<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------ --------------
-------------------
Commission File Number 0-27574
POWERCERV CORPORATION
(Exact name of registrant as specified in its charter)
FLORIDA 59-3350778
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 NORTH ASHLEY DRIVE, SUITE 2700, TAMPA, FLORIDA 33602
(Address of principal executive offices, including zip code)
(813) 226-2600
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
----- -----
As of May 8, 1996, there were 13,800,674 shares of the registrant's common
stock, $.001 par value, outstanding.
================================================================================
<PAGE> 2
POWERCERV CORPORATION
FORM 10-Q
Contents
<TABLE>
<CAPTION>
Part I. Financial Information Page
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31,1996 (unaudited) and December 31, 1995 . . . 2
Condensed Consolidated Statements of Operations for the Three Months Ended
March 31, 1996 and 1995 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1996 and 1995 (unaudited) . . . . . . . . . . . . . . . . . . . . . . 4
Notes to Condensed Consolidated Financial Statements (unaudited) . . . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . 7
Accountant's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
INTERGY is a registered trademark of the registrant and the PowerCerv logo,
ADAPTlications, EnPower Series, PowerPerformance Series, PowerTOOL, PADLock,
FLOWBuilder, BatchBuilder, PowerCOM, PowerMAN, Xceed, Response, GrowthPlan and
AppSync are trademarks of the registrant. All other trademarks and company
names mentioned are the property of their respective owners.
1
<PAGE> 3
POWERCERV CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
-----------------------------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 16,043 $ 1
Accounts receivable, net of allowance of $500 and
$425, respectively 9,868 7,950
Refundable income taxes 115 823
Inventories 84 43
Other current assets 230 30
--------- ---------
Total current assets 26,340 8,847
Property and equipment, net 2,199 1,886
Intangible assets, net 3,838 3,193
Deferred tax asset 1,295 1,195
Other assets 76 171
--------- ---------
Total assets $ 33,748 $ 15,292
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Lines of credit $ - $ 3,417
Current portion of notes payable - 2,468
Accounts payable 1,665 1,720
Accrued expenses 1,423 1,114
Deferred revenue 1,476 1,425
Due to affiliate - 11
--------- ---------
Total current liabilities 4,564 10,155
Notes payable, less current portion - 8,932
Noncurrent income taxes payable 1,520 1,195
Redeemable preferred stock - 5,500
Convertible preferred stock - 5,500
Shareholders' equity (deficit) 27,664 (15,990)
--------- ---------
Total liabilities and shareholders' equity $ 33,748 $ 15,292
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 4
POWERCERV CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------------------
1996 1995
----------- ---------
<S> <C> <C>
Revenues:
License fees $ 3,054 $ 829
Technology resales 710 1,067
Service fees 6,033 3,706
----------- ---------
Total revenues 9,797 5,602
----------- ---------
Costs and expenses:
Cost of licenses 230 -
Cost of technology resales 460 860
Cost of services 3,522 1,997
General and administrative 1,030 889
Research and development 1,355 526
Sales and marketing 2,410 951
In-process research and development 100 -
----------- ---------
Total costs and expenses 9,107 5,223
----------- ---------
Operating income 690 379
Interest expense (income), net 96 (1)
----------- ---------
Income before income taxes 594 380
Provision for income taxes 225 150
----------- ---------
Net income $ 369 $ 230
----------- ---------
Earnings per share $ 0.03 $ 0.02
=========== =========
Weighted average shares outstanding 11,703 10,837
=========== =========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 5
POWERCERV CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------
1996 1995
----------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 369 $ 230
Adjustments to reconcile net income to net cash
provided by (used in) operations:
Depreciation and amortization 121 42
Deferred taxes (100) 43
Write-off of in-process research and development 100 -
Accretion of imputed interest 141 -
Amortization of intangibles 231 -
Changes in assets and liabilities (net of effect of acquisition) (712) (47)
----------- ---------
Net cash provided by operating activities 150 268
----------- ---------
Cash flows from investing activities:
Purchases of property and equipment, net (278) (152)
Acquisition of net assets, net of cash received (21) -
----------- ---------
Net cash used in investing activities (299) (152)
----------- ---------
Cash flow from financing activities:
Net proceeds from issuance of common stock 36,850 -
Borrowings on line of credit - 86
Subchapter S distributions - (160)
Repayment of notes payable (11,541) -
Redemption of preferred stock (5,500) -
Repayment of lines of credit (3,618) -
----------- ---------
Net cash provided by (used in) financing activities 16,191 (74)
----------- ---------
Net increase in cash and cash equivalents 16,042 42
Cash and cash equivalents, beginning of period 1 87
----------- ---------
Cash and cash equivalents, end of period $ 16,043 $ 129
=========== =========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 6
POWERCERV CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1996 AND 1995
A. BASIS OF PRESENTATION
The condensed consolidated balance sheet of PowerCerv Corporation and its
Subsidiary (collectively, the "Company") as of March 31, 1996 and the
condensed consolidated statements of operations and cash flows for the three
months ended March 31, 1996 and 1995 have been prepared by the Company, without
audit. In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows at March 31, 1996 and for all periods
presented have been made. The condensed consolidated balance sheet at December
31, 1995 has been derived from the Company's audited consolidated financial
statements at that date.
