---



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



FORM 10-Q

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

For the quarterly period ended March 31, 2000

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

400 North Ashley Drive, Suite 2700, Tampa, Florida 33602
(Address of principal executive offices, including zip code)

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

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

As of May 8, 2000, there were 13,811,210 shares of the registrants common
stock, $.001 par value, outstanding.







---



---



PowerCerv Corporation
Form 10-Q

Index

|                                                                    |                                                                                                                   |  |    |    | 
|------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- |  | -- | -- | 
|Part I. Financial Information                                       | Page                                                                                                             
|                                                                   
|Item 1. Financial Statements                                       
|                                                                   
|                                                                    | Condensed Consolidated Balance Sheets as of March 31, 2000 (unaudited)
   and December 31, 1999                   |  |    | 2  | 
|                                                                   
|                                                                    | Condensed Consolidated Statements of Operations for the Three Months Ended
   March 31, 2000 and 1999 (unaudited) |  |    | 3  | 
|                                                                   
|                                                                    | Condensed Consolidated Statements of Cash Flows for the Three Months Ended
   March 31, 2000 and 1999 (unaudited) |  |    | 4  | 
|                                                                   
|                                                                    | Notes to Condensed Consolidated Financial Statements (unaudited)                                                  |  |    | 5  | 
|                                                                   
|Item 2. Managements Discussion and Analysis of Financial Condition
|                                                                    | and Results of Operations                                                                                         |  |    | 10 | 
|                                                                   
|Item 3. Quantitative and Qualitative Disclosure of Market Risk      |                                                                                                                   |  | 17 |   
|                                                                   
|Independent Accountants Review Report                              |                                                                                                                   |  | 18 |   
|                                                                   
|                                                                   
|Part II. Other Information                                         
|                                                                   
|Item 1. Legal Proceedings                                           |                                                                                                                   |  | 19 |   
|                                                                   
|Item 6. Exhibits and Reports on Form 8-K                            |                                                                                                                   |  | 19 |   
|                                                                   
|                                                                   
|Signatures                                                          |                                                                                                                   |  | 20 |   

1



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Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

PowerCerv Corporation

Condensed Consolidated Balance Sheets(In thousands)

|                                     |                                                     |                                            |              |       |        |  |        |       |        | 
|------------------------------------ | --------------------------------------------------- | ------------------------------------------ | ------------ | ----- | ------ |  | ------ | ----- | ------ | 
|                                     | March 31,                                           |                                            | December 31,
|                                     | 2000                                                |                                            | 1999        
|                                     |                                                     |                                            |             
|                                     | (unaudited)                                        
|Assets                              
|                                    
|                                    
|                                    
|                                    
|Current assets:                     
|                                    
|                                    
|                                    
|                                    
|                                     | Cash and cash equivalents                           |                                            | $            | 5,021 |        |  | $      | 6,224 |       
|                                    
|                                    
|                                    
|                                    
|                                     | Accounts receivable, net of allowance of $1,674 and
|
|                                     |                                                     | $1,545, respectively                       |              |       | 4,857  |  |        |       | 6,952  | 
|                                    
|                                    
|                                    
|                                    
|                                     | Other current assets                                |                                            |              | 258   |        |  |        | 193   |       
|                                     |                                                     |                                            |              |       |        |  |        |      
|                                     |                                                     | Total current assets                       |              |       | 10,136 |  |        |       | 13,369 | 
|                                    
|                                    
|                                    
|                                    
|Property and equipment, net          |                                                     |                                            | 1,095        |       |        |  | 1,231  |      
|                                    
|                                    
|                                    
|                                    
|Intangible assets, net               |                                                     |                                            | 419          |       |        |  | 321    |      
|                                    
|                                    
|                                    
|                                    
|Investment in third party            |                                                     |                                            | 500          |       |        |  | 500    |      
|                                    
|                                    
|                                    
|                                    
|Notes receivable, net                |                                                     |                                            | 1,130        |       |        |  | 1,037  |      
|                                    
|                                    
|                                    
|                                    
|Deposits and other assets            |                                                     |                                            | 75           |       |        |  | 99     |      
|                                     |                                                     |                                            |              |       |        |  |        |      
|                                     |                                                     | Total assets                               |              | $     | 13,355 |  |        | $     | 16,557 | 
|                                     |                                                     |                                            |              |       |        |  |        |      
|Liabilities and Shareholders Equity
|                                    
|                                    
|                                    
|                                    
|Current liabilities:                
|                                    
|                                    
|                                    
|                                    
|                                     | Accounts payable                                    |                                            | $            | 580   |        |  | $      | 489   |       
|                                    
|                                    
|                                    
|                                    
|                                     | Accrued expenses                                    |                                            |              | 2,046 |        |  |        | 2,087 |       
|                                    
|                                    
|                                    
|                                    
|                                     | Deferred revenue                                    |                                            |              | 1,779 |        |  |        | 2,001 |       
|                                     |                                                     |                                            |              |       |        |  |        |      
|                                     |                                                     | Total current liabilities                  |              |       | 4,405  |  |        |       | 4,577  | 
|                                    
|                                    
|                                    
|                                    
|Deferred gain on sale of business    |                                                     |                                            | 827          |       |        |  | 827    |      
|                                    
|                                    
|                                    
|                                    
|Shareholders equity                 |                                                     |                                            | 8,123        |       |        |  | 11,153 |      
|                                     |                                                     |                                            |              |       |        |  |        |      
|                                    
|                                    
|                                    
|                                    
|                                     |                                                     | Total liabilities and shareholders equity |              | $     | 13,355 |  |        | $     | 16,557 | 
|                                     |                                                     |                                            |              |       |        |  |        |      

