UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 10-Q



x
        
        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934For the quarterly period ended June 30, 2009ORo
        
        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934For the transition period from ________________ to ________________




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. Employerincorporation or organization)
        
        Identification No.)55 Lane Road, Fairfield, New Jersey
        
        07004(Address of principal executive offices)
        
        (Zip Code)


973-461-5200

(Registrants telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.YesxNoo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes [   ]     No  [   ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (check one):



Large accelerated filer o
        Accelerated fileroNon-accelerated filer o (Do not check if a smaller reporting company)
        Smaller reporting companyx


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Yeso
        
        Nox




Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.



Class
        
        Outstanding at August 11, 2009Common Stock, $.01 par value per share
        
        24,612,786 shares




COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY



INDEX TO FORM 10-Q FOR THE QUARTER ENDED JUNE30, 2009


PART I:
        FINANCIAL INFORMATION



Item 1.
        Financial Statements



Consolidated Balance Sheets as of June 30, 2009 (Unaudited)



and December 31, 2008 (Audited)
        3



Consolidated Statements of Operations for the three and six



months ended June 30, 2009 and 2008 (Unaudited)
        5



Consolidated Statements of Cash Flows for the six



months ended June 30, 2009 and 2008 (Unaudited)
        6



Notes to Consolidated Financial Statements (Unaudited)
        7



Item 2.
        Managements Discussion and Analysis of Financial



Condition and Results of Operations
        12



Item 3.
        Quantitative and Qualitative Disclosures



About Market Risk
        19



Item 4.
        Controls and Procedures
        19




PART II:
        OTHER INFORMATION





Item 1A.
        Risk Factors
        20




Item 4.
        Submission of Matters to a Vote of Security Holders
        25




Item 6.
        Exhibits
        25




SIGNATURES
        26







.   .   .   .   .   .   .   .   .   .



2





PART I:
        FINANCIAL INFORMATION



Item 1.
        Financial Statements.

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY



CONSOLIDATED BALANCE SHEETS




June 30,
2009
        December 31,
2008(Unaudited)Assets:Current Assets:Cash and Cash Equivalents
        $         4,392,761
        $         4,686,470Accounts Receivable (Less Allowance for Doubtful Accountsof $25,000 in 2009 and 2008)
        1,699,429
        2,055,815Prepaid Expenses
        467,097
        334,804Deferred Tax Asset
        840,000
        840,000Total Current Assets
        7,399,287
        7,917,089Property and Equipment  At Cost:Furniture, Fixtures and Equipment
        623,547
        623,547Less:  Accumulated Depreciation
        (338,851)
        (300,164)Property and Equipment  Net
        284,696
        323,383Capitalized Software (Less Accumulated Amortization of$11,536,419 and $11,049,157, respectively)
        1,778,142
        1,848,111Deferred Tax Asset
        840,000
        840,000Other Assets
        110,151
        110,151Total Assets
        $         10,412,276
        $      11,038,734



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




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COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY



CONSOLIDATED BALANCE SHEETS




June 30,
2009
        December 31,
2008(Unaudited)Liabilities and Stockholders Equity:Current Liabilities:Accounts Payable
        $          318,738
        $          227,007Accrued Expenses Payable
        331,605
        1,061,065Deferred Charges
        22,503
        22,503Unearned Revenue
        1,750,002
        1,800,485Total Current Liabilities
        2,422,848
        3,111,060Long-Term Liabilities:Deferred Charges
        112,592
        123,844Total Liabilities
        2,535,440
        3,234,904Commitments and Contingencies
        
        Stockholders Equity:
Common Stock, $.01 Par Value, Authorized 75,000,000 Shares; 24,786,656 and 24,690,227 Shares Issued and 24,584,786 and 24,488,357 Shares Outstanding, Respectively
        247,866
        246,902Paid-in Capital
        29,367,295
        29,185,646Accumulated Deficit
        (21,573,431)
        (21,463,824)Treasury Stock  At Cost  201,870 Shares
        (164,894)
        (164,894)Total Stockholders Equity
        7,876,836
        7,803,830Total Liabilities and Stockholders Equity
        $     10,412,276
        $     11,038,734



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






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COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY



CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)



Three months ended June 30,
        Six months ended June 30,2009
        2008
        2009
        2008Revenues:Licenses
        $        83,415
        $        170,899
        $        306,393
        $         869,399Maintenance
        1,252,475
        958,672
        2,497,479
        1,947,515Professional Services
        890,619
        828,886
        1,986,567
        1,684,316Applications Service Provider (ASP) Services
        512,964
        551,959
        1,003,688
        1,005,594Total Revenues
        2,739,473
        2,510,416
        5,794,127
        5,506,824Cost of Revenues:Licenses
        232,990
        258,386
        492,320
        536,881Maintenance
        624,155
        620,302
        1,196,555
        1,074,887Professional Services
        412,171
        359,581
        938,522
        741,323ASP Services
        379,782
        244,791
        772,633
        552,967Total Cost of Revenues
        1,649,098
        1,483,060
        3,400,030
        2,906,058Direct Margin
        1,090,375
        1,027,356
        2,394,097
        2,600,766Operating Expenses:Sales and Marketing
        222,421
        156,998
        436,523
        391,325General and Administrative
        467,145
        417,161
        929,551
        973,010Research and Development
        226,010
        166,583
        438,414
        382,211Total Operating Expenses
        915,576
        740,742
        1,804,488
        1,746,546Operating Income
        174,799
        286,614
        589,609
        854,220Other Income (Expense):Interest Expense
        
        (4,531)
        
        (9,063)Interest Expense  Related Party
        
        (1,308)
        
        (2,616)Interest Income
        1,895
        3,041
        5,867
        3,043Other Income
        17,181
        8,419
        33,300
        26,609Total Other Income (Expense)
        19,076
        5,621
        39,167
        17,973Income Before Income Taxes
        193,875
        292,235
        628,776
        872,193Income Taxes
        
        
        
        Net Income
        $       193,875
        $       292,235
        $         628,776
        $        872,193Basic Earnings Per Common Share
        $             0.01
        $              0.01
        $               0.03
        $               0.04Diluted Earnings Per Common Share
        $             0.01
        $              0.01
        $               0.03
        $               0.04Weighted Average Number of CommonShares Outstanding for Basic Earnings Per Common Share
        24,585,000
        23,520,000
        24,565,000
        23,441,000Weighted Average Number of CommonShares Outstanding for Diluted Earnings  Per Common Share
        25,010,000
        24,085,000
        24,915,000
        24,043,000




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




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COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY



CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)




Six months ended June 30,2009
        2008Cash Flows Provided From Operating Activities:Net Income
        $        628,776
        $         872,193Adjustments to Reconcile Net Income toNet Cash Provided From Operating Activities:Depreciation
        38,687
        30,374Amortization of Capitalized Software
        487,262
        445,918Amortization of Deferred Financing Costs
        
