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



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FORM 10-QSB

|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 
| 
|  |  | For the quarterly period ended June 30, 2002                                            
| 
| 
|  |  | OR                                                                                      
| 
|o |  | 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
(Name of small business issuer 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 2675, Tampa, Florida 33602
(Address of principal executive offices, including zip code)

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

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

As of September 30, 2002, there were 1,313,000 shares of the registrants common
stock, $.001 par value, outstanding.



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PowerCerv Corporation
Form 10-QSB

Index

|                                                                   |                                                                                                                       |  |      |   | 
|------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------- |  | ---- | - | 
|                                                                   |                                                                                                                       |  | Page
|                                                                   |                                                                                                                       |  |     
|Part I. Financial Information                                      |                                                                                                                       |  |      |  
|                                                                  
|Item 1. Financial Statements                                       |                                                                                                                       |  |      |  
|                                                                  
|                                                                   | Condensed Consolidated Balance Sheets as of June 30, 2002 (unaudited)
and December 31, 2001                           |  |      | 2 | 
|                                                                  
|                                                                   | Condensed Consolidated Statements of Operations for the Three and Six
Months Ended June 30, 2002 and 2001 (unaudited) |  |      | 3 | 
|                                                                  
|                                                                   | Condensed Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 2002 and 2001 (unaudited)           |  |      | 4 | 
|                                                                  
|                                                                   | Notes to Condensed Consolidated Financial Statements (unaudited)                                                      |  |      | 5 | 
|                                                                  
|Item 2. Managements Discussion and Analysis or Plan of Operations |                                                                                                                       |  | 10   |  
|                                                                  
|Item 3. Quantitative and Qualitative Disclosure about Market Risk  |                                                                                                                       |  | 16   |  
|                                                                  
|Item 4. Internal Controls                                          |                                                                                                                       |  | 16   |  
|                                                                  
|Part II. Other Information                                         |                                                                                                                       |  |      |  
|                                                                  
|Item 1. Legal Proceedings                                          |                                                                                                                       |  | 17   |  
|                                                                  
|Item 6. Exhibits and Reports on Form 8-K                           |                                                                                                                       |  | 17   |  
|                                                                  
|Signatures                                                         |                                                                                                                       |  | 18   |  
|                                                                  
|Certifications                                                     |                                                                                                                       |  | 19   |  



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Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

PowerCerv Corporation

Condensed Consolidated Balance Sheets(In thousands)

|                                               |                                                                          |                                                      |      |               |       |                   |     |       |       | 
|---------------------------------------------- | ------------------------------------------------------------------------ | ---------------------------------------------------- | ---- | ------------- | ----- | ----------------- | --- | ----- | ----- | 
|                                               |                                                                          |                                                      |      | June 30, 2002 |       | December 31, 2001
|                                               |                                                                          |                                                      |      |               |       |                  
|                                               |                                                                          |                                                      |      | (unaudited)   |       |                   |     |      
|Assets                                         |                                                                          |                                                      |      |               |       |                   |     |      
|Current assets:                                |                                                                          |                                                      |      |               |       |                   |     |      
|                                               | Cash and cash equivalents                                                |                                                      | $    | 231           |       |                   | $   | 635   |      
|                                               | Accounts receivable, net of allowance of $1,768 and
$1,880, respectively |                                                      |      | 527           |       |                   |     | 934   |      
|                                               | Other current assets                                                     |                                                      |      | 356           |       |                   |     | 499   |      
|                                               |                                                                          |                                                      |      |               |       |                   |     |      
|                                               |                                                                          | Total current assets                                 |      |               | 1,114 |                   |     |       | 2,068 | 
|Property and equipment, net                    |                                                                          |                                                      | 64   |               |       |                   | 76  |      
|Intangible assets, net                         |                                                                          |                                                      | 279  |               |       |                   | 375 |      
|Notes receivable, net                          |                                                                          |                                                      | 217  |               |       |                   | 383 |      
|Deposits and other assets                      |                                                                          |                                                      | 14   |               |       |                   | 18  |      
|                                               |                                                                          |                                                      |      |               |       |                   |     |      
|                                               |                                                                          | Total assets                                         |      | $             | 1,688 |                   |     | $     | 2,920 | 
|                                               |                                                                          |                                                      |      |               |       |                   |     |      
|Liabilities and Shareholders Equity (Deficit) |                                                                          |                                                      |      |               |       |                   |     |      
|Current liabilities:                           |                                                                          |                                                      |      |               |       |                   |     |      
|                                               | Accounts payable                                                         |                                                      | $    | 524           |       |                   | $   | 581   |      
|                                               | Accrued expenses and other                                               |                                                      |      | 944           |       |                   |     | 1,371 |      
|                                               | Deferred revenue                                                         |                                                      |      | 518           |       |                   |     | 845   |      
|                                               |                                                                          |                                                      |      |               |       |                   |     |      
|                                               |                                                                          | Total current liabilities                            |      |               | 1,986 |                   |     |       | 2,797 | 
|Shareholders equity (deficit)                 |                                                                          |                                                      | (298 | )             |       |                   | 123 |      
|                                               |                                                                          |                                                      |      |               |       |                   |     |      
|                                               |                                                                          | Total liabilities and shareholders equity (deficit) |      | $             | 1,688 |                   |     | $     | 2,920 | 
|                                               |                                                                          |                                                      |      |               |       |                   |     |      

See accompanying notes to condensed consolidated financial statements.