See accompanying independent accountants review report and notes to condensed
consolidated financial statements.

2



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PowerCerv Corporation

Condensed Consolidated Statements of Operations (Unaudited)(In thousands, except per share amounts)

|                                                      |                                |                   |                                                         |         |   |                              |        |       |       |        |        | 
|----------------------------------------------------- | ------------------------------ | ----------------- | ------------------------------------------------------- | ------- | - | ---------------------------- | ------ | ----- | ----- | ------ | ------ | 
|                                                      |                                |                   |                                                         |         |   | Three months ended March 31,
|                                                      |                                |                   |                                                         |         |   |                             
|                                                      |                                |                   |                                                         |         |   | 2000                         |        | 1999 
|                                                      |                                |                   |                                                         |         |   |                              |        |      
|Revenues:                                            
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | License fees                   |                   | $                                                       | 319     |   |                              | $      | 1,453 |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Service fees                   |                   |                                                         | 2,187   |   |                              |        | 2,727 |      
|                                                      |                                |                   |                                                         |         |   |                              |        |      
|                                                     
|                                                      |                                |                   | Total revenues                                          |         |   | 2,506                        |        |       |       | 4,180  |       
|                                                      |                                |                   |                                                         |         |   |                              |        |      
|                                                     
|Costs and expenses:                                  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Cost of licenses               |                   |                                                         | 138     |   |                              |        | 178   |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Cost of services               |                   |                                                         | 1,694   |   |                              |        | 1,990 |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | General and administrative     |                   |                                                         | 1,261   |   |                              |        | 1,215 |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Sales and marketing            |                   |                                                         | 1,755   |   |                              |        | 2,166 |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Research and development       |                   |                                                         | 1,220   |   |                              |        | 1,158 |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Work force reduction and other |                   |                                                         |        |   |                              |        | 485   |      
|                                                      |                                |                   |                                                         |         |   |                              |        |      
|                                                     
|                                                      |                                |                   | Total costs and expenses                                |         |   | 6,068                        |        |       |       | 7,192  |       
|                                                      |                                |                   |                                                         |         |   |                              |        |      
|                                                     
|                                                      |                                |                   | Operating loss                                          |         |   | (3,562                       | )      |       |       | (3,012 | )     
|                                                     
|Interest income (expense), net                        |                                |                   | (91                                                     | )       |   |                              | 50     |      
|                                                     
|Operations disposed of during 1999                   
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                | Revenue           |                                                         |         |  |                              |        |       | 2,464 |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                | Cost and expenses |                                                         |         |  |                              |        |       | 2,240 |       
|                                                      |                                |                   |                                                         |         |   |                              |        |      
|                                                      |                                |                   |                                                        |         |   |                              | 224    |      
|                                                     
|Gain on sale of business                              |                                |                   |                                                        |         |   |                              | 2,996  |      
|                                                      |                                |                   |                                                         |         |   |                              |        |      
|                                                      |                                |                   |                                                         |         |   |                              | 3,220  |      
|                                                     
|                                                      |                                |                   | Income (loss) before income taxes                       |         |   | (3,653                       | )      |       |       | 258    |       
|                                                     
|Income tax expense                                    |                                |                   | 248                                                     |         |   |                              |       |      
|                                                     
|                                                      |                                |                   | Net income (loss) and comprehensive
      income (loss) |         | $ | (3,901                       | )      |       | $     | 258    |       
|                                                      |                                |                   |                                                         |         |   |                              |        |      
|                                                     
|Basic and diluted net income (loss) per share         |                                | $                 | (0.29                                                   | )       |   | $                            | 0.02   |      
|                                                      |                                |                   |                                                         |         |   |                              |        |      
|                                                     
|Shares used in computing net income (loss) per share:
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                |                   |                                                         | Basic   |   |                              | 13,649 |       |       |        | 13,827 | 
|                                                      |                                |                   |                                                         |         |   |                              |        |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                |                   |                                                         | Diluted |   |                              | 13,649 |       |       |        | 14,148 | 
|                                                      |                                |                   |                                                         |         |   |                              |        |      

See accompanying independent accountants review report and notes to condensed
consolidated financial statements.

