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



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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 September 30, 2000

OR

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

For the transition period from ____________ to ______________



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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. Yes[X] No[ ]

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













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TABLE OF CONTENTS



|                                                                                              |  |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|Part I. FINANCIAL INFORMATION                                                                
|Item 1. Financial Statements                                                                 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|Item 3. Quantitative and Qualitative Disclosure of Market Risk                               
|INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
REVIEW REPORT                                      
|Part II. Other Information                                                                   
|Executive Termination Agreement                                                              
|Accnts' Ltr Rgrdng Unaudited Interim Financials                                              
|Financial Data Schedule                                                                      



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PowerCerv Corporation
Form 10-Q

Index

|                                                                    |                                                                                                                                 |  |    |      |  | 
|------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------- |  | -- | ---- |  | 
|                                                                    |                                                                                                                                 |  |    | Page
|                                                                    |                                                                                                                                 |  |    |     
|Part I. Financial Information                                      
|                                                                   
|Item 1. Financial Statements                                       
|                                                                   
|                                                                    | Condensed Consolidated Balance Sheets as of September 30, 2000 (unaudited)
     and December 31, 1999                           |  |    | 2    | 
|                                                                   
|                                                                    | Condensed Consolidated Statements of Operations for the Three and Nine
Months Ended     September 30, 2000 and 1999 (unaudited) |  |    | 3    | 
|                                                                   
|                                                                    | Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
     September 30, 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      |                                                                                                                                 |  | 18 |     
|                                                                   
|Independent Accountants Review Report                              |                                                                                                                                 |  | 19 |     
|                                                                   
|                                                                   
|Part II. Other Information                                         
|                                                                   
|Item 1. Legal Proceedings                                           |                                                                                                                                 |  | 20 |     
|                                                                   
|Item 6. Exhibits and Reports on Form 8-K                            |                                                                                                                                 |  | 20 |     
|                                                                   
|Signatures                                                          |                                                                                                                                 |  | 22 |     

1



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##### Table of Contents









Part I. FINANCIAL INFORMATION







Item 1. Financial Statements

PowerCerv Corporation

Condensed Consolidated Balance Sheets(In thousands)

|                                                                |                                                                          |                                            |       |              |       |  |        |       |        | 
|--------------------------------------------------------------- | ------------------------------------------------------------------------ | ------------------------------------------ | ----- | ------------ | ----- |  | ------ | ----- | ------ | 
|                                                                |                                                                          | September 30,                              |       | December 31,
|                                                                |                                                                          | 2000                                       |       | 1999        
|                                                                |                                                                          |                                            |       |             
|                                                                |                                                                          |                                            |       | (unaudited) 
|Assets                                                         
|                                                               
|                                                               
|                                                               
|                                                               
|Current assets:                                                
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Cash and cash equivalents                                                |                                            | $     | 2,697        |       |  | $      | 6,224 |       
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Accounts receivable, net of allowance of $1,509 and
$1,545, respectively |                                            |       | 3,938        |       |  |        | 6,952 |       
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Other current assets                                                     |                                            |       | 429          |       |  |        | 193   |       
|                                                                |                                                                          |                                            |       |              |       |  |        |      
|                                                                |                                                                          | Total current assets                       |       |              | 7,064 |  |        |       | 13,369 | 
|                                                               
|                                                               
|                                                               
|                                                               
|Property and equipment, net                                     |                                                                          |                                            | 680   |              |       |  | 1,231  |      
|                                                               
|                                                               
|                                                               
|                                                               
|Intangible assets, net                                          |                                                                          |                                            | 567   |              |       |  | 321    |      
|                                                               
|                                                               
|                                                               
|                                                               
|Investment in third party                                       |                                                                          |                                            |      |              |       |  | 500    |      
|                                                               
|                                                               
|                                                               
|                                                               
|Notes receivable, net of allowance of $130 and $0,
respectively |                                                                          |                                            | 1,161 |              |       |  | 1,037  |      
|                                                               
|                                                               
|                                                               
|                                                               
|Deposits and other assets                                       |                                                                          |                                            | 41    |              |       |  | 99     |      
|                                                                |                                                                          |                                            |       |              |       |  |        |      
|                                                                |                                                                          | Total assets                               |       | $            | 9,513 |  |        | $     | 16,557 | 
|                                                                |                                                                          |                                            |       |              |       |  |        |      
|Liabilities and Shareholders Equity                           
|                                                               
|                                                               
|                                                               
|                                                               
|Current liabilities:                                           
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Accounts payable                                                         |                                            | $     | 601          |       |  | $      | 489   |       
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Accrued expenses                                                         |                                            |       | 2,273        |       |  |        | 2,087 |       
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Deferred revenue                                                         |                                            |       | 1,574        |       |  |        | 2,001 |       
|                                                                |                                                                          |                                            |       |              |       |  |        |      
|                                                                |                                                                          | Total current liabilities                  |       |              | 4,448 |  |        |       | 4,577  | 
|                                                               
|                                                               
|                                                               
|                                                               
|Deferred gain on sale of business                               |                                                                          |                                            | 827   |              |       |  | 827    |      
|                                                               
|                                                               
|                                                               
|                                                               
|Shareholders equity                                            |                                                                          |                                            | 4,238 |              |       |  | 11,153 |      
|                                                                |                                                                          |                                            |       |              |       |  |        |      
|                                                                |                                                                          | Total liabilities and shareholders equity |       | $            | 9,513 |  |        | $     | 16,557 | 
|                                                                |                                                                          |                                            |       |              |       |  |        |      

