COVER ALL TECHNOLOGIES INC
10-Q, 2000-10-31
PREPACKAGED SOFTWARE
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                                  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 September 30, 2000 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 October 30, 2000:

          17,681,172 shares of Common Stock, par value $.01 per share.

<PAGE>

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
================================================================================

INDEX TO FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2000.
================================================================================

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

     Consolidated Balance Sheets as of September 30, 2000 (Unaudited)
     and December 31, 1999 (Audited)........................................   3

     Consolidated Statements of Operations for the three and nine
     months ended September 30, 2000 and 1999 (Unaudited)...................   5

     Consolidated Statements of Cash Flows for the nine
     months ended September 30, 2000 and 1999 (Unaudited)...................   6

     Notes to Consolidated Financial Statements (Unaudited).................   7

Item 2. Management's Discussion and Analysis of Financial
        Condition and Results of Operations.................................  12

PART II: OTHER INFORMATION..................................................  15

SIGNATURES..................................................................  16


                                       -2-
<PAGE>

PART I: FINANCIAL INFORMATION

Item 1: Financial Statements

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
================================================================================

CONSOLIDATED BALANCE SHEETS
================================================================================

<TABLE>
<CAPTION>
                                                              September 30,  December 31,
                                                                  2000           1999
                                                              -------------  ------------
                                                               (Unaudited)     (Audited)
<S>                                                            <C>            <C>
Assets:
Current Assets:
   Cash and Cash Equivalents ...............................   $   396,131    $ 1,065,793
   Accounts Receivable (Less Allowance for Doubtful Accounts
      of $1,402,271 and $1,730,249) ........................     2,545,858      2,368,272
   Note Receivable -- Related Party ........................     1,250,000        959,344
   Prepaid Expenses ........................................       203,312        365,194
   Accrued Interest -- Related Party Note Receivable .......            --         40,656
                                                               -----------    -----------

   Total Current Assets ....................................     4,395,301      4,799,259
                                                               -----------    -----------

Property and Equipment -- At Cost:
   Furniture, Fixtures and Equipment .......................     3,213,623      3,191,154
   Less: Accumulated Depreciation ..........................    (2,863,425)    (2,749,589)
                                                               -----------    -----------

  Property and Equipment -- Net ............................       350,198        441,565
                                                               -----------    -----------

Note Receivable -- Related Party
   (Net of Unearned Interest of $175,449 and $250,477) .....       824,551      1,749,523
                                                               -----------    -----------

Capitalized Software (Less Accumulated Amortization of
   $3,759,000 and $3,084,571) ..............................     1,422,631      2,097,060
                                                               -----------    -----------

Other Assets ...............................................        59,335         59,335
                                                               -----------    -----------

   Total Assets ............................................   $ 7,052,016    $ 9,146,742
                                                               ===========    ===========
</TABLE>

              The Accompanying Notes are an Integral Part of These
                       Consolidated Financial Statements.


                                      -3-
<PAGE>

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
================================================================================

CONSOLIDATED BALANCE SHEETS
================================================================================

<TABLE>
<CAPTION>
                                                                 September 30,    December 31,
                                                                     2000             1999
                                                                 -------------    ------------
                                                                  (Unaudited)      (Audited)
<S>                                                              <C>             <C>
Liabilities and Stockholders' Equity:
Current Liabilities:
   Accounts Payable ..........................................   $  1,130,073    $  1,085,395
   Accrued Liabilities .......................................        445,179         886,850
   Obligation Under Capital Lease ............................         63,164          59,497
   Unearned Revenue ..........................................      1,482,297       1,595,217
                                                                 ------------    ------------

   Total Current Liabilities .................................      3,120,713       3,629,959

Long-Term Liabilities:
   Obligation Under Capital Lease ............................         34,573          82,416
   Convertible Debentures ....................................      3,000,000       3,000,000
                                                                 ------------    ------------

   Total Long-Term Liabilities ...............................      3,034,573       3,082,416
                                                                 ------------    ------------

   Total Liabilities .........................................      6,155,286       6,709,375
                                                                 ------------    ------------

Commitments and Contingencies ................................             --              --
                                                                 ------------    ------------

Stockholders' Equity:
   Common Stock, $.01 Par Value, Authorized 75,000,000 Shares,
      Issued 17,681,172 and 17,003,672 Shares, Respectively ..        176,812         170,037

Capital In Excess of Par Value ...............................     27,207,203      26,763,197

Accumulated Deficit ..........................................    (26,487,285)    (24,495,867)
                                                                 ------------    ------------

Total Stockholders' Equity ...................................        896,730       2,437,367
                                                                 ------------    ------------

Total Liabilities and Stockholders' Equity ...................   $  7,052,016    $  9,146,742
                                                                 ============    ============
</TABLE>

              The Accompanying Notes are an Integral Part of These
                       Consolidated Financial Statements.


