##### Table of Contents









UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




---

FORM 10-Q



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



| |  |                                                  
| |  | -------------------------------------------------
| |  | For the quarterly period ended September 30, 1999

OR



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



| |  |                                           
| |  | ------------------------------------------
| |  | For the transition period from 
        to

Commission File Number 0-27574



---

PowerCerv Corporation

(Exact name of registrant as specified in its
charter)


|                                                                       |  |                                             
|---------------------------------------------------------------------- |  | --------------------------------------------
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Florida                                                                |  | 59-3350778                                  
|(State or other jurisdiction of
        incorporation or organization) |  | (I.R.S. Employee
        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 10, 1999, there were 13,165,883 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                                                                                        
|                              |                                                                                                                      | Condensed Consolidated Balance Sheets                           
|                              |                                                                                                                      | Condensed Consolidated Statements of Operations (Unaudited)     
|                              |                                                                                                                      | Condensed Consolidated Statements of Cash Flows (Unaudited)     
|                              |                                                                                                                      | Notes to Condensed Consolidated Financial Statements (Unaudited)
|                              | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations (Dollars in thousands)
|                              | Item 3. Quantitative and Qualitative Disclosure of Market Risk                                                      
|                              | INDEPENDENT ACCOUNTANTS REVIEW REPORT                                                                              
|Part II. Other Information   
|                              | Item 1. Legal Proceedings                                                                                           
|                              | Item 4. Submission of Matters to a Vote of Security Holders                                                         
|                              | Item 6. Exhibits and Reports on Form 8-K                                                                            
|                              | SIGNATURES                                                                                                          



---



PowerCerv Corporation

Form 10-Q


Index

|                                                                                                 |                                                                                                                               |      |    |   | 
|------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------- | ---- | -- | - | 
|                                                                                                 |                                                                                                                               | Page
|                                                                                                 |                                                                                                                               |     
|Part I. Financial Information                                                                    |                                                                                                                               |      |    |  
|Item 1.  Financial Statements                                                                    |                                                                                                                               |      |    |  
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                 | Condensed Consolidated Balance Sheets as of September  30,
	1999 (unaudited) and December 31, 1998                            |      |    | 2 | 
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                 | Condensed Consolidated Statements of Operations for the Three and
	 Nine Months Ended September 30, 1999 and 1998 (unaudited) |      |    | 3 | 
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                 | Condensed Consolidated Statements of Cash Flows for the Nine
	Months Ended September 30, 1999 and 1998 (unaudited)            |      |    | 4 | 
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                 | Notes to Condensed Consolidated Financial Statements (unaudited)                                                              |      |    | 5 | 
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Item 2.  Managements Discussion and Analysis
	 of Financial Condition and Results of Operations |                                                                                                                               |      | 9  |  
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Item 3.  Quantitative and Qualitative Disclosure
	of Market Risks                                |                                                                                                                               |      | 15 |  
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Independent Accountants Review Report                                                           |                                                                                                                               |      | 16 |  
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Part II. Other Information                                                                       |                                                                                                                               |      |    |  
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Item 1.  Legal Proceedings                                                                       |                                                                                                                               |      | 17 |  
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Item 4.  Submission of Matters to a Vote of
	Security Holders                                    |                                                                                                                               |      | 17 |  
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Item 6.  Exhibits and Reports on Form 8-K                                                        |                                                                                                                               |      | 18 |  
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Signatures                                                                                       |                                                                                                                               |      | 19 |  

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,
|                                     |                                                                           | 1999                                       |        | 1998        
|                                     |                                                                           |                                            |        |             
|                                     |                                                                           | (Unaudited)                                |        |             
|                                    
|                                    
|                                    
|                                    
|ASSETS                               |                                                                           |                                            |        |              |        |  |        |      
|                                    
|                                    
|                                    
|                                    
|Current assets:                      |                                                                           |                                            |        |              |        |  |        |      
|                                    
|                                    
|                                    
|                                    
|                                     | Cash and cash equivalents                                                 |                                            | $      | 6,002        |        |  | $      | 6,594 |       
|                                    
|                                    
|                                    
|                                    
|                                     | Accounts receivable, net of allowance of $1,415 and $1,480,
	respectively |                                            |        | 6,274        |        |  |        | 5,007 |       
|                                    
|                                    
|                                    
|                                    
|                                     | Other current assets                                                      |                                            |        | 221          |        |  |        | 240   |       
|                                     |                                                                           |                                            |        |              |        |  |        |      
|                                     |                                                                           | Total current assets                       |        |              | 12,497 |  |        |       | 11,841 | 
|                                    
|                                    
|                                    
|                                    
|Property and equipment, net          |                                                                           |                                            | 1,348  |              |        |  | 2,239  |      
|                                    
|                                    
|                                    
|                                    
|Intangible assets, net               |                                                                           |                                            | 64     |              |        |  | 556    |      
|                                    
|                                    
|                                    
|                                    
|Investment in third party            |                                                                           |                                            | 750    |              |        |  | 1,000  |      
|                                    
|                                    
|                                    
|                                    
|Note receivable                      |                                                                           |                                            | 827    |              |        |  |       |      
|                                    
|                                    
|                                    
|                                    
|Deposits and other assets            |                                                                           |                                            | 99     |              |        |  | 94     |      
|                                     |                                                                           |                                            |        |              |        |  |        |      
|                                     |                                                                           | Total assets                               |        | $            | 15,585 |  |        | $     | 15,730 | 
|                                     |                                                                           |                                            |        |              |        |  |        |      
|LIABILITIES AND SHAREHOLDERS EQUITY |                                                                           |                                            |        |              |        |  |        |      
|                                    
|                                    
|                                    
|                                    
|Current liabilities:                 |                                                                           |                                            |        |              |        |  |        |      
|                                    
|                                    
|                                    
|                                    
|                                     | Accounts payable                                                          |                                            | $      | 563          |        |  | $      | 637   |       
|                                    
|                                    
|                                    
|                                    
|                                     | Accrued expenses                                                          |                                            |        | 2,210        |        |  |        | 1,954 |       
|                                    
|                                    
|                                    
|                                    
|                                     | Deferred revenue                                                          |                                            |        | 1,799        |        |  |        | 1,864 |       
|                                     |                                                                           |                                            |        |              |        |  |        |      
|                                     |                                                                           | Total current liabilities                  |        |              | 4,572  |  |        |       | 4,455  | 
|                                    
|                                    
|                                    
|                                    
|Deferred gain on sale of business    |                                                                           |                                            | 827    |              |        |  |       |      
|                                    
|                                    
|                                    
|                                    
|Shareholders equity                 |                                                                           |                                            | 10,186 |              |        |  | 11,275 |      
|                                     |                                                                           |                                            |        |              |        |  |        |      
|                                     |                                                                           | Total liabilities and shareholders equity |        | $            | 15,585 |  |        | $     | 15,730 | 
|                                     |                                                                           |                                            |        |              |        |  |        |      

