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 September 30, 2010ORoTRANSITION 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 November 8, 2010Common Stock, $.01 par value per share24,917,300shares


COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY  INDEX TO FORM 10-Q FOR THE QUARTER ENDEDSEPTEMBER 30, 2010 PART I: FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of September 30, 2010 (Unaudited) and December 31, 2009 3 Consolidated Statements of Operations for the three and nine months ended September 30, 2010 and 2009 (Unaudited) 5 Consolidated Statements of Cash Flows for the nine months ended September 30, 2010 and 2009 (Unaudited) 6 Notes to Consolidated Financial Statements (Unaudited) 8 Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations 14 Item 3. Quantitative and Qualitative Disclosures
About Market Risk 21 Item 4. Controls and Procedures 21  PART II: OTHER INFORMATION  Item 1A. Risk Factors 22  Item 6. Exhibits 22  SIGNATURES 23                                       2   PART I:
FINANCIAL INFORMATION
Item 1.
Financial Statements.
COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS




September 30, 2010
     
     December 31, 2009(Unaudited)Assets:Current
Assets:Cash and Cash
Equivalents
     
     
     
     $
     5,770,595
     
     
     $
     4,324,446Accounts
Receivable (Less Allowance for Doubtful Accounts of $25,000)
     
     
     
     
     2,127,202
     
     
     
     5,086,482Prepaid
Expenses
     
     
     
     
     744,754
     
     
     
     415,491Deferred Tax
Asset
     
     
     
     
     806,750
     
     
     
     806,750Total Current
Assets
     
     
     
     
     9,449,301
     
     
     
     10,633,169Property and
Equipment  At Cost:Furniture,
Fixtures and Equipment
     
     
     
     
     956,269
     
     
     
     624,266Less:
Accumulated Depreciation
     
     
     
     
     483,916
     
     
     
     371,329Property and
Equipment  Net
     
     
     
     
     472,353
     
     
     
     252,937Goodwill
     
     
     
     
     1,039,115
     
     
     
     Capitalized
Software (Less Accumulated Amortization of $12,464,906 and $11,966,365, respectively)
     
     
     
     
     4,814,187
     
     
     
     2,341,960Customer
Lists/Relationship (Less Accumulated Amortization of $34,426 and $0, respectively)
     
     
     
     
     185,574
     
     
     
     Non-Compete
Agreements (Less Accumulated Amortization of $30,044 and $0, respectively)
     
     
     
     
     129,955
     
     
     
     Deferred Tax
Asset
     
     
     
     
     1,660,750
     
     
     
     1,660,750Other
Assets
     
     
     
     
     217,588
     
     
     
     110,151Total
Assets
     
     
     
     $
     17,968,823
     
     
     $
     14,998,967
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.

3

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS







September 30, 2010
     
     December 31, 2009(Unaudited)Liabilities and Stockholders Equity:Current
Liabilities:Accounts
Payable
     
     
     
     $
     254,083
     
     
     $
     208,814Current
Portion of Long Term Debt
     
     
     
     
     400,000
     
     
     
     Accrued
Expenses Payable
     
     
     
     
     931,991
     
     
     
     1,275,058Taxes
Payable
     
     
     
     
     197,444
     
     
     
     139,035Deferred
Charges
     
     
     
     
     50,042
     
     
     
     27,510Unearned
Revenue
     
     
     
     
     2,162,855
     
     
     
     1,750,303Total Current
Liabilities
     
     
     
     
     3,996,415
     
     
     
     3,400,720Long Term
Liabilities:Long Term
Debt
     
     
     
     
     100,000
     
     
     
     Deferred
Charges
     
     
     
     
     56,924
     
     
     
     96,333Total
Liabilities
     
     
     
     
     4,153,339
     
     
     
     3,497,053Commitments
and Contingencies
     
     
     
     
     
     
     
     
     Stockholders Equity: Common Stock, $.01 Par Value, Authorized 75,000,000 Shares; 25,119,170 and 24,885,656 Shares Issued and
24,917,300 and 24,683,786 Shares Outstanding, Respectively
     
     
     
     
     251,192
     
     
     
     248,856Paid-In
Capital
     
     
     
     
     30,280,048
     
     
     
     29,703,254Accumulated
Deficit
     
     
     
     
     (16,550,862
     )
     
     
     (18,285,302
     )Treasury
Stock  At Cost  201,870 Shares
     
     
     
     
     (164,894
     )
     
     
     (164,894
     )Total
Stockholders Equity
     
     
     
     
     13,815,484
     
     
     
     11,501,914Total
Liabilities and Stockholders Equity
     
     
     
     $
     17,968,823
     
     
     $
     14,998,967
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.