                                      -4-
<PAGE>

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
================================================================================

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
================================================================================

<TABLE>
<CAPTION>
                                                  Three months ended              Nine months ended
                                                     September 30,                   September 30,
                                             ----------------------------    ----------------------------
                                                 2000            1999            2000            1999
                                             ------------    ------------    ------------    ------------
<S>                                          <C>             <C>             <C>             <C>
Revenues:
     Licenses ............................   $    721,070    $    301,500    $  1,736,776    $  2,504,690
     Maintenance .........................        977,553       1,132,966       2,986,360       3,235,451
     Professional Services ...............        534,529         699,584       1,344,059       3,020,184
                                             ------------    ------------    ------------    ------------
     Total Revenues ......................      2,233,152       2,134,050       6,067,195       8,760,325
                                             ------------    ------------    ------------    ------------

Cost of Revenues:
     Licenses ............................        422,616       1,157,537       2,422,410       4,257,839
     Maintenance .........................        856,349         405,471       2,408,636       1,235,249
     Professional Services ...............        245,313         288,522         625,175         947,325
                                             ------------    ------------    ------------    ------------
     Total Cost of Revenues ..............      1,524,278       1,851,530       5,456,221       6,440,413
                                             ------------    ------------    ------------    ------------
     Direct Margin .......................        708,874        (282,520)        610,974       2,319,912
                                             ------------    ------------    ------------    ------------

Operating Expenses:
     Sales and Marketing .................        228,324         354,612         628,371       1,339,318
     General and Administrative ..........        432,802         346,795       1,342,590       1,027,903
     Research and Development ............        223,503         291,356         612,877         777,735
     Allowance for Doubtful Accounts .....        (38,675)        129,000        (203,440)       (145,405)
                                             ------------    ------------    ------------    ------------
     Total Operating Expenses ............        845,954       1,121,763       2,380,398       2,999,551
                                             ------------    ------------    ------------    ------------
     Operating Income (Loss) .............       (137,080)       (839,243)     (1,769,424)       (679,639)
                                             ------------    ------------    ------------    ------------

Interest Expense (Income):
     Interest Expense (Income) ...........         95,220          95,370         283,057         276,165
     Interest Income - Related Party
       (Imputed) .........................        (17,186)        (46,757)        (75,028)       (145,720)
                                             ------------    ------------    ------------    ------------
     Total Interest Expense (Income) .....         78,034          48,613         208,029         130,445
                                             ------------    ------------    ------------    ------------

     Foreign Currency Transaction
       Gain (Loss) .......................             --         (16,161)        (13,965)        (58,814)
                                             ------------    ------------    ------------    ------------
     Income (Loss) Before Income Tax
       Benefit ...........................       (215,114)       (904,017)     (1,991,418)       (868,898)

Income Tax Benefit .......................             --              --              --         200,000
                                             ------------    ------------    ------------    ------------

Net Income (Loss) ........................   $   (215,114)   $   (904,017)   $ (1,991,418)   $   (668,898)
                                             ============    ============    ============    ============

Basic and Diluted Earnings (Loss) Per
     Common Share ........................   $      (0.01)   $      (0.05)   $      (0.11)   $      (0.04)
                                             ============    ============    ============    ============

Weighted Average Number of Common Shares
     Outstanding for Basic Earnings (Loss)
     Per Common Share ....................     17,681,000      17,000,000      17,295,000      16,997,000
                                             ============    ============    ============    ============
</TABLE>

              The Accompanying Notes are an Integral Part of These
                       Consolidated Financial Statements.