3



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PowerCerv Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited)(In thousands)

|                                                     |                                            |                                           |                                                                    |        |                              |        |       |       |        |        |  
|---------------------------------------------------- | ------------------------------------------ | ----------------------------------------- | ------------------------------------------------------------------ | ------ | ---------------------------- | ------ | ----- | ----- | ------ | ------ | -
|                                                     |                                            |                                           |                                                                    |        | Three months ended March 31,
|                                                     |                                            |                                           |                                                                    |        |                             
|                                                     |                                            |                                           |                                                                    |        | 2000                         |        | 1999 
|                                                     |                                            |                                           |                                                                    |        |                              |        |      
|Cash flows from operating activities:               
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net income (loss)                          |                                           | $                                                                  | (3,901 | )                            |        | $     | 258   |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Adjustments to reconcile net income (loss)
|                                                     |                                            | to net cash used in operating activities:
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                            | Depreciation and amortization             |                                                                    |        | 197                          |        |       |       | 390    |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                            | Gain on sale of business                  |                                                                    |        |                             |        |       |       | (2,996 | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                            | Deferred revenue                          |                                                                    |        | (221                         | )      |       |       | (603   | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                            | Changes in assets and liabilities         |                                                                    |        | 2,010                        |        |       |       | 695    |       
|                                                     |                                            |                                           |                                                                    |        |                              |        |       |      
|                                                     |                                            |                                           | Net cash flows used in operating activities                        |        |                              | (1,915 | )     |       |        | (2,256 | )
|                                                     |                                            |                                           |                                                                    |        |                              |        |       |      
|Cash flows from investing activities:               
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Sale of business                           |                                           |                                                                    |       |                              |        |       | 2,455 |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Return of investment in third party        |                                           |                                                                    |       |                              |        |       | 250   |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Purchase of intangible asset               |                                           |                                                                    | (100   | )                            |        |       |      |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Purchases of property and equipment, net   |                                           |                                                                    | (59    | )                            |        |       | (136  | )     
|                                                     |                                            |                                           |                                                                    |        |                              |        |       |      
|                                                     |                                            |                                           | Net cash flows (used in) provided by
         investing activities |        |                              | (159   | )     |       |        | 2,569  |  
|                                                     |                                            |                                           |                                                                    |        |                              |        |       |      
|                                                    
|                                                    
|                                                    
|                                                    
|Cash flows from financing activities:               
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net proceeds from issuance of common stock |                                           |                                                                    | 871    |                              |        |       | 20    |       
|                                                     |                                            |                                           |                                                                    |        |                              |        |       |      
|                                                     |                                            |                                           | Net cash flows provided by financing activities                    |        |                              | 871    |       |       |        | 20     |  
|                                                     |                                            |                                           |                                                                    |        |                              |        |       |      
|Net increase (decrease) in cash and cash equivalents |                                            |                                           | (1,203                                                             | )      |                              |        | 333   |      
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and cash equivalents, beginning of period       |                                            |                                           | 6,224                                                              |        |                              |        | 6,594 |      
|                                                     |                                            |                                           |                                                                    |        |                              |        |       |      
|Cash and cash equivalents, end of period             |                                            | $                                         | 5,021                                                              |        |                              | $      | 6,927 |      
|                                                     |                                            |                                           |                                                                    |        |                              |        |       |      

See accompanying independent accountants review report and notes to condensed
consolidated financial statements.

4



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PowerCerv Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

A.  Basis of Presentation

The condensed consolidated balance sheet of PowerCerv Corporation and its
subsidiary (collectively, the Company) as of March 31, 2000, and the
condensed consolidated statements of operations for the three months ended
March 31, 2000 and 1999 and the condensed consolidated statements of cash flows
for the three months ended March 31, 2000 and 1999 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 March 31, 2000, and
for all periods presented have been made. The condensed consolidated balance
sheet at December 31, 1999, has been derived from the Companys audited
consolidated financial statements at that date.

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, 1999, included in the Companys 1999 Annual Report on Form 10-K/A filed
with the SEC on April 13, 2000 (1999 Annual Report).

The results of operations for the three months ended March 31, 2000, are
not necessarily indicative of results that may be expected for any other
interim period or for the full fiscal year.

B.  Revenue Recognition

License fees represent revenue from the licensing of the Companys
Enterprise Resource Planning (ERP) application products and, to a lesser
extent, its development tools. License fees also include royalties earned on
the Companys ERP application products and related intellectual properties.
Service fees represent revenue from consulting services, education services and
support and maintenance services.