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



2



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##### Table of Contents



PowerCerv Corporation






Condensed Consolidated Statements of Operations (Unaudited)


(In thousands, except per share amounts)


|                                                      |                                                   |                          |    |                   |       |      |     |        |       |   |       |        |        |   |       |        |        |  
|----------------------------------------------------- | ------------------------------------------------- | ------------------------ | -- | ----------------- | ----- | ---- | --- | ------ | ----- | - | ----- | ------ | ------ | - | ----- | ------ | ------ | -
|                                                      |                                                   |                          |    |                  
|                                                      |                                                   | Three months ended       |    | Nine months ended
|                                                      |                                                   | September 30,            |    | September 30,    
|                                                      |                                                   |                          |    |                  
|                                                      |                                                   | 1999                     |    | 1998              |       | 1999 |     | 1998  
|                                                      |                                                   |                          |    |                   |       |      |     |       
|Revenues:                                             |                                                   |                          |    |                   |       |      |     |        |       |   |       |        |        |   |       |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | License fees                                      |                          | $  | 2,854             |       |      | $   | 2,790  |       |   | $     | 6,096  |        |   | $     | 5,738  |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Service fees                                      |                          |    | 3,041             |       |      |     | 2,055  |       |   |       | 8,462  |        |   |       | 6,200  |       
|                                                      |                                                   |                          |    |                   |       |      |     |        |       |   |       |        |        |   |       |       
|                                                      |                                                   | Total revenues           |    |                   | 5,895 |      |     |        | 4,845 |   |       |        | 14,558 |   |       |        | 11,938 |  
|                                                      |                                                   |                          |    |                   |       |      |     |        |       |   |       |        |        |   |       |       
|Costs and expenses:                                   |                                                   |                          |    |                   |       |      |     |        |       |   |       |        |        |   |       |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Cost of licenses                                  |                          |    | 413               |       |      |     | 142    |       |   |       | 826    |        |   |       | 441    |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Cost of services                                  |                          |    | 1,835             |       |      |     | 1,623  |       |   |       | 5,795  |        |   |       | 5,266  |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | General and administrative                        |                          |    | 1,005             |       |      |     | 1,001  |       |   |       | 3,531  |        |   |       | 3,250  |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Sales and marketing                               |                          |    | 1,902             |       |      |     | 1,696  |       |   |       | 6,085  |        |   |       | 4,288  |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Research and development                          |                          |    | 1,123             |       |      |     | 989    |       |   |       | 3,352  |        |   |       | 2,846  |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Work force reduction and other                    |                          |    |                  |       |      |     |       |       |   |       | 485    |        |   |       |       |       
|                                                      |                                                   |                          |    |                   |       |      |     |        |       |   |       |        |        |   |       |       
|                                                      |                                                   | Total costs and expenses |    |                   | 6,278 |      |     |        | 5,451 |   |       |        | 20,074 |   |       |        | 16,091 |  
|                                                      |                                                   |                          |    |                   |       |      |     |        |       |   |       |        |        |   |       |       
|                                                      |                                                   | Operating loss           |    |                   | (383  | )    |     |        | (606  | ) |       |        | (5,516 | ) |       |        | (4,153 | )
|                                                     
|                                                     
|                                                     
|                                                     
|Interest and other income (net)                       |                                                   |                          | 62 |                   |       |      | 82  |        |       |   | 206   |        |        |   | 232   |       
|                                                      |                                                   |                          |    |                   |       |      |     |        |       |   |       |        |        |   |       |       
|Operations disposed of during 1999                    |                                                   |                          |    |                   |       |      |     |        |       |   |       |        |        |   |       |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Revenues                                          |                          |    |                  |       |      |     | 2,977  |       |   |       | 2,464  |        |   |       | 10,481 |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Cost and expenses                                 |                          |    |                  |       |      |     | 2,441  |       |   |       | 2,240  |        |   |       | 8,393  |       
|                                                      |                                                   |                          |    |                   |       |      |     |        |       |   |       |        |        |   |       |       
|                                                      |                                                   |                          |    |                   |       |      | 536 |        |       |   | 224   |        |        |   | 2,088 |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Gain on sale of business                          |                          |    |                  |       |      |     |       |       |   |       | 5,647  |        |   |       |       |       
|                                                      |                                                   |                          |    |                   |       |      |     |        |       |   |       |        |        |   |       |       
|                                                      |                                                   |                          |   |                   |       |      | 536 |        |       |   | 5,871 |        |        |   | 2,088 |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Income (loss) before income taxes                 |                          |    | (321              | )     |      |     | 12     |       |   |       | 561    |        |   |       | (1,833 | )     
|                                                     
|                                                     
|                                                     
|                                                     
|Provision for income taxes                            |                                                   |                          |   |                   |       |      |    |        |       |   |      |        |        |   |      |       
|                                                      |                                                   |                          |    |                   |       |      |     |        |       |   |       |        |        |   |       |       
|                                                      | Net income (loss) and Comprehensive income (loss) |                          | $  | (321              | )     |      | $   | 12     |       |   | $     | 561    |        |   | $     | (1,833 | )     
|                                                      |                                                   |                          |    |                   |       |      |     |        |       |   |       |        |        |   |       |       
|Net income (loss) per share:                          |                                                   |                          |    |                   |       |      |     |        |       |   |       |        |        |   |       |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Basic                                             |                          | $  | (0.02             | )     |      | $   | 0.00   |       |   | $     | 0.04   |        |   | $     | (0.13  | )     
|                                                      |                                                   |                          |    |                   |       |      |     |        |       |   |       |        |        |   |       |       
|                                                      | Diluted                                           |                          | $  | (0.02             | )     |      | $   | 0.00   |       |   | $     | 0.04   |        |   | $     | (0.13  | )     
|                                                      |                                                   |                          |    |                   |       |      |     |        |       |   |       |        |        |   |       |       
|Shares used in computing net income (loss) per share: |                                                   |                          |    |                   |       |      |     |        |       |   |       |        |        |   |       |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Basic                                             |                          |    | 13,153            |       |      |     | 13,831 |       |   |       | 13,372 |        |   |       | 13,811 |       
|                                                      |                                                   |                          |    |                   |       |      |     |        |       |   |       |        |        |   |       |       
|                                                      | Diluted                                           |                          |    | 13,153            |       |      |     | 14,680 |       |   |       | 14,284 |        |   |       | 13,811 |       
|                                                      |                                                   |                          |    |                   |       |      |     |        |       |   |       |        |        |   |       |       

