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                  
|Item 3. Quantitative and Qualitative Disclosure about Market Risk
|INDEPENDENT ACCOUNTANTS REVIEW REPORT                           
|Part II. Other Information                                       
|Item 1. Legal Proceedings                                        
|Item 6. Exhibits and Reports on Form 8-K                         
|                                                                  | Signatures                                                      
|Accountants' Letter Regarding Unaudited Interim                  



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##### Table of Contents



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



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FORM 10-Q

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

For the quarterly period ended March 31, 2001

OR

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

For the transition period from ____________ to ______________



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Commission File Number 0-27574

PowerCerv Corporation
(Exact name of registrant as specified in its charter)

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

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

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

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

As of May 8, 2001, there were 13,811,210 shares of the registrants common
stock, $.001 par value, outstanding.

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##### Table of Contents



PowerCerv Corporation
Form 10-Q

Index

Part I. Financial Information

|                                                                                              |                                                                                                                |  |      |   |  | 
|--------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- |  | ---- | - |  | 
|                                                                                              |                                                                                                                |  | Page
|                                                                                              |                                                                                                                |  |     
|Item 1. Financial Statements                                                                 
|                                                                                             
|                                                                                              | Condensed Consolidated Balance Sheets as of March 31, 2001 (unaudited)
and December 31, 2000                   |  |      | 2 | 
|                                                                                             
|                                                                                              | Condensed Consolidated Statements of Operations for the Three Months Ended
March 31, 2001 and 2000 (unaudited) |  |      | 3 | 
|                                                                                             
|                                                                                              | Condensed Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2001 and 2000 (unaudited) |  |      | 4 | 
|                                                                                             
|                                                                                              | Notes to Condensed Consolidated Financial Statements (unaudited)                                               |  |      | 5 | 
|                                                                                             
|Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations |                                                                                                                |  | 10   |  
|                                                                                             
|Item 3.
Quantitative and Qualitative Disclosure about Market Risk                             |                                                                                                                |  | 17   |  
|                                                                                             
|Independent
Certified Public Accountants Review Report                                       |                                                                                                                |  | 18   |  
|                                                                                             
|Part II. Other Information                                                                   
|                                                                                             
|Item 1. Legal Proceedings                                                                     |                                                                                                                |  | 19   |  
|                                                                                             
|Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                                |  | 19   |  
|                                                                                             
|Signatures                                                                                    |                                                                                                                |  | 20   |  

1



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##### Table of Contents









Part I. FINANCIAL INFORMATION







Item 1. Financial Statements

PowerCerv Corporation







Condensed Consolidated Balance Sheets

(In thousands)


|                                                                          |                                                                          |                                            |       |                |       |                   |       |       |       | 
|------------------------------------------------------------------------- | ------------------------------------------------------------------------ | ------------------------------------------ | ----- | -------------- | ----- | ----------------- | ----- | ----- | ----- | 
|                                                                          |                                                                          |                                            |       | March 31, 2001 |       | December 31, 2000
|                                                                          |                                                                          |                                            |       |                |       |                  
|                                                                          |                                                                          |                                            |       | (unaudited)   
|Assets                                                                   
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Current assets:                                                          
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Cash and cash equivalents                                                |                                            | $     | 1,558          |       |                   | $     | 2,136 |      
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Accounts receivable, net of allowance of $1,851 and
$1,831, respectively |                                            |       | 2,038          |       |                   |       | 2,538 |      
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Other current assets                                                     |                                            |       | 641            |       |                   |       | 668   |      
|                                                                          |                                                                          |                                            |       |                |       |                   |       |       |      
|                                                                         
|                                                                          |                                                                          | Total current assets                       |       |                | 4,237 |                   |       |       | 5,342 | 
|                                                                         
|Property and equipment, net                                               |                                                                          |                                            | 361   |                |       |                   | 511   |      
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Intangible assets, net                                                    |                                                                          |                                            | 517   |                |       |                   | 565   |      
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Notes receivable, net                                                     |                                                                          |                                            | 827   |                |       |                   | 888   |      
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Deposits and other assets                                                 |                                                                          |                                            | 28    |                |       |                   | 28    |      
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Deferred tax asset, net of allowance of $12,750
and $12,335, respectively |                                                                          |                                            |      |                |       |                   |      |      
|                                                                          |                                                                          |                                            |       |                |       |                   |       |       |      
|                                                                         
|                                                                          |                                                                          | Total assets                               |       | $              | 5,970 |                   |       | $     | 7,334 | 
|                                                                          |                                                                          |                                            |       |                |       |                   |       |       |      
|                                                                         
|Liabilities and Shareholders

Equity                                    
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Current liabilities:                                                     
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Accounts payable                                                         |                                            | $     | 582            |       |                   | $     | 508   |      
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Accrued expenses                                                         |                                            |       | 1,664          |       |                   |       | 1,719 |      
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Deferred revenue                                                         |                                            |       | 1,329          |       |                   |       | 1,490 |      
|                                                                          |                                                                          |                                            |       |                |       |                   |       |       |      
|                                                                         
|                                                                          |                                                                          | Total current liabilities                  |       |                | 3,575 |                   |       |       | 3,717 | 
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Shareholders equity                                                      |                                                                          |                                            | 2,395 |                |       |                   | 3,617 |      
|                                                                          |                                                                          |                                            |       |                |       |                   |       |       |      
|                                                                         
|                                                                          |                                                                          | Total liabilities and shareholders equity |       | $              | 5,970 |                   |       | $     | 7,334 | 
|                                                                          |                                                                          |                                            |       |                |       |                   |       |       |      