The Company recognizes 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.

5



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PowerCerv Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

C.  Earnings (Loss) Per Share Data

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

|            |                                                                             |   |                    |        |      |   |      |        | 
|----------- | --------------------------------------------------------------------------- | - | ------------------ | ------ | ---- | - | ---- | ------ | 
|            | (dollars in thousands, except per share amounts)                           
|           
|            |                                                                             |   | Three Months Ended
|            |                                                                             |   | March 31,         
|            |                                                                             |   |                   
|            |                                                                             |   | 2000               |        | 1999
|            |                                                                             |   |                    |        |     
|Basic:     
|           
|           
|           
|           
|            | Net income (loss)                                                           |   | $                  | (3,901 | )    |   | $    | 258    | 
|            |                                                                             |   |                    |        |      |   |      |       
|           
|           
|           
|           
|            | Average shares outstanding                                                  |   |                    | 13,649 |      |   |      | 13,827 | 
|            |                                                                             |   |                    |        |      |   |      |       
|Basic EPS   |                                                                             | $ | (0.29              | )      |      | $ | 0.02 |       
|            |                                                                             |   |                    |        |      |   |      |       
|Diluted:   
|           
|           
|           
|           
|            | Net income (loss)                                                           |   | $                  | (3,901 | )    |   | $    | 258    | 
|            |                                                                             |   |                    |        |      |   |      |       
|            | Average shares outstanding                                                  |   |                    | 13,649 |      |   |      | 13,827 | 
|           
|           
|           
|           
|            | Net effect of dilutive stock options
   based on the treasury stock method |   |                    |       |      |   |      | 321    | 
|            |                                                                             |   |                    |        |      |   |      |       
|            | Totals                                                                      |   |                    | 13,649 |      |   |      | 14,148 | 
|            |                                                                             |   |                    |        |      |   |      |       
|Diluted EPS |                                                                             | $ | (0.29              | )      |      | $ | 0.02 |       
|            |                                                                             |   |                    |        |      |   |      |       

Common stock equivalents in the three-month period ended March 31, 2000,
were anti-dilutive due to the net loss sustained by the Company during this
period, thus the diluted net loss per share in this period is the same as the
basic net loss per share. During the quarter ended March 31, 2000, stock
options and warrants were exercised to acquire 383,499 shares at an average
exercise price of $2.29 per share.

D.  Accrued Expenses

Accrued expenses consist of the following:

|                            |  |                        |       |              |  |   |       | 
|--------------------------- |  | ---------------------- | ----- | ------------ |  | - | ----- | 
|                            |  | (dollars in thousands)
|                           
|                            |  | March 31,              |       | December 31,
|                            |  | 2000                   |       | 1999        
|                            |  |                        |       |             
|Compensation                |  | $                      | 766   |              |  | $ | 1,139 | 
|                           
|                           
|                           
|                           
|Severance and related costs |  |                        |      |              |  |   | 45    | 
|                           
|                           
|                           
|                           
|Other                       |  |                        | 1,280 |              |  |   | 903   | 
|                            |  |                        |       |              |  |   |       | 
|                            |  | $                      | 2,046 |              |  | $ | 2,087 | 
|                            |  |                        |       |              |  |   |       | 

6



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PowerCerv Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)



E.  Commitments

The Company has entered into employment agreements with certain of its
executive officers. Information regarding these agreements is available in the
Companys 1999 Annual Report.

F.  Contingencies

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 their 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.

G.  Income Taxes

During the first quarter of 2000, the Company recorded a charge related to
estimated federal and state income tax and interest totaling $359 resulting
from an Internal Revenue Service examination of the Companys 1996 and 1995
federal income tax returns. The amount allocated to tax expense was $209, and
$150 was allocated to interest expense. The Internal Revenue Service has rendered
an unfavorable assessment resulting in the estimated exposure amount. The
Company will continue to appeal this assessment.

The Company also recorded $39 of income tax expense related to state
income taxes and increased its deferred income tax asset valuation allowance
for the three-month period ended March 31, 2000, to offset the tax benefit
applicable to the loss incurred during the period. The decision to fully
reserve the deferred income tax asset was primarily the result of the Companys
continued losses from operations.

For the three-month period ended March 31, 1999, the Company recorded no
federal income tax expense since its net operating loss carryforwards offset
any tax expense applicable to the net income for that period.

7



---



PowerCerv Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)



H.  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, support and maintenance services and the
license product segment provides ERP application products.