2



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PowerCerv Corporation

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

|                                             |                                |         |                          |                                 |       |                             |      |                           |       |       |      |       |       |       |      |       |       |        |        |  
|-------------------------------------------- | ------------------------------ | ------- | ------------------------ | ------------------------------- | ----- | --------------------------- | ---- | ------------------------- | ----- | ----- | ---- | ----- | ----- | ----- | ---- | ----- | ----- | ------ | ------ | -
|                                             |                                |         |                          |                                 |       | Three months ended June 30, |      | Six months ended June 30,
|                                             |                                |         |                          |                                 |       |                             |      |                          
|                                             |                                |         |                          |                                 |       | 2002                        |      | 2001                      |       | 2002  |      | 2001 
|                                             |                                |         |                          |                                 |       |                             |      |                           |       |       |      |      
|Revenues:                                    |                                |         |                          |                                 |       |                             |      |                           |       |       |      |       |       |       |      |      
|                                             | License fees                   |         | $                        | 31                              |       |                             | $    | 633                       |       |       | $    | 260   |       |       | $    | 1,086 |      
|                                             | Service fees                   |         |                          | 640                             |       |                             |      | 1,170                     |       |       |      | 1,370 |       |       |      | 2,576 |      
|                                             |                                |         |                          |                                 |       |                             |      |                           |       |       |      |       |       |       |      |      
|                                             |                                |         | Total revenues           |                                 |       | 671                         |      |                           |       | 1,803 |      |       |       | 1,630 |      |       |       | 3,662  |       
|                                             |                                |         |                          |                                 |       |                             |      |                           |       |       |      |       |       |       |      |      
|Costs and expenses:                          |                                |         |                          |                                 |       |                             |      |                           |       |       |      |       |       |       |      |      
|                                             | Cost of licenses               |         |                          | 54                              |       |                             |      | 79                        |       |       |      | 126   |       |       |      | 157   |      
|                                             | Cost of services               |         |                          | 276                             |       |                             |      | 875                       |       |       |      | 577   |       |       |      | 1,968 |      
|                                             | General and administrative     |         |                          | 319                             |       |                             |      | 683                       |       |       |      | 590   |       |       |      | 1,293 |      
|                                             | Sales and marketing            |         |                          | 103                             |       |                             |      | 450                       |       |       |      | 318   |       |       |      | 1,005 |      
|                                             | Research and development       |         |                          | 196                             |       |                             |      | 493                       |       |       |      | 455   |       |       |      | 1,091 |      
|                                             | Work force reduction and other |         |                          | 5                               |       |                             |      | 24                        |       |       |      | 30    |       |       |      | 193   |      
|                                             |                                |         |                          |                                 |       |                             |      |                           |       |       |      |       |       |       |      |      
|                                             |                                |         | Total costs and expenses |                                 |       | 953                         |      |                           |       | 2,604 |      |       |       | 2096  |      |       |       | 5,707  |       
|                                             |                                |         |                          |                                 |       |                             |      |                           |       |       |      |       |       |       |      |      
|                                             |                                |         | Operating loss           |                                 |       | (282                        | )    |                           |       | (801  | )    |       |       | (466  | )    |       |       | (2,045 | )     
|Interest and other income (expense),
net     |                                |         | 39                       |                                 |       |                             | 18   |                           |       |       | 45   |       |       |       | 51   |      
|                                             |                                |         |                          |                                 |       |                             |      |                           |       |       |      |       |       |       |      |      
|                                             |                                |         |                          | Loss before income taxes        |       |                             | (243 | )                         |       |       | (783 | )     |       |       | (421 | )     |       |        | (1,994 | )
|Income tax expense                           |                                |         |                         |                                 |       |                             |     |                           |       |       |     |       |       |       | 10   |      
|                                             |                                |         |                          |                                 |       |                             |      |                           |       |       |      |       |       |       |      |      
|                                             |                                |         |                          | Net loss and comprehensive loss |       | $                           | (243 | )                         |       | $     | (783 | )     |       | $     | (421 | )     |       | $      | (2,004 | )
|                                             |                                |         |                          |                                 |       |                             |      |                           |       |       |      |       |       |       |      |      
|Net loss per share:                          |                                |         |                          |                                 |       |                             |      |                           |       |       |      |       |       |       |      |      
|                                             |                                | Basic   |                          | $                               | (.19  | )                           |      | $                         | (.51  | )     |      | $     | (.32  | )     |      | $     | (1.31 | )     
|                                             |                                |         |                          |                                 |       |                             |      |                           |       |       |      |       |       |       |      |      
|                                             |                                | Diluted |                          | $                               | (.19  | )                           |      | $                         | (.51  | )     |      | $     | (.32  | )     |      | $     | (1.31 | )     
|                                             |                                |         |                          |                                 |       |                             |      |                           |       |       |      |       |       |       |      |      
|Shares used in computing net loss
per share: |                                |         |                          |                                 |       |                             |      |                           |       |       |      |       |       |       |      |      
|                                             |                                | Basic   |                          |                                 | 1,313 |                             |      |                           | 1,535 |       |      |       | 1,313 |       |      |       | 1,535 |       
|                                             |                                |         |                          |                                 |       |                             |      |                           |       |       |      |       |       |       |      |      
|                                             |                                | Diluted |                          |                                 | 1,313 |                             |      |                           | 1,535 |       |      |       | 1,313 |       |      |       | 1,535 |       
|                                             |                                |         |                          |                                 |       |                             |      |                           |       |       |      |       |       |       |      |      

See accompanying notes to condensed consolidated financial statements.

