cash received
 as a result of the Company exercising a put option related to
its $1.5 million investment made in 1996.

Net cash provided by financing activities for the years ended
December 31, 1999, 1998 and 1997 totaled $0.8 million, $0.1
million and $0.1 million, respectively. These amounts generally
relate to the exercise of options for common stock.

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To date, inflation has not had a material effect on the
Companys financial results. There can be no assurance,
however, that inflation may not adversely affect the
Companys financial results in the future.

If the Company is not successful in achieving targeted license
and service revenues, the Company may be required to take further
 actions to align its operating expenses with its revenues, such
as further reductions in work force or other cost cutting
measures. The Company is dependent upon its ability to generate
cash flows from its license and service fees, as well as the
collection of its outstanding accounts receivable, to maintain
its current liquidity levels.

The Company believes that, based upon its projected revenues and
operating expense levels, funds generated from operations,
existing cash and cash equivalents and its short-term accounts
receivable, together with the availability of the Line of Credit,
 will be sufficient to finance the Companys operations for
at least the next twelve months. See Forward Looking
Statements and Associated Considerations 
Liquidity.

As noted previously, effective March 31, 1999, the Company
sold the net assets of its general consulting/general education
business to a third party. Consideration totaled approximately
$10 million and consisted of a combination of cash, PowerCerv
Common Stock and secured promissory notes. Under the terms of the
 agreement, the Company received approximately $6.7 million in
cash in 1999. The remaining consideration is evidenced by a $0.8
million promissory note which will mature in 2004.

Impact of the Year 2000

In prior years, the Company discussed the nature and progress of
its plans to become Year 2000 ready. In late 1999, the Company
completed its remediation and testing of systems. As a result of
those planning and implementation efforts, the Company
experienced no significant disruptions in mission critical
information technology and non-information technology systems and
 believes those systems successfully responded to the Year 2000
date change. The Company expensed approximately $400,000 during
1999 in connection with remediating its systems. The Company is
not aware of any material problems resulting from Year 2000
issues, either with its products, its internal systems, or the
products and services of third parties. The Company will continue
 to monitor its mission critical computer applications and those
of its suppliers and vendors throughout the year 2000 to ensure
that any latent Year 2000 matters that may arise are addressed
promptly.

Forward-Looking Statements and Associated Considerations

This Annual Report on Form 10-K and the documents
incorporated herein by reference contain forward-looking
statements that have been made pursuant to the provisions of the
Private Securities Litigation Reform Act of 1995. Words such as
anticipates, expects,
intends, plans, believes,
seeks, estimates, variations of such
words and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees
of future performance and are subject to certain risks,
uncertainties and assumptions that are difficult to predict;
therefore, actual results may differ materially from those
expressed or forecasted in any such forward-looking statements.
In addition, the Company may, from time to time, make oral
forward-looking statements. The Company undertakes no obligation
to publicly update or revise any forward-looking statements,
whether as a result of new information, future events, or
otherwise. Such statements appear in a number of places in this
report and include statements regarding the intent, belief or
current expectations of the Company, its directors or its
officers with respect to, among other things: (i) trends
affecting the Companys financial condition or results of
operations; (ii) the industry in which the Company operates;
 (iii) the Companys business and growth strategies;
and (iv) other matters. Prospective investors are cautioned
that any such forward-looking statements are not guarantees of
future performance and involve risks and uncertainties, and that
actual results may differ materially from those indicated in the
forward-looking statements as a result of various factors.
Readers are cautioned not to place undue reliance on these
forward-looking statements. Factors to consider in evaluating any
 forward-looking statements and the other information contained
herein include the following:

Fluctuations in Quarterly Activities and Results of
Operations. The Company has experienced significant
fluctuations in its revenues and operating results from quarter
to quarter and anticipates that it will continue to experience
such quarterly fluctuations. Factors that may contribute to such
fluctuations include,

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License revenues for the Companys application products
generally reflect a relatively high amount of revenue per order.
The loss or delay of individual orders for these products,
therefore, could have a more significant impact on the revenues
and quarterly results of the Company than on those of companies
with higher sales volumes and lower revenues per order. The
Companys software products generally are shipped as orders
are received (generally no significant order backlog exists), and
 revenues are recognized as software products are shipped if
collection is probable and the remaining Company obligations are
insignificant. As a result, software license revenues in any
quarter are substantially dependent on orders booked and shipped
in that quarter. The timing of license revenues derived from
sales of the Companys application products is difficult to
predict because of the length of the sales cycle for these
products. In addition, the Companys license revenues occur
predominantly in the third month of each quarter and tend to be
concentrated in the last weeks or days of a quarter. Accordingly,
 the Companys quarterly results of operations are difficult
 to predict and delays in product delivery or in closings of
license sales near the end of a quarter could cause quarterly
revenues and, to a greater degree, net income, to fall
substantially short of anticipated levels. Since the
Companys operating expenses are based on anticipated
revenue trends and because a high percentage of the
Companys expenses are relatively fixed, a delay in the
recognition of revenue from a limited number of application
license transactions could cause significant variations in the
Companys operating results from quarter to quarter and
could result in losses. To the extent such expenses precede, or
are not subsequently followed by, increased revenues, the
Companys operating results would be materially adversely
affected. In addition, the achievement of anticipated revenues is
 substantially dependent on the ability of the Company to
attract, on a timely basis, and retain skilled personnel,
especially sales and service personnel. As a result of these
factors, revenues for any quarter are subject to significant
variation, and the Company believes that period-to-period
comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as indications of future
 performance. Fluctuations in operating results may also result
in volatility in the price of the Companys Common Stock.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Competition. The market for enterprise software
        application products and services is intensely competitive,
        rapidly changing and significantly affected by new product
        offerings and other market activities. A number of companies
        offer products similar to the Companys products and
        services, which are targeted at mid-size U.S. Companies. In
        addition, the Companys market has no proprietary barriers
        to entry, which would limit competitors from developing similar
        products or selling competing products. Many of the
        Companys existing competitors, as well as a number of
        potential competitors, have longer operating history, more
        established marketing and sales organizations, greater name
        recognition, larger R&D and technical organizations,
        significantly greater financial and technical resources and a
        larger installed base of customers than the Company. As a result,
         these competitors may be able to respond more quickly to new or
        emerging technologies and to changes in customer requirements, or
         to devote greater resources to the development, promotion and
        sale of their products, than can the Company. There can be no
        assurance that the Company will be able to compete successfully
        with existing or new

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | competitors or that such competitors will not offer or develop
	products that are superior to the Companys products or that
	 achieve greater market acceptance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | Economic and Market Condition Risks. Various segments of
	the software industry have experienced significant economic
	downturns characterized by decreased product demand, price
	erosion, work slowdown and layoffs. In addition, there is
	increasing uncertainty in the ERP market attributed to many
	factors, including global economic conditions and strong
	competitive forces. Our future license fee revenue and results of
	 operations may experience substantial fluctuations from period
	to period as a consequence of these factors and such conditions
	may affect the timing of orders from major customers and other
	factors affecting capital spending. Although we have a diverse
	client base, we have targeted a number of vertical markets. As a
	result, any economic downturns in general or in our targeted
	vertical markets would have a material adverse effect on our
	business, operating results or financial condition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | Lengthy Sales Cycle. Customers in our target market make a
	 significant capital investment in purchasing our ERP application
	 solution. Potential customers spend significant time and
	resources on determining which software to purchase. This
	requires us to spend substantial time, effort and money educating
	 and convincing prospective customers to purchase our software
	over our competitors. Selling our ERP application solution
	requires an extensive sales effort because the decision to
	license software generally involves evaluation by a significant
	number of customer personnel in various functional and geographic
	 areas. The Company also has no control over which company a
	customer favors or if the customer chooses to delay or forego a
	purchase. Due to all of these factors, the sales cycle generally
	ranges from a minimum of three (3) months up to twelve
	(12) months. Since the sales cycle is unpredictable, the
	Company cannot precisely forecast the timing or amount of
	specific license sales. Furthermore, license sales may vary from
	quarter to quarter. Any delays associated with closing large
	license transactions could have a material adverse effect on the
	Companys business, operating results and financial
	condition.                                                                                                                                                                                                                                 
|
| | Ability to Manage Change. The Company was incorporated in
	April 1992 and commercially shipped its initial products in late
	1993. Since inception and through 1996, the Company experienced
	rapid growth in its revenue, the number of its employees and the
	scope of its operations. Beginning in 1997 and through 1999, the
	Company initiated restructuring and reorganization efforts
	resulting in a reduction in the number of employees. The number
	of Company employees, for example, has fluctuated from 372 as of
	December 31, 1997, to 281 as of December 31, 1998 and
	to 193 as of December 31, 1999. The Companys rapid
	growth has resulted in, and is expected to continue to create,
	new and increased responsibilities for management personnel, as
	well as additional demands on the Companys operating and
	financial systems, including addressing and reducing employee
	turnover. The Companys business and future growth will
	depend on the efforts of key management personnel and the
	Companys ability to attract and retain qualified management
	 personnel. The Companys business plan will also require it
	 to recruit additional qualified technical personnel, to enhance
	its managerial systems for its operations, and to successfully
	integrate new employees and systems into its existing operations.
	 If the Company is unable to manage change effectively, the
	Companys business, financial condition and results of
	operations could be materially adversely affected.
|
| | The Company began operations primarily as a VAR of client/server
	software development tools developed by third parties and as a
	provider of related consulting services. For each quarter since
	that time, including the quarter ended December 31, 1999,
	revenue from services has accounted for at least a majority of
	the Companys revenue. The Companys strategy is to
	seek to increase its revenue from the sale of the Companys
	ERP Plus application software products as a percentage of total
	revenue. However, selling, distributing and supporting computer
	software may demand different sales, technological and management
	 skills than providing software consulting services. To be
	successful, the Company and its management will be required to
	adapt to the changing nature of the Companys business. Any
	failure to do so would have a material adverse effect on the
	Companys business, financial condition and results of
	operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In 1997, the Company incurred an $18.1 million net loss on
	license revenues of $6.4 million. In late 1997 and early 1998,
	the Company underwent a reduction in work force of approximately
	50 persons resulting in work force reduction and other charges of
	 $1,010,000. In 1998, the Company hired a new President/COO with
	extensive application software company management experience, and
	 implemented a strategy to focus its operations on the sale of
	its ERP Plus application products to mid-size U.S. discrete
	manufacturing companies. Also during 1998, the Company recorded
	profits in its third and fourth quarters, and reduced its loss to
	 $1.8 million for the year. In 1999, the Company took further
	measures to focus its business on the development, marketing,
	sale, implementation and training of its ERP Plus application
	products. On March 31, 1999, the Company sold the net assets
	 of its general consulting/general education business to a third
	party to further increase the Companys focus on selling ERP
	 application software solutions to its target market. The Company
	 believes that its management team, its emphasis on sales and ERP
	 Plus application products and its success to date with this
	strategic financial condition of the Company; however, there can
	be no assurance that the Company will achieve those objectives in
	 connection with this focused operating strategy.
|
| | The Company has pursued, and will continue to pursue, growth
	opportunities through internal development and, if appropriate
	opportunities arise, acquisition of complementary enterprises and
	 products. The Company competes for acquisition and expansion
	opportunities with many entities that have substantially greater
	resources. In addition, acquisitions may involve difficulties in
	the retention of personnel, diversion of managements
	attention, unexpected legal liabilities, and tax and accounting
	issues. There can be no assurance that the Company will be able
	to successfully identify suitable acquisition candidates,
	complete acquisitions, integrate acquired businesses into its
	operations or expand into new markets. Once integrated,
	acquisitions may not achieve levels of revenue, profitability or
	productivity comparable to the existing business of the Company
	or otherwise perform as expected. The occurrence of any of these
	events could have a material adverse effect on the Companys
	 business, financial condition and results of operations.                                                                                                                                                                                                                                                                                                                                                
|
| | Liquidity. On December 31, 1999, the Companys
	cash and cash equivalents were $6.2 million. If the
	Companys existing cash reserves prove insufficient to fund
	its operating needs, and the Company is not able to borrow
	against its 1999 Line of Credit in accordance with its terms (or
	obtain the revenue of its Line of Credit upon expiration),
	management may be required to seek alternative capital funding
	sources. Further, there can be no assurances that such funds
	would be available to the Company, or if available would be on
	terms satisfactory to the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | Availability of Consulting Personnel. The Companys
	application products generally require that some level of
	post-sale technical consulting and implementation services and
	related education and training be provided to the end-user
	customer. The Companys future success will depend on its
	ability to recruit, hire, train, retain and provide enough
	application and technical consultants or, alternatively, to
	continue to develop and expand relationships with third party
	organizations willing and able to provide these services. There
	can be no assurance that the Company will be able to achieve
	these objectives and, if it is unable to do so, this could have a
	 material adverse effect on the Companys business,
	financial condition and results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | Dependence on Product Development and Associated Risks.
	The enterprise resource planning application software market is
	characterized by rapid technological advances, changes in
	customer requirements and frequent new product introductions and
	enhancements. The Companys future success will depend upon
	its ability to enhance its current products, and to develop and
	introduce new products on a timely basis that keep pace with
	technological developments, respond to evolving customer
	requirements and achieve market acceptance. Any failure by the
	Company to anticipate or respond adequately to technological
	developments and customer requirements, or any significant delays
	 in product development or introduction, could result in a loss
	of competitiveness or revenue. In the past, the Company has
	experienced unexpected delays in the introduction of certain of
	its products, which has had an adverse impact on the
	Companys revenue. Also, new products, when first released
	by the Company, may contain undetected difficulties or defects
	that, despite testing by the Company, are discovered only after
	they have been installed and used by customers. There is no
	assurance that such difficulties will not be discovered in                                                                                                                                                                     

