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, 2000 Commission File Number 0-13124
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COVER-ALL TECHNOLOGIES INC.
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(Exact name of registrant as specified in its charter)
Delaware 13-2698053
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
18-01 Pollitt Drive
Fair Lawn, New Jersey 07410
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (201) 794-4800
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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 8, 2000:
17,041,172 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, 2000
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PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2000
[Unaudited] and December 31, 1999 [Audited].................................3
Consolidated Statements of Operations for the three
months ended March 31, 2000 and 1999 [Unaudited]............................5
Consolidated Statements of Cash Flows for the three
months ended March 31, 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............................................11
PART II - OTHER INFORMATION...................................................14
SIGNATURES ..................................................................15
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
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<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
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(Unaudited) (Audited)
<S> <C> <C>
Assets:
Current Assets:
Cash and Cash Equivalents .................................... $ 516,342 $ 1,065,793
Accounts Receivable (Less Allowance for Doubtful Accounts
of $1,565,992 and $1,730,249) ............................. 2,259,685 2,368,272
Note Receivable -- Related Party ............................. 1,000,000 959,344
Prepaid Expenses ............................................. 417,519 365,194
Accrued Interest -- Related Party Receivable ................. -- 40,656
----------- -----------
Total Current Assets ......................................... 4,193,546 4,799,259
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Property and Equipment-- At Cost:
Furniture, Fixtures and Equipment ............................ 3,214,288 3,191,154
Less: Accumulated Depreciation ............................... (2,787,601) (2,749,589)
----------- -----------
Property and Equipment -- Net ................................... 426,687 441,565
----------- -----------
Note Receivable -- Related Party
(Net of Unearned Interest of $209,821 and $250,477) .......... 1,290,179 1,749,523
----------- -----------
Capitalized Software (Less Accumulated Amortization of
$3,309,379 and $3,084,571) ................................... 1,872,252 2,097,060
----------- -----------
Other Assets .................................................... 59,335 59,335
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Total Assets ................................................. $ 7,841,999 $ 9,146,742
=========== ===========
</TABLE>
The Accompanying Notes are an Integral Part of These
Consolidated Financial Statements.
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<PAGE>
COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
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<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
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(Unaudited) (Audited)
<S> <C> <C>
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable ............................................... $ 1,278,440 $ 1,085,395
Accrued Liabilities ............................................ 530,578 886,850
Obligation Under Capital Lease ................................. 60,695 59,497
Unearned Revenue ............................................... 1,195,005 1,595,217
------------ ------------
Total Current Liabilities ...................................... 3,064,718 3,626,959
Long-Term Liabilities:
Obligation Under Capital Lease ................................. 66,785 82,416
Convertible Debentures ......................................... 3,000,000 3,000,000
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Total Long-Term Liabilities .................................... 3,066,785 3,082,416
------------ ------------
Total Liabilities .............................................. 6,131,503 6,709,375
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Commitments and Contingencies ..................................... -- --
------------ ------------
Stockholders' Equity:
Common Stock, $.01 Par Value, Authorized 30,000,000 Shares,
Issued 17,041,172 and 17,003,672 Shares,
Respectively ................................................ 170,412 170,037
Capital In Excess of Par Value .................................... 26,813,603 26,763,197
Accumulated Deficit ............................................... (25,273,519) (24,495,867)
------------ ------------
Total Stockholders' Equity ........................................ 1,710,496 2,437,367
------------ ------------
Total Liabilities and Stockholders' Equity ........................ $ 7,841,999 $ 9,146,742
============ ============
</TABLE>
The Accompanying Notes are an Integral Part of These
Consolidated Financial Statements.