3



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PowerCerv Corporation

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

|                                               |                                                                             |                                   |                                             |                                                 |      |                           |       |        |      |        |    | 
|---------------------------------------------- | --------------------------------------------------------------------------- | --------------------------------- | ------------------------------------------- | ----------------------------------------------- | ---- | ------------------------- | ----- | ------ | ---- | ------ | -- | 
|                                               |                                                                             |                                   |                                             |                                                 |      | Six months ended June 30,
|                                               |                                                                             |                                   |                                             |                                                 |      |                          
|                                               |                                                                             |                                   |                                             |                                                 |      | 2002                      |       | 2001  
|                                               |                                                                             |                                   |                                             |                                                 |      |                           |       |       
|Cash flows from operating activities:          |                                                                             |                                   |                                             |                                                 |      |                           |       |       
|                                               | Net loss                                                                    |                                   | $                                           | (421                                            | )    |                           | $     | (2,004 | )   
|                                               | Adjustments to reconcile net loss to net cash
used in operating activities: |                                   |                                             |                                                 |      |                           |       |        |     
|                                               |                                                                             | Depreciation and amortization     |                                             |                                                 | 107  |                           |       |        | 387  |       
|                                               |                                                                             | Deferred revenue                  |                                             |                                                 | (327 | )                         |       |        | (168 | )     
|                                               |                                                                             | Changes in assets and liabilities |                                             |                                                 | (77  | )                         |       |        | 697  |       
|                                               |                                                                             |                                   |                                             |                                                 |      |                           |       |       
|                                               |                                                                             |                                   | Net cash flows used in operating activities |                                                 |      | (718                      | )     |        |      | (1,088 | ) 
|                                               |                                                                             |                                   |                                             |                                                 |      |                           |       |       
|Cash flows from investing activities:          |                                                                             |                                   |                                             |                                                 |      |                           |       |       
|                                               | Payments received on notes receivable                                       |                                   |                                             | 183                                             |      |                           |       | 114    |     
|                                               | Purchases of property and equipment, net                                    |                                   |                                             |                                                |      |                           |       | (15    | )   
|                                               |                                                                             |                                   |                                             |                                                 |      |                           |       |       
|                                               |                                                                             |                                   |                                             | Net cash flows provided by investing activities |      |                           | 183   |        |      |        | 99 | 
|                                               |                                                                             |                                   |                                             |                                                 |      |                           |       |       
|Cash flows from financing activities:          |                                                                             |                                   |                                             |                                                 |      |                           |       |       
|                                               | Net proceeds from issuance of preferred stock                               |                                   |                                             | 85                                              |      |                           |       |       |     
|                                               | Loans received from officers and directors                                  |                                   |                                             | 46                                              |      |                           |       |       |     
|                                               |                                                                             |                                   |                                             |                                                 |      |                           |       |       
|                                               |                                                                             |                                   |                                             | Net cash flows provided by financing activities |      |                           | 131   |        |      |        |   | 
|                                               |                                                                             |                                   |                                             |                                                 |      |                           |       |       
|Net decrease in cash and cash equivalents      |                                                                             |                                   | (404                                        | )                                               |      |                           | (989  | )     
|Cash and cash equivalents, beginning of period |                                                                             |                                   | 635                                         |                                                 |      |                           | 2,136 |       
|                                               |                                                                             |                                   |                                             |                                                 |      |                           |       |       
|Cash and cash equivalents, end of period       |                                                                             | $                                 | 231                                         |                                                 |      | $                         | 1,147 |       
|                                               |                                                                             |                                   |                                             |                                                 |      |                           |       |       

See accompanying notes to condensed consolidated financial statements.

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PowerCerv Corporation

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

A. Basis of Presentation

The unaudited condensed consolidated balance sheet of PowerCerv
Corporation and its subsidiary (collectively, the Company or PowerCerv) as
of June 30, 2002, and the condensed consolidated statements of operations for
the three and six months ended June 30, 2002 and 2001 and the condensed
consolidated statements of cash flows for the six months ended June 30, 2002
and 2001 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 June 30, 2002, and for all periods presented have been made. The
financial statements are prepared on the going concern basis. See further
discussion in note J. The condensed consolidated balance sheet at December 31,
2001, 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, 2001, included in the Companys 2001 Annual Report on Form 10-KSB filed
with the SEC on April 16, 2002 (2001 Annual Report).

The results of operations for the six months ended June 30, 2002, are not
necessarily indicative of results that may be expected for any other interim
period or for the full fiscal year.

B. Significant Accounting Policies

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

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PowerCerv Corporation

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

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

New Accounting Pronouncements

On July 20, 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 141, Business Combinations,
and SFAS 142, Goodwill and Intangible Assets. SFAS 141 is effective for all
business combinations completed after June 30, 2001. SFAS 142 is effective for
the year beginning January 1, 2002; however certain provisions of the Statement
apply to goodwill and other intangible assets acquired between July 1, 2001 and
the effective date of SFAS 142. The adoption of this statement did not have a
significant effect on the Companys results of operations or financial
position. The Company recognized $7 of goodwill amortization expense in 2001.
Goodwill amounted to $4 at June 30, 2002.

In July 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. This statement addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. This Statement applies to
all entities. It applies to legal obligations associated with the retirement
of long-lived assets that result from the acquisition, construction,
development and (or) the normal operation of a long-lived asset, except for
certain obligations of lessees. This Statement is for financial statements
issued for fiscal years beginning after June 15, 2002. The Company is
evaluating the impact of the adoption of this standard and has not yet
determined the effect of adoption on its financial position and results of
operations.

In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. This statement addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets and supersedes FASB Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The provisions
of the statement are effective for financial statements issued for fiscal years
beginning after December 15, 2001. The adoption of this statement on January
1, 2002 did not have a significant effect on the Companys results of
operations or financial position.