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| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | the future, causing significant customer relations issues, delays
	 in product introduction and shipments, or requiring design
	modifications that could adversely affect the Companys
	competitive position, business, financial condition and results
	of operations. In addition, there can be no assurance that new
	products or product enhancements developed by the Company will
	achieve market acceptance, in which case the Companys
	business, financial condition and results of operations could be
	adversely affected. See Business  Product
	Development.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | Dependence on New Products. The Companys future
	success will depend heavily on sales of the Companys
	products including its ERP Plus applications, and the failure of
	these products to find market acceptance would have a material
	adverse effect on the Companys business, financial
	condition and results of operations. Also, new products, when
	first released by the Company, may contain undetected
	difficulties or defects that, despite testing by the Company, are
	 discovered only after they have been installed and used by
	customers. In response, the Companys support staff provides
	 software fixes and maintenance releases designed to correct or
	work around these difficulties or defects, most of which are
	uncovered in the months immediately following commercial release
	of a new product. There can be no assurance that such
	difficulties will not be discovered in the future, causing
	significant customer relations issues, delays in product
	introduction and shipments, or requiring design modifications
	that could adversely affect the Companys competitive
	position, business, financial condition and results of
	operations. See Business  Products and
	Services.                                                                                                                                            
|
| | Dependence on PowerBuilder® and others. The Company
	currently derives substantially all its revenue from
	(i) sales of its application products written using
	PowerBuilder software and various relational database management
	software products available from Microsoft and Sybase and
	(ii) consulting, education and maintenance services related
	to all of these products. As a result, any factor adversely
	affecting demand for or use of PowerBuilder or adversely
	affecting the Companys relationship with Sybase or
	Microsoft could have a material adverse effect on the
	Companys business, financial condition and results of
	operations. Moreover, any changes in or new versions of
	PowerBuilder or business decisions by Sybase related to the
	long-term product status of PowerBuilder that require changes to
	the Companys products could materially adversely affect the
	 Companys business, financial condition and results of
	operations if the Company were not able to successfully develop
	or implement such changes in a timely fashion. The Companys
	 future financial performance will also depend in part on the
	successful development and introduction of new and enhanced
	versions of PowerBuilder and other products, and customer
	acceptance of such new and enhanced products. See
	Business  Products and Services.
|
| | Dependence on Proprietary Technology; Risks of Third-Party
	Claims for Infringement. The Company regards its products as
	proprietary trade secrets and confidential information. The
	Company relies on a combination of copyright, trademark and trade
	 secrets laws, employee and third-party nondisclosure agreements
	and other industry standard methods for protecting ownership of
	its products. There can be no assurance, however, that in spite
	of these precautions, an unauthorized third party will not use,
	copy or reverse engineer portions of the Companys products.
	 In addition, the laws of some foreign countries do not protect
	the Companys proprietary rights to the same extent as do
	the laws of the United States. There can be no assurance that the
	 methods used by the Company to protect its products will be
	adequate or that the Companys competitors will not
	independently develop products that are substantially equivalent
	or superior to the Companys products.                                                                                                                                                                                                                                                                                                                                                         
|
| | The Company believes that it has all necessary rights to market
	its software products and development tool products, although
	there can be no assurance that third parties will not assert
	infringement claims against the Company in the future. The
	Company expects that, as the number of products increase and the
	functionality of these products further overlaps, the likelihood
	of third parties asserting infringement claims against the
	Company will increase. Any claim, whether or not it has merit,
	could result in costly litigation, divert management attention,
	and require the Company to enter into royalty or other license
	arrangement. Such royalty or other license arrangement, if
	required, may not be available on terms acceptable to the Company
	 or at all.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | There has been substantial litigation in the software industry
	involving intellectual property rights. Although the Company does
	 not believe that it is infringing the intellectual property
	rights of others, there can be no assurance that such claims will
	 not be asserted and, if asserted, would not have a material
	adverse effect on the Companys business, financial
	condition and results of operations. In addition, if the Company
	acquires or licenses a portion of the software included in its
	products from third parties, its exposure to infringement actions
	 may increase because the Company must rely upon such third
	parties for information as to the origin and ownership of such
	acquired or licensed software. Although the Company has obtained
	and intends to continue to obtain representations as to the
	origins and ownership of such acquired or licensed software and
	obtain indemnification to cover any breach of any such
	representations, there can be no assurance that such
	representations will be accurate or that such indemnification
	will provide adequate compensation for any breach of such
	representations. In the future, litigation may be necessary to
	enforce and protect trade secrets, copyrights and other
	intellectual property rights of the Company. The Company may also
	 be subject to litigation to defend against claimed infringement
	of the rights of others or to determine the scope and validity of
	 the intellectual property rights of others. Any such litigation
	could be costly and divert managements attention, either of
	 which could have a material adverse effect on the Companys
	 business, financial condition and results of operations. Adverse
	 determinations in such litigation could result in the loss of
	the Companys proprietary rights, subject the Company to
	significant liabilities, require the Company to seek licenses
	from third parties or prevent the Company from selling its
	products, any one of which would have a material adverse effect
	on the Companys business, financial condition and results
	of operations. See Business  Intellectual
	Property and Other Proprietary Technology.
|
| | Expansion of Indirect Channels; Potential for Channel
	Conflict. The Company markets its application products and
	services directly through both a direct sales force and
	telesales, and indirectly through marketing channels such as
	VARs, OEMs, channel partners and distributors. Although VARs,
	OEMs, channel partners and distributors accounted for a growing
	percentage in 1997, 1998 and 1999, the Company is increasing
	resources dedicated to developing and expanding indirect
	marketing channels. There can be no assurance that the Company
	will be able to attract and retain a sufficient number of
	qualified VARs, OEMs, teaming partners and distributors to market
	 successfully the Companys tools and applications. The
	failure to retain its VARs, OEMs, channel partners and
	distributors could have a material adverse effect on the
	Companys business, financial condition and results of
	operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| | Relationships with VARs, OEMs, teaming partners and distributors
	are usually established through formal reseller agreements. In
	many cases, these agreements may be terminated by either party at
	 any time without cause. Therefore, there can be no assurance
	that any VAR, OEM, teaming partner or distributor will continue
	to represent the Companys products, and the inability to
	retain certain VARs, OEMs, teaming partners or distributors could
	 have a material adverse effect on the Companys business,
	financial condition and results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | Selling through indirect channels may limit the Companys
	contacts with its customers. As a result, the Companys
	ability to accurately forecast sales, evaluate customer
	satisfaction and recognize emerging customer requirements may be
	hindered. The Companys strategy of marketing its products
	directly to end-users and indirectly through VARs, OEMs, teaming
	partners and distributors may result in distribution channel
	conflicts. The Companys direct sales efforts may compete
	with those of its indirect channels and, to the extent different
	resellers target the same customers, resellers may also come into
	 conflict with each other. Although the Company has attempted to
	manage its distribution channels in a manner to avoid potential
	conflicts, there can be no assurance that channel conflicts will
	not materially adversely affect its relationships with existing
	VARs, OEMs, teaming partners or distributors or adversely affect
	its ability to attract new VARs, OEMs, teaming partners and
	distributors. See Business  Marketing, Sales and
	 Distribution.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| | Voting Control by Management. The executive officers and
	directors of the Company beneficially own approximately 48% of
	the outstanding Common Stock as of February 19, 2000. As a
	result, while there is no agreement or understanding among these
	persons with respect to the voting of their Common Stock, if they
	 vote together, they may effectively be able to control the
	outcome of matters requiring a                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | shareholder vote, including the election of directors, adopting
	or amending provisions of the Companys Articles of
	Incorporation and Bylaws, and approving mergers or other similar
	transactions, such as sales of substantially all the
	Companys assets. To the extent there is control, such
	control by the officers and directors may have the effect of
	discouraging certain types of transactions involving an actual or
	 potential change of control of the Company, including
	transactions in which the holders of Common Stock might otherwise
	 receive a premium for their shares over then-current market
	prices. In addition, the possibility of such persons exercising
	such control may limit the price that certain investors may be
	willing to pay in the future for shares of the Companys
	Common Stock. Moreover, the Company is not prohibited from
	engaging in transactions with its management and principal
	shareholders, or with entities in which such persons have an
	interest. The Companys Articles of Incorporation do not
	provide for cumulative voting in the election of directors.
|
| | Dependence on Key Personnel. The Companys success
	depends to a significant extent upon a number of key management
	and technical personnel, including its Chairman,
	Marc J. Fratello, and its President and Chief Executive
	 Officer, Michael J. Simmons, the loss of either of
	whom could have a material adverse effect on the Companys
	business, financial condition and results of operations. The
	Company believes that its future success will also depend in
	large part upon its ability to attract and retain highly skilled
	technical, management, sales and marketing personnel. Competition
	 for such personnel in the computer software industry is intense,
	 and there can be no assurance that the Company will be
	successful in attracting and retaining such personnel. Departures
	 and additions of key personnel may be disruptive to the
	Companys business and could have a material adverse effect
	on the Companys business, financial condition and results
	of operations.                                                                                                                    
|
| | Possible Volatility of Stock Price. The Companys
	stock price has fluctuated substantially since its March 1,
	1996 initial public offering in March 1996. The market price of
	the Common Stock is subject to significant fluctuations in
	response to quarterly and annual operating results of the
	Company, the gain or loss of significant customer orders,
	announcements of technological improvements or new products by
	the Company or its competitors, changes in financial estimates by
	 securities analysts, changes in general conditions in the
	economy, the financial markets or the computer software industry,
	 or other developments affecting the Company, its customers or
	its competitors, some of which may be unrelated to the
	Companys performance and beyond the Companys control.
	 The stock of many technology companies has experienced extreme
	price and volume fluctuations unrelated to the operating
	performance of those companies. These market fluctuations have
	adversely affected and may continue to adversely affect the
	market price of the Companys Common Stock.             




Item  7A.     Quantitative
And Qualitative Disclosures About Market Risk

The Company had no holdings of derivative financial or commodity
instruments at December 31, 1999. The Company has no
significant exposure to interest rate or foreign currency
exchange rate risks. An increase in interest rates of
100 basis points would not significantly impact the
Companys net income. Generally, all of the Companys
business is transacted in U.S. dollars. Accordingly, foreign
exchange rate fluctuations should not have a significant impact
on the Company.




Item  8.     Financial
Statements and Supplementary Data

The Companys Consolidated Financial Statements and Notes
thereto and the reports of Ernst & Young LLP and KPMG LLP,
the Companys independent accountants, are set forth on the
pages indicated in Item 14.

27



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##### Table of Contents






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

There were no disagreements with respect to the Companys
independent accountants during 1999. As discussed and more fully
described in the Companys Form 8-K dated July 7,
1998, the Company appointed Ernst & Young as its independent
accountants and terminated its relationship with KPMG during
1998.




PART III

Certain information required by Part III is omitted from this
Report on Form 10-K since the Company will file a definitive
 Proxy Statement for its Annual Meeting of Shareholders to be
held on June 1, 2000, 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 year covered by this Report, and certain information included
 in the Proxy Statement is incorporated herein by reference.




Item  10.     Directors and
Executive Officers of the Registrant

The information required by this Item is incorporated by
reference from the section entitled Directors and Executive
 Officers in the Proxy Statement.




Item  11.     Executive
Compensation

The information required by this Item is incorporated by
reference from the section entitled Executive
Compensation in the Proxy Statement.




Item  12.     Security
Ownership of Certain Beneficial Owners and Management

The information required by this Item is incorporated by
reference from the section entitled Stock 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 from the section entitled Certain Transactions in the Proxy Statement.

28



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##### Table of Contents






PART IV




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

(a)  The following documents are filed as part of this
Report:

1.  Financial Statements

|                                                                                                                        |  |      |  | 
|----------------------------------------------------------------------------------------------------------------------- |  | ---- |  | 
|                                                                                                                        |  | Page
|                                                                                                                        |  |     
|Independent Auditors Report  KPMG LLP                                                                                 |  |      |  | 
|Report of Independent Certified Public Accountants 
	Ernst & Young LLP                                                 |  |      |  | 
|Consolidated Balance Sheets as of December 31, 1999 and 1998                                                            |  |      |  | 
|Consolidated Statements of Operations for each of the years in
	the three-year period ended December 31, 1999           |  |      |  | 
|Consolidated Statements of Shareholders Equity for each of
	the years in the three-year period ended December 31, 1999 |  |      |  | 
|Consolidated Statements of Cash Flows for each of the years in
	the three-year period ended December 31, 1999           |  |      |  | 
|Notes to Consolidated Financial Statements                                                                              |  |      |  | 

2.  Financial Statement Schedules

The following consolidated financial statement schedules are
included herein:

|                                                                                                                                                                                                                                          |  |      |  | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- |  | 
|                                                                                                                                                                                                                                          |  | Page
|                                                                                                                                                                                                                                          |  |     
|Schedule II  Schedule of Valuation and Qualifying
	 Accounts for each of the years in the three-year period ended
	December 31, 1999                                                                                                     |  |      |  | 
|                                                                                                                                                                                                                                         
|All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are
inapplicable and, therefore, have been omitted.