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<PAGE>
COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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Three months ended March 31,
----------------------------
2000 1999
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Revenues:
Licenses .................................... $ 820,000 $ 1,199,555
Maintenance ................................. 1,056,190 1,020,402
Professional Services ....................... 402,530 909,551
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Total Revenues .............................. 2,278,720 3,129,508
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Cost of Revenues:
Licenses .................................... 1,436,830 1,470,072
Maintenance ................................. 698,992 461,586
Professional Services ....................... 149,591 350,746
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Total Cost of Revenues ...................... 2,285,413 2,282,404
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Direct Margin ............................... (6,693) 847,104
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Operating Expenses:
Sales and Marketing ......................... 187,650 469,717
General and Administrative .................. 366,045 313,799
Research and Development .................... 164,965 240,042
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Total Operating Expenses .................... 718,660 1,023,558
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Operating (Loss) Income ..................... (725,353) (176,454)
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Interest Expense (Income):
Interest Expense ............................ 96,792 95,943
Interest Income - Related Party (Imputed) ... (40,656) (52,206)
Interest Income ............................. (3,837) (7,055)
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Interest Expense (Income) ................... 52,299 36,682
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Income (Loss) Before Income Tax Benefit ..... (777,652) (213,136)
Income Tax Benefit ............................. -- 196,825
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Net (Loss) Income .............................. $ (777,652) $ (16,311)
============ ============
Basic and Diluted Earnings (Loss) Per
Common Share ................................ $ (0.05) $ (0.00)
============ ============
Weighted Average Number of Common
Shares Outstanding for Basic
Earnings (Loss) Per Common Share ............ 17,029,000 16,987,000
============ ============
The Accompanying Notes are an Integral Part of These
Consolidated Financial Statements.
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<PAGE>
COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
2000 1999
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<S> <C> <C>
Cash Flows from Operating Activities:
Income (Loss) from Operations ................................ $ (777,652) $ (16,311)
Adjustments to Reconcile Net Income (Loss) to
Net Cash Provided From (Used for) Operating Activities:
Depreciation ............................................ 38,012 47,030
Amortization of Capitalized Software .................... 224,808 105,087
Imputed Interest Income ................................. (81,312) (104,793)
Deferred Tax Asset ...................................... -- (200,000)
Provision for Uncollectible Accounts .................... (140,250) (40,405)
Changes in Assets and Liabilities:
(Increase) Decrease in:
Accounts Receivable ..................................... 248,837 (446,940)
Prepaid Expenses ........................................ (52,325) (175,778)
Accrued Interest - Related Party Note
Receivable ............................................ 40,656 52,587
Other Assets ............................................ -- (6,825)
Increase (Decrease) in:
Accounts Payable ........................................ 193,045 (95,783)
Accrued Liabilities ..................................... (356,272) 104,541
Unearned Revenue ........................................ (400,212) 707,980
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Net Cash (Used for) Operating Activities ..................... (1,062,665) (69,610)
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Cash Flows from Investing Activities:
Repayment of Notes Receivable - Related Party ................ 500,000 500,000
Capital Expenditures ......................................... (23,134) (124,107)
Capitalized Software Expenditures ............................ -- (457,155)
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Net Cash Provided from (Used for) Investing Activities ....... 476,866 (81,262)
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Cash Flows from Financing Activities:
Net Proceeds From the Issuance of Common Stock ............... 31,250 --
Principal Payments on Capital Lease .......................... (14,433) --
Proceeds from Exercise of Stock Options ...................... 19,531 20,000
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Net Cash Provided from Financing Activities .................. 36,348 20,000
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Change in Cash and Cash Equivalents .............................. (549,451) (130,872)
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Cash and Cash Equivalents - Beginning of Period .................. 1,065,793 2,286,610
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Cash and Cash Equivalents - End of Period ........................ $ 516,342 $ 2,155,738
=========== ===========
</TABLE>
The Accompanying Notes are an Integral Part of These
Consolidated Financial Statements.
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<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.'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 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, 2000, and the results of operations for the
three month periods ended March 31, 2000 and 1999, and the cash flows for the
three month periods ended March 31, 2000 and 1999. Such adjustments are of a
normal and recurring nature. The results of operations for the three month
period ended March 31, 2000 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 March 31, 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 Company's common stock and to Care's history of making each of the
$500,000 payments on the promissory note in a timely
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<PAGE>
COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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[2] Sale of Stock and Purchase and Sale of Care Software License (continued)
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.
