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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

        |X|     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
                EXCHANGE ACT OF 1934

                FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006.

        |_|     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                SECURITIES EXCHANGE ACT OF 1934

                FOR THE TRANSITION PERIOD FROM ___________ TO __________.

                         Commission file number 0-13124
                         ------------------------------

                           COVER-ALL TECHNOLOGIES INC.
             (Exact name of Registrant as specified in its charter)

         DELAWARE                                     13-2698053
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)

55 LANE ROAD, FAIRFIELD, NEW JERSEY                                   07004
(Address of principal executive office)                             (Zip Code)

                                 (973) 461-5200
              (Registrant's telephone number, including area code)

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

                                      NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                     COMMON STOCK, PAR VALUE $.01 PER SHARE

        Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes |_| No |X|

        Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Exchange Act from their
obligations under those Securities. Yes |_| No |X|

        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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. |X|

        Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange
Act. (Check one):

Large accelerated filer |_|    Accelerated filer |_|   Non-accelerated filer |X|

        Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Act). Yes |_| No |X|

The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant as of June 30, 2006, the last business day of
the registrant's most recently completed second fiscal quarter, was $4,158,000.
As of March 13, 2007, there were 17,498,005 shares outstanding of our common
stock.

                      DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Registrant's Proxy Statement for the 2007 Annual Meeting of
Stockholders ("Proxy Statement"), to be filed with the Securities and Exchange
Commission (the "SEC") not later than 120 days after the close of the
Registrant's fiscal year, are incorporated by reference as described in Part
III.


<PAGE>




                           FORWARD-LOOKING STATEMENTS

        Certain of the matters discussed in this report, including, without
limitation, matters discussed under Item 1 - "Business", Item 1A - "Risk
Factors" and Item 7 - "Management's Discussion and Analysis of Financial
Condition and Results of Operations," may constitute forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. Certain of these forward-looking statements can be identified by the
use of forward-looking terminology such as "believes," "expects," "may," "will,"
"should," "seeks," "approximately," "intends," "plans," "estimates," or
"anticipates" or the negative of these terms or other comparable terminology, or
by discussions of strategy, plans or intentions. Statements contained in this
report that are not historical facts are forward-looking statements. Without
limiting the generality of the preceding statement, all statements in this
report concerning or relating to estimated and projected earnings, margins,
costs, expenditures, cash flows, growth rates and financial results are
forward-looking statements. In addition, through our senior management, from
time to time we make forward-looking statements concerning our expected future
operations and performance and other developments. Such forward-looking
statements are necessarily estimates reflecting our best judgment based upon
current information and involve a number of risks and uncertainties. Other
factors may affect the accuracy of these forward-looking statements and our
actual results may differ materially from the results anticipated in these
forward-looking statements. While it is impossible to identify all such factors,
factors that could cause actual results to differ materially from those
estimated by us include, but are not limited to, those factors or conditions
described under Item 1A - "Risk Factors" and Item 7 - "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Critical
Accounting Policies and Estimates" and general conditions in the economy and
capital markets.


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<TABLE>
<CAPTION>

                                                    TABLE OF CONTENTS

                                                         PART I
<S>           <C>                                                                                                   <C>
ITEM 1.       BUSINESS................................................................................................4

ITEM 1A.      RISK FACTORS...........................................................................................10

ITEM 1B.      UNRESOLVED STAFF COMMENTS..............................................................................15

ITEM 2.       PROPERTIES.............................................................................................15

ITEM 3.       LEGAL PROCEEDINGS......................................................................................15

ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS....................................................16

                                                         PART II

ITEM 5.       MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
              MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES......................................................17

ITEM 6.       SELECTED FINANCIAL DATA................................................................................19

ITEM 7.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..................20

ITEM 7A.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.............................................31

ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA............................................................32

ITEM 9.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE...................32

ITEM 9A.      CONTROLS AND PROCEDURES................................................................................32

ITEM 9B.      OTHER INFORMATION......................................................................................32

                                                        PART III

ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.....................................................33

ITEM 11.      EXECUTIVE COMPENSATION.................................................................................34

ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.........................................34

ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.........................................................34

ITEM 14.      PRINCIPAL ACCOUNTING FEES AND SERVICES.................................................................34

                                                         PART IV

ITEM 15.      EXHIBITS, FINANCIAL STATEMENT SCHEDULES................................................................34
</TABLE>


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                                     PART I

ITEM 1. BUSINESS

GENERAL

        We provide state-of-the-art software products, services and solutions to
the property and casualty insurance industry. Our customers include insurance
companies, agents, brokers and managing general agents (MGAs).

        Our software products and services focus on the functions required to
market, underwrite, rate, issue, print, bill and support the entire life cycle
of insurance policies. Our products and services combine an in-depth knowledge
of property and casualty insurance with innovative solution designs using
state-of-the-art technology. Our products are either available "off-the-shelf"
or customized to specific customer needs. Our software can be licensed for
customer use on their own platforms or can be provided through our application
services provider, referred to as "ASP," using third party technology platforms
and support.

        We also provide 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.

        We were incorporated in Delaware in April 1985 as Warner Computer
Systems, Inc. and changed our name to Warner Insurance Services, Inc. in March
1992. In June 1996, we changed our name to Cover-All Technologies Inc. Our
products and services are offered through our wholly-owned subsidiary, Cover-All
Systems, Inc., also a Delaware corporation.

PRODUCTS

        MY INSURANCE CENTER

        In 2001, we announced the availability of My Insurance Center, referred
to as "MIC," a customizable and configurable Internet-enabled software platform
and suite of product components that was developed to provide insurance agents,
brokers and carriers with integrated workflows and access to real-time
information.

        MIC is designed to be the platform for the entire insurance process from
the insured through agents, brokers, insurance companies and reinsurers. MIC is
designed to serve both large and small organizations and to serve the "extended
enterprise" by using advanced security to extend capabilities beyond the
client's walls to partners, suppliers and customers. It is designed to be a low
cost and variable cost platform that meets or exceeds security/audit standards
required by sophisticated data centers.

        MIC was designed to segregate functionality and access to data to the
individual user. These capabilities are configured and managed by the client and
can be "changed" in real time by authorized users. Additionally, all changes are
tracked by user, date and time to provide audit trails and controls. These

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capabilities enable our clients to manage and monitor their business as it
happens, in real time as well as help them address the increasing demands of
regulatory compliance.