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

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 March 31,
|                                             |                                |                                 |                          |         |        |                             
|                                             |                                |                                 |                          |         |        | 2001                         |        | 2000 
|                                             |                                |                                 |                          |         |        |                              |        |      
|Revenues:                                   
|                                            
|                                            
|                                            
|                                            
|                                             | License fees                   |                                 | $                        | 453     |        |                              | $      | 319   |       
|                                            
|                                            
|                                            
|                                            
|                                             | Service fees                   |                                 |                          | 1,406   |        |                              |        | 2,187 |       
|                                             |                                |                                 |                          |         |        |                              |        |       |       
|                                            
|                                             |                                | Total revenues                  |                          |         | 1,859  |                              |        |       | 2,506  |       
|                                             |                                |                                 |                          |         |        |                              |        |       |       
|                                            
|Costs and expenses:                         
|                                            
|                                            
|                                            
|                                            
|                                             | Cost of licenses               |                                 |                          | 78      |        |                              |        | 138   |       
|                                            
|                                            
|                                            
|                                            
|                                             | Cost of services               |                                 |                          | 1,093   |        |                              |        | 1,694 |       
|                                            
|                                            
|                                            
|                                            
|                                             | General and administrative     |                                 |                          | 610     |        |                              |        | 1,261 |       
|                                            
|                                            
|                                            
|                                            
|                                             | Sales and marketing            |                                 |                          | 555     |        |                              |        | 1,755 |       
|                                            
|                                            
|                                            
|                                            
|                                             | Research and development       |                                 |                          | 598     |        |                              |        | 1,220 |       
|                                            
|                                            
|                                            
|                                            
|                                             | Work force reduction and other |                                 |                          | 169     |        |                              |        |      |       
|                                             |                                |                                 |                          |         |        |                              |        |       |       
|                                            
|                                             |                                | Total costs and expenses        |                          |         | 3,103  |                              |        |       | 6,068  |       
|                                             |                                |                                 |                          |         |        |                              |        |       |       
|                                            
|                                             |                                | Operating loss                  |                          |         | (1,244 | )                            |        |       | (3,562 | )     
|                                            
|Interest income (expense), net               |                                |                                 | 33                       |         |        |                              | (91    | )    
|                                            
|                                             |                                |                                 | Loss before income taxes |         |        | (1,211                       | )      |       |        | (3,653 | )     
|                                            
|Income tax expense                           |                                |                                 | 10                       |         |        |                              | 248    |      
|                                             |                                |                                 |                          |         |        |                              |        |       |       
|                                            
|                                             |                                | Net loss and comprehensive
Loss |                          | $       | (1,221 | )                            |        | $     | (3,901 | )     
|                                             |                                |                                 |                          |         |        |                              |        |       |       
|                                            
|Basic and diluted net loss per share         |                                | $                               | (0.09                    | )       |        | $                            | (0.29  | )    
|                                             |                                |                                 |                          |         |        |                              |        |       |       
|                                            
|Shares used in computing net loss per share:
|                                            
|                                            
|                                            
|                                            
|                                             |                                |                                 |                          | Basic   |        |                              | 13,811 |       |        |        | 13,649 | 
|                                             |                                |                                 |                          |         |        |                              |        |       |       
|                                             |                                |                                 |                          | Diluted |        |                              | 13,811 |       |        |        | 13,649 | 
|                                             |                                |                                 |                          |         |        |                              |        |       |       

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

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PowerCerv Corporation







Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)


|                                                |                                                                                   |                                   |                                                           |        |                              |      |        |        |       |        |  
|----------------------------------------------- | --------------------------------------------------------------------------------- | --------------------------------- | --------------------------------------------------------- | ------ | ---------------------------- | ---- | ------ | ------ | ----- | ------ | -
|                                                |                                                                                   |                                   |                                                           |        | Three months ended March 31,
|                                                |                                                                                   |                                   |                                                           |        |                             
|                                                |                                                                                   |                                   |                                                           |        | 2001                         |      | 2000  
|                                                |                                                                                   |                                   |                                                           |        |                              |      |       
|Cash flows from operating activities:          
|                                               
|                                               
|                                               
|                                               
|                                                | Net loss                                                                          |                                   | $                                                         | (1,221 | )                            |      | $      | (3,901 | )    
|                                               
|                                               
|                                               
|                                               
|                                                | Adjustments to reconcile net loss
      To net cash used in operating activities:
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                   | Depreciation and amortization     |                                                           |        | 200                          |      |        |        | 197   |       
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                   | Deferred revenue                  |                                                           |        | (161                         | )    |        |        | (221  | )     
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                   | Changes in assets and liabilities |                                                           |        | 545                          |      |        |        | 2,010 |       
|                                                |                                                                                   |                                   |                                                           |        |                              |      |        |       
|                                               
|                                                |                                                                                   |                                   | Net cash flows used in operating activities               |        |                              | (637 | )      |        |       | (1,915 | )
|                                                |                                                                                   |                                   |                                                           |        |                              |      |        |       
|                                               
|Cash flows from investing activities:          
|                                               
|                                               
|                                               
|                                               
|                                                | Purchase of intangible asset                                                      |                                   |                                                           |       |                              |      |        | (100   | )    
|                                               
|                                               
|                                               
|                                               
|                                                | Payment
received on notes receivable                                              |                                   |                                                           | 61     |                              |      |        |      
|                                               
|                                               
|                                               
|                                               
|                                                | Purchases of property and equipment, net                                          |                                   |                                                           | (2     | )                            |      |        | (59    | )    
|                                                |                                                                                   |                                   |                                                           |        |                              |      |        |       
|                                               
|                                                |                                                                                   |                                   | Net cash
flows provided by (used in) investing activities |        |                              | 59   |        |        |       | (159   | )
|                                                |                                                                                   |                                   |                                                           |        |                              |      |        |        |      
|                                               
|Cash flows from financing activities:          
|                                               
|                                               
|                                               
|                                               
|                                                | Net proceeds from issuance of common

