UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31, 2009ORoTRANSITION 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) Delaware13-2698053(State or other jurisdiction of(IRS Employerincorporation or organization)Identification No.)55 Lane Road, Fairfield, New Jersey07004(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.    Yes [X]     No  [   ] 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 [   ] Accelerated filer [   ] Non-accelerated filer [   ] (Do not check if a smaller reporting company) Smaller reporting company [X] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes [   ]     No  [X] Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date. ClassOutstanding at May 11, 2009Common Stock, $.01 par value per share24,612,786shares   COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

INDEX TO FORM 10-Q FOR THE QUARTER ENDEDMARCH 31, 2009
PART I:
FINANCIAL INFORMATION
Item 1.
Financial Statements
Consolidated Balance Sheets as of March 31, 2009 (Unaudited)
and December 31, 2008 (Audited)
3
Consolidated Statements of Operations for the three
months ended March 31, 2009 and 2008 (Unaudited)
5
Consolidated Statements of Cash Flows for the three
months ended March 31, 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.
Qualitative and Quantitative Disclosures
About Market Risk
18
Item 4.
Controls and Procedures
18

PART II:
OTHER INFORMATION

Item 1A.
Risk Factors
20

Item 6.
Exhibits
20

SIGNATURES
21




.   .   .   .   .   .   .   .   .   .

2

PART I:
FINANCIAL INFORMATION
Item 1.
Financial Statements.
COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

March 31,2009December 31,2008(Unaudited)(Audited)Assets:Current Assets:Cash and Cash Equivalents$
5,188,175$
4,686,470Accounts Receivable (Less Allowance for Doubtful Accounts
of $25,000 in 2009 and 2008)1,652,6442,055,815Prepaid Expenses466,455334,804Deferred Tax Asset840,000840,000Total Current Assets8,147,2747,917,089Property and Equipment  At Cost:Furniture, Fixtures and Equipment623,547623,547Less:  Accumulated Depreciation(320,932)(300,164)Property and Equipment  Net302,615323,383Capitalized Software (Less Accumulated Amortization of
$11,296,261 and $11,049,157, respectively)1,718,0951,848,111Deferred Tax Asset840,000840,000Other Assets110,151110,151Total Assets$
11,118,135$
11,038,734
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.

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CONSOLIDATED BALANCE SHEETS

March 31,2009December 31,2008(Unaudited)(Audited)Liabilities and Stockholders Equity:Current Liabilities:Accounts Payable$
372,170$
227,007Accrued Expenses Payable551,1831,061,065Dividend Payable744,440Deferred Charges22,50322,503Unearned Revenue1,733,3011,800,485Total Current Liabilities3,423,5973,111,060Long-Term Liabilities:Deferred Charges118,218123,844Total Long-Term Liabilities118,218123,844Total Liabilities3,541,8153,234,904Commitments and ContingenciesStockholders Equity:
Common Stock, $.01 Par Value, Authorized 75,000,000 Shares;
24,786,656 and 24,690,227 Shares Issued and 24,584,786
and 24,488,357 Shares Outstanding, Respectively247,866246,902Paid-In Capital29,266,71129,185,646Accumulated Deficit(21,773,363)(21,463,824)Treasury Stock  At Cost  201,870 Shares(164,894)(164,894)Total Stockholders Equity7,576,3207,803,830Total Liabilities and Stockholders Equity$
11,118,135$
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 March 31,20092008Revenues:Licenses$
222,978$
698,500Maintenance1,245,004988,843Professional Services1,095,948855,430Applications Service Provider (ASP) Services490,724453,635Total Revenues3,054,6542,996,408Cost of Revenues:Licenses259,330278,495Maintenance572,400454,585Professional Services526,351381,742ASP Services392,851308,176Total Cost of Revenues1,750,9321,422,998Direct Margin1,303,7221,573,410Operating Expenses:Sales and Marketing214,102234,327General and Administrative462,406555,849Research and Development212,404215,628Total Operating Expenses888,9121,005,804Operating Income414,810567,606Other Income (Expense):Interest Expense(4,532)Interest Expense  Related Party(1,308)Interest Income3,9722Other Income16,11918,190Total Other Income (Expense)20,09112,352Income Before Income Taxes434,901579,958Income TaxesNet Income$
434,901$
579,958Basic Earnings Per Common Share$
0.02$
0.02Diluted Earnings Per Common Share$
0.02$
0.02Weighted Average Number of Common Shares 
Outstanding for Basic Earnings 
Per Common Share24,565,00023,362,000Weighted Average Number of Common Shares 
Outstanding for Diluted Earnings 
Per Common Share24,844,00024,873,000
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)

