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

FORM 10-QSB

þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended September 30, 2003ORo
    
    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

(Name of small business issuer as specified in its charter)


Florida
(State or other jurisdiction of
incorporation or organization)
    
    59-3350778
(I.R.S. Employer
Identification No.)


400 North Ashley Drive, Suite 2675, Tampa, Florida 33602
(Address of principal executive offices, including zip code)

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

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

As of May 16, 2003, there were 1,313,000 shares of the registrants common
stock, $.001 par value, outstanding.



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PowerCerv Corporation
Form 10-QSB

Index

PagePart I. Financial Information PageItem 1. Financial StatementsCondensed Consolidated Balance Sheets as of September 30, 2003 (unaudited)
and December 31, 2002
    
    
    2Condensed Consolidated Statements of Operations for the Three and Nine
Months Ended September 30, 2003 and 2002 (unaudited)
    
    
    3Condensed Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 2003 and 2002 (unaudited)
    
    
    4Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    5Item 2. Managements Discussion and Analysis or Plan of Operations
    
    
    10Item 3. Controls and Procedures
    
    
    15Part II. Other InformationItem 1. Legal Proceedings
    
    
    16Item 6. Exhibits and Reports on Form 8-K
    
    
    16Signatures
    
    
    17Certifications


See notes to condensed consolidated financial statements.

1



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POWERCERV CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2003 AND 2002

September
    
    September30, 2003
    
    30, 2002ASSETSCurrent assets:Cash and cash equivalents
    
    $
    21,000
    
    
    $
    245,000Notes receivable
    
    
    220,000
    
    
    
    204,000Other current assets
    
    
    46,000
    
    
    
    72,000Total current assets
    
    
    287,000
    
    
    
    521,000Notes receivable, net
    
    
    
    
    
    
    136,000Total assets
    
    $
    287,000
    
    
    $
    657,000LIABILITIES AND SHAREHOLDERS DEFICITCurrent liabilities:Accounts payable
    
    $
    16,000
    
    
    $
    194,000Accrued expenses
    
    
    407,000
    
    
    
    472,000Total current liabilities
    
    
    423,000
    
    
    
    666,000Shareholders deficit
    
    
    (136,000
    )
    
    
    (9,000
    )Total liabilities and shareholders deficit
    
    $
    287,000
    
    
    $
    657,000


See notes to condensed consolidated financial statements.

2



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POWERCERV CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2003
    
    2002
    
    2003
    
    2002Revenues:License fees
    
    $
    
    
    
    $
    105,000
    
    
    $
    
    
    
    $
    365,000Service fees
    
    
    
    
    
    
    370,000
    
    
    
    
    
    
    
    1,740,000Total revenues
    
    
    
    
    
    
    475,000
    
    
    
    
    
    
    
    2,105,000Costs and Expenses:Cost of licenses
    
    
    
    
    
    
    54,000
    
    
    
    
    
    
    
    180,000Cost of services
    
    
    
    
    
    
    181,000
    
    
    
    
    
    
    
    758,000General and administrative
    
    
    31,000
    
    
    
    257,000
    
    
    
    131,000
    
    
    
    847,000Sales and marketing
    
    
    
    
    
    
    111,000
    
    
    
    
    
    
    
    429,000Research and development
    
    
    
    
    
    
    153,000
    
    
    
    
    
    
    
    608,000Work force reduction and other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,000Total costs and expenses
    
    
    31,000
    
    
    
    756,000
    
    
    
    131,000
    
    
    
    2,852,000Operating loss
    
    
    (31,000
    )
    
    
    (281,000
    )
    
    
    (131,000
    )
    
    
    (747,000
    )Interest and other income
(expense), net
    
    
    2,000
    
    
    
    6,000
    
    
    
    7,000
    
    
    
    51,000Loss before income taxes
    
    
    (29,000
    )
    
    
    (275,000
    )
    
    
    (124,000
    )
    
    
    (696,000
    )Income tax expense
    
    
    
    
    
    
    
    
    
    
    3,000
    
    
    
    Net loss
    
    $
    (29,000
    )
    
    $
    (275,000
    )
    
    $
    (127,000
    )
    
    $
    (696,000
    )Basic and diluted loss per share
    
    $
    (    .02
    )
    
    $
    (      .21
    )
    
    $
    (     .10
    )
    
    $
    (        .53
    )Shares used in computing net loss
per share:Basic
    
    
    1,313
    
    
    
    1,313
    
    
    
    1,313
    
    
    
    1,313Diluted
    
    
    1,313
    
    
    
    1,313
    
    
    
    1,313
    
    
    
    1,313


See notes to condensed consolidated financial statements.