stock                                       |                                   |                                                           |       |                              |      |        | 871    |      
|                                                |                                                                                   |                                   |                                                           |        |                              |      |        |       
|                                                |                                                                                   |                                   | Net cash flows provided by financing activities           |        |                              |     |        |        |       | 871    |  
|                                                |                                                                                   |                                   |                                                           |        |                              |      |        |       
|Net decrease in cash and cash equivalents       |                                                                                   |                                   | (578                                                      | )      |                              |      | (1,203 | )     
|                                               
|                                               
|                                               
|                                               
|Cash and cash equivalents, beginning of

period |                                                                                   |                                   | 2,136                                                     |        |                              |      | 6,224  |       
|                                                |                                                                                   |                                   |                                                           |        |                              |      |        |       
|                                               
|Cash and cash equivalents, end of period        |                                                                                   | $                                 | 1,558                                                     |        |                              | $    | 5,021  |       
|                                                |                                                                                   |                                   |                                                           |        |                              |      |        |       

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

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##### Table of Contents



PowerCerv Corporation







Notes to Condensed Consolidated Financial Statements (Unaudited)

(In thousands, except per share amounts)


A. Basis of Presentation

The condensed consolidated balance sheet of PowerCerv Corporation and its
subsidiary (collectively, the Company) as of March 31, 2001, and the
condensed consolidated statements of operations for the three months ended
March 31, 2001 and 2000 and the condensed consolidated statements of cash flows
for the three months ended March 31, 2001 and 2000 have been prepared by the
Company, without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows at March 31, 2001, and
for all periods presented have been made. The condensed consolidated balance
sheet at December 31, 2000, 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, 2000, included in the Companys 2000 Annual Report on Form 10-K filed with
the SEC on April 17, 2001 (2000 Annual Report).

The results of operations for the three months ended March 31, 2001, 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 open,
modifiable Integrated Enterprise Response Software Solutions with innovative
e-Commerce application products. License fees also include royalties earned on
the Companys application products and related intellectual properties. Service
fees represent fees for services, primarily relating to the Companys
applications, including consulting, education and maintenance and support
consulting 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

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PowerCerv Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)(In thousands, except per share amounts)

separate element and are not essential to the customers functionality
requirements and there is vendor-specific objective evidence of fair value
for these services. Consulting and education revenue is recognized as the
services are performed. Revenue from support and maintenance activities is
recognized ratably over the term of the maintenance period and the unrecognized
portion is recorded as deferred revenue.

C. Earnings (Loss) Per Share Data

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

| |             |                                                                          |   |                    |        |      |   |       |        |  
| | ----------- | ------------------------------------------------------------------------ | - | ------------------ | ------ | ---- | - | ----- | ------ | -
| |             | (dollars in thousands, except per share amounts)                        
|
| |             |                                                                          |   | Three Months Ended
| |             |                                                                          |   | March 31,         
| |             |                                                                          |   |                   
| |             |                                                                          |   | 2001               |        | 2000
| |             |                                                                          |   |                    |        |     
| | Basic:     
|
|
|
|
| |             | Net loss                                                                 |   | $                  | (1,221 | )    |   | $     | (3,901 | )
| |             |                                                                          |   |                    |        |      |   |       |        |  
| |             | Average shares outstanding                                               |   |                    | 13,811 |      |   |       | 13,649 |  
| |             |                                                                          |   |                    |        |      |   |       |        |  
| | Basic EPS   |                                                                          | $ | (0.09              | )      |      | $ | (0.29 | )     
| |             |                                                                          |   |                    |        |      |   |      
| | Diluted:   
|
|
|
|
| |             | Net loss                                                                 |   | $                  | (1,221 | )    |   | $     | (3,901 | )
| |             |                                                                          |   |                    |        |      |   |      
| |             | Average shares outstanding                                               |   |                    | 13,811 |      |   |       | 13,649 |  
|
|
|
|
| |             | Net effect of dilutive stock options
based on the treasury stock method |   |                    |       |      |   |       |       |  
| |             |                                                                          |   |                    |        |      |   |      
| |             | Totals                                                                   |   |                    | 13,811 |      |   |       | 13,649 |  
| |             |                                                                          |   |                    |        |      |   |      
| | Diluted EPS |                                                                          | $ | (0.09              | )      |      | $ | (0.29 | )     
| |             |                                                                          |   |                    |        |      |   |      

Common stock equivalents in the three-month periods ended March 31, 2001
and 2000, were anti-dilutive due to the net losses sustained by the Company
during these periods, thus the diluted net loss per share in these periods is
the same as the basic net loss per share.