        New capabilities have been created in the last twelve months that extend
the functionality of MIC to the submission of business and include underwriting
rules, electronic underwriting files, milestone-driven workflows, which are
customizable based upon definable conditions like completed applications and
underwriting information, policy dashboards that include premium and loss
information and various other functionality. The architecture of MIC enables
Cover-All to introduce and customize capabilities in short cycle times that
allow our customers to be responsive and nimble.

        MIC enables our customers to utilize our rating, policy issuance,
billing and other software components into a fully-integrated platform that,
among other things, eliminates redundant data entry. Information is stored in a
client-centric database and becomes immediately available to other users or
functions. MIC may be customized to generate user alerts when a user-specified
condition occurs. Additionally, MIC has been designed to allow the customer to
configure features according to their own look and feel preferences and workflow
processes. For instance, the browser-based user interface allows employees,
agents and other end-users to personalize their desktops so they see only the
information they need or desire. MIC allows our customers to reduce costs,
leverage the latest technologies, better manage risk and provide better service
to their customers.

        MIC is built upon the Customer Insurance Database, referred to as "CI,"
that brings together policy, billing and information from other business
functions into an integrated "customer view" that enables better customer
service and coordination. A key component of CI is the Insurance Policy
Database, referred to as "IPD." IPD is a relational database that holds detailed
policy and policy history data for more than forty lines of commercial property
and casualty insurance and has been designed to bring powerful data access and
reporting capabilities to the desktop.

        MIC is being made available to users either for in-house implementation
or through our ASP. Combined with our client-centric database, MIC has an
integrated and flexible architecture designed to enable our customers to make
rapid business and technological changes.

        MIC offers the following features and benefits:

        o       DATA INTEGRATION - IPD is an integrated data repository that
                provides information to MIC quickly and inexpensively. Multiple
                software components share data to help integrate business
                functions, manage workflow and avoid duplicate data problems.
        o       APPLICATION INTEGRATION; SINGLE SIGN-ON - MIC allows the end
                user to switch back and forth among applications without having
                to log in to individual applications, increasing a user's
                productivity. MIC provides a consolidated view of data from
                different software components and provides "hotlinks" enabling a
                customer to connect quickly to the specific module of the
                specific system. MIC offers the user fast access, pro-active
                alerts and real-time responsiveness.
        o       BROAD ACCESSIBILITY - MIC is an Internet application, which
                utilizes a sophisticated portal capability.
        o       INTEGRATED DATA REPRESENTATION - MIC provides a consolidated
                view of information from disparate systems.
        o       PERSONALIZATION AND CUSTOMIZATION - MIC allows each user to
                personalize his or her view similar to other Internet portals,
                to meet the needs and the stylistic preferences of each
                individual user. MIC personalization allows the user to hide or
                show content, filter the content and also change color and page
                styles. Customization in MIC allows the host to

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                control the accessibility to content for each user and also
                facilitates changes to content in MIC as business needs change,
                without additional programming.
        o       SCALABILITY - MIC can grow with our customer's needs, measured
                in terms of the numbers of concurrent users, response times and
                other variables.
        o       SECURITY - MIC can be configured to achieve appropriate levels
                of security on data transfer over the Internet. MIC is also
                designed to adapt to almost any organizational hierarchy and
                data level security needs with minimal set-up effort by the
                customer.
        o       COMPLIANCE - MIC is compliant with federal, state and insurance
                regulations.

        MIC utilizes technology based on Oracle(R) 10G Application Server,
Oracle 10G Database, J2EE and XML. MIC seamlessly integrates MIC Rating and
Issuance and other business components and our Customer Insurance Database.

        MIC enables us to market the business components in "custom groupings,"
or as a service in an ASP environment, depending on customer needs.

MIC RATING & ISSUANCE - THE POLICY RATING AND ISSUANCE COMPONENT OF MIC

        In 1989, we purchased the assets related to the exclusive proprietary
rights to a PC-based software application for policy rating and issuance for
property and casualty insurance companies. This software uses a unique design
that separates the "insurance product definition" from the actual technology
"engines." The sophistication of this design has enabled us to stay current with
technology innovations while preserving our "insurance knowledge" investment.
This concept evolved into what is formerly known as the Classic product. During
2003, 2004 and 2005, this concept further evolved and the Classic product was
significantly expanded and is now sold and marketed as MIC Rating & Issuance.
All of our Classic customers have upgraded to MIC Rating & Issuance, and we no
longer refer to the product as "Classic."

        The MIC Rating & Issuance component supports the following policy
        functions:

        o       Data capture and editing
        o       Rating
        o       Policy issuance including multiple recipient print
        o       All policy transactions including quotes, new lines,
                endorsements, renewals, audits and cancellations
        o       Policy database.

        MIC Rating & Issuance is designed to accommodate all lines of property
and casualty insurance. It is especially effective in coping with the complexity
and variability of commercial lines of insurance.

        This flexibility of MIC Rating & Issuance is a competitive advantage,
and today we offer off-the-shelf support for more than 40 lines of commercial
business in virtually all states and Puerto Rico. Our extensive experience in
creating custom products combined with our proprietary tool set enables us to
deliver support for new insurance products in short time frames.

        During the latter part of 2002, we developed a new "presentation layer"
incorporating the latest technologies, such as Java and XML, to provide a very
flexible and robust user interface over the Internet. This capability also
included significant enhancements to our security and administration functions
as well as a number of "usability" enhancements. These capabilities
significantly expand and enhance the "core" rating and issuance capabilities of
the legacy Classic product. The new product has now been fully integrated with
MIC and is being sold and marketed as MIC Rating & Issuance.The MIC Rating &
Issuance has been and continues to be enhanced and updated with new technology.
The sophisticated design of the product isolates

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insurance product knowledge from the application itself in data files, referred
to as "Metadata." We have built an extensive knowledge base, estimated at more
than 100 person-years of effort, in this Metadata that defines the details of
virtually hundreds of insurance policy types and coverages for the MIC Rating &
Issuance product.

        The design of MIC Rating & Issuance also allows us to stay current with
changes in technology while re-using the intellectual capital invested in the
insurance rules. Our upgrading the Classic product line to run on an
intranet/Internet has enabled multiple users to contribute to the common data
store. We have also integrated this product to IPD and MIC. We have streamlined
the support process with the goal to improve quality to our customers.

        The MIC Rating & Issuance product is in use in over 30 companies.