3



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POWERCERV CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months EndedSeptember 30,2003
    
    2002Operating activities:Net loss
    
    $
    (127,000
    )
    
    $
    (696,000
    )Adjustments to reconcile net loss to net
cash flows from operating activities:Depreciation and amortization
    
    
    
    
    
    
    161,000Deferred revenue
    
    
    
    
    
    
    (359,000
    )Changes in assets and liabilities
    
    
    (218,000
    )
    
    
    (26,000
    )Net cash flows used in operating activities
    
    
    (345,000
    )
    
    
    (920,000
    )Investing activities:Payments received on notes receivable
    
    
    121,000
    
    
    
    281,000Net cash flows provided by investing activities
    
    
    121,000
    
    
    
    281,000Financing activities:Net proceeds from issuance of preferred stock
    
    
    
    
    
    
    85,000Loans received from officers and directors
    
    
    
    
    
    
    46,000Net cash flows provided by financing activities
    
    
    
    
    
    
    131,000Net decrease in cash and cash equivalents
    
    
    (224,000
    )
    
    
    (508,000
    )Cash and cash equivalents at beginning of period
    
    
    245,000
    
    
    
    635,000Cash and cash equivalents at end of period
    
    $
    21,000
    
    
    $
    127,000


See notes to condensed consolidated
financial statements.

4



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PowerCerv Corporation
Notes to Condensed Consolidated Financial Statements

1. Basis of Presentation

Organization and Operations:



| |  | The condensed consolidated balance sheet of PowerCerv Corporation and its
subsidiary (collectively, the Company) as of September 30, 2003, and the
condensed consolidated statements of operations for the three and nine
months ended September 30, 2003 and 2002 and the condensed consolidated
statements of cash flows for the nine months ended September 30, 2003 and
2002 have been prepared by the Company, without audit. In the opinion of
management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows at September 30, 2003, and for all periods
presented have been made. The condensed consolidated balance sheet at
December 31, 2002, has been derived from the Companys audited consolidated
financial statements at that date.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | On December 1, 2002, the Company completed the sale of substantially all of
its operating assets to PCV Acquisition, Inc., a subsidiary of ASA
International, Ltd (collectively referred to as ASA), a holding company of
vertical enterprise software solutions based in Framingham, Massachusetts.
As a result of this transaction, the Company has no current operations.
Following the closing, the Company has used its best efforts to settle its
remaining liabilities with the transaction proceeds and certain other
receivables. The Company plans to continue as a separate public entity,
seek to merge with another operating business and not compete in its former
line of business; however, there can be no assurance that these plans will
be successfully implemented. Until such a merger transaction is effected,
there will be no significant expected operations of PowerCerv.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Prior to December 1, 2002 the Company focused its resources, including
product development, marketing and sales efforts, on the needs and
requirements of small and medium size discrete manufacturing companies with
annual revenues between $5 million and $250 million in this market. In
addition, PowerCerv provided professional and business consulting services
relating to its software applications. The Company marketed its products and
services throughout the United States and also marketed its software
products outside the United States through distributors. PowerCerv
Corporation and PowerCerv Technologies Corporation are herein referred to as
the Company.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the Securities and
Exchange Commission (SEC) rules and regulations. These condensed
consolidated financial statements should be read in conjunction with the
audited consolidated financial statements and notes thereto for the year
ended December 31, 2002, included in the Companys 2002 Annual Report on
Form 10-KSB filed with the SEC on April 15, 2003 (2002
Annual Report).
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

5



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PowerCerv Corporation
Notes to Condensed Consolidated Financial Statements

1. Basis of Presentation (continued):

Organization
and Operations (continued):



| |  | The results of operations for the nine months ended September 30, 2003, are
not necessarily indicative of results that may be expected for any other
interim period or for the full fiscal year.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The report of the Companys independent auditors for the year ended December
31, 2002 contains an explanatory paragraph as to the substantial doubt of
the Companys ability to continue as a going concern. No adjustments have
been made to the accompanying financial statements to give effect to this
uncertainty.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2. Significant Accounting Policies