See accompanying independent accountants review report and
notes to



3



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##### Table of Contents



PowerCerv Corporation






Condensed Consolidated Statements of Cash Flows (Unaudited)


(In thousands)


|                                                     |                                                                                                     |                                   |                                                           |       |        |        |       |        |       |       |  
|---------------------------------------------------- | --------------------------------------------------------------------------------------------------- | --------------------------------- | --------------------------------------------------------- | ----- | ------ | ------ | ----- | ------ | ----- | ----- | -
|                                                     |                                                                                                     |                                  
|                                                     |                                                                                                     | Nine months ended                
|                                                     |                                                                                                     | September 30,                    
|                                                     |                                                                                                     |                                  
|                                                     |                                                                                                     | 1999                              |                                                           | 1998 
|                                                     |                                                                                                     |                                   |                                                           |      
|Cash flows from operating activities:                |                                                                                                     |                                   |                                                           |       |        |        |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net income (loss)                                                                                   |                                   | $                                                         | 561   |        |        | $     | (1,833 | )    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Adjustments to reconcile net income (loss) to net cash (used in)
	provided by operating activities: |                                   |                                                           |       |        |        |       |        |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                                     | Depreciation and amortization     |                                                           |       | 929    |        |       |        | 1,076 |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                                     | Gain on sale of business          |                                                           |       | (5,647 | )      |       |        |      |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                                     | Deferred revenue                  |                                                           |       | 71     |        |       |        | 943   |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                                     | Changes in assets and liabilities |                                                           |       | (3,189 | )      |       |        | 970   |      
|                                                     |                                                                                                     |                                   |                                                           |       |        |        |       |       
|                                                     |                                                                                                     |                                   | Net cash flows (used in) provided by operating activities |       |        | (7,275 | )     |        |       | 1,156 |  
|                                                     |                                                                                                     |                                   |                                                           |       |        |        |       |       
|Cash flows from investing activities:                |                                                                                                     |                                   |                                                           |       |        |        |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Sale of business                                                                                    |                                   |                                                           | 6,680 |        |        |       |       |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Return of investment in third party                                                                 |                                   |                                                           | 250   |        |        |       |       |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Purchases of property and equipment, net                                                            |                                   |                                                           | (307  | )      |        |       | (614   | )    
|                                                     |                                                                                                     |                                   |                                                           |       |        |        |       |       
|                                                     |                                                                                                     |                                   | Net cash flows provided by (used in) investing activities |       |        | 6,623  |       |        |       | (614  | )
|                                                     |                                                                                                     |                                   |                                                           |       |        |        |       |       
|Cash flows from financing activities:                |                                                                                                     |                                   |                                                           |       |        |        |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net proceeds from issuance of common stock                                                          |                                   |                                                           | 60    |        |        |       | 115    |      
|                                                     |                                                                                                     |                                   |                                                           |       |        |        |       |       
|                                                     |                                                                                                     |                                   | Net cash flows provided by financing activities           |       |        | 60     |       |        |       | 115   |  
|                                                     |                                                                                                     |                                   |                                                           |       |        |        |       |       
|Net (decrease) increase in cash and cash equivalents |                                                                                                     |                                   | (592                                                      | )     |        |        | 657   |       
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and cash equivalents, beginning of period       |                                                                                                     |                                   | 6,594                                                     |       |        |        | 6,360 |       
|                                                     |                                                                                                     |                                   |                                                           |       |        |        |       |       
|Cash and cash equivalents, end of period             |                                                                                                     | $                                 | 6,002                                                     |       |        | $      | 7,017 |       
|                                                     |                                                                                                     |                                   |                                                           |       |        |        |       |       

See accompanying independent accountants review report and
notes to



4



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##### Table of Contents



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, 1999, and the condensed consolidated
statements of operations for the three and nine months ended
September 30, 1999 and 1998 and the condensed consolidated
statements of cash flows for the nine months ended
September 30, 1999 and 1998 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, 1999, and for all
 periods presented have been made. The condensed consolidated
balance sheet at December 31, 1998, 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, 1998, included in
the Companys 1998 Annual Report on Form 10-K filed
with the SEC on April 14, 1999 (1998 Annual
Report).

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

B.  Revenue Recognition

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

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

5



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##### Table of Contents



PowerCerv Corporation


Notes to Condensed Consolidated Financial Statements
(Unaudited)  (Continued)

C.  Earnings Per Share Data

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

|            |                                                                            |                               |       |                   |   |      |      |        |  |   |      |        |  |   |       |        |  
|----------- | -------------------------------------------------------------------------- | ----------------------------- | ----- | ----------------- | - | ---- | ---- | ------ |  | - | ---- | ------ |  | - | ----- | ------ | -
|            |                                                                            |                               |       |                  
|            |                                                                            | Three Months Ended            |       | Nine Months Ended
|            |                                                                            | September 30,                 |       | September 30,    
|            |                                                                            |                               |       |                  
|            |                                                                            | 1999                          |       | 1998              |   | 1999 |      | 1998  
|            |                                                                            |                               |       |                   |   |      |      |       
|            |                                                                            |                              
|            |                                                                            | (Dollars in thousands, except
|            |                                                                            | per share amounts)           
|           
|           
|           
|           
|Basic:      |                                                                            |                               |       |                   |   |      |      |        |  |   |      |        |  |   |       |       
|           
|           
|           
|           
|            | Net income (loss)                                                          |                               | $     | (321              | ) |      | $    | 12     |  |   | $    | 561    |  |   | $     | (1,833 | )
|            |                                                                            |                               |       |                   |   |      |      |        |  |   |      |        |  |   |       |       
|            | Average shares outstanding                                                 |                               |       | 13,153            |   |      |      | 13,831 |  |   |      | 13,372 |  |   |       | 13,811 |  
|            |                                                                            |                               |       |                   |   |      |      |        |  |   |      |        |  |   |       |       
|Basic EPS   |                                                                            | $                             | (0.02 | )                 |   | $    | 0.00 |        |  | $ | 0.04 |        |  | $ | (0.13 | )     
|            |                                                                            |                               |       |                   |   |      |      |        |  |   |      |        |  |   |       |       
|Diluted:    |                                                                            |                               |       |                   |   |      |      |        |  |   |      |        |  |   |       |       
|           
|           
|           
|           
|            | Net income (loss)                                                          |                               | $     | (321              | ) |      | $    | 12     |  |   | $    | 561    |  |   | $     | (1,833 | )
|            |                                                                            |                               |       |                   |   |      |      |        |  |   |      |        |  |   |       |       
|            | Average shares outstanding                                                 |                               |       | 13,153            |   |      |      | 13,831 |  |   |      | 13,372 |  |   |       | 13,811 |  
|           
|           
|           
|           
|            | Net effect of dilutive stock options  based on the
	treasury stock method |                               |       |                  |   |      |      | 849    |  |   |      | 912    |  |   |       |       |  
|            |                                                                            |                               |       |                   |   |      |      |        |  |   |      |        |  |   |       |       
|            | Totals                                                                     |                               |       | 13,153            |   |      |      | 14,680 |  |   |      | 14,284 |  |   |       | 13,811 |  
|            |                                                                            |                               |       |                   |   |      |      |        |  |   |      |        |  |   |       |       
|Diluted EPS |                                                                            | $                             | (0.02 | )                 |   | $    | 0.00 |        |  | $ | 0.04 |        |  | $ | (0.13 | )     
|            |                                                                            |                               |       |                   |   |      |      |        |  |   |      |        |  |   |       |       