MY INSURANCE CENTER - FUNCTIONAL CAPABILITIES

        We have, through MIC, a deep inventory of insurance software components
combined with a sophisticated implementation platform. MIC includes the
following critical components:

        o       My Insurance Center Portal
        o       Enterprise, Customer-centric Oracle database
        o       Underwriting Tools
        o       End User access to information in real time
        o       Rating and Issuance
        o       Full policy lifecycle support
        o       Clear and comprehensive data collection with extensive real time
                edits
        o       Policy history - easy policy changes and useful for activities
                such as coverage inquiries
        o       On-line system, screen and field level look-ups
        o       On-line Commercial Lines Manual Tables and Footnotes
        o       Easy and direct system navigation
        o       Standard ISO (Insurance Service Office)/NCCI coverages and rates
                support
        o       Company customized coverages and rates support
        o       Fully automated recipient-driven issuance of insurance policies,
                worksheets, ID cards, etc., including print preview
        o       Policy database
        o       Multiple company/program/state/coverage support.
        o       Templates to reduce data entry time
        o       Billing Capabilities
        o       Claims Repository
        o       Customer Relationship Management
        o       Agency and Program Management
        o       Advanced Administration
        o       Access to Web Services and Information Providers
        o       Policy Dashboard - premium & loss information
        o       Advanced Workflows, Diarie
        o       Electronic Underwriting files
        o       Compliance Assist, Help Desk
        o       Interfaces to "back end" accounting and reporting systems

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        We expect to utilize these capabilities to expand and leverage our
ability to respond to broadening marketplace and new customer opportunities with
solutions that address the special needs of carriers, managing general agents,
agents, brokers and third party providers with both off-the-shelf and custom
solutions. Our user interface capabilities of the MIC product are being enhanced
with more functionality through various strategic alliances and partnerships
that offer business process partnering (outsourcing), accounting, claims
administration capabilities and actuarial and statistical reporting services. We
also intend to continue to enhance our functional components based upon market
demand, existing customer needs, new capabilities offered by Web Services as
well as changes in technology (for example, support for personal digital
assistants, or PDAs), especially Internet technologies. We are also developing
integration and inter-connection capabilities for MIC to exchange data with
third party systems which should bring significant benefit to our customers by
reducing data entry and reducing the exposure to errors & omissions liability.

        We are also increasing and enhancing our services portfolio. We have
expanded our professional services with conversion and interface offerings. We
developed new rule-based capabilities to enable us to implement data exchange
services that will save our customers time and effort converting to our products
or linking our products to existing systems. We also have developed a "custom"
service offering for customers who desire specially-tailored services, service
level agreements and other services that enable them to achieve their business
objectives.

        In February 2007, we announced that we were extending MIC capabilities
by acquiring and integrating the application processing functionality of the
brokerage application processing platform of InsureHiTech, a specialty wholesale
insurance brokerage for hedge funds, private equity, technology and life science
companies.

COMPETITION

        The computer software and services industry is highly competitive and
rapidly changing, as current competitors expand their product offerings and new
companies enter the marketplace. Because of our extensive knowledge-base in the
insurance industry, however, we believe that our products offer customers
certain advantages not available from our competitors. Our customers have access
to our extensive experience and software inventory in the area of rating and
policy issuance of commercial lines policies, among the most complex of
insurance transactions.

        There are a number of larger companies, including computer software,
services and outsourcing companies, consulting firms, computer manufacturers and
insurance companies that have greater financial resources than we have and
possess the technological ability to develop software products similar to those
we offer. These companies represent a significant competitive challenge to our
business. Very large insurers that internally develop systems similar to ours
may or may not become our major customers for software or services. We compete
on the basis of our insurance knowledge, products, service, price, system
functionality and performance and technological advances.

MARKETING

        We maintain an in-house sales and marketing staff. We also utilize
distributors, outside consultants and other complimentary service providers to
market our products. We are continuing to redesign our Internet site and
establish linkages to portals and other web sites. This is an on-going effort
that will continue to expand in 2007 as we focus on the Internet as the primary
source of information for current and potential customers interested in our
products and services. We also participate in and display and demonstrate our
software products at industry trade shows. Our consulting staff, business
partners and other third parties also generate sales leads.

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RESEARCH AND DEVELOPMENT

        Our business is characterized by rapid business and technological
change. We believe our success will depend, in part, on our ability to meet the
new needs of our customers and the marketplace as well as continuing to enhance
our products based on new technologies. Accordingly, we must maintain ongoing
research and development programs to continually add value to our suite of
products, as well as any possible expansion of our product lines.

        Our goal with all of our products and services is to enhance the ease of
implementation, functionality, long-term flexibility and the ability to provide
improved customer service.

        Research and development expenses were $464,000, $809,000 and $760,000
for the years ended December 31, 2006, 2005 and 2004, respectively.

BACKLOG

        We had no license, maintenance, professional services or ASP backlog of
unbilled work as of December 31, 2006.

MAJOR CUSTOMERS

        Our product line is in use in over 30 companies. For the year ended
December 31, 2006, we had three customers contribute revenues in excess of 10%
of our total revenues. For the years ended December 31, 2005 and 2004, we had
only one customer in either of those years contribute revenues in excess of 10%
of our total revenues. AIGT generated 27%, 23% and 31% of our revenues for the
years ended December 31, 2006, 2005 and 2004, respectively. Two other customers
generated 13% and 11%, respectively, of our revenue for the year ended December
31, 2006.

        We had no export sales in 2006, 2005 or 2004.

EMPLOYEES

        We had on average 45 employees during 2006. None of our employees are
represented by a labor union, and we have not experienced any work stoppages. We
believe that relations with our employees are good.

AVAILABLE INFORMATION

        Our website address is www.cover-all.com. We make available, free of
charge, through our website our annual report on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended, as soon as reasonably practicable after we electronically file
such material with, or furnish it to, the SEC. The information on our website is
not incorporated by reference into this report.

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ITEM 1A.RISK FACTORS

                                  RISK FACTORS

        THE FOLLOWING ARE CERTAIN RISK FACTORS THAT CAN AFFECT OUR BUSINESS AND
OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION. THERE MAY BE OTHER RISK
FACTORS, AND THIS LIST IS NOT EXHAUSTIVE. WE OPERATE IN A CONTINUALLY CHANGING
BUSINESS ENVIRONMENT, AND NEW RISK FACTORS EMERGE FROM TIME TO TIME. WE CANNOT
PREDICT SUCH NEW RISK FACTORS, NOR CAN WE ASSESS THE IMPACT, IF ANY, OF SUCH NEW
RISK FACTORS ON OUR BUSINESS. YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK
FACTORS, AS WELL AS OTHER INFORMATION DESCRIBED ELSEWHERE IN THIS ANNUAL REPORT.

RISKS RELATED TO OUR BUSINESS AND OUR INDUSTRY

        WE INCURRED LARGE LOSSES IN 2006 AND 2005. OUR EARNINGS ARE VOLATILE,
AND WE MAY NOT BE PROFITABLE IN THE FUTURE.