        26,273Amortization of Stock-based Compensation
        175,113
        354,248Changes in Assets and Liabilities:(Increase) Decrease in:Accounts Receivable
        356,386
        1,856,920Prepaid Expenses
        (132,293)
        (52,929)Increase (Decrease) in:Accounts Payable
        91,731
        (448,853)Accrued Liabilities
        (729,460)
        (543,845)Deferred Charges
        (11,252)
        (11,251)Unearned Revenue
        (50,483)
        (53,031)Net Cash Provided From Operating Activities
        854,467
        2,476,017Cash Flows [Used For] Investing Activities:Capital Expenditures
        
        (209,851)Capitalized Software Expenditures
        (417,293)
        (533,975)Net Cash (Used For) Investing Activities
        (417,293)
        (743,826)Cash Flows [Used For] Provided From Financing Activities:Dividends Paid to Common Stockholders
        (738,383)
        Proceeds From Exercise of Stock Options and Warrants
        7,500
        26,800Net Cash (Used For) Provided From Financing Activities
        (730,883)
        26,800Change in Cash and Cash Equivalents
        (293,709)
        1,758,991Cash and Cash Equivalents  Beginning of Period
        4,686,470
        10,914Cash and Cash Equivalents  End of Period
        $     4,392,761
        $      1,769,905Supplemental Disclosures of Cash Flow InformationCash Paid During the Periods for:Interest
        $                 
        $             9,063Interest  Related Party
        
        2,616Income Taxes
        
        




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



6





COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

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, 2008.  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.  The financial statements include on a consolidated basis the results of its subsidiary.  All material intercompany transactions and balances 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 June 30, 2009, and the results of their operations for the three and six month periods ended June 30, 2009 and 2008, and their cash flows for the six month periods ended June 30, 2009 and 2008.  Such adjustments are of a normal and recurring nature.  The results of operations for the three and six month periods ended June 30, 2009 and 2008 are not necessarily indicative of the results to be expected for a full year.


Unless otherwise disclosed in the notes to the consolidated financial
statement, the estimated fair value of financial assets and liabilities approximates carrying value. Subsequent events have been
evaluated through the filing date (August 14, 2009) of these unaudited condensed consolidated financial statements.



[2]  Earnings Per Share Disclosures

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share (EPS) computations:


For the three months ended
June 30, 2009Income
(Numerator)
        Shares
(Denominator)
        Per Share
AmountBasic EPS:Income Available to Common
Stockholders
        $    193,875
        24,584,786
        $ 0.01Effect of Dilutive Securities:Exercise of Options and Restricted Stock
        
        359,264
        Exercise of Warrants
        
        66,346
        Diluted EPS:Income Available to Common Stockholders
Plus Assumed Conversions
        $   193,875
        25,010,396
        $ 0.01



Options and restricted stock to purchase an aggregate of 609,963 shares of our common stock at prices ranging from $1.05 to $1.46 per share were outstanding at June 30, 2009, but were not included in the computation of diluted EPS because the options exercise prices were greater than the average market price of the common shares.


For the six months ended
June 30, 2009Income
(Numerator)
        Shares
(Denominator)
        Per Share
AmountBasic EPS:Income Available to Common
Stockholders
        $    628,776
        24,564,548
        $      0.03Effect of Dilutive Securities:Exercise of Options and Restricted Stock
        
        286,186
        Exercise of Warrants
        
        63,918
        Diluted EPS:Income Available to Common Stockholders
Plus Assumed Conversions
        $    628,776
        24,914,652
        $     0.03





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COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Options and restricted stock to purchase an aggregate of 609,963 shares of our common stock at prices ranging from $1.05 to $1.46 per share were outstanding at June 30, 2009, but were not included in the computation of diluted EPS because the options exercise prices were greater than the average market price of the common shares.




For the three months ended
June30, 2008Income
(Numerator)
        Shares
(Denominator)
        Per Share
AmountBasic EPS:Income Available to Common
Stockholders
        $    292,235
        23,519,647
        $  0.01Effect of Dilutive Securities:Exercise of Options and Restricted Stock
        
        485,643
        Exercise of Warrants
        
        79,350
        Diluted EPS:Income Available to Common Stockholders
Plus Assumed Conversions
        $   292,235
        24,084,640
        $   0.01



Options to purchase an aggregate of 380,000 shares of our common stock at prices ranging from $1.16 to $1.40 per share were outstanding at June 30, 2008, but were not included in the computation of diluted EPS because the options exercise prices were greater than the average market price of the common shares.




For the six months ended
June 30, 2008Income
(Numerator)
        Shares
(Denominator)
        Per Share
AmountBasic EPS:Income Available to CommonStockholders
        $    872,193
        23,440,703
        $         0.04Effect of Dilutive Securities:Exercise of Options
        
        521,462
        Exercise of Warrants
        
        81,335
        Diluted EPS:Income Available to Common Stockholders
Plus Assumed Conversions
        $    872,193
        24,043,500
        $         0.04



Options to purchase an aggregate of 380,000 shares of our common stock at prices ranging from $1.16 to $1.40 per share were outstanding at June 30, 2008, but were not included in the computation of diluted EPS because the options exercise prices were greater than the average market price of the common shares.



[3]  Stock Option and Stock Purchase Plans



Stock Options

The Company adopted SFAS No. 123R.  In the three and six months ended June 30, 2009, we recognized $100,000 and $175,000, respectively, of stock-based compensation expense in our consolidated financial statements.

The estimated fair value underlying our calculation of compensation expense for stock options is based on the Black-Scholes-Merton pricing model.  SFAS 123R requires forfeitures of share-based awards to be estimated at the time of grant and revised, if necessary, in subsequent periods if our estimates change based on the actual amount of forfeitures we have experienced.



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COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

In June 2005, we adopted the 2005 Stock Incentive Plan (which we refer to as the 2005 Plan).  Options and stock awards for the purchase of up to 5,000,000 shares may be granted by the Board of Directors to our employees as consultants at an exercise or grant price determined by the Board of Directors on the date of grant.  In March 2008, the 2005 Plan was amended and restated in order to make the Companys independent directors eligible participants under the 2005 Plan.  Either incentive or nonqualified stock options with a term of not more than ten years may be granted.  The 2005 Plan allows the Board of Directors to grant restricted or unrestricted stock awards or awards denominated in stock equivalent units, securities or debenture convertible into common stock, or any combination of the foregoing and may be paid in common stock or other securities, in cash, or in a combination of
common stock or other securities and cash.  At June 30, 2009, an aggregate of 3,202,537 shares were available for grant under the 2005 Plan.