C. Net Loss Per Share Data

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

6



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PowerCerv Corporation

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

|            |                                                                          |   |                    |       |                  |   |      |       |      |   |      |       |   |   |       |        |  
|----------- | ------------------------------------------------------------------------ | - | ------------------ | ----- | ---------------- | - | ---- | ----- | ---- | - | ---- | ----- | - | - | ----- | ------ | -
|            |                                                                          |   | Three Months Ended |       | Six Months Ended
|            |                                                                          |   | June 30,           |       | June 30,        
|            |                                                                          |   |                    |       |                 
|            |                                                                          |   | 2002               |       | 2001             |   | 2002 |       | 2001
|            |                                                                          |   |                    |       |                  |   |      |       |     
|Basic:      |                                                                          |   |                    |       |                  |   |      |       |      |   |      |       |   |   |       |       
|            | Net loss                                                                 |   | $                  | (243  | )                |   | $    | (783  | )    |   | $    | (421  | ) |   | $     | (2,004 | )
|            |                                                                          |   |                    |       |                  |   |      |       |      |   |      |       |   |   |       |       
|            | Average shares outstanding                                               |   |                    | 1,313 |                  |   |      | 1,535 |      |   |      | 1,313 |   |   |       | 1,535  |  
|            |                                                                          |   |                    |       |                  |   |      |       |      |   |      |       |   |   |       |       
|Basic EPS   |                                                                          | $ | (.19               | )     |                  | $ | (.51 | )     |      | $ | (.32 | )     |   | $ | (1.31 | )     
|            |                                                                          |   |                    |       |                  |   |      |       |      |   |      |       |   |   |       |       
|Diluted:    |                                                                          |   |                    |       |                  |   |      |       |      |   |      |       |   |   |       |       
|            | Net loss                                                                 |   | $                  | (243  | )                |   | $    | (783  | )    |   | $    | (421  | ) |   | $     | (2,004 | )
|            |                                                                          |   |                    |       |                  |   |      |       |      |   |      |       |   |   |       |       
|            | Average shares outstanding                                               |   |                    | 1,313 |                  |   |      | 1,535 |      |   |      | 1,313 |   |   |       | 1,535  |  
|            | Net effect of dilutive
stock options
based on the treasury
stock method |   |                    |      |                  |   |      |      |      |   |      |      |   |   |       |       |  
|            |                                                                          |   |                    |       |                  |   |      |       |      |   |      |       |   |   |       |       
|            | Totals                                                                   |   |                    | 1,313 |                  |   |      | 1,535 |      |   |      | 1,313 |   |   |       | 1,535  |  
|            |                                                                          |   |                    |       |                  |   |      |       |      |   |      |       |   |   |       |       
|Diluted EPS |                                                                          | $ | (.19               | )     |                  | $ | (.51 | )     |      | $ | (.32 | )     |   | $ | (1.31 | )     
|            |                                                                          |   |                    |       |                  |   |      |       |      |   |      |       |   |   |       |       

Common stock equivalents in the three and six-month periods ended June 30,
2002 and June 30, 2001, were anti-dilutive due to the net losses sustained by
the Company during those periods. Therefore, the diluted net loss per share in
these periods is the same as the basic net loss per share.

D. Commitments

The Company has entered into employment agreements with certain of its
executive officers. Information regarding these agreements is available in the
2001 Annual Report and Form 10-KSB/A.

E. Contingencies

Lifsey v. Ross, et. al.:A complaint was filed on July 24, 1997, in the
United States District Court for the Middle District of Florida, captioned J.
Conrad Lifsey vs. Harold R. Ross, Gerald R. Wicker, Marc J. Fratello, Roy E.
Crippen, III, Donald B. Hebb, Jr., Thomas S. Roberts, PowerCerv Corporation,
Alex Brown & Sons, Inc., Robertson, Stephens & Company, ABS Capital Partners,
L.P., Summit Investors II, L.P., and Summit Ventures III, L.P. The complaint
purports to be a class action on behalf of those persons who purchased shares
of the Companys common stock from March 1, 1996 (the date of the Companys
initial public offering of its common stock (IPO)) through July 24, 1996.
The complaint alleges, among other things, that the defendants violated the
Securities Act of 1933 and the Securities Exchange Act of 1934 in connection
with the Companys IPO and in its subsequent securities filings, press releases
and other public statements. The parties have agreed to a settlement (for
which the Company is insured) and have filed with the Court a Memorandum of
Understanding.

The Company, in the normal course of business, is also subject to
miscellaneous legal proceedings. The Company is defending these proceedings
and currently 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 or results of operations.

7



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##### 



PowerCerv Corporation

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

F. Income Taxes

The Companys federal income tax returns for the years ended December 31,
1996 and 1995 were subject to a routine examination by the Internal Revenue
Service that resulted in an assessment of $66,000 of federal tax, $143,000 of
state tax and approximately $150,000 of interest. The Company recorded a
charge for this exposure upon receiving the notice of assessment in 2000, but
is currently in the process of appealing 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:

|                                 |  |                                  |      |                                |  |             |     |       |  |         |      |          |  |             |      |       |  |   |      |   |  |   |       |  |  |   |      |   |  |   |       |  
|-------------------------------- |  | -------------------------------- | ---- | ------------------------------ |  | ----------- | --- | ----- |  | ------- | ---- | -------- |  | ----------- | ---- | ----- |  | - | ---- | - |  | - | ----- |  |  | - | ---- | - |  | - | ----- | -
|                                 |  | Three Months Ended June 30, 2002 |      | Six Months Ended June 30, 2002
|                                 |  |                                  |      |                               
|                                 |  | License                          |      | Services                       |  | Unallocated |     | Total |  | License |      | Services |  | Unallocated |      | Total
|                                 |  |                                  |      |                                |  |             |     |       |  |         |      |          |  |             |      |      
|Revenues from external
Customers |  | $                                | 31   |                                |  | $           | 640 |       |  |         |     |          |  | $           | 671  |       |  | $ | 260  |   |  | $ | 1,370 |  |  |   |     |   |  | $ | 1,630 |  
|Segment profit (loss)            |  | $                                | (322 | )                              |  | $           | 364 |       |  | $       | (285 | )        |  | $           | (243 | )     |  | $ | (639 | ) |  | $ | 793   |  |  | $ | (575 | ) |  | $ | (421  | )

|                                 |  |                                  |      |                                |  |             |       |       |  |         |      |          |  |             |       |       |  |   |        |   |  |   |       |  |  |   |        |   |  |   |        |  
|-------------------------------- |  | -------------------------------- | ---- | ------------------------------ |  | ----------- | ----- | ----- |  | ------- | ---- | -------- |  | ----------- | ----- | ----- |  | - | ------ | - |  | - | ----- |  |  | - | ------ | - |  | - | ------ | -
|                                 |  | Three Months Ended June 30, 2001 |      | Six Months Ended June 30, 2001
|                                 |  |                                  |      |                               
|                                 |  | License                          |      | Services                       |  | Unallocated |       | Total |  | License |      | Services |  | Unallocated |       | Total
|                                 |  |                                  |      |                                |  |             |       |       |  |         |      |          |  |             |       |      
|Revenues from external
Customers |  | $                                | 633  |                                |  | $           | 1,170 |       |  |         |     |          |  | $           | 1,803 |       |  | $ | 1,086  |   |  | $ | 2,576 |  |  |   |       |   |  | $ | 3,662  |  
|Segment profit (loss)            |  | $                                | (389 | )                              |  | $           | 295   |       |  | $       | (689 | )        |  | $           | (783  | )     |  | $ | (1,167 | ) |  | $ | 608   |  |  | $ | (1,445 | ) |  | $ | (2,004 | )