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

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PowerCerv Corporation

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

|                                                      |                                |                          |                                                   |         |       |                    |        |                   |       |       |        |       |      |        |        |       |       |        |        | 
|----------------------------------------------------- | ------------------------------ | ------------------------ | ------------------------------------------------- | ------- | ----- | ------------------ | ------ | ----------------- | ----- | ----- | ------ | ----- | ---- | ------ | ------ | ----- | ----- | ------ | ------ | 
|                                                      |                                |                          |                                                   |         |       | Three months ended |        | Nine months ended
|                                                      |                                |                          |                                                   |         |       | September 30,      |        | September 30,    
|                                                      |                                |                          |                                                   |         |       |                    |        |                  
|                                                      |                                |                          |                                                   |         |       | 2000               |        | 1999              |       | 2000  |        | 1999 
|                                                      |                                |                          |                                                   |         |       |                    |        |                   |       |       |        |      
|Revenues:                                            
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | License fees                   |                          | $                                                 | 1,470   |       |                    | $      | 2,854             |       |       | $      | 2,998 |      |        | $      | 6,096 |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Service fees                   |                          |                                                   | 2,129   |       |                    |        | 3,041             |       |       |        | 6,433 |      |        |        | 8,462 |      
|                                                      |                                |                          |                                                   |         |       |                    |        |                   |       |       |        |       |      |        |        |      
|                                                      |                                |                          | Total revenues                                    |         |       | 3,599              |        |                   |       | 5,895 |        |       |      | 9,431  |        |       |       | 14,558 |       
|                                                      |                                |                          |                                                   |         |       |                    |        |                   |       |       |        |       |      |        |        |      
|Costs and expenses:                                  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Cost of licenses               |                          |                                                   | 369     |       |                    |        | 413               |       |       |        | 609   |      |        |        | 826   |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Cost of services               |                          |                                                   | 1,226   |       |                    |        | 1,835             |       |       |        | 4,616 |      |        |        | 5,795 |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | General and administrative     |                          |                                                   | 736     |       |                    |        | 1,005             |       |       |        | 3,146 |      |        |        | 3,531 |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Sales and marketing            |                          |                                                   | 1,054   |       |                    |        | 1,902             |       |       |        | 4,500 |      |        |        | 6,085 |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Research and development       |                          |                                                   | 834     |       |                    |        | 1,123             |       |       |        | 3,182 |      |        |        | 3,352 |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Work force reduction and other |                          |                                                   | 162     |       |                    |        |                  |       |       |        | 873   |      |        |        | 485   |      
|                                                      |                                |                          |                                                   |         |       |                    |        |                   |       |       |        |       |      |        |        |      
|                                                      |                                |                          | Total costs and expenses                          |         |       | 4,381              |        |                   |       | 6,278 |        |       |      | 16,926 |        |       |       | 20,074 |       
|                                                      |                                |                          |                                                   |         |       |                    |        |                   |       |       |        |       |      |        |        |      
|                                                      |                                |                          | Operating loss                                    |         |       | (782               | )      |                   |       | (383  | )      |       |      | (7,495 | )      |       |       | (5,516 | )     
|                                                     
|                                                     
|                                                     
|                                                     
|Interest and other income
(expense), net              |                                |                          | 37                                                |         |       |                    | 62     |                   |       |       | (36    | )     |      |        | 206    |      
|                                                      |                                |                          |                                                   |         |       |                    |        |                   |       |       |        |       |      |        |        |      
|Operations disposed of during 1999                   
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                | Revenues                 |                                                   |         |      |                    |        |                   |      |       |        |       |     |        |        |       | 2,464 |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                | Cost and expenses        |                                                   |         |      |                    |        |                   |      |       |        |       |     |        |        |       | 2,240 |       
|                                                      |                                |                          |                                                   |         |       |                    |        |                   |       |       |        |       |      |        |        |      
|                                                      |                                |                          |                                                  |         |       |                    |       |                   |       |       |       |       |      |        | 224    |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                | Gain on sale of business |                                                   |         |      |                    |        |                   |      |       |        |       |     |        |        |       | 5,647 |       
|                                                      |                                |                          |                                                   |         |       |                    |        |                   |       |       |        |       |      |        |        |      
|                                                      |                                |                          |                                                  |         |       |                    |       |                   |       |       |       |       |      |        | 5,871  |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                |                          | Income (loss) before income
taxes                 |         |       | (745               | )      |                   |       | (321  | )      |       |      | (7,531 | )      |       |       | 561    |       
|                                                     
|                                                     
|                                                     
|                                                     
|Income tax expense                                    |                                |                          | 7                                                 |         |       |                    |       |                   |       |       | 255    |       |      |        |       |      
|                                                      |                                |                          |                                                   |         |       |                    |        |                   |       |       |        |       |      |        |        |      
|                                                      |                                |                          | Net income (loss) and
comprehensive income (loss) |         | $     | (752               | )      |                   | $     | (321  | )      |       | $    | (7,786 | )      |       | $     | 561    |       
|                                                      |                                |                          |                                                   |         |       |                    |        |                   |       |       |        |       |      |        |        |      
|Net income (loss) per share:                         
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                | Basic                    |                                                   | $       | (0.05 | )                  |        | $                 | (0.02 | )     |        | $     | (.57 | )      |        | $     | 0.04  |       
|                                                      |                                |                          |                                                   |         |       |                    |        |                   |       |       |        |       |      |        |        |      
|                                                      |                                | Diluted                  |                                                   | $       | (0.05 | )                  |        | $                 | (0.02 | )     |        | $     | (.57 | )      |        | $     | 0.04  |       
|                                                      |                                |                          |                                                   |         |       |                    |        |                   |       |       |        |       |      |        |        |      
|Shares used in computing net income
(loss) per share:
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                |                          |                                                   | Basic   |       |                    | 13,811 |                   |       |       | 13,153 |       |      |        | 13,758 |       |       |        | 13,372 | 
|                                                      |                                |                          |                                                   |         |       |                    |        |                   |       |       |        |       |      |        |        |      
|                                                      |                                |                          |                                                   | Diluted |       |                    | 13,811 |                   |       |       | 13,153 |       |      |        | 13,758 |       |       |        | 14,284 | 
|                                                      |                                |                          |                                                   |         |       |                    |        |                   |       |       |        |       |      |        |        |      