In November 1994, we adopted the 1994 Stock Option Plan for Independent Directors.  The Plan was subsequently amended in June 2000 to increase the aggregate number of shares of common stock available for grant to 750,000.  Each non-employee director who is serving on a Date of Grant shall automatically be granted an option to purchase 10,000 shares of common stock at the fair market value of common stock on the date the option is granted.  Dates of Grant are November 15, 1994, 1999, 2004 and 2009 for non-employee directors serving on November 15, 1994.  For individuals who become non-employee directors after November 15, 1994, such directors Dates of Grant will be the date such individual becomes a director and the fifth, tenth and fifteenth anniversaries of such date.  Options are exercisable in full 6 months after the applicable date of grant and expire 5 years
after the date of grant.  At June 30, 2009, an aggregate of 750,000 shares were available for grant under the 1994 Stock Option Plan for Independent Directors.

A summary of the changes in outstanding common stock options for all outstanding plans is as follows:


Shares
        Exercise PricePer Share
        Weighted-Average Remaining Contractual Life
        Weighted-Average Exercise PriceBalance, December 31, 2008
        1,497,463
        $0.36  1.40
        3.4 years
        $        0.92Granted
        350,000
        1.00  1.05
        4.7 years
        1.01Exercised
        
        
        
        Canceled
        
        
        
        Expired
        
        
        
        Balance, June 30, 2009
        1,847,463
        $0.36  1.40
        3.3 years
        $        0.94



Of the stock options outstanding, an aggregate of 774,949 are currently exercisable.

The Black-Scholes-Merton option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable.  In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility.

Warrants



There were an aggregate of 100,000 warrants outstanding at June 30, 2009.  The exercise prices for all the warrants issued and outstanding as of June 30, 2009 were equal to or greater than the market price of our common stock at the date of grant.



A summary of the changes in outstanding warrants is as follows:





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COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)




Outstanding and Exercisable Warrants
        Exercise PricePer Warrant
        Weighted-Average Remaining Contractual Life
        Weighted-Average Exercise PriceBalance, December 31, 2008
        121,429
        $0.35
        2.35 years
        $         0.35Exercised
        (21,429)
        0.35
        
        0.35Balance, June 30, 2009
        100,000
        $0.35
        1.85 years
        $         0.35



Time-Based Restricted Stock Units



A summary of our time-based restricted stock units, or RSUs, for the three months ended June 30, 2009 is as follows:


Shares
        
        Weighted-Average Grant Date Fair Value Per ShareBalance, January 1, 2009
        382,500
        
        $              1.24Vested
        (150,000)
        
        1.38Forfeited
        (17,500)
        
        1.40Balance, June 30, 2009
        215,000
        
        $              1.13



[4]  Income Taxes

At December 31, 2008, the Company had a net
operating tax loss carry forward of approximately $21,000,000 expiring at various dates through December
31, 2026. The deferred tax asset related to this amount has been partially offset by a valuation
allowance. The valuation allowance reduces the value of the tax asset to the amount which management
believes will be used prior to expiration. Increases in the anticipated use of net operating loss
carryforwards to offset future taxable income resulted in a decrease in that allowance of approximately
$78,000 and $252,000 during the three and six months ended June 30, 2009, respectively, and
approximately $117,000 and $349,000 during the three and six months ended June 30, 2008, respectively.

[5]  Recent Accounting Pronouncements

In May 2009, the FASB issued SFAS No. 165, Subsequent Events (SFAS 165).  SFAS 165 establishes general standards of accounting for and disclosures of subsequent events that occurred after the balance sheet date but prior to the issuance of financial statements.  SFAS 165 is effective for financial statements issued for interim or fiscal years ending after June 15, 2009.  We adopted SFAS 165 and its adoption did not have a material impact on our consolidated financial statements.

In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1,Interim Disclosures about Fair Vlaue of Financial Instruments.This FSP amends FASB Statement No. 107,Disclosures about Fair Value of Financial Instrumentsto require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements.  This FSP also amended APB Opinion No. 28,Interim Financial Reporting,to require those disclosures in summarized financial information at interim reporting periods.  This FSP shall be effective for interim periods ending after June 15, 2009.  We adopted FSP No. FAS 107-1 and APB 28-1 and its adoption did not a material impact on our consolidated financial statements.

In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2,Recognition and Presentation of Other-Than-Temporary Impairments.This FAS amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to imporove the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements.  The FSP des not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities.  The FSP shall be effective for interim and annual reporting periods ending after June 15, 2009.  We adopted FSP No. FAS 115-2 and FAS 124-2 and its adoption did not have a material impact on our consolidated financial statements.



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COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


[6]  Dividend

On February 17, 2009, the Company declared a special cash dividend in the amount of $0.03 per share on its common stock.  This dividend was paid on April 7, 2009 to common stockholders of record as of the close of business on March 27, 2009.  This dividend was recorded as an increase of the accumulated deficit.


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COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY


Item 2:
        Managements Discussion and Analysis of Financial Condition and Results of Operations.


Certain of the matters discussed in this report, including, without limitation, matters discussed under this Item 2, Managements Discussion and Analysis of Financial Condition and Results of Operations, may constitute forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act) and are subject to the occurrence of certain contingencies which may not occur in the time frames anticipated or otherwise, and, as a result, could cause actual results to differ materially from such statements.  In addition to other factors and matters discussed elsewhere in this report on Form 10-Q and in our Form 10-K filed with the Securities and Exchange Commission on March 30, 2009 and other periodic reports filed, these risks, uncertainties and contingency include, but are not limited to, risks associated with increased competition, customer
decisions, the successful completion of continuing development of new products, the successful negotiation, execution and implementation of anticipated new software contracts, the successful addition of personnel in the marketing and technical areas and our ability to complete development and sell and license our products at prices which result in sufficient revenues to realize profits, and other business factors beyond our control.

Overview

We are a supplier of software products for the property and casualty insurance industry, supplying a wide range of professional services that support product customization, conversion from existing systems and data integration with other software or reporting agencies.  We also offer on-going support services including incorporating recent insurance rate and rule changes in our solutions.  These support services also include analyzing the changes, developments, quality assurance, documentation and distribution of insurance rate and rule changes.

We earn revenue from software contract licenses, service fees from our Application Service Provider (ASP), continuing maintenance fees for servicing the product and professional services.  Total revenue for the three and six months ended June 30, 2009 increased to $2,739,000 and $5,794,000, from $2,510,000 and $5,507,000, respectively, for the three and six months ended June 30, 2008, mainly due to an increase in maintenance revenue, professional services revenue offset by a decrease in license and ASP revenue for the three months ended June 30, 2009 and the six months ended June 30, 2009.

The following is an overview of the key components of our revenue and other important financial data for the three and six months ended June 30, 2009:

Software Licenses.Our license revenue in the three and six months ended June 30, 2009 of $83,000 and $306,000, respectively, was from existing customers who chose to renew, add onto or extend their use of our software.  For the three and six months ended June 30, 2008, we generated $171,000 and $869,000, respectively, in license revenue.  Our new software license revenue is affected by the strength of general economic and business conditions and the competitive position of our software products.  New software license sales are characterized by long sales cycles and intense competition.  Timing of new software license sales can substantially affect our quarterly results.