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

|                                         |  |               |      |               |  |               |      |               |  |   |      |   |  |   |        |  
|---------------------------------------- |  | ------------- | ---- | ------------- |  | ------------- | ---- | ------------- |  | - | ---- | - |  | - | ------ | -
|                                         |  | Three         |      | Six           |  | Three         |      | Six          
|                                         |  | Months Ended  |      | Months Ended  |  | Months Ended  |      | Months Ended 
|                                         |  | June 30, 2002 |      | June 30, 2002 |  | June 30, 2001 |      | June 30, 2001
|                                         |  |               |      |               |  |               |      |              
|General and administrative costs         |  | $             | (319 | )             |  | $             | (590 | )             |  | $ | (683 | ) |  | $ | (1,293 | )
|Work force reduction                     |  |               | (5   | )             |  |               | (30  | )             |  |   | (24  | ) |  |   | (193   | )
|Interest and other income (expense), net |  |               | 39   |               |  |               | 45   |               |  |   | 18   |   |  |   | 51     |  
|Income tax expense                       |  |               |     |               |  |               |     |               |  |   |     |   |  |   | (10    | )
|                                         |  |               |      |               |  |               |      |               |  |   |      |   |  |   |        |  
|                                         |  | $             | (285 | )             |  | $             | (575 | )             |  | $ | (689 | ) |  | $ | (1,445 | )

8



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##### 



PowerCerv Corporation

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

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

H. Work Force Reduction and Other

During the first quarter of 2002, the Company announced and completed a
work force reduction. The Company recorded a restructuring charge of $25
related to the severance costs of 3 employees (2 non-senior level services
employees and 1 non-senior level research and development employee) and
relocation costs. As of June 30, 2002, these costs were paid.

I. Loans from Officers and Directors

In June 2002, the Company received loans from its Chief Executive Officer
and two of its board members totaling $46. Each loan bears an annual
interest rate of 7% and is payable upon demand. The proceeds from these loans
were used to fund the Companys operations.

J. Liquidity

During 2002, the Company has attempted to improve cash flow. To date, the
Company has instituted flexible work arrangements, reduced work weeks,
uniform salary reductions, workforce reductions, elimination of non-critical
costs and accelerated cash conversion of receivables. However, as of
September 30, 2002, the Companys cash and cash equivalents totaled
approximately $120. Management believes that it can sustain positive cash
levels through the expected closing date of the asset sale
transaction discussed in note K based on its assessment of current
receivables, projected future billings, an advance obtained from ASA
International, Ltd. and by securing advance payments on a note
receivable from a related party; although there can be no assurance
that the Company can do so. The Company has canceled the line of
credit commitment that it had with a bank. In the event that the
asset sale discussed in note K is not completed, the Company will have to consider the
possibility of filing a bankruptcy petition or take steps towards liquidation.

K. Subsequent Event

On October 1,
2002, the Company entered into a definitive asset purchase agreement
with ASA International Ltd. pursuant to which PowerCerv will sell
substantially all of its assets to ASA and ASA will assume certain of
the Companys liabilities. ASA will not assume the
Companys accrued liabilities associated with certain pending
legal matters nor will it assume payroll and other compensation
related liabilities. In addition to ASA assuming certain liabilities
at closing, ASA will pay PowerCerv $500 in cash and issue a $90
promissory note due in six months. The purchase price may be subject
to certain post-closing adjustments. In order to assist PowerCerv in
meeting its cash flow needs, ASA advanced PowerCerv the sum of $100
evidenced by a 7% promissory note due on demand after
November 2, 2002 or on the earlier of closing of the transaction
or termination of the purchase agreement. The loan is secured by a
pledge of PowerCervs assets. Following the closing, PowerCerv
will use its best efforts to settle its remaining liabilities. Closing the transaction is subject to the
satisfaction of various conditions, including approval of PowerCerv
shareholders.

9



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##### 



PowerCerv Corporation

Item 2. Managements Discussion and Analysis or Plan of Operations(dollars in thousands)

Overview

During 2002, the Company has attempted to improve cash flow. To date, the
Company has instituted flexible work arrangements, reduced work weeks,
uniform salary reductions, workforce reductions, elimination of non-critical
costs and accelerated cash conversion of receivables. Although these measures
have resulted in lower expenses, it has significantly reduced the Companys
personnel and its ability to generate revenue. As of September 2002, the
Company had a total of 21 employees. On October 1, 
2002, the Company entered into a definitive asset purchase agreement
with ASA International Ltd. pursuant to which PowerCerv will sell
substantially all of its assets to ASA and ASA will assume certain of
the Companys liabilities. ASA will not assume the
Companys accrued liabilities associated with certain pending
legal matters nor will it assume payroll and other compensation
related liabilities. In addition to ASA assuming certain liabilities
at closing, ASA will pay PowerCerv $500 in cash and issue a $90
promissory note due in six months. The purchase price may be subject
to certain post-closing adjustments. In order to assist PowerCerv in
meeting its cash flow needs, ASA advanced PowerCerv the sum of $100
evidenced by a 7% promissory note due on demand after
November 2, 2002 or on the earlier of closing of the transaction
or termination of the purchase agreement. The loan is secured by a
pledge of PowerCervs assets. Following the closing, PowerCerv
will use its best efforts to settle its remaining liabilities. Closing the transaction is subject to the
satisfaction of various conditions, including approval of PowerCerv
shareholders. The Company will also take
actions to secure advance payments on a note receivable from a
related party and believes that such amounts, along with
Managements assessment of current receivables and projected
billings, will provide adequate
resources to the Company through the expected closing date of the
asset sale transaction, although there can be no assurance that the
Company can do so. As of September 30, 2002, the Companys cash
and cash equivalents totaled approximately $120. The uncertainty of the
Companys solvency has materially affected its sales efforts and may continue
to do so in the future. In the event that the asset sale discussed
above is not completed, the Company will likely have to consider
bankruptcy and liquidation alternatives.