6



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PowerCerv Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)(In thousands, except per share amounts)

D. Commitments

The Company has entered into employment agreements with certain of its
executive officers. Information regarding these agreements is available in the
Companys 2000 Annual Report.

E. Contingencies

A complaint was filed on July 24, 1997, in the United States District
Court for the Middle District of Florida, entitled J. Conrad Lifsey v. Harold
Ross, Gerald 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
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 plaintiffs seek
damages of an unspecified amount, rescission of certain securities sales and
certain other remedies.

On March 19, 1998, Defendants filed their Motions to Dismiss this
Complaint. These motions were heard by oral argument on October 30, 2000, over
two and one-half years later. Approximately two and one-half months later, on
January 12, 2001, the court dismissed the complaint holding that the complaint
was insufficient as a matter of law to state a claim under the relevant
sections of the federal securities laws. Nonetheless, the Court, harbor[ing]
substantial doubt that the plaintiffs have sufficient facts at their disposal
to properly state a claim, permitted plaintiffs an opportunity to replead.

On February 16, 2001, Plaintiffs filed an amended complaint asserting
essentially the same causes of action based on the same set of factual
circumstances. Defendants continue to deny any wrongdoing and in light of the
Courts Order of January 12, 2001, have filed Motions to Dismiss requesting the
Court dismiss the amended complaint with prejudice.

The Company, in the normal course of business, is also subject to
miscellaneous legal proceedings. The Company is defending these proceedings
and anticipates that it will be successful and/or able to resolve these matters in a manner that will not materially
effect the Companys financial position.

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PowerCerv Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)(In thousands, except per share amounts)

F. Income Taxes

As of March 31, 2001, the Company had a deferred tax
asset of $12,750 which is fully reserved.

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

G. Segment Reporting

The Company has identified its operating segments as its services and
license product segments. In 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, Disclosures about
Segments of an Enterprise and Related Information. The services segment
provides consulting, education, support and maintenance services and the
license product segment provides Integrated Enterprise Response Software
Solutions with innovative e-Commerce application products.

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

|                                 |  |                                                 |      |          |  |             |       |       |  |  |      |   |  |   |        |  
|-------------------------------- |  | ----------------------------------------------- | ---- | -------- |  | ----------- | ----- | ----- |  |  | ---- | - |  | - | ------ | -
|                                 |  | For the Three-month Period Ended March 31, 2001
|                                 |  |                                                
|                                 |  | License                                        
|                                 |  | Product                                         |      | Services |  | Unallocated |       | Total
|                                 |  |                                                 |      |          |  |             |       |      
|Revenues from external
Customers |  | $                                               | 453  |          |  | $           | 1,406 |       |  |  |     |   |  | $ | 1,859  |  
|                                
|                                
|                                
|                                
|Segment profit (loss)            |  |                                                 | (778 | )        |  |             | 313   |       |  |  | (756 | ) |  |   | (1,221 | )

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

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

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##### Table of Contents



PowerCerv Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)(In thousands, except per share amounts)

|                                 |  |                            |      |      |  |   |        |  
|-------------------------------- |  | -------------------------- | ---- | ---- |  | - | ------ | -
|                                 |  | For the Three-month Period
|                                 |  | Ended March 31,           
|                                 |  |                           
|                                 |  | 2001                       |      | 2000
|                                 |  |                            |      |     
|General and administrative costs |  | $                          | (610 | )    |  | $ | (1,261 | )
|                                
|                                
|                                
|                                
|Work force reduction             |  |                            | (169 | )    |  |   |       |  
|                                
|                                
|                                
|                                
|Interest income (expense), net   |  |                            | 33   |      |  |   | (91    | )
|                                
|                                
|                                
|                                
|Income tax expense               |  |                            | (10  | )    |  |   | (248   | )
|                                 |  |                            |      |      |  |   |        |  
|                                 |  | $                          | (756 | )    |  | $ | (1,600 | )

H. Work Force Reduction and Other

During the first quarter of 2001, the Company announced and completed a
work force reduction in line with its objective to streamline overall
operations and improve financial condition. The Company recorded a
restructuring charge of $169 related to severance costs for approximately 30
employees (1 senior-level staff and 29 non senior-level employees primarily in
research and development and services). As of March 31, 2001, approximately
$50 remains in accrued liabilities for severance payments to be made over the
next 7 months in connection with the 2001 restructuring charge.

During the second quarter of 2000, the Company initiated actions to reduce
its work force and undertook cost cutting measures. The Company recorded a
restructuring charge related to a work force reduction and other expenses
totaling $873 of which $711 was recorded in the second quarter and $162 was
recorded in the third quarter. The total restructuring charge includes
severance and related costs of $649 (4 senior-level staff and 35 non
senior-level employees primarily in sales, services and research and
development) and costs of $224 related to office closings. As of March 31,
2001, approximately $282 remains in accrued liabilities for payments to be made
over the next 12 months in connection with the 2000 restructuring charge. As
part of the restructuring plan, the Companys Chairman assumed the role of
Chief Executive Officer, and the previous Chief Executive Officer is no longer
with the Company. Office closings were completed during the third quarter of
2000, and severance payments will be paid through April 2002.

9



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##### Table of Contents



PowerCerv Corporation







Item 2. Managements Discussion and Analysis of

Financial Condition and Results of Operations  (dollars in thousands)


Overview

The Company is focused on delivering open, modifiable Integrated
Enterprise Response Software Solutions with innovative e-Commerce capabilities
to mid-size U.S. companies with annual revenues up to $750 million. The Company
has focused its resources, including product development, marketing and sales
efforts, on the needs and requirements of companies in this market. The
Companys revenues currently consist primarily of software license fees and
fees for services, relating to the Companys applications, including
consulting, education and maintenance and support.