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

        WE MAY NEED ADDITIONAL FINANCING IN ORDER TO CONTINUE TO DEVELOP OUR
BUSINESS.

        We may need additional financing to continue to fund the research and
development of our software products and to expand and grow our business
generally. To the extent that we will be required to fund operating losses, our
financial position would deteriorate. We may not be able to find significant
additional financing on terms favorable to us or at all. If equity securities
are issued in connection with a financing, dilution to our stockholders may
result, and if additional funds are raised through the incurrence of debt, we
may be subject to further restrictions on our operations and finances.
Furthermore, if we do incur additional debt, we may be limiting our ability to
repurchase capital stock, engage in mergers, consolidations, acquisitions and
asset sales, or alter our lines of business, even though these actions might
otherwise benefit our business. As of December 31, 2006, we had a net
stockholders' equity (deficit) of approximately $(1,024,000) and a net working
capital (deficiency) of approximately $(898,000).

        WE MAY NOT HAVE SUFFICIENT CASH TO SERVICE OUR INDEBTEDNESS.

        As of March 23, 2007, our outstanding indebtedness consisted in
aggregate principal amount of $295,880 on our 8% convertible debentures due
2008, which we refer to as our 2008 Debentures. The 2008 Debentures mature on
July 1, 2008, unless they are earlier redeemed by us or the holder or converted
into shares of our common stock at the holder's option at a conversion price of
$0.30 per share, subject to adjustment. We may redeem the debentures for cash at
101% of the principal amount, together with accrued and unpaid interest through
the redemption date, upon the occurrence of certain events specified in the
debentures. We cannot assure you that any or all of the holders of our
outstanding debentures will continue to elect to convert all or a portion of
their monthly cash installments of principal into shares of our common stock in
any future periods.

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        Our ability to make payments on and to refinance our indebtedness, to
the extent the holders of our debentures do not continue to elect to convert
required principal payments into shares of our common stock, and to fund working
capital needs and planned capital expenditures will depend on our ability to
generate cash in the future. In addition, our ability to generate cash, to a
certain extent, is subject to general economic, financial, competitive and other
factors that are beyond our control. We cannot assure you that our business will
generate sufficient cash flow from operations, that currently anticipated cost
savings and operating improvements will be realized on schedule or that future
borrowings will be available to us in amounts sufficient to enable us to pay our
indebtedness or to fund our other liquidity needs. If we are unable to repay our
indebtedness through cash flow from operations, we may need to obtain additional
financing. We cannot be certain that we will be able to obtain additional
financing on terms favorable to us, or at all.

        WE DEPEND ON PRODUCT DEVELOPMENT IN ORDER TO REMAIN COMPETITIVE IN OUR
INDUSTRY.

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

        OUR PRODUCTS MAY NOT ACHIEVE MARKET ACCEPTANCE, WHICH MAY MAKE IT
DIFFICULT FOR US TO COMPETE.

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

        OUR PRODUCTS ARE AFFECTED BY RAPID TECHNOLOGICAL CHANGE AND WE MAY NOT
BE ABLE TO KEEP UP WITH THESE CHANGES.

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

                                       11

<PAGE>


        OUR MARKET IS HIGHLY COMPETITIVE.

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

        o       undertake more extensive marketing campaigns for their brands
                and services;
        o       devote more resources to product development;
        o       adopt more aggressive pricing policies; and
        o       make more attractive offers to potential employees and
                third-party service providers.

        WE DEPEND ON KEY PERSONNEL.

        Our success depends to a significant extent upon a limited number of
members of senior management and other key employees, including John W. Roblin,
our President and Chief Executive Officer, Maryanne Gallagher, our Chief
Operating Officer, and Manish D. Shah, our Chief Technology Officer. Mr.
Roblin's employment contract expires in December of 2007. We maintain key man
life insurance on Mr. Roblin and Ms. Gallagher in the amount of $1,000,000 per
individual. The loss of the service of one or more key managers or other key
employees could have a significant and adverse effect upon our business,
operating results or financial condition. In addition, we believe that our
future success will depend in large part upon our ability to attract and retain
additional highly skilled technical, management, sales and marketing personnel.
Competition for such personnel in the computer software industry is intense. We
may not be successful in attracting and retaining such personnel, and the
failure to do so could have a material adverse effect on our business, operating
results or financial condition.

        WE DEPEND UPON PROPRIETARY TECHNOLOGY AND WE ARE SUBJECT TO THE RISK OF
THIRD PARTY CLAIMS OF INFRINGEMENT.

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

        While we believe that our products and trademarks do not infringe upon
the proprietary rights of third parties, third parties may claim that our
products infringe, or may infringe, upon their proprietary rights. Any
infringement claims, with or without merit, could be time-consuming, result in
costly litigation and diversion of technical and management personnel, cause
product shipment delays or require us to develop non-infringing technology or
enter into royalty or licensing agreements. Royalty or licensing agreements, if

                                       12

<PAGE>


required, may not be available on terms acceptable to us or at all. If a claim
of product infringement against us is successful and we fail or are unable to
develop non-infringing technology or license the infringed or similar
technology, our business, operating results and financial condition could be
significantly and adversely affected.

        WE DEPEND ON EXISTING CUSTOMERS.

        In 2006 and 2005, our software products operations depended primarily on
certain existing customers. One of these customers accounted for approximately
27% and 23% of our total revenues in 2006 and 2005, respectively. Two other
customers accounted for approximately 13% and 11% of our total revenue in 2006,
respectively. We anticipate that our operations will continue to depend upon the
continuing business of our existing customers and the ability to attract new
customers. As a result, the loss of one or more of our existing customers or our
inability to continue to attract new customers could significantly and adversely
affect our business, operating results and financial condition.

        A DECLINE IN COMPUTER SOFTWARE SPENDING MAY RESULT IN A DECREASE IN OUR
REVENUES OR LOWER OUR GROWTH RATE.

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

        WE MAY NOT GET THE FULL BENEFIT OF OUR TAX CREDITS.

        Under the United States Internal Revenue Code, companies that have not
been operating profitably are allowed to apply certain of their past losses to
offset future taxable income liabilities they may incur once they reach
profitability. These amounts are known as net operating loss carryforwards. At
December 31, 2006, we had approximately $26,700,000 of federal net operating tax
loss carryforwards expiring at various dates through 2026. Because of certain
provisions of the Tax Reform Act of 1986 related to change of control, however,
we may not get the full benefit of these loss carryforwards. If we are limited
from using net operating loss carryforwards to offset any of our income, this
would increase our taxes owed and reduce our cash for operations.