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

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PowerCerv Corporation

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

|                                               |                                                                                      |                                   |                                                 |        |                                 |        |       |       |        |        |  
|---------------------------------------------- | ------------------------------------------------------------------------------------ | --------------------------------- | ----------------------------------------------- | ------ | ------------------------------- | ------ | ----- | ----- | ------ | ------ | -
|                                               |                                                                                      |                                   |                                                 |        | Nine months ended September 30,
|                                               |                                                                                      |                                   |                                                 |        |                                
|                                               |                                                                                      |                                   |                                                 |        | 2000                            |        | 1999 
|                                               |                                                                                      |                                   |                                                 |        |                                 |        |      
|Cash flows from operating activities:         
|                                              
|                                              
|                                              
|                                              
|                                               | Net income (loss)                                                                    |                                   | $                                               | (7,786 | )                               |        | $     | 561   |       
|                                              
|                                              
|                                              
|                                              
|                                               | Adjustments to reconcile net income (loss) to net cash
used in operating activities:
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                      | Depreciation and amortization     |                                                 |        | 585                             |        |       |       | 929    |       
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                      | Gain on sale of business          |                                                 |        |                                |        |       |       | (5,647 | )     
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                      | Deferred revenue                  |                                                 |        | (427                            | )      |       |       | 71     |       
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                      | Changes in assets and liabilities |                                                 |        | 3,009                           |        |       |       | (3,189 | )     
|                                               |                                                                                      |                                   |                                                 |        |                                 |        |       |      
|                                               |                                                                                      |                                   | Net cash flows used in operating activities     |        |                                 | (4,619 | )     |       |        | (7,275 | )
|                                               |                                                                                      |                                   |                                                 |        |                                 |        |       |      
|Cash flows from investing activities:         
|                                              
|                                              
|                                              
|                                              
|                                               | Sale of business                                                                     |                                   |                                                 |       |                                 |        |       | 6,680 |       
|                                              
|                                              
|                                              
|                                              
|                                               | Return of investment in third party                                                  |                                   |                                                 | 500    |                                 |        |       | 250   |       
|                                              
|                                              
|                                              
|                                              
|                                               | Purchase of intangible asset                                                         |                                   |                                                 | (250   | )                               |        |       |      |       
|                                              
|                                              
|                                              
|                                              
|                                               | Purchases of property and equipment, net                                             |                                   |                                                 | (29    | )                               |        |       | (307  | )     
|                                               |                                                                                      |                                   |                                                 |        |                                 |        |       |      
|                                               |                                                                                      |                                   | Net cash flows provided by investing activities |        |                                 | 221    |       |       |        | 6,623  |  
|                                               |                                                                                      |                                   |                                                 |        |                                 |        |       |      
|Cash flows from financing activities:         
|                                              
|                                              
|                                              
|                                              
|                                               | Net proceeds from issuance of common stock                                           |                                   |                                                 | 871    |                                 |        |       | 60    |       
|                                               |                                                                                      |                                   |                                                 |        |                                 |        |       |      
|                                               |                                                                                      |                                   | Net cash flows provided by financing activities |        |                                 | 871    |       |       |        | 60     |  
|                                               |                                                                                      |                                   |                                                 |        |                                 |        |       |      
|Net decrease in cash and cash equivalents      |                                                                                      |                                   | (3,527                                          | )      |                                 |        | (592  | )    
|                                              
|                                              
|                                              
|                                              
|Cash and cash equivalents, beginning of period |                                                                                      |                                   | 6,224                                           |        |                                 |        | 6,594 |      
|                                               |                                                                                      |                                   |                                                 |        |                                 |        |       |      
|Cash and cash equivalents, end of period       |                                                                                      | $                                 | 2,697                                           |        |                                 | $      | 6,002 |      
|                                               |                                                                                      |                                   |                                                 |        |                                 |        |       |      

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

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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 September 30, 2000, and the
condensed consolidated statements of operations for the three and nine months
ended September 30, 2000 and 1999 and the condensed consolidated statements of
cash flows for the nine months ended September 30, 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
September 30, 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 and nine months ended September
30, 2000, are not necessarily indicative of results that may be expected for
any other interim period or for the full fiscal year.

On December 3, 1999, the SEC issued Staff Accounting Bulletin (SAB) No.
101, Revenue Recognition in Financial Statements, which provides guidance on
the recognition, presentation, and disclosure of revenue in financial
statements. The SAB was effective for the first quarter of the fiscal year
beginning after December 15, 1999, however, recently the SEC has extended the
implementation date for companies whose fiscal year ends between December 16,
1999, and March 15, 2000, to the fourth quarter of fiscal year 2000. The
Company has evaluated the impact of this SAB on its financial reporting of
results of operations and does not believe that adoption of SAB 101 will have a
material impact on revenues.

In June 2000, the FASB issued SFAS No. 138, Accounting for Certain
Derivative Instruments and Certain Hedging Activities, an amendment of FASB
Statement No. 133, which is effective for fiscal years beginning after June 15,
2000. PowerCerv does not anticipate that the adoption of this Statement will
have a significant effect on its results of operations or financial position.

B.  Revenue Recognition

License fees represent revenue from the licensing of the Companys
Integrated Enterprise Response Solutions application products. License fees
also include royalties earned on the Companys Integrated Enterprise Response
Solutions 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

5



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PowerCerv Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

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.

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:

