UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
---------
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1998 Commission File Number 0-13124
COVER-ALL TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
Delaware 13-2698053
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
18-01 Pollitt Drive
Fair Lawn, New Jersey 07410
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code:(201) 794-4800
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 and 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
Number of shares outstanding at May 13, 1998:
16,978,022 shares of Common Stock, par value $.01 per share.
<PAGE>
COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
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INDEX TO FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998.
- ------------------------------------------------------------------------------
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1998 [Unaudited]
and December 31, 1997 [Audited].................................. 1
Consolidated Statements of Operations for the three months ended
March 31, 1998 and 1997 [Unaudited].............................. 3
Consolidated Statements of Cash Flows for the three months ended
March 31, 1998 and 1997 [Unaudited].............................. 4
Notes to Consolidated Financial Statements [Unaudited]........... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 8
PART II: OTHER INFORMATION..........................................10
SIGNATURES..........................................................11
. . . . . . . . . .
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------
<TABLE>
March 31, December 31,
1 9 9 8 1 9 9 7
[Unaudited] [Audited]
Assets:
Current Assets:
<S> <C> <C>
Cash and Cash Equivalents $2,763,060 $ 2,908,167
Notes and Accounts Receivable [Less Allowance for
Doubtful Accounts of $185,610 and $185,610] 4,009,813 1,234,706
Prepaid Expenses 235,864 140,783
---------- -----------
Total Current Assets 7,008,737 4,283,656
---------- -----------
Property and Equipment - At Cost:
Furniture, Fixtures and Equipment 2,650,900 2,625,678
Less: Accumulated Depreciation (2,436,162) (2,397,704)
---------- -----------
Property and Equipment - Net 214,738 227,974
---------- -----------
Software License Held for Sale at December 31, 1997
[Less Accumulated Amortization of $-0- and $1,750,000] -- 3,250,000
---------- -----------
Capitalized Software [Less Accumulated Amortization of
$1,992,489 and $1,820,857] 541,424 663,057
Notes Receivable - Long-Term 2,893,054 --
---------- -----------
Other Assets 65,735 59,335
---------- -----------
Total Assets $10,723,688 $ 8,484,022
=========== ===========
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.
</TABLE>
1
<PAGE>
COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------
March 31, December 31,
1 9 9 8 1 9 9 7
[Unaudited] [Audited]
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable $ 665,923 $ 571,309
Accrued Liabilities 1,772,276 1,618,676
Unearned Revenue 809,116 447,133
---------- -----------
Total Current Liabilities 3,247,315 2,637,118
Convertible Debentures 3,000,000 3,000,000
---------- -----------
Total Liabilities 6,247,315 5,637,118
---------- -----------
Commitments and Contingencies -- --
---------- -----------
Stockholders' Equity:
Common Stock, $.01 Par Value, Authorized
30,000,000 Shares, Issued 16,863,222 and
16,791,122 Shares, Respectively 168,632 167,911
Capital in Excess of Par Value 26,539,289 25,273,031
Accumulated Deficit (22,231,548) (22,594,038)
----------- -----------
Total Stockholders' Equity 4,476,373 2,846,904
---------- -----------
Total Liabilities and Stockholders' Equity $10,723,688 $ 8,484,022
=========== ===========
The Accompanying Notes are an Integral Part of These Consolidated Financial
Statements.
2
<PAGE>
COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF OPERATIONS
[UNAUDITED]
- ------------------------------------------------------------------------------
Three months ended
March 31,
1 9 9 8 1 9 9 7
------- -------
Revenues:
Licenses $ 1,409,035 $ 73,976
Maintenance 895,133 586,860
Professional Services 566,788 221,878
----------- -----------
Total Revenues 2,870,956 882,714
----------- -----------
Cost of Revenues:
Licenses 896,682 453,723
Maintenance 341,325 639,500
Professional Services 175,893 213,167
----------- -----------
Total Cost of Revenues 1,413,900 1,306,390
----------- -----------
Gross Profit 1,457,056 (423,676)
----------- -----------
Operating Expenses:
Sales and Marketing 336,183 351,929
General and Administrative 417,029 806,298
Research and Development 264,278 --
----------- -----------
Total Operating Expenses 1,017,490 1,158,227
----------- -----------
Operating Income [Loss] 439,566 (1,581,903)
Interest Income 16,675 1,718
Interest Expense 93,750 5,729
---------- -----------
Net Income [Loss] $ 362,491 $(1,585,914)
=========== ===========
Basic Earnings [Loss] Per Share $ 0.02 $ (0.09)
=========== ===========
Diluted Earnings [Loss] Per Share $ 0.02 $ (0.09)
=========== ===========
Weighted Average Number of Common Shares Outstanding 16,814,053 16,717,994
The Accompanying Notes are an Integral Part of These Consolidated Financial
Statements.