                                      -5-
<PAGE>

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
================================================================================

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
================================================================================

<TABLE>
<CAPTION>
                                                                   Nine months ended September 30,
                                                                   -------------------------------
                                                                       2000                1999
                                                                   -----------         -----------
<S>                                                                <C>                 <C>
Cash Flows from Operating Activities:
      Income (Loss) from Operations ............................   $(1,991,418)        $  (668,898)
      Adjustments to Reconcile Net Income (Loss) to
         Net Cash Provided From (Used for) Operating Activities:
             Depreciation ......................................       114,328             151,941
             Amortization of Capitalized Software ..............       674,429             348,113
             Imputed Interest Income ...........................      (115,684)           (104,793)
             Deferred Tax Asset ................................            --            (200,000)
             Provision for Uncollectible Accounts ..............      (203,440)             76,000

      Changes in Assets and Liabilities:
         (Increase) Decrease in:
             Accounts Receivable ...............................        25,854            (764,799)
             Prepaid Expenses ..................................       161,882            (107,943)
             Accrued Interest -- Related Party Note Receivable .        40,656             (40,927)
             Other Assets ......................................            --              (4,968)

         Increase (Decrease) in:
             Accounts Payable ..................................        44,678            (161,995)
             Accrued Liabilities ...............................      (441,671)           (422,018)
             Unearned Revenue ..................................      (112,920)          1,046,844
                                                                   -----------         -----------

      Net Cash Used For Operating Activities .................    (1,803,306)           (853,443)
                                                                   -----------         -----------

Cash Flows from Investing Activities:
      Repayment of Notes Receivable - Related Party ............       750,000             500,000
      Capital Expenditures .....................................       (22,961)           (368,583)
      Capitalized Software Expenditures ........................            --          (1,186,162)
                                                                   -----------         -----------

      Net Cash Provided From (Used For) Investing Activities ....       727,039          (1,054,745)
                                                                   -----------         -----------

Cash Flows from Financing Activities:
      Net Proceeds from Issuance of Common Stock ...............       431,250                  --
      Principal Payments on Capital Lease ......................       (44,176)            (22,962)
      Proceeds from Exercise of Stock Options ..................        19,531              40,000
                                                                   -----------         -----------

      Net Cash Provided from Financing Activities ..............       406,605              17,038
                                                                   -----------         -----------

Change in Cash and Cash Equivalents ............................      (669,662)         (1,891,150)

Cash and Cash Equivalents - Beginning of Period ................     1,065,793           2,286,610
                                                                   -----------         -----------

Cash and Cash Equivalents - End of Period ......................   $   396,131         $   395,460
                                                                   ===========         ===========
</TABLE>

              The Accompanying Notes are an Integral Part of These
                       Consolidated Financial Statements.


                                      -6-
<PAGE>

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
================================================================================

[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.'s (the
"Company") Annual Report on Form 10-K for the year ended December 31, 1999.
While the Company believes that the disclosures herein 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 period 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
consolidated financial position as of September 30, 2000, and the results of
their operations for the three and nine month periods ended September 30, 2000
and 1999, and their cash flows for the nine month periods ended September 30,
2000 and 1999. Such adjustments are of a normal and recurring nature. The
results of operations for the three and nine month periods ended September 30,
2000 and 1999 are not necessarily indicative of the results to be expected for a
full year.

[2] Sale of Stock and Purchase and Sale of Care Software License

On March 31, 1996, the Company was granted by Care Corporation Limited ("Care")
the exclusive license for the Care software systems 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 at $2.00
per share to value the license at $5,000,000 at March 31, 1996. 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 portions of the shares issued to Care at $.01 per share.

In the fourth quarter of 1997, the Company made a strategic decision to allocate
its future resources to its TAS 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.

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 note (the "Care Note"),
payable in semi-annual installments of $500,000 which, when discounted at 6%,
results in a principal amount of the note of $3,893,054. Based on the above, and
due to the related party nature of the Care Software License buy back agreement,
the Company has recorded the $1,143,054 difference between the carrying value of
the Care Software License at December 31, 1997 of $3,250,000 and the discounted
$4,393,054 buy back agreement amount to capital in excess of par value in the
first quarter of 1998.

The discounted note is collateralized by unencumbered Cover-All stock owned by
Care and a Care affiliate, Software Investments Limited ("SIL"). 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 of the
note. 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. The Company has received the subsequent payments due under
the Care Note, including the payment due by September 30, 2000. In November
1999, the Board of Directors decided that due to the hardship placed upon Care
by the pledged share requirement of the pledge agreement given the then current
price of the


                                      -7-
<PAGE>

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
================================================================================

Company's common stock and to Care's history of making each of the $500,000
payments on the promissory note in a timely manner, it would be in the best
interest of the Company to agree to allow Care to cap the number of shares of
the Company's common stock required to be pledged to the Company pursuant to the
pledge agreement to 2,500,000. In connection with the investment by Vault
Management Limited (see Note 3), one-half of the payment due September 30, 2000
has been deferred until December 31, 2000.