3.  Exhibits

|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                           
|------- |  | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |   |  |                                                                                                                                                                                                                                                                                                                                                           
|Number  |  |   |  | Description                                                                                                                                                                                                                                                                                                                                               
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                           
|3.1     |  |  |  | Articles of Incorporation of the Company effective as of
	January 1, 1996, as amended by the Articles of Amendment
	dated as of January 9, 1996 (incorporated herein by
	reference to Exhibit Number 3.1 to the Companys
	Registration Statement on Form S-1 (File No. 333-00250)).                                                                      
|3.2     |  |  |  | Bylaws of the Company (incorporated herein by reference to
	Exhibit Number 3.2 to the Companys Registration
	Statement on Form S-1 (File No. 333-00250)).                                                                                                                                                                                                
|10.1    |  |  |  | Loan Agreement and related promissory note, security agreements
	and guarantees, each dated October 31, 1996, among
	NationsBank, N.A. (South) and the Company, for a $5,000,000
	revolving line of credit (incorporated herein by reference from
	Exhibit Number 10.3 to the Companys Annual Report on
	Form 10-K for the year ended December 31, 1996).
|10.2    |  |  |  | NationsBank Commitment Letter dated October 9, 1997, and related
	promissory note dated October 22, 1997, extending the
	maturity of the Companys $5,000,000 revolving line of
	credit (incorporated herein by reference from Exhibit
	Number 10.3 to the Companys Annual Report on
	Form 10-K for the year ended December 31, 1997).                   
|10.3    |  |  |  | Amendment to Loan Agreement, dated January 26, 1998, among
	NationsBank, N.A. and the Company, related to the Companys
	$5,000,000 revolving line of credit (incorporated herein by
	reference from Exhibit Number 10.4 to the Companys
	Annual Report on Form 10-K for the year ended
	December 31, 1997).                                             

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##### Table of Contents



|        |  |   |  |                                                                                                                                                                                                                                                                                                                    
|------- |  | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |   |  |                                                                                                                                                                                                                                                                                                                    
|Number  |  |   |  | Description                                                                                                                                                                                                                                                                                                        
|        |  |   |  |                                                                                                                                                                                                                                                                                                                    
|10.4    |  |  |  | Loan Agreement and related promissory note, dated March 29, 1999,
	 among NationsBank, N.A. and the Company, related to the
	Companys $10,000,000 credit facility (incorporated herein
	by reference from Exhibit Number 10.4 to the Companys
	Annual Report on Form 10-K for the year ended December 31,
	1998).
|10.5    |  |  |  | Employment, Noncompetition, Development and Confidentiality
	Agreement, dated April 10, 1997, between the Company and
	Marc J. Fratello (incorporated herein by reference from Exhibit
	Number 10.2 to the Companys Quarterly Report on
	Form 10-Q for the calendar quarter ended March 31,
	1997).               
|10.6    |  |  |  | Employment, Noncompetition, Development and Confidentiality
	Agreement, dated April 10, 1997, between the Company and Roy
	 E. Crippen, III (incorporated herein by reference from Exhibit
	Number 10.3 to the Companys Quarterly Report on
	Form 10-Q for the calendar quarter ended March 31,
	1997).           
|10.7    |  |  |  | Executive Employment Agreement, dated February 19, 1998, between
	the Company and Michael J. Simmons (incorporated herein by
	reference from Exhibit Number 10.2 to the Companys
	Quarterly Report on Form 10-Q for the calendar quarter ended
	 June 30, 1998).                                                  
|10.8    |  |  |  | Amended and Restated Executive Employment Agreement, dated
	April 7, 1998, between the Company and Stephen M. Wagman
	(incorporated herein by reference from Exhibit Number 10.4
	to the Companys Quarterly Report on Form 10-Q for the
	calendar quarter ended June 30, 1998).                                   
|10.9    |  |  |  | Executive Employment Agreement, dated April 10, 1997, between the
	 Company and Ronald D. Nall (incorporated herein by reference
	from Exhibit Number 10.5 to the Companys Quarterly
	Report on Form 10-Q for the calendar quarter ended
	June 30, 1998).                                                         
|10.10   |  |  |  | Asset Purchase Agreement, dated March 30, 1999, by and between
	the Company and R.O.I Consulting, Inc. (incorporated herein by
	reference from Exhibit Number 2 to the Companys
	Current Report on Form 8-K filed on April 13, 1999).                                                                             
|22      |  |  |  | Subsidiary of the Registrant (incorporated herein by reference
	from Exhibit Number 21 to the Companys Registration
	Statement on Form S-1 (File No. 333-00250)).                                                                                                                                                 
|23.1    |  |  |  | Consent of Independent Certified Public Accountants 
	Ernst & Young LLP                                                                                                                                                                                                                                           
|23.2    |  |  |  | Independent Auditors ConsentKPMG LLP                                                                                                                                                                                                                                                                             
|27.1    |  |  |  | Financial Data Schedule (for SEC use only).                                                                                                                                                                                                                                                                        

(b)  Reports on Form 8-K

None.

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##### Table of Contents



INDEPENDENT AUDITORS REPORT

The Board of Directors



We have audited the accompanying consolidated statements of
operations, shareholders equity and cash flows of PowerCerv
 Corporation and subsidiary for the year ended December 31,
1997. In connection with our audit of these consolidated
financial statements, we also have audited the 1997 information
in the financial statement schedule as listed under Item 14
of this Form 10-K. These consolidated financial statements
and financial statement schedule are the responsibility of the
Companys management. Our responsibility is to express an
opinion on the 1997 consolidated financial statements and
attendant information in the financial statement schedule based
on our audit.

We conducted our audit in accordance with auditing standards
generally accepted in the 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 audit provides a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to
 above present fairly, in all material respects, the results of
operations and cash flows of PowerCerv Corporation and subsidiary
 for the year ended December 31, 1997, in conformity with
accounting principles generally accepted in the United States.
Also, in our opinion, the information in the 1997 financial
statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents
fairly in all material respects, the information set forth
therein.



| |              
| | -------------
| | /s/  KPMG LLP

Tampa, Florida



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##### Table of Contents



REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors



We have audited the accompanying consolidated balance sheet of
PowerCerv Corporation as of December 31, 1999 and 1998, and
the related consolidated statement of operations,
shareholders equity, and cash flows for each of the two
years in the period ended December 31, 1999. Our audits also
 include the information relating to the years ended
December 31, 1999 and 1998, on the financial statement
schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements and schedule based on our
audits.

We conducted our audits in accordance with auditing standards
generally accepted in the 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.

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



| |                       
| | ----------------------
| | /s/  Ernst & Young LLP

Tampa, Florida



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##### Table of Contents



POWERCERV CORPORATION

CONSOLIDATED BALANCE SHEETS

December 31, 1999 and 1998


|                                              |                                                      |                                              |         |             |            |  |   |             |            | 
|--------------------------------------------- | ---------------------------------------------------- | -------------------------------------------- | ------- | ----------- | ---------- |  | - | ----------- | ---------- | 
|                                              |                                                      | 1999                                         |         | 1998       
|                                              |                                                      |                                              |         |            
|                                             
|                                             
|                                             
|                                             
|ASSETS                                       
|                                             
|                                             
|                                             
|                                             
|Current assets:                               |                                                      |                                              |         |             |            |  |   |            
|                                             
|                                             
|                                             
|                                             
|                                              | Cash and cash
	equivalents                           |                                              | $       | 6,224,258   |            |  | $ | 6,594,430   |           
|                                              | Accounts receivable,
	net of allowance of $1,545,000 |                                              |         |             |            |  |   |             |           
|                                             
|                                             
|                                             
|                                             
|                                              | in 1999 and $1,480,000
	in 1998                      |                                              |         | 6,952,168   |            |  |   | 5,007,263   |           
|                                             
|                                             
|                                             
|                                             
|                                              | Inventories                                          |                                              |         | 48,427      |            |  |   | 137,492     |           
|                                             
|                                             
|                                             
|                                             
|                                              | Other current assets                                 |                                              |         | 144,044     |            |  |   | 102,732     |           
|                                              |                                                      |                                              |         |             |            |  |   |            
|                                              |                                                      | Total
	 current assets                       |         |             | 13,368,897 |  |   |             | 11,841,917 | 
|                                              |                                                      |                                              |         |             |            |  |   |            
|                                             
|                                             
|                                             
|                                             
|                                              | Property and equipment,
	 net                        |                                              |         | 1,231,054   |            |  |   | 2,238,936   |           
|                                             
|                                             
|                                             
|                                             
|                                              | Intangible assets, net                               |                                              |         | 320,960     |            |  |   | 555,657     |           
|                                             
|                                             
|                                             
|                                             
|                                              | Investment in
	third-party                           |                                              |         | 500,000     |            |  |   | 1,000,000   |           
|                                             
|                                             
|                                             
|                                             
|                                              | Notes receivable                                     |                                              |         | 827,500     |            |  |   |            |           
|                                             
|                                             
|                                             
|                                             
|                                              | Deposits and other                                   |                                              |         | 308,798     |            |  |   | 93,809      |           
|                                              |                                                      |                                              |         |             |            |  |   |            
|                                              |                                                      | Total
	 assets                               |         | $           | 16,557,209 |  |   | $           | 15,730,319 | 
|                                              |                                                      |                                              |         |             |            |  |   |            
|                                             
|                                             
|                                             
|                                             
|LIABILITIES AND SHAREHOLDERS EQUITY         
|                                             
|                                             
|                                             
|                                             
|Current liabilities:                          |                                                      |                                              |         |             |            |  |   |            
|                                             
|                                             
|                                             
|                                             
|                                              | Accounts payable                                     |                                              | $       | 489,034     |            |  | $ | 637,209     |           
|                                             
|                                             
|                                             
|                                             
|                                              | Accrued expenses                                     |                                              |         | 2,086,992   |            |  |   | 1,954,069   |           
|                                             
|                                             
|                                             
|                                             
|                                              | Deferred revenue                                     |                                              |         | 2,000,468   |            |  |   | 1,863,882   |           
|                                              |                                                      |                                              |         |             |            |  |   |            
|                                              |                                                      | Total
	 current liabilities                  |         |             | 4,576,494  |  |   |             | 4,455,160  | 
|                                             
|                                             
|                                             
|                                             
|Deferred gain on sale
	of business            |                                                      |                                              | 827,500 |             |            |  |  |            
|Commitments,
	contingencies and related party |                                                      |                                              |         |             |            |  |   |            
|                                              | transactions                                         |                                              |         |             |            |  |   |             |           
|                                             
|                                             
|                                             
|                                             
|Shareholders equity:                         |                                                      |                                              |         |             |            |  |   |            
|                                              | Common stock, $.001 par
	 value, 45,000,000 shares   |                                              |         |             |            |  |   |             |           
|                                              | authorized; 13,428,000
	shares and 13,837,000 shares |                                              |         |             |            |  |   |             |           
|                                              | issued and outstanding
	at December 31, 1999 and     |                                              |         |             |            |  |   |             |           
|                                             
|                                             
|                                             
|                                             
|                                              | 1998, respectively                                   |                                              |         | 13,428      |            |  |   | 13,837      |           
|                                             
|                                             
|                                             
|                                             
|                                              | Additional paid-in
	capital                          |                                              |         | 50,076,095  |            |  |   | 50,990,134  |           
|                                             
|                                             
|                                             
|                                             
|                                              | Accumulated deficit                                  |                                              |         | (38,936,308 | )          |  |   | (39,728,812 | )         
|                                              |                                                      |                                              |         |             |            |  |   |            
|                                              |                                                      | Total
	 shareholders equity                 |         |             | 11,153,215 |  |   |             | 11,275,159 | 
|                                              |                                                      |                                              |         |             |            |  |   |            
|                                             
|                                              |                                                      | Total
	 liabilities and shareholders equity |         | $           | 16,557,209 |  |   | $           | 15,730,319 | 
|                                              |                                                      |                                              |         |             |            |  |   |            

See accompanying notes to consolidated financial statements.