4

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)




Three months endedSeptember 30,
     
     Nine months endedSeptember 30,2010
     
     2009
     
     2010
     
     2009Revenues:Licenses
     
     
     
     $
     277,856
     
     
     $
     177,887
     
     
     $
     1,725,177
     
     
     $
     484,280Maintenance
     
     
     
     
     1,405,696
     
     
     
     1,242,784
     
     
     
     4,123,897
     
     
     
     3,740,263Professional
Services
     
     
     
     
     2,348,740
     
     
     
     599,341
     
     
     
     5,359,782
     
     
     
     2,585,908Applications
Service Provider (ASP) Services
     
     
     
     
     636,981
     
     
     
     530,616
     
     
     
     1,908,885
     
     
     
     1,534,304Total
Revenues
     
     
     
     
     4,669,273
     
     
     
     2,550,628
     
     
     
     13,117,741
     
     
     
     8,344,755Cost of
Revenues:Licenses
     
     
     
     
     339,463
     
     
     
     229,192
     
     
     
     998,503
     
     
     
     721,512Maintenance
     
     
     
     
     755,658
     
     
     
     625,058
     
     
     
     2,063,805
     
     
     
     1,821,613Professional
Services
     
     
     
     
     1,562,679
     
     
     
     307,960
     
     
     
     3,414,518
     
     
     
     1,246,482ASP
Services
     
     
     
     
     420,001
     
     
     
     391,968
     
     
     
     1,260,520
     
     
     
     1,164,601Total Cost
of Revenues
     
     
     
     
     3,077,801
     
     
     
     1,554,178
     
     
     
     7,737,346
     
     
     
     4,954,208Direct
Margin
     
     
     
     
     1,591,472
     
     
     
     996,450
     
     
     
     5,380,395
     
     
     
     3,390,547Operating
Expenses:Sales and
Marketing
     
     
     
     
     361,361
     
     
     
     252,018
     
     
     
     1,119,752
     
     
     
     688,541General and
Administrative
     
     
     
     
     502,897
     
     
     
     449,909
     
     
     
     1,451,106
     
     
     
     1,371,435Acquisition
Expenses
     
     
     
     
     
     
     
     
     
     
     
     
     285,240
     
     
     
     Research and
Development
     
     
     
     
     205,237
     
     
     
     231,449
     
     
     
     537,992
     
     
     
     669,863Total
Operating Expenses
     
     
     
     
     1,069,495
     
     
     
     933,376
     
     
     
     3,394,090
     
     
     
     2,729,839Operating
Income
     
     
     
     
     521,977
     
     
     
     63,074
     
     
     
     1,986,305
     
     
     
     660,708Other
(Expense) Income:Interest
Expense
     
     
     
     
     (7,124
     )
     
     
     
     
     
     
     (13,699
     )
     
     
     Interest
Income
     
     
     
     
     7,779
     
     
     
     216
     
     
     
     7,943
     
     
     
     6,084Other
Income
     
     
     
     
     11,364
     
     
     
     9,018
     
     
     
     32,967
     
     
     
     42,318Total
Other Income
     
     
     
     
     12,019
     
     
     
     9,234
     
     
     
     27,211
     
     
     
     48,402Income
Before Income Taxes
     
     
     
     
     533,996
     
     
     
     72,308
     
     
     
     2,013,516
     
     
     
     709,110Income
Taxes
     
     
     
     
     85,586
     
     
     
     51,461
     
     
     
     279,076
     
     
     
     59,486Net
Income
     
     
     
     $
     448,410
     
     
     $
     20,847
     
     
     $
     1,734,440
     
     
     $
     649,624Basic
Earnings Per Common Share
     
     
     
     $
     0.02
     
     
     $
     0.00
     
     
     $
     0.07
     
     
     $
     0.03Diluted
Earnings Per Common Share
     
     
     
     $
     0.02
     
     
     $
     0.00
     
     
     $
     0.07
     
     
     $
     0.03Weighted
Average Number of Common Shares Outstanding for Basic Earnings Per Common Share
     
     
     
     
     24,831,000
     
     
     
     24,588,000
     
     
     
     24,789,000
     
     
     
     24,579,000Weighted
Average Number of Common Shares Outstanding for Diluted Earnings Per Common Share
     
     
     
     
     25,545,000
     
     
     
     25,163,000
     
     
     
     25,547,000
     
     
     
     25,005,000
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.
 5

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine months ended September 30,2010
     
     2009Cash Flows
Provided From Operating Activities:Net
Income
     
     
     
     $
     1,734,440
     
     
     $
     649,624Adjustments
to Reconcile Net Income toNet Cash
Provided From Operating Activities:Depreciation
     
     
     