The following tables provide the various segment data (dollars in
thousands):

|                                     |  |                                                 |        |          |  |             |       |       |  |  |        |   |  |   |        |  
|------------------------------------ |  | ----------------------------------------------- | ------ | -------- |  | ----------- | ----- | ----- |  |  | ------ | - |  | - | ------ | -
|                                     |  | For the Three-month Period Ended March 31, 2000
|                                     |  |                                                
|                                     |  | License                                        
|                                     |  | Product                                         |        | Services |  | Unallocated |       | Total
|                                     |  |                                                
|Revenues from external
    Customers |  | $                                               | 319    |          |  | $           | 2,187 |       |  |  |       |   |  | $ | 2,506  |  
|                                    
|                                    
|                                    
|                                    
|Segment profit (loss)                |  |                                                 | (2,794 | )        |  |             | 493   |       |  |  | (1,600 | ) |  |   | (3,901 | )

|                                     |  |                                                 |        |          |  |             |       |       |  |  |       |  |  |   |       | 
|------------------------------------ |  | ----------------------------------------------- | ------ | -------- |  | ----------- | ----- | ----- |  |  | ----- |  |  | - | ----- | 
|                                     |  | For the Three-month Period Ended March 31, 1999
|                                     |  |                                                
|                                     |  | License                                        
|                                     |  | Product                                         |        | Services |  | Unallocated |       | Total
|                                     |  |                                                
|Revenues from external
    Customers |  | $                                               | 1,453  |          |  | $           | 2,727 |       |  |  |      |  |  | $ | 4,180 | 
|                                    
|                                    
|                                    
|                                    
|Segment profit (loss)                |  |                                                 | (2,049 | )        |  |             | 737   |       |  |  | 1,570 |  |  |   | 258   | 

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

|                                 |  |                            |        |      |  |   |        |  
|-------------------------------- |  | -------------------------- | ------ | ---- |  | - | ------ | -
|                                 |  | For the Three-month Period
|                                 |  | Ended March 31,           
|                                 |  |                           
|                                 |  | 2000                       |        | 1999
|                                 |  |                            |        |     
|General and administrative costs |  | $                          | (1,261 | )    |  | $ | (1,215 | )
|                                
|                                
|                                
|                                
|Work force reduction             |  |                            |       |      |  |   | (485   | )
|                                
|                                
|                                
|                                
|Interest income (expense), net   |  |                            | (91    | )    |  |   | 50     |  
|                                
|                                
|                                
|                                
|Operations disposed of in 1999   |  |                            |       |      |  |   | 224    |  
|                                
|                                
|                                
|                                
|Gain on sale of business         |  |                            |       |      |  |   | 2,996  |  
|                                
|                                
|                                
|                                
|Income tax expense               |  |                            | (248   | )    |  |   |       |  
|                                 |  |                            |        |      |  |   |        |  
|                                 |  | $                          | (1,600 | )    |  | $ | 1,570  |  

8



---



PowerCerv Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)



I.  Work Force Reduction and Other

During the first quarter of 1999, the Company recorded a charge related to
a work force reduction and other related expenses totaling $485. This amount
included severance and related costs of $391 (11 employees, primarily
management level) and costs of $94 related to office downsizings or closings.
As of March 31, 2000, the Company had paid all of the $485 charged to expense.

J.  Sale of Business

Effective March 31, 1999, the Company sold its general consulting and
general education business (consulting and education services other than its
application-related services) to a third party. Consideration totaled
approximately $10 million and consisted of a combination of cash, the Companys
common stock and promissory notes. A portion of the gain relates to a $827 note receivable maturing in 2004
and will be recognized upon collection of the note.

9



---



PowerCerv Corporation

Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations(dollars in thousands)



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 services,
primarily relating to the Companys applications, 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 Plusapplication
products. On March 31, 1999 the company sold its general consulting and
general education business (consulting and education services other than its
application-related services ) to a third party. The results of operations for
the first quarter of 1999 have been reclassified to conform with the current
quarters presentations. It also finalized its 1998 strategy to discontinue
technology resales of various third-party software products.

License fees represent 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, 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. 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.

10



---



PowerCerv Corporation

Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations(dollars in thousands)



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.

In June, 1998, the Financial Accounting Standards Board issued statement
No. 133, Accounting for Derivative Instruments and Hedging Activities, as
amended, which is required to be adopted in years beginning after June 15,
2000. Because of the Companys minimal use of derivatives, management does not
anticipate that the adoption of the new statement will have a significant
effect on earnings or the financial position of the Company.

This Quarterly Report on Form 10-Q 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 1999 Annual
Report on Form 10K/A filed with the SEC on April 13, 2000, under Managements
Discussion and Analysis of Financial Condition and Results of Operations 
Forward-Looking Statements and Associated Considerations; Fluctuations in
Quarterly Activity and Results of Operations; Competition; Economic and
Market Condition Risks; Impact of the Year 2000; 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.