        COMPLIANCE WITH CHANGING REGULATION OF CORPORATE GOVERNANCE AND PUBLIC
DISCLOSURE MAY RESULT IN ADDITIONAL EXPENSES.

        Changing laws, regulations and standards relating to corporate
governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and
new Securities and Exchange Commission regulations, are creating uncertainty for
companies such as ours. To maintain high standards of corporate governance and
public disclosure, we intend to invest substantial resources to comply with
evolving standards. This investment may result in increased general and
administrative expenses and a diversion of management time and attention from
revenue-generating activities.

                                       13

<PAGE>


RISKS RELATED TO OUR COMMON STOCK

        HOLDERS OF SHARES OF OUR COMMON STOCK MAY HAVE DIFFICULTY IN SELLING
THOSE SHARES.

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

        OUR SHARES ARE SUBJECT TO DILUTION AS A RESULT OF THE CONVERSION OF OUR
CONVERTIBLE DEBENTURES AND THE EXERCISE OF OUR WARRANTS.

        DEBENTURES. In 2001, we issued $1,800,000 aggregate principal amount of
8% convertible debentures due 2008, which we refer to as the 2008 Debentures,
and in 2002, we issued $700,000 aggregate principal amount of 8% convertible
debentures due 2009, which we refer to as the 2009 Debentures. The 2008
Debentures were issued to two funds managed by RENN Capital Group, Inc., for an
aggregate of $1,400,000, and the remainder of the 2008 Debentures were issued to
John Roblin, our Chairman and Chief Executive Officer, and certain other
investors. Our 2009 Debentures were issued only to the two RENN funds. Our
debentures are convertible at the election of the holders into shares of our
common stock, at a conversion price of $0.30 per share, subject to adjustment.
Since we have been required to begin making monthly installments of principal
payments on our 2008 Debentures and 2009 Debentures, in July 2004 and July 2005,
respectively, and through January 2007, the holders of our debentures have
elected to convert an aggregate of $468,399 in principal amount of such
debentures at a conversion price of $0.30 per share, in lieu of receiving such
installment payments in cash, for an aggregate of 1,561,330 shares of our common
stock. On March 23, 2007, the RENN funds elected to convert all of their
remaining unpaid principal amount due on their 2008 Debentures and 2009
Debentures, totaling $1,631,601, into 5,438,670 shares of our common stock.
After giving effect to this conversion, as of March 23, 2007, our only
outstanding debentures are an aggregate principal amount of $295,880 that
remains outstanding on the 2008 Debentures, which, at the conversion price of
$0.30 per share, are convertible into an aggregate of 986,267 shares of our
common stock. The 2008 Debentures mature on July 1, 2008, unless they are
earlier redeemed by us or the holder or converted into shares of our common
stock at the holder's option at a conversion price of $0.30 per share, subject
to adjustment.

        The conversion price with the respect to each of our outstanding
debentures is subject to adjustment if and whenever we issue additional shares
of our common stock for less than the then current conversion price per share,
in which case the conversion price will be reduced to a new conversion price
equal to the price per share of the additional stock issued. Pursuant to the
terms of the debentures, the issuance or sale of additional shares of our common
stock resulting from (1) the conversion of any of the debentures, (2) the
exercise of warrants or employee or director stock options outstanding on the
day that the debentures were issued or (3) the exercise of stock options to be
granted in the future to employees or directors pursuant to our existing stock
option plans, will not trigger any adjustment to the conversion price of the
debentures. The issuance of any shares of our common stock as a consequence of
the conversion of any of the debentures may result in

                                       14

<PAGE>


significant dilution to our stockholders and may depress the market price of
your investment. Further, if the conversion price of the debentures is adjusted,
the additional shares of our common stock that would be issued upon conversion
of the debentures as a result of such adjustment may also result in significant
dilution to our stockholders.

        WARRANTS. An aggregate of 128,572 warrants, expiring in 2007, to
purchase such number of shares of our common stock issued to various investors,
including the RENN funds, John Roblin and certain other investors, are
outstanding as of December 31, 2006 and exercisable at a current exercise price
of $0.22 per share. An aggregate of 128,572 warrants, expiring in 2011, to
purchase such number of shares of our common stock issued to the same investors,
are outstanding as of December 31, 2006 and exercisable at a current exercise
price of $0.35 per share. The current exercise prices of these warrants are
subject to adjustment if and whenever we issue or sell additional shares of our
common stock for less than 95% of the market price on the date of issuance or
sale, in which case the exercise price will be reduced to a new exercise price
in accordance with the terms of the warrant. Pursuant to the terms of these
warrants, the issuance or sale of additional shares of common stock resulting
from (1) the exercise of stock options to be granted in the future to employees
or directors pursuant to our existing stock option plans or (2) the exercise of
any convertible security, in either case outstanding on the date of the warrant,
will not trigger any adjustment to the exercise price of the warrants.

        The issuance of any additional shares of our common stock as a
consequence of the exercise of any of the warrants may result in significant
dilution to our stockholders and may depress the market price of your
investment. Further, if the exercise price of the warrants is adjusted, the
additional shares of our common stock that would be issued upon exercise of the
warrants as a result of such adjustment may also result in significant dilution
to our stockholders.

        OUR STOCK PRICE HAS BEEN VOLATILE.

        Quarterly operating results have fluctuated and are likely to continue
to fluctuate significantly. The market price of our common stock has been and
may continue to be highly volatile. Factors that are difficult to predict, such
as quarterly revenues and operating results, limited trading volumes and overall
market performance, will have a significant effect on the price for shares of
our common stock. Revenues and operating results have varied considerably in the
past from period to period and are likely to vary considerably in the future. We
plan product development and other expenses based on anticipated future revenue.
If revenue falls below expectations, financial performance is likely to be
adversely affected because only small portions of expenses vary with revenue. As
a result, period-to-period comparisons of operating results are not necessarily
meaningful and should not be relied upon to predict future performance.

ITEM 1B. UNRESOLVED STAFF COMMENTS

        Not applicable.

ITEM 2.  PROPERTIES

        Our headquarters is located in Fairfield, New Jersey, where we occupy
approximately 20,000 square feet under a lease which expires at October 31,
2012. Currently, we fully utilize this facility. We believe that our
headquarters is well maintained and adequate to meet our needs in the
foreseeable future.

ITEM 3.  LEGAL PROCEEDINGS

        None.