     
     115,645
     
     
     
     55,495Amortization
of Capitalized Software
     
     
     
     
     498,541
     
     
     
     713,567Amortization
of Customer Lists/Relationships
     
     
     
     
     34,426
     
     
     
     Amortization
of Non-Compete Agreements
     
     
     
     
     30,044
     
     
     
     Non-Cash
Stock-Based Compensation
     
     
     
     
     458,629
     
     
     
     276,667Changes in
Assets and Liabilities:(Increase)
Decrease in:Accounts
Receivable
     
     
     
     
     2,959,280
     
     
     
     70,688Prepaid
Expenses
     
     
     
     
     (299,010
     )
     
     
     (331,316
     )Other
Assets
     
     
     
     
     (107,437
     )
     
     
     (769
     )Increase
(Decrease) in:Accounts
Payable
     
     
     
     
     45,269
     
     
     
     (72,247
     )Accrued
Liabilities
     
     
     
     
     (343,066
     )
     
     
     (633,665
     )Taxes
Payable
     
     
     
     
     58,409
     
     
     
     Deferred
Charges
     
     
     
     
     (16,877
     )
     
     
     (16,878
     )Unearned
Revenue
     
     
     
     
     412,551
     
     
     
     (11,267
     )Net Cash
Provided From Operating Activities
     
     
     
     
     5,580,844
     
     
     
     699,899Cash Flows
Used For Investing Activities:Capital
Expenditures
     
     
     
     
     (122,404
     )
     
     
     Capitalized
Software Expenditures
     
     
     
     
     (2,150,768
     )
     
     
     (928,938
     )Capitalized
Acquisition Expenditures
     
     
     
     
     (1,792,023
     )
     
     
     Net Cash Used
For Investing Activities
     
     
     
     
     (4,065,195
     )
     
     
     (928,938
     )Cash Flows
Used For Financing Activities:Payment of
Long Term Debt
     
     
     
     
     (100,000
     )
     
     
     Dividends
Paid to Common Stockholders
     
     
     
     
     
     
     
     
     (738,383
     )Proceeds from
Exercise of Stock Options
     
     
     
     
     30,500
     
     
     
     20,000Net Cash Used
For Financing Activities
     
     
     
     
     (69,500
     )
     
     
     (718,383
     )Change in
Cash and Cash Equivalents
     
     
     
     
     1,446,149
     
     
     
     (947,422
     )Cash and
Cash Equivalents  Beginning of Period
     
     
     
     
     4,324,446
     
     
     
     4,686,470Cash and
Cash Equivalents  End of Period
     
     
     
     $
     5,770,595
     
     
     $
     3,739,048Supplemental Disclosures of Cash Flow InformationCash Paid
During the Periods for:Interest
     
     
     
     $
     13,699
     
     
     $
     Income
Taxes
     
     
     
     $
     218,734
     
     
     $
     59,486
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 paid on
April 7, 2009 to common stockholders of record as of the close of business on March 27, 2009.

6

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Supplemental schedule of noncash investing activities:
The Company purchased certain assets of Moore Stephens Business Solutions, LLC (MSBS).
In connection with the acquisition, debt was issued as follows:

Fair value of
assets acquired
     
     
     
     $
     2,482,023Cash paid for
the assets acquired
     
     
     
     
     (1,792,023
     )Fair value of
common stock issued
     
     
     
     
     (90,000
     )Debt
issued
     
     
     
     $
     600,000
The Company issued an aggregate 76,014 shares of its common stock in connection with the acquisition.
See Note 7 of Notes to Consolidated Financial Statements for further details on the acquisition.


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


7

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, 2009. 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 wholly-owned subsidiary, Cover-All Systems, Inc. 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 September 30, 2010, and the results of their operations for the
three and nine month periods ended September 30, 2010 and 2009, and their cash flows for the nine month periods ended
September 30, 2010 and 2009. Such adjustments are of a normal and recurring nature. The results of
operations for the three and nine month periods ended September 30, 2010 and 2009 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 with the
effect of dilutive securities determined using the treasury stock method:



For the three months ended September 30, 2010Income (Numerator)
     
     Shares (Denominator)
     
     Per Share AmountBasic
EPS:Income
Available to Common Stockholders
     
     
     
     $
     448,410
     
     
     
     24,830,833
     
     
     $
     0.02Effect of
Dilutive Securities:Exercise of
Options and Restricted Stock
     
     
     
     
     
     
     
     
     640,429
     
     
     
     Exercise of
Warrants
     
     
     
     
     
     
     
     
     73,881
     
     
     
     Diluted
EPS:Income
Available to Common Stockholders Plus Assumed Exercises
     
     
     
     $
     448,410
     
     
     
     25,545,143
     
     
     $
     0.02
An aggregate of 1,019,463 restricted shares of common stock and
shares of common stock underlying options at prices ranging from $1.38 to $1.55 per share were outstanding at September
30, 2010, but were not included in the computation of diluted EPS because the exercise prices of the options were
greater than the average market price of the common shares.