Results of Operations

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

11



---



PowerCerv Corporation

Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations(dollars in thousands)



|                             |  |                              |       |        |  |      |     |    |  |   |       |   | 
|---------------------------- |  | ---------------------------- | ----- | ------ |  | ---- | --- | -- |  | - | ----- | - | 
|Revenues                     |  | Three months ended March 31,
|                             | 
|                             |  | 2000                         |       | Change |  | 1999
|                             |  |                             
|License fees                 |  | $                            | 319   |        |  |      | (78 | %) |  | $ | 1,453
|                            
|                            
|                            
|                            
|Percentage of total revenues |  |                              | 13    | %      |  |      |     |    |  |   | 35    | %
|                             |  |                             
|Service fees                 |  | $                            | 2,187 |        |  |      | (20 | %) |  | $ | 2,727
|                            
|                            
|                            
|                            
|Percentage of total revenues |  |                              | 87    | %      |  |      |     |    |  |   | 65    | %
|                             |  |                             

License fees. The Companys license fees are derived from licensing the
Companys application products and, to a lesser extent, 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 decreased for the three-month period ended March 31,
2000, compared to the same period in 1999. Management believes the primary reason for the decrease
in license revenue was decreased activity by the Companys potential
customers as they return to normal buying cycles after addressing
their Y2K concerns.
Interest in our products and sales leads were strong, but our
potential customers were not compelled to make decisions in
the first quarter. The difference between quarters also reflects the fact that
in the first quarter of 1999 there was $473 from an internal use license and
OEM agreement with the purchaser of the Companys general consulting and
education business. The Company expects the first quarter will be the
low point in the year for license fee revenues as customers return to normal
review and buying cycles, but there can be no assurance that the Companys
license revenues will increase in accordance with managements expectations.

Services fees.The Companys service fees consist of revenue from
consulting, education and support and maintenance services for the Companys
application 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 are based on a percentage
of related license fees. Management believes that the decrease in
service revenue was also impacted by Y2K
concerns. Management believes that companies focused their efforts on
getting new systems running before December 31, 1999, which
resulted in substantially lower license purchases and a general
decrease in consulting services and maintenance and support services in the first quarter of
2000. The Company believes that as revenue from licensing its application
products increases, the demand for application consulting services (and related
revenue) will increase correspondingly, as will service fees for maintenance
and support; however, there can be no assurance that license revenue will
increase or that if it does increase, revenue from service fees will increase
correspondingly.

12



---



PowerCerv Corporation

Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations(dollars in thousands)



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 and services:

|                             |  |                              |       |        |  |      |     |    |  |   |       |   | 
|---------------------------- |  | ---------------------------- | ----- | ------ |  | ---- | --- | -- |  | - | ----- | - | 
|Cost of revenues             |  | Three months ended March 31,
|                             | 
|                             |  | 2000                         |       | Change |  | 1999
|                             |  |                             
|Cost of license fees         |  | $                            | 138   |        |  |      | (22 | %) |  | $ | 178  
|                            
|                            
|                            
|                            
|Gross profit percentage      |  |                              | 57    | %      |  |      |     |    |  |   | 88    | %
|                             |  |                             
|Cost of service              |  | $                            | 1,694 |        |  |      | (15 | %) |  | $ | 1,990
|                            
|                            
|                            
|                            
|Percentage of total revenues |  |                              | 23    | %      |  |      |     |    |  |   | 27    | %
|                             |  |                             

Cost of licenses.The cost of licenses consists primarily of production
costs, royalties associated with third-party products sold with the Companys
products, the cost associated with resales made by VARs, and the amortization
of intangible assets. The cost of licenses for the first quarter of 2000
decreased 22% compared to 1999 primarily resulting from lower amortization
expense and increased royalties associated with third-party products sold
with the Companys products. The decrease in gross profit percentage is due
to significantly lower license fee revenue and increased royalties for the
current period.

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
15% in the first quarter of 2000 compared to 1999 primarily due to a lower
compensation expense for the period.
The decrease in gross profit percentage is primarily due to lower
use of consultants resulting from lower service activity in the current period.

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

|                             |  |                              |       |        |  |      |       |  |  |   |       |   | 
|---------------------------- |  | ---------------------------- | ----- | ------ |  | ---- | ----- |  |  | - | ----- | - | 
|Operating expenses:          |  | Three months ended March 31,
|                             | 
|                             |  | 2000                         |       | Change |  | 1999
|                             |  |                             
|General and administrative   |  | $                            | 1,261 |        |  |      | 3%    |  |  | $ | 1,215
|                            
|                            
|                            
|                            
|Percentage of total revenues |  |                              | 50    | %      |  |      |       |  |  |   | 29    | %
|                             |  |                             
|Sales and marketing          |  |                              | 1,755 |        |  |      | (18%) |  |  |   | 2,166
|                            
|                            
|                            
|                            
|Percentage of total revenues |  |                              | 70    | %      |  |      |       |  |  |   | 52    | %
|                             |  |                             
|Research and development     |  |                              | 1,220 |        |  |      | 5%    |  |  |   | 1,158
|                            
|                            
|                            
|                            
|Percentage of total revenues |  |                              | 49    | %      |  |      |       |  |  |   | 28    | %
|                             |  |                             

General and Administrative (G&A).G&A expenses include compensation,
communications, accounting, human resources, legal and related facilities
expenses. The increase in G&A expenses for the three-month period ended March
31, 2000, compared to the three-month period ended March 31, 1999, is
primarily due to higher bad debt expense, which was offset to a
certain extent by lower compensation expense.
The G&A expense percentage of total revenue increased due to the fixed nature
of G&A expenses and a reduction in total revenue for the period.