The balance of the undiscounted Care Note at September 30, 2000 is $2,250,000,
of which $1,250,000 is classified as currently due. The undiscounted long-term
portion of the Care Note at September 30, 2000 of $1,000,000 is shown at
$824,551, net of unearned interest of $175,449.

[3] Investment by Vault Management Limited

On June 21, 2000, the Company entered into an agreement with Vault Management
Limited ("Vault") to purchase between 640,000 and 1,600,000 shares of the
Company's Common Stock at $.625 per share, which was the closing price per share
of the Company's Common Stock on May 30, 2000, the date the agreement was
reached.

The agreement will generate a minimum of $400,000 and a maximum of $1 million in
proceeds to the Company. The proceeds will be used for general working capital
purposes.

The agreement also calls for the equivalent number of the Company's detachable
five-year warrants to be issued to Vault at an exercise price of $.625 per
share. The agreement provides that Vault shall have the option to make payments
beyond the required $400,000 in $200,000 installments each on August 31, 2000,
October 31, 2000 and November 30, 2000. Vault did not exercise its option to
make a payment of $200,000 on August 31, 2000. The decision not to exercise
Vault's option was mutually agreed upon by Vault and the Company.

As part of the Vault transaction, the Company also agreed to modify the terms of
the Care Note such that the semi-annual principal payment of $500,000 due and
payable on September 30, 2000 shall be due and payable as to $250,000 on
September 30, 2000 and as to $250,000 on December 31, 2000. The Company received
the $250,000 payment on September 29, 2000. Mr. Mark Johnson, the Company's
Chairman and Interim Chief Financial Officer, is a director of both Vault and
Care.

[4] Segment Information

The following information is presented as a result of the Company adopting SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information."

At March 31, 2000, the Company merged the management teams and infrastructures
of its two business units to improve customer service. The Company will continue
to separately assess the performance of each of these products.

At September 30, 1999, the Company's two business units had distinct management
teams and infrastructures that offered different products and services which
were evaluated separately in assessing performance and allocating resources.
These business units have been reported as two reportable segments, Classic and
TAS.

The following financial information is reported on the basis that is used
internally for evaluating segment performance and deciding how to allocate
resources.


                                      -8-
<PAGE>

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
================================================================================

                                                  (Dollars in Thousands)
                                           Three Months ended September 30, 2000
                                           -------------------------------------
                                           Classic        TAS       Consolidated
                                           -------      -------     ------------

Revenues ................................  $ 1,974      $   259       $ 2,233
Operating Profit (Loss) .................      796         (933)         (137)
Interest Income .........................       16            2            18
Interest Expense ........................       85           11            96
Income (Loss) before Income Tax Benefit .      727         (942)         (215)

                                                  (Dollars in Thousands)
                                            Nine Months ended September 30, 2000
                                           -------------------------------------
                                           Classic        TAS       Consolidated
                                           -------      -------     ------------
Revenues.................................  $ 5,308      $   759       $ 6,067
Operating Profit (Loss)..................    1,825       (3,594)       (1,769)
Interest Income..........................       66           15            81
Interest Expense.........................      256           33           289
Income (Loss) before Income Tax Benefit .    1,622       (3,613)       (1,991)

                                                  (Dollars in Thousands)
                                           Three Months ended September 30, 1999
                                           -------------------------------------
                                           Classic        TAS       Consolidated
                                           -------      -------     ------------

Revenues.................................  $ 1,681      $   453       $ 2,134
Operating Profit (Loss)..................      424       (1,263)         (839)
Interest Income..........................       46            4            50
Interest Expense.........................       77           22            99
Income (Loss) before Income Tax Benefit .      379       (1,283)         (904)

                                                  (Dollars in Thousands)
                                            Nine Months ended September 30, 1999
                                           -------------------------------------
                                           Classic        TAS       Consolidated
                                           -------      -------     ------------

Revenues.................................   $ 5,735     $ 3,025       $ 8,760
Operating Profit (Loss)..................     2,292      (2,972)         (680)
Interest Income..........................       114          48           162
Interest Expense.........................       203          90           293
Income (Loss) before Income Tax Benefit..     2,152      (3,021)         (869)