8

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




For the nine months ended September 30, 2010Income (Numerator)
     
     Shares (Denominator)
     
     Per Share AmountBasic
EPS:Income
Available to Common Stockholders
     
     
     
     $
     1,734,440
     
     
     
     24,788,766
     
     
     $
     0.07Effect of
Dilutive Securities:Exercise of
Options and Restricted Stock
     
     
     
     
     
     
     
     
     683,561
     
     
     
     Exercise of
Warrants
     
     
     
     
     
     
     
     
     74,820
     
     
     
     Diluted
EPS:Income
Available to Common Stockholders Plus Assumed Exercises
     
     
     
     $
     1,734,440
     
     
     
     25,547,147
     
     
     $
     0.07
An aggregate of 947,000 restricted shares of common stock and
shares of common stock underlying options at prices ranging from $1.40 to $1.55 per share were outstanding at September
30, 2010, but were not included in the computation of diluted EPS because the exercise prices of the options were
greater than the average market price of the common shares.



For the three months ended September 30, 2009Income (Numerator)
     
     Shares (Denominator)
     
     Per Share AmountBasic
EPS:Income
Available to Common Stockholders
     
     
     
     $
     20,847
     
     
     
     24,587,721
     
     
     $
     0.00Effect of
Dilutive Securities:Exercise of
Options and Restricted Stock
     
     
     
     
     
     
     
     
     504,530
     
     
     
     Exercise of
Warrants
     
     
     
     
     
     
     
     
     70,339
     
     
     
     Diluted
EPS:Income
Available to Common Stockholders Plus Assumed Exercises
     
     
     
     $
     20,847
     
     
     
     25,162,590
     
     
     $
     0.00
An aggregate of 554,963 restricted shares of common stock and
shares of common stock underlying options at prices ranging from $1.38 to $1.40 per share were outstanding at September
30, 2009, but were not included in the computation of diluted EPS because the exercise prices of the options were
greater than the average market price of the common shares.







For the nine months ended September 30, 2009Income (Numerator)
     
     Shares (Denominator)
     
     Per Share AmountBasic
EPS:Income
Available to Common Stockholders
     
     
     
     $
     649,624
     
     
     
     24,579,103
     
     
     $
     0.03Effect 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 Exercises
     
     
     
     $
     649,624
     
     
     
     25,004,713
     
     
     $
     0.03

9

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

An aggregate of 609,963 restricted shares of common stock and
shares of common stock underlying options at prices ranging from $1.05 to $1.40 per share were outstanding at September
30, 2009, but were not included in the computation of diluted EPS because the exercise prices of the options were
greater than the average market price of the common shares.

[3]  Stock Option and Stock Purchase Plans

Stock Options
In the three and nine months ended September 30, 2010, we recognized $180,000 and $459,000, 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.  Forfeitures of share-based awards are 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 common stock or other securities
and cash. At September 30, 2010, an aggregate of 2,258,036 shares were available for grant under the 2005
Plan.

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


Shares
     
     Exercise Price Per Share
     
     Weighted-AverageRemainingContractual Life
     
     Weighted-AverageExercise PriceBalance,
January 1, 2010
     
     
     
     
     1,802,463
     
     
     $
     0.36  1.40
     
     
     
     2.8 years
     
     
     $
     0.95Granted
     
     
     
     
     567,500
     
     
     
     1.12  1.55
     
     
     
     4.6 years
     
     
     
     1.40Exercised
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     Canceled
     
     
     
     
     (75,000
     )
     
     
     1.25  1.25
     
     
     
     
     
     
     
     Expired
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     Balance,
September 30, 2010
     
     
     
     
     2,294,963
     
     
     $
     0.36  1.55
     
     
     
     3.4 years
     
     
     $
     1.05
Of the stock options outstanding, an aggregate of 1,320,963 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.