The Companys revenues currently consist primarily of software license
fees and fees for services, primarily relating to the Companys applications,
including consulting, education and maintenance and support. Service fees
remain the Companys largest single revenue source, although the Companys is
attempting to increase revenue generated from licensing its ERP Plusand
web-enabled eSeriesapplication 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.

This Quarterly Report on Form 10-QSB may 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 and other
risks as described in the Companys 2001 Annual Report on
Form 10-KSB filed with the SEC on April 16, 2002, 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; 

10



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##### 



PowerCerv Corporation

Item 2. Managements Discussion and Analysis or Plan of Operations(dollars in thousands)

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 June 30, |     | Six months ended June 30,
|                             |  |                             |     |                          
|                             |  | 2002                        |     | Change                    |  | 2001 |     | 2002 |  | Change |       | 2001
|                             |  |                             |     |                           |  |      |     |      |  |        |       |     
|License fees                 |  | $                           | 31  |                           |  |      | (95 | %)   |  | $      | 633   |      |  | $ | 260   |   |  |  | (76 | %) |  | $ | 1,086 |  
|Percentage of total revenues |  |                             | 5   | %                         |  |      |     |      |  |        | 35    | %    |  |   | 16    | % |  |  |     |    |  |   | 30    | %
|                             |  |                             |     |                           |  |      |     |      |  |        |       |      |  |   |       |   |  |  |     |    |  |   |       |  
|Service fees                 |  |                             | 640 |                           |  |      | (45 | %)   |  |        | 1,170 |      |  |   | 1,370 |   |  |  | (47 | %) |  |   | 2,576 |  
|Percentage of total revenues |  |                             | 95  | %                         |  |      |     |      |  |        | 65    | %    |  |   | 84    | % |  |  |     |    |  |   | 70    | %
|                             |  |                             |     |                           |  |      |     |      |  |        |       |      |  |   |       |   |  |  |     |    |  |   |       |  

License fees. The Companys license fees are derived from licensing the
Companys application products. In addition, any royalty fees earned are
included in license fees. The Company establishes its licensing fees using a
tiered pricing approach based on the number of concurrent servers and users.
Source code licenses are available at an additional cost.

License fees decreased for the three and six-month periods ended June 30,
2002, compared to the same periods in 2001 principally due to substantially
fewer new customers in the current periods. The Company has reduced its sales
and marketing staff significantly in an effort to reduce costs. As a result,
the Company has been unable to identify and pursue the same level of possible
sales targets as in the comparable period in 2001. As of September 2002, the
Company had a total of 4 employees in the sales and marketing departments.
Although the Company will continue to monitor its sales pipeline, there can be
no assurance that the Company will be successful in generating new license
sales.

The Company expects that license fees for the quarter ended September 30,
2002 will be relatively consistent with the quarter ended June 30, 2002.

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 2002 as compared to the
comparable period in 2001 as a result of the reduction in sales force.
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 may 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.

11



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##### 



PowerCerv Corporation

Item 2. Managements Discussion and Analysis or Plan of Operations(dollars in thousands)

The Company expects that services revenue for the quarter ended September
30, 2002 will be substantially less than the previous quarter. Management
believes that the expected decline in services revenue is partly due to several
customer deferrals of services resulting from depressed economic conditions.
Additionally, the expected decline is also the result of substantially fewer
new customers in 2002.

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 June 30, |     | Six months ended June 30,
|                        |  |                             |     |                          
|                        |  | 2002                        |     | Change                    |  | 2001 |     | 2002 |  | Change |     | 2001
|                        |  |                             |     |                           |  |      |     |      |  |        |     |     
|Cost of licenses        |  | $                           | 54  |                           |  |      | (32 | %)   |  | $      | 79  |      |  | $ | 126 |   |  |  | (20 | %) |  | $ | 157   |  
|Gross profit percentage |  |                             | (74 | %)                        |  |      |     |      |  |        | 88  | %    |  |   | 52  | % |  |  |     |    |  |   | 86    | %
|                        |  |                             |     |                           |  |      |     |      |  |        |     |      |  |   |     |   |  |  |     |    |  |   |       |  
|Cost of services        |  |                             | 276 |                           |  |      | (68 | %)   |  |        | 875 |      |  |   | 577 |   |  |  | (71 | %) |  |   | 1,968 |  
|Gross profit percentage |  |                             | 57  | %                         |  |      |     |      |  |        | 25  | %    |  |   | 58  | % |  |  |     |    |  |   | 24    | %
|                        |  |                             |     |                           |  |      |     |      |  |        |     |      |  |   |     |   |  |  |     |    |  |   |       |  

Cost of licenses. The cost of licenses consists primarily of production
costs, royalties associated with certain modules of the Companys application
products and the amortization of intangible assets. The cost of licenses for
the three and six-month periods ended June 30, 2002 decreased 32% and 20%,
respectively, compared to the 2001 period primarily resulting from fewer third
party fees on licenses sold. The decrease in gross profit percentage in the
current periods is due to lower license fee revenue and certain fixed costs due
to the amortization of intangible assets.