                                       15

<PAGE>


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        No matters were submitted to a vote of our security holders through the
solicitation of proxies or otherwise during the three months ended December 31,
2006.


                                       16


<PAGE>



                                     PART II


ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

                  MARKET PRICE OF AND DIVIDENDS ON COMMON STOCK

        Our common stock trades in the over-the-counter market on the OTC
Bulletin Board. The quotations below reflect the high and low bid prices for our
common stock since January 1, 2005 as traded in the over-the-counter market on
the OTC Bulletin Board. The quotations below reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.

2006:                                            HIGH                  LOW
                                                 -----                -----
4th Quarter                                  $   0.79              $   0.42
3rd Quarter                                      0.51                  0.31
2nd Quarter                                      0.43                  0.31
1st Quarter                                      0.58                  0.35

2005:                                            HIGH                  LOW
                                                 -----                -----
4th Quarter                                  $   0.57              $   0.38
3rd Quarter                                      0.69                  0.43
2nd Quarter                                      0.75                  0.45
1st Quarter                                      0.80                  0.41

        As of March 13, 2007, there were 510 holders of record of our common
stock. This number does not include beneficial owners who may hold their shares
in street name.

        We have not paid any dividends on our common stock and do not anticipate
paying any dividends in the foreseeable future. In addition, the convertible
loan agreements governing the 2008 Debentures currently prohibit the payment of
dividends by us without the prior written consent of the holders of such
debentures.

        The closing sales price for our common stock on March 13, 2007 was
$1.10, as reported by the OTC Bulletin Board.

                     RECENT SALES OF UNREGISTERED SECURITIES

        On March 23, 2007, we issued an aggregate of 5,438,670 shares of our
common stock to the RENN funds in connection with their election to convert an
aggregate of $1,631,601 principal amount of debentures, representing all of
their remaining unpaid principal amount due on their 2008 Debentures and 2009
Debentures, at a conversion price of $0.30 per share. In August 2006 and January
2007, the holders of our debentures elected to convert an aggregate of $127,254
and $119,807, respectively, principal amount of such debentures, representing
all of their monthly installments of principal due in 2006 under such debentures
(in lieu of receiving such installment payments in cash), for shares of our
common stock at the conversion price of $0.30 per share. In connection with this
conversion, we issued to the holders of the debentures an aggregate of 424,181
and 399,358 shares of our common stock in August 2006 and January 2007,
respectively. No cash proceeds were received by us in connection with each
conversion of the debentures. The shares of our common stock issued upon each
conversion of the debentures were issued exempt from registration in reliance on
Section 3(a)(9) of the Securities Act of 1933 as an exchange of securities by an
issuer with its existing security holders where no commission or other
remuneration was paid or given directly or indirectly for soliciting such
exchange.

                                       17

<PAGE>



                                PERFORMANCE GRAPH

        The graph below compares the cumulative total stockholder returns
(including reinvestment of dividends) from the period from December 31, 2001
through December 31, 2006 on an investment of $100 in (i) our common stock, (ii)
the Russell 2000 Index (an index of small capitalization companies) and (iii) an
index of peer companies that we have selected. You should be aware that
historical results are not necessarily indicative of future performance.
<TABLE>
<CAPTION>
                        [PERFORMANCE GRAPH APPEARS HERE]

                               COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN AMONG COVER-ALL TECHNOLOGIES INC.,
                                                      THE RUSSELL 2000 INDEX AND A PEER GROUP
                                 ---------------------------------------------------------------------------

                                 12//31/01      12/31/02    12/31/03     12/31/04      12/31/05    12//31/06
                                 ---------      --------    --------     --------      --------    ---------
<S>                              <C>          <C>          <C>          <C>          <C>          <C>
Cover-All Technologies Inc.      $   100.00   $   176.92   $   203.85   $   246.15   $   211.54   $   303.85
Russell 2000 Index               $   100.00   $    79.52   $   117.09   $   138.55   $   144.86   $   171.47
Peer Group (1)                   $   100.00   $    70.89   $    93.41   $   116.70   $   104.60   $   111.37
</TABLE>

-------
(1)     The peer group consists of Computer Sciences Corporation, Ebix.com Inc.,
        Pegasystems Inc. and TenFold Corp.

                                       18

<PAGE>




ITEM 6. SELECTED FINANCIAL DATA

        The following selected historical financial information as of December
31, 2006 and 2005, and for each of the years ended December 31, 2006, 2005 and
2004, have been derived from and should be read in conjunction with our audited
consolidated financial statements and related notes thereto included elsewhere
in this report. The selected historical consolidated financial information as of
December 31, 2004, 2003 and 2002 and for the years ended December 31, 2003 and
2002 have been derived from our audited consolidated financial statements which
are not included in this report. All dollar amounts below are expressed in
thousands, except per share data.

SELECTED FIVE-YEAR CONSOLIDATED FINANCIAL DATA

        The following is a summary of selected five-year consolidated financial
data for the years ended December 31, 2006, 2005, 2004, 2003 and 2002:
<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                           -------------------------------------------------------------
                                             2006          2005          2004         2003         2002
                                           -------      --------       -------      -------      -------
<S>                                        <C>          <C>            <C>          <C>          <C>
STATEMENT OF OPERATIONS DATA:                        (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Revenues ............................      $ 7,288      $  7,255       $ 9,274      $ 7,524      $ 8,142
Income (loss) before income tax .....       (1,000)       (1,434)          816          392          738
Net income (loss) ...................       (1,000)       (1,434)          767          392          877
Net income (loss) per share - basic .        (0.06)        (0.09)         0.05         0.03         0.06
Net income (loss) per share - diluted        (0.06)        (0.09)         0.04         0.02         0.04
Cash dividends per share ............      $    --       $    --       $    --      $    --      $    --


BALANCE SHEET DATA:
Cash and cash equivalents ...........      $   132       $   296       $   144      $ 1,193      $ 2,063
Working capital (deficiency) ........         (898)         (237)          900          177          336
Total assets ........................        3,556         4,677         6,388        5,485        5,589
Short-term debt .....................          339           247           220          105           --
Long-term debt ......................        1,708         1,927         2,175        2,395        2,500
Stockholders' equity (deficit) ......       (1,024)         (265)          928           41         (354)
</TABLE>