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##### Table of Contents



POWERCERV CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

Years ended December 31, 1999, 1998 and 1997


|                                                      |  |      |            |      |  |      |            |   |  |   |             |  
|----------------------------------------------------- |  | ---- | ---------- | ---- |  | ---- | ---------- | - |  | - | ----------- | -
|                                                      |  | 1999 |            | 1998 |  | 1997
|                                                      |  |      |            |      |  |     
|Revenue:                                              |  |      |            |      |  |      |            |   |  |   |             |  
|                                                     
|                                                     
|                                                     
|                                                     
|License fees                                          |  | $    | 9,257,199  |      |  | $    | 8,342,230  |   |  | $ | 6,433,813   |  
|                                                     
|                                                     
|                                                     
|                                                     
|Technology resales                                    |  |      |           |      |  |      | 857,887    |   |  |   | 2,385,028   |  
|                                                     
|                                                     
|                                                     
|                                                     
|Service fees                                          |  |      | 11,463,838 |      |  |      | 8,532,805  |   |  |   | 9,498,559   |  
|                                                      |  |      |            |      |  |      |            |   |  |   |             |  
|Total
	 revenue                                       |  |      | 20,721,037 |      |  |      | 17,732,922 |   |  |   | 18,317,400  |  
|                                                      |  |      |            |      |  |      |            |   |  |   |             |  
|Costs and expenses:                                   |  |      |            |      |  |      |            |   |  |   |             |  
|                                                     
|                                                     
|                                                     
|                                                     
|Cost of licenses                                      |  |      | 993,612    |      |  |      | 670,082    |   |  |   | 2,975,425   |  
|                                                     
|                                                     
|                                                     
|                                                     
|Cost of technology resales                            |  |      |           |      |  |      | 592,439    |   |  |   | 1,871,046   |  
|                                                     
|                                                     
|                                                     
|                                                     
|Cost of services                                      |  |      | 7,578,288  |      |  |      | 6,935,061  |   |  |   | 7,523,707   |  
|                                                     
|                                                     
|                                                     
|                                                     
|General and administrative                            |  |      | 4,476,042  |      |  |      | 3,886,360  |   |  |   | 7,686,842   |  
|                                                     
|                                                     
|                                                     
|                                                     
|Sales and marketing                                   |  |      | 8,021,833  |      |  |      | 6,102,916  |   |  |   | 11,075,102  |  
|                                                     
|                                                     
|                                                     
|                                                     
|Research and development                              |  |      | 4,504,162  |      |  |      | 3,819,587  |   |  |   | 5,787,529   |  
|                                                     
|                                                     
|                                                     
|                                                     
|Work force reduction and other                        |  |      | 485,252    |      |  |      |           |   |  |   | 1,010,000   |  
|                                                      |  |      |            |      |  |      |            |   |  |   |             |  
|Total
	 costs and expenses                            |  |      | 26,059,189 |      |  |      | 22,006,445 |   |  |   | 37,929,651  |  
|                                                      |  |      |            |      |  |      |            |   |  |   |             |  
|Operating
	 loss                                      |  |      | (5,338,152 | )    |  |      | (4,273,523 | ) |  |   | (19,612,251 | )
|                                                      |  |      |            |      |  |      |            |   |  |   |             |  
|Other income (expense):                               |  |      |            |      |  |      |            |   |  |   |             |  
|                                                     
|                                                     
|                                                     
|                                                     
|Interest expense                                      |  |      | (26,811    | )    |  |      | (14,851    | ) |  |   | (13,966     | )
|                                                     
|                                                     
|                                                     
|                                                     
|Interest income                                       |  |      | 297,152    |      |  |      | 314,877    |   |  |   | 615,126     |  
|                                                     
|                                                     
|                                                     
|                                                     
|Miscellaneous expense                                 |  |      | (10,192    | )    |  |      | 1,346      |   |  |   | (23,150     | )
|                                                      |  |      |            |      |  |      |            |   |  |   |             |  
|Total
	 other income                                  |  |      | 260,149    |      |  |      | 301,372    |   |  |   | 578,010     |  
|                                                      |  |      |            |      |  |      |            |   |  |   |             |  
|Operations disposed of during 1999                    |  |      |            |      |  |      |            |   |  |   |             |  
|                                                     
|                                                     
|                                                     
|                                                     
|Revenues                                              |  |      | 2,463,637  |      |  |      | 12,237,770 |   |  |   | 14,769,327  |  
|                                                     
|                                                     
|                                                     
|                                                     
|Costs and expenses                                    |  |      | 2,239,824  |      |  |      | 10,073,504 |   |  |   | 12,110,847  |  
|                                                      |  |      |            |      |  |      |            |   |  |   |             |  
|                                                      |  |      | 223,813    |      |  |      | 2,164,266  |   |  |   | 2,658,480   |  
|                                                     
|                                                     
|                                                     
|                                                     
|Gain on sale of business                              |  |      | 5,646,694  |      |  |      |           |   |  |   |            |  
|                                                      |  |      |            |      |  |      |            |   |  |   |             |  
|                                                      |  |      | 5,870,507  |      |  |      | 2,164,266  |   |  |   | 2,658,480   |  
|                                                     
|                                                     
|                                                     
|                                                     
|Income
	 (loss) before income taxes                   |  |      | 792,504    |      |  |      | (1,807,885 | ) |  |   | (16,375,761 | )
|                                                     
|                                                     
|                                                     
|                                                     
|Income tax expense (benefit)                          |  |      |           |      |  |      |           |   |  |   | 1,711,500   |  
|                                                      |  |      |            |      |  |      |            |   |  |   |             |  
|Net
	 income (loss) and comprehensive income (loss)   |  | $    | 792,504    |      |  | $    | (1,807,885 | ) |  | $ | (18,087,261 | )
|                                                      |  |      |            |      |  |      |            |   |  |   |             |  
|Net income (loss) per share:                          |  |      |            |      |  |      |            |   |  |   |             |  
|                                                     
|                                                     
|                                                     
|                                                     
|Basic and diluted                                     |  | $    | 0.06       |      |  | $    | (0.13      | ) |  | $ | (1.31       | )
|                                                      |  |      |            |      |  |      |            |   |  |   |             |  
|Shares used in computing net income (loss) per share: |  |      |            |      |  |      |            |   |  |   |             |  
|                                                     
|                                                     
|                                                     
|                                                     
|Basic                                                 |  |      | 13,322,000 |      |  |      | 13,817,000 |   |  |   | 13,839,000  |  
|                                                      |  |      |            |      |  |      |            |   |  |   |             |  
|Diluted                                               |  |      | 14,389,000 |      |  |      | 13,817,000 |   |  |   | 13,839,000  |  
|                                                      |  |      |            |      |  |      |            |   |  |   |             |  

See accompanying notes to consolidated financial statements.

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POWERCERV CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY

Years Ended December 31, 1999, 1998 and 1997


|                           |                                                                              |              |            |            |   |         |        |             |   |               |            |            |   |   |             |             |   |   |            |             |  
|-------------------------- | ---------------------------------------------------------------------------- | ------------ | ---------- | ---------- | - | ------- | ------ | ----------- | - | ------------- | ---------- | ---------- | - | - | ----------- | ----------- | - | - | ---------- | ----------- | -
|                           |                                                                              |              |            |            |   |         |        |            
|                           |                                                                              | Common Stock |            |            |   |         |        |            
|                           |                                                                              |              |            | Additional |   |         |        | Total      
|                           |                                                                              |              |            | Par        |   | Paid-in |        | Accumulated |   | Shareholders
|                           |                                                                              | Shares       |            | Value      |   | Capital |        | Deficit     |   | Equity       
|                           |                                                                              |              |            |            |   |         |        |             |   |              
|Balance, January 1, 1997   |                                                                              | $            | 13,783,000 |            |   |         | 13,783 |             |   | $             | 50,812,156 |            |   | $ | (19,833,666 | )           |   | $ | 30,992,273 |            
|                          
|                          
|                          
|                          
|                           | Issuance of common stock                                                     |              |            | 14,000     |   |         |        | 14          |   |               |            | 52,106     |   |   |             |            |   |   |            | 52,120      |  
|                          
|                          
|                          
|                          
|                           | Net loss                                                                     |              |            |           |   |         |        |            |   |               |            |           |   |   |             | (18,087,261 | ) |   |            | (18,087,261 | )
|                           |                                                                              |              |            |            |   |         |        |             |   |               |            |            |   |   |             |             |   |   |            |            
|Balance, December 31, 1997 |                                                                              |              | 13,797,000 |            |   |         | 13,797 |             |   |               | 50,864,262 |            |   |   | (37,920,927 | )           |   |   | 12,957,132 |            
|                          
|                          
|                          
|                          
|                           | Issuance of common stock                                                     |              |            | 40,000     |   |         |        | 40          |   |               |            | 125,872    |   |   |             |            |   |   |            | 125,912     |  
|                          
|                          
|                          
|                          
|                           | Net loss                                                                     |              |            |           |   |         |        |            |   |               |            |           |   |   |             | (1,807,885  | ) |   |            | (1,807,885  | )
|                           |                                                                              |              |            |            |   |         |        |             |   |               |            |            |   |   |             |             |   |   |            |            
|Balance, December 31, 1998 |                                                                              |              | 13,837,000 |            |   |         | 13,837 |             |   |               | 50,990,134 |            |   |   | (39,728,812 | )           |   |   | 11,275,159 |            
|                          
|                          
|                          
|                          
|                           | Issuance of common stock                                                     |              |            | 291,000    |   |         |        | 291         |   |               |            | 796,511    |   |   |             |            |   |   |            | 796,802     |  
|                          
|                          
|                          
|                          
|                           | Stock received as consideration for sale of the general
	consulting business |              |            | (700,000   | ) |         |        | (700        | ) |               |            | (1,836,800 | ) |   |             |            |   |   |            | (1,837,500  | )
|                          
|                          
|                          
|                          
|                           | Issuance of warrant                                                          |              |            |           |   |         |        |            |   |               |            | 126,250    |   |   |             |            |   |   |            | 126,250     |  
|                          
|                          
|                          
|                          
|                           | Net income                                                                   |              |            |           |   |         |        |            |   |               |            |           |   |   |             | 792,504     |   |   |            | 792,504     |  
|                           |                                                                              |              |            |            |   |         |        |             |   |               |            |            |   |   |             |             |   |   |            |            
|Balance, December 31, 1999 |                                                                              |              | 13,428,000 |            |   | $       | 13,428 |             |   | $             | 50,076,095 |            |   | $ | (38,936,308 | )           |   | $ | 11,153,215 |            
|                           |                                                                              |              |            |            |   |         |        |             |   |               |            |            |   |   |             |             |   |   |            |            

See accompanying notes to consolidated financial statements.

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POWERCERV CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 1999, 1998 and 1997


|                                             |                                                                                                     |                                                                   |           |           |            |      |           |            |            |   |            |             |            |  
|-------------------------------------------- | --------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------- | --------- | --------- | ---------- | ---- | --------- | ---------- | ---------- | - | ---------- | ----------- | ---------- | -
|                                             |                                                                                                     | 1999                                                              |           | 1998      |            | 1997
|                                             |                                                                                                     |                                                                   |           |           |            |     
|Cash flows from operating activities:        |                                                                                                     |                                                                   |           |           |            |      |           |            |            |   |            |            
|                                            
|                                            
|                                            
|                                            
|                                             | Net income (loss)                                                                                   |                                                                   | $         | 792,504   |            |      | $         | (1,807,885 | )          |   | $          | (18,087,261 | )         
|                                            
|                                            
|                                            
|                                            
|                                             | Adjustments to reconcile net income (loss) to net cash provided
	by (used in) operating activities: |                                                                   |           |           |            |      |           |            |            |   |            |             |           
|                                            
|                                            
|                                            
|                                            
|                                             |                                                                                                     | Depreciation and amortization                                     |           |           | 1,177,169  |      |           |            | 1,451,285  |   |            |             | 3,420,837  |  
|                                            
|                                            
|                                            
|                                            
|                                             |                                                                                                     | Gain on sale of business                                          |           |           | (5,646,694 | )    |           |            |           |   |            |             |           |  
|                                            
|                                            
|                                            
|                                            
|Deferred income taxes:                       |                                                                                                     |                                                                   |          |           |            |      |          |            |            |   | 1,657,700  |            
|                                            
|                                            
|                                            
|                                            
|                                             | Deferred revenue                                                                                    |                                                                   |           | 272,850   |            |      |           | 371,809    |            |   |            | (286,296    | )         
|                                            
|                                            
|                                            
|                                            
|                                             | Provision for uncollectible accounts                                                                |                                                                   |           | 290,474   |            |      |           | (155,841   | )          |   |            | 2,011,453   |           
|                                            
|                                            
|                                            
|                                            
|                                             | Changes in assets and liabilities, net of effect of divestiture:                                    |                                                                   |           |           |            |      |           |            |            |   |            |             |           
|                                            
|                                            
|                                            
|                                            
|                                             |                                                                                                     | Accounts receivable                                               |           |           | (4,026,614 | )    |           |            | 2,073,928  |   |            |             | 1,783,165  |  
|                                            
|                                            
|                                            
|                                            
|                                             |                                                                                                     | Refundable income taxes                                           |           |           |           |      |           |            |           |   |            |             | 103,170    |  
|                                            
|                                            
|                                            
|                                            
|                                             |                                                                                                     | Inventories                                                       |           |           | 14,956     |      |           |            | 17,534     |   |            |             | 105,663    |  
|                                            
|                                            
|                                            
|                                            
|                                             |                                                                                                     | Deposits and other                                                |           |           | (240,310   | )    |           |            | 42,943     |   |            |             | (12,873    | )
|                                            
|                                            
|                                            
|                                            
|                                             |                                                                                                     | Accounts payable and accrued expenses                             |           |           | (285,950   | )    |           |            | (1,646,123 | ) |            |             | 1,714,114  |  
|                                             |                                                                                                     |                                                                   |           |           |            |      |           |            |            |   |            |            
|                                             |                                                                                                     | Net cash provided by (used in) operating activities               |           |           | (7,651,615 | )    |           |            | 347,650    |   |            |             | (7,590,328 | )
|                                             |                                                                                                     |                                                                   |           |           |            |      |           |            |            |   |            |            
|Cash flows from investing activities:        |                                                                                                     |                                                                   |           |           |            |      |           |            |            |   |            |            
|                                            
|                                            
|                                            
|                                            
|                                             | Sale of business                                                                                    |                                                                   |           | 6,680,077 |            |      |           |           |            |   |            |            |           
|                                            
|                                            
|                                            
|                                            
|                                             | Purchases of property and equipment, net                                                            |                                                                   |           | (395,436  | )          |      |           | (739,381   | )          |   |            | (738,711    | )         
|                                            
|                                            
|                                            
|                                            
|                                             | Exercise of third-party put options                                                                 |                                                                   |           | 500,000   |            |      |           | 500,000    |            |   |            |            |           
|                                            
|                                            
|                                            
|                                            
|                                             | Purchase of intangible asset                                                                        |                                                                   |           | (300,000  | )          |      |           |           |            |   |            |            |           
|                                             |                                                                                                     |                                                                   |           |           |            |      |           |            |            |   |            |            
|                                             |                                                                                                     | Net cash provided by (used in) investing activities               |           |           | 6,484,641  |      |           |            | (239,381   | ) |            |             | (738,711   | )
|                                             |                                                                                                     |                                                                   |           |           |            |      |           |            |            |   |            |            
|Cash flows from financing activities:        |                                                                                                     |                                                                   |           |           |            |      |           |            |            |   |            |            
|                                            
|                                            
|                                            
|                                            
|                                             |                                                                                                     | Net proceeds from issuance of common stock, net of offering costs |           |           | 796,802    |      |           |            | 125,912    |   |            |             | 52,120     |  
|                                             |                                                                                                     |                                                                   |           |           |            |      |           |            |            |   |            |            
|                                             |                                                                                                     | Net cash provided by financing activities                         |           |           | 796,802    |      |           |            | 125,912    |   |            |             | 52,120     |  
|                                             |                                                                                                     |                                                                   |           |           |            |      |           |            |            |   |            |            
|                                             |                                                                                                     | Net increase (decrease) in cash and cash equivalents              |           |           | (370,172   | )    |           |            | 234,181    |   |            |             | (8,276,919 | )
|                                            
|                                            
|                                            
|                                            
|Cash and cash equivalents, beginning of year |                                                                                                     |                                                                   | 6,594,430 |           |            |      | 6,360,249 |            |            |   | 14,637,168 |            
|                                             |                                                                                                     |                                                                   |           |           |            |      |           |            |            |   |            |            
|Cash and cash equivalents, end of year       |                                                                                                     | $                                                                 | 6,224,258 |           |            | $    | 6,594,430 |            |            | $ | 6,360,249  |            
|                                             |                                                                                                     |                                                                   |           |           |            |      |           |            |            |   |            |            

See accompanying notes to consolidated financial statements.