                                      -9-
<PAGE>

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
================================================================================

[5] Earnings Per Share Disclosures

The following is a reconciliation of the numerator and denominator of the basic
and diluted earnings per share ("EPS") computations:

<TABLE>
<CAPTION>
                                                     For the three months ended
                                                         September 30, 2000
                                              ----------------------------------------
                                                 Income         Shares       Per Share
                                              (Numerator)    (Denominator)     Amount
                                              -----------    -------------   ---------
<S>                                            <C>             <C>           <C>
Basic EPS:
 Income Available to Common
   Stockholders ............................   $(215,114)      17,681,172    $  (0.01)
Effect of Dilutive Securities:
  Options ..................................          --               --          --
  Warrants .................................          --               --          --
                                               ---------       ----------    --------
Diluted EPS:
  Income Available to Common Stockholders
    Plus Assumed Conversions ...............   $(215,114)      17,681,172    $  (0.01)
                                               =========       ==========    ========

<CAPTION>
                                                      For the nine months ended
                                                         September 30, 2000
                                              ----------------------------------------
                                                 Income         Shares       Per Share
                                              (Numerator)    (Denominator)     Amount
                                              -----------    -------------   ---------
<S>                                           <C>             <C>            <C>
Basic EPS:
 Income Available to Common
   Stockholders ..........................    $(1,991,418)    17,295,168     $  (0.11)
Effect of Dilutive Securities:
  Options ................................             --             --           --
  Warrants ...............................             --             --           --
                                              -----------     ----------     --------
Diluted EPS:
  Income Available to Common Stockholders
    Plus Assumed Conversions .............    $(1,991,418)    17,295,168     $  (0.11)
                                              ===========    ===========     ========
</TABLE>


                                      -10-
<PAGE>

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
================================================================================

<TABLE>
<CAPTION>
                                                     For the three months ended
                                                         September 30, 1999
                                              ----------------------------------------
                                                 Income         Shares       Per Share
                                              (Numerator)    (Denominator)     Amount
                                              -----------    -------------   ---------
<S>                                           <C>              <C>           <C>
Basic EPS:
 Income Available to Common
   Stockholders ............................  $ (904,017)      17,000,000    $  (0.05)
Effect of Dilutive Securities:
  Options ..................................          --          157,805          --
  Warrants .................................          --               --          --
                                              ----------       ----------    --------
Diluted EPS:
  Income Available to Common Stockholders
    Plus Assumed Conversions ...............  $ (904,017)      17,157,805    $  (0.05)
                                              ==========       ==========    ========

<CAPTION>
                                                      For the nine months ended
                                                         September 30, 1999
                                              ----------------------------------------
                                                 Income         Shares       Per Share
                                              (Numerator)    (Denominator)     Amount
                                              -----------    -------------   ---------
<S>                                            <C>             <C>           <C>
Basic EPS:
 Income Available to Common
   Stockholders ............................   $ (668,898)     16,996,749    $  (0.04)
Effect of Dilutive Securities:
  Options ..................................           --         371,602          --
  Warrants .................................           --         154,781          --
                                               ----------      ----------    --------
Diluted EPS:
  Income Available to Common Stockholders
    Plus Assumed Conversions ...............   $ (668,898)     17,523,132    $  (0.04)
                                               ==========      ==========    ========
</TABLE>

Options to purchase 282,500 shares of common stock at prices ranging from $2.13
to $5.00 per share were outstanding at September 30, 1999, but were not included
in the computation of diluted EPS because the options' exercise price was
greater than the average market price of the common shares for the period
($2.04).

The Company's options and warrants were not included in the computation of EPS
for the periods ended September 30, 2000 because to do so would be antidilutive.
The Company's convertible debt does not affect the EPS calculation for the
periods ended September 30, 2000 and 1999 because it would be antidilutive.