3
<PAGE>
COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
- ------------------------------------------------------------------------------
<TABLE>
Three months ended
March 31,
1 9 9 8 1 9 9 7
------- -------
Cash Flows from Operating Activities:
<S> <C> <C>
Net Income [Loss] $ 362,491 $(1,585,914)
Adjustments to Reconcile Net Income [Loss] to Net Cash
Used for Operating Activities:
Depreciation 38,458 58,519
Amortization of Capitalized Software and Software License 171,632 453,724
Provision for Uncollectible Accounts -- 33,099
Noncash Compensation Expense on Granting of Stock Options -- 12,157
Changes in Assets and Liabilities:
[Increase] Decrease in:
Notes and Accounts Receivable (1,775,107) 519,666
Prepaid Expenses (95,081) (364,638)
Other Assets (6,400) 2,333
Increase [Decrease] in:
Accounts Payable 94,614 243,295
Accrued Liabilities 153,600 (208,142)
Unearned Revenue 361,983 (148,442)
---------- -----------
Net Cash [Used For] Continuing Operating Activities (693,810) (984,343)
---------- -----------
Cash Flows from Investing Activities:
Capital Expenditures (25,222) 1,436
Capitalized Software Expenditures (50,000) --
---------- -----------
Net Cash [Used For] Provided from Investing Activities (75,222) 1,436
---------- -----------
Cash Flows from Financing Activities:
Proceeds from Bridge Financing -- 750,000
Payments on Bridge Financing -- (750,000)
Proceeds from Convertible Debentures -- 3,000,000
Proceeds from Sale of Software License 500,000 --
Proceeds from Exercise of Stock Options 123,925 1,575
---------- -----------
Net Cash Provided from Financing Activities 623,925 3,001,575
---------- -----------
Change in Cash and Cash Equivalents (145,107) 2,018,668
Cash and Cash Equivalents - Beginning of Periods 2,908,167 446,672
---------- -----------
Cash and Cash Equivalents - End of Periods $2,763,060 $ 2,465,340
========== ===========
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.
</TABLE>
4
<PAGE>
COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
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[1] General
For a summary of significant accounting policies, refer to Note 1 of Notes to
Consolidated Financial Statements included in Cover-All Technologies Inc. [the
"Company"] Annual Report on Form 10-K for the year ended December 31, 1997.
While the Company believes that the disclosures presented are adequate to make
the information not misleading, these consolidated financial statements should
be read in conjunction with the consolidated financial statements and the notes
thereto included in the Company's latest annual report. Certain amounts for the
prior year have been reclassified to conform with the current period's financial
statement presentation. The financial statements include on a consolidated basis
the results of all subsidiaries. All material intercompany transactions have
been eliminated.
In the opinion of management, the accompanying consolidated financial statements
include all adjustments which are necessary to present fairly the Company's
financial position as of March 31, 1998 and December 31, 1997 and the results of
operations for the three month periods ended March 31, 1998 and 1997, and the
cash flows for the three month periods ended March 31, 1998 and 1997. Such
adjustments are of a normal and recurring nature. The results of operations for
the three month period ended March 31, 1998 are not necessarily indicative of
the results to be expected for a full year.
[2] Convertible Notes & Debentures
On March 14, 1997, the Company obtained $750,000 in bridge financing through the
sale of 12 1/2% Convertible Notes to three major stockholders. The principal and
accrued interest on the bridge financing was repaid in full on March 31, 1997
out of the proceeds from the financing discussed below.
On March 31, 1997, the Company issued $3,000,000 of 12 1/2% Convertible
Debentures [the "Debentures"] to an institutional investor at face value. The
Debentures are immediately convertible, in whole or in part, into shares of the
Company's Common Stock at a conversion price of $1.25 per share, subject to
adjustment, and mature on March 31, 2002. Interest is payable quarterly. The
Debentures contain certain covenants which restrict the Company's ability to
incur debt, grant liens, pay dividends or other restricted payments and make
investments and acquisitions. The Company cannot redeem the Debentures for two
years and thereafter may call the Debentures only if the closing price of the
Company's Common Stock exceeds $1.50 for the twenty days preceding the
redemption date. A portion of the proceeds from the issuance was used to repay
the bridge financing. The remaining net proceeds were used for working capital
purposes.