The Company was organized in April 1992, and through calendar year 1994 a
substantial part of the Companys revenue was derived from technology resales
and consulting and education services. The Company began selling its own
license product in the fourth quarter of 1993. Since then, the Company has
brought several additional applications to the market. Service fees remain the
Companys largest single revenue source, although the Companys strategy is to
seek to increase revenue generated from licensing its application products. On
March 31, 1999, the Company sold its general consulting and general education
business (consulting and education services other than its application-related
services ) to a related party. It also finalized its 1998 strategy to
discontinue technology resales of various third-party software products.

License fees represent revenue from licensing the Companys Integrated
Enterprise Response Software Solutions application products and royalties
earned on the Companys Integrated Enterprise Response Software Solutions
application products and related intellectual properties. Service fees
represent revenue from implementing the Companys Integrated Enterprise
Response Software Solutions application products, consulting services,
education services and maintenance and support services.

Beginning January 1, 1998, the Company has recognized revenue in
accordance with the American Institute of Certified Public Accountants
(AICPA) Statement of Position 97-2, Software Revenue Recognition (SOP
97-2), as amended by Statement of Position 98-4 (SOP 98-4), Deferral of the
Effective Date of a Provision of SOP 97-2.Revenue is recognized from licenses
of the Companys software products when the contract has been executed, the
product(s) has been shipped, collectibility is probable and the software
license fees are fixed or determinable. In the event that the contract
provides for multiple elements (e.g., software products, post-contract customer
support, consulting services), the total fee is allocated to these elements
based on vendor-specific objective evidence of fair value. If any portion of
the license fees is subject to forfeiture, refund or other contractual
contingencies, the Company will postpone revenue recognition until these
contingencies have been removed. Historically, product returns and allowances
have been immaterial. For those periods in which the Company marketed its
development tools and third party technology resales, license revenue was
recognized following the procedures above except that these products are
generally licensed via shrinkwrap license agreements. The Company generally
accounts for consulting and education services separate from software license
fees for those multi-element arrangements where services are a separate element
and are not essential to the customers functionality requirements and there is
vendor-specific objective evidence of fair value for these services. If any
portion of the license fees is subject to forfeiture, refund or other
contractual

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PowerCerv Corporation

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

contingencies, the Company will postpone revenue recognition until these
contingencies have been removed. Historically, product returns and allowances
have been immaterial. Consulting and education revenue is recognized as the
services are performed. Revenue from support and maintenance activities is
recognized ratably over the term of the maintenance period and the unrecognized
portion is recorded as deferred revenue. Prior to January 1, 1998, the Company
recognized revenue in accordance with the American Institute of Certified
Public Accountants Statement of Position 91-1, Software Revenue Recognition.

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 2000 Annual
Report on Form 10K filed with the SEC on April 17, 2001, under Managements
Discussion and Analysis of Financial Condition and Results of Operations 
Plan of Operations  Forward-Looking Statements and Associated
Considerations; Fluctuations in Quarterly Activity and Results of
Operations; Competition; Economic and Market Condition Risks;
Lengthy Sales Cycle; Ability to Manage Change; Liquidity;
Availability of Consulting Personnel, Dependence on Product Development
and Associated Risks, Dependence on New Products; Dependence on
PowerBuilder® and others; Dependence on Proprietary
Technology; Risks of Third-Party Claims for Infringement; Expansion of
Indirect Channels; Potential for Channel Conflict; Voting Control by
Management; Dependence on Key Personnel; and Possible Volatility of
Stock Price. The Company assumes no obligation to update any such
forward-looking statement. It is important to note that the Companys actual
results could differ materially from those in such forward-looking statements.

Results of Operations

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

|                             |  |                              |       |        |  |      |     |    |  |   |       |  
|---------------------------- |  | ---------------------------- | ----- | ------ |  | ---- | --- | -- |  | - | ----- | -
|Revenues                     |  | Three months ended March 31,
|                             |  |                             
|                             |  | 2001                         |       | Change |  | 2000
|                             |  |                              |       |        |  |     
|License fees                 |  | $                            | 453   |        |  |      | 42  | %  |  | $ | 319   |  
|                            
|                            
|                            
|                            
|Percentage of total revenues |  |                              | 24    | %      |  |      |     |    |  |   | 13    | %
|                             |  |                              |       |        |  |      |     |    |  |   |       |  
|Service fees                 |  | $                            | 1,406 |        |  |      | (36 | %) |  | $ | 2,187 |  
|                            
|                            
|                            
|                            
|Percentage of total revenues |  |                              | 76    | %      |  |      |     |    |  |   | 87    | %
|                             |  |                              |       |        |  |      |     |    |  |   |       |  

11



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##### Table of Contents



PowerCerv Corporation

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

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 increased for the three-month period ended March 31, 2001,
compared to the same period in 2000. The primary reason for the increase in
the first quarter of 2001 was a $270 fee from an internal use license and OEM
agreement with an unrelated entity. Historically, first quarter sales are the
low point for the year. The Company expects renewed growth in its license
revenue, but there can be no assurance that the Companys license revenues will
increase in accordance with managements expectations.