Revenue Recognition:



| |  | Prior to December 1, 2002, the Company 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 was 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
provided for multiple elements (e.g., software products, post-contract
customer support, consulting services), the total fee was allocated to these
elements based on vendor-specific objective evidence of fair value. If any
portion of the license fees was subject to forfeiture, refund or other
contractual contingencies, the Company would postpone revenue recognition
until these contingencies have been removed. The Company generally
accounted for consulting and education services separate from software
license fees for those multi-element arrangements where services were 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 would
postpone revenue recognition until these contingencies have been removed.
Historically, product returns and allowances have been immaterial. Revenue
from support and maintenance activities was recognized ratably over the term
of the maintenance period and the unrecognized portion is recorded as
deferred revenue.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6



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PowerCerv Corporation
Notes to Condensed Consolidated Financial Statements

2. Significant Accounting Policies

New Accounting Pronouncements



| |  | In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure, which (i) amends SFAS 123,
Accounting for Stock-Based Compensation, to provide alternative methods of
transition for an entity that voluntarily changes to the fair value based
method of accounting for stock-based employee compensation (ii) amends the
disclosure provisions of SFAS 123 to require prominent disclosure about the
effects on reported net income of an entitys accounting policy decisions
with respect to stock-based employee compensation and (iii) requires
disclosure about those effects in interim financial information. Items (ii)
and (iii) of the new requirements in SFAS 148 are effective for financial
statements for fiscal years ending after December 15, 2002. There were no
equity instruments issued to employees therefore this adoption of the
standard has no impact on the financial statements.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | In November 2002, the FASB issued FASB Interpretation No. 45 Guarantors
Accounting and Disclosure Requirements for Guarantors, including Indirect
Guarantors of Indebtedness to Others(FIN 45). FIN 45 creates new
disclosure and liability recognition requirements for certain guarantees,
including obligations to stand ready to perform. The initial recognition
and measurement requirements of FIN 45 are effective prospectively for
guarantees issued or modified after December 31, 2002, and the disclosure
requirements are effective for financial periods ending after December 31,
2002. In accordance with FIN 45, the Company has disclosed guarantee
information. There are no guarantees therefore the adoption of this
standard has no impact on the financial statements.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. The statement amends and
clarifies accounting and reporting for derivative instruments, including
certain derivative instruments embedded in other contracts, and hedging
activities. This statement is designed to improve financial reporting such
that contracts with comparable characteristics are accounted for similarly.
The statement, which is generally effective for contracts entered into or
modified after June 30, 2003, is not anticipated to have a significant
effect on the Companys financial position or results of operations.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity.This
statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. This statement is effective for financial instruments entered into
or modified after May 31, 2003, and is otherwise effective at the beginning
of the first interim period beginning after June 15, 2003. The Company
currently has no such financial instruments outstanding or under
consideration and therefore adoption of this standard currently has no
financial reporting implications.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7



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PowerCerv Corporation
Notes to Condensed Consolidated Financial Statements

2. Significant Accounting Policies (continued):

New Accounting Pronouncements (continued):



| |  | In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of
Valuable Interest Entities. This interpretation clarifies rules relating to
consolidation where entities are controlled by means other than a majority
voting interest and instances in which equity investors do not bear the
residual economic risks. This interpretation is effective immediately for
variable interest entities created after January 31, 2003 and for interim
periods beginning after December 15, 2003 for interests acquired prior to
February 1, 2003. The Company currently has no ownership in variable
interest entities and therefore adoption of this standard currently has no
financial reporting implications.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

3. Net Loss Per Share Data



| |  | The following table sets forth the computation of basic and diluted loss per
share (EPS) for the periods indicated:
| |  | ---------------------------------------------------------------------------------------------------------------------

Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2003
    
    2002
    
    2003
    
    2002Basic:Net loss
    
    $
    (29,000
    )
    
    $
    (275,000
    )
    
    $
    (127,000
    )
    
    $
    (696,000
    )Averages shares outstanding
    
    
    1,313
    
    
    
    1,313
    
    
    
    1,313
    
    
    
    1,313Basic EPS
    
    $
    (.02
    )
    
    $
    (.21
    )
    
    $
    (.10
    )
    
    $
    (.53
    )Diluted:Net loss
    
    $
    (29,000
    )
    
    $
    (275,000
    )
    
    
    (127,000
    )
    
    $
    (696,000
    )Average shares outstanding
    
    
    1,313
    
    
    
    1,313
    
    
    
    1,313
    
    
    
    1,313Net effect of dilutive stock
options based on treasury
stock method
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Totals
    
    
    1,313
    
    
    
    1,313
    
    
    
    1,313
    
    
    
    1,313Diluted EPS
    
    $
    (.02
    )
    
    $
    (.21
    )
    
    $
    (.10
    )
    
    $
    (.53
    )


Common stock equivalents in the three and nine-month periods ended
September 30, 2003 and September 30, 2002, were anti-dilutive due to the net
losses sustained by the Company during these periods, thus the diluted net loss
per share in these periods is the same as the basic net loss per share.