Cost of services.The cost of services consists primarily of compensation
and travel costs associated with providing consulting, product support and
maintenance, technical and education services. The cost of services decreased
68% and 71% for the three and six-month periods ended June 30, 2002,
respectively, compared to the 2001 period primarily due to a lower compensation
expense and operating costs for the respective periods. During 2001 and the
first quarter of 2002, the Company implemented several work force reductions
and cost cutting measures. As of September 2002, the Company had a total of 8
employees in its services department. Management believes that although these
reductions have resulted in lower expenses and increased utilization of
remaining personnel, the Companys services revenue capacity has been reduced
significantly and there can be no assurance that the Company will be able to
sustain operations if it is unable to complete the asset sale
discussed in the Overview above.

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

12



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##### 



PowerCerv Corporation

Item 2. Managements Discussion and Analysis or Plan of Operations(dollars in thousands)

|                             |  |                             |     |                           |  |      |     |      |  |        |     |      |  |   |     |   |  |  |     |    |  |   |       |  
|---------------------------- |  | --------------------------- | --- | ------------------------- |  | ---- | --- | ---- |  | ------ | --- | ---- |  | - | --- | - |  |  | --- | -- |  | - | ----- | -
|Operating Expenses:          |  | Three months ended June 30, |     | Six months ended June 30,
|                             |  |                             |     |                          
|                             |  | 2002                        |     | Change                    |  | 2001 |     | 2002 |  | Change |     | 2001
|                             |  |                             |     |                           |  |      |     |      |  |        |     |     
|General and administrative   |  | $                           | 319 |                           |  |      | (53 | %)   |  | $      | 683 |      |  | $ | 590 |   |  |  | (54 | %) |  | $ | 1,293 |  
|Percentage of total revenues |  |                             | 48  | %                         |  |      |     |      |  |        | 38  | %    |  |   | 36  | % |  |  |     |    |  |   | 35    | %
|                             |  |                             |     |                           |  |      |     |      |  |        |     |      |  |   |     |   |  |  |     |    |  |   |       |  
|Sales and marketing          |  |                             | 103 |                           |  |      | (77 | %)   |  |        | 450 |      |  |   | 318 |   |  |  | (68 | %) |  |   | 1,005 |  
|Percentage of total revenues |  |                             | 15  | %                         |  |      |     |      |  |        | 25  | %    |  |   | 20  | % |  |  |     |    |  |   | 27    | %
|                             |  |                             |     |                           |  |      |     |      |  |        |     |      |  |   |     |   |  |  |     |    |  |   |       |  
|Research and development     |  |                             | 196 |                           |  |      | (60 | %)   |  |        | 493 |      |  |   | 455 |   |  |  | (58 | %) |  |   | 1,091 |  
|Percentage of total revenues |  |                             | 29  | %                         |  |      |     |      |  |        | 27  | %    |  |   | 28  | % |  |  |     |    |  |   | 30    | %
|                             |  |                             |     |                           |  |      |     |      |  |        |     |      |  |   |     |   |  |  |     |    |  |   |       |  

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 and six-month
periods ended June 30, 2002, compared to the 2001 period, primarily resulted
from lower compensation and operating costs. The G&A percentage of total
revenue increased in the current quarter due to lower revenue and certain fixed
G&A costs. Substantial cost cutting measures were implemented by management in
2001. As of September 2002, the Company had a total of 4 employees in its G&A
department. Management believes that the reductions the Company has
implemented in the past 9 months have resulted in lower expenses and increased
utilization of remaining G&A personnel; however, there can be no assurance that
the Company will be able to sustain operations if it is unable to
complete the asset sale discussed in the Overview above.

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; and related communications
costs. Sales and marketing costs decreased 77% and 68% for the three and
six-month periods ended June 30, 2002, respectively, as compared to the same
periods in 2001 primarily as a result of lower compensation and lower marketing
expense in the current periods. The sales and marketing expense as a percentage
of total revenue decreased due to substantial cost cutting measures implemented
by the Company in 2001. As of September 2002, the Company had a total of 4
employees in the sales and marketing department. Management believes that
these reductions have resulted in lower expenses; however there can be no
assurance that the Company will be able to sustain operations if it
is unable to complete the asset sale discussed in the
Overview above.

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. R&D costs
decreased 60% and 58% for the three and six-month periods ended June 30, 2002,
as compared to the same periods in 2001, primarily due to a decrease in R&D
personnel and operating costs as a result of the cost cutting measures
implemented by the Company in 2001. As of September 2002, the Company had a
total of 5 employees in the R&D department. Management believes that these
reductions have resulted in lower expenses and increased utilization of
remaining R&D personnel.

13



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##### 



PowerCerv Corporation

Item 2. Managements Discussion and Analysis or Plan of Operations(dollars in thousands)

Liquidity and Capital Resources

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

|                          |  |               |  |        |  |                   |      |   |  |  |     |    |  |   |      |  
|------------------------- |  | ------------- |  | ------ |  | ----------------- | ---- | - |  |  | --- | -- |  | - | ---- | -
|                          |  | As of        
|                          |  |              
|                          |  | June 30, 2002 |  | Change |  | December 31, 2001
|                          |  |               |  |        |  |                  
|Working capital           |  |               |  |        |  | $                 | (872 | ) |  |  | (20 | %) |  | $ | (729 | )
|Cash and cash equivalents |  |               |  |        |  | $                 | 231  |   |  |  | (64 | %) |  | $ | 635  |  

Working capital and cash and cash equivalents decreased as of June 30,
2002, compared to December 31, 2001, due to reduced revenues resulting in lower
accounts receivable and operating losses for the six-month period.

|                                            |  |                                   |      |        |  |      |     |   |  |   |        |  
|------------------------------------------- |  | --------------------------------- | ---- | ------ |  | ---- | --- | - |  | - | ------ | -
|                                            |  | For the Six months ended June 30,
|                                            |  |                                  
|                                            |  | 2002                              |      | Change |  | 2001
|                                            |  |                                   |      |        |  |     
|Cash flows used in operating activities     |  | $                                 | (718 | )      |  |      | 34  | % |  | $ | (1,088 | )
|Cash flows provided by investing
activities |  |                                   | 183  |        |  |      | 85  | % |  |   | 99     |  
|Cash flows provided by financing
activities |  |                                   | 131  |        |  |      | 100 | % |  |   |       |  

For the six-month period ended June 30, 2002, cash used by operating
activities totaled $718, due principally to lower revenues, resulting losses
for the period and the timing of payments and cash collections.