Maintenance.Maintenance revenue was $1,253,000 and $2,498,000, respectively, in the three and six months ended June 30, 2009 compared to $959,000 and $1,948,000, respectively, in the same periods in 2008.  Maintenance revenue is influenced primarily by the following factors: the renewal rate from our existing customer base, the amount of new maintenance associated with new license sales and annual price increases.

Professional Services.The increase in professional services revenue, from $829,000 and $1,684,000, respectively, in the three and six months ended June 30, 2008, to $890,000 and $1,986,000, respectively, in the same periods of 2009, was a result of increased demand for new software capabilities and customizations from our current customer base.

ASP Services.ASP services revenue was  $513,000 and $1,004,000, respectively, in the first three and six months of 2009 compared to $552,000 and $1,006,000, respectively, in the same periods in 2008, due to an expanded and extended contractual relationship with two large customers.



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COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

Income before Provision for Income Taxes.Income before provision for income taxes was  $194,000 and $629,000, respectively, in the three and six months ended June 30, 2009 compared to $292,000 and $872,000, respectively, in the same periods of 2008 primarily due to an increase in maintenance and professional services revenue offset by a decrease in license and ASP revenue and our continuing and ongoing effort to maintain our expenses in line with our revenues for the six months ended June 30, 2009.

Net Income.Net income for the three and six months ended June 30, 2009 increasedto $194,000 and $629,000, respectively, from $292,000 and $872,000, respectively, in the same periods of 2008 as a result of an increasein maintenance and professional services revenue offset by a decrease in license and ASP revenue and our continuing and ongoing effort to maintain our expenses in line with our revenues for the six months ended June 30, 2009.

Cash Flow.We generated $854,000 in positive cash flow from operations in the first six months of 2009 and ended the period with $4,393,000 in cash and cash equivalents and $1,699,000 in accounts receivable.

We continue to face challenges to growth in 2009 mainly in the marketing and selling of our products and services to new customers, caused by a number of factors, including long sales cycles and general economic and business conditions.  In addition, there are risks related to customers acceptance and implementation delays, which could affect the timing and amount of license revenue we are able to recognize.  However, given the positive response to our new software from existing customers, the significant expansion of our relationship with a very large customer and the introduction of additional software capabilities, we are expanding our sales and marketing efforts to both new and existing customers.  Consequently, we are incurring additional sales and marketing expense in advance of generating the corresponding revenue.

Results of Operations

The following table sets forth, for the periods indicated, certain items from the consolidated statements of operations expressed as a percentage of total revenues:


Three MonthsEnded June30,
        Six MonthsEnded June30,2009
        2008
        2009
        2008Revenues:License
        3.1%
        6.8%
        5.3%
        15.8%Maintenance
        45.7
        38.2
        43.1
        35.4Professional Services
        32.5
        33.0
        34.3
        30.6ASP Services
        18.7
        22.0
        17.3
        18.2Total Revenues
        100.0
        100.0
        100.0
        100.0Cost of Revenues:License
        8.5
        10.3
        8.5
        9.7Maintenance
        22.8
        24.7
        20.7
        19.5Professional Services
        15.0
        14.3
        16.2
        13.6ASP Services
        13.9
        9.8
        13.3
        10.0Total Cost of Revenues
        60.2
        59.1
        58.7
        52.8Direct Margin
        39.8
        40.9
        41.3
        47.2Operating Expenses:Sales and Marketing
        8.1
        6.3
        7.5
        7.1





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General and Administrative
        17.1
        16.6
        16.0
        17.7Research and Development
        8.2
        6.6
        7.6
        6.9Total Operating Expenses
        33.4
        29.5
        31.1
        31.7Operating Income
        6.4
        11.4
        10.2
        15.5Other (Expense) Income:Interest Expense
        0.1
        (0.1)
        0.1
        (0.2)Other Income
        0.6
        0.3
        0.6
        0.5Total Other (Expense) Income
        0.7
        0.2
        0.7
        0.3Income Before Income Taxes
        7.1
        11.6
        10.9
        15.8Income Taxes (Benefit)
        
        
        
        Net Income
        7.1%
        11.6%
        10.9%
        15.8%



Three and Six Months Ended June 30, 2009 Compared to Three and Six Months Ended June 30, 2008

Total revenues for the three months ended June 30, 2009 were $2,739,000 compared to $2,510,000 for the same period in 2008.  License fees were $83,000 for the three months ended June 30, 2009 compared to $171,000 in the same period in 2008 as a result of fewer new sales to existing customers in 2009.  For the three months ended June 30, 2009, maintenance revenues were $1,253,000 compared to $959,000 in the same period of the prior year primarily due to annual renewals from existing customers and the one new customer contract signed in 2009.  For the three months ended June 30, 2009, ASP revenues were $513,000 compared to $552,000 in the same period for the prior year, due to an expanded and extended contractual relationship with two customers.Professional services revenue contributed $890,000 in the three months ended June 30, 2009 compared
to $829,000 in the second quarter of 2008, as a result of increased demand for new software capabilities and customizations from our current customer base.

For the six months ended June 30, 2009, total revenues were $5,794,000 compared to $5,507,000 in the same period of the prior year.

Cost of sales increased to $1,649,000 and $3,400,000, respectively, for the three and six months ended June 30, 2009 compared to $1,483,000 and $2,906,000, respectively, for the same periods in 2008, due to personnel-related costs.  We are expanding our delivery bandwidth while maintaining our costs in line with our revenues through improved productivity and new technology in order to meet our increasing demand.  Non-cash capitalized software amortization was $240,000 and $487,000, respectively, for the three and six months ended June 30, 2009 as compared to $223,000 and $446,000, respectively, for the same periods in 2008.  We capitalized $300,000 and $417,000, respectively, of software development costs in the three and six months ended June 30, 2009 as compared to $347,000 and $534,000, respectively, in the same periods in 2008.

Research and development expenses increased to $226,000 and $438,000, respectively, for the three and six months ended June 30, 2009 as compared to $167,000 and $382,000, respectively, for the same periods in 2008, primarily as a result of our efforts to develop new capability to better service our customers.  We are continuing our ongoing efforts to enhance the functionality of our products and solutions and believe that investments in research and development are critical to our remaining competitive in the marketplace.

Sales and marketing expenses were $222,000 and $437,000, respectively, for the three and six months ended June 30, 2009 as compared to $157,000 and $391,000, respectively, in the same periods of 2008.  This increase in 2009 was primarily due to an addition in our marketing and sales staff, resulting in an increase in personnel-related costs.



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General and administrative expenses increased to $467,000 and $930,000, respectively, in the three and six months ended June 30, 2009 as compared to $417,000 and $973,000, respectively, in the same periods in 2008.  This increase in 2009 was mainly due to stock-based compensation related to options and warrants issued to one of our executives and stock-based compensation to our non-employee directors.