8



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PowerCerv Corporation
Notes to Condensed Consolidated Financial Statements

4. Commitments



| |  | The Company has entered into employment agreements with certain of its
executive officers. Information regarding these agreements is available in
the Companys 2002 Annual Report. As of September 30, 2003, all employment
agreements have been terminated.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Indemnifications



| |  | The Company indemnified its officers and directors against costs and expenses
related to shareholder and other claims (i.e. only actions taken in their
capacity as officers and directors) that are not covered by the Companys
directors and officers insurance policy. This indemnification is ongoing and
does not include a limit on the maximum potential future payments, nor are
there any recourse provisions or collateral that may offset the cost. As of
September 30, 2003, the Company has not recorded a liability for any
obligations arising as a result of these indemnifications.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

5. Contingencies



| |  | The Company, in the normal course of business, may also be subject to
miscellaneous legal proceedings, which management does not believe will have
a significant impact on the financial statements.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6. Income Taxes



| |  | 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 (IRS) that resulted in an assessment of approximately $66,000 of
federal tax. The Company recorded a charge for estimated federal and state
income tax and related interest costs upon receiving the notice of assessment
in 2000. During October 2002, the Company settled this matter with the IRS by
agreeing to pay an additional income tax liability of $63,000 plus applicable
interest through the date of payment. During April 2003, the Company
received a Statement of Adjustment from the IRS regarding the assessment
totaling $183,000, which is included in accrued expenses. This settlement
amount is consistent with the amount provided for federal taxes and interest
in an earlier period. The Company plans to continue addressing this matter
with the IRS in an effort to obtain a reduction in the balance due; however
there can be no assurance that the Company will be successful.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9



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PowerCerv Corporation
Notes to Condensed Consolidated Financial Statements

Item 2. Management Discussion and Analysis or Plan of Operations

Overview

On December 1, 2002, the Company completed the sale of substantially all of its
operating assets to PCV Acquisition, Inc., a subsidiary of ASA International,
Ltd (collectively referred to as ASA), a holding company of vertical
enterprise software solutions based in Framingham, Massachusetts. This
transaction was approved by PowerCervs shareholders on November 26, 2002. In
the future, the Company may merge with another operating company. Until such a
merger transaction is effected, there will be no significant expected
operations of PowerCerv.

Prior to December 1, 2002 the Company focused its resources, including product
development, marketing and sales efforts, on the needs and requirements of
small and medium size discrete manufacturing companies with annual revenues
between $5 million and $250 million in this market. In addition, PowerCerv
provided professional and business consulting services relating to its software
applications. The Company marketed its products and services throughout the
United States and also marketed its software products outside the United States
through distributors. PowerCerv Corporation and PowerCerv Technologies
Corporation are herein referred to as the Company.

This Quarterly Report on Form 10-QSB and any 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 the Companys 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
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.
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 as described in the Companys 2002 Annual
Report on Form 10KSB filed with the SEC on April 15, 2003, under Managements
Discussion and Analysis of Financial Condition and Results of Operations 
Plan of Operations  Forward-Looking Statements and Associated
Considerations; Fluctuations in Quarterly Activity and Results of
Operations; Competition; Economic and Market Condition Risks;
Lengthy Sales Cycle; Ability to Manage Change; Liquidity;
Availability of Consulting Personnel, Dependence on Product Development
and Associated Risks, Dependence on New Products; Dependence on
PowerBuilder® and others; Dependence on Proprietary Technology; Risks of
Third-Party Claims for Infringement; Expansion of Indirect Channels;
Potential for Channel Conflict; Voting Control by Management;
Dependence on Key Personnel; and Possible Volatility of Stock Price.
The Company assumes no obligation to update any such forward-looking statement.
It is important to note that the Companys actual results could differ
materially from those in such forward-looking statements.

10



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PowerCerv Corporation
Notes to Condensed Consolidated Financial Statements

Item 2. Management Discussion and Analysis or Plan of Operations (continued):

Revenues:

License Fees. Prior to December 1, 2002, the Companys license fees were
derived from licensing the Companys application products. In addition, any
royalty fees earned were included in license fees. The Company established its
licensing fees using a tiered pricing approach based on the number of
concurrent servers and users. Source code licenses were available at an
additional cost.