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

        The following is a summary of selected quarterly financial data for the
years ended December 31, 2006, 2005 and 2004:
<TABLE>
<CAPTION>
                                                                 2006
                                           ------------------------------------------------
                                             Q1            Q2            Q3           Q4
                                           -------      --------       -------      -------
                                               (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                        <C>           <C>           <C>          <C>
Total revenues ..................          $ 1,739       $ 1,638       $ 1,618      $ 2,293
Operating income ................             (246)         (270)         (310)           2
Net income ......................             (290)         (314)         (353)         (43)
Basic earnings per common share .          $ (0.02)      $ (0.02)      $ (0.02)   $   (0.00)
Diluted earnings per common share          $ (0.02)      $ (0.02)      $ (0.02)   $   (0.00)
</TABLE>

                                       19

<PAGE>
<TABLE>
<CAPTION>

                                                                 2005
                                           ------------------------------------------------
                                             Q1            Q2            Q3           Q4
                                           -------      --------       -------      -------
                                               (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                        <C>           <C>           <C>        <C>
Total revenues .........................   $ 2,087       $ 1,713       $  1,638   $   1,817
Operating income (loss) ................       (23)         (444)         (472)        (355)
Net income (loss) ......................       (35)         (487)         (517)        (395)
Basic earnings (loss) per common share .   $ (0.00)      $ (0.03)      $ (0.03)   $   (0.03)
Diluted earnings (loss) per common share   $ (0.00)      $ (0.03)      $ (0.03)   $   (0.03)
</TABLE>

<TABLE>
<CAPTION>
                                                                 2004
                                           ------------------------------------------------
                                             Q1            Q2            Q3           Q4
                                           -------      --------       -------      -------
                                               (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                        <C>           <C>           <C>        <C>
Total revenues..........................   $ 1,894       $ 1,927       $ 1,640    $   3,813
Operating income (loss).................        50          (112)         (300)       1,357
Net income (loss).......................         3          (161)         (350)       1,275
Basic earnings (loss) per common share..   $  0.00       $ (0.01)      $ (0.02)   $    0.08
Diluted earnings (loss) per common share   $  0.00       $ (0.01)      $ (0.02)   $    0.07
</TABLE>

                                       20

<PAGE>




ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

        THE FOLLOWING FORWARD-LOOKING STATEMENTS (AS SUCH TERM IS DEFINED IN THE
PRIVATE SECURITIES LITIGATION REFORM ACT) 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. THESE CONTINGENCIES INCLUDE, AMONG OTHER THINGS, 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.

2006 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
software provided through our application services provider ("ASP"), continuing
maintenance fees for servicing our products and professional services. Total
revenue in 2006 increased to $7,288,000 from $7,255,000 in 2005 due to an
increase in license and professional services and ASP revenue, which was
partially offset by a decrease in maintenance revenue.

        The following is an overview of the key components of our revenue and
other important financial data in 2006:

        SOFTWARE LICENSES. We signed no new customer licenses in 2006. The
increase in license revenue, to $1,376,000 in 2006 from $1,323,000 in 2005, was
mainly a result of sales to existing customers in 2006 and one new customer
license sale in 2005.

        MAINTENANCE. The decrease in maintenance revenue, to $3,471,000 in 2006
from $3,637,000 in 2005, was mainly due to the non-renewal of several existing
customers.

        PROFESSIONAL SERVICES. The increase in professional services revenue, to
$1,176,000 in 2006 from $1,064,000 in 2005, was a result of increased demand for
new software capabilities and customizations from our current customer base.

        ASP. ASP revenue increased to $1,265,000 in 2006 from $1,231,000 in
2005, due primarily to an expanded and extended contractual relationship with a
large customer.

        INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES. Loss before provision
for income taxes was $(1,000,000) in 2006 compared to a loss of $(1,434,000) in
2005, primarily due to an increase in license, professional services and ASP
revenue and a decrease in operating expenses.

        NET INCOME (LOSS). Net income (loss) for 2006 decreased to $(1,000,000)
from $(1,434,000) in 2005 as a result of an increase in license, professional
services and ASP revenue and a decrease in operating expenses.

                                       21

<PAGE>


        We continue to face several challenges to growth in 2007 mainly in the
marketing and selling of our products and services to new customers, caused by
long sales cycles and competition. 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.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

        This discussion and analysis of our financial condition and results of
operations are based on our consolidated financial statements that have been
prepared under accounting principles generally accepted in the United States.
The preparation of financial statements requires our management to make
estimates and assumptions that affect the reported amount of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting periods. Actual results could
materially differ from those estimates. We have disclosed all significant
accounting policies in Note 1 to the consolidated financial statements included
in this annual report on Form 10-K. The consolidated financial statements and
the related notes thereto should be read in conjunction with the following
discussion of our critical accounting policies. Critical accounting policies and
estimates are:

        o       Revenue Recognition
        o       Valuation of Capitalized Software
        o       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 revenue 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 by SOP 98-4, "Deferral of the Effective Date of
SOP 97-2, Software Revenue Recognition" and SOP 98-9, "Modification of SOP 97-2
with Respect to Certain Transactions." Revenue from the sale of software
licenses is predominately from standardized software and is recognized when
standard 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 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 recognized 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 revenue is 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.

                                       22

<PAGE>


        LICENSE REVENUE

        We recognize our license revenue upon delivery, provided 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 has been 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 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 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 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

        Our 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. We believe that accounts
receivable credit risk exposure beyond such allowance is limited.

                                       23

<PAGE>


RESULTS OF OPERATIONS

        The following table sets forth, for the years indicated, certain items
from the consolidated statements of operations expressed as a percentage of
total revenues:
<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31,
                                                               -------------------------------
                                                                2006         2005         2004
                                                               -----        -----        -----
<S>                                                             <C>          <C>          <C>
REVENUES:
         License                                                18.9%        18.2%        37.0%
         Maintenance                                            47.6         50.1         47.0
         Professional Services                                  16.1         14.7          9.3
         Applications Service Provider ("ASP") Services         17.4         17.0          6.7
                                                               -----        -----        -----
         TOTAL REVENUES                                        100.0        100.0        100.0
                                                               -----        -----        -----
COST OF REVENUES:
         License                                                17.6         21.6         16.2
         Maintenance                                            41.3         39.0         29.9
         Professional Services                                   7.8          6.9          4.7
         ASP Services                                            5.2          2.6          1.4
                                                               -----        -----        -----
         TOTAL COST OF REVENUES                                 71.9         70.1         52.2
                                                               -----        -----        -----
         DIRECT MARGIN                                          28.1         29.9         47.8
                                                               -----        -----        -----
OPERATING EXPENSES:
         Sales and Marketing                                    12.9         16.9         13.6
         General and Administrative                             20.1         19.7         15.1
         Research and Development                                6.4         11.1          8.2
         Provision for Doubtful Accounts                          --           --          0.2
                                                               -----        -----        -----
         TOTAL OPERATING EXPENSES                               39.4         47.7         37.1
                                                               -----        -----        -----
         OPERATING INCOME (LOSS)                               (11.3)       (17.8)        10.7
                                                               -----        -----        -----
OTHER EXPENSE (INCOME):
         Interest Expense                                        2.3          2.5          2.0
         Interest Expense - Related Party                        0.1          0.1          0.1
         Interest Income                                          --         (0.1)        (0.0)
         Other Expense                                            --           --          0.0
         Other Income                                             --         (0.5)        (0.2)
                                                               -----        -----        -----
         TOTAL OTHER EXPENSE                                     2.4          2.0          1.9
                                                               -----        -----        -----
         (LOSS) INCOME BEFORE INCOME TAXES EXPENSE             (13.7)       (19.8)         8.8
                                                               -----        -----        -----
INCOME TAXES (EXPENSE):                                           --           --          0.5
                                                               -----        -----        -----
         NET (LOSS) INCOME                                     (13.7)%      (19.8)%        8.3%
                                                               -----        -----        -----
</TABLE>