|            |                                                                          |   |                                          |        |                   |   |       |        |      |   |       |        |   |   |      |        | 
|----------- | ------------------------------------------------------------------------ | - | ---------------------------------------- | ------ | ----------------- | - | ----- | ------ | ---- | - | ----- | ------ | - | - | ---- | ------ | 
|            |                                                                          |   | (in thousands, except per share amounts)
|           
|            |                                                                          |   | Three Months Ended                       |        | Nine Months Ended
|            |                                                                          |   | September 30,                            |        | September 30,    
|            |                                                                          |   |                                          |        |                  
|            |                                                                          |   | 2000                                     |        | 1999              |   | 2000  |        | 1999
|            |                                                                          |   |                                          |        |                   |   |       |        |     
|Basic:     
|           
|           
|           
|           
|            | Net income (loss)                                                        |   | $                                        | (752   | )                 |   | $     | (321   | )    |   | $     | (7,786 | ) |   | $    | 561    | 
|            |                                                                          |   |                                          |        |                   |   |       |        |      |   |       |        |   |   |      |       
|            | Average shares outstanding                                               |   |                                          | 13,811 |                   |   |       | 13,153 |      |   |       | 13,758 |   |   |      | 13,372 | 
|            |                                                                          |   |                                          |        |                   |   |       |        |      |   |       |        |   |   |      |       
|Basic EPS   |                                                                          | $ | (0.05                                    | )      |                   | $ | (0.02 | )      |      | $ | (0.57 | )      |   | $ | 0.04 |       
|            |                                                                          |   |                                          |        |                   |   |       |        |      |   |       |        |   |   |      |       
|Diluted:   
|           
|           
|           
|           
|            | Net income (loss)                                                        |   | $                                        | (752   | )                 |   | $     | (321   | )    |   | $     | (7,786 | ) |   | $    | 561    | 
|            |                                                                          |   |                                          |        |                   |   |       |        |      |   |       |        |   |   |      |       
|            | Average shares outstanding                                               |   |                                          | 13,811 |                   |   |       | 13,153 |      |   |       | 13,758 |   |   |      | 13,372 | 
|           
|           
|           
|           
|            | Net effect of dilutive
stock options
based on the treasury
stock method |   |                                          |       |                   |   |       |       |      |   |       |       |   |   |      | 912    | 
|            |                                                                          |   |                                          |        |                   |   |       |        |      |   |       |        |   |   |      |       
|            | Totals                                                                   |   |                                          | 13,811 |                   |   |       | 13,153 |      |   |       | 13,758 |   |   |      | 14,284 | 
|            |                                                                          |   |                                          |        |                   |   |       |        |      |   |       |        |   |   |      |       
|Diluted EPS |                                                                          | $ | (0.05                                    | )      |                   | $ | (0.02 | )      |      | $ | (0.57 | )      |   | $ | 0.04 |       
|            |                                                                          |   |                                          |        |                   |   |       |        |      |   |       |        |   |   |      |       

Common stock equivalents in the three and nine month periods ended
September 30, 2000 and the three month period ended September 30, 1999, were
anti-dilutive due to the net loss sustained by the Company during those
periods, thus the diluted net loss per share in those periods is the same as
the basic net loss per share. During the quarter ended September 30, 2000,
employees exercised no stock options.

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PowerCerv Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

D.  Accrued Expenses

Accrued expenses consist of the following:

|                            |  |                |       |              |  |   |       | 
|--------------------------- |  | -------------- | ----- | ------------ |  | - | ----- | 
|                            |  | (in thousands)
|                           
|                            |  | September 30,  |       | December 31,
|                            |  | 2000           |       | 1999        
|                            |  |                |       |             
|Compensation                |  | $              | 693   |              |  | $ | 1,139 | 
|                           
|                           
|                           
|                           
|Severance and related costs |  |                | 566   |              |  |   | 45    | 
|                           
|                           
|                           
|                           
|Other                       |  |                | 1,014 |              |  |   | 903   | 
|                            |  |                |       |              |  |   |       | 
|                            |  | $              | 2,273 |              |  | $ | 2,087 | 
|                            |  |                |       |              |  |   |       | 

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 stay 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, however, the parties were again unable to
resolve this matter. On May 1, 2000, defendants filed supplemental authority
in support of their motions to dismiss. The Court entertained oral argument on
Defendants Motion to Dismiss on October 30, 2000. To date, however, the Court
has not issued an Order on the Motion. 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.

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PowerCerv Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

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 amounts allocated to tax expense and interest
expense were $209 and $150, respectively. 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 $46 of income tax expense related to state and
federal income taxes. The Company recorded a deferred income tax benefit
applicable to the losses incurred during the period and correspondingly
increased its deferred income tax valuation allowance for the same amount for
the nine month period ended September 30, 2000. 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 and nine month periods ended September 30, 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.

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
Integrated Enterprise Response Solutions application products.

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

|                       |  |                                       |      |                                      |  |             |     |       |  |         |      |          |  |             |      |       |  |   |        |   |  |   |       |  |  |   |        |   |  |   |        |  
|---------------------- |  | ------------------------------------- | ---- | ------------------------------------ |  | ----------- | --- | ----- |  | ------- | ---- | -------- |  | ----------- | ---- | ----- |  | - | ------ | - |  | - | ----- |  |  | - | ------ | - |  | - | ------ | -
|                       |  | Three Months Ended September 30, 2000 |      | Nine Months Ended September 30, 2000
|                       |  |                                       |      |                                     
|                       |  | License                               |      | Services                             |  | Unallocated |     | Total |  | License |      | Services |  | Unallocated |      | Total
|                       |  |                                       |      |                                      |  |             |     |       |  |         |      |          |  |             |      |      
|Revenues from external
|
|Segment profit (loss)  |  | $                                     | (787 | )                                    |  | $           | 903 |       |  | $       | (868 | )        |  | $           | (752 | )     |  | $ | (5,293 | ) |  | $ | 1,817 |  |  | $ | (4,310 | ) |  | $ | (7,786 | )

|                       |  |                                       |       |                                      |  |             |       |       |  |         |      |          |  |             |       |       |  |   |        |   |  |   |       |  |  |  |       |  |  |   |        | 
|---------------------- |  | ------------------------------------- | ----- | ------------------------------------ |  | ----------- | ----- | ----- |  | ------- | ---- | -------- |  | ----------- | ----- | ----- |  | - | ------ | - |  | - | ----- |  |  |  | ----- |  |  | - | ------ | 
|                       |  | Three Months
Ended September 30, 1999 |       | Nine
Months Ended September 30, 1999
|                       |  |                                       |       |                                     
|                       |  | License                               |       | Services                             |  | Unallocated |       | Total |  | License |      | Services |  | Unallocated |       | Total
|                       |  |                                       |       |                                      |  |             |       |       |  |         |      |          |  |             |       |      
|Revenues from external
|Customers              |  | $                                     | 2,854 |                                      |  | $           | 3,041 |       |  |         |     |          |  | $           | 5,895 |       |  | $ | 6,096  |   |  | $ | 8,462 |  |  |  |      |  |  | $ | 14,558 | 
|Segment profit (loss)  |  |                                       | (584  | )                                    |  |             | 1,206 |       |  | $       | (943 | )        |  |             | (321  | )     |  |   | (4,167 | ) |  |   | 2,667 |  |  |  | 2,061 |  |  |   | 561    | 