10

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

Warrants

There were an aggregate of 100,000 warrants outstanding at
September 30, 2010.  The exercise prices for all the warrants issued and outstanding as of September 30, 2010 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 andExercisableWarrants
     
     Exercise Price Per Warrant
     
     Weighted-AverageRemainingContractual Life
     
     Weighted-AverageExercise PriceBalance,
January 1, 2010
     
     
     
     
     100,000
     
     
     $
     0.35
     
     
     
     1.11 years
     
     
     $
     0.35Exercised
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     Balance,
September 30, 2010
     
     
     
     
     100,000
     
     
     $
     0.35
     
     
     
     0.61 years
     
     
     $
     0.35
Time-Based Restricted Stock Units

A summary of our time-based restricted stock units, or RSUs, for the three months ended September 30, 2010 is as follows:


Shares
     
     Weighted-Average GrantDate Fair Value Per ShareBalance,
January 1, 2010
     
     
     
     
     215,000
     
     
     $
     1.13Granted
     
     
     
     
     483,668
     
     
     
     1.35Forfeited or
Expired
     
     
     
     
     (41,667
     )
     
     
     1.18Exercised/Vested
     
     
     
     
     (107,500
     )
     
     
     1.40Balance,
September 30, 2010
     
     
     
     
     549,501
     
     
     $
     1.26
[4]  Income Taxes
At December 31, 2009, the Company had a net operating tax loss
carryforward of approximately $16,000,000 expiring through December 31, 2026.  The deferred tax asset related to
this amount has been partially offset by a valuation allowance.  The anticipated use of net operating loss
carryforwards to offset future taxable income resulted in a decrease in that allowance of approximately $685,000 for the
nine months ended September 30, 2010.

[5]  Recently Issued Accounting Standards

In July 2010, the
Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)
No. 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit
Losses. ASU No. 2010-20 requires a greater level of disaggregation in disclosures relating to the credit
quality of the Companys financing receivables and allowance for loan losses. Furthermore, ASU 2010-20 also
requires enhanced disclosures around nonaccrual and past due financing receivables, impaired loans and loan
modifications. The standard is effective for the first interim or annual reporting periods ending on or after
December 15, 2010.

In January 2010, the
FASB issued updated accounting guidance related to fair value measurements and disclosures which amends and clarifies
existing disclosure requirements. This updated accounting guidance requires new disclosures related to amounts
transferred into and out of Level I and 2 fair value measurements as well as separate disclosures of purchases, sales,
issuances, and settlements related to amounts reported as Level 3 fair value measurements. This guidance also clarifies
existing fair value disclosure requirements related to the level of disaggregation and the valuation techniques and
inputs used to measure fair value for both recurring and nonrecurring fair value measurements. This guidance is
effective for interim and annual periods beginningafter

11

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

December 15, 2009, except for the
separate disclosures of purchases, sales, issuances, and settlements related to amounts reported as Level 3 fair value
measurements, which is effective for fiscal years beginning after December 15, 2010. The Company does not believe the
adoption of this guidance will have a material impact on its consolidated financial statements.


In February 2010, the FASB issued an additional accounting pronouncement that amended certain requirements for subsequent events (FASB Accounting Standards Codification (ASC) Topic 855), which requires an SEC filer or a conduit bond obligor to evaluate subsequent events through the date the financial statements are available to be issued and removes the previous requirement to disclose the date through which subsequent events have been evaluated. The amended amendments were effective on issuance of the final pronouncement. The adoption of this pronouncement had no effect on our consolidated financial statements.

In September 2009,
the FASB issued ASU No. 2009-13, Multiple-Deliverable Revenue Arrangements, and ASU No. 2009-14, Certain
Revenue Arrangements That Include Software Elements - a consensus of the FASB Emerging Issues Task Force, to amend the
existing revenue recognition guidance. ASU No. 2009-13 amends ASC 605, Revenue Recognition, 25,
"Multiple-Element Arrangements" (formerly EITF Issue 00-21, "Revenue Arrangements with Multiple
Deliverables"), as follows: modifies criteria used to separate elements in a multiple-element arrangement,
introduces the concept of "best estimate of selling price" for determining the selling price of a deliverable,
establishes a hierarchy of evidence for determining the selling price of a deliverable, requires use of the relative
selling price method and prohibits use of the residual method to allocate arrangement consideration among units of
accounting, and expands the disclosure requirements for all multiple-element arrangements within the scope of ASC
605-25.



ASU No. 2009-14 amends
the scope of ASC 985, Software, 605, "Revenue Recognition" (formerly AICPA Statement of Position 97-2,
Software Revenue Recognition), to exclude certain tangible products and related deliverables that contain embedded
software from the scope of this guidance. Instead, the excluded products and related deliverables must be evaluated for
separation, measurement, and allocation under the guidance of ASC 605-25, as amended by ASU No. 2009-13. The amended
guidance is effective prospectively for revenue arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010. Early adoption is permitted. An entity may elect retrospective application to all
revenue arrangements for all periods presented using the guidance in ASC 250, Accounting Changes and Error Corrections.
Entities must adopt the amendments resulting from both of these ASUs in the same period using the same transition
method, where applicable. Management is reviewing ASU No. 2009-13 and ASU No. 2009-14 for applicability to the Company's
revenue recognition policies. The Company will adopt this standard for its fiscal year beginning January 1, 2011.