Certain information and footnote disclosure 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 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, 1995 included in
the Company's Form S-1 Registration Statement as declared effective on February
29, 1996.
The results of operations for the three months ended March 31, 1996 are not
necessarily indicative of results that may be expected for any other interim
period or for the full fiscal year.
B. INITIAL PUBLIC OFFERING
On March 1, 1996, the Company completed its initial public offering ("IPO")
and issued 2,900,000 shares of its common stock at a price of $14.00 per share.
The Company received approximately $36.9 million of cash, net of offering
expenses and underwriting discounts and commissions. Simultaneously, all
outstanding shares of convertible preferred stock were automatically converted
into common stock on a one-for-one basis and all outstanding shares of
redeemable preferred stock were redeemed. On April 3, 1996, the Company
received approximately $6.4 million, net of underwriting discounts and
commissions, in connection with the issuance of 495,000 shares of its common
stock pursuant to the underwriter's exercise of the over-allotment option
granted by the Company in connection with the IPO.
C. EARNINGS PER SHARE
Earnings per share is computed using the weighted average number of shares
of common stock outstanding and dilutive common equivalent shares. Pursuant to
the rules of the Securities and Exchange Commission, common and common
equivalent shares issued during the twelve month period prior to the Company's
IPO have been assumed to be outstanding for all periods presented.
5
<PAGE> 7
POWERCERV CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
D. ACCRUED EXPENSES
Accrued expenses consist of the following at March 31, 1996 and December 31,
1995:
<TABLE>
<CAPTION>
1996 1995
---------------- ---------------
<S> <C> <C>
Compensation $ 702,000 $ 660,000
Sales tax 311,000 355,000
IPO expenses 250,000 -
Other 160,000 99,000
-------------- --------------
$ 1,423,000 $ 1,114,000
============== ==============
</TABLE>
E. INCOME TAXES
Prior to May 15, 1995, the Company was treated as an S Corporation for
income tax purposes. Effective May 15, 1995, the Company converted to a C
Corporation, and adopted Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes. The provision for income taxes in 1995 was
calculated using the statutory tax rate in effect during the applicable period,
as if the Company were taxable as a C Corporation.
6
<PAGE> 8
POWERCERV CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
OVERVIEW
PowerCerv Corporation and its wholly-owned subsidiary, PowerCerv
Technologies Corporation (collectively the "Company") provide a broad range of
client/server development tools, application products and services enabling its
customers to successfully implement client/server systems to achieve their
business goals. The Company's products and services provide its customers with
the ability to successfully design, develop, deploy and maintain client/server
solutions for their specific needs, whether those needs are best met by buying
pre-written applications, building custom applications from scratch or combining
elements of both approaches. The Company not only provides development tools to
customers designing their own applications, but also provides application
products that can themselves be adapted to the customer's specific requirements.
In addition, the Company provides consulting and education services to assist
customers in designing and deploying an optimal solution for their business
problems. PowerCerv's development tools and application products are based on
the technology foundation of widely-used products provided by vendors such as
Powersoft, Sybase, Oracle and Microsoft, and utilize an open architecture
enabling their implementation with multiple databases, multiple operating
systems, and integration to other industry standard applications.