Liquidity and Capital Resources

Sources of Liquidity

We have funded our operations primarily from cash flow from operations.  Cash from operations results primarily from net income from the income statement less non-cash expenses (depreciation and amortization) and changes in working capital from the balance sheet.

Our largest source of operating cash flows is cash collections from our customers following the purchase or renewal of software licenses, product support agreements and other related services.  Payments from customers for software licenses are generally received at the beginning of the contract term.  Payments from customers for product support and ASP services are generally received in advance on a quarterly basis.  Payments for professional services are generally received 30 days after the services are performed.

At June 30, 2009, we had cash and cash equivalents of approximately $4,393,000 compared to cash and cash equivalents of approximately $4,806,000 at December 31, 2008.  The decrease in cash and cash equivalents is primarily attributable to the payment of a dividend in the six months ended June 30, 2009.

Cash Flows

Our ability to generate cash has depended on a number of different factors, primarily our ability to continue to secure and retain existing customers and generate new license sales and related product support agreements.  In order to attract new customers and maintain or grow existing revenue streams, we utilize our existing sources of capital to invest in sales and marketing, technology infrastructure and research and development.

Our ability to continue to control expenses, maintain existing revenue streams and anticipate new revenue will impact the amounts and certainty of cash flows.  We intend to maintain our expenses in line with existing revenue streams from maintenance support, ASP services and professional services.

Balance sheet items that should be considered in assessing our liquidity include cash and cash equivalents, accounts receivable, prepaid expenses, accounts payable and accrued liabilities.  Statement of operations items that should be considered in assessing our liquidity include revenues, cost of revenues (net of depreciation and amortization), operating expenses (net of depreciation and amortization) and other expenses.  Statement of cash flows items that should be considered in assessing our liquidity include net cash flows from operating activities, net cash flows from investing activities and net cash flows from financing activities.

At June 30, 2009, we had working capital of approximately $4,976,000 compared to a working capital of approximately $1,808,000 at June 30, 2008.  This increase in our working capital resulted primarily from an increase in maintenance and professional services revenue and our continuing and ongoing effort to maintain our costs in line with our revenues.  For the six months ended June 30, 2009, net cash provided from operating activities totaled approximately $854,000 compared to approximately $2,476,000 for the six months ended June 30, 2008.  In 2009, cash flow from operating activities represented the Companys principal source of cash and results primarily from net income (loss), less non-cash expense and changes in working capital.  The Company had a significant increase in its accounts receivable in 2008 due to the license sale to one large customer offset by non-cash expenses and
payment of liabilities.

For the six months ended June 30, 2009, net cash used for investing activities was approximately $417,000 compared to approximately $744,000 for the six months ended June 30, 2008.  The Company expects capital



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expenditures and capital software expenditures to continue to be funded by cash generated from operations.  For the six months ended June 30, 2009, net cash (used for) provided from financing activities was approximately $(731,000) compared to approximately $27,000 for the six months ended June 30, 2008.  The cash (used for) provided from financing activities in 2009 consisted of dividends paid to common stockholders and proceeds from the exercise of stock options and warrants.

Funding Requirements

Our primary uses of cash are for personnel-related expenditures, facilities and technology costs.

We do not anticipate any large capital expenditures that will require us to seek new sources of capital.  We lease computer equipment for terms of three years in order to have the latest available technology to serve our customers and develop new products.

On June 18, 2008, the Company announced that the board of directors authorized a share buyback plan of up to 1,000,000 shares of the Companys common stock, in accordance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended.  In 2008, the Company purchased an aggregate of 201,870 shares of the Companys common stock on the open market at an average purchase price of $0.82 per share for a total purchase price of approximately $164,894.

On February 17, 2009, we announced that our board of directors declared a special cash dividend in the amount of $0.03 per share on our common stock.  This dividend was paid on April 7, 2009 to common stockholders of record as of the close of business on March 27, 2009.  The Company also announced that in light of its decision to declare a special cash dividend, the board of directors determined that the Company will suspend its common stock buyback plan until further notice.

We prepare monthly cash flow projections on a rolling twelve-month basis based on a detailed review of anticipated receipts and revenue from licenses, maintenance, ASP and professional services.  We also perform a detailed review of our disbursements, including fixed costs, variable costs, legal costs, payroll costs and other specific payments, on a rolling twelve-month basis.

We believe that our current cash balances and anticipated cash flows from operations will be sufficient to meet our normal operating needs for at least the next twelve months.  We do not anticipate any material changes in our sources of and needs for capital.  Our ability to fund our working capital needs and address planned capital expenditures will depend on our ability to generate cash in the future.  We anticipate generating future working capital through sales to new customers and continued sales and services to our existing customers.

Our future liquidity and capital resource requirements will depend on many factors, including but not limited to the following trends and uncertainties we face:



        Our ability to generate cash is subject to general economic, financial, competitive and other factors beyond our control.




        Our need to invest resources in product development in order to continue to enhance our current product, develop new products, attract and retain customers and keep pace with competitive product introductions and technological developments.




        We experience intense competition in our industry and continuing technological changes.




        Insurance companies typically are slow in making decisions and have numerous bureaucratic and institutional obstacles, which can make our efforts to attain new customers difficult.




        We compete with a number of larger companies who have greater resources than those of ours.  We compete on the basis of insurance knowledge, products, services, price, technological advances and system functionality and performance.




        Our operations continue to depend upon the continuing business of our existing customers and our ability to attract new customers.




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
        A decline in software spending in the insurance industry could result in a decrease in our revenue.


Material risks to cash flow from operations include delayed or reduced cash payments accompanying sales of new licenses or a decline in our services business.  There can be no assurance that changes in our plans or other events affecting our operations will not result in materially accelerated or unexpected expenditures.

We do not expect for there to be a change in the mix or relative cost of our sources of capital.

Net Operating Loss Carryforwards

At December 31, 2008, we had approximately $21,000,000 of federal net operating tax loss carryforwards expiring at various dates through 2026.  The Tax Reform Act of 1986 enacted a complex set of rules which limits a companys ability to utilize net operating loss carryforwards and tax credit carryforwards in periods following an ownership change.  These rules define ownership change as a greater than 50 percent point change in stock ownership within a defined testing period which is generally a three-year period.  As a result of stock which may be issued by us from time to time, including the stock which may be issued relating to a potential merger or acquisition, or as the result of other changes in ownership of our outstanding stock, we may experience an ownership change and consequently our utilization of net operating loss carryforwards could be significantly limited.


Off-Balance Sheet Transactions

We do not maintain any off-balance sheet transactions, arrangements, obligations or other relationships with unconsolidated entities or others that are reasonably likely to have a material current or future effect on our condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies and Estimates

The SEC has issued cautionary advice to elicit more precise disclosure in this Item 2, MD&A, about accounting policies that management believes are most critical in portraying our financial results and in requiring managements most difficult subjective or complex judgments.