The Companys cash provided by investing activities totaled $183 for the
six-month period ended June 30, 2002, principally due to payments received on
notes receivable. The cash used in investing activities for the six-month
period ended June 30, 2001, was principally due to payments received on notes
receivable ($114) offset by purchases of fixed assets ($15).

At June 30, 2002, the Companys primary source of liquidity consisted of
its cash and cash equivalents balance of $231 and its short-term accounts
receivable balance of $527. However, as of September 30, 2002, the Companys
cash and cash equivalents totaled approximately $120. Management believes that
it can sustain positive cash levels through the expected closing date
of the asset sale discussed in the Overview above based on its
assessment of current receivables and projected future billings, the
loan received from ASA and actions to secure advance payments on a
note receivable from a related party; although there
can be no assurance that the Company can do so. The Company has canceled the line of credit
commitment that it had with a bank. In the event that the asset sale discussed above
is not completed, the Company will have
to consider bankruptcy and liquidation alternatives.

14



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PowerCerv Corporation

Item 2. Managements Discussion and Analysis or Plan of Operations(dollars in thousands)

In 2001, the Company took restructuring actions involving workforce
reductions and office closures. 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. Restructuring actions have resulted in reduced personnel
throughout the Company; which has limited and will limit the Companys ability
to pursue sales and service fees opportunities.

Minor workforce reductions were completed in 2002 in an attempt to further
align costs with revenues. As more fully discussed in the Companys 2001
Annual Report  Plan of Operations and Note 3 to the consolidated financial
statements and the going concern uncertainty explanatory paragraph in the
related Report of Independent Certified Public Accountants also included in the
Companys 2001 Annual Report, the Company has implemented cost cutting measures
and other actions.

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

15



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PowerCerv Corporation

Item 3. Quantitative and Qualitative Disclosure about Market Risk

Not Applicable

Item 4. Internal Controls

Not Applicable

16



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##### 



PowerCerv Corporation

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

Lifsey v. Ross, et. al.:A complaint was filed on July 24, 1997, in the
United States District Court for the Middle District of Florida, captioned J.
Conrad Lifsey vs. Harold R. Ross, Gerald R. Wicker, Marc J. Fratello, Roy E.
Crippen, III, Donald B. Hebb, Jr., Thomas S. Roberts, PowerCerv Corporation,
Alex Brown & Sons, Inc., Robertson, Stephens & Company, ABS Capital Partners,
L.P., Summit Investors II, L.P., and Summit Ventures III, L.P. The complaint
purports to be a class action on behalf of those persons who purchased shares
of the Companys common stock from March 1, 1996 (the date of the Companys
initial public offering of its common stock (IPO)) through July 24, 1996.
The complaint alleges, among other things, that the defendants violated the
Securities Act of 1933 and the Securities Exchange Act of 1934 in connection
with the Companys IPO and in its subsequent securities filings, press releases
and other public statements. The parties have agreed to a settlement and have
filed with the Court a Memorandum of Understanding.

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

|     |  |                                                  
|---- |  | -------------------------------------------------
|10.1 |  | Asset Purchase Agreement.                        
|    
|10.2 |  | Press Release Regarding Asset Purchase Agreement.

|     |  |                                                                             
|---- |  | ----------------------------------------------------------------------------
|99.1 |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
|    
|99.2 |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

(b) Reports on Form 8-K

None

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PowerCerv Corporation

Form 10-QSB
(for the quarterly period ended June 30, 2002)

Signatures

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

|                      |  |                                                                                  
|--------------------- |  | ---------------------------------------------------------------------------------
|                      |  | PowerCerv Corporation                                                            
|                     
|                     
|                     
|Date: October 2, 2002 |  | /s/ Marc J. Fratello                                                             
|                      |  |                                                                                  
|                      |  | Marc J. Fratello, President and
Chief Executive Officer
(Duly Authorized Officer)
|                     
|                     
|Date: October 2, 2002 |  | /s/ Aria L. Siplin                                                               
|                      |  |                                                                                  
|                      |  | Aria L. Siplin
Chief Financial Officer, Treasurer
(Principal Financial Officer)  

18



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##### 



Rider A

Certifications

I, Marc J. Fratello, certify that:



| |                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------
| | 1. I have reviewed the Registrants Form 10-QSB quarterly report for the
period ended June 30, 2002 (the Report).



| |                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. Based on my knowledge, the Report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by the Report.



| |                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3. Based on my knowledge, the financial statements, and other financial
information included in the Report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Registrant as
of, and for, the periods presented in the Report.

| |  |                                                                                
| |  | -------------------------------------------------------------------------------
| |  | /s/ Marc J. Fratello                                                           
| |  |                                                                                
| |  | Name: Marc J. Fratello
Title: Chief Executive Officer
(Chief Executive Officer)

I, Aria L. Siplin, certify that:



| |                               
| | ------------------------------
| | 1. I have reviewed the Report.



| |                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. Based on my knowledge, the Report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by the Report.



| |                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3. Based on my knowledge, the financial statements, and other financial
information included in the Report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Registrant as
of, and for, the periods presented in the Report.

| |  |                                                                              
| |  | -----------------------------------------------------------------------------
| |  | /s/ Aria L. Siplin                                                           
| |  |                                                                              
| |  | Name: Aria L. Siplin
Title: Chief Financial Officer
(Chief Financial Officer)

EXPLANATORY NOTE REGARDING CERTIFICATIONS: Representations 4, 5 and 6 of
the Certification as set forth in this Form 10-QSB have been omitted,
consistent with the Transition Provisions of SEC Exchange Act Release No.
34-46427, because this Quarterly Report of Form 10-QSB covers a period ending
before the Effective Date of Rules 13a-14 and 15d-14.

19