Three months ended March 31,20092008Cash Flows Provided From Operating Activities:Net Income$
434,901$
579,958Adjustments to Reconcile Net Income toNet Cash Provided From Operating Activities:Depreciation20,76912,353Amortization of Capitalized Software247,104222,730Amortization of Deferred Financing Costs8,618Noncash Stock-Based Compensation74,529270,874Changes in Assets and Liabilities:(Increase) Decrease in:Accounts Receivable403,171904,656Prepaid Expenses(131,651)(113,111)Increase (Decrease) in:Accounts Payable145,163(285,672)Accrued Liabilities(509,883)(427,045)Deferred Charges(5,626)(5,626)Unearned Revenue(67,184)89,417Net Cash Provided From Operating Activities611,2931,257,152Cash Flows Used For Investing Activities:Capital Expenditures(65,201)Capitalized Software Expenditures(117,088)(187,352)Net Cash Used For Investing Activities(117,088)(252,553)Cash Flows Provided From Financing Activities:Proceeds from Exercise of Stock Options and Warrants7,50023,800Net Cash Provided From Financing Activities7,50023,800Change in Cash and Cash Equivalents501,7051,028,399Cash and Cash Equivalents  Beginning of Period4,686,47010,914Cash and Cash Equivalents  End of Period$
5,188,175$
1,039,313Supplemental Disclosures of Cash Flow InformationCash Paid During the Periods for:Interest$
$
4,532Interest  Related Party1,308Income Taxes
Supplemental Disclosure of Non-Cash Operating and Financing Activities

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 payable on or about April 7, 2009 to common stockholders of record as of the close of business on March 27, 2009.

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

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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 March 31, 2009, and the results of their operations for the three month periods ended March 31, 2009 and 2008, and their cash flows for the three month periods ended March 31, 2009 and 2008.  Such adjustments are of a normal and recurring nature.  The results of operations for the three month periods ended March 31, 2009 and 2008 are not necessarily indicative of the results to be expected for a full year.
[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
March 31, 2009Income(Numerator)Shares(Denominator)Per ShareAmountBasic EPS:Income Available to Common
Stockholders$
434,90124,564,548$
0.02Effect of Dilutive Securities:Exercise of Options and Restricted Stock218,806Exercise of Warrants61,111Diluted EPS:Income Available to Common Stockholders
Plus Assumed Conversions$
434,90124,844,465$
0.02
Options to purchase 859,963 shares of common stock at prices ranging from $1.00 to $1.40 per share were outstanding at March 31, 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.

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COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

For the three months ended
March 31, 2008Income(Numerator)Shares(Denominator)Per ShareAmountBasic EPS:Income Available to Common
Stockholders$ 579,95823,361,759$ 0.02Interest Reversal Convertible Debentures 
  (Net of Tax)3,147Effect of Dilutive Securities:Exercise of Options554,054Exercise of Warrants83,141Conversion of Convertible Debentures874,217Diluted EPS:Income Available to Common Stockholders
Plus Assumed Conversions$ 583,10524,873,171$ 0.02
Options to purchase 380,000 shares of common stock at prices ranging from $1.13 to $1.40 per share were outstanding at March 31, 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 123R.  In the three months ended March 31, 2009 and 2008, we recognized $75,000 and $271,000, respectively, 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.
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 and 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 directors who are not employees of the Company eligible participants under the 2005 Plan.  Options may be granted as incentive or nonqualified stock options with a term of not more than ten years.  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 com



mon stock or other securities and cash.  At March 31, 2009, 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.  Options for the purchase of up to 300,000 shares may be granted to our directors who are not employees.  The Plan was amended in June 2000 to increase the aggregate number of shares of common stock available for grant from 300,000 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.