Other - Current Developments regarding Sarbanes-Oxley Section 404(b)


On July 21, 2010 President Obama signed into law the Dodd-Frank
Wall Street Reform and Consumer Protection Act (the Act). The Act, among other things, gives non-accelerated filers,
issuers with market capitalizations of less than $75 million, a permanent exemption from complying with Section 404(b)
of the Sarbanes-Oxley (SOX) Act of 2002.



[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.


[7]  Acquisition

On April 12, 2010, the Company
announced the acquisition of MSBS, a provider of business intelligence and advanced analytics solutions to the insurance
industry based in New York, New York.  The Company acquired substantially all of MSBS assets (excluding
working capital) for an aggregate purchase price of $2,450,000, with no assumed indebtedness, payable as follows:
 (i) a cash payment in the amount of $1,760,000; (ii) the execution and


12

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

delivery by us to MSBS of a non-negotiable, subordinated
promissory note in the aggregate principal amount of $600,000; and (iii) the delivery to MSBS of 76,014 shares of our
common stock, which number of shares had a fair market value of $90,000 calculated as provided for in the purchase
agreement.

MSBS serves the insurance industry exclusively, providing business
intelligence and advanced analytics solutions. Leveraging its Insurance Analytic Framework (IAF), which delivers
accurate, available and actionable key metric and dimensions specific to the insurance industry, MSBS has established a
dominant presence in an otherwise underserved market. With the integration of these capabilities into the
Cover-All portfolio, the combined company will be well positioned to deliver additional value to the existing customers
of both companies, as well as benefit from an unrivaled and unique competitive advantage in its combined offerings.


On April 12, 2010 the MSBS acquisition was valued at $2,482,023.  As a result of that acquisition, the Company acquired the following assets:


Prepaid
Expenses
     
     
     
     $
     30,253Computer
Equipment
     
     
     
     
     106,400Furniture and
Fixtures
     
     
     
     
     89,480Leasehold
Improvements
     
     
     
     
     16,775Partially
Complete Software
     
     
     
     
     820,000Non-Compete
Agreements
     
     
     
     
     160,000Customer
Lists/Relationships
     
     
     
     
     220,000Goodwill1
     
     
     
     
     1,039,115Total
     
     
     
     $
     2,482,023
The above amounts represent the allocation of purchase price based on the asset valuation which occurred during April 2010.
  _________________


1 Goodwill resulted from the acquisition price exceeding the fair market value of assets acquired.

13

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, in our Form 10-K for the fiscal year ended December 31, 2009 filed with the Securities and Exchange
Commission (SEC) on March 19, 2010 and in our other periodic reports filed with the SEC, 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 previously sold products and professional services. Total revenue for the three and nine months ended
September 30, 2010 increased to $4,669,000 and $13,118,000, respectively, from $2,551,000 and $8,345,000, respectively,
for the three and nine months ended September 30, 2009, mainly due to an increase in all revenue categories for the
three and nine months ended September 30, 2010 and our recent acquisition of MSBS.

The following is an overview of the
key components of our revenue and other important financial data for the three and nine months ended September 30,
2010:

Software Licenses.Our license revenue in the three and nine months ended September 30, 2010 of $278,000 and $1,725,000,
respectively, was from existing customers who chose to renew licenses, add permission for additional users on existing
licenses or to extend their use of our software. For the three and nine months ended September 30, 2009, we
generated $178,000 and $484,000, respectively, in license revenue. Our new software license revenue is affected by
the strength of the general economy, business conditions in the insurance industry 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 $1,406,000 and $4,124,000, respectively, in the three and nine months ended September 30, 2010 compared to
$1,243,000 and $3,740,000, respectively, in the same periods in 2009. Maintenance revenue is influenced primarily
by the following factors: the renewal rate from our existing customer base, the incremental increase in maintenance
associated with new license sales and annual price increases.

Professional Services. Professional services revenue was $2,349,000 and $5,360,000, respectively, in the three and nine months ended
September 30, 2010 compared to $599,000 and $2,586,000, respectively, in the same periods in 2009, as a result of
increased demand for new software capabilities and customization from our current customer base during the nine months
ended September 30, 2010 and our recent acquisition of MSBS.


14

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY


ASP Services.ASP
services revenue was $637,000 and $1,909,000, respectively, in the first three and nine months ended September 30, 2010
compared to $531,000 and $1,534,000, respectively, in the same periods in 2009, due to an expanded and extended
contractual relationship with two large customers.