License fees decreased 100% in the three and nine-month periods ended September
30, 2003 compared to the same periods in 2002. The decrease was due to the
sale of the Companys operations to ASA.

Service fees.Prior to December 1, 2002, the Companys service fees consisted
of revenue from consulting, education and support and maintenance services for
the Companys application software licenses. Consulting services were primarily
provided on a time and materials basis, education services were generally
priced on a per-student basis and annual support and maintenance were based on
a percentage of related license fees.

Service fees decreased 100% in the three and nine-month periods ended
September 30, 2003 compared to the same periods in 2002 as a result of the sale
to ASA.

Costs and Expenses

Cost of Licenses. Prior to December 1, 2002, the cost of licenses consisted
primarily of production costs, royalties associated with certain modules of the
Companys application products and the amortization of intangible assets. The
cost of license decreased 100% in the three and nine-month periods ended
September 30, 2003 compared to the same periods in 2002 due to the sale to ASA.

Cost of Services. Prior to December 1, 2002, the cost of services consisted
primarily of compensation and travel costs associated with providing
consulting, product support and maintenance, technical services and education.
The cost of services decreased 100% in the three and nine-month periods ended
September 30, 2003 compared to the same periods in 2002 as a result of the sale
to ASA.

11



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PowerCerv Corporation
Notes to Condensed Consolidated Financial Statements

Item 2. Management Discussion and Analysis or Plan of Operations (continued):

Costs and Expenses (continued):

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

Operating Expenses:
    
    Three months ended
    
    Nine months endedSeptember 30,
    
    September 30,2003
    
    Change
    
    2002
    
    2003
    
    Change
    
    2002General and
administrative
    
    $
    31,000
    
    
    
    (88
    %)
    
    $
    257,000
    
    
    $
    131,000
    
    
    
    (85
    %)
    
    $
    847,000Percentage of total
revenues
    
    
    
    
    
    
    
    
    
    
    54
    %
    
    
    
    
    
    
    
    
    
    
    40
    %Sales and marketing
    
    
    
    
    
    
    (100
    %)
    
    $
    111,000
    
    
    
    
    
    
    
    (100
    %)
    
    $
    429,000Percentage of total
revenues
    
    
    
    
    
    
    
    
    
    
    23
    %
    
    
    
    
    
    
    
    
    
    
    20
    %Research and
development
    
    
    
    
    
    
    (100
    %)
    
    $
    153,000
    
    
    
    
    
    
    
    (100
    %)
    
    
    608,000Percentage of total
revenues
    
    
    
    
    
    
    
    
    
    
    32
    %
    
    
    
    
    
    
    
    
    
    
    29
    %


General and Administrative (G&A).G&A expenses primarily include accounting,
legal and related corporate expenses. The decrease in G&A expenses for the
three and nine-month periods ended September 30, 2003, compared to the same
periods in 2002, resulted from the sale of the Companys operations to ASA.

Sales and Marketing. Prior to December 1, 2002, sales and marketing expenses
primarily consisted of compensation paid to sales and marketing personnel;
costs of marketing, including direct mail and telemarketing activities; and
related communications costs. Sales and marketing expense decreased 100% for
the three and nine-month periods ended September 30, 2003 compared to the same
periods in 2002 due to the sale to ASA.

Research and Development(R&D). Prior to December 1, 2002, R&D costs
consisted primarily of compensation and related facilities expenses, software
and equipment costs associated with developing, maintaining and enhancing the
Companys products. Historically, the Company did not capitalize any internal
R&D costs as the costs incurred during the period between the point in time
that technological feasibility is established and a product is released to the
market were insignificant. R&D costs decreased 100% for the three and
nine-month periods ended September 30, 2003 compared to the same periods in
2002 due to the sale to ASA.

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PowerCerv Corporation
Notes to Condensed Consolidated Financial Statements

Item 2. Management Discussion and Analysis or Plan of Operations (continued):

Income taxes.

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
(IRS) that resulted in an assessment of approximately $66,000 of federal tax.
The Company recorded a charge for estimated federal and state income tax and
related interest costs upon receiving the notice of assessment in 2000. During
October 2002, the Company settled this matter with the IRS by agreeing to pay
an additional income tax liability of $63,000 plus applicable interest through
the date of payment. During April 2003, the Company received a Statement of
Adjustment from the IRS regarding the assessment totaling $183,000. This
settlement amount is consistent with the amount provided for federal taxes and
interest in an earlier period. The Company plans to continue addressing this
matter with the IRS in an effort to obtain a reduction in the balance due;
however there can be no assurance that the Company will be successful.