Potential common shares in the three month period ended
September 30, 1999 and nine month period ended
September 30, 1998 were anti-dilutive due to the net loss
sustained by the Company during these periods, thus the diluted
net loss per share in these periods is the same as the basic net
loss per share. During the quarter ended September 30, 1999,
 employees exercised 18,475 stock options at an average exercise
price of $2.17 per share.

D.  Accrued Expenses

Accrued expenses consist of the following:

|                            |  |                        |       |              |  |   |       | 
|--------------------------- |  | ---------------------- | ----- | ------------ |  | - | ----- | 
|                            |  | September 30,          |       | December 31,
|                            |  | 1999                   |       | 1998        
|                            |  |                        |       |             
|                            |  |                       
|                            |  | (Dollars in thousands)
|                           
|                           
|                           
|                           
|Compensation                |  | $                      | 1,306 |              |  | $ | 1,055 | 
|                           
|                           
|                           
|                           
|Severance and related costs |  |                        | 89    |              |  |   | 57    | 
|                           
|                           
|                           
|                           
|Other                       |  |                        | 815   |              |  |   | 842   | 
|                            |  |                        |       |              |  |   |       | 
|                            |  | $                      | 2,210 |              |  | $ | 1,954 | 
|                            |  |                        |       |              |  |   |       | 

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 1998 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.

6



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PowerCerv Corporation


Notes to Condensed Consolidated Financial Statements
(Unaudited)  (Continued)

The complaint purports to be a class action on behalf of those
persons who purchased shares of the Companys common stock
from March 1, 1996 (the date of the Companys initial
public offering of its common stock (IPO)) through
July 24, 1996. The complaint alleges, among other things,
that the defendants violated the Securities Act of 1933 and the
Securities Exchange Act of 1934 in connection with the
Companys IPO and in its subsequent securities filings,
press releases and other public statements. The plaintiff seeks
damages of an unspecified amount, rescission of certain
securities sales and certain other remedies. On March 19,
1998, the defendants filed their motions to dismiss this
complaint. An effect of this motion filing is to postpone any
discovery on this case until after the motions are ruled on by
the Court. No ruling has yet been handed down. 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. In June of 1999 the
Court once again recommended to the parties that they attend a
mediation conference to resolve the matter. The parties declined.
 The parties have been advised by the Court that it intends to
order a second mediation early next year. The defendants continue
 to deny any wrongdoing and intend to contest the suit
vigorously.

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

G.  Income Taxes

For the three and nine month periods ended September 30,
1999, the Company recorded no income tax expense since its net
operating loss carryforwards should substantially offset any tax
expense applicable to the net income for the 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 ERP application products.

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

|                                 |  |                                       |       |                                      |  |             |       |       |  |         |      |          |  |             |       |       |  |   |        |   |  |   |       |  |  |  |       |  |  |   |        | 
|-------------------------------- |  | ------------------------------------- | ----- | ------------------------------------ |  | ----------- | ----- | ----- |  | ------- | ---- | -------- |  | ----------- | ----- | ----- |  | - | ------ | - |  | - | ----- |  |  |  | ----- |  |  | - | ------ | 
|                                 |  |                                       |       |                                     
|                                 |  | 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    | 

|                                 |  |                                       |       |                                      |  |             |       |       |  |         |      |          |  |             |       |       |  |   |        |   |  |   |       |  |  |  |      |   |  |   |        |  
|-------------------------------- |  | ------------------------------------- | ----- | ------------------------------------ |  | ----------- | ----- | ----- |  | ------- | ---- | -------- |  | ----------- | ----- | ----- |  | - | ------ | - |  | - | ----- |  |  |  | ---- | - |  | - | ------ | -
|                                 |  |                                       |       |                                     
|                                 |  | Three Months Ended September 30, 1998 |       | Nine Months Ended September 30, 1998
|                                 |  |                                       |       |                                     
|                                 |  | License                               |       | Services                             |  | Unallocated |       | Total |  | License |      | Services |  | Unallocated |       | Total
|                                 |  |                                       |       |                                      |  |             |       |       |  |         |      |          |  |             |       |      
|Revenues from external Customers |  | $                                     | 2,790 |                                      |  | $           | 2,055 |       |  |         |     |          |  | $           | 4,845 |       |  | $ | 5,738  |   |  | $ | 6,200 |  |  |  |     |   |  | $ | 11,938 |  
|                                
|                                
|                                
|                                
|Segment profit (loss)            |  |                                       | (37   | )                                    |  |             | 432   |       |  |         | (383 | )        |  |             | 12    |       |  |   | (1,837 | ) |  |   | 934   |  |  |  | (930 | ) |  |   | (1,833 | )

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PowerCerv Corporation


Notes to Condensed Consolidated Financial Statements
(Unaudited)  (Continued)

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

|                                 |  |               |        |               |  |               |        |               |  |   |        |   |  |   |        |  
|-------------------------------- |  | ------------- | ------ | ------------- |  | ------------- | ------ | ------------- |  | - | ------ | - |  | - | ------ | -
|                                 |  | Three         |        | Nine          |  | Three         |        | Nine         
|                                 |  | Months Ended  |        | Months Ended  |  | Months Ended  |        | Months Ended 
|                                 |  | September 30, |        | September 30, |  | September 30, |        | September 30,
|                                 |  | 1999          |        | 1999          |  | 1998          |        | 1998         
|                                 |  |               |        |               |  |               |        |              
|General and administrative costs |  | $             | (1,005 | )             |  | $             | (3,531 | )             |  | $ | (1,001 | ) |  | $ | (3,250 | )
|                                
|                                
|                                
|                                
|Work force reduction             |  |               |       |               |  |               | (485   | )             |  |   |       |   |  |   |       |  
|                                
|                                
|                                
|                                
|Interest and other income        |  |               | 62     |               |  |               | 206    |               |  |   | 82     |   |  |   | 232    |  
|                                
|                                
|                                
|                                
|Operations disposed of in 1999   |  |               |       |               |  |               | 224    |               |  |   | 536    |   |  |   | 2,088  |  
|                                
|                                
|                                
|                                
|Gain on sale of business         |  |               |       |               |  |               | 5,647  |               |  |   |       |   |  |   |       |  
|                                 |  |               |        |               |  |               |        |               |  |   |        |   |  |   |        |  
|                                 |  | $             | (943   | )             |  | $             | 2,061  |               |  | $ | (383   | ) |  | $ | (930   | )

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 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
September 30, 1999, the Company had paid approximately $396
of the total $485 charged to expense and expects to pay the
remaining amounts (related to one employee) within the next six
months.