8

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


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 March 31, 2009, 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:
SharesExercise Price 
Per ShareWeighted-Average Remaining Contractual LifeWeighted-Average Exercise PriceBalance, December 31, 20081,497,463$
0.36  1.403.4 years$
0.92Granted300,000$             1.004.92 years1.00Balance, March 31, 20091,797,463$
0.36  1.403.5 years$
0.93
Of the stock options outstanding, an aggregate of 771,615 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.  Because our employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in managements opinion, the existing models do not necessarily provide a reliable single measure of the fair value of our employee stock options.
Warrants

There were an aggregate of 100,000 warrants outstanding at March 31, 2009.  The exercise prices for all the warrants issued and outstanding as of March 31, 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:

Outstanding and Exercisable WarrantsExercise Price 
Per WarrantWeighted-Average Remaining Contractual LifeWeighted-Average Exercise PriceBalance, December 31, 2008121,429$0.352.35 years$0.35Exercised(21,429)0.350.35Balance, March 31, 2009100,000$0.352.10 years$0.35
Time-Based Restricted Stock Units

A summary of our time-based restricted stock units, or RSUs, for the three months ended March 31, 2009 is as follows:

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COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



SharesWeighted-Average Grant Date Fair Value Per ShareBalance, January 1, 2009382,500$
1.24Vested(150,000)1.38Forfeited or Expired(17,500)1.40Balance, March 31, 2009215,000$
1.13
[4]  Income Taxes
At December 31, 2008, the Company had a net operating tax loss carryforward of approximately $21,000,000 expiring through December 31, 2026.  The deferred tax asset related to this amount has been offset by a valuation allowance.  The anticipated use of net operating loss carryforwards to offset current taxable income resulted in a decrease in that allowance of approximately $174,000.
[5]  Recent Accounting Pronouncements
Determination of the Useful Life of Intangible Assets:  In April 2008, the FASB issued FASB Staff Position (FSP) No. FAS 142-3, Determination of the Useful Life of Intangible Assets.  FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible Assets.  FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008 and early adoption is prohibited.  We adopted FSP FAS 142-3 and its adoption did not have a material impact on our consolidated financial statements.
Derivative Instruments and Hedging Activities Disclosures:  In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133.  Statement 161 requires disclosure of how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for and how derivative instruments and related hedged items affect an entitys financial position, financial performance and cash flows.  Statement 161 is effective for fiscal years beginning after November 15, 2008, with early adoption permitted.  We adopted Statement 161 and its adoption did not have a material impact on our consolidated financial statements.
Business Combinations:  In December 2007, the FASB issued Statement No. 141 (revised 2007), Business Combinations.  The standard changes the accounting for business combinations including the measurement of acquirer shares issued in consideration for a business combination, the recognition of contingent consideration, the accounting for pre-acquisition gain and loss contingencies, the recognition of capitalized in-process research and development, the accounting for acquisition related restructuring liabilities, the treatment of acquisition related transaction costs and the recognition of changes in the acquirers income tax valuation allowance.  Statement 141(R) is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited.  We adopted Statement 141(R) and its adoption did not have a material impact on our consolidated financial statements.
Accounting and Reporting of Noncontrolling Interests:  In December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51.  The standard changes the accounting for noncontrolling (minority) interests in consolidated financial statements including the requirements to classify noncontrolling interests as a component of consolidated stockholders equity, and the elimination of minority interest accounting in results of operations with earnings attributable to noncontrolling interests reported as a part of consolidated earnings.  Additionally, Statement 160 revises the accounting for both increases and decreases in a parents controlling ownership interest.  Statement 160 is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited.  We adopted Statement 160 and its adopt



ion did not have a material impact on our consolidated financial statements.