The balance of the undiscounted Care Note at March 31, 2000 is $2,500,000, of
which $1,000,000 is classified as currently due. The undiscounted long-term
portion of the Care Note at March 31, 2000 of $1,500,000 is shown at $1,290,179,
net of unearned interest of $209,821.
[3] Income Taxes
An analysis of the components of the income tax provision is as follows:
The income tax provision (benefit) for continuing operations differs from
the amount computed by applying the statutory federal income tax rate as
follows:
Three Months
Ended
March 31, 2000
--------------
Computed Federal Statutory Tax (Benefit) .................... $(264,000)
Valuation Allowance to Reduce Deferred Tax Asset ............ 264,000
---------
Actual Provision (Benefit) .............................. $ --
=========
The components of the net deferred tax asset and liability were as follows:
Three Months
Ended
March 31, 2000
--------------
Deferred Tax Assets -- Current:
Accounts Receivable Allowance .......................... $ 626,000
Reserve for Loss on Disposal ........................... 13,000
Vacation Accrual ....................................... 10,000
Valuation Allowance .................................... (649,000)
-----------
Current Deferred Tax Asset ........................... $ --
===========
Deferred Tax Asset (Liability) -- Long-Term:
Net Operating Loss Carryforward ........................ $ 8,550,000
Stock Options .......................................... 128,000
Capitalized Software ................................... (749,000)
Depreciation and Amortization .......................... 70,000
Valuation Allowance .................................... (7,999,000)
-----------
Long-Term Deferred Tax Asset ......................... $ --
===========
The net change increase during 2000 in the total valuation allowance is
$378,000.
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<PAGE>
COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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[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 March 31, 1999, the Company's two business units had distinct management
teams and infrastructures that offer different products and services which are
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.
(Dollars in Thousands)
Three Months ended March 31, 2000
---------------------------------------------
Classic TAS Care Consolidated
------- ------ ---- ------------
Revenues....................... 1,888 391 -- 2,279
Operating Profit (Loss)........ 753 (1,478) -- (725)
Interest Income ............... 37 7 -- 44
Interest Expense .............. 81 16 -- 97
Income (Loss) Before Income
Tax Benefit ................. 709 (1,478) -- (778)
(Dollars in Thousands)
Three Months ended March 31, 1999
---------------------------------------------
Classic TAS Care Consolidated
------- ------ ---- ------------
Revenues....................... 1,701 1,429 -- 3,130
Operating Profit (Loss)........ 724 (900) -- (176)
Interest Income ............... 32 27 -- 59
Interest Expense .............. 52 44 -- 96
Income (Loss) Before Income
Tax Benefit ................. 707 (917) -- (213)
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<PAGE>
COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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[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
March 31, 2000
-------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ----------
<S> <C> <C> <C>
Basic EPS:
Loss Available to Common
Stockholders ............................ $ (777,652) 17,029,000 $ (0.05)
Effect of Dilutive Securities:
Options .................................. -- -- --
Warrants ................................. -- -- --
---------- ---------- ----------
Diluted EPS:
Loss Available to Common Stockholders
Plus Assumed Conversions ............... $ (777,652) 17,029,000 $ (0.05)
========== ========== ==========
<CAPTION>
For the three months ended
March 31, 1999
-------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ----------
<S> <C> <C> <C>
Basic EPS:
Loss Available to Common
Stockholders ............................ $ (16,311) 16,987,000 $ (0.00)
Effect of Dilutive Securities:
Options .................................. -- 637,888 --
Warrants ................................. -- 411,327 --
---------- ---------- ----------
Diluted EPS:
Loss Available to Common Stockholders
Plus Assumed Conversions ............... $ (16,311) 18,036,215 $ (0.00)
========== ========== ==========
</TABLE>
Options to purchase 100,000 shares of common stock at prices ranging from $3.50
to $5.00 per share were outstanding at March 31, 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 ($2.79). The convertible debt
did not have a dilutive effect because the amount of interest (net of tax) on a
per share basis exceeds basic earnings per share.