The preparation of financial documents in conformity with accounting principles generally accepted in the United States of America requires management to make judgments and estimates.  On an on-going basis, we evaluate our estimates, the most significant of which include establishing allowances for doubtful accounts, a valuation allowance for our deferred tax assets and determining the recoverability of our long-lived assets.  The basis for our estimates are historical experience and various assumptions that are believed to be reasonable under the circumstances, given the available information at the time of the estimate, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources.  Actual results may differ from the amounts estimated and recorded in our financial statements.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:



        Revenue Recognition




        Valuation of Capitalized Software




        Valuation of Allowance for Doubtful Accounts Receivable




Revenue Recognition



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Revenue recognition rules are very complex, and certain judgments affect the application of our revenue policy.  The amount and timing of our revenues is difficult to predict, and any shortfall in revenue or delay in recognizing revenue could cause our operating results to vary significantly from quarter to quarter.  In addition to determining our results of operations for a given period, our revenue recognition determines the timing of certain expenses, such as commissions, royalties and other variable expenses.

Our revenues are recognized in accordance with SOP 97-2, Software Revenue Recognition, as amended.  Revenue from the sale of software licenses is predominately related to the sale of standardized software and is recognized when these software modules are delivered and accepted by the customer, the license term has begun, the fee is fixed or determinable and collectibility is probable.  Revenue from software maintenance contracts and ASP services is recognized ratably over the life of the contract.  Revenue from professional consulting services is recognized when the service is provided.

Amounts invoiced to our customers in excess of currently recognizable revenues are recorded as deferred revenues.  The timing and amounts invoiced to customers can vary significantly from recognized revenues depending on specific contract terms and can therefore have a significant impact on deferred revenues in any given period.

Our revenues are derived from the licensing of our software products, professional services, maintenance and support and ASP services.  We recognize revenue when persuasive evidence of an arrangement exists, we have delivered the product or performed the service, the fee is fixed or determinable and collection is probable.



License Revenue.  We recognize our license revenue upon delivery, provided that collection is determined to be probable and no significant obligations remain.



Services and Support Revenue.  Our services and support revenue is composed of professional services (such as consulting services and training) and maintenance and support and ASP services.  Our professional services revenue is recognized when the services are performed.  Our maintenance and support and ASP offerings are recognized ratably over the term of the arrangement.



Multiple Element Arrangement.  We enter into revenue arrangements in which a customer may purchase a combination of software, maintenance and support, and professional services (multiple-element arrangements).  When vendor-specific objective evidence (VSOE) of fair value exists for all elements, we allocate revenue to each element based on the relative fair value of each of the elements.  VSOE of fair value is established by the price charged when that element is sold separately.  For maintenance and support, VSOE of fair value is established by renewal rates when they are sold separately.  For arrangements where VSOE of fair value exists only for the undelivered elements, we defer the full fair value of the undelivered elements and recognize the difference between the total arrangement fee and the amount deferred for the undelivered items as revenue,
assuming all other criteria for revenue recognition have been met.



Valuation of Capitalized Software

Costs for the conceptual formulation and design of new software products are expensed as incurred until technological feasibility has been established.  Once technological feasibility is established, we capitalize costs to produce the finished software products.  Capitalization ceases when the product is available for general release to customers.  Costs associated with product enhancements that extend the original products life or significantly improve the original products marketability are also capitalized once technological feasibility for that particular enhancement has been established.  Amortization is calculated on a product-by-product basis as the greater of the amount computed using (a) the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues for that product or (b) the straight-line method over the
remaining economic life of the product.  At each balance sheet date, the unamortized capitalized costs of each computer software product is compared to the net realizable value of that product.  If an amount of unamortized capitalized costs of a computer software product is found to exceed the net realizable value of that asset, such amount will be written off.  The net realizable value is the estimated future gross revenues from that product reduced by the estimated future costs of



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completing and deploying of that product, including the costs of performing maintenance and customer support required to satisfy our responsibility set forth at the time of sale.

Valuation of Allowance for Doubtful Accounts Receivable

Managements estimate of the allowance for doubtful accounts is based on historical information, historical loss levels, and an analysis of the collectibility of individual accounts.  We routinely assess the financial strength of our customers and based upon factors concerning credit risk, establish an allowance for uncollectible accounts.  Management believes that accounts receivable credit risk exposure beyond such allowance is limited.


Item 3.
        Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company and this item is inapplicable to us.


Item 4.
        Controls and Procedures.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)).  Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange
Commission (the SEC) rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There has been no change in our internal control over financial reporting during the quarter ended June 30, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

* * * * * * * * *

Statements in this Form 10-Q 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, risks associated with increased competition, customer decisions, the successful completion of continuing development of new products, the successful negotiation, execution and implementation of anticipated new software contracts, the successful addition of personnel in the marketing and technical areas and our ability to complete development and sell and license our products at prices which result in sufficient revenues to realize profits, and other business factors beyond
our control.  Those and other risks are described in the Companys filings with the SEC over the last 12 months, including our Form 10-K filed with the SEC on March 30, 2009, copies of which are available from the SEC or may be obtained upon request from the Company.



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PART II:
        OTHER INFORMATION



Item 1A.
        Risk Factors.


In addition to the other information described elsewhere in this Quarterly Report, you should carefully consider the following risk factors, which could materially adversely affect our business, financial condition and results of operations.  The risks described below are not the only risks facing our Company.  Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may materially adversely affect our business, financial condition and results of operations.

Risks Related to Our Business

While we were profitable in 2008 and 2007, we incurred losses in 2006 and 2005.  Our earnings arevolatile, and we may not be profitable in the future.

We incurred a loss of $1,000,000 in 2006 and $1,434,000 in 2005.  Although we generated net income of approximately $4,556,000 in 2008 and $1,231,000 in 2007, there is no assurance that we will be able to maintain profitability in the future.  Our ability to invest in sales and marketing programs, to expand and upgrade our technology infrastructure and to fund our research and development efforts will depend on existing cash balances and our ability to generate cash in the future.  This, to a certain extent, is subject to general economic, financial, competitive, regulatory and other factors that are beyond our control.  If we are unable to achieve or maintain profitability in the future, we may be unable to fund our liquidity needs.

We may need additional financing in order to continue to develop our business.

We may need additional financing to continue to fund the research and development of our software products and to expand and grow our business generally.  To the extent that we will be required to fund operating losses, our financial position would deteriorate.  If equity securities are issued in connection with a financing, dilution to our stockholders may result, and if additional funds are raised through the incurrence of debt, we may be subject to further restrictions on our operations and finances.  Furthermore, if we do incur additional debt, we may be limiting our ability to repurchase capital stock, engage in mergers, consolidations, acquisitions and asset sales, or alter our lines of business, even though these actions might otherwise benefit our business. As of December 31, 2008, we had a net stockholders equity of approximately $7,804,000 and a net working capital of
approximately $4,806,000.

We depend on product development in order to remain competitive in our industry.