                                      -11-
<PAGE>

Item 2:

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
================================================================================

Total revenues for the three months ended September 30, 2000 were $2,233,000 as
compared to $2,134,000 for the same period in 1999. License fees were $721,000
for the three months ended September 30, 2000 compared to $301,000 in the same
period in 1999, as a result of three new Classic sales in the third quarter of
2000. For the three months ended September 30, 2000, maintenance revenues were
$978,000 compared to $1,133,000 in the same period of the prior year.
Professional services revenue contributed $534,000 in the three months ended
September 30, 2000 compared to $700,000 in the third quarter of 1999 as a result
of no new TAS 2000 sales. Total Classic revenues were $1,974,000 for the three
months ended September 30, 2000 as compared to $1,681,000 for the three months
ended September 30, 1999. Total TAS 2000 revenues were $259,000 for the three
months ended September 30, 2000 as compared to $453,000 for the three months
ended September 30, 1999. For the nine months ended September 30, 2000, total
revenues were $6,067,000 compared to $8,760,000 in the same period of the prior
year. Total Classic revenues were $5,308,000 for the nine months ended September
30, 2000 as compared to $5,735,000 in the same period in 1999. Total TAS 2000
revenues were $759,000 for the first nine months of 2000 as compared to
$3,025,000 in the same period in 1999.

Cost of sales decreased to $1,524,000 and $5,456,000 for the three and nine
months ended September 30, 2000 as compared to $1,852,000 and $6,440,000 for the
same periods in 1999 due to staff reductions in the TAS 2000 division, which has
been reorganized and resources have been allocated to providing maintenance to
the existing TAS 2000 customers. Non-cash capitalized software amortization was
$225,000 and $674,000 for the three and nine months ended September 30, 2000 as
compared to $119,000 and $348,000 in the same periods in 1999.

Research and development expenses were $224,000 and $613,000 for the three and
nine months ended September 30, 2000 compared to $291,000 ad $778,000 for the
same periods in 1999.

Sales and marketing expenses were $228,000 and $628,000 for the three and nine
months ended September 30, 2000 as compared to $355,000 and $1,339,000 in the
same periods of 1999 primarily due to a reduction in the sales force in 2000.

General and administrative expenses increased to $433,000 and $1,343,000 in the
three and nine months ended September 30, 2000 as compared to $347,000 and
$1,028,000 in the same periods in 1999 primarily due to an increase in the
staffing and legal costs in 2000.

During 1999, the Company availed itself of a program offered by the State of New
Jersey whereby it sold state net operating loss carryovers of $11,178,111 for
net proceeds of $835,066. The sale of additional net operating loss carryovers
by the Company has been approved for 2000, but the exact allocation has not yet
been determined. The State of New Jersey indicated that the minimum allocation
would be one-half of the amount allowed in 1999. The Company expects to
recognize the income tax benefit of this sale in the fourth quarter of 2000.

Liquidity and Capital Resources

At September 30, 2000, the Company had working capital of $1,275,000 compared to
a working capital of $3,368,000 in 1999.

On March 28, 2000, the Company received the $500,000 scheduled payment due under
the Care Note. During June 2000, the Company received $400,000 from Vault
Management Limited. On September 29, 2000, the Company received the $250,000
scheduled payment due under the Care Note.

The Company believes that its current cash balances and anticipated cash flows
from operations will be sufficient to meet normal operating needs for the
Company in 2000.


                                      -12-
<PAGE>

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
================================================================================

New Authoritative Accounting Pronouncements

The Financial Accounting Standard Board ("FASB") has issued Statement of
Financial Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities.
SFAS No. 133 requires that an entity recognize all derivatives as either assets
or liabilities in the statement of financial position and measure those
instruments at fair value. The accounting for changes in the fair value of a
derivative depends on the intended use of the derivative and how it is
designated, for example, gain or losses related to changes in the fair value of
a derivative not designated as a hedging instrument is recognized in earnings in
the period of the change, while certain types of hedges may be initially
reported as a component of other comprehensive income (outside earnings) until
the consummation of the underlying transaction.

SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. Initial application of SFAS No. 133 should be as of the
beginning of a fiscal quarter; on that date, hedging relationships must be
designated anew and documented pursuant to the provisions of SFAS No. 133.
Earlier application of all of the provisions of SFAS No. 133 is encouraged, but
it is permitted only as of the beginning of any fiscal quarter. SFAS No. 133 is
not to be applied retroactively to financial statements of prior periods.

The Company does not currently have any derivative instruments and is not
currently engaged in any hedging activities. In June 1999, the FASB issued SFAS
No. 137 which deferred the effective date of SFAS No. 133 to fiscal quarters
beginning after June 30, 2000.