[3] Sale of Stock and Warrants
On March 31, 1996, the Company was granted by Care Corporation Limited ["Care"]
the exclusive license for the Care software for use in the workers' compensation
claims administration markets in Canada, Mexico and Central and South America
[the "Care Software License"]. In exchange for this license, the Company issued
to Care 2,500,000 shares of the Company's Common Stock and the Company recorded
a software license for $5,000,000. The agreement was revised on March 14, 1997
and the Company engaged Care as its exclusive sales agent for a monthly fee of
$10,000 against commissions of 20%. Depending upon the level of revenue reached,
or not reached, the Company had the right to repurchase all or a portion of the
shares issued to Care at $.01 per share. Under certain circumstances, based upon
aggregate net sales in excess of $10 million from a maximum of two separate
sales during such three-year period, the Company was required to grant Care
five-year warrants to buy an additional 1,000,000 shares of the Company's Common
Stock at $2.00 per share.
In the fourth quarter of 1997, the Company made a strategic decision to allocate
its future resources to its TAS 2000 and Classic product lines rather than the
product line obtained via the Care Software License. In this regard, on March
31, 1998, the Company negotiated and consummated a buy back by Care of the Care
Software License.
5
<PAGE>
COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2
[UNAUDITED]
- ------------------------------------------------------------------------------
[3] Sale of Stock and Warrants [Continued]
For the buy back of Care Software License by Care, the Company received $500,000
on March 31, 1998, and a $4,500,000 non-interest bearing non-recourse [except as
to collateral] note, payable in semi-annual installments of $500,000 which, when
discounted, results in a principal amount of the note of $3,893,054. The
discounted note is collateralized by unencumbered Cover-All stock owned by Care.
The number of shares required as collateral will vary, such that the market
value of the shares held as collateral must equal 150% of the outstanding
balance. The number of shares required as collateral will be adjusted at each
payment date based on the market price of the Company's shares and the balance
outstanding on such date. Based on the market price of the Company's stock on
March 30, 1998, approximately 1,700,000 shares were pledged as collateral. Upon
receipt of the first $500,000 payment under the agreement on March 31, 1998, the
Company lifted the aforementioned $.01 per share stock repurchase restriction on
the 2,500,000 shares.
In separate but related agreements, Care agreed to grant to the Company certain
non-exclusive re-seller rights to the Care software, and the Company agreed to
grant to Care certain non-exclusive re-seller rights to the TAS 2000 software
and Classic product lines.
Based on the above, and due to the related party nature of the Care Software
License buy back agreement, the Company recorded the $1,143,000 difference
between the carrying value of the Care Software License and the discounted
$4,393,000 buy back agreement to capital in excess of par value at March 31,
1998.
[4] Income Taxes
Pursuant to Statement of Financial Accounting Standards ["SFAS"] No. 109,
"Accounting for Income Taxes," income tax expense [or benefit] for the period is
the sum of deferred tax expense [or benefit] and income taxes currently payable
[or refundable]. Deferred tax expense [or benefit] is the change during the year
in a company's deferred tax liabilities and assets. Deferred tax liabilities and
assets are determined based on differences between financial reporting and tax
basis of assets and liabilities, and are measured using the enacted tax rates
and laws that will be in effect when the differences are expected to reverse. At
December 31, 1997, the Company had approximately $3,000,000, $14,000,000 and
$7,000,000 of operating tax loss carryforwards expiring in 2012, 2011, and 2010,
respectively. No provision for income taxes is reflected in these financial
statements as the Company anticipates utilizing the operating tax loss
carryforwards to offset any taxable income the Company may have.
[5] Net Income [Loss] Per Share
The Financial Accounting Standards Board has issued SFAS No. 128, "Earnings per
Share," which is effective for financial statements issued for periods ending
after December 15, 1997. Accordingly, earnings per share data in the financial
statements for the three months ended March 31, 1998, have been calculated in
accordance with SFAS No. 128. Prior periods loss per share data have been
recalculated and it was determined that no adjustment was necessary.
SFAS No. 128 supersedes Accounting Principles Board Opinion No. 15, Earnings per
Share, and replaces its primary earnings per share with a new basic earnings per
share representing the amount of earnings for the period available to each share
of common stock outstanding during the reporting period. Basic earnings [loss]
per share is computed by dividing income [loss] available to common stockholders
by the weighted average number of common shares outstanding during the period.
SFAS No. 128 also requires a dual presentation of basic and diluted earnings per
share on the face of the statement of operations for all companies with complex
capital structures. Diluted earnings per share reflects the amount of earnings
for the period available to each share of common stock outstanding during the
reporting period, while giving effect to all dilutive potential common shares
that were outstanding during the period, such as common shares that could result
from the potential exercise or conversion of securities into common stock.