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.

8



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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 ERP and
front-office enterprise application software solutions to
mid-size U.S. discrete manufacturing 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 consist primarily of
software license fees and fees for services, including
consulting, education, and maintenance and support.

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

The Company recognizes revenue in accordance with the American
Institute of Certified Public Accountants SOP 97-2, as
amended by SOP 98-4 and 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.

This Quarterly Report on Form 10-Q and any documents
incorporated herein by reference contain forward-looking
statements that have been made pursuant to the provisions of the
Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are based on current expectations,
estimates and projections about the Companys industry,
managements beliefs and certain assumptions made by the
Companys management. Words such as anticipates,
 expects, intends, plans,
believes, seeks, estimates,
variations of such words and similar expressions are intended to
identify such forward-looking statements. These statements are
not guarantees of future performance and are subject to certain
risks, uncertainties and assumptions that are difficult to
predict; therefore, actual results may differ materially from
those expressed or forecasted in any such forward-looking
statements. Forward-looking statements include, without
limitation, statements regarding the extent and timing of future
revenues and expenses and customer demand for the Companys
products and services as described in the Companys 1998
Annual Report on Form 10-K filed with the SEC on
April 14, 1999, 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; Year 2000
Readiness;  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 Other
Third Party Products;  Dependence on
Proprietary Technology; Risks of Third-Party Claims for
Infringement;  Expansion of Indirect
Channels; and Potential for Channel Conflict;
 Voting Control by Management;
 Dependence on Key Personnel; and
 Possible Volatility of Stock Price. The
Company

9



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##### Table of Contents





Results of Operations

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

Revenues:

|                             |  |                    |       |                   |  |      |    |      |  |        |       |      |  |   |       |  |  |  |    |   |  |   |       | 
|---------------------------- |  | ------------------ | ----- | ----------------- |  | ---- | -- | ---- |  | ------ | ----- | ---- |  | - | ----- |  |  |  | -- | - |  | - | ----- | 
|                             |  |                    |       |                  
|                             |  | Three months ended |       | Nine months ended
|                             |  | September 30,      |       | September 30,    
|                             |  |                    |       |                  
|                             |  | 1999               |       | Change            |  | 1998 |    | 1999 |  | Change |       | 1998
|                             |  |                    |       |                   |  |      |    |      |  |        |       |     
|License fees                 |  | $                  | 2,854 |                   |  |      | 2  | %    |  | $      | 2,790 |      |  | $ | 6,096 |  |  |  | 6  | % |  | $ | 5,738 | 
|                            
|                            
|                            
|                            
|Percentage of total revenues |  |                    | 48%   |                   |  |      |    |      |  |        | 58%   |      |  |   | 42%   |  |  |  |    |   |  |   | 48%   | 
|                             |  |                    |       |                   |  |      |    |      |  |        |       |      |  |   |       |  |  |  |    |   |  |   |       | 
|Service fees                 |  |                    | 3,041 |                   |  |      | 48 | %    |  |        | 2,055 |      |  |   | 8,462 |  |  |  | 36 | % |  |   | 6,200 | 
|                            
|                            
|                            
|                            
|Percentage of total revenues |  |                    | 52%   |                   |  |      |    |      |  |        | 42%   |      |  |   | 58%   |  |  |  |    |   |  |   | 52%   | 
|                             |  |                    |       |                   |  |      |    |      |  |        |       |      |  |   |       |  |  |  |    |   |  |   |       | 

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 revenue increased for the three month period ended
September 30, 1999, and for the nine month period ended
September 30, 1999. The increase in the three month period
is primarily a result of the investment the Company made to
strengthen its marketing and sales organizations in the first
quarter. The Company believes this investment was able to offset
the decrease in demand for ERP Software. The nine month increase
was also impacted by the purchase of an internal use license and
OEM agreement by the purchaser of the Companys former
general consulting and education business. There is significant
uncertainty in the ERP software industry concerning the potential
 effects associated with Year 2000 readiness. Management believes
 that customers and potential customers purchasing patterns may
be affected in a number of ways. Many companies are expending
significant resources to upgrade their systems. These
expenditures may result in reduced funds available to purchase
software products such as those the Company offers.

Services fees. The Companys service fees consist of
revenue from consulting, education, and support and maintenance
services on its ERP applications products. Consulting services
are primarily provided on a time and materials basis, education
services are generally priced on a per-student basis and annual
support and maintenance service fees are based on a percentage of
 the related license fees. The increase in service fees for both
the three month and nine month periods ending September 30,
1999 is attributable to productivity improvements, a broader
applications base and a higher level of customizations and
multi-plant implementations.

On March 31, 1999, the Company sold its general consulting
and general education business to a third party. During 1998, it
also discontinued its technology resales business. These
discontinued businesses contributed revenue of $2,977 and margins
 of $536 for the three months ended September 30, 1998. They
 contributed revenues of $2,464 and margins of $224 for the nine
months ended September 30, 1999, and revenues of $10,481 and
 margins of $2,088 for the nine months ended September 30,
1998.