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<PAGE>
COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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Item 2:
Total revenues for the three months ended March 31, 2000 were $2,279,000 as
compared to $3,130,000 for the same period in 1999. Licenses fees were $820,000
for the three months ended March 31, 2000 compared to $1,200,000 in the same
period in 1999, as the result of no new TAS 2000 sales in the first quarter of
2000. For the three months ended March 31, 2000, maintenance revenues were
$1,056,000 compared to $1,020,000 in the same period of the prior year due to an
increased Classic customer base. Professional services revenue contributed
$403,000 in the three months ended March 31, 2000 compared to $910,000 in the
first quarter of 1999 as a result of no new TAS 2000 sales. Total Classic
revenues were $1,888,000 for the three months ended March 31, 2000 as compared
to $1,701,000 for the three months ended March 31, 1999. Total TAS 2000 revenues
were $391,000 for the three months ended March 31, 2000 as compared to
$1,429,000 for the three months ended March 31, 1999.
Cost of sales increased to $2,285,000 for the three months ended March 31, 2000
as compared to $2,282,000 for the same period in 1999. Non-cash capitalized
software amortization was $225,000 for the three months ended March 31, 2000 as
compared to $105,000 in the same period in 1999.
Research and development expenses were $165,000 for the three months ended March
31, 2000 compared to $240,000 for the same period in 1999.
Sales and marketing expenses were $188,000 for the three months ended March 31,
2000 as compared to $470,000 in the same period of 1999 due primarily to a
reduction in the sales force in 2000.
General and administrative expenses increased to $366,000 in the three months
ended March 31, 2000 as compared to $314,000 primarily due to an increase in
staffing costs in the first quarter of 2000.
Liquidity and Capital Resources
At March 31, 2000, the Company had working capital of $1,129,000 compared to a
working capital of $1,172,000 in 1999.
On March 28, 2000, the Company received the $500,000 scheduled payment due under
the Care Note.
The Company is seeking alternative financing to insure that its cash balances
will be sufficient to meet its normal operating needs and to continue to make
significant investment in software development in response to its business
opportunities in 2000.
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
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COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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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.
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.
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. The Company's
international business is 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 be materially adversely impacted by changes in these or other factors.
The Company's exposure to foreign exchange rate fluctuations arises from sales
made to a U.K. customer. As exchange rates vary, these results, when translated,
may vary from expectations and adversely impact overall expected profitability.
The effect of foreign exchange rate fluctuations on the Company as of March 31,
2000 was not material.
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<PAGE>
COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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* * * * * * * * *
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.
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<PAGE>
COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARIES
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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 allegedly failing, among other things, to provide a graphical user interface
version of software to Inspire.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits.
27. Financial Data Schedule.
(b) Reports on Form 8-K.
On January 6, 2000, the Company filed a Form 8-K under Item 5 to reflect
the hiring of John Roblin as the Company's President and Chief Executive
Officer on December 20, 1999.
- 14 -
<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 15, 2000 By: /s/ Mark Johnston
---------------------------------------------------
Mark Johnston, Chairman and Interim Chief Financial
Officer
Date: May 15, 2000 By: /s/ John Roblin
---------------------------------------------------
John Roblin, President and Chief Executive Officer
- 15 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM COVER-ALL
TECHNOLOGIES INC. FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 2000, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-2000
<CASH> 516,342
<SECURITIES> 0
<RECEIVABLES> 3,825,677
<ALLOWANCES> 1,565,992
<INVENTORY> 0
<CURRENT-ASSETS> 4,193,546
<PP&E> 3,214,288
<DEPRECIATION> 2,787,601
<TOTAL-ASSETS> 7,841,999
<CURRENT-LIABILITIES> 3,064,718
<BONDS> 3,000,000
0
0
<COMMON> 170,412
<OTHER-SE> 1,540,084
<TOTAL-LIABILITY-AND-EQUITY> 7,841,999
<SALES> 0
<TOTAL-REVENUES> 2,278,720
<CGS> 0
<TOTAL-COSTS> 2,285,413
<OTHER-EXPENSES> 718,660
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52,299
<INCOME-PRETAX> (777,652)
<INCOME-TAX> 0
<INCOME-CONTINUING> (777,652)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (777,652)
<EPS-BASIC> (.05)
<EPS-DILUTED> (.05)
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