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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 payable on or about April 7, 2009 to common stockholders of record as of the close of business on March 27, 2009.

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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 dev



elopment 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 ASPs, continuing maintenance fees for servicing the product and professional services.  Total revenue for the three months ended March 31, 2009 increased to $3,055,000 from $2,996,000 for the three months ended March 31, 2008, due to an increase in revenues from maintenance, professional services and ASP services.
The following is an overview of the key components of our revenue and other important financial data for the three months ended March 31, 2009:
Software Licenses.Our license revenue in the three months ended March 31, 2009 of $223,000 was from existing customers who chose to renew, add onto or extend their use of our software.  For the three months ended March 31, 2008, we generated $698,000 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 $1,245,000 in the three months ended March 31, 2009 compared to $989,000 in the same period in 2008.  The increase in the first three months of 2009 was mainly due to the annual renewal of existing customers maintenance and maintenance from new customer contracts signed 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 $855,000 in the three months ended March 31, 2008 to $1,096,000 in the same period 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 $491,000 in the first three months of 2009 compared to $454,000 in the same period in 2008, due to expanded and extended contractual relationships with two large customers.
Income before Provision for Income Taxes.Income before provision for income taxes was $435,000 in the three months ended March 31, 2009 compared to $580,000 in the same period of 2008, as a result of an increase in maintenance, professional services and ASP revenue offset by a decrease in capitalized software. We concentrated

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our efforts in the three months ended March 31, 2009 on implementing our new workers compensation product and will resume capitalization efforts in the remaining months of 2009.
Net Income.Net income for the three months ended March 31, 2009 decreasedto $435,000 from $580,000 in the same period of 2008, as a result of an increase in maintenance, professional services and ASP revenue offset by a decrease in capitalized software. We concentrated our efforts in the three months ended March 31, 2009 on implementing our new workers compensation product and will resume capitalization efforts in the remaining months of 2009.
Cash Flow.We generated $611,000 in positive cash flow from operations in the first three months of 2009 and ended the period with $5,188,000 in cash and cash equivalents and $1,653,000 in accounts receivable.
We continue to face competition for 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 Months Ended March 31,20092008Revenues:License7.3%23.3%Maintenance40.833.0Professional Services35.928.5Applications Service Provider (ASP) Services16.015.2Total Revenues100.0100.0Cost of Revenues:License8.59.3Maintenance18.715.2Professional Services17.212.7ASP Services12.910.3Total Cost of Revenues57.347.5Direct Margin42.752.5Operating Expenses:Sales and Marketing7.07.8General and Administrative15.118.6Research and Development7.07.2Total Operating Expenses29.133.6Operating Income13.618.9Other Expense (Income):Interest Expense0.2Interest Income(0.1)Other Income(0.5)(0.6)Total Other Expense (Income)(0.6)(0.4)Income Before Income Taxes14.219.3Income TaxesNet Income14.2%19.3%
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Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008
Total revenues for the three months ended March 31, 2009 were $3,055,000 as compared to $2,996,000 for the same period in 2008.  License fees were $223,000 for the three months ended March 31, 2009 as compared to $698,000 in the same period in 2008, as a result of a new customer sale in 2008 and no new customer sales in 2009.  For the three months ended March 31, 2009, maintenance revenues were $1,245,000 as compared to $989,000 in the same period of the prior year primarily due to the annual renewals from our existing customers and the new customer contracts signed in 2008.  For the three months ended March 31, 2009, ASP revenues were $491,000 as compared to $454,000 in the same period for the prior year, due to expanded and extended contractual relationships with two customers. Professional services revenue contributed $1,096,000 in the three months ended March 31, 2009 as compared to $855,000 in the first quart