Liquidity and Capital Resources

PowerCerv is dependent on identifying an acceptable merger candidate in order
to continue as a going concern. PowerCervs auditors have issued a going
concern opinion on the financial statements for the year ended December 31,
2002, indicating that the Company had current liabilities in excess of its
current assets and had sold its principal business assets on December 1, 2002
and ceased revenue-generating activities on that date. These factors raise
substantial doubt in PowerCervs ability to continue as a going concern. If
PowerCerv is unable to identify acceptable merger candidates, it is unlikely
that PowerCerv will remain as a viable going concern.

The following tables sets forth, for the periods indicated, certain financial
data regarding the Companys working capital balances, cash and cash
equivalents, cash used in operating activities, cash provided by investing
activities and cash provided by financing activities:

As ofSeptember 30,
    December 31,2003
    
    Change
    
    2002Working capital deficit
    
    $
    (136,000
    )
    
    
    6
    %
    
    $
    (145,000
    )Cash and cash equivalents
    
    $
    21,000
    
    
    
    (91
    %)
    
    $
    245,000


Cash and cash equivalents decreased as of September 30, 2003, compared to
December 31, 2002, due to discontinued operations and losses for the period.

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PowerCerv Corporation
Notes to Condensed Consolidated Financial Statements

For theNine months endedSeptember 30,2003
    
    Change
    
    2002Cash flows used in operating activities
    
    $
    (345,000
    )
    
    
    52
    %
    
    $
    (920,000
    )Cash flows provided by investing activities
    
    $
    121,000
    
    
    
    (34
    )%
    
    $
    281,000Cash flows provided by financing activities
    
    
    
    
    
    
    (100
    )%
    
    $
    131,000


For the nine-month period ended September 30, 2003, cash used by operating
activities totaled $345,000 due principally to no significant operations,
resulting losses for the period and the timing of payments and cash
collections.

The Companys cash provided by investing activities totaled $121,000 and
$183,000 for the nine-month periods ended September 30, 2003 and 2002,
respectively, principally due to payments received on notes receivable.

The Companys cash provided by financing activities totaled $131,000 for the
nine-month period ended September 30, 2002, due to payment received on notes
receivable of $85,000 associated with convertible preferred stock issued in
2001 and loans from officers of $46,000.

At September 30, 2003, the Companys primary source of liquidity consisted of
its cash and cash equivalents balance of $21,000.

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.

See Liquidity and Capital Resources and Forward Looking Statements and
Associated ConsiderationsLiquidity as set forth in the Companys 2002 Annual
Report.

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PowerCerv Corporation
Notes to Condensed Consolidated Financial Statements

ITEM 3. CONTROLS AND PROCEDURES

As required by Rule 13a-15 under the Securities Exchange Act of1934 (the
Exchange Act), the Company carried out an evaluation of the effectiveness of
the design and operation of the disclosure controls and procedures during the
period covered by this report. This evaluation was carried out under the
supervision and with the participation of the Companys Chairman. Based upon
that evaluation, the Chairman concluded that the disclosure controls and
procedures are effective in timely alerting management to material information
relating to the Company required to be included in our periodic SEC filings.
There have been no significant changes in the internal controls or in other
factors that could significantly affect internal controls subsequent to the
date the evaluation was carried out.

Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in the Companys
reports filed or submitted under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities
and Exchange Commissions rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed in the Companys reports filed under the
Exchange Act is accumulated and communicated to the Chairman, to allow timely
decisions regarding required disclosure.

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PowerCerv Corporation
Notes to Condensed Consolidated Financial Statements

Part II. Other Information

Item 1. Legal Proceedings

The Company, in the normal course of business, may also be subject
to miscellaneous legal proceedings.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

31.1 Certification of Chairman under Rule 13a  14(a).

32.1 Certification of Chairman pursuant to 18 U.S.C. Section 1350.

(b) Reports on Form 8-K

None

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PowerCerv Corporation

Form 10-QSB

(for the quarterly period ended September 30, 2003)

Signatures

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

PowerCerv CorporationDate: November 13, 2003
    
    /s/ John S. McMullenJohn S. McMullenChairman, Principal Financial Officer
and Principal Accounting Officer
(Duly Authorized Officer)


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