13



---



PowerCerv Corporation



Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations(dollars in thousands)

Sales and Marketing.Sales and marketing expenses primarily consist of
compensation paid to sales and marketing personnel; costs of
marketing; including direct
mail and telemarketing activities; costs of public relations,
including trade shows and
conferences; and related communications costs. Sales and marketing costs
decreased 18% for the three-month period ended March 31, 2000, as compared to
the same period in 1999 as a result of lower sales commissions earned on
license revenue in the current period, which was offset to a certain
extent by increased advertising and
tradeshow costs. The sales and marketing expense as a percentage of total
revenue increased due to lower license and service revenue for the period.
During the first quarter of 2000, the Company increased its investment in
marketing programs focused on increasing awareness of the Company and its
products and expansions of the Companys marketing and telemarketing
organizations in Tampa. There can be no assurance that these investments will
result in higher revenues for the Company.

Research and Development (R&D).R&D costs consist primarily of
compensation and related facilities and equipment costs associated with
developing, maintaining and enhancing the Companys products. Since inception,
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. R&D costs increased 5% for the three-month period ended March
31, 2000, as compared to the same period in 1999, primarily due to increased
personnel costs. The R&D cost percentage of total revenue increased due to the
fixed nature of R&D costs and decreased total revenue for the period.

Work Force Reduction and Other.During the first quarter of 1999, the
Company recorded a charge related to a work force reduction and other related
expenses totaling $485. This amount included severance and related costs of
$391 (11 employees, primarily management level) and costs of $94 related to
office downsizings or closings. As of March 31,
2000, the Company had paid all of the total $485 charged to expense.

Income taxes.During the first quarter of 2000, the Company recorded a
charge related to estimated federal and state income tax and interest totaling
$359 resulting from an Internal Revenue Service examination of the Companys
1996 and 1995 federal income tax returns. The amount allocated to tax expense
was $209, and $150 was allocated to interest expense. The Internal Revenue
Service has rendered an unfavorable assessment resulting in the estimated
exposure amount. The Company will continue to appeal this assessment.

The Company also recorded $39 of income tax expense related to state
income taxes and increased its deferred income tax asset valuation allowance
for the three-month period ended March 31, 2000, to offset the tax benefit
applicable to the loss incurred during the period. The decision to fully
reserve the deferred income tax asset was primarily the result of the Companys
continued losses from operations.

14



---



PowerCerv Corporation

Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations(dollars in thousands)



For the three-month period ended March 31, 1999, the Company recorded no
federal income tax expense since its net operating loss carryforwards offset
any tax expense applicable to the net income for that period.

Liquidity and Capital Resources

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 and cash used in investing
activities:

|                          |       |           |       |        |  |      |     |              |  |   |       | 
|------------------------- | ----- | --------- | ----- | ------ |  | ---- | --- | ------------ |  | - | ----- | 
|                          | As of
|                          |       | March 31, |       |        |  |      |     | December 31,
|                          |       | 2000      |       | Change |  | 1999
|                          |       |          
|Working capital           |       | $         | 5,731 |        |  |      | (35 | %)           |  | $ | 8,792 | 
|                         
|                         
|                         
|                         
|Cash and cash equivalents |       | $         | 5,021 |        |  |      | (19 | %)           |  | $ | 6,224 | 

Working capital and cash and cash equivalents decreased as of March 31,
2000, compared to December 31, 1999, due to significantly reduced revenues
resulting in lower accounts receivable and operating losses for the quarter.

|                                                      |  |                              |        |        |  |         |      |   |  |  |        |  
|----------------------------------------------------- |  | ---------------------------- | ------ | ------ |  | ------- | ---- | - |  |  | ------ | -
|                                                      |  |                              |        |        |  | For the
|                                                      |  | Three months ended March 31,
|                                                      |  |                             
|                                                      |  | 2000                         |        | Change |  | 1999   
|                                                      |  |                              |        |        |  |        
|Cash flows used in operating activities               |  |                              | (1,915 | )      |  |         | 15   | % |  |  | (2,256 | )
|                                                     
|                                                     
|                                                     
|                                                     
|Cash flows (used in) provided by investing activities |  |                              | (159   | )      |  |         | >100 | % |  |  | 2,569  |  
|                                                     
|                                                     
|                                                     
|                                                     
|Cash flows provided by financing activities           |  |                              | 871    |        |  |         | >100 | % |  |  | 20     |  

For the three-month period ended March 31, 2000, cash used by operating
activities totaled $1,915, due principally to lower than anticipated license
revenues and subsequent operating losses for the quarter.