10



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##### Table of Contents



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,    
|                        |  |                    |       |                  
|                        |  | 1999               |       | Change            |  | 1998 |      | 1999 |  | Change |       | 1998
|                        |  |                    |       |                   |  |      |      |      |  |        |       |     
|Cost of licenses        |  | $                  | 413   |                   |  |      | >100 | %    |  | $      | 142   |      |  | $ | 826   |  |  |  | 87% |  |  | $ | 441   | 
|                       
|                       
|                       
|                       
|Gross profit percentage |  |                    | 86%   |                   |  |      |      |      |  |        | 95%   |      |  |   | 86%   |  |  |  |     |  |  |   | 92%   | 
|                        |  |                    |       |                   |  |      |      |      |  |        |       |      |  |   |       |  |  |  |     |  |  |   |       | 
|Cost of services        |  |                    | 1,835 |                   |  |      | 13   | %    |  |        | 1,623 |      |  |   | 5,795 |  |  |  | 10% |  |  |   | 5,266 | 
|                       
|                       
|                       
|                       
|Gross profit percentage |  |                    | 40%   |                   |  |      |      |      |  |        | 21%   |      |  |   | 32%   |  |  |  |     |  |  |   | 15%   | 
|                        |  |                    |       |                   |  |      |      |      |  |        |       |      |  |   |       |  |  |  |     |  |  |   |       | 

Cost of licenses. The cost of licenses consists primarily
of production costs, royalties associated with third-party
products sold with the Companys products, the cost
associated with resales made by VARs, and the amortization
of intangible assets. The higher cost incurred in 1999 is a
result of expenses associated with increased VAR sales in 1999.

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 increase in dollar costs is associated with
the increase in volume of revenue for services both in the three
and nine month periods ending September 30, 1999. The
increase in gross margin for both periods is primarily a result
of improved productivity and efficiencies, derived in part from
the Companys work force reduction and reorganization.

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,    
|                             |  |                    |       |                  
|                             |  | 1999               |       | Change            |  | 1998 |     | 1999 |  | Change |       | 1998
|                             |  |                    |       |                   |  |      |     |      |  |        |       |     
|General and administrative   |  | $                  | 1,005 |                   |  |      |    |      |  | $      | 1,001 |      |  | $ | 3,531 |  |  |  | 9%  |  |  | $ | 3,250 | 
|                            
|                            
|                            
|                            
|Percentage of total revenues |  |                    | 17%   |                   |  |      |     |      |  |        | 21%   |      |  |   | 24%   |  |  |  |     |  |  |   | 27%   | 
|                             |  |                    |       |                   |  |      |     |      |  |        |       |      |  |   |       |  |  |  |     |  |  |   |       | 
|Sales and marketing          |  |                    | 1,902 |                   |  |      | 12% |      |  |        | 1,696 |      |  |   | 6,085 |  |  |  | 42% |  |  |   | 4,288 | 
|                            
|                            
|                            
|                            
|Percentage of total revenues |  |                    | 32%   |                   |  |      |     |      |  |        | 35%   |      |  |   | 42%   |  |  |  |     |  |  |   | 36%   | 
|                             |  |                    |       |                   |  |      |     |      |  |        |       |      |  |   |       |  |  |  |     |  |  |   |       | 
|Research and development     |  |                    | 1,123 |                   |  |      | 14% |      |  |        | 989   |      |  |   | 3,352 |  |  |  | 18% |  |  |   | 2,846 | 
|                            
|                            
|                            
|                            
|Percentage of total revenues |  |                    | 19%   |                   |  |      |     |      |  |        | 20%   |      |  |   | 23%   |  |  |  |     |  |  |   | 24%   | 
|                             |  |                    |       |                   |  |      |     |      |  |        |       |      |  |   |       |  |  |  |     |  |  |   |       | 

General and administrative (G&A). G&A expenses
include compensation paid to accounting, human resources, legal
and corporate staff and related communications and facilities
expenses. The increase in G&A expenses for the nine month
period is primarily related to unusually high outside legal
expenses primarily associated with the class action litigation as
 referenced in footnote F, Contingencies, and settlement of
certain outstanding litigation matters.

Sales and marketing. Sales and marketing expenses
primarily consist of compensation paid to sales and marketing
personnel, cost of marketing, direct mail and telemarketing
activities, advertising, cost of public relations, trade shows
and conferences, and related communications costs. Sales and
marketing costs increased 12% and 42%, respectively, for the
three and nine month periods ended September 30, 1999 over
the same periods in 1998. This was primarily a result of the
Companys accelerated investments in its marketing and sales
 organizations. These investments included hiring additional
personnel in the direct sales organization, including regional
vice presidents, field sales representatives and pre-sales
specialists, a change in the Companys commission structure
designed to drive growth in ERP Plus application product sales,
broad

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Research and development (R&D). R&D costs consist
primarily of compensation and related facilities and equipment
costs associated with developing, maintaining and enhancing the
Companys products. Since inception, the Company has not
capitalized any internal R&D costs, as the costs incurred
during the period between the point in time that technological
feasibility is established and that a product is released to the
market have been insignificant. R&D costs increased 14% and
18%, respectively, for the three and nine month periods ending
September 30, 1999 over the corresponding periods in 1998,
primarily due to increased personnel costs.

Work force reduction and other. During the first quarter
of 1999, the Company recorded a charge related to a work force
reduction and other related expenses totaling $485. This amount
included severance and related costs of $391 (11 employees,
primarily management level) and costs of $94 related to office
downsizing or closings. The Company expects to realize gross
annual savings of approximately $1,200 as a result of these
actions. As of September 30, 1999, the Company has paid
approximately $396 of the total $485 charged to expense and
expects to pay the remaining amounts (related to one employee)
within the next six months.

Income taxes.For the three month and nine month periods
ended September 30, 1999, the Company recorded no income tax
 expense, since its net operating loss carryforwards
substantially offset any taxable income realized during the
periods.

Impact of the Year 2000 Issue

The Year 2000 issue is the result of computer programs being
written using two digits rather than four to define the
applicable year. Affected computer programs or hardware that have
 date-sensitive software or embedded chips may recognize a date
using 00 as the year 1900 rather than the year 2000.
Potential implications include system failures or miscalculations
 that could impair a companys ability to conduct normal
business operations and process transactions. This Year 2000
issue affects the Company in two general areas: (i) its
software products sold to customers, and (ii) its internal
information systems.

Based on its assessments, management believes that the current
versions of the Companys ERP application products generally
 are Year 2000 ready. However, these products are developed and
produced using third-party development tools that, themselves,
may be subject to Year 2000 issues. The Company has tested its
products in an attempt to identify any such issues, but there is
no assurance that all such issues have been identified and
corrected. The Company has a published Year 2000 Readiness
Disclosure statement that provides guidance to its customers and
prospects on the status of the Year 2000 issue with respect to
its products. From time to time, customers require this statement
 to be included as a warranty in their license agreements, which
the Company will do. This could result in additional exposure for
 the Company to Year 2000-related litigation. Furthermore, it has
 been widely reported that a significant amount of litigation
surrounding business interruptions will arise out of Year 2000
issues. It is uncertain whether, or to what extent, the Company
may be affected by such litigation. See Managements
Discussion and Analysis of Financial Condition and Results of
Operations  Forward Looking Statements and Associated
Considerations  Year 2000 Readiness in the
Companys 1998 Annual Report.

The Companys efforts to resolve the Year 2000 issue with
respect to its internal information systems involve the following
 four phases: assessment, remediation or replacement, testing and
 contingency planning. The Company has completed the assessment,
remediation, and testing processes for its information technology
 and non-information technology exposures. The Company presently
believes that its internal software systems, which include its
application products and other internally developed software and
its relational database management system, are Year 2000 ready.

The Company completed all of the phases of its Year 2000
compliance efforts during the third quarter. The Company modified
 or replaced certain hardware and upgraded certain operating
system software so that

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The Company has queried its significant suppliers and
subcontractors that do not share information systems with the
Company (external agents). To date, the Company is not aware of
any external agent with a Year 2000 issue that would materially
impact the Companys results of operations, liquidity or
capital resources. However, the Company has no means of ensuring
that external agents will be Year 2000 ready. The inability of
external agents to complete their Year 2000 resolution process in
 a timely fashion could materially impact the Company. The effect
 of non-compliance by external agents is not determinable.

The Company is utilizing internal resources to address Year 2000
issues. The total cost of its Year 2000 effort was approximately
$0.4 million and was funded through operating cash flows.

Management believes it has effectively resolved all of its known
Year 2000 issues. However, disruptions in the economy generally
resulting from Year 2000 issues could also materially adversely
affect the Company. The Company also could be subject to Year
2000-related litigation. The amount of potential liability or
potential lost revenue cannot be reasonably estimated at this
time.

The Company currently has no contingency plans in place in the
event that additional Year 2000 issues arise but will continue to
 evaluate the need for such plans on an ongoing basis.

In addition to the concerns discussed above on the Year 2000
issue and how it affects the Companys products and its
internal information systems, significant uncertainty exists in
the ERP software industry concerning the potential effects
associated with Year 2000 readiness. As noted previously,
management believes that customers and potential customers
purchasing patterns may be affected in a number of ways. Many
companies are expending significant resources to upgrade their
systems. These expenditures may result in reduced funds available
 to purchase software products such as those the Company offers.
Many potential customers may defer purchasing Year 2000 ready
products as long as possible, accelerate purchasing such
products, switch to other systems or suppliers, or purchase the
Companys products only as an interim solution. See
Managements Discussion and Analysis of Financial
Condition and Results of Operations  Forward Looking
Statements and Associated Considerations  Year 2000
Readiness in the Companys 1998 Annual Report.

Liquidity and Capital Resources

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

|                          |  |               |       |        |  |              |    |    |  |   |       | 
|------------------------- |  | ------------- | ----- | ------ |  | ------------ | -- | -- |  | - | ----- | 
|                          |  |              
|                          |  | As of        
|                          |  |              
|                          |  | September 30, |       |        |  | December 31,
|                          |  | 1999          |       | Change |  | 1998        
|                          |  |               |       |        |  |             
|Working capital           |  | $             | 7,925 |        |  |              | 7  | %  |  | $ | 7,386 | 
|                         
|                         
|                         
|                         
|Cash and cash equivalents |  |               | 6,002 |        |  |              | (9 | %) |  |   | 6,594 | 

|                                                |  |                   |        |        |  |      |      |    |  |  |       |  
|----------------------------------------------- |  | ----------------- | ------ | ------ |  | ---- | ---- | -- |  |  | ----- | -
|                                                |  |                  
|                                                |  | For the          
|                                                |  | Nine months ended
|                                                |  | September 30,    
|                                                |  |                  
|                                                |  | 1999              |        | Change |  | 1998
|                                                |  |                   |        |        |  |     
|Cash (used in) provided by operating activities |  |                   | (7,275 | )      |  |      | >100 | %  |  |  | 1,156 |  
|                                               
|                                               
|                                               
|                                               
|Cash provided by (used in) investing activities |  |                   | 6,623  |        |  |      | >100 | %  |  |  | (614  | )
|                                               
|                                               
|                                               
|                                               
|Cash provided by financing activities           |  |                   | 60     |        |  |      | (48  | %) |  |  | 115   |  

Working capital increased as of September 30, 1999, compared
 to December 31, 1998, principally due to proceeds from the
sale of the Companys general consulting and general
education business to a third party, partially offset by negative
 cash flow from operations.

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For the nine month period ended September 30, 1999, cash
used by operating activities totaled $7,275, due principally to
lower than anticipated license revenue in the first quarter and
increased operating expenses for the nine month period as a
result of the Companys investment in its sales and
marketing organizations.

The Companys cash provided by investing activities totaled
$6,623 for the nine month period ended September 30, 1999,
principally due to the proceeds from the sale of the
Companys general consulting and general education business
($6,680 in the nine months ended September 30, 1999) and
proceeds from a return of the Companys investment in a
third party ($250), offset by purchases of property and equipment
 ($307).

At September 30, 1999, the Companys primary source of
liquidity consisted of its cash and cash equivalents balance of
$6,002 and its receivables of $6,274. The Company has an
agreement with its bank for a credit facility of $10 million
 (1999 Line of Credit). As of September 30,
1999, there was no outstanding balance against this facility. The
 1999 Line of Credit consists of a commitment for a revolving
line of credit totaling $5 million, with an additional
$5 million of uncommitted funding. The agreement requires
the Company to maintain certain financial ratios. The first
$2 million of the 1999 Line of Credit is unsecured, with an
interest rate equal to the 90-day floating LIBOR rate plus 150 or
 200 basis points, based on the Companys tangible net
worth. Draws from $2 million to $5 million will be
conditioned upon the Companys compliance with an additional
 financial ratio, or alternatively, may be secured by the
Companys accounts receivable and inventory. Draws in excess
 of $5 million will be subject to terms agreed to at the
time of the draw.

The Company believes that, based upon its projected revenues and
operating expense levels, that funds generated from operations,
existing cash and cash equivalents and its accounts receivable,
together with the availability of the line of credit, will be
sufficient to finance the Companys operations for at least
the next twelve months. See Forward Looking Statements and
Associated Considerations  Liquidity as set
forth in the Companys 1998 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, 1999. The Company has no
significant exposure to interest rate or foreign currency
exchange rate risks. An increase in interest rates of 100 basis
points would not significantly impact the Companys net
income. Generally, all of the Companys business is
transacted in U.S. dollars. Accordingly, foreign exchange rate
fluctuations should not have a significant impact on the Company.