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

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PowerCerv Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

|                                         |  |               |      |               |  |               |        |               |  |   |        |   |  |   |        |  
|---------------------------------------- |  | ------------- | ---- | ------------- |  | ------------- | ------ | ------------- |  | - | ------ | - |  | - | ------ | -
|                                         |  | Three         |      | Nine          |  | Three         |        | Nine         
|                                         |  | Months Ended  |      | Months Ended  |  | Months Ended  |        | Months Ended 
|                                         |  | September 30, |      | September 30, |  | September 30, |        | September 30,
|                                         |  | 2000          |      | 2000          |  | 1999          |        | 1999         
|                                         |  |               |      |               |  |               |        |               | 
|General and administrative costs         |  | $             | (736 | )             |  | $             | (3,146 | )             |  | $ | (1,005 | ) |  | $ | (3,531 | )
|                                        
|                                        
|                                        
|                                        
|Work force reduction                     |  |               | (162 | )             |  |               | (873   | )             |  |   |       |   |  |   | (485   | )
|                                        
|                                        
|                                        
|                                        
|Interest and other income (expense), net |  |               | 37   |               |  |               | (36    | )             |  |   | 62     |   |  |   | 206    |  
|                                        
|                                        
|                                        
|                                        
|Operations disposed of in 1999           |  |               |     |               |  |               |       |               |  |   |       |   |  |   | 224    |  
|                                        
|                                        
|                                        
|                                        
|Gain on sale of business                 |  |               |     |               |  |               |       |               |  |   |       |   |  |   | 5,647  |  
|                                        
|                                        
|                                        
|                                        
|Income tax expense                       |  |               | (7   | )             |  |               | (255   | )             |  |   |       |   |  |   |       |  
|                                         |  |               |      |               |  |               |        |               |  |   |        |   |  |   |        |  
|                                         |  | $             | (868 | )             |  | $             | (4,310 | )             |  | $ | (943   | ) |  | $ | 2,061  |  

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

I.   Work Force Reduction and Other

During the second quarter of
2000, the Company initiated actions to reduce
its work force and undertook additional cost cutting measures in line with its
objective to return to profitability. The Company recorded a restructuring
charge related to a work force reduction and other expenses totaling $711 in
the second quarter of 2000. Additional restructuring charges of $162 were
recorded in the third quarter of 2000 for a total restructuring charge of $873
in 2000. The total restructuring charge includes severance and related costs
of $649 (4 senior-level staff and 35 non senior-level employees primarily in
sales, services and research and development) and costs of $224 related to
office closings. At September 30, 2000, the Company had approximately $566 in
remaining restructuring related liabilities that are included in accrued
expenses on the condensed consolidated balance sheet. As part of the
restructuring plan, the Companys Chairman has assumed the role of Chief
Executive Officer, and the previous Chief Executive Officer is no longer with
the Company. Substantially all of the obligations associated with the
restructuring are expected to be completed within the next 12 months. The
Company expects to realize gross annual savings of approximately $6,400 as a
result of these actions. The restructuring is part of the Companys strategic
plan to reevaluate the Companys direction, product positioning, marketing
segments and distribution strategies. Management believes that it has properly
resized the Company to minimize future losses, allow for sufficient time to
implement its strategic plan and ultimately seek to return to
profitability; however, there can be no assurance that the Company
will return to profitability as a result of these actions.

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.

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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 Integrated
Enterprise Response Solutions with innovative E-Commerce capabilities 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 application 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 Integrated
Enterprise Response Solutions application products and royalties earned on the
Companys Integrated Enterprise Response Solutions application products and
related intellectual properties. Service fees represent revenue from
implementing the Companys Integrated Enterprise Response Solutions 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. Consulting and education

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PowerCerv Corporation

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

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 (FASB) 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.

On December 3, 1999, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial
Statements, which provides guidance on the recognition, presentation, and
disclosure of revenue in financial statements. The SAB was effective for the
first quarter of the fiscal year beginning after December 15, 1999, however,
recently the SEC has extended the implementation date for companies whose
fiscal year ends between December 16, 1999, and March 15, 2000, to the fourth
quarter of fiscal year 2000. The Company has evaluated the impact of this SAB
on its financial reporting of results of operations and does not believe that
adoption of SAB 101 will have a material impact on revenues.

In June, 2000, the FASB issued SFAS No. 138, Accounting for Certain
Derivative Instruments and Certain Hedging Activities, an amendment of FASB
Statement No. 133, which is effective for fiscal years beginning after June 15,
2000. PowerCerv does not anticipate that the adoption of this Statement will
have a significant effect on its results of operations or financial position.

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, and/or
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

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PowerCerv Corporation

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

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 from continuing operations:

|                             |  |                    |       |                   |  |      |     |      |  |        |       |      |  |   |       |   |  |  |     |    |  |   |       |  
|---------------------------- |  | ------------------ | ----- | ----------------- |  | ---- | --- | ---- |  | ------ | ----- | ---- |  | - | ----- | - |  |  | --- | -- |  | - | ----- | -
|Revenues                     |  | Three months ended |       | Nine months ended
|                             |  | September 30,      |       | September 30,    
|                             |  |                    |       |                  
|                             |  | 2000               |       | Change            |  | 1999 |     | 2000 |  | Change |       | 1999
|                             |  |                    |       |                   |  |      |     |      |  |        |       |     
|License fees                 |  | $                  | 1,470 |                   |  |      | (48 | )%   |  | $      | 2,854 |      |  | $ | 2,998 |   |  |  | (51 | )% |  | $ | 6,096 |  
|                            
|                            
|                            
|                            
|Percentage of total revenues |  |                    | 41    | %                 |  |      |     |      |  |        | 48    | %    |  |   | 32    | % |  |  |     |    |  |   | 42    | %
|                             |  |                    |       |                   |  |      |     |      |  |        |       |      |  |   |       |   |  |  |     |    |  |   |       |  
|Service fees                 |  |                    | 2,129 |                   |  |      | (30 | )%   |  |        | 3,041 |      |  |   | 6,433 |   |  |  | (24 | )% |  |   | 8,462 |  
|                            
|                            
|                            
|                            
|Percentage of total revenues |  |                    | 59    | %                 |  |      |     |      |  |        | 52    | %    |  |   | 68    | % |  |  |     |    |  |   | 58    | %
|                             |  |                    |       |                   |  |      |     |      |  |        |       |      |  |   |       |   |  |  |     |    |  |   |       |  