The Companys cash used in investing activities totaled $159 for the
three-month period ended March 31, 2000, as a result of investments in software
and fixed assets. The Companys cash in 1999 was principally
provided by proceeds from the sale of the Companys general consulting and general
education business ($2,455 in the first quarter of 1999) and proceeds from a
return of the Companys investment in a third party ($250), offset by purchases
of property and equipment ($136).

At March 31, 2000, the Companys primary source of liquidity consisted of
its cash and cash equivalents balance of $5,021 and its short-term accounts
receivable balance of $4,857. The Company has an agreement with its bank for a credit facility of $10 million (1999 Line of Credit). As of March 31, 2000,
there was no outstanding balance against this facility.

15



---



PowerCerv Corporation

Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations(dollars in thousands)



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 credit agreement requires
the Company to maintain certain financial ratios. 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. 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 is currently seeking a renewal of at least a
portion of the 1999 Line of Credit.

If the Companys existing cash
reserves prove insufficient to fund its future cash requirements, and
the Company is not able to renew its Line of Credit upon expiration
or is unable to borrow against its 1999 Line of Credit if renewed,
the Company may be required to seek alternative capital funding
sources. 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. If the Company fails to maintain
sufficient liquidity to fund its future cash requirements, the
Companys ability to pursue its business strategy during the year
2000 and thereafter would be adversely affected. See Forward Looking Statements and Associated ConsiderationsLiquidity as set
forth in the Companys 1999 Annual Report.

16



---



PowerCerv Corporation

Item 3. Quantitative and Qualitative Disclosure of Market Risk



The Company had no holdings of derivative financial or commodity
instruments at March 31, 2000. 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.

17



---



INDEPENDENT ACCOUNTANTS REVIEW REPORT





The Board of Directors
PowerCerv Corporation

We have reviewed the accompanying condensed consolidated balance sheet of
PowerCerv Corporation as of March 31, 2000, and the related condensed
consolidated statements of operations for the three-month periods ended March
31, 2000 and 1999 and the condensed statements of cash flows for the
three-month periods ended March 31, 2000 and 1999. These financial statements
are the responsibility of the Companys management.

We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with auditing standards generally accepted in the United States,
which will be performed for the full year with the objective of expressing an
opinion regarding the financial statements taken as a whole. Accordingly, we
do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial statements
referred to above for them to be in conformity with accounting principles
generally accepted in the United States.

We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet of PowerCerv
Corporation as of December 31, 1999, and the related consolidated statements of
operations, shareholders equity, and cash flows for the year then ended not
presented herein and in our report dated January 20, 2000, we expressed an
unqualified opinion on those consolidated financial statement. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of December 31, 1999, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.

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

Tampa, Florida
April 13, 2000

18



---



PowerCerv Corporation

Part II. Other Information



Item 1. 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 their 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 6. Exhibits and Reports on Form 8-K

|    |  |                     |                                                                                                                                                                                                                                                                 
|--- |  | ------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Exhibits           
|   
|    |  | 10.1                | 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 1998 Annual
Report).
|   
|    |  | 10.2                | 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 with the SEC on April 13, 1999).                
|   
|    |  | 15.1                | Accountants Letter regarding Unaudited Interim Financial
Information.                                                                                                                                                                                          
|   
|    |  | 27.1                | Financial Data Schedule.                                                                                                                                                                                                                                        
|   
|(b) |  | Reports on Form 8-K
|   
|    |  | None               

19



---



PowerCerv Corporation

Form 10-Q

(for the quarterly period ended March 31, 2000)



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 CORPORATION                                                                          
|                  
|                  
|Date: May 12, 2000 |  | /s/ Marc J. Fratello                                                                           
|                   |  |                                                                                                
|                   |  | Marc J. Fratello,
Chairman of the Board
(Duly Authorized Officer)                               | 
|                  
|                  
|Date: May 12, 2000 |  | /s/ Michael J. Simmons                                                                         
|                   |  |                                                                                                
|                   |  | Michael J. Simmons,
President, Chief Executive Officer
  and Director
(Duly Authorized Officer) | 
|                  
|                  
|Date: May 12, 2000 |  | /s/ Lawrence J. Alves                                                                          
|                   |  |                                                                                                
|                   |  | Lawrence J. Alves,
Chief Financial Officer
(Principal Financial Officer)                        | 

20