Service fees.The Companys service fees consist of revenue from
consulting, education and support and maintenance services for the Companys
application software licenses. Consulting services are primarily provided on a
time and materials basis, education services are generally priced on a
per-student basis and annual support and maintenance are based on a percentage
of related license fees. Management believes that the decrease in service
revenue was due to fewer new license deals closed in 2000. Generally, to the
extent that revenue from licensing its application products increases, the
Company believes the demand for application consulting services (and related
revenue) over subsequent quarters will likely increase; however, there can be no
assurance that license revenue will increase or that if it does increase,
revenue from service fees will increase correspondingly.

Costs and expenses

The following table sets forth, for the periods indicated, certain
financial data regarding the Companys costs associated with its license fees
and services:

|                        |  |                              |       |        |  |      |     |    |  |   |       |  
|----------------------- |  | ---------------------------- | ----- | ------ |  | ---- | --- | -- |  | - | ----- | -
|Cost of revenues:       |  | Three months ended March 31,
|                        |  |                             
|                        |  | 2001                         |       | Change |  | 2000
|                        |  |                              |       |        |  |     
|Cost of licenses        |  | $                            | 78    |        |  |      | (43 | %) |  | $ | 138   |  
|                       
|                       
|                       
|                       
|Gross profit percentage |  |                              | 83    | %      |  |      |     |    |  |   | 57    | %
|                        |  |                              |       |        |  |      |     |    |  |   |       |  
|Cost of services        |  | $                            | 1,093 |        |  |      | (35 | %) |  | $ | 1,694 |  
|                       
|                       
|                       
|                       
|Gross profit percentage |  |                              | 22    | %      |  |      |     |    |  |   | 23    | %
|                        |  |                              |       |        |  |      |     |    |  |   |       |  

Cost of licenses.The cost of licenses consists primarily of production
costs, royalties associated with modules of the Companys application products,
and the amortization of
intangible assets. The cost of licenses for the first quarter of 2001 decreased
43% compared to 2000 primarily resulting from fewer third party fees on
licenses sold in the current quarter offset by higher amortization expense.
The increase in gross profit percentage is due to higher license fee revenue
and decreased third party fees for the current period.

Cost of Services. The cost of services consists primarily of compensation
and nonreimbursable travel costs associated with providing consulting, product
support and maintenance, technical services and education. The cost of services
decreased 35% in the first quarter of 2001 compared to 2000 primarily due

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PowerCerv Corporation

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

to a lower compensation expense and operating costs for the period.
In addition to the 2000 workforce reduction, the Companys January 2001 work force reduction resulted in the
elimination of approximately seven services positions. The Company expects to
realize gross annual savings of approximately $600 as a result of these
terminations. A minor work force reduction was also implemented in the second
quarter of 2001. The Company expects that these reductions will result in
lower expenses and increased utilization of remaining services personnel;
however, there can be no assurance that the Company will return to
profitability as a result of these actions.

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

|                             |  |                              |     |        |  |      |     |    |  |   |       |  
|---------------------------- |  | ---------------------------- | --- | ------ |  | ---- | --- | -- |  | - | ----- | -
|Operating expenses:          |  | Three months ended March 31,
|                             |  |                             
|                             |  | 2001                         |     | Change |  | 2000
|                             |  |                              |     |        |  |     
|General and administrative   |  | $                            | 610 |        |  |      | (52 | %) |  | $ | 1,261 |  
|                            
|                            
|                            
|                            
|Percentage of total revenues |  |                              | 33  | %      |  |      |     |    |  |   | 50    | %
|                             |  |                              |     |        |  |      |     |    |  |   |       |  
|Sales and marketing          |  |                              | 555 |        |  |      | (68 | %) |  |   | 1,755 |  
|                            
|                            
|                            
|                            
|Percentage of total revenues |  |                              | 30  | %      |  |      |     |    |  |   | 70    | %
|                             |  |                              |     |        |  |      |     |    |  |   |       |  
|Research and development     |  |                              | 598 |        |  |      | (51 | %) |  |   | 1,220 |  
|                            
|                            
|                            
|                            
|Percentage of total revenues |  |                              | 32  | %      |  |      |     |    |  |   | 49    | %
|                             |  |                              |     |        |  |      |     |    |  |   |       |  

General and Administrative (G&A).G&A expenses include general
compensation, communications, accounting, human resources, legal and related
facilities expenses. The decrease in G&A expenses for the three-month period
ended March 31, 2001, compared to the three-month period ended March 31, 2000,
primarily resulted from lower compensation, bad debt and depreciation costs.
The G&A percentage of total revenue decreased due to substantial cost cutting
measures implemented by management in 2000 and 2001. The Company
expects that these reductions will result in lower expenses and increased
utilization of remaining G&A personnel; however, there can be no assurance that
the Company will return to profitability as a result of these actions.

Sales and Marketing.Sales and marketing expenses primarily consist of
compensation paid to sales and marketing personnel; costs of marketing,
including direct mail and telemarketing activities; costs of public relations,
including trade shows and conferences; and related communications costs. Sales
and marketing costs decreased 68% for the three-month period ended March 31,
2001, as compared to the same period in 2000 primarily as a result of lower
compensation in the current period. The sales and marketing expense as a
percentage of total revenue decreased due to substantial cost cutting measures
implemented by the Company in 2000 and 2001. The Companys January 2001 work
force reduction resulted in the elimination of approximately four sales and
marketing positions. The Company expects to realize gross annual savings of
approximately $220 as a result of these terminations. A minor work force
reduction was also implemented in the second quarter of 2001. The Company
expects that these reductions will result in lower expenses and increased
utilization of remaining sales and marketing personnel; however, there can be
no assurance that the Company will return to profitability or that there will
not be any negative impact as a result of these actions.