License fees.The Companys license fees are derived from licensing the
Companys application products. 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 and nine months ended September 30, 2000, compared to
the same periods in 1999. Management believes the primary reason for the
decrease in license revenue was due to overall depressed market conditions
initially resulting from customers reluctance to make decisions early in the
year after having addressed Y2K concerns in the previous year. Management
believes that depressed market conditions continued in the second and third
quarters of 2000 due to decreased demand for traditional enterprise software
and a shift to integrated systems with E-Commerce. As a result, customers are taking longer to make
decisions regarding these more advanced systems. Due to current market
conditions, the Company initiated restructuring measures that included work
force reduction plans and office closings beginning in the second quarter.
Management believes that it has properly resized the Company to minimize
further losses and seek to return to profitability once market conditions
improve. Additionally, the Company has developed a strategic plan focusing on
reevaluating the Companys direction, product positioning, market segments and
distribution strategies. The Company expects continued growth in its license
revenue, 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.

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PowerCerv Corporation

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

Management believes that the decrease in service revenue was also impacted by
the overall depressed market conditions resulting initially from Y2K concerns
and then due to a shift in demand from traditional enterprise software to
integrated systems with E-Commerce capabilities. 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 2000.
The Company believes that as revenue from licensing its application products
increases, the demand for application consulting services (and related revenue)
will likely increase. Service fees for maintenance and support will also
likely increase; however, there can be no assurance that license revenue will
increase or that if it does increase, revenue from service fees will increase
correspondingly.

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 |       | Nine months ended
|                        |  | September 30,      |       | September 30,    
|                        |  |                    |       |                  
|                        |  | 2000               |       | Change            |  | 1999 |     | 2000 |  | Change |       | 1999
|                        |  |                    |       |                   |  |      |     |      |  |        |       |     
|Cost of licenses        |  | $                  | 369   |                   |  |      | (11 | )%   |  | $      | 413   |      |  | $ | 609   |   |  |  | (26 | )% |  | $ | 826   |  
|                       
|                       
|                       
|                       
|Gross profit percentage |  |                    | 75    | %                 |  |      |     |      |  |        | 86    | %    |  |   | 80    | % |  |  |     |    |  |   | 86    | %
|                        |  |                    |       |                   |  |      |     |      |  |        |       |      |  |   |       |   |  |  |     |    |  |   |       |  
|Cost of services        |  |                    | 1,226 |                   |  |      | (33 | )%   |  |        | 1,835 |      |  |   | 4,616 |   |  |  | (20 | )% |  |   | 5,795 |  
|                       
|                       
|                       
|                       
|Gross profit percentage |  |                    | 42    | %                 |  |      |     |      |  |        | 40    | %    |  |   | 28    | % |  |  |     |    |  |   | 32    | %
|                        |  |                    |       |                   |  |      |     |      |  |        |       |      |  |   |       |   |  |  |     |    |  |   |       |  

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 VARs, and the amortization
of intangible assets. The cost of licenses for the three and nine months ended
September 30, 2000, decreased 11% and 26%, respectively, compared to the same
periods in 1999 primarily resulting from lower amortization expense and
decreased royalties associated with third-party products sold with the
Companys products. Gross profit margin decreased for the three and nine
months ended September 30, 2000, compared to the same periods in 1999 due to
significantly lower license fee revenue and higher VAR fees.

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
33% and 20%, respectively, for the three and nine months ended September 30,
2000, as compared to the same periods in 1999 primarily due to lower
compensation expense for the periods. The decrease in gross profit percentage
for the nine months ended September 30, 2000 is primarily due to lower use of
consultants resulting from lower service fee activity in the period. The
Companys restructuring plan initiated in the second quarter of 2000 resulted
in the elimination of eight services positions. The Company expects to realize
gross annual savings of approximately $2,132. The Company believes that it has
properly resized the consulting services component and expects that these
reductions will result in lower expenses and increased utilization of remaining
services personnel, however, there can be no assurance that the Company will
return to profitability as a result of these actions.

13



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##### Table of Contents



PowerCerv Corporation

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

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

|                             |  |                    |       |                   |  |      |     |      |  |        |       |      |  |   |       |   |  |  |     |    |  |   |       |  
|---------------------------- |  | ------------------ | ----- | ----------------- |  | ---- | --- | ---- |  | ------ | ----- | ---- |  | - | ----- | - |  |  | --- | -- |  | - | ----- | -
|Operating Expenses:          |  | Three months ended |       | Nine months ended
|                             |  | September 30,      |       | September 30,    
|                             |  |                    |       |                  
|                             |  | 2000               |       | Change            |  | 1999 |     | 2000 |  | Change |       | 1999
|                             |  |                    |       |                   |  |      |     |      |  |        |       |     
|General and administrative   |  | $                  | 736   |                   |  |      | (27 | )%   |  | $      | 1,005 |      |  | $ | 3,146 |   |  |  | (11 | )% |  | $ | 3,531 |  
|                            
|                            
|                            
|                            
|Percentage of total revenues |  |                    | 20    | %                 |  |      |     |      |  |        | 17    | %    |  |   | 33    | % |  |  |     |    |  |   | 24    | %
|                             |  |                    |       |                   |  |      |     |      |  |        |       |      |  |   |       |   |  |  |     |    |  |   |       |  
|Sales and marketing          |  |                    | 1,054 |                   |  |      | (45 | )%   |  |        | 1,902 |      |  |   | 4,500 |   |  |  | (26 | )% |  |   | 6,085 |  
|                            
|                            
|                            
|                            
|Percentage of total revenues |  |                    | 29    | %                 |  |      |     |      |  |        | 32    | %    |  |   | 48    | % |  |  |     |    |  |   | 42    | %
|                             |  |                    |       |                   |  |      |     |      |  |        |       |      |  |   |       |   |  |  |     |    |  |   |       |  
|Research and development     |  |                    | 834   |                   |  |      | (26 | )%   |  |        | 1,123 |      |  |   | 3,182 |   |  |  | (5  | )% |  |   | 3,352 |  
|                            
|                            
|                            
|                            
|Percentage of total revenues |  |                    | 23    | %                 |  |      |     |      |  |        | 19    | %    |  |   | 34    | % |  |  |     |    |  |   | 23    | %
|                             |  |                    |       |                   |  |      |     |      |  |        |       |      |  |   |       |   |  |  |     |    |  |   |       |  

General and administrative (G&A).G&A expenses include compensation,
communications, accounting, human resources, legal and related facilities
expenses. The decrease in G&A expenses for the three and nine months ended
September 30, 2000, compared to the same periods in 1999, is primarily due to
lower compensation, communication and legal expenses in the current periods.
The decrease for the nine month period is offset by higher bad debt expense in
the earlier portion of the nine month period ended September 30, 2000. 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 periods. The Companys restructuring plan initiated in
the second quarter of 2000 resulted in the elimination of five G&A positions.
The Company expects to realize gross annual savings of approximately $422. The
Company believes that it has properly resized its cost structure and expects
that these reductions will result in lower expenses, however, there can be no
assurance that the Company will return to profitability as a result of these
actions.

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 45% and 26%, respectively, for the three and nine
months ended September 30, 2000, as compared to the same periods in 1999. The
decrease for the nine-month period is the result of lower sales commissions
earned on license revenue in the current year, offset, to a certain extent, by
increased advertising and tradeshow costs. The decrease in expenses for the
three months ended September 30, 2000, compared to the same period in 1999 is
primarily due to lower personnel costs. The sales and marketing expense as a
percentage of total revenue increased for the nine-month period due to lower
license and service revenue. However, in the current quarter, sales and
marketing expenses declined as a percentage of total revenue due to the
restructuring actions initiated by the Company in the second quarter. During
the first half 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.
The Companys restructuring and cost cutting plan initiated in the second
quarter of 2000 involved a reduction in advertising costs for the remainder of
the year by placing fewer trade media ads and included a resizing of the sales
and marketing staff through the elimination of 14 positions. The Company
expects to realize gross annual savings of approximately $2,810. There can be
no assurance that the first and second quarter marketing investments

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PowerCerv Corporation

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

will
result in higher revenues for the Company, or that the Company will return to
profitability as a result of its cost cutting measures.

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 decreased 26% and 5%, respectively, for the three and
nine months ended September 30, 2000, as compared to the same periods in 1999,
primarily due to decreased personnel costs realized in the third quarter of
2000 as a result of the Companys restructuring. The R&D cost percentage of
total revenue increased due to the fixed nature of R&D costs and decreased
total revenue for the periods. The Companys restructuring plan initiated in
the second quarter involved the elimination of 15 R&D positions. The Company
expects to realize gross annual savings of approximately $1,036; however, there
can be no assurance that the Company will return to profitability as a result
of these actions.

Work force reduction and other.During the second quarter of 2000, the
Company initiated actions to reduce its work force and undertook additional
cost cutting measures in line with its objective to return to profitability.
The Company recorded a restructuring charge related to a work force reduction
and other expenses totaling $711 in the second quarter of 2000. Additional
restructuring charges of $162 were recorded in the third quarter of 2000 for a
total restructuring charge of $873 in 2000. The total restructuring charge
includes severance and related costs of $649 (4 senior-level staff and 35 non
senior-level employees primarily in sales, services and research and
development) and costs of $224 related to office closings. At September 30,
2000, the Company had approximately $566 in remaining restructuring related
liabilities that are included in accrued expenses on the condensed consolidated
balance sheet. As part of the restructuring plan, the Companys Chairman has
assumed the role of Chief Executive Officer, and the previous Chief Executive
Officer is no longer with the Company. Substantially all of the obligations
associated with the restructuring are expected to be completed within the next
12 months. The Company expects to realize gross annual savings of
approximately $6,400 as a result of these actions. The restructuring is part
of the Companys strategic plan to reevaluate the Companys direction, product
positioning, marketing segments and distribution strategies. Management
believes that it has properly resized the Company to minimize future losses,
allow for sufficient time to implement its strategic plan and ultimately seek
to return to profitability; however, there can be no assurance that
the Company will return to profitability as a result of these actions.

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.

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 amounts allocated to tax expense
and interest expense were $209 and $150, respectively. The Internal Revenue
Service has rendered an unfavorable assessment resulting in the estimated
exposure amount. The Company will continue to appeal this assessment.

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PowerCerv Corporation

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

The Company also recorded $46 of income tax expense related to state and
federal income taxes. The Company recorded a deferred income tax benefit
applicable to the losses incurred during the period and correspondingly
increased its deferred income tax valuation allowance for the same amount for
the nine month period ended September 30, 2000. 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 and nine-month periods ended September 30, 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 set forth, for the periods indicated, certain
financial data regarding the periods indicated, certain financial data
regarding the Companys working capital balances, cash and cash equivalents,
cash used in operating activities, cash provided by investing activities and
cash provided by financing activities:

|                          |  |               |       |        |  |              |     |    |  |   |       |  | 
|------------------------- |  | ------------- | ----- | ------ |  | ------------ | --- | -- |  | - | ----- |  | 
|                          |  | As of        
|                          |  |              
|                          |  | September 30, |       |        |  | December 31,
|                          |  | 2000          |       | Change |  | 1999        
|                          |  |               |       |        |  |             
|Working capital           |  | $             | 2,616 |        |  |              | (70 | )% |  | $ | 8,792 | 
|                         
|                         
|                         
|                         
|Cash and cash equivalents |  |               | 2,697 |        |  |              | (57 | )% |  |   | 6,224 | 

|                                      |  |                            |        |        |  |      |      |    |  |   |        |  
|------------------------------------- |  | -------------------------- | ------ | ------ |  | ---- | ---- | -- |  | - | ------ | -
|                                      |  | For the nine              
|                                      |  | months ended September 30,
|                                      |  |                           
|                                      |  | 2000                       |        | Change |  | 1999
|                                      |  |                            |        |        |  |     
|Cash used in operating activities     |  | $                          | (4,619 | )      |  |      | 37   | %  |  | $ | (7,275 | )
|                                     
|                                     
|                                     
|                                     
|Cash provided by investing activities |  |                            | 221    |        |  |      | (97  | )% |  |   | 6,623  |  
|                                     
|                                     
|                                     
|                                     
|Cash provided by financing activities |  |                            | 871    |        |  |      | >100 | %  |  |   | 60     |  

Working capital and cash and cash equivalents decreased as of September
30, 2000, compared to December 31, 1999, principally due to negative cash flow
from operations.

For the nine month period ended September 30, 2000, cash used by operating
activities totaled $4,619, due principally to lower than anticipated license
revenue for the year and consequently lower service fees for the nine month
period.

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PowerCerv Corporation

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

The Companys cash provided by investing activities totaling $221 for the
nine month period ended September 30, 2000, was principally due to the proceeds
from a return of the Companys investment in a third party ($500), offset by
purchases of software and fixed assets ($279). The cash provided by investing
activities of $6,623 for the nine month period ended September 30, 1999, was
principally due to the sale of its general consulting business in March 1999
($6,680) and the proceeds from a return of the Companys investment in a third
party ($250), offset by purchases of fixed assets ($307).

At September 30, 2000, the Companys primary source of liquidity consisted
of its cash and cash equivalents balance of $2,697 and its short-term accounts
receivable balance of $3,938. The Companys 1999 Line of Credit expired on May
30, 2000. The Company is currently seeking other sources of debt or equity.
There can be no assurances that such funds will be available to the Company or,
if available, would be on terms satisfactory to the Company.

In June of 2000, PowerCerv recognized that revenue for the Company was not
going to rapidly return to the levels achieved in the third and fourth quarters
of last year. The decision was made to downsize the Company in an effort to
minimize future losses, allow for sufficient time to implement its strategic
plan and ultimately seek to return to profitability. The cost of this
restructuring is approximately $873 of which $711 was reported as part of the
second quarter results and the balance of $162 was reported in the third
quarter. This restructuring will save the Company approximately $1,600 in
expenses per quarter; however, there can be no assurance that the Company will
return to profitability as a result of these actions.

If the Companys existing cash reserves and restructuring decision prove
insufficient to fund its future cash requirements and the Company is not able
to obtain other sources of funds, the Companys ability to pursue its business
strategy beyond the year 2000 could be adversely affected. However, as a result of the
Companys restructuring decision, the amount of cash used in operations
decreased substantially in the third quarter of 2000 as compared to the second
quarter. See Forward Looking Statements and Associated ConsiderationsLiquidity as set forth in the Companys 1999 Annual Report.

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PowerCerv Corporation







Item 3. Quantitative and Qualitative Disclosure of Market Risk

The Company had no holdings of derivative financial or commodity instruments at
September 30, 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.

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##### Table of Contents









INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
REVIEW REPORT

The Board of Directors
PowerCerv Corporation

We have reviewed the accompanying condensed consolidated balance sheet of
PowerCerv Corporation as of September 30, 2000, and the related condensed
consolidated statements of operations for the three-month and nine-month
periods then ended and the condensed consolidated statement of cash flows for
the nine-month period then ended. These financial statements are the
responsibility of the Companys management.

We conducted our review 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
of America, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express such
an opinion.

Based on our review, 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 of America.

/s/ Grant Thornton LLP

Tampa, Florida
October 20, 2000

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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 stay 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, however, the parties were again unable to
resolve this matter. On May 1, 2000, defendants filed supplemental authority
in support of their motions to dismiss. On October 30, 2000, the Court
entertained oral argument on Defendants Motion to Dismiss. To date, the
Court has not issued an Order on the Motion. The defendants continue to deny
any wrongdoing and, should the Motion not be granted, 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     |  | 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).
|   
|    |  | 10.2     |  | Executive Termination Agreement, dated July 27,
2000, between PowerCerv Corporation and Michael J. Simmons.                                                                                                                                     

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PowerCerv Corporation

Part II. Other Information



|    |  |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                       
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------
|    |  | 15.1                                                                                                                                                                                                                                                                                                                                                                                    |  | Accountants Letter regarding Unaudited Interim Financial Information.
|   
|   
|    |  | 27.1                                                                                                                                                                                                                                                                                                                                                                                    |  | Financial Data Schedule. (for SEC use only)                           
|   
|(b) |  | Reports on Form 8-K                                                                                                                                                                                                                                                                                                                                                                    
|   
|    |  | The Company filed a current report on 8-K on September 28, 2000, to
report under Item 4, Change in Registrants Certifying Accountant, the
Companys appointment of Grant Thornton LLP as its independent accountant
for the remainder of 2000. On September 25, 2000 the Company notified
Ernst and Young LLP that the Companys relationship with Ernst and Young
LLP was terminated.

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PowerCerv Corporation

Form 10-Q

(for the quarterly period ended September 30, 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: November 14,  2000 |  | /s/  Marc J. Fratello                                                              
|                         |  |                                                                                    
|                         |  | Marc J. Fratello,
Chairman and Chief Executive Officer
(Duly Authorized Officer)   
|                        
|                        
|Date: November 14,  2000 |  | /s/ Lawrence J. Alves                                                              
|                         |  |                                                                                    
|                         |  | Lawrence J. Alves,
Chief Financial Officer, Treasurer
(Principal Financial Officer)

22