er of 2008 as a result of increased demand for new software capabilities and customizations from our current customer base.
Cost of sales increased to $1,751,000 for the three months ended March 31, 2009 as compared to $1,423,000 for the same period in 2008 due to a reduction in capitalized software in the three months ended March 31, 2009 and concentration of our efforts on implementation of our new workers compensation product.  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 continually increasing demand.  Non-cash capitalized software amortization was $247,000 for the three months ended March 31, 2009 as compared to $223,000 for the same period in 2008.  The Company capitalized $117,000 of software development costs in the first three months of 2009 as compared to $187,000 in the same period in 2008.
Research and development expenses decreased slightly to $212,000 for the three months ended March 31, 2009 as compared to $216,000 for the same period in 2008, primarily as a result of our efforts to develop new capability to better service our customers and concentration of our efforts in the three months ended March 31, 2009 on implementing a new workers compensation product.  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 $214,000 for the three months ended March 31, 2009 as compared to $234,000 in the same period of 2008.  This decrease in 2009 was primarily due to a decrease in our marketing and sales personnel related costs and commissions.
General and administrative expenses were $462,000 in the three months ended March 31, 2009 as compared to $556,000 in the same period in 2008.  This decrease in 2009 was mainly due to decreased stock-based compensation related to options and restricted stock issued to one of our executives and stock-based compensation to our non-employee directors in 2008.
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 plus 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 March 31, 2009, we had cash and cash equivalents of $5,188,000 compared to cash and cash equivalents of $1,039,000 at March 31, 2008.  The increase in cash and cash equivalents is primarily attributable to the increase

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in our revenues from maintenance, professional services and ASP services in the three months ended March 31, 2009 and new customer contracts signed in 2007 and 2008.
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 March 31, 2009, we had working capital of approximately $4,724,000 compared to working capital of approximately $1,405,000 at March 31, 2008.  This increase in our working capital resulted primarily from an increase in our revenues from maintenance, professional services and ASP services from existing customers and new customer contracts in 2007 and 2008 that generated significant cash in the later part of 2008. For the three months ended March 31, 2009, net cash provided from operating activities totaled approximately $611,000 compared to approximately $1,257,000 for the three months ended March 31, 2008.  In 2009, cash flow from operating activities represented the Companys principal source of cash and results primarily from net income, plus 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 three months ended March 31, 2009, net cash used for investing activities was approximately $117,000 as compared to approximately $253,000 for the three months ended March 31, 2008.  The Company expects capital expenditures and capital software expenditures to continue to be funded by cash generated from operations.  For the three months ended March 31, 2009, net cash provided from financing activities was approximately $7,500 compared to approximately $24,000 for the three months ended March 31, 2008.  The cash provided from financing activities in 2009 consisted of proceeds from the exercise of 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.

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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 payable on or about 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, 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 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.
·
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 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.
During the three months ended March 31, 2009 and 2008, there were no changes in the Deferred Tax Asset Valuation Allowance.

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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 ongoing 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
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.

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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 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 not applicable 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 our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act are 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 tha



t information required to be disclosed by us in such reports is accumulated and communicated to our

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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 March 31, 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.
The risk factors included in the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2008, have not materially changed.
Item 6.
Exhibits.
ExhibitNo.Description31.1Chief Executive Officer Certification pursuant to Section 13a-15(e) of the Securities Exchange Act.31.2Chief Financial Officer Certification pursuant to Section 13a-15(e) of the Securities Exchange Act.32.1Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2Certification 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.
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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:  May 13, 2009
By:
/s/ John W. Roblin
John W. Roblin, Chairman of the Board of Directors and Chief Executive Officer



Date:  May 13, 2009
By: /s/ Ann F. Massey
Ann F. Massey, Chief Financial Officer

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