We are currently investing resources in product development and expect to continue to do so in the future.  Our future success will depend on our ability to continue to enhance our current product line and to continue to develop and introduce new products that keep pace with competitive product introductions and technological developments, satisfy diverse and evolving insurance industry requirements and otherwise achieve market acceptance.  We may not be successful in continuing to develop and market, on a timely and cost-effective basis, product enhancements or new products that respond to technological advances by others.  In addition, we have in the past experienced delays in the development, introduction and marketing of new and enhanced products, and we may experience similar delays in the future.  Any failure by us to anticipate or respond adequately to changes in
technology and insurance industry preferences, or any significant delays in product development or introduction, would significantly and adversely affect our business, operating results and financial condition.

Our products may not achieve market acceptance, which may make it difficult for us to compete.



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Our future success will depend upon our ability to increase the number of insurance companies that license our software products.  As a result of the intense competition in our industry and the rapid technological changes which characterize it, our products may not achieve significant market acceptance.  Further, insurance companies are typically characterized by slow decision-making and numerous bureaucratic and institutional obstacles which will make our efforts to significantly expand our customer base difficult.

We depend on key personnel.

Our success depends to a significant extent upon a limited number of members of senior management and other key employees, including John W. Roblin, our Chief Executive Officer, Manish D. Shah, our President and Chief Technology Officer, and Maryanne Gallagher, our Executive Vice President and Chief Operating Officer.  We maintain key man life insurance on Mr. Roblin, Mr. Shah and Ms. Gallagher in the amount of $1,000,000 per individual.  The loss of the service of one or more key managers or other key employees could have a significant and adverse effect upon our business, operating results or financial condition.  In addition, we believe that our future success will depend in large part upon our ability to attract and retain additional highly skilled technical, management, sales and marketing personnel.  Competition for such personnel in the computer software industry is intense.  We may
not be successful in attracting and retaining such personnel, and the failure to do so could have a material adverse effect on our business, operating results or financial condition.

Our products are affected by rapid technological change and we may not be able to keep up with these changes.

The demand for our products is impacted by rapid technological advances, evolving industry standards in computer hardware and software technology, changing insurance industry requirements and frequent new product introductions and enhancements that address the evolving needs of the insurance industry.  The process of developing software products such as those we offer is extremely complex and is expected to become increasingly complex and expensive in the future with the introduction of new platforms and technologies.  The introduction of products embodying new technologies and the emergence of new industry standards and practices can render existing products obsolete and unmarketable.  Our future success depends upon our ability to anticipate or respond to technological advances, emerging industry standards and practices in a timely and cost-effective manner.  We may not be
successful in developing and marketing new products or enhancements to existing products that respond to technological changes or evolving industry standards.  The failure to respond successfully to these changes and evolving standards on a timely basis, or at all, could have a detrimental effect on our business, operating results and financial condition.

Our market is highly competitive.



Both the computer software and the insurance software systems industries are highly competitive.  There are a number of larger companies, including computer manufacturers, computer service and software companies and insurance companies, that have greater financial resources than we have.  These companies currently offer and have the technological ability to develop software products similar to those offered by us.  These companies present a significant competitive challenge to our business.  Because we do not have the same financial resources as these competitors, we may have a difficult time in the future in competing with these companies.  In addition, very large insurers internally develop systems similar to our systems and as a result, they may not become customers of our software.  We compete on the basis of our insurance knowledge, products, service, price, system functionality and
performance and technological advances.  Although we believe we can continue to compete on the basis of these factors, some of our current competitors have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, marketing and other resources than we do.  Our current competitors may be able to:



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
        undertake more extensive marketing campaigns for their brands and services;




        devote more resources to product development;




        adopt more aggressive pricing policies; and




        make more attractive offers to potential employees and third-party service providers.


We depend upon proprietary technology and we are subject to the risk of third party claims of infringement.

Our success and ability to compete depends in part upon our proprietary software technology.  We also rely on certain software that we license from others.  We rely on a combination of trade secret, copyright and trademark laws, nondisclosure and other contractual agreements and technical measures to protect our proprietary rights.  We currently have no patents or patent applications pending.  Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use information that we regard as proprietary.  The steps we take to protect our proprietary technology may not prevent misappropriation of our technology, and this protection may not stop competitors from developing products which function or have features similar to our products.

While we believe that our products and trademarks do not infringe upon the proprietary rights of third parties, third parties may claim that our products infringe, or may infringe, upon their proprietary rights.  Any infringement claims, with or without merit, could be time-consuming, result in costly litigation and diversion of technical and management personnel, cause product shipment delays or require us to develop non-infringing technology or enter into royalty or licensing agreements.  Royalty or licensing agreements, if required, may not be available on terms acceptable to us or at all.  If a claim of product infringement against us is successful and we fail or are unable to develop non-infringing technology or license the infringed or similar technology, our business, operating results and financial condition could be significantly and adversely affected.



We depend on existing major customers, and the loss of one or more of which could have a material adverse effect on our results of operations and financial condition.



In 2008 and 2007, our software products operations depended primarily on certain existing major customers.  One of these major customers, a unit of AIG, accounted for approximately 15% and 19% of our total revenues in 2008 and 2007, respectively.  One other major customer, a second unit of AIG, accounted for approximately 17% and 25% of our total revenues in 2008 and 2007, respectively.  The other customer, a third unit of AIG, generated 27% of our total revenues for the year ended December 31, 2008.  Two other customers, neither of which are units of AIG, generated approximately 13% and 11% of our revenues in 2006.  We anticipate that our operations will continue to depend upon the continuing business of our existing customers, particularly the major customers, and the ability to attract new customers.  Our contractual arrangements with these units of AIG, however, do not obligate any of
them to continue to purchase from us any additional software license or professional services.  Each of the three units of AIG has the obligation to continue to purchase our support services (which include our ASP services) during the applicable contractual term with such unit.  The term with respect to our contractual arrangement to provide these services to the first of the AIG units referred to above will expire on March 31, 2010 and, unless the parties mutually agree otherwise, is subject to renewal or non-renewal seven months prior to the expiration date.  The term with respect to our contractual arrangement to provide these services to the remaining two units of AIG will expire on September 30, 2012 and will automatically renew for successive one-year terms unless a party delivers a written notice of non-renewal to the other party at least 180 days prior to the expiration of the then current term.  For the year ended December 31, 2008, the revenues we generated from such
continuing support services (including our ASP services) for the three units of AIG represented approximately 12%, 4% and 2%, respectively, of our total revenues, and the total revenues we generated from the three units of AIG represented approximately 15%, 17% and 27%, respectively.  The loss of one or more of our existing major customers or our



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inability to continue to attract new customers could significantly and adversely affect our business, operating results and financial condition.



A decline in computer software spending may result in a decrease in our revenues or lower our growth rate.