In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101"), which clarifies certain existing accounting principles for the timing of
revenue recognition and its classification in the financial statements. The SEC
delayed the required implementation date of SAB 101 by issuing Staff Accounting
Bulletins No. 101A, "Amendment: Revenue Recognition in Financial Statements" and
101B, "Second Amendment: Revenue Recognition in Financial Statements" in March
and June 2000, respectively. As a result, the SAB 101 will not be effective for
the Company until the quarter ended December 31, 2000. The Company believes the
adoption of SAB 101 will not be material to the earnings and financial position
of the Company.

Year 2000 Readiness

The Year 2000 issue ("Y2K") is the result of computer programs that were written
using two digits rather than four to define the applicable year. As a result,
software may recognize a date using the two digits "00" as 1900 rather than the
year 2000. Computer programs that do not recognize the proper date could
generate erroneous data or cause systems to fail. In addition, the Year 2000
problem also affects non-information technologies such as machines, equipment
and other systems that contain embedded microprocessors. The Year 2000 problem
could affect the Company's computers, software programs, equipment and other
systems used by the Company as well as such technologies of other companies with
which the Company does business.

To date, the Company's systems and software have not experienced any material
disruption due to the onset of the Year 2000, and the Company is unaware of any
material problems or issues with the operation of its systems and software as a
result of Year 2000 issues. In addition, the Company is unaware of any material
problems or issues with critical third party systems and services utilized by
the Company. The Company did not incur any significant additional expense
relating to the Y2K problem. In anticipation of Y2K, the Company installed a
managerial and financial reporting system and a telephone voicemail system which
are warranted to be Y2K ready by their respective vendors. The total cost of
those systems was approximately $58,000.


                                      -13-
<PAGE>

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
================================================================================

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to the impact of interest rate changes, foreign currency
fluctuations and changes in the market value of its investments.

Interest Rate Risk. The Company's exposure to market rate risk for changes in
interest rates relates primarily to the Company's investment portfolio. The
Company has not used derivative financial instruments in its investment
portfolio. The Company invests its excess cash in a major bank money market
account. The Company protects and preserves its invested funds by limiting
default, market and reinvestment risk.

Investments in this account carry a degree of interest rate risk. Fixed rate
securities may have their fair market value adversely impacted due to a rise in
interest rates, while floating rate securities may produce less income than
expected if interest rates fall. Due in part to these factors, the Company's
future investment income may fall short of expectations due to changes in
interest rates or the Company may suffer losses in principal if forced to sell
securities which have declined in market value due to changes in interest rates.

Foreign Currency Risk. The Company earned revenues in the U.K. in the first
quarter of 2000. The Company presently has no international business. The
Company's international business was subject to risks typical of an
international business, including, but not limited to differing economic
conditions, changes in political climate, differing tax structures, other
regulations and restrictions, and foreign exchange rate volatility. Accordingly,
the Company's future results could have been materially adversely impacted by
changes in these or other factors.

The Company's exposure to foreign exchange rate fluctuations arose from sales
made to a U.K. customer. As exchange rates vary, these results, when translated,
could have varied from expectations and adversely impacted overall expected
profitability. The effect of foreign exchange rate fluctuations on the Company
as of September 30, 2000 was a loss of $14,000.

                                * * * * * * * * *

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.


                                      -14-
<PAGE>

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
================================================================================

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

         On February 23, 2000, COVER-ALL commenced an action against Inspire
         Insurance Solutions, Inc., a Texas corporation ("Inspire"), in United
         States District Court, District of New Jersey, claiming $1.5 million in
         damages for breach of contract stemming from Inspire's failure to make
         certain maintenance and support payments to COVER-ALL and its
         anticipatory repudiation of such future payments under the contract. In
         April 2000, Inspire filed counterclaims against COVER-ALL for $2.5
         million for allegedly failing, among other things, to provide a
         graphical user interface version of software to Inspire. The parties
         have conducted discovery proceedings which COVER-ALL expects will be
         completed during the fourth quarter of 2000.

Item 6 - Exhibits and Reports on Form 8-K

(a)    Exhibits.

       27.      Financial Data Schedule.

(b)    Reports on Form 8-K.

       None.


                                      -15-
<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: October 31, 2000                 By: /s/ Mark Johnston
                                           -------------------------------------
                                           Mark Johnston, Chairman and Interim
                                           Chief Financial Officer


Date: October 31, 2000                 By: /s/ John Roblin
                                           -------------------------------------
                                           John Roblin, President and Chief
                                           Executive Officer


                                      -16-



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