36



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##### Table of Contents



POWERCERV CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999 and 1998


(1)  Organization and Operations

PowerCerv Corporation and its wholly-owned subsidiary (PowerCerv
Technologies Corporation) develop, market, license, implement and
 support open, modifiable ERP/back-office and
front-office enterprise application software
solutions to mid-size U.S. companies. In addition, PowerCerv
provides a wide range of professional and business consulting
services relating to its software applications. The Company has
offices throughout the United States and markets its software
products outside the United States through distributors.
PowerCerv Corporation and PowerCerv Technologies Corporation are
herein referred to as the Company.

Effective March 31, 1999, the Company sold its general
consulting business (i.e., consulting services other than its
application-related services) to a third party. Consideration
totaled approximately $10 million and consisted of a combination
of cash, PowerCerv common stock, and notes. The Company
recognized a $5,646,694 gain on the sale of the consulting
business during 1999. Additionally, a portion of the gain relates
 to a $827,500 note receivable maturing in 2004 and will be
recognized upon collection of the note. Operating results from
the general consulting business for 1999, 1998 and 1997 have been
 reclassified in the accompanying statement of operations as
operations disposed of during 1999.

(2)  Summary of Significant Accounting Policies

(a)  Use of Estimates

The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires
 management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated
 financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
 from those estimates. To the extent managements estimates
prove to be incorrect, financial results for future periods may
be adversely affected. Significant estimates contained in the
accompanying consolidated financial statements include
managements estimate of the allowance for uncollectible
accounts receivable, valuation allowance relating to deferred tax
 assets, and the recoverability of long term assets, including
investments, property and equipment and intangible assets.

(b)  Cash and Cash Equivalents

The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.

(c)  Inventories

Inventories are valued at the lower of cost (first-in, first-out
method) or market, and consist of third party products and
educational materials.

(d)  Property and Equipment

Property and equipment are recorded at cost. Depreciation and
amortization are calculated on a straight-line basis over the
estimated useful lives of the respective assets. Upon retirement
or sale, cost and accumulated depreciation or amortization on
such assets are removed from the accounts and any gains or losses
 are reflected in the consolidated statement of operations.
Maintenance and repairs are charged to expense as incurred.

37



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##### Table of Contents



POWERCERV CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

During the fourth quarter of 1997, the Company implemented
actions to reduce its work force. As a result of these actions,
certain property and equipment was determined to be impaired and
was written down to its estimated net realizable value (see
Note 3).

(e)  Revenue Recognition

License fees represent revenue from the licensing of the
Companys application products and, to a lesser extent, its
developmental tools. The Company licenses its application
products pursuant to non-exclusive and non-transferable license
agreements. License fees also include royalties earned on the
Companys application products and related intellectual
properties. Technology resales represent revenue from the resale
of third-parties software products. Service fees represent
revenue from consulting, education, and support and maintenance
services.

Beginning January 1, 1998, the Company has recognized
revenue in accordance with the American Institute of Certified
Public Accountants Statement of Position 97-2, Software
Revenue Recognition(SOP 97-2), as amended by
Statement of Position 98-4, Deferral of the Effective Date of
a Provision of SOP 97-2(SOP 98-4) and Statement
of Position 98-9, Modification of SOP 97-2, Software Revenue
Recognition, With Respect to Certain Transactions(SOP
98-9). Revenue is recognized from licenses of the
Companys software products when the contract has been
executed, the product(s) has been shipped, collectibility is
probable and the software license fees are fixed or determinable.
 In the event that the contract provides for multiple elements
(e.g., software products, post-contract customer support,
consulting services), the total fee is allocated to these
elements based on vendor-specific objective evidence
of fair value. If any portion of the license fees is subject to
forfeiture, refund or other contractual contingencies, the
Company will postpone revenue recognition until these
contingencies have been removed. Historically, product returns
and allowances have been immaterial. The Company generally
accounts for consulting and education services separate from
software license fees for those multi-element arrangements where
services are a separate element and are not essential to the
customers functionality requirements and there is
vendor-specific objective evidence of fair value for
these services. Consulting and education revenue is recognized as
 the services are performed. Revenue from support and maintenance
 activities is recognized ratably over the term of the
maintenance period and the unrecognized portion is recorded as
deferred revenue. Prior to January 1, 1998, the Company
recognized revenue in accordance with the American Institute of
Certified Public Accountants Statement of
Position 91-1, Software Revenue Recognition.

(f)  Software Development Costs

Software development costs are accounted for in accordance with
Statement of Financial Accounting Standards No. 86, Accounting for the Costs of Computer Software to be Sold, Leased,
 or Otherwise Marketed. Costs associated with the planning
and design phase of software development, including coding and
testing activities necessary to establish technological
feasibility, are classified as research and development and
expensed as incurred. Once technological feasibility has been
determined, additional costs incurred in development, including
coding, testing, and product quality assurance, are capitalized
when material.

During 1999, the Company entered into an agreement with a third
party for the conversion of certain existing software from one
architecture to another. As of December 31, 1999, the
Company capitalized $300,000 in fees paid to the third party. The
 Company is committed to provide additional funding of $250,000.
Once the software is available for resale, the Company will begin
 amortizing these costs.

During the years ended December 31, 1999, 1998, 1997 and
1996, the Company did not capitalize any internal software
development costs. During 1996 and 1995 the Company acquired
certain software technology. The acquired software technology is
being amortized, on a product-by-product basis, at the greater of
 the straight-line basis utilizing the estimated economic life,
generally three to five years, or the ratio of the current
product revenue to total expected revenue over the life of the
product.

38



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POWERCERV CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The Company periodically reviews the carrying value of its
software development costs and the remaining life to determine if
 impairment has occurred. This review and assessment is done by
comparing the net book value of the intangible assets to the
undiscounted net cash flows of the related assets.

Acquired software technology and its amortization are summarized
as follows:

|     |  |      |           |              |  |              |           |  |  |  |           | 
|---- |  | ---- | --------- | ------------ |  | ------------ | --------- |  |  |  | --------- | 
|     |  |      |           | Amortization |  | Accumulated 
|Year |  | Cost |           | Expense      |  | Amortization
|     |  |      |           |              |  |             
|1999 |  | $    | 3,207,000 |              |  |              | 161,000   |  |  |  | 2,907,000 | 
|    
|    
|    
|    
|1998 |  |      | 2,907,000 |              |  |              | 301,000   |  |  |  | 2,746,000 | 
|    
|    
|    
|    
|1997 |  |      | 2,907,000 |              |  |              | 1,555,000 |  |  |  | 2,445,000 | 

Included in the $1,555,000 amortization expense for 1997 is
$808,000 of additional amortization expense recorded in the
fourth quarter of 1997 to reduce the carrying value of the
acquired software technology to its net realizable value.

(g)  Goodwill and Other Intangible Assets

The Company amortizes goodwill and other intangible assets on a
straight-line basis over a seven-year period. The Company
periodically reviews the value of goodwill and other intangible
assets and their remaining life to determine if impairment has
occurred. This review and assessment compares the net book value
of the intangible assets to the undiscounted future net cash
flows of the related assets.

Goodwill and other intangible assets and amortization amounts are
 summarized as follows:

|     |  |      |           |              |  |              |         |  |  |  |           | 
|---- |  | ---- | --------- | ------------ |  | ------------ | ------- |  |  |  | --------- | 
|     |  |      |           | Amortization |  | Accumulated 
|Year |  | Cost |           | expense      |  | amortization
|     |  |      |           |              |  |             
|1999 |  | $    | 568,000   |              |  |              | 123,000 |  |  |  | 547,000   | 
|    
|    
|    
|    
|1998 |  |      | 1,458,000 |              |  |              | 123,000 |  |  |  | 1,064,000 | 
|    
|    
|    
|    
|1997 |  |      | 1,453,000 |              |  |              | 736,000 |  |  |  | 941,000   | 

Amounts written off during 1999 resulted from the Companys
sale of its general consulting business and related to goodwill
having an original cost of $893,000 and accumulated depreciation
of $640,000.

Included in the $736,000 amortization expense for 1997 is
$530,000 of additional amortization expense recorded in the
fourth quarter of 1997 to reduce the carrying value of goodwill
to its net realizable value.

(h)  Investment in Third-Party

During December 1996, the Company acquired a 5% fully-diluted
equity interest in a closely-held entity, through a $1,500,000
investment in the entitys Series B convertible
preferred stock. The cost of the investment was based upon a
valuation of the entity done for the Company by an independent
firm. During the year ended December 31, 1997, the
Companys investment interest was diluted to approximately
4% as a result of additional equity transactions by the investee
company. During December 1998, the Company entered into an
agreement that expanded its rights to exercise its preferred
stock put options and exercised its preferred stock put option on
 98,232 shares for $500,000. During 1999, the Company exercised
its preferred stock put option on 98,232 shares for $500,000. The
 remaining preferred stock put options can be exercised on the
remaining 98,447 shares of investee stock on June 15, 2000.
The investee company develops, markets and licenses accounting
software. Based upon managements evaluations of the
investee companys projection of undiscounted future cash
flows, the Company is of the opinion that its investment is
recorded at the lower of cost or market value as of
December 31, 1999. In a separate transaction with this
entity, the Company entered into a partnering agreement in June
1996. Under this agreement, the Company granted this entity
original equipment manufacturer (OEM) development and
distribution rights to one of its application products in
exchange for a license fee of $2 million. In addition to the OEM
license fee, the Company was entitled to

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##### Table of Contents



POWERCERV CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

royalties based upon future licensing of the OEM products. The
partnering agreement also provided for the entity to have
value-added reseller rights for certain of the Companys
other products. During December 1997, the Company amended the
partnering agreement by expanding the OEM license rights for a
license fee of $250,000. During 1998, the Company amended the
partnering agreement twice by expanding the OEM license rights
for license fees of $825,000. These amendments also provide
evaluation license rights to other application products of the
Company and reduced the total royalties due under the partnering
agreement from $2 million to zero. During 1999, the Company
amended the partnering agreement by expanding the OEM license
rights for license fees of $350,000.

(i)  Income Taxes

The Company provides for income taxes in accordance with the
Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes(Statement 109).
 Statement 109 requires the use of the asset and liability
method of accounting for income taxes. Under this method,
deferred tax assets and liabilities are recognized for the future
 tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in operations
in the period that includes the enactment date.

(j)  Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of accounts
receivable from customers. This risk, however, is limited due to
the large number of customers comprising the Companys
customer base and their dispersion.

(k)  Stock Based Compensation

Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation(Statement
123) stipulates that entities recognize as expense over the
 vesting period the fair value of all stock-based awards on the
date of grant. Alternatively, Statement 123 allows entities to
continue to apply the provisions of APB 25 and provide pro forma
net income and pro forma net earnings per share disclosures for
employee stock options as if the fair-value-based method defined
in Statement 123 had been applied. The Company has elected to
continue to apply the provisions of Accounting Principles Board
Opinion No. 25 and provide the pro forma disclosure
information required by Statement 123 (see note 11b).