A decline in the demand for computer software among our current and prospective customers may result in decreased revenues or a lower growth rate for us because our sales depend, in part, on our customers level of funding for new or additional computer software systems and services.  Moreover, demand for our solutions may be reduced by a decline in overall demand for computer software and services.  The current decline in overall technology spending may cause our customers to reduce or eliminate software and services spending and cause price erosion for our solutions, which would substantially affect our sales of new software licenses and the average sales price for these licenses.  Because of these market and economic conditions, we believe there will continue to be uncertainty in the level of demand for our products and services. Accordingly, we cannot assure you that we
will be able to increase or maintain our revenues.

We may not get the full benefit of our tax credits.

Under the United States Internal Revenue Code, companies that have not been operating profitably are allowed to apply certain of their past losses to offset future taxable income liabilities they may incur once they reach profitability.  These amounts are known as net operating tax loss carryforwards.  At December 31, 2008, we had approximately $21 million of federal net operating tax loss carryforwards expiring at various dates through 2026.  Because of certain provisions of the Tax Reform Act of 1986 related to change of control, however, we may not get the full benefit of these loss carryforwards.  If we are limited from using net operating tax loss carryforwards to offset any of our income, this would increase our taxes owed and reduce our cash for operations.

Risks Related to Our Common Stock

Holders of our common stock may have difficulty in selling those shares.

Our common stock is not traded on any securities exchange.  Our common stock is quoted on the Over-the-Counter (OTC) Bulletin Board.  Securities quoted on the OTC Bulletin Board do not enjoy the same liquidity as securities that trade on a securities exchange.  As a result, you may have difficulty in selling shares of our common stock.  In addition, our common stock is a penny stock as that term is defined in the Securities Exchange Act of 1934.  Brokers effecting transactions in a penny stock are subject to additional customer disclosure and record keeping obligations, including disclosure of the risks associated with low price stocks, stock quote information and broker compensation.  In addition, brokers effecting transactions in a penny stock are also subject to additional sales practice requirements under Rule 15g-9 of the Exchange Act
including making inquiries into the suitability of penny stock investments for each customer or obtaining a prior written agreement for the specific penny stock purchase.  Because of these additional obligations, some brokers will not effect transactions in penny stocks.

Our stock price has been volatile.

Quarterly operating results have fluctuated and are likely to continue to fluctuate significantly.  The market price of our common stock has been and may continue to be highly volatile.  Factors that are difficult to predict, such as quarterly revenues and operating results, limited trading volumes and overall market performance, will have a significant effect on the price of our common stock.  Revenues and operating results have varied considerably in the past from period to period and are likely to vary considerably in the future.  We plan product development and other expenses based on anticipated future revenue. If revenue falls below expectations, financial performance is likely to be adversely affected because only small portions of expenses vary with revenue.  As a result, period-to-



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period comparisons of operating results are not necessarily meaningful and should not be relied upon to predict future performance.

Our shares are subject to dilution as a result of the exercise of our warrants.

An aggregate of 100,000 warrants, expiring in 2011, to purchase such number of shares of our common stock were outstanding as of March 31, 2009 and exercisable at a current exercise price of $0.35 per share.  The current exercise price of these warrants is subject to adjustment if and whenever we issue or sell additional shares of our common stock for less than 95% of the market price on the date of issuance or sale, in which case the exercise price will be reduced to a new exercise price in accordance with the terms of the warrants.  Pursuant to the terms of these warrants, the issuance or sale of additional shares of common stock resulting from the exercise of stock options to be granted in the future to employees or directors pursuant to our existing stock option plans outstanding on the date of the warrant will not trigger any adjustment to the exercise price of the warrants.  The
issuance of any additional shares of our common stock as a consequence of the exercise of any of the warrants may result in significant dilution to our stockholders and may depress the market price of our common stock.  Further, if the exercise price of the warrants is adjusted, the additional shares of our common stock that would be issued upon exercise of the warrants as a result of such adjustment may also result in significant dilution to our stockholders.

Provisions of our certificate of incorporation, as amended, and by-laws and Delaware law might discourage, delay or prevent a change of control of or changes in our management and, as a result, depress the trading price of our common stock.



Our certificate of incorporation, as amended (the Certificate of Incorporation), and by-laws contain provisions that could discourage, delay or prevent a change in control or changes in our management that our stockholders may deem advantageous.  These provisions:





        require super-majority voting to amend some provisions in our Certificate of Incorporation and by-laws;




        establish a staggered board of directors;




        limit the ability of our stockholders to call special meetings of stockholders;




        prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;




        provide that the board of directors is expressly authorized to make, alter or repeal our by-laws; and




        establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at stockholder meetings.




In addition, we are subject to Section 203 of the Delaware General Corporation Law, which, subject to some exceptions, prohibits business combinations between a Delaware corporation and an interested stockholder, which is generally defined as a stockholder who becomes a beneficial owner of 15% or more of a Delaware corporations voting stock for a three-year period following the date that the stockholder became an interested stockholder.  Section 203 could have the effect of delaying, deferring or preventing a change in control that our stockholders might consider to be in their best interests.



These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control.  These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and cause us to take corporate actions other than those you desire.



We may not pay any cash dividends on our common stock.



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COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

Declaration and payment of any dividend on our common stock is subject to the discretion of our board of directors.  The timing and amount of dividend payments will be dependent upon factors such as our earnings, financial condition, cash requirements and availability, and restrictions in our credit facilities.  While we have historically paid a cash dividend, the payment of dividends is not guaranteed or assured.  Accordingly, it is likely that investors may have to rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment.




Item 4.
        Submission of Matters to a Vote of Security Holders.

The Annual Meeting of our Stockholders was held on June 4, 2009.  At that meeting, our stockholders elected one director, John W. Roblin, to serve for a term of three years and until his successor is duly elected and qualified.  In addition, the stockholders approved the ratification of the appointment of MSPC, as independent auditors for the fiscal year ending December 31, 2009.

The results of the voting are as follows:

Proposal 1  Election of a Class of Directors




Director
        Votes For
        Votes WithheldJohn W. Roblin
        15,163,417
        48,977

Proposal 2  Ratification of Appointment of MSPC as Independent Auditors




Votes For
        Votes Against
        Votes Withheld15,418,694
        2,380
        30,615




Item 6.
        Exhibits.



ExhibitNo.
        
        Description10(k)
        
        Client Services Addendum, effective as of January 1, 2005, between the Registrant and AIG Technogies, Inc. [incorporated by reference to Exhibit 10(k) to the Registrants Amendment No. 3 to Registration Statement on Form S-1 (Commission File No. 333-156397) filed on August 6, 2009.]31.1*
        
        Chief Executive Officer Certification pursuant to Section 13a-15(e) of the Securities Exchange Act.31.2*
        
        Chief Financial Officer Certification pursuant to Section 13a-15(e) of the Securities Exchange Act.32.1*
        
        Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2*
        
        Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



_________________________

*Filed herewith.



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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:  August 14, 2009By:/s/ John W. Roblin

John W. Roblin, Chairman of the Board of Directors and Chief Executive Officer





Date:  August 14, 2009By:/s/ Ann F. Massey

Ann F. Massey, Chief Financial Officer





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