6
<PAGE>
COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #3
[UNAUDITED]
- ------------------------------------------------------------------------------
[5] Net Income [Loss] Per Share [Continued]
The computation of diluted earnings per share does not assume conversion,
exercise, or contingent issuance of securities that would have an antidilutive
effect on per share amounts [i.e., increasing earnings per share or reducing
loss per share]. The dilutive effect of outstanding options and warrants and
their equivalents are reflected in dilutive earnings per share by the
application of the treasury stock method which recognizes the use of proceeds
that could be obtained upon exercise of options and warrants in computing
diluted earnings per share. It assumes that any proceeds would be used to
purchase common stock at the average market price during the period. Options and
warrants will have a dilutive effect only when the average market price of the
common stock during the period exceeds the exercise price of the options or
warrants. The Company's options and warrants were not included in the
computation of loss per share for the three months ended March 31, 1997, because
to do so would have been antidilutive for that period, however, such options and
warrants did dilute earnings per share for the three months ended March 31,
1998, however, the effect was not material.
The dilutive effect of convertible debt is reflected in diluted earnings per
share by the application of the if-converted method. While the Company's
convertible debt had a dilutive effect on earnings per share for the three
months ended March 31, 1998, its effect was not material. The Company's
convertible debt did not affect the loss per share calculation for the three
months ended March 31, 1997, because its inclusion would have been antidilutive.
[6] Presentation
Certain items have been reclassified from the prior period to conform with the
current period's presentation.
. . . . . . . . . .
7
<PAGE>
Item 2:
COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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Total revenues for the three months ended March 31, 1998 were $2,871,000 as
compared to $883,000 for the same period in 1996, an increase of 225%. Licenses
fees were $1,409,000 for the three months ended March 31, 1998 compared to
$74,000 in the same period in 1997 as a result of new contracts signed in the
first quarter of 1998. For the three months ended March 31, 1998, maintenance
revenues were $895,000 compared to $587,000 in the same period of the prior year
due to an increased customer base and new contracts signed. Professional
services revenue contributed $567,000 in the three months ended March 31, 1998
compared to $222,000 in the first quarter of 1997 as a result of new contracts
signed in the first quarter of 1998. Total Classic revenues were $1,744,000 for
the three months ended March 31, 1998 as compared to $833,000 for the three
months ended March 31, 1997. Total TAS 2000 revenues were $1,127,000 for the
three months ended March 31, 1998 as compared to $50,000 for the three months
ended March 31, 1997.
Cost of sales increased to $1,414,000 for the three months ended March 31, 1998
as compared to $1,306,000 for the same period in 1997 as a result of an increase
in sales volume. There was no license fee amortization for the three months
ended March 31, 1998 due to the sale of the Care license back to the Care
Corporation Limited. Non-cash capitalized software and license fees amortization
was $172,000 for the three months ended March 31, 1998 as compared to $454,000
in the same period in 1997.
Research and development expenses were $264,000 for the three months ended March
31, 1998 compared to none for the same period in 1997 as a result of the start
of design and feasibility of several modules of the TAS 2000 product line
related to new contracts signed in the first quarter of 1998.
Sales and marketing expenses were $336,000 for the three months ended March 31,
1998 as compared to $352,000 in the same period of 1997 due to an efficient
marketing and sales effort to improve the market shares of the Companys' product
lines, TAS 2000 and Classic.
General and administrative expenses decreased to $417,000 in the three months
ended March 31, 1998 as compared to $806,000 in the same period in 1997 due to
the ongoing effort to reduce overhead costs.
The Company is working toward continued growth in 1998 and beyond. In the
Classic line, the Company is positioned to increase market share as a result of
completion of a project making it Windows 95 compliant and maintaining the
strengths upon which its current market acceptance is based.
The TAS 2000 product line offers a complete set of policy administration
applications development products. The TAS 2000 products are being marketed in
both the domestic marketplace and in the United Kingdom, through systems
integrators. A contract for the TAS 2000 product was announced on March 25, 1998
with Cornhill Insurance PLC, a wholly-owned subsidiary of Allianz AG. This
licensing and services agreement, which is expected to be performed in 1998 and
is valued at $4,500,000 encompasses Cover-All's Total Administrative System [TAS
2000] modules including Policy Administration, Client Management, Agency
Management, Billing Cash & Commissions, Statistical Reporting and Pyramid
Services' Claims Administration.