40



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##### Table of Contents



POWERCERV CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(l)  Net Income (Loss) per Share

The Company computes net income (loss) per share based upon
Statement of Financial Accounting Standards No. 128, Earnings Per Share.The following table sets forth the
computation of basic and diluted earnings (loss) per share
(EPS) for the periods indicated:

|            |                                                                            |              |      |            |            |      |       |            |            |   |       |             |            | 
|----------- | -------------------------------------------------------------------------- | ------------ | ---- | ---------- | ---------- | ---- | ----- | ---------- | ---------- | - | ----- | ----------- | ---------- | 
|            |                                                                            |             
|            |                                                                            | December 31,
|            |                                                                            |             
|            |                                                                            | 1999         |      | 1998       |            | 1997
|            |                                                                            |              |      |            |            |     
|Basic:      |                                                                            |              |      |            |            |      |       |            |            |   |       |            
|           
|           
|           
|           
|            | Net income (loss)                                                          |              | $    | 792,504    |            |      | $     | (1,807,885 | )          |   | $     | (18,087,261 | )         
|            |                                                                            |              |      |            |            |      |       |            |            |   |       |            
|            | Average shares outstanding                                                 |              |      | 13,322,000 |            |      |       | 13,817,000 |            |   |       | 13,839,000  |           
|            |                                                                            |              |      |            |            |      |       |            |            |   |       |            
|Basic EPS   |                                                                            | $            | 0.06 |            |            | $    | (0.13 | )          |            | $ | (1.31 | )          
|            |                                                                            |              |      |            |            |      |       |            |            |   |       |            
|Diluted:    |                                                                            |              |      |            |            |      |       |            |            |   |       |            
|           
|           
|           
|           
|            | Net income (loss)                                                          |              | $    | 792,504    |            |      | $     | (1,807,885 | )          |   | $     | (18,087,261 | )         
|            |                                                                            |              |      |            |            |      |       |            |            |   |       |            
|            | Average shares outstanding                                                 |              |      | 13,322,000 |            |      |       | 13,817,000 |            |   |       | 13,839,000  |           
|           
|           
|           
|           
|            | Net effect of dilutive stock options  based on the
	treasury stock method |              |      | 1,067,000  |            |      |       |           |            |   |       |            |           
|            |                                                                            |              |      |            |            |      |       |            |            |   |       |            
|            |                                                                            | Totals       |      |            | 14,389,000 |      |       |            | 13,817,000 |   |       |             | 13,839,000 | 
|            |                                                                            |              |      |            |            |      |       |            |            |   |       |            
|Diluted EPS |                                                                            | $            | 0.06 |            |            | $    | (0.13 | )          |            | $ | (1.31 | )          
|            |                                                                            |              |      |            |            |      |       |            |            |   |       |            

Common stock equivalents in the years ended December 31,
1998 and 1997 were anti-dilutive due to the net loss sustained by
 the Company during these years, thus the diluted net loss per
share in these years is the same as the basic net loss per share.
 During the year ended December 31, 1999, employees
exercised 290,755 stock options at an average exercise price of
$2.73 per share.

(m)  Reclassifications

Certain prior year amounts have been reclassified to conform with
 the current years presentation.

(n)  Fair Value of Financial Instruments

Cash, accounts receivable, accounts payable and accrued
liabilities are reflected in the financial statements at their
carrying amount which approximates fair value because of the
short term maturity of those instruments. The carrying amount of
notes receivable is assumed to approximate fair value because
there have not been any significant changes in market conditions
or specific circumstances since the instrument was recorded at
fair value.

(o)  Supplemental Cash Flow Information

The Company considers all highly liquid investments with maturity
 dates of three months or less at the time of purchase to be cash
 equivalents. At December 31, 1999 and 1998, cash
equivalents totaled approximately $2,500,000 and $3,991,000,
respectively.

In March 1999, the Company received 700,000 shares of the
Companys common stock (valued at $2.63 per share) as
consideration for the sale of the Companys general
consulting business.

Interest paid during the years ended December 31, 1999, 1998
 and 1997 was approximately $26,800, $14,800 and $14,000,
respectively.

Income tax refunds totaled approximately $14,000 and $89,000
during the years ended December 31, 1998 and 1997,
respectively.

41



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##### Table of Contents



POWERCERV CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(3)  Work Force Reduction and Other Charge

During the first quarter of 1999, the Company recorded a charge
related to a work force reduction and other related expenses
totaling $485,000. This amount included severance and related
costs of $391,000 (11 employees, primarily management level)
 and costs of $94,000 related to office downsizings or closings.
The Company expects to realize gross annual savings of
approximately $1,200,000 as a result of these actions. As of
December 31, 1999, the Company had paid approximately
$440,000 of the total $485,000 charged to expense and expects to
pay the remaining amounts by March 31, 2000.

During the fourth quarter of 1997, the Company initiated actions
to reduce its work force and undertook additional cost cutting
measures in line with its objective to return to profitability.
The other measures included, but were not limited to, the closing
 of the Companys international office in Amsterdam. As a
result, the Company recorded a charge totaling $1,010,000 in its
consolidated statement of operations for the year ended
December 31, 1997, which consisted of the following:

|                                                                                            |  |   |           | 
|------------------------------------------------------------------------------------------- |  | - | --------- | 
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Severance and related costs (50 employees)                                                  |  | $ | 411,000   | 
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Office closing costs                                                                        |  |   | 113,000   | 
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Impairment of property and equipment primarily related to assets
	used by severed employees |  |   | 192,000   | 
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Other costs, primarily related to previous contractual
	commitments                         |  |   | 294,000   | 
|                                                                                            |  |   |           | 
|                                                                                            |  | $ | 1,010,000 | 
|                                                                                            |  |   |           | 

The above actions were initiated by the Company during the fourth
 quarter of 1997. Office closings and certain other actions were
completed during the year ended December 31, 1998.

(4)  Property and Equipment

Property and equipment consists of the following at
December 31, 1999 and 1998:

|                                               |  |      |           |      |  |              |           |  |  |  |       |  
|---------------------------------------------- |  | ---- | --------- | ---- |  | ------------ | --------- |  |  |  | ----- | -
|                                               |  |      |           |      |  | Estimated   
|                                               |  | 1999 |           | 1998 |  | Useful Lives
|                                               |  |      |           |      |  |             
|                                               |  |      |           |      |  | (years)     
|                                              
|                                              
|                                              
|                                              
|Leasehold improvements                         |  | $    | 438,781   |      |  | $            | 439,202   |  |  |  | 3  5 | *
|                                              
|                                              
|                                              
|                                              
|Furniture and fixtures                         |  |      | 745,638   |      |  |              | 751,678   |  |  |  | 5  7 |  
|                                              
|                                              
|                                              
|                                              
|Computer equipment                             |  |      | 3,603,821 |      |  |              | 3,797,594 |  |  |  | 2  7 |  
|                                              
|                                              
|                                              
|                                              
|Equipment                                      |  |      | 507,213   |      |  |              | 600,357   |  |  |  | 3  7 |  
|                                               |  |      |           |      |  |              |           |  |  |  |       |  
|                                               |  |      | 5,295,453 |      |  |              | 5,588,831 |  |  |  |       |  
|                                              
|                                              
|                                              
|                                              
|Less accumulated depreciation and amortization |  |      | 4,064,399 |      |  |              | 3,349,895 |  |  |  |       |  
|                                               |  |      |           |      |  |              |           |  |  |  |       |  
|                                               |  | $    | 1,231,054 |      |  |              | 2,238,936 |  |  |  |       |  
|                                               |  |      |           |      |  |              |           |  |  |  |       |  






|  |                                                
|- | -----------------------------------------------
|* | Or the remaining term of the lease, if shorter.

Depreciation and amortization expense totaled approximately
$892,256, $1,027,000, and $1,131,000 during the years ended
December 31, 1999, 1998, and 1997, respectively.

(5)  Lines of Credit and Notes Payable

The company had a $5 million unsecured revolving line of credit
that expired on February 15, 1999. On March 29, 1999,
the Company entered into an agreement with its bank for a
$10 million credit facility. The credit facility consists of
 a commitment for a revolving line of credit totaling
$5 million, with an additional $5 million of
uncommitted funding. The agreement requires the Company to
maintain certain financial ratios. The Company was in compliance
with these financial ratios at December 31, 1999. The first
$2 million of the

42



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##### Table of Contents



POWERCERV CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

1999 Line of Credit is unsecured, with an interest rate equal to
the 90-day floating LIBOR rate plus 150 or 200 basis points,
 based on the Companys tangible net worth, as defined
(7.75% at December 31, 1999). Draws from $2 million to
$5 million will be conditioned upon the Companys
compliance with an additional financial ratio, or alternatively,
may be secured by the Companys accounts receivable and
inventory. Draws in excess of $5 million will be subject to
terms agreed to at the time of the draw. The agreement expires on
 May 31, 2000. The Company plans to renew the line of credit
 upon expiration. There were no outstanding balances on the line
of credit as of December 31, 1999 and 1998.

(6)  Accrued Expenses

Accrued expenses consist of the following at December 31,
1999 and 1998:

|                            |  |      |           |      |  |   |           | 
|--------------------------- |  | ---- | --------- | ---- |  | - | --------- | 
|                            |  | 1999 |           | 1998
|                            |  |      |           |     
|Compensation                |  | $    | 1,139,308 |      |  | $ | 1,054,972 | 
|                           
|                           
|                           
|                           
|Severance and related costs |  |      | 45,072    |      |  |   | 57,033    | 
|                           
|                           
|                           
|                           
|Other                       |  |      | 902,612   |      |  |   | 842,064   | 
|                            |  |      |           |      |  |   |           | 
|                            |  | $    | 2,086,992 |      |  | $ | 1,954,069 | 
|                            |  |      |           |      |  |   |           | 

(7)  Income Taxes

Income tax expense for the years ended December 31, 1999,
1998 and 1997 consists of the following:

|          |         |                          |   |      |   |      |   |   |   |  |           |           |           | 
|--------- | ------- | ------------------------ | - | ---- | - | ---- | - | - | - |  | --------- | --------- | --------- | 
|          |         | 1999                     |   | 1998 |   | 1997
|          |         |                          |   |      |   |     
|Current:  |         |                          |   |      |   |      |   |   |   |  |           |          
|         
|         
|         
|         
|          | Federal |                          | $ |     |   |      | $ |  |   |  | $         | 45,300    |          
|         
|         
|         
|         
|          | State   |                          |   |     |   |      |   |  |   |  |           | 8,500     |          
|          |         |                          |   |      |   |      |   |   |   |  |           |          
|          |         |                          |  |      |   |      |  |   |   |  | 53,800    |          
|          |         |                          |   |      |   |      |   |   |   |  |           |          
|Deferred: |         |                          |   |      |   |      |   |   |   |  |           |          
|         
|         
|         
|         
|          | Federal |                          |   |     |   |      |   |  |   |  |           | 1,395,700 |          
|         
|         
|         
|         
|          | State   |                          |   |     |   |      |   |  |   |  |           | 262,000   |          
|          |         |                          |   |      |   |      |   |   |   |  |           |          
|          |         |                          |  |      |   |      |  |   |   |  | 1,657,700 |          
|          |         |                          |   |      |   |      |   |   |   |  |           |          
|          |         | Total income tax expense |   | $    |  |      |   | $ |  |  |           | $         | 1,711,500 | 
|          |         |                          |   |      |   |      |   |   |   |  |           |          

Income tax expense (benefit) for the years ended
December 31, 1999, 1998 and 1997 differed from the amount
computed by applying the U.S. federal income tax rate of
34 percent to loss before income taxes as a result of the
following:

|                                        |                                                           |      |         |          |   |      |          |         |   |   |            |           |  
|--------------------------------------- | --------------------------------------------------------- | ---- | ------- | -------- | - | ---- | -------- | ------- | - | - | ---------- | --------- | -
|                                        |                                                           | 1999 |         | 1998     |   | 1997
|                                        |                                                           |      |         |          |   |     
|Expected income tax expense (benefit) |                                                           | $    | 269,000 |          |   | $    | (615,000 | )       |   | $ | (5,568,000 | )        
|                                       
|                                       
|                                       
|                                       
|                                        | State, net of federal benefit                             |      |         | 38,000   |   |      |          | (72,000 | ) |   |            | (648,000  | )
|                                       
|                                       
|                                       
|                                       
|                                        | Change in the valuation allowance for deferred tax assets |      |         | (441,000 | ) |      |          | 687,000 |   |   |            | 7,936,000 |  
|                                       
|                                       
|                                       
|                                       
|                                        | Nondeductible items                                     |      |         | 134,000  |   |      |          |        |   |   |            |          |  
|                                       
|                                       
|                                       
|                                       
|                                        | Other, net                                                |      |         |         |   |      |          |        |   |   |            | (8,500    | )
|                                        |                                                           |      |         |          |   |      |          |         |   |   |            |          
|                                        |                                                           | $    |        |          |   | $    |         |         |   | $ | 1,711,500  |          
|                                        |                                                           |      |         |          |   |      |          |         |   |   |            |          