13



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PowerCerv Corporation

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

Research and Development (R&D).R&D costs consist primarily of
compensation and related facilities, software and equipment costs associated
with developing, maintaining and enhancing the Companys products.
Historically, the Company has not capitalized any internal R&D costs as the
costs incurred during the period between the point in time that technological
feasibility is established and that a product is released to the market have
been insignificant. R&D costs decreased 51% for the three-month period ended
March 31, 2001, as compared to the same period in 2000, primarily due to
decreased personnel costs. The R&D cost percentage of total revenue decreased
due to substantial cost cutting measures implemented by the Company in 2000 and
2001. The Companys January 2001 work force reduction resulted in the
elimination of approximately 17 R&D positions. The Company expects to realize
gross annual savings of approximately $1.3 million as a result of these
terminations. A minor work force reduction was also implemented in the second
quarter of 2001. The Company expects that these reductions will result in
lower expenses and increased utilization of remaining R&D personnel; however,
there can be no assurance that the Company will return to profitability or that
there will not be any negative impact as a result of these actions.

Work Force Reduction and Other.

During the first quarter of 2001, the Company announced and completed a
work force reduction in line with its objective to streamline operations and
improve financial condition. The Company recorded a restructuring charge of
$169 related to severance costs for approximately 30 employees (1 senior-level
staff and 29 non senior-level employees primarily in research and development
and services). As of March 31, 2001, approximately $50 remains in accrued
liabilities for severance payments to be made over the next 7 months in
connection with the 2001 restructuring charge.

During the second quarter of 2000, the Company initiated actions to reduce
its work force and undertook cost cutting measures. The Company recorded a
restructuring charge related to a work force reduction and other expenses
totaling $873 of which $711 was recorded in the second quarter and $162 was
recorded in the third quarter. The total restructuring charge includes
severance and related costs of $649 (4 senior-level staff and 35 non
senior-level employees primarily in sales, services and research and
development) and costs of $224 related to office closings. As of March 31,
2001, approximately $272 remains in accrued liabilities for payments to be made
over the next 12 months. As part of the restructuring plan, the Companys
Chairman has assumed the role of Chief Executive Officer, and the previous
Chief Executive Officer is no longer with the Company. Office closings were
completed during the third quarter of 2000, and severance payments will be paid
through April 2002.

The Company expects that these reductions will result in lower expenses
and increased utilization of its remaining personnel; however, there can be no
assurance that the Company will return to profitability as a result of these
actions.

Income taxes.

As of March 31, 2001, the Company
had a deferred tax asset of $12,750 which is fully reserved.

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##### Table of Contents



PowerCerv Corporation

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

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

Liquidity and Capital Resources

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

|                          |  |           |       |        |  |      |     |              |  |   |       | 
|------------------------- |  | --------- | ----- | ------ |  | ---- | --- | ------------ |  | - | ----- | 
|                          |  | As of    
|                          |  |          
|                          |  | March 31, |       |        |  |      |     | December 31,
|                          |  |          
|                          |  | 2001      |       | Change |  | 2000
|                          |  |           |       |        |  |     
|Working capital           |  | $         | 662   |        |  |      | (59 | %)           |  | $ | 1,625 | 
|                         
|                         
|                         
|                         
|Cash and cash equivalents |  | $         | 1,558 |        |  |      | (27 | %)           |  | $ | 2,136 | 

Working capital and cash and cash equivalents decreased as of March 31,
2001, compared to December 31, 2000, due to significantly reduced revenues
resulting in lower accounts receivable and operating losses for the quarter.

|                                                      |  |                              |      |        |  |      |      |    |  |  |        |  
|----------------------------------------------------- |  | ---------------------------- | ---- | ------ |  | ---- | ---- | -- |  |  | ------ | -
|                                                      |  | For the                     
|                                                      |  | Three months ended March 31,
|                                                      |  |                             
|                                                      |  | 2001                         |      | Change |  | 2000
|                                                      |  |                              |      |        |  |     
|Cash flows used in operating activities               |  |                              | (637 | )      |  |      | 67   | %  |  |  | (1,915 | )
|                                                     
|                                                     
|                                                     
|                                                     
|Cash
flows provided by (used in) investing activities |  |                              | 59   |        |  |      | 137  | %  |  |  | (159   | )
|                                                     
|                                                     
|                                                     
|                                                     
|Cash flows provided by financing activities           |  |                              |     |        |  |      | (100 | %) |  |  | 871    |  

For the three-month period ended March 31, 2001, cash used by operating
activities totaled $637, due principally to lower than anticipated revenues and
resulting losses for the quarter.

The Companys cash
provided by investing activities totaled $59 for the
three-month period ended March 31, 2001, principally due to
payments received on notes receivable. The cash used in investing activities total $159 for the three-month
period ended March 31, 2000, as a result of investments in software and fixed
assets.

At March 31, 2001, the Companys primary source of liquidity consisted of
its cash and cash equivalents balance of $1,558 and its short-term accounts
receivable balance of $2,038. The Company is
currently seeking other sources of debt or equity. There can be no assurances
that such funds will be available to the Company or, if available, would be on
terms satisfactory to the Company.