Income before Provision for Income
Taxes.Income before provision for income taxes was $534,000 and $2,014,000, respectively, in the three and
nine months ended September 30, 2010 compared to $72,000 and $709,000, respectively, in the same periods of 2009
primarily due to an increase in all revenue categories and our ongoing effort to maintain our expenses in line with our
continuing revenues for the nine months ended September 30, 2010.

Net Income.Net income
for the three and nine months ended September 30, 2010 increased to $448,000 and $1,734,000, respectively, from $21,000
and $650,000, respectively, in the same periods of 2009 as a result of an increase in all revenue categories and our
continuing and ongoing effort to maintain our expenses in line with our continuing revenues for the nine months ended
September 30, 2010.

Cash Flow.We generated
$5,581,000 in positive cash flow from operations in the first nine months of 2010 and ended the period with $5,771,000
in cash and cash equivalents and $2,127,000 in accounts receivable.

We continue to face competition for
growth in 2010 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 September 30,
     
     Nine Months Ended September 30,2010
     
     2009
     
     2010
     
     2009Revenues:License
     
     
     
     
     6.0
     %
     
     
     7.0
     %
     
     
     13.2
     %
     
     
     5.8
     %Maintenance
     
     
     
     
     30.1
     
     
     
     48.7
     
     
     
     31.4
     
     
     
     44.8Professional
Services
     
     
     
     
     50.3
     
     
     
     23.5
     
     
     
     40.9
     
     
     
     31.0ASP
Services
     
     
     
     
     13.6
     
     
     
     20.8
     
     
     
     14.5
     
     
     
     18.4Total
Revenues
     
     
     
     
     100.0
     
     
     
     100.0
     
     
     
     100.0
     
     
     
     100.0Cost of
Revenues:License
     
     
     
     
     7.3
     
     
     
     8.9
     
     
     
     7.6
     
     
     
     8.6Maintenance
     
     
     
     
     16.2
     
     
     
     24.5
     
     
     
     15.7
     
     
     
     21.8Professional
Services
     
     
     
     
     33.4
     
     
     
     12.1
     
     
     
     26.0
     
     
     
     14.9ASP
Services
     
     
     
     
     9.0
     
     
     
     15.4
     
     
     
     9.7
     
     
     
     14.1Total Cost
of Revenues
     
     
     
     
     65.9
     
     
     
     60.9
     
     
     
     59.0
     
     
     
     59.4Direct
Margin
     
     
     
     
     34.1
     
     
     
     39.1
     
     
     
     41.0
     
     
     
     40.6
15

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY






Operating
Expenses:Sales and
Marketing
     
     
     
     
     7.7
     
     
     
     9.9
     
     
     
     8.5
     
     
     
     8.3General and
Administrative
     
     
     
     
     10.8
     
     
     
     17.6
     
     
     
     11.1
     
     
     
     16.5Acquisition
Expenses
     
     
     
     
     
     
     
     
     
     
     
     
     2.2
     
     
     
     Research and
Development
     
     
     
     
     4.4
     
     
     
     9.2
     
     
     
     4.1
     
     
     
     7.9Total
Operating Expenses
     
     
     
     
     22.9
     
     
     
     36.7
     
     
     
     25.9
     
     
     
     32.7Operating
Income
     
     
     
     
     11.2
     
     
     
     2.4
     
     
     
     15.1
     
     
     
     7.9Other
(Expense) Income:Interest
(Expense) Income
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     0.1Other
Income
     
     
     
     
     0.2
     
     
     
     0.4
     
     
     
     0.2
     
     
     
     0.5Total
Other (Expense) Income
     
     
     
     
     0.2
     
     
     
     0.4
     
     
     
     0.2
     
     
     
     0.6Income
Before Income Taxes
     
     
     
     
     11.4
     
     
     
     2.8
     
     
     
     15.3
     
     
     
     8.5Income
Taxes
     
     
     
     
     1.8
     
     
     
     2.0
     
     
     
     2.1
     
     
     
     0.7Net
Income
     
     
     
     
     9.6
     %
     
     
     0.8
     %
     
     
     13.2
     %
     
     
     7.8
     %
Three and Nine Months Ended September 30, 2010 Compared to Three and Nine Months Ended
September 30, 2009


Total revenues for the three months
ended September 30, 2010 were $4,669,000 compared to $2,551,000 for the same period in 2009.  License fees were
$278,000 for the three months ended September 30, 2010 compared to $178,000 in the same period in 2009 as a result of
new sales to existing customers in 2010.  For the three months ended September 30, 2010, maintenance revenues were
$1,406,000 compared to $1,243,000 in the same period of the prior year primarily due to annual renewals from existing
customers and the three new customer contracts signed in 2009.  For the three months ended September 30, 2010, ASP
revenues were $637,000 compared to $531,000 in the same period for the prior year, due to an expanded and extended
contractual relationship with two customers.  Professional services revenue contributed $2,349,000 in the three
months ended September 30, 2010 compared to $599,000 in the third quarter of 2009, as a result of increased demand for
new software capabilities and customizations from our current customer base and our recent acquisition of MSBS.