YEAR ENDED DECEMBER 31, 2006 COMPARED WITH YEAR ENDED DECEMBER 31, 2005

        REVENUES

        Total revenues were $7,288,000 for the year ended December 31, 2006
compared to $7,255,000 for the year ended December 31, 2005. License fees were
$1,376,000 for the year ended December 31, 2006 compared to $1,323,000 in the
same period in 2005 as a result of no new customer sales and sales to existing
customers in 2006 and one new customer license in 2005. For the year ended
December 31, 2006,

                                       24

<PAGE>


maintenance revenues were $3,471,000 compared to $3,637,000 in the same period
of the prior year, due in part to the non-renewal of several existing customers.
Professional services revenue contributed $1,177,000 for the year ended December
31, 2006 compared to $1,064,000 for the year ended December 31, 2005 as a result
of increased demand for new software capabilities and customizations from our
current customer base. ASP revenues were $1,265,000 for the year ended December
31, 2006 compared to $1,231,000 for the year ended December 31, 2005 due
primarily to an expanded and extended contractual relationship with a large
customer.

        Cost of sales increased to $5,244,000 for the year ended December 31,
2006 as compared to $5,087,000 for 2005, due to staff-related expenses. Non-cash
capitalized software amortization was $1,114,000 for the year ended December 31,
2006 as compared to $981,000 in 2005. We capitalized software development costs
of $888,000 in 2006 compared to $701,000 in 2005.

        EXPENSES

        RESEARCH AND DEVELOPMENT. Research and development expenses decreased to
$464,000 for the year ended December 31, 2006 from $809,000 in 2005, primarily
due to an increase concentration on capitalizable projects and the need for our
research and development staff to work on implementations of MIC. We continue to
maintain our ongoing effort to enhance the functionality of our products and
solutions.

        SALES AND MARKETING. Sales and marketing expenses decreased to $943,000
for the year ended December 31, 2006 from $1,222,000 in 2005, primarily due to a
reduction in our marketing and sales staff in 2006.

        GENERAL AND ADMINISTRATIVE. General and administrative expenses were
$1,461,000 in 2006 as compared to $1,431,000 in 2005. The increase in the
general and administrative expenses was mainly due to directors fees paid and an
increase in legal fees related to a potential acquisition in 2006.

        OTHER EXPENSE. We had $1,000 of other expense for the year ended
December 31, 2006 compared to $0 of other expense for the year ended December
31, 2005. In 2006, other expense was related to a settlement of late fees
related to one customer.

        OTHER INCOME. We had $3,000 of other income for the year ended December
31, 2006 compared to $39,000 of other income for the year ended December 31,
2005. In 2006 and 2005, other income was related to late fees collected from
customers.

        PROVISION FOR DOUBTFUL ACCOUNTS. We had no provision for doubtful
accounts in 2006 and 2005.

YEAR ENDED DECEMBER 31, 2005 COMPARED WITH YEAR ENDED DECEMBER 31, 2004

        REVENUES

        Total revenues were $7,255,000 for the year ended December 31, 2005
compared to $9,274,000 for the year ended December 31, 2004. License fees were
$1,323,000 for the year ended December 31, 2005 compared to $3,435,000 in the
same period in 2004 as a result of only one new customer sale and fewer sales to
existing customers in 2005 and a license renewal by a major customer in 2004.
For the year ended December 31, 2005, maintenance revenues were $3,637,000
compared to $4,356,000 in the same period of the prior year, due in part to the
loss of a few customers and implementation delays for some customers upgrading
to the new software, which delayed maintenance billing for their new software
capabilities. Professional services revenue contributed $1,064,000 for the year
ended December 31, 2005 compared to $866,000 for the year ended December 31,
2004 as a result of increased demand for new software capabilities

                                       25

<PAGE>


and customizations from our current customer base. ASP revenues were $1,231,000
for the year ended December 31, 2005 compared to $617,000 for the year ended
December 31, 2004 due to an expanded and extended contractual relationship with
a very large customer.

        Cost of sales increased to $5,087,000 for the year ended December 31,
2005 as compared to $4,836,000 for 2004, due to staff-related expenses. Non-cash
capitalized software amortization was $981,000 for the year ended December 31,
2005 as compared to $1,008,000 in 2004. We capitalized software development
costs of $701,000 in 2005 compared to $988,000 in 2004.

        EXPENSES

        RESEARCH AND DEVELOPMENT. Research and development expenses increased to
$809,000 for the year ended December 31, 2005 from $760,000 in 2004, primarily
due to the ongoing effort to enhance the functionality of our products and
solutions.

        SALES AND MARKETING. Sales and marketing expenses decreased to
$1,222,000 for the year ended December 31, 2005 from $1,257,000 in 2004,
primarily due to a reduction in our marketing and sales staff in 2005.

        GENERAL AND ADMINISTRATIVE. General and administrative expenses were
$1,431,000 in 2005 as compared to $1,404,000 in 2004. The increase in the
general and administrative expenses was mainly due to directors fees paid and an
increase in legal fees in 2005.

        OTHER INCOME. We had $39,000 of other income for the year ended December
31, 2005 compared to $17,000 of other income for the year ended December 31,
2004. In 2005 and 2004, other income was related to late fees collected from
customers.

        PROVISION FOR DOUBTFUL ACCOUNTS. We had no provision for doubtful
accounts in 2005. We had a $22,000 provision for doubtful accounts in 2004.

LIQUIDITY AND CAPITAL RESOURCES

        SOURCES OF LIQUIDITY

        We have funded our operