##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



---



FORM 10-QSB



þ    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES
EXCHANGE ACT OF 1934



For the quarterly period ended
March 31, 2004



OR



 ̈TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934



For the transition period from  to



Commission File Number 0-27574



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PowerCerv Corporation

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



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



10150 Highland Manor
Drive, Suite 236, Tampa, Florida 33610

(Address of principal executive offices, including zip code)



(813) 226-2600

(Issuers telephone number, including area code)



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



As of May 18, 2004, there were 2,310,000 shares of the registrants common stock, $.001 par value, outstanding.



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##### Table of Contents

PowerCerv Corporation

Form 10-QSB



Index



|                                                                                                              |  |     
|------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                              |  | Page
|Part I. Financial Information                                                                                 |  |     
|                                                                                                              | 
|Item 1. Financial Statements                                                                                  |  |     
|                                                                                                              | 
|Condensed Consolidated Balance Sheets as of March 31, 2004 (unaudited) andDecember 31, 2003 (audited)         |  | 2   
|                                                                                                              | 
|Condensed Consolidated Statements of Operations for the Three Months EndedMarch 31, 2004 and 2003 (unaudited) |  | 3   
|                                                                                                              | 
|Condensed Consolidated Statements of Cash Flows for the Three Months EndedMarch 31, 2004 and 2003 (unaudited) |  | 4   
|                                                                                                              | 
|Condensed Consolidated Statement of Shareholders Equity for the three months endedMarch 31, 2004 (unaudited) |  | 5   
|                                                                                                              | 
|Notes to Condensed Consolidated Financial Statements (unaudited)                                              |  | 6-8 
|                                                                                                              | 
|Item 2. Managements Discussion and Analysis or Plan of Operations                                            |  | 9-11
|                                                                                                              | 
|Item 3. Controls and Procedures                                                                               |  | 12  
|                                                                                                              | 
|Part II. Other Information                                                                                    |  |     
|                                                                                                              | 
|Item 1. Legal Proceedings                                                                                     |  | 13  
|                                                                                                              | 
|Item 6. Exhibits and Reports on Form 8-K                                                                      |  | 13  
|                                                                                                              | 
|Signatures                                                                                                    |  | 14  
|                                                                                                              | 
|Certifications                                                                                                |  |     



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##### Table of Contents

Part I. FINANCIAL INFORMATION



Item 1. Financial
Statements



PowerCerv Corporation and Subsidiary

Condensed Consolidated Balance Sheets



|                                            |  |                          |          |   |                  |   |          |  
|------------------------------------------- |  | ------------------------ | -------- | - | ---------------- | - | -------- | -
|                                            |  | March 31,2004(unaudited) |          |   | December 31,2003 |  
|Assets                                      |  |                          |          |   |                  |   |          |  
|Current assets:                             |  |                          |          |   |                  |   |          |  
|Cash and cash equivalents                   |  | $                        |         |   |                  | $ | 33,086   |  
|Note receivable, related party              |  |                          |         |   |                  |   | 110,000  |  
|Other current assets                        |  |                          | 8,000    |   |                  |   | 11,000   |  
|                                            |  |                          |          |   |                  |   |          |  
|                                            |  |                         
|Total current assets                        |  |                          | 8,000    |   |                  | $ | 154,086  |  
|                                            |  |                          |          |   |                  |   |          |  
|                                            |  |                         
|Total assets                                |  | $                        | 8,000    |   |                  | $ | 154,086  |  
|                                            |  |                          |          |   |                  |   |          |  
|Liabilities and Shareholders Deficit       |  |                          |          |   |                  |   |          |  
|Current liabilities:                        |  |                          |          |   |                  |   |          |  
|Accounts payable                            |  | $                        | 9,197    |   |                  | $ | 11,398   |  
|Bank overdraft                              |  |                          | 53,314   |   |                  |   |         |  
|Accrued expenses                            |  |                          | 269,435  |   |                  |   | 344,563  |  
|Due to related party                        |  |                          | 52,105   |   |                  |   |         |  
|                                            |  |                          |          |   |                  |   |          |  
|                                            |  |                         
|Total current liabilities                   |  |                          | 384,051  |   |                  |   | 355,961  |  
|                                            |  |                         
|Commitments and contingencies (Note 8)      |  |                          |         |   |                  |   |         |  
|                                            |  |                         
|Shareholders deficit:                      |  |                          | (376,051 | ) |                  |   | (201,875 | )
|                                            |  |                          |          |   |                  |   |          |  
|                                            |  |                         
|Total liabilities and shareholders deficit |  | $                        | 8,000    |   |                  | $ | 154,086  |  
|                                            |  |                          |          |   |                  |   |          |  



See accompanying notes
to condensed consolidated financial statements.



2



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##### Table of Contents

PowerCerv Corporation and Subsidiary

Condensed Consolidated Statements of Operations

(Unaudited)



|                                                      |  |                             |           |   |      |   |           |  
|----------------------------------------------------- |  | --------------------------- | --------- | - | ---- | - | --------- | -
|                                                      |  | Three months endedMarch 31, |          
|                                                      |  | 2004                        |           |   | 2003 |  
|Revenues                                              |  | $                           |          |   |      | $ |          |  
|                                                      |  |                            
|Costs and expenses:                                   |  |                             |           |   |      |   |           |  
|General and administrative                            |  |                             | 26,251    |   |      |   | 62,000    |  
|                                                      |  |                             |           |   |      |   |           |  
|                                                      |  |                            
|Operating loss                                        |  |                             | (26,251   | ) |      |   | (62,000   | )
|                                                      |  |                            
|Litigation settlement income                          |  |                             | 125,000   |   |      |   |          |  
|Interest income, net                                  |  |                             |          |   |      |   | 2,000     |  
|                                                      |  |                             |           |   |      |   |           |  
|                                                      |  |                            
|Income (loss) before income taxes                     |  |                             | 98,749    |   |      |   | (60,000   | )
|                                                      |  |                            
|Income tax expense                                    |  |                             |          |   |      |   |          |  
|                                                      |  |                             |           |   |      |   |           |  
|                                                      |  |                            
|Net income (loss)                                     |  | $                           | 98,749    |   |      | $ | (60,000   | )
|                                                      |  |                             |           |   |      |   |           |  
|                                                      |  |                            
|Basic and diluted net loss per share                  |  | $                           | (0.10     | ) |      | $ | (0.05     | )
|                                                      |  |                             |           |   |      |   |           |  
|                                                      |  |                            
|Shares used in computing net income (loss) per share: |  |                             |           |   |      |   |           |  
|Basic                                                 |  |                             | 1,652,713 |   |      |   | 1,313,000 |  
|                                                      |  |                             |           |   |      |   |           |  
|Diluted                                               |  |                             | 1,652,713 |   |      |   | 1,313,000 |  
|                                                      |  |                             |           |   |      |   |           |  



See accompanying notes
to condensed consolidated financial statements.



3



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##### Table of Contents

PowerCerv Corporation and Subsidiary

Condensed Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                     |  |                             |          |   |      |   |          |  
|------------------------------------------------------------------------------------ |  | --------------------------- | -------- | - | ---- | - | -------- | -
|                                                                                     |  | Three months endedMarch 31, |         
|                                                                                     |  | 2004                        |          |   | 2003 |  
|Cash flows from operating activities:                                                |  |                             |          |   |      |   |          |  
|Net income (loss)                                                                    |  | $                           | 98,749   |   |      | $ | (60,000  | )
|Adjustments to reconcile net income (loss) to net cash used in operating activities: |  |                             |          |   |      |   |          |  
|Changes in assets and liabilities                                                    |  |                             | (22,224  | ) |      |   | (146,000 | )
|                                                                                     |  |                             |          |   |      |   |          |  
|                                                                                     |  |                            
|Net cash flows provided by (used in) operating activities                            |  |                             | 76,525   |   |      |   | (206,000 | )
|                                                                                     |  |                             |          |   |      |   |          |  
|                                                                                     |  |                            
|Cash flows from investing activities:                                                |  |                             |          |   |      |   |          |  
|Proceeds received on notes receivable                                                |  |                             | 110,000  |   |      |   | 21,000   |  
|                                                                                     |  |                             |          |   |      |   |          |  
|                                                                                     |  |                            
|Net cash flows used in investing activities                                          |  |                             | 110,000  |   |      |   | 21,000   |  
|                                                                                     |  |                             |          |   |      |   |          |  
|                                                                                     |  |                            
|Cash flows from financing activities:                                                |  |                             |          |   |      |   |          |  
|Payment of cash distribution to shareholders                                         |  |                             | (272,925 | ) |      |   |         |  
|Increase in bank overdraft                                                           |  |                             | 53,314   |   |      |   |         |  
|                                                                                     |  |                             |          |   |      |   |          |  
|                                                                                     |  |                            
|Net cash flows provided by financing activities                                      |  |                             | (219,611 | ) |      |   |         |  
|                                                                                     |  |                             |          |   |      |   |          |  
|                                                                                     |  |                            
|Net decrease in cash and cash equivalents                                            |  |                             | (33,086  | ) |      |   | (185,000 | )
|                                                                                     |  |                            
|Cash and cash equivalents, beginning of period                                       |  |                             | 33,086   |   |      |   | 245,000  |  
|                                                                                     |  |                             |          |   |      |   |          |  
|                                                                                     |  |                            
|Cash and cash equivalents, end of period                                             |  | $                           |         |   |      | $ | 60,000   |  
|                                                                                     |  |                             |          |   |      |   |          |  



SUPPLEMENTAL
DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:



| | In 2004, the Company converted 997,222 shares of preferred stock to 997,222 shares of common stock.
|- | ---------------------------------------------------------------------------------------------------



| | In 2004, $27,075 in stock subscriptions receivable were funded through a reduction in cash distributions to shareholders. These stock subscriptions receivable have been levied by
the IRS and, as such, the payments further reduced amounts due the IRS.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | In 2004, an aggregate of $52,105 in payments due the IRS were funded by a related party.
|- | ----------------------------------------------------------------------------------------



See accompanying notes to condensed consolidated financial statements.



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##### Table of Contents

PowerCerv Corporation and Subsidiary

Consolidated Statements of Shareholders Equity (Deficit)

For the three months ended March 31, 2004



|                                                                                 |  |              |  |                 |       |        |                          |   |               |   |       |                    |  |   |                             |  |   |                                   |   |  |   |             |   |  |   |         |   |  |   |          |  
|-------------------------------------------------------------------------------- |  | ------------ |  | --------------- | ----- | ------ | ------------------------ | - | ------------- | - | ----- | ------------------ |  | - | --------------------------- |  | - | --------------------------------- | - |  | - | ----------- | - |  | - | ------- | - |  | - | -------- | -
|                                                                                 |  | Common Stock |  | Preferred Stock |       |        | AdditionalPaid-InCapital |   | TreasuryStock |   |       | AccumulatedDeficit |  |   | StockSubscriptionReceivable |  |   | TotalShareholdersEquity(Deficit) |  
|                                                                                 |  | Shares       |  | Parvalue        |       | Shares |                          |   | ParValue      |   |       |                    |  |   |                            
|Balance, December 31, 2003                                                       |  | 1,312,778    |  | $               | 1,313 |        | 1,022,222                |   |               | $ | 1,022 |                    |  | $ | 51,704,944                  |  | $ | (25,931                           | ) |  | $ | (51,811,223 | ) |  | $ | (72,000 | ) |  | $ | (201,875 | )
|Cash distributions to shareholders                                               |  |             |  |                 |      |        |                         |   |               |   |      |                    |  |   |                            |  |   |                                  |   |  |   | (272,925    | ) |  |   |        |   |  |   | (272,925 | )
|Reduction of subscription receivable in lieu of cash distribution to shareholder |  |             |  |                 |      |        |                         |   |               |   |      |                    |  |   |                            |  |   |                                  |   |  |   | (27,075     | ) |  |   | 27,075  |   |  |   |         |  
|Conversion of preferred stock to common stock                                    |  | 997,222      |  |                 | 997   |        | (997,222                 | ) |               |   | (997  | )                  |  |   |                            |  |   |                                  |   |  |   |            |   |  |   |        |   |  |   |         |  
|Net income                                                                       |  |             |  |                 |      |        |                         |   |               |   |      |                    |  |   |                            |  |   |                                  |   |  |   | 98,749      |   |  |   |        |   |  |   | 98,749   |  
|                                                                                 |  |              |  |                 |       |        |                          |   |               |   |       |                    |  |   |                             |  |   |                                   |   |  |   |             |   |  |   |         |   |  |   |          |  
|Balance, March 31, 2004                                                          |  | 2,310,000    |  | $               | 2,310 |        | 25,000                   |   |               | $ | 25    |                    |  | $ | 51,704,944                  |  | $ | (25,931                           | ) |  | $ | (52,012,474 | ) |  | $ | (44,925 | ) |  | $ | (376,051 | )
|                                                                                 |  |              |  |                 |       |        |                          |   |               |   |       |                    |  |   |                             |  |   |                                   |   |  |   |             |   |  |   |         |   |  |   |          |  



See accompanying notes
to condensed consolidated financial statements.



5



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##### Table of Contents

PowerCerv Corporation and Subsidiary

Notes to Condensed Consolidated Financial Statements

(Unaudited)



|1. | Organization and Operations
|-- | ---------------------------



The condensed consolidated balance sheet of PowerCerv Corporation and its subsidiary (collectively, the Company) as of March 31, 2004, and the
condensed consolidated statements of operations for the three months ended March 31, 2004 and 2003 and the condensed consolidated statements of cash flows for the three months ended March 31, 2004 and 2003 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 and for the three months ended March 31, 2004 and
2003, have been made.



On December 1, 2002, the Company
completed the sale of substantially all of its operating assets to PCV Acquisition, Inc., a subsidiary of ASA International, Ltd (collectively referred to as ASA), a holding company of vertical enterprise software solutions based in
Framingham, Massachusetts. As a result of this transaction, the Company has no current operations. On December 30, 2003, the Company entered into an agreement with WhiteKnight SST, Inc. to develop and implement a business plan for the Company.
WhiteKnight SST, Inc. is a public company owned in part by two directors of the Company.



Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the Securities and
Exchange Commission (SEC) rules and regulations. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2003
included in the Companys 2003 Annual Report on Form 10-KSB filed with the SEC on April 20, 2004 (2003 Annual Report).



The results of operations for the three months ended March 31, 2004, are not necessarily indicative of results that may be expected for any other interim
period or for the full fiscal year.



The report of the
Companys independent auditors for the year ended December 31, 2003 contains an explanatory paragraph as to the substantial doubt of the Companys ability to continue as a going concern. No adjustments have been made to the accompanying
condensed consolidated financial statements to give effect to this uncertainty.



|2. | Accrued Expenses
|-- | ----------------



Accrued expenses consist of the following at March 31, 2004:



|                      |  |   |        
|--------------------- |  | - | -------
|Income tax assessment |  | $ | 227,296
|Other                 |  |   | 42,139 
|                      |  |   |        
|                      |  | $ | 269,435
|                      |  |   |        



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##### Table of Contents

PowerCerv Corporation and Subsidiary

Notes to Condensed Consolidated Financial Statements

(Unaudited)



|3. | Shareholders equity
|-- | --------------------



In March 2004, all of the outstanding 997,222 shares of preferred stock of the Company were converted to 997,222 shares of common stock.



In February 2004, the Company declared a cash distribution for the
Companys Preferred and Common stockholders of record as of February 27, 2004 and March 8, 2004, respectively. Distributions per share of $0.27075 and $0.02286 were paid to these Preferred and Common stockholders, respectively in March 2004.



|4. | Net loss per share
|-- | ------------------



|                                               |  |                            |          |   |                |           |               |   |       |           |  |   |         |   |               |           |  |   |       |  
|---------------------------------------------- |  | -------------------------- | -------- | - | -------------- | --------- | ------------- | - | ----- | --------- |  | - | ------- | - | ------------- | --------- |  | - | ----- | -
|                                               |  | For the three months ended |         
|                                               |  | March 31, 2004             |          |   | March 31, 2003 |          
|                                               |  | Net Income                 |          |   | Shares         |           | $Amount/Share |   |       | NetIncome |  |   | Shares  |   | $Amount/Share |          
|Net income (loss)                              |  | $                          | 98,749   |   |                |           |               |   |       |           |  | $ | (60,000 | ) |               |           |  |   |       |  
|                                               |  |                            |          |   |                |          
|Less: Preferred cash distributions             |  |                            | (269,998 | ) |                |           |               |   |       |           |  |   |        |   |               |           |  |   |       |  
|                                               |  |                            |          |   |                |           |               |   |       |           |  |   |         |   |               |           |  |   |       |  
|                                               |  |                            |          |   |                |          
|Basic & diluted EPS:                           |  |                            |          |   |                |           |               |   |       |           |  |   |         |   |               |           |  |   |       |  
|                                               |  |                            |          |   |                |          
|Income (loss) available to common shareholders |  | $                          | (171,249 | ) |                | 1,652,713 |               | $ | (0.10 | )         |  | $ | (60,000 | ) |               | 1,312,778 |  | $ | (0.05 | )
|                                               |  |                            |          |   |                |           |               |   |       |           |  |   |         |   |               |           |  |   |       |  



In 2003, common stock
equivalents were anti-dilutive due to net losses sustained by the Company during this period, thus the diluted net loss per share in this period is the same as the basic net loss per share. In 2004, there were no outstanding common stock
equivalents.



|5. | Income taxes
|-- | ------------



Income tax expense for the three months ended March 31, 2004 and 2003 consists of the following:



|                              |  |      |         |   |      |   |         |  
|----------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                              |  | 2004 |         |   | 2003 |  
|Current                       |  | $    |        |   |      | $ |        |  
|Deferred                      |  |      | 37,500  |   |      |   | (23,000 | )
|Change in valuation allowance |  |      | (37,500 | ) |      |   | 23,000  |  
|                              |  |      |         |   |      |   |         |  
|Total income tax expense      |  | $    |        |   |      | $ |        |  
|                              |  |      |         |   |      |   |         |  



Deferred tax assets
consist of the following:



|                                                                |  |      |             |  
|--------------------------------------------------------------- |  | ---- | ----------- | -
|                                                                |  | 2004 |            
|Net operating loss carryforwards (subject to annual limitation) |  | $    | 13,985,000  |  
|Valuation allowance                                             |  |      | (13,985,000 | )
|                                                                |  |      |             |  
|                                                                |  | $    |            |  
|                                                                |  |      |             |  



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PowerCerv Corporation and Subsidiary

Notes to Condensed Consolidated Financial Statements

(Unaudited)



|5. | Income taxes (continued):
|-- | -------------------------



Income tax expense differs from that determined by applying the federal statutory rate to pre-tax income due to the change in the valuation allowance.



The Company increased (decreased) its deferred income tax
asset valuation allowance by ($37,500) and $23,000 during the three months ended March 31, 2004 and 2003, respectively. The decision to continue to fully reserve the deferred income tax asset was primarily the result of the Companys sale of
its operating assets. At March 31, 2004, the Company has net operating loss carry forwards of approximately $36,800,000, for federal income tax purposes that expire at various times from years 2010 to 2023.



|6. | Related party transactions:
|-- | ---------------------------



On December 30, 2003, the Company signed a management and finance agreement for consulting services with WhiteKnight SST, Inc. (WhiteKnight),
to develop and implement a business plan for PowerCerv. WhiteKnight has agreed to make available to the Company $250,000 in convertible debt or equity capital. Pursuant to this agreement, WhiteKnight can receive up to a 50 percent equity interest in
the Company in connection with this infusion of capital. WhiteKnight is owned in part by the Companys Chief Executive Officer and Corporate Secretary. WhiteKnight advanced the Company approximately $52,000 during the three months ended March
31, 2004.



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##### Table of Contents

PowerCerv Corporation and Subsidiary

Form 10-QSB



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



Overview



On December 1, 2002, the
Company completed the sale of substantially all of its operating assets to PCV Acquisition, Inc., a subsidiary of ASA International, Ltd (collectively referred to as ASA), a holding company of vertical enterprise software solutions based
in Framingham, Massachusetts. This transaction was approved by PowerCervs shareholders on November 26, 2002. As a result of this transaction, the Company has no current operations. On December 30, 2003, the Company entered into an agreement
with WhiteKnight SST, Inc. to develop and implement a business plan for the Company. WhiteKnight SST, Inc. is a public company owned in part by two directors of the Company.



This Quarterly Report on Form 10-QSB and any documents incorporated herein by reference contain forward-looking statements that have been
made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current expectations, estimates and projections about the Companys industry, managements beliefs and
certain assumptions made by the Companys management. Words such as anticipates, expects, intends, plans, believes, seeks, estimates, variations of such words
and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict; therefore,
actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Forward-looking statements include, without limitation, statements regarding the extent and timing of future revenues and expenses and
customer demand for the Companys products and services as described in the Companys 2003 Annual Report on Form 10KSB filed with the SEC on April 20, 2004, under Managements Discussion and Analysis of Financial Condition and
Results of Operations  Plan of Operations  Forward-Looking Statements and Associated Considerations; Fluctuations in Quarterly Activity and Results of Operations; Competition;
Economic and Market Condition Risks; Lengthy Sales Cycle; Ability to Manage Change; Liquidity; Availability of Consulting Personnel, Dependence on
Product Development and Associated Risks, Dependence on New Products; Dependence on PowerBuilder® and others; Dependence on Proprietary Technology; Risks of Third-Party Claims for Infringement; Expansion of
Indirect Channels; Potential for Channel Conflict; Voting Control by Management; Dependence on Key Personnel; and Possible Volatility of Stock Price. The Company assumes no obligation to
update any such forward-looking statement. It is important to note that the Companys actual results could differ materially from those in such forward-looking statements.



Results of operations



General and Administrative (G&A).



G&A expenses primarily include accounting, legal and related corporate expenses. The decrease in G&A expenses for the three-month period ended March 31, 2004,
compared to the three-month period ended March 31, 2003, was primarily due to a decrease in legal fees for the three months ended March 31, 2004.





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##### Table of Contents

PowerCerv Corporation and Subsidiary

Form 10-QSB



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



Other income



Other income consists of a cash settlement received from the Companys prior external auditors related to the IRS tax assessment and
litigation related thereto.



Dividends and Preferred Stock Conversion



In February 2004, the Company declared a cash distribution for the
Companys Preferred and Common stockholders of record as of February 27, 2004 and March 8, 2004, respectively. Distributions per share of $0.27075 and $0.02286 were paid to these Preferred and Common stockholders, respectively in March 2004.



In March 2004, all of the outstanding 997,222 shares of preferred stock of the
Company were converted to 997,222 shares of common stock.



Income taxes



The Companys federal income tax returns for the years ended
December 31, 1996 and 1995 were subject to a routine examination by the Internal Revenue Service (IRS) that resulted in an assessment of approximately $66,000 of federal tax. The Company recorded a charge for estimated federal and state income tax
and related interest costs upon receiving the notice of assessment in 2000. During October 2002, the Company settled this matter with the IRS by agreeing to pay an additional income tax liability of $63,000 plus applicable interest through the date
of payment. During April 2003, the Company received a Statement of Adjustment from the IRS regarding the assessment totaling $183,000. This settlement amount is consistent with the amount provided for federal taxes and interest in an earlier period.
During 2003, the Company made income tax and interest payments totaling $110,000 for this assessment and authorized the IRS to levy against an outstanding note receivable of $72,000. During 2004, payments totaling $27,075 were made to the IRS, via
collections of the note receivable. Further, $52,105 in payments were funded by WhiteKnight.



Liquidity and Capital Resources



PowerCerv is dependent on identifying an acceptable merger candidate in order to continue as a going concern. PowerCervs auditors have issued a going concern opinion on the financial statements for the year ended December
31, 2003, indicating that the Company had current liabilities in excess of its current assets and had sold its principal business assets on December 1, 2002 and ceased revenue generating activities on that date. These factors raise substantial doubt
in PowerCervs ability to continue as a going concern. If PowerCerv is unable to identify acceptable merger candidates, it is unlikely that PowerCerv will remain as a viable going concern.



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PowerCerv Corporation and Subsidiary

Form 10-QSB



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



Liquidity and Capital Resources (continued)



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



|                          |  |                |          |  
|------------------------- |  | -------------- | -------- | -
|                          |  | March 31, 2004 |         
|Working capital deficit   |  | $              | (376,051 | )
|Cash and cash equivalents |  | $              | 0        |  



|                                                      |  |                                      |   |  |        |    |  |          |  
|----------------------------------------------------- |  | ------------------------------------ | - |  | ------ | -- |  | -------- | -
|                                                      |  | For the Three months ended March 31, |  
|                                                      |  | 2004                                 |   |  | Change |    |  | 2003     |  
|Cash flows provided by (used) in operating activities |  | 76,525                               |   |  | 137    | %  |  | (206,000 | )
|Cash flows provided by investing activities           |  | 110,000                              |   |  | 423    | %  |  | 21,000   |  
|Cash flows used in financing activities               |  | (219,611                             | ) |  | (100   | %) |  |         |  



For the three-month period ended March
31, 2004, cash provided by operating activities totaled $129,839 due principally to a cash settlement of $125,000 received from the Companys prior external auditors relating to the IRS assessment and litigation related thereto.



The Companys cash provided by investing activities totaled $110,000 and $21,000 for the
three-month periods ended March 31, 2004 and 2003, respectively, principally due to payments received on notes receivable.



The Companys cash used in financing activities totaled $243,000 for the three-month period ended March 31, 2004, due to payment received on a stock subscription
receivable offset by dividends paid during the quarter.



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



See Liquidity and Capital Resources and Forward Looking Statements and
Associated ConsiderationsLiquidity as set forth in the Companys 2003 Annual Report.



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##### Table of Contents

PowerCerv Corporation and Subsidiary

Form 10-QSB



ITEM 3. CONTROLS AND PROCEDURES.



As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the Exchange Act), the Company carried out an evaluation of the effectiveness of the design and operation of the disclosure controls and procedures within the
90 days covered by this report. This evaluation was carried out under the supervision and with the participation of the Companys Chairman. Based upon that evaluation, the Chairman concluded that the disclosure controls and procedures are
effective in timely alerting management to material information relating to the Company required to be included in our periodic SEC filings. There have been no significant changes in the internal controls or in other factors that could significantly
affect internal controls subsequent to the date the evaluation was carried out.



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



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PowerCerv Corporation and Subsidiary

Form 10-QSB



Part II. Other Information



Item 1. Legal Proceedings



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



Item 6. Exhibits and Reports on Form 8-K



|(a) | Exhibits
|--- | --------

|
|

|     |  |                                                                  
|---- |  | -----------------------------------------------------------------
|     | 
|31.1 |  | Certification of Chairman pursuant to Sarbanes-Oxley Section 302.
|     | 
|32.1 |  | Certification of Chairman pursuant to 18 U.S.C. Section 1350     



|(b) | Reports on Form 8-K
|--- | -------------------



On March 3, 2004, the Company filed a report on Form 8-K disclosing the declaration by its Board of Directors on February 27, 2004, of cash distributions
payable on the Companys preferred stock and common stock.



On January 8, 2004, the Company filed a report on Form 8-K disclosing a joint agreement between the Company and WhiteKnight SST, Inc.



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##### Table of Contents

PowerCerv Corporation and Subsidiary

Form 10-QSB



Signatures



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



|                    |  |  |  |                       |  |                                                                                                                |  | 
|------------------- |  |  |  | --------------------- |  | -------------------------------------------------------------------------------------------------------------- |  | 
|                    |  |  |  | POWERCERV CORPORATION
|                    |  | 
|Date:  May 20, 2004 |  |  |  | /s/ John Stanton     
|                    |  |  |  |                       |  | John Stanton, Chairman, Principal Financial Officer and Principal Accounting Officer (Duly Authorized Officer)





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