The discussion in this report contains forward-looking statements that
involve risks and uncertainties. The Company's actual results may differ
materially from the results discussed herein and including those in the
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in this report, and
the risks discussed in the "Risk Factors" section (including, but not limited
to, the Company's ability to manage change, fluctuation in the company's
quarterly activities and results of operations, the Company's dependence on new
products, the overall condition of the client/server market and the Company's
technology foundations, the availability of qualified consulting personnel, the
risks inherent in the Company's development of its new products, and
competition) in the Company's Registration Statement on Form S-1 as declared
effective by the Securities and Exchange Commission on February 29, 1996 (Reg.
No. 333-00250). Due to all of these factors, it is possible that in some future
quarters the Company's results of operations may be below the expectations of
public market analysts and investors. In such event, the price of the Company's
common stock would likely be adversely affected.
7
<PAGE> 9
POWERCERV CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(DOLLARS IN THOUSANDS)
RESULTS OF OPERATIONS
The Company's revenues consist primarily of software license fees, resales
of software products developed by other independent software vendors
("technology resales") and fees for services, including consulting, education
and maintenance. For the quarter ended March 31, 1996, service fees remain the
Company's largest single revenue source, although the Company's strategy is to
seek to increase revenue generated by licensing its development tools and
application products as a percentage of total revenue.
The Company recognizes revenue in accordance with the American Institute of
Certified Public Accountants Statement of Position 91-1, Software Revenue
Recognition. Software license fees are recognized upon shipment to the customer
if collection is probable and the remaining Company obligations are
insignificant. The Company provides for potential product returns and
allowances at the time of shipment. Historically, product returns and
allowances have been immaterial. Revenues from consulting and education
services are recognized as those services are performed. Revenue for
maintenance services is recognized ratably over the term of the support period.
Unrecognized amounts are recorded as deferred revenue.
The Company's quarterly revenue and results of operations have fluctuated
significantly in the past and will likely fluctuate in the future. Causes of
such fluctuations have included and may include, among others, the demand for
the Company's products and services; the size and timing of orders; the number,
timing and significance of new product announcements by the Company and its
competitors; the ability of the Company to develop, introduce, market, sell and
ship existing, new and enhanced versions of the Company's products on a timely
basis; the level of product and price competition; changes in operating
expenses; changes in average selling prices and mix between the Company's
products, technology resale products and services; changes in the Company's
sales incentive strategy; the mix of direct and indirect sales (including
international sales); changes in customers' budget constraints and general
economic factors. Any one or more of these or other factors could have a
material adverse effect on the Company's business, financial condition and
results of operations. The potential occurrence of any one or more of these
factors makes the prediction of revenue and results of operations on a quarterly
basis difficult and performance forecasts derived from such predictions
unreliable.
8
<PAGE> 10
POWERCERV CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(DOLLARS IN THOUSANDS)
REVENUES
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1996 CHANGE 1995
------------------------------------- -----------------------------------------
<S> <C> <C> <C>
License fees $ 3,054 268% $ 829
Percentage of total revenues 31% 15%
------------------------------------- -----------------------------------------
Technology resales 710 (33)% 1,067
Percentage of total revenues 7% 19%
------------------------------------- -----------------------------------------
Service fees 6,033 63% 3,706
Percentage of total revenues 62% 66%
------------------------------------- -----------------------------------------
</TABLE>
In general, revenues are difficult to forecast because the market for
client/server software is evolving rapidly and the Company's sales cycle, from
the customer's initial evaluation through purchase of multiple licenses and the
related support services, varies substantially from customer to customer and
from product to product. License fee revenue from quarter to quarter is
difficult to forecast, as no significant order backlog exists at the end of any
quarter because the Company's products typically are shipped upon receipt of
customers' orders.
The Company's strategy is to seek to expand its offering of higher margin
development tools and application products and increase their sales as a
percentage of total revenue. Implementation of this strategy has in the past,
and may in the future, cause the Company's quarterly results to fluctuate. In
addition, the Company has built and intends to continue to build an expense
infrastructure that assumes this strategy will succeed. Therefore, the failure
of the Company to achieve this strategy could have a material adverse effect on
the Company's business, financial condition and results of operations.