15



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PowerCerv Corporation

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

If the Company is not successful in achieving targeted license and service
revenues, the Company may be required to take further actions to align its
operating expenses with its revenues, such as further reductions in work force
or other cost cutting measures. The Company is dependent upon its ability to
generate cash flows from its license and service fees, as well as the
collection of its outstanding accounts receivable, to maintain its current
liquidity levels.

PowerCerv recognized that revenue for the Company was not going to rapidly
return to the levels previously achieved. As a result, management has taken
steps to streamline operations and improve financial condition of the Company.
These steps include restructuring initiatives that commenced in 2000 as well as
strategies and actions already taken or planned for 2001, including workforce
reductions that were implemented in the first and second quarters of 2001.
Additionally, management has reduced or deferred certain wages for senior
executives. Furthermore, management will use best efforts to eliminate costs
that have been evaluated as non-critical to the success of the Companys core
strategies. Management estimates that the aforementioned strategies and
actions once fully implemented will reduce its overall expenses by
approximately $1 million per quarter. However, there can be no assurance that
the Company will return to profitability as a result of these actions or that
further actions will not be necessary in 2001.

If the Companys existing cash reserves and restructuring decisions prove
insufficient to fund its future cash requirements and the Company is not able
to obtain other sources of funds, the Companys ability to pursue its business
strategy beyond the year 2001 could be materially adversely effected. However,
as a result of the Companys restructuring decisions, the amount of cash used
in operations decreased substantially in the first quarter of 2001 as compared
to the previous year. As more fully discussed in the Companys 2000 Annual
Report  Plan of Operations, the Company has implemented, or is in the
process of initiating, cost cutting measures and other actions that management
believes will provide adequate working capital for at least twelve months.

See Liquidity and Capital Resources and Forward Looking Statements and
Associated ConsiderationsLiquidity as set forth in the Companys 2000 Annual
Report.

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PowerCerv Corporation







Item 3. Quantitative and Qualitative
Disclosure about Market Risk

The Company had no holdings of derivative financial or commodity
instruments at March 31, 2001. The Company has no significant exposure to
interest rate or foreign currency exchange rate risks. An increase in interest
rates of 100 basis points would not significantly impact the Companys net
income. Generally, all of the Companys business is transacted in U.S. dollars.
Accordingly, foreign exchange rate fluctuations should not have a significant
impact on the Company.

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##### Table of Contents









INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS REVIEW REPORT

The Board of Directors
PowerCerv Corporation

We have reviewed the
accompanying condensed consolidated balance sheet of PowerCerv
Corporation as of March 31, 2001, and the related condensed
consolidated statement of operations for the three-month period then
ended and the condensed consolidated statement of cash flows for the
three-month period then ended. These financial statements are the
responsibility of the Company's management.

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

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

/s/ Grant Thornton LLP

Tampa, Florida
April 20, 2001

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##### Table of Contents



PowerCerv Corporation







Part II. Other Information







Item 1. Legal Proceedings

A complaint was filed on July 24, 1997, in the United States District
Court for the Middle District of Florida, entitled J. Conrad Lifsey v. Harold
Ross, Gerald 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
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 plaintiffs seek
damages of an unspecified amount, rescission of certain securities sales and
certain other remedies.

On March 19, 1998, Defendants filed their Motions to Dismiss this
Complaint. These motions were heard by oral argument on October 30, 2000, over
two and one-half years later. Approximately two and one-half months later, on
January 12, 2001, the Court dismissed the complaint holding that the complaint
was insufficient as a matter of law to state a claim under the relevant
sections of the federal securities laws. Nonetheless, the Court, harbor[ing]
substantial doubt that the plaintiffs have sufficient facts at their disposal
to properly state a claim, permitted plaintiffs an opportunity to replead.

On February 16, 2001, Plaintiffs filed an amended complaint asserting
essentially the same causes of action based on the same set of factual
circumstances. Defendants continue to deny any wrongdoing and in light of the
Courts Order of January 12, 2001, have filed Motions to Dismiss requesting the
Court dismiss the amended complaint with prejudice.

The Company, in the normal course of business, is also subject to
miscellaneous legal proceedings. The Company is defending these proceedings
and anticipates that it will be successful and/or able to resolve these matters
in a manner that will not materially effect the Companys financial position.







Item 6. Exhibits and Reports on Form 8-K

|    |  |                     |  |                                                                       
|--- |  | ------------------- |  | ----------------------------------------------------------------------
|(a) |  | Exhibits           
|   
|   
|   
|   
|   
|    |  | 15.1                |  | Accountants Letter regarding Unaudited Interim Financial
Information.
|   
|   
|   
|   
|   
|(b) |  | Reports on Form 8-K
|   
|   
|   
|   
|   
|    |  | None               

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##### Table of Contents



PowerCerv Corporation

Form 10-Q

(for the quarterly period ended March 31, 2001)







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                                                                                   
|                  
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|Date: May 15, 2001 |  | /s/ Marc J. Fratello                                                                                    
|                   |  |                                                                                                         
|                   |  | Marc J. Fratello,
President, Chief Executive Officer and
Chairman of the Board
(Duly Authorized Officer)
|                  
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|Date: May 15, 2001 |  | /s/ Lawrence J. Alves                                                                                   
|                   |  |                                                                                                         
|                   |  | Lawrence J. Alves,
Chief Financial Officer
(Principal Financial Officer)                                

20