8
<PAGE>
COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------
Liquidity and Capital Resources
In 1996, the Company was granted by Care, the Care Software License. The Care
software is an integrated suite of computer applications for the administration
of claims processing of workers' compensation. The product has been successfully
deployed in Australia and the United States in Third Party Administration
["TPA"] and self insured environments, including city and state government
operations as well as with major private corporations. In the fourth quarter of
1997, the Company made a strategic decision to allocate its future resources to
its TAS 2000 and Classic product lines rather than the product line obtained via
the Care Software License. In this regard, on March 31, 1998, the Company
negotiated a buy back by Care of the Care Software License, while acquiring
worldwide reseller rights, excluding Australia, New Zealand, and the United
States to the Care Software.
In consideration for the buy back of the Care Software License by Care, the
Company received $500,000 on March 31, 1998, and a $4,500,000 non-interest
bearing non-recourse [except as to collateral] note, payable in semi-annual
installments of $500,000 which, when discounted, results in a principal amount
of the note of $3,893,000. The discounted note is collateralized by unencumbered
Cover-All stock owned by Care. The number of shares required as collateral will
vary, such that the market value of the shares held as collateral must equal
150% of the outstanding balance. The number of shares required as collateral
will be adjusted at each payment date based on the market price of the Company's
shares and the balance outstanding on the date. Based on the market price of the
Company's stock on March 30, 1998, approximately 1,700,000 shares were pledged
as collateral.
Based on the above, and due to the related party nature of the Care Software
License buy back agreement, the Company recorded $1,143,000, the difference
between the carrying value of the Care Software License of $3,250,000 at
December 31, 1997, and the discounted $4,393,000 buy back agreement to capital
in excess of par value at March 31, 1998.
On March 31, 1997, the Company sold $3,000,000 of 12 1/2% Convertible Debentures
due March 2002 [the "Debentures"] to an institutional investor. The Debentures
were sold at face value, pay interest quarterly and are convertible, in whole or
in part, into shares of Common Stock of the Company at $1.25 per share, subject
to adjustment. The Debentures contain certain covenants which restrict the
Company's ability to incur indebtedness, grant liens, pay dividends or other
defined restricted payments and make investments and acquisitions. The Company
cannot redeem the Debentures for two years and thereafter may only call the
Debentures if the closing price of the Company's Common Stock for the twenty
business days preceding the redemption date exceeds $1.50. The net proceeds from
this financing were used for working capital purposes.
At March 31, 1998, the Company had working capital of $3,761,000, as compared to
working capital of $651,000 at March 31, 1997. The improvement in working
capital was due to the payments received on new contracts signed and the
recording of $500,000 cash received as a result of the buy back of the Care
Software License by Care.
The Company believes that its current cash balances and anticipated cash flows
from continuing operations will be sufficient to meet normal operating needs for
the Company in 1998.
Statements in this Form 10Q, other than statements of historical information are
forward-looking statements that are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements involve known and unknown risks which may cause the Company's actual
results in future periods to differ materially from expected results. Those
risks include, among others, risk associated with increased competition,
customer decisions, delays in productivity programs and new product
introductions, and other business factors beyond the Company's control. Those
and other risks are described in the Company's filings with the Securities and
Exchange Commission ["SEC"] over the last 12 months, copies of which are
available from the SEC or may be obtained upon request from the Company.
9
<PAGE>
COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits.
27. Financial Data Schedule.
(b) Reports on Form 8-K.
The Company filed a Form 8-K on May 14, 1998 under Item 5 to reflect the
signing of employment and services agreements between the Company and each
of Brian Magowan, its Chief Executive Officer, Peter Lynch, its President,
and Dalia Ophir, its Chief Technology Officer.
10
<PAGE>
COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
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.
COVER-ALL TECHNOLOGIES INC.
Date: May 14, 1998 By:/s/ Brian Magowan
Brian Magowan, Chairman and Chief
Executive Officer
Date: May 14, 1998 By:/s/ John R. Nobel
-----------------
John R. Nobel, Chief Financial Officer
11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet and the consolidated statement of operations, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Mar-31-1998
<CASH> 2,673,060
<SECURITIES> 0
<RECEIVABLES> 4,009,813
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,008,737
<PP&E> 2,650,900
<DEPRECIATION> 2,436,162
<TOTAL-ASSETS> 10,723,688
<CURRENT-LIABILITIES> 3,247,315
<BONDS> 0
0
0
<COMMON> 168,632
<OTHER-SE> 4,307,741
<TOTAL-LIABILITY-AND-EQUITY> 10,723,688
<SALES> 2,870,956
<TOTAL-REVENUES> 2,870,956
<CGS> 1,413,900
<TOTAL-COSTS> 1,017,490
<OTHER-EXPENSES> (16,675)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 93,750
<INCOME-PRETAX> 362,491
<INCOME-TAX> 0
<INCOME-CONTINUING> 362,491
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 362,491
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>