License fees revenue rose as a result of an increase in the number of
licenses sold primarily due to increased market acceptance of the Company's
products and underlying client/server technology, expansion of the Company's
product offerings and growth in the Company's sales, marketing and customer
service organizations.
Technology resales revenue decreased due to the Company's increased focus
on sales of its own development tools and application products and increased
market competition for technology resale products. The Company believes that
1996 quarterly technology resales revenue will continue to be less than such
revenue in the corresponding periods in 1995.
Service fees revenue grew because of the increase in the number of
consulting personnel, the increase in the realized consulting hourly rates and
the additional maintenance revenue provided by the Company's product licensing
activities. The higher rates per hour were attained due to the consultants
performing higher value added work associated with licenses of the Company's
products.
COSTS AND EXPENSES
<TABLE>
<CAPTION>
COST OF REVENUES: Three months ended March 31,
----------------------------
1996 CHANGE 1995
------------------------------ -------------------------------------------
<S> <C> <C> <C>
Cost of licenses $ 230 (*) $ -
Gross profit percentage 92% -%
------------------------------ -------------------------------------------
Cost of technology resales 460 (47)% 860
Gross profit percentage 35% 19%
------------------------------ -------------------------------------------
Cost of services 3,522 76 % 1,997
Gross profit percentage 42% 46%
------------------------------ -------------------------------------------
</TABLE>
(*) not meaningful
9
<PAGE> 11
POWERCERV CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(DOLLARS IN THOUSANDS)
A substantial portion of the Company's operating expenses is related to
personnel, facilities and marketing programs. The level of spending for such
expenses cannot be adjusted quickly and is therefore fixed in the short term.
The Company's expense levels for personnel, facilities and marketing programs
are based, in significant part, on the Company's expectations of future revenue
on a quarterly basis. If actual revenue levels on a quarterly basis are below
management's expectations, results of operations are likely to be adversely
affected by a similar amount because a relatively small amount of the Company's
operating expense varies with its revenue in the short term.
The cost of licenses consists primarily of production costs and the
amortization of intangible assets. The 1995 cost of licenses was immaterial and
therefore not classified as a separate component of costs and expenses.
The increase in the gross profit margin of technology resales is due to new
higher margin resales, primarily databases, and the recognition of revenue of
certain resale products on a commission basis versus recording the transaction
as gross sales revenue with the corresponding costs.
The decrease in the gross profit margin of service fees resulted primarily
from increased personnel costs. The Company anticipates that the gross profit
margin for 1996 quarterly service fees will continue to be less than such margin
for the corresponding periods in 1995, and the 1996 first quarter gross profit
margin may not be sustainable.
<TABLE>
<CAPTION>
OPERATING EXPENSES: Three months ended March 31,
----------------------------
1996 CHANGE 1995
-------------------------------------- -----------------------------------------------------
<S> <C> <C> <C>
General and administrative $1,030 16% $889
Percentage of total revenues 11% 16%
-------------------------------------- -----------------------------------------------------
Research and development 1,355 158% 526
Percentage of total revenues 14% 9%
-------------------------------------- -----------------------------------------------------
Sales and marketing 2,410 153% 951
Percentage of total revenue 25% 17%
-------------------------------------- -----------------------------------------------------
In-process research and development 100 (*) -
Percentage of total revenues 1% -%
-------------------------------------- -----------------------------------------------------
</TABLE>
(*) not meaningful
General and administrative ("G&A") expenses decreased as a percentage of
total revenues primarily due to certain corporate professional support personnel
being reclassified from G&A to sales and marketing and leverage being obtained
from the existing G&A infrastructure.
Research and development ("R&D") expenses increased due primarily to
additional R&D personnel necessary to expand and enhance the Company's product
line. The Company believes that R&D will continue to increase in dollar amounts
in the future.
The rise in sales and marketing expenses was attributable to the Company's
investment in its direct and indirect sales force, both domestically and
internationally, and increased marketing expenses for the Company's expanded
product line. The Company will continue to increase its direct and indirect
sales force and consequently its sales and marketing expenses may continue to
increase both in dollar amounts and percentage of total revenues in the near
future.
Effective January 1, 1996, the Company completed the strategic acquisition
of substantially all of the net assets of Visual Systems Development Group of
Michigan, Inc. The acquisition resulted in the issuance of 110,000 shares of
the Company's common stock and was accounted for as a purchase transaction. The
allocation of the purchase price of $935 included an allocation of $100 to
in-process R&D which is reflected as a one-time charge in the Company's first
quarter 1996 operating results.
10
<PAGE> 12
POWERCERV CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(DOLLARS IN THOUSANDS)
PROVISION FOR INCOME TAXES
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1996 CHANGE 1995
--------------------------------------
<S> <C> <C> <C>
Provision for income taxes $ 225 50% $ 150
Percentage of revenue 2% 3%
</TABLE>
The Company's estimated tax rate for the three months ended March 31, 1996
was 39% compared to 38% for the corresponding period in 1995.
Until May 1995, the Company was treated as an S Corporation for federal and
state income tax purposes. Accordingly, federal income taxes on any earnings
were payable by the Company's shareholders rather than the Company. The
provision for income taxes in 1995 was calculated using the statutory tax rate
in effect during the applicable period, as if the Company were taxable as a
C Corporation.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
As of and for the
Three months ended March 31,
----------------------------
1996 CHANGE 1995
-------------------------------------------
<S> <C> <C> <C>
Working capital $ 21,776 (*) $ (1,479)
Cash and cash equivalents 16,043 (*) 129
Cash provided by operating activities 150 (44%) 268
Cash used in investing activities 299 97% 152
Cash provided by (used in) financing activities 16,191 (*) (74)
</TABLE>
(*) not meaningful.
Working capital, cash and cash equivalents and cash provided by financing
activities increased in the three months ended March 31, 1996, due primarily to
the successful completion of the IPO on March 1, 1996.
11
<PAGE> 13
POWERCERV CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(DOLLARS IN THOUSANDS)
The decrease in cash flow from operations for the three months ended March
31, 1996 as compared to the corresponding period in 1995 was due primarily to
the significant growth of the Company and the resulting impact on the changes in
assets and liabilities.
Cash used in investing activities increased for the three months ended
March 31, 1996 as compared to the corresponding period in 1995, due primarily to
additional purchases of property and equipment.
Proceeds from the IPO were used to pay off all outstanding bank debt and
shareholder loans. Due to the Company's strong cash position and in light of
its current plans, the Company terminated its bank lines of credit.
The Company believes that funds generated from its operations, existing
cash balances, and the $6.4 million received on April 3, 1996 in connection with
the underwriter's exercise of the over-allotment option will be sufficient to
finance the Company's operations for at least the next twelve months.
REVIEW BY INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The Company's independent certified public accountants have made a limited
review of the financial information furnished herein in accordance with
standards established by the American Institute of Certified Public Accountants.
The Accountants' Report is presented on page 14 of this report.
12
<PAGE> 14
[KPMG PEAT MARWICK LLP LETTERHEAD]
100 North Tampa Street, Suite 2400
Tampa, FL 33602
ACCOUNTANTS' REPORT
The Board of Directors
PowerCerv Corporation:
We have reviewed the condensed consolidated balance sheet of PowerCerv
Corporation and subsidiary as of March 31, 1996, and the related condensed
consolidated statements of operations and cash flows for the three months ended
March 31, 1996 and 1995. These condensed consolidated financial statements are
the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of PowerCerv Corporation and
subsidiary as of December 31, 1995, and the related consolidated statements of
operations, shareholders' equity (deficit), and cash flows, for the year then
ended (not presented herein); and in our report dated January 27, 1996, we
expressed an unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1995 is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
/s/KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
April 18, 1996
13
<PAGE> 15
POWERCERV CORPORATION
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1 Agreement and Plan of Reorganization, dated as of January 1,
1996, among the Company, PowerCerv Technologies Corporation and
Visual Systems Development Group of Michigan, Inc. (incorporated
herein by reference to Exhibit Number 2.3 to the Pre-Effective
Amendment No. 1 to the Company's Registration Statement on Form
S-1 (File No. 333-00250)).
3.1 Articles of Incorporation of the Company effective as of January
1, 1996, as amended by the Articles of Amendment dated as of
January 9, 1996 (incorporated herein by reference to Exhibit
Number 3.1 to the Company's Registration Statement on Form S-1
(File No. 333-00250)).
3.2 Bylaws of the Company (incorporated herein by reference to
Exhibit Number 3.2 to the Company's Registration Statement on
Form S-1 (File No. 333-00250)).
4.1 Form of Share Exchange Agreement, effective as of January 1, 1996
between the Company and the former owners of capital stock of the
Company's subsidiary, PowerCerv Technologies Corporation
(incorporated herein by reference to Exhibit Number 4.4 to the
Company's Registration Statement on Form S-1 (File No.
333-00250)).
4.2 Form of Agreement to Convert Preferred Stock among the Company,
Summit Ventures III, L.P., Summit Investors II, L.P. and ABS
Capital Partners, L.P. (incorporated herein by reference to
Exhibit Number 4.5 to the Company's Registration Statement on
Form S-1 (File No. 333-00250)).
10.1 Management Services Agreement, dated as of January 1, 1996,
between the Company and PowerCerv Technologies Corporation
(incorporated herein by reference to Exhibit Number 10.25 to the
Pre-Effective Amendment No. 1 to the Company's Registration
Statement on Form S-1 (File No. 333-00250)).
10.2 Loan Agreement and related promissory notes' security agreements
and guarantees, each dated February 13, 1996, among NationsBank,
N.A. (South), the Company, Harold R. Ross, Marc J. Fratello, and
Roy E. Crippen, III for a $4,000,000 and a $1,500,000 revolving
line of credit (incorporated herein by reference to Exhibit
Number 10.23 to the Pre-Effective Amendment No. 2 to the
Company's Registration Statement on Form S-1 (File No.
333-00250)).
15.1 Letter re unaudited interim financial information.
27.1 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
The Company did not file any report on Form 8-K during the quarter ended
March 31, 1996.
14
<PAGE> 16
POWERCERV CORPORATION
FORM 10-Q
(for the three-month period ended March 31, 1996)
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.
Dated: May 14, 1996
PowerCerv Corporation
/s/ Harold R. Ross
----------------------------------------
Harold R. Ross,
Chief Executive Officer
/s/ Gerald R. Wicker
----------------------------------------
Gerald R. Wicker,
Chief Financial Officer
(Principal Financial and Accounting
Officer)
15
<PAGE> 1
EXHIBIT 15.1
PowerCerv Corporation
400 North Ashley Drive, Suite 2700
Tampa, Florida 33602
Gentlemen:
Re: Registration Statement on Form S-8 (No. 333-3960)
With respect to the above referenced registration statement, we acknowledge our
awareness of the incorporation by reference therein of our report dated April
18, 1996 related to our review of interim financial information, which report
was included in the Form 10-Q of PowerCerv Corporation for the three months
ended March 31, 1996.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not
considered part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the
meaning of Sections 7 and 11 of the Act.
/s/ KPMG Peat Marwick LLP
- -------------------------
KPMG Peat Marwick LLP
Tampa, Florida
April 18, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTHS ENDED
MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q
FILING.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 16,043
<SECURITIES> 0
<RECEIVABLES> 10,368
<ALLOWANCES> 500
<INVENTORY> 84
<CURRENT-ASSETS> 26,340
<PP&E> 2,697
<DEPRECIATION> 498
<TOTAL-ASSETS> 33,748
<CURRENT-LIABILITIES> 4,564
<BONDS> 0
0
0
<COMMON> 13
<OTHER-SE> 27,651
<TOTAL-LIABILITY-AND-EQUITY> 33,748
<SALES> 0
<TOTAL-REVENUES> 9,797
<CGS> 0
<TOTAL-COSTS> 9,106
<OTHER-EXPENSES> 96
<LOSS-PROVISION> 75
<INTEREST-EXPENSE> 174
<INCOME-PRETAX> 594
<INCOME-TAX> 225
<INCOME-CONTINUING> 369
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 369
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