43



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##### Table of Contents



POWERCERV CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The tax effects of temporary differences that give rise to
significant components of the deferred tax assets and deferred
tax liabilities at December 31, 1999 and 1998 are presented
below:

|                               |                                                         |                                 |        |           |            |   |         |           |            |  
|------------------------------ | ------------------------------------------------------- | ------------------------------- | ------ | --------- | ---------- | - | ------- | --------- | ---------- | -
|                               |                                                         | 1999                            |        | 1998     
|                               |                                                         |                                 |        |          
|Deferred tax assets:           |                                                         |                                 |        |           |            |   |         |          
|                              
|                              
|                              
|                              
|                               | Deferred revenue                                        |                                 | $      |          |            |   | $       | 135,000   |           
|                              
|                              
|                              
|                              
|                               | Provision for uncollectible accounts                    |                                 |        | 207,000   |            |   |         |          |           
|                              
|                              
|                              
|                              
|                               | Accrued expenses and work force reduction               |                                 |        | 100,000   |            |   |         | 95,000    |           
|                              
|                              
|                              
|                              
|                               | Deferred gain on sale                                   |                                 |        | 314,000   |            |   |         |          |           
|                              
|                              
|                              
|                              
|                               | Operating losses                                        |                                 |        | 6,034,000 |            |   |         | 6,661,000 |           
|                              
|                              
|                              
|                              
|                               | Intangible assets                                       |                                 |        | 2,900,000 |            |   |         | 3,231,000 |           
|                               |                                                         |                                 |        |           |            |   |         |          
|                               |                                                         | Total gross deferred tax assets |        |           | 9,555,000  |   |         |           | 10,122,000 |  
|                              
|                              
|                              
|                              
|                               |                                                         | Less valuation allowance        |        |           | (9,477,000 | ) |         |           | (9,918,000 | )
|                               |                                                         |                                 |        |           |            |   |         |          
|                               |                                                         | Net deferred tax assets         |        |           | 78,000     |   |         |           | 204,000    |  
|                               |                                                         |                                 |        |           |            |   |         |          
|Deferred tax liabilities:      |                                                         |                                 |        |           |            |   |         |          
|                              
|                              
|                              
|                              
|                               | Depreciation and amortization of property and equipment |                                 |        | 78,000    |            |   |         | 196,000   |           
|                              
|                              
|                              
|                              
|                               | Other                                                   |                                 |        |          |            |   |         | 8,000     |           
|                               |                                                         |                                 |        |           |            |   |         |          
|Gross deferred tax liabilities |                                                         |                                 | 78,000 |           |            |   | 204,000 |          
|                               |                                                         |                                 |        |           |            |   |         |          
|                               |                                                         | Total net deferred tax assets   |        | $         |           |   |         |           |           |  
|                               |                                                         |                                 |        |           |            |   |         |          

The Company decreased its deferred income tax asset valuation
allowance by $441,000 during the year ended December 31,
1999. The decision to continue to fully reserve the deferred
income tax asset was primarily the result of the Companys
continued losses from operations. At December 31, 1999, the
Company has net operating loss carry forwards of approximately
$15,880,000 for federal income tax purposes that expire at
various times from years 2010 to 2019.

The Companys federal income tax returns for the years ended
 December 31, 1996 and 1995 were subject to a routine
examination by the Internal Revenue Service that resulted in an
assessment of $66,000 of tax and approximately $87,000 of
interest. The Company is currently in the process of appealing
this assessment.

(8)  Shareholders Equity

In September 1997, a former officer exercised a right to require
the Company to repurchase certain common shares at a price equal
to fair value, as defined by agreement. The Company repurchased
the shares for approximately $189,000. In 1997, the Company also
considered the former officer to have provided consulting
services to the Company in the amount of approximately $11,000.
This repurchase of the shares and the compensation for the
consulting services provided were used to offset and repay in
1997 the former officers outstanding note receivable.

During 1999, the Company granted a warrant to an unrelated third
party to purchase 125,000 shares of the Companys common
stock in consideration for professional services. The warrant,
which expires the earlier of December 31, 2000, or the
termination of their relationship, has an exercise price equal to
 $1.75 per share, the fair market value of the Companys
common stock on the date of grant. The warrant was exercised on
January 10, 2000. The Company recorded expense of $126,250
related to this grant during 1999.

During 1999, the Company purchased an option to acquire up to
2,000,000 shares of its common stock from a former officer and
director. The former officer agreed not to engage in any further
trading of his common stock of the Company during the option
period. The Company assigned this option to a third party during
the 120-day option period.

44



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##### Table of Contents



POWERCERV CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(9)  Comprehensive Income (Loss)

Beginning January 1, 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, Reporting
Comprehensive Income. Statement 130, which defines
comprehensive income as the change in equity of an enterprise
except for those changes resulting from shareholder transactions,
 establishes standards for reporting comprehensive income. For
the years ended December 31, 1999, 1998 and 1997, the
Company did not have any comprehensive income (loss) other than
the net income (loss) reported on the Consolidated Statements of
Operations.

(10)  Commitments and Contingencies

(a)  Leases

The Company conducts its operations in leased facilities. The
lease terms range from one month to five years. Rental expenses
under operating leases approximated $834,000, $1,080,000 and
$1,167,000, during the years ended December 31, 1999, 1998
and 1997, respectively.

Future minimum lease payments under noncancelable operating lease
 agreements during the years following December 31, 1999,
are as follows:

|             |  |            |           | 
|------------ |  | ---------- | --------- | 
|Year Ending  |  |           
|December 31, |  | Commitment
|             |  |           
|2000         |  | $          | 975,000   | 
|            
|            
|            
|            
|2001         |  |            | 413,000   | 
|            
|            
|            
|            
|2002         |  |            | 146,000   | 
|            
|            
|            
|            
|2003         |  |            | 55,000    | 
|            
|            
|            
|            
|2004         |  |            | 200       | 
|            
|            
|            
|            
|Thereafter   |  |            |          | 
|             |  |            |           | 
|             |  | $          | 1,589,200 | 
|             |  |            |           | 

(b)  Litigation

A complaint was filed on July 24, 1997 in the United States
District Court for the Middle District of Florida, captioned
J. Conrad Lifsey vs. Harold R. Ross, Gerald R.
Wicker, Marc J. Fratello, Roy E. Crippen, III,
Donald B. Hebb, Jr., Thomas S. Roberts, PowerCerv
Corporation, Alex Brown & Sons, Inc., Robertson, Stephens
& Company, ABS Capital Partners, L.P., Summit Investors II,
L.P., and Summit Ventures III, L.P. The complaint purports to be
a class action on behalf of those persons who purchased shares of
 the Companys common stock from March 1, 1996 (the
date of the Companys initial public offering of its common
stock (IPO)) through July 24, 1996. The
complaint alleges, among other things, that the defendants
violated the Securities Act of 1933 and the Securities Exchange
Act of 1934 in connection with the Companys IPO and in its
subsequent securities filings, press releases and other public
statements. The plaintiff seeks damages of an unspecified amount,
 rescission of certain securities sales and certain other
remedies. On March 19, 1998, the defendants filed their
motions to dismiss this complaint.

An effect of this motion filing is to postpone any discovery on
this case until after the motions are ruled on by the Court. On
April 5, 1998, the Court ordered the parties to attend a
mediation conference by July 30, 1998. The parties did not
resolve this lawsuit in the mediation conference. The Court
ordered a second mediation conference which is currently set for
March 22, 2000 in which the parties were again unable to
resolve this lawsuit. To date, the Court has not issued a ruling
on the Companys motion to dismiss. The defendants continue
to deny any wrongdoing and intend to contest the suit vigorously.

The Company is also subject to miscellaneous legal proceedings in
 the normal course of business. The Company is currently
defending these proceedings and claims and anticipates that it
will be able to resolve

45



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##### Table of Contents



POWERCERV CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

these matters in a manner that will not have a material adverse
effect on the Companys consolidated financial position.

(c) Other

During 1999, the Company entered into an OEM agreement with an
unrelated third party. The Company is required to pay the
following non-refundable commitment amounts:

|                         |  |            |         | 
|------------------------ |  | ---------- | ------- | 
|Year Ending December 31, |  | Commitment
|                         |  |           
|2000                     |  | $          | 325,000 | 
|                        
|                        
|                        
|                        
|2001                     |  |            | 125,000 | 
|                         |  |            |         | 
|                         |  | $          | 450,000 | 
|                         |  |            |         | 

(d)  Employment Agreements

The Company is party to employment agreements with several of its
 officers that provide for annual base salaries, target bonus
levels, severance pay under certain conditions, and certain other
 benefits.

(11) Employee Benefit Plans

(a)  Defined Contribution Plan

The Company has a 401(k) plan covering employees who meet
established eligibility requirements. Under the plan provisions,
the Company may match participant contributions. During 1999 and
1998, the Company matched 30% of participant contributions to a
maximum matching amount of 6% of participant base compensation.
During 1997, the Company matched 50% of participant contributions
 to a maximum matching amount of 6% of participant base
compensation. Total Company contributions were approximately
$155,000, $145,000 and $342,000, during the years ended December
31, 1999, 1998 and 1997, respectively. During the years ended
December 31, 1999, 1998 and 1997, this match occurred in the
 form of Company common stock purchased in the open market.
During 1999 and 1998, Plan forfeitures funded the Company
matching amounts.

(b)  Stock Option Plan

In June 1995, the Company established a stock option plan, which
provides for the granting of both incentive stock options and
non-statutory stock options. Only employees are eligible to
receive grants of incentive stock options.

Generally, options granted under this stock option plan expire 10
 years after the date of grant, are exercisable in four equal
annual installments commencing one year from the date of grant
and are granted at fair market value on the date of the grant. As
 of December 31, 1999, a total of 4,675,000 shares were
reserved for issuance under the plan.

During 1998, the Company issued 1,815,000 non-qualified stock
options to certain new members of senior management. These
options were granted at fair market value on the date of the
grant, are vested based upon specific dates through December 2001
 and expire 10 years after the date of grant.

46



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##### Table of Contents



POWERCERV CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Activity with respect to all stock options is summarized as
follows:

|                             |                   |                     |           |                  |   |   |      |      | 
|---------------------------- | ----------------- | ------------------- | --------- | ---------------- | - | - | ---- | ---- | 
|                             |                   |                    
|                             |                   | Options Outstanding
|                             |                   |                    
|                             |                   |                     |           | Weighted-Average
|                             |                   |                     |           | Option Price    
|                             |                   | Shares              |           | Per Share       
|                             |                   |                     |           |                 
|Balance at December 31, 1996 |                   |                     | 920,922   |                  |   | $ | 5.00 |     
|                            
|                            
|                            
|                            
|                             | Options granted   |                     |           | 835,014          |   |   |      | 3.28 | 
|                            
|                            
|                            
|                            
|                             | Options exercised |                     |           | (13,958          | ) |   |      | 3.73 | 
|                            
|                            
|                            
|                            
|                             | Options canceled  |                     |           | (439,576         | ) |   |      | 5.15 | 
|                             |                   |                     |           |                  |   |   |      |     
|Balance at December 31, 1997 |                   |                     | 1,302,402 |                  |   |   | 3.86 |     
|                            
|                            
|                            
|                            
|                             | Options granted   |                     |           | 4,888,506        |   |   |      | 2.83 | 
|                            
|                            
|                            
|                            
|                             | Options exercised |                     |           | (40,191          | ) |   |      | 3.13 | 
|                            
|                            
|                            
|                            
|                             | Options canceled  |                     |           | (728,277         | ) |   |      | 3.74 | 
|                             |                   |                     |           |                  |   |   |      |     
|Balance at December 31, 1998 |                   |                     | 5,422,440 |                  |   |   | 2.95 |     
|                            
|                            
|                            
|                            
|                             | Options granted   |                     |           | 3,325,003        |   |   |      | 1.92 | 
|                            
|                            
|                            
|                            
|                             | Options exercised |                     |           | (290,755         | ) |   |      | 2.73 | 
|                            
|                            
|                            
|                            
|                             | Options canceled  |                     |           | (2,623,054       | ) |   |      | 3.36 | 
|                             |                   |                     |           |                  |   |   |      |     
|Balance at December 31, 1999 |                   |                     | 5,833,634 |                  |   |   | 2.95 |     
|                             |                   |                     |           |                  |   |   |      |     

Subsequent to December 31, 1999, the Company canceled
351,008 options primarily due to the termination of certain
employees. Additionally 383,499 options and warrants were
exercised subsequent to December 31, 1999.