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##### Table of Contents






INDEPENDENT ACCOUNTANTS REVIEW REPORT

The Board of Directors



We have reviewed the accompanying condensed consolidated balance
sheet of PowerCerv Corporation and subsidiary as of
September 30, 1999, and the related condensed consolidated
statements of operations for the three-month and nine-month
periods ended September 30, 1999 and 1998 and the condensed
statements of cash flows for the nine month periods ended
September 30, 1999 and 1998. These financial statements are
the responsibility of the Companys management. The
condensed consolidated statements of operations and cash flows
for the three-month period ended March 31, 1998, not
separately presented herein, were reviewed by other accountants
whose report (dated April 17, 1998) stated that they were
not aware of any material modifications that should be made to
those statements for them to be in conformity with generally
accepted accounting principles.

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

Based on our 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 generally accepted accounting principles.

We have previously audited, in accordance with generally accepted
 auditing standards, the consolidated balance sheet of PowerCerv
Corporation as of December 31, 1998, and the related
consolidated statements of operations, shareholders equity,
 and cash flows for the year then ended (not presented herein)
and in our report dated January 22, 1999, except with respect to
Note 16, as to which the date is March 31, 1999, we
expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of
December 31, 1998, is fairly stated, in all material
respects, in relation to the consolidated balance sheet from
which it has been derived.



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

Tampa, Florida



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##### Table of Contents






Part  II.  Other Information




Item  1.  Legal Proceedings

A complaint was filed on July 24, 1997 in the United States
District Court for the Middle District of Florida, captioned
J. Conrad Lifsey vs. Harold R. Ross, Gerald R.
Wicker, Marc J. Fratello, Roy E. Crippen, III,
Donald B. Hebb, Jr., Thomas S. Roberts, PowerCerv
Corporation, Alex Brown & Sons, Inc., Robertson, Stephens
& Company, ABS Capital Partners, L.P., Summit Investors II,
L.P., and Summit Ventures III, L.P. The complaint purports to be
a class action on behalf of those persons who purchased shares of
 the Companys common stock from March 1, 1996 (the
date of the Companys initial public offering of its common
stock (IPO)) through July 24, 1996. The
complaint alleges, among other things, that the defendants
violated the Securities Act of 1933 and the Securities Exchange
Act of 1934 in connection with the Companys IPO and in its
subsequent securities filings, press releases and other public
statements. The plaintiff seeks damages of an unspecified amount,
 rescission of certain securities sales and certain other
remedies. On March 19, 1998, the defendants filed their
motions to dismiss this complaint. An effect of this motion
filing is to postpone any discovery on this case until after the
motions are ruled on by the Court. No ruling has yet been handed
down. 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. In June
 of 1999 the Court once again recommended to the parties that
they attend a mediation conference to resolve the matter. The
parties declined. The parties have been advised by the Court that
 it intends to order a second mediation early next year. The
defendants continue to deny any wrongdoing and intend to contest
the suit vigorously.

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




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

The Company held its Annual Meeting of Shareholders on
June 2, 1999 (1999 Annual Meeting). At the 1999
Annual Meeting, the shareholders voted to elect Marc J.
Fratello, Roy E. Crippen, III, Michael J. Simmons,
 O.G. Greene and Stuart C. Johnson as directors of the
Company, to hold office until the Companys 2000 Annual
Meeting and until their successors are elected and qualified or
earlier resignation, removal from office or death. The
shareholders also voted to approve a proposal to amend the
Companys 1995 Stock Option Plan (Stock Option
Plan) to increase the number of shares available for
issuance under the Stock Option Plan from 3,675,000 shares to
4,675,000 shares.

The total number of shares of the Companys common stock,
$.001 par value (Common Stock), issued, outstanding
and entitled to vote at the 1999 Annual Meeting was 13,147,408
shares, of which 12,051,417 shares of Common Stock were present
in person or by proxy. The following list indicates the number of
 votes received by each of the nominees for the Companys
Board of Directors:

|                    |  |           |            |             |  |  |         | 
|------------------- |  | --------- | ---------- | ----------- |  |  | ------- | 
|Name                |  | Votes For |            | Abstentions
|                    |  |           |            |            
|Marc J. Fratello    |  |           | 11,169,750 |             |  |  | 881,667 | 
|                   
|                   
|                   
|                   
|Roy E. Crippen, III |  |           | 11,169,767 |             |  |  | 881,650 | 
|                   
|                   
|                   
|                   
|Michael J. Simmons  |  |           | 11,174,167 |             |  |  | 876,950 | 
|                   
|                   
|                   
|                   
|O.G. Greene         |  |           | 11,169,767 |             |  |  | 881,650 | 
|                   
|                   
|                   
|                   
|Stuart C. Johnson   |  |           | 11,169,767 |             |  |  | 881,650 | 

The Stock Option Plan proposal was approved by a majority of the
shareholders present and entitled to vote at the 1999 Annual
Shareholders Meeting. Specifically, of the 12,051,417 shares of
Common Stock present in person or by proxy, a total of 7,653,459
voted in favor of this proposal, 1,635,040 shares of Common Stock
 voted against, and 2,762,918 shares of Common Stock abstained
from voting.

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##### Table of Contents






Item  6.  Exhibits and Reports on
Form 8-K

(a)  Exhibits

|     |  |                                                                                                                                                                                                                                                                     
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1 |  | Loan Agreement and related promissory note, dated March 29,
	1999, among NationsBank, N.A. and the Company, related to the
	Companys $10,000,000 credit facility (incorporated herein
	by reference from Exhibit Number 10.4 to the Companys
	1998 Annual Report).
|10.2 |  | Asset Purchase Agreement, dated March 30, 1999, by and
	between the Company and R.O.I Consulting, Inc. (incorporated
	herein by reference from Exhibit Number 2 to the
	Companys Current Report on Form 8-K filed with the SEC
	 on April 13, 1999).               
|15.1 |  | Accountants Letter regarding Unaudited Interim Financial
	Information.                                                                                                                                                                                             
|27.1 |  | Financial Data Schedule. (for SEC use only)                                                                                                                                                                                                                         

(b)  None.

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##### Table of Contents



PowerCerv Corporation

Form 10-Q

(For the quarterly period ended September 30, 1999)




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 15, 1999 |  | /s/ MARC J. FRATELLO
	-----------------------------------------------
	Marc J. Fratello,Chairman and Chief Executive Officer
	(Duly Authorized Officer)     
|                       
|Date: November 15, 1999 |  | /s/ MICHAEL J. SIMMONS
	-----------------------------------------------
	Michael J. Simmons,President and Chief Operating Officer
	(Duly Authorized Officer)
|                       
|Date: November 15, 1999 |  | /s/ LAWRENCE J. ALVES
	-----------------------------------------------
	Lawrence J. Alves,Chief Financial Officer, Treasurer
	(Principal Financial Officer) 

19