For the nine months ended September 30, 2010, total revenues were $13,118,000 compared to $8,345,000 in the same period of the prior year.
Cost of sales increased to $3,078,000 and $7,737,000, respectively, for the three and nine months ended September 30, 2010 compared to $1,554,000 and $4,954,000, respectively, for the same periods in 2009. 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 $142,000 and $499,000, respectively, for the three and nine months ended September 30, 2010 as compared to $227,000 and $714,000, respectively, for the same periods in 2009.  We capitalized $840,000 and $2,151,000, respectively, of software development costs in the three and nine months ended September 30, 2010 as compared to $512,000 and $929,000, respectively, in the same periods in 2009.
Research and development expenses decreased to $205,000 and $538,000, respectively, for the three and nine months ended September 30, 2010 as compared to $231,000 and $670,000, respectively, for the same periods in 2009.  We are continuing our 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 $361,000 and $1,120,000, respectively, for the three and nine months ended September 30, 2010 as compared to $252,000 and $689,000, respectively, in the same periods of 2009.  This

16

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY


increase in 2010 was primarily due to an addition in our marketing and sales staff, resulting in an increase in personnel-related costs.

Acquisition expenses were
approximately $285,000 for the nine months ended September 30, 2010 as compared to zero in the same period of 2009.
 These expenses were in connection with the acquisition of MSBS discussed in Note 7 of Notes to Consolidated
Financial Statements.

General and administrative expenses
increased to $503,000 and $1,451,000, respectively, in the three and nine months ended September 30, 2010 as compared to
$450,000 and $1,371,000, respectively, in the same periods in 2009.  This increase in 2010 was mainly due to
stock-based compensation related to options and restricted stock issued to our employees 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 September 30,
2010, we had cash and cash equivalents of approximately $5,771,000compared to cash
and cash equivalents of approximately $4,324,000 at December 31, 2009. The increase in cash and cash equivalents
is primarily attributable to the increase in all revenue categories and our continuing effort to maintain our cost in
line with our on-going revenue in the nine months ended September 30, 2010.

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 September 30, 2010, we had working
capital of approximately $5,453,000 compared to a working capital of approximately $4,836,000 at December 31, 2009.
This increase in our working capital resulted primarily from an increase in all revenue categories and our
continuing and ongoing effort to maintain our costs in line with our on-going revenues. For the nine months ended
September 30, 2010, net cash provided from operating activities totaled approximately $5,581,000 compared to
approximately $700,000 for the nine months ended September 30,


17

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY


2009.  In 2010, 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 2009
due to the license sale to three customers offset by non-cash expenses and payment of liabilities.

For the nine months ended September
30, 2010, net cash (used for) investing activities was approximately $(4,065,000) compared to approximately $(929,000)
for the nine months ended September 30, 2009. The Company expects capital expenditures and capital software
expenditures to continue to be funded by cash generated from operations. For the nine months ended September 30,
2010, net cash (used for) provided from financing activities was approximately $(70,000) compared to approximately
$(718,000) for the nine months ended September 30, 2009. The cash (used for) provided from financing activities in
2010 consisted of partial payment of our long term debt and proceeds from the exercise of stock options.

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 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 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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COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

·

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, 2009, we had
approximately $16,000,000 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

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


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COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY


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 FASB ASC 986-605, 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 recognizable revenues are recorded as deferred revenues. The timing and amounts invoiced to customers
can vary significantly 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 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.


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COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

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, 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 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 September 30, 2010 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 19, 2010 and Post-Effective Amendment No. 1 to Form S-1 (File No. 333-156397) filed with the SEC on May 7,
2010, copies of which are available from the SEC or may be obtained upon request from the Company.


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COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY


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, 2009, filed with the SEC on March 19,
2010, have not materially changed, but for the addition of the risk factors set forth in the Companys
Post-Effective Amendment No. 1 to Form S-1 (File No. 333-156397), filed with the SEC on May 7, 2010, which are
incorporated herein by reference.

Item 6.
Exhibits.



ExhibitNo.Description31.1*Certification of Chief
Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2*Certification of Chief
Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.32.1*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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COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

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:  November 12, 2010
By:
/s/ John W. Roblin
John W. Roblin, Chairman of the Board of Directors and Chief Executive Officer



Date:  November 12, 2010
By: /s/ Ann F. Massey
Ann F. Massey, Chief Financial Officer



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