The range of exercise prices, shares, weighted-average
contractual life and weighted-average exercise price for the
options outstanding at December 31, 1999 is presented below:

|                |       |        |  |                  |  |                  |       |  |  |  |           |  |  |  |         |  |  |   |       | 
|--------------- | ----- | ------ |  | ---------------- |  | ---------------- | ----- |  |  |  | --------- |  |  |  | ------- |  |  | - | ----- | 
|                |       |        |  |                  |  |                 
|Range of        |       |        |  | Weighted-Average |  | Weighted-Average
|Exercise Prices |       | Shares |  | Contractual Life |  | Exercise Price  
|                |       |        |  |                  |  |                 
|$               | 1.50  |        |  | -                |  |                  | 2.50  |  |  |  | 3,023,751 |  |  |  | 9 years |  |  | $ | 1.92  | 
|                | 2.51  |        |  | -                |  |                  | 4.00  |  |  |  | 2,248,843 |  |  |  | 9 years |  |  |   | 2.93  | 
|                | 4.01  |        |  | -                |  |                  | 5.81  |  |  |  | 544,855   |  |  |  | 8 years |  |  |   | 4.32  | 
|                | 7.00  |        |  | -                |  |                  | 10.00 |  |  |  | 14,085    |  |  |  | 6 years |  |  |   | 9.84  | 
|                | 12.75 |        |  | -                |  |                  | 16.75 |  |  |  | 2,100     |  |  |  | 6 years |  |  |   | 13.08 | 
|                |       |        |  |                  |  |                  |       |  |  |  |           |  |  |  |         |  |  |   |       | 
|                | 1.50  |        |  | -                |  |                  | 16.75 |  |  |  | 5,833,634 |  |  |  | 9 years |  |  |   | 2.55  | 
|                |       |        |  |                  |  |                  |       |  |  |  |           |  |  |  |         |  |  |   |       | 

The range of exercise prices, shares and weighted-average
exercise price for the options exercisable at December 31,
1999 are presented below:

|                |       |             |  |                  |  |  |       |  |  |  |           |  |  |   |       | 
|--------------- | ----- | ----------- |  | ---------------- |  |  | ----- |  |  |  | --------- |  |  | - | ----- | 
|                |       |             |  |                 
|Range of        |       | Shares      |  | Weighted-Average
|Exercise Prices |       | Exercisable |  | Exercise Price  
|                |       |             |  |                 
|$               | 1.50  |             |  | -                |  |  | 2.50  |  |  |  | 1,438,820 |  |  | $ | 1.82  | 
|               
|               
|               
|               
|                | 2.51  |             |  | -                |  |  | 4.00  |  |  |  | 746,931   |  |  |   | 3.08  | 
|               
|               
|               
|               
|                | 4.01  |             |  | -                |  |  | 5.81  |  |  |  | 189,973   |  |  |   | 4.45  | 
|               
|               
|               
|               
|                | 7.00  |             |  | -                |  |  | 10.00 |  |  |  | 13,522    |  |  |   | 9.83  | 
|               
|               
|               
|               
|                | 12.75 |             |  | -                |  |  | 16.75 |  |  |  | 1,725     |  |  |   | 13.12 | 
|                |       |             |  |                  |  |  |       |  |  |  |           |  |  |   |       | 
|                | 1.50  |             |  | -                |  |  | 16.75 |  |  |  | 2,390,971 |  |  |   | 2.48  | 
|                |       |             |  |                  |  |  |       |  |  |  |           |  |  |   |       | 

The per share weighted-average fair value of stock options
granted during 1999, 1998 and 1997 was $1.78, $2.94 and $1.63,
respectively on the date of grant using the Black Scholes
option-pricing model with the following weighted-average
assumptions: 1999  expected dividend yield of 0%,
risk-free interest rate

47



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##### Table of Contents



POWERCERV CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

averaging 5.5%, expected volatility rate of 109%, and an expected
 life of 4 years; 1998  expected dividend yield of 0%,
 risk-free interest rate of 4.7%, expected volatility rate of
157%, and an expected life of 3.5 years; 1997 
expected dividend yield of 0%, risk-free interest rate of 5.8%,
expected volatility rate of 103%, and an expected life of
3.5 years.

The Company applies APB 25 in accounting for its stock
options and, accordingly, no compensation cost has been
recognized for its stock options in the consolidated financial
statements. Had the Company determined compensation cost based on
 the fair value at the grant date for its stock options under
Statement 123, the Companys net loss would have been
as follows:

|                                       |  |        |            |            |  |      |       |          |  |      |            |          |  |   |       |   |  |   |             |   |  |   |       |  
|-------------------------------------- |  | ------ | ---------- | ---------- |  | ---- | ----- | -------- |  | ---- | ---------- | -------- |  | - | ----- | - |  | - | ----------- | - |  | - | ----- | -
|                                       |  |        |            |            |  |     
|                                       |  | 1999   |            | 1998       |  | 1997
|                                       |  |        |            |            |  |     
|                                       |  |        |            | Net        |  |      |       |         
|                                       |  | Net    |            | Income     |  |      |       | Net      |  |      |            | Net     
|                                       |  | Income |            | (Loss) Per |  | Net  |       | Loss Per |  | Net  |            | Loss Per
|                                       |  | (Loss) |            | Share      |  | Loss |       | Share    |  | Loss |            | Share   
|                                       |  |        |            |            |  |      |       |          |  |      |            |         
|As reported                            |  | $      | 792,504    |            |  | $    | 0.06  |          |  | $    | (1,807,885 | )        |  | $ | (0.13 | ) |  | $ | (18,087,261 | ) |  | $ | (1.31 | )
|                                      
|                                      
|                                      
|                                      
|Statement 123 compensation, net of tax |  |        | (1,431,022 | )          |  |      | (0.11 | )        |  |      | (1,407,000 | )        |  |   | (0.10 | ) |  |   | (849,000    | ) |  |   | (0.06 | )
|                                       |  |        |            |            |  |      |       |          |  |      |            |          |  |   |       |   |  |   |             |   |  |   |       |  
|Pro forma disclosure                   |  | $      | (638,518   | )          |  | $    | (0.05 | )        |  | $    | (3,214,885 | )        |  | $ | (0.23 | ) |  | $ | (18,936,261 | ) |  | $ | (1.37 | )
|                                       |  |        |            |            |  |      |       |          |  |      |            |          |  |   |       |   |  |   |             |   |  |   |       |  

(12)  Segment Reporting

The Company has identified its operating segments as its services
 and license product segments. In 1998, the Company adopted
Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related
Information.The services segment provides consulting,
education and maintenance services and the license product
segment provides application, tools and technology resale
products.

The following tables provide the various segment data:

|                                 |  |                                      |            |          |  |             |            |       |  |   |           |  |  |   |            | 
|-------------------------------- |  | ------------------------------------ | ---------- | -------- |  | ----------- | ---------- | ----- |  | - | --------- |  |  | - | ---------- | 
|                                 |  |                                     
|                                 |  | For the Year Ended December 31, 1999
|                                 |  |                                     
|                                 |  |                                      |            | License  |  |            
|                                 |  | Services                             |            | Products |  | Unallocated |            | Total
|                                 |  |                                      |            |          |  |             |            |      
|Revenues from external customers |  | $                                    | 11,463,838 |          |  | $           | 9,257,199  |       |  | $ |          |  |  | $ | 20,721,037 | 
|                                
|                                
|                                
|                                
|Segment profit or loss           |  | $                                    | 3,885,550  |          |  | $           | (4,262,408 | )     |  | $ | 1,169,362 |  |  | $ | 792,504    | 

|                                 |  |                                      |           |          |  |             |            |       |  |   |            |   |  |   |            |  
|-------------------------------- |  | ------------------------------------ | --------- | -------- |  | ----------- | ---------- | ----- |  | - | ---------- | - |  | - | ---------- | -
|                                 |  |                                     
|                                 |  | For the Year Ended December 31, 1998
|                                 |  |                                     
|                                 |  |                                      |           | License  |  |            
|                                 |  | Services                             |           | Products |  | Unallocated |            | Total
|                                 |  |                                      |           |          |  |             |            |      
|Revenues from external customers |  | $                                    | 8,532,805 |          |  | $           | 9,200,117  |       |  | $ |           |   |  | $ | 17,732,922 |  
|                                
|                                
|                                
|                                
|Segment profit or loss           |  | $                                    | 1,437,995 |          |  | $           | (1,825,158 | )     |  | $ | (1,420,722 | ) |  | $ | (1,807,885 | )

|                                 |  |                                      |           |          |  |             |             |       |  |   |            |   |  |   |             |  
|-------------------------------- |  | ------------------------------------ | --------- | -------- |  | ----------- | ----------- | ----- |  | - | ---------- | - |  | - | ----------- | -
|                                 |  |                                     
|                                 |  | For the Year Ended December 31, 1997
|                                 |  |                                     
|                                 |  |                                      |           | License  |  |            
|                                 |  | Services                             |           | Products |  | Unallocated |             | Total
|                                 |  |                                      |           |          |  |             |             |      
|Revenues from external customers |  | $                                    | 9,498,559 |          |  | $           | 8,818,841   |       |  | $ |           |   |  | $ | 18,317,400  |  
|                                
|                                
|                                
|                                
|Segment profit or loss           |  | $                                    | 791,905   |          |  | $           | (11,707,314 | )     |  | $ | (7,171,852 | ) |  | $ | (18,087,261 | )

48



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##### Table of Contents



POWERCERV CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

There were no transactions between segments. The unallocated
amounts are made up of the following items:

|                                 |  |                                 |            |      |  |      |            |   |  |   |            |  
|-------------------------------- |  | ------------------------------- | ---------- | ---- |  | ---- | ---------- | - |  | - | ---------- | -
|                                 |  |                                
|                                 |  | For the Year Ended December 31,
|                                 |  |                                
|                                 |  | 1999                            |            | 1998 |  | 1997
|                                 |  |                                 |            |      |  |     
|General and administrative costs |  | $                               | (4,476,042 | )    |  | $    | (3,886,360 | ) |  | $ | (7,686,842 | )
|                                
|                                
|                                
|                                
|Work force reduction             |  |                                 | (485,252   | )    |  |      |           |   |  |   | (1,010,000 | )
|                                
|                                
|                                
|                                
|Interest and other income        |  |                                 | 260,149    |      |  |      | 301,372    |   |  |   | 578,010    |  
|                                
|                                
|                                
|                                
|Operations disposed of in 1999   |  |                                 | 223,813    |      |  |      | 2,164,266  |   |  |   | 2,658,480  |  
|                                
|                                
|                                
|                                
|Gain on sale of business         |  |                                 | 5,646,694  |      |  |      |           |   |  |   |           |  
|                                
|                                
|                                
|                                
|Income tax expense               |  |                                 |           |      |  |      |           |   |  |   | (1,711,500 | )
|                                 |  |                                 |            |      |  |      |            |   |  |   |            |  
|                                 |  | $                               | 1,169,362  |      |  | $    | (1,420,722 | ) |  | $ | (7,171,852 | )
|                                 |  |                                 |            |      |  |      |            |   |  |   |            |  

The Company does not use assets as a measure of the
segments performance, thus no assets are disclosed by
segment in the table above.

(13)  Related Party Transactions

Material related party transactions that have been entered into
by the Company that are not otherwise in these notes are
summarized below.

The Company has used the services of an entity owned by the
Companys Chairman, former Vice Chairman and Chief
Technology Officer, and former Chief Executive Officer to recruit
 sales and consulting personnel for the Company. Related expense
incurred by the Company for these services approximated $93,000
in 1999. For the two previous years, expense totaled
approximately $169,000 and $319,000, respectively. During 1999
owner sold the entity to an unrelated third party.

During the year ended December 31, 1996, an officer of the
Company was appointed to the Board of Directors of the investee
company discussed in Note 2(h).

(14)  Preferred Stock

The Companys Articles of Incorporation authorize and permit
 the Companys Board of Directors to issue up to
5,000,000 shares of preferred stock (par value of $.001 per
share) in one or more series, and to fix the relative rights,
preferences and limitations of each series. As of
December 31, 1999, there were no preferred shares
outstanding.

49



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##### Table of Contents



SCHEDULE II

SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS

|                                     |                              |                |   |            |  |            |   |            |   |  |   |      |   |  |   |       | 
|------------------------------------ | ---------------------------- | -------------- | - | ---------- |  | ---------- | - | ---------- | - |  | - | ---- | - |  | - | ----- | 
|                                     |                              |                |   | Additions  |  |            |   |           
|                                     |                              | Balance at     |   | Charged to |  |            |   | Balance at
|                                     |                              | Beginning of   |   | Cost and   |  |            |   | End of    
|                                     |                              | Year           |   | Expenses   |  | Write-Offs |   | Year      
|                                     |                              |                |   |            |  |            |   |           
|                                     |                              |               
|                                     |                              | (In thousands)
|Allowance For Uncollectible Accounts |                              |                |   |            |  |            |   |            |   |  |   |      |   |  |   |      
|                                    
|                                    
|                                    
|                                    
|                                     | Year ended December 31, 1999 |                | $ | 1,480      |  |            | $ | 290        |   |  | $ | (225 | ) |  | $ | 1,545 | 
|                                    
|                                    
|                                    
|                                    
|                                     | Year ended December 31, 1998 |                | $ | 2,000      |  |            | $ | (156       | ) |  | $ | (364 | ) |  | $ | 1,480 | 
|                                    
|                                    
|                                    
|                                    
|                                     | Year ended December 31, 1997 |                | $ | 550        |  |            | $ | 2,011      |   |  | $ | (561 | ) |  | $ | 2,000 | 

50



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned
thereunto duly authorized, in the City of Tampa, State of
Florida, on March 30, 2000.

| |  |                       |  |                                                                   
| |  | --------------------- |  | ------------------------------------------------------------------
| |  | POWERCERV CORPORATION
|
| |  | By:                   |  | /s/ MICHAEL J. SIMMONS                                            
| |  |                       |  |                                                                   
| |  |                       |  | Michael J. SimmonsPresident, Chief Executive Officer
	And Director

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

|                                           |  |                                                       |  |               
|------------------------------------------ |  | ----------------------------------------------------- |  | --------------
|Signature                                  |  | Title                                                 |  | Date          
|                                           |  |                                                       |  |               
|                                          
|                                          
|                                          
|/s/ MARC J. FRATELLOMarc J. Fratello       |  | Chairman of the Board                                 |  | March 30, 2000
|                                          
|                                          
|                                          
|/s/ MICHAEL J. SIMMONSMichael J. Simmons   |  | President, Chief Executive Officer and Director       |  | March 30, 2000
|                                          
|                                          
|                                          
|/s/ LAWRENCE J. ALVESLawrence J. Alves     |  | Chief Financial Officer (Principal Financial Officer) |  | March 30, 2000
|                                          
|                                          
|                                          
|/s/ ROY E. CRIPPEN, IIIRoy E. Crippen, III |  | Director                                              |  | March 30, 2000
|                                          
|                                          
|                                          
|/s/ O. G. GREENEO. G. Greene               |  | Director                                              |  | March 30, 2000
|                                          
|                                          
|                                          
|/s/ STUART C. JOHNSONStuart C. Johnson     |  | Director                                              |  | March 30, 2000
|                                          
|                                          
|                                          
|/s/ DAVID A. STRAZ, JR.David A. Straz, Jr. |  | Director                                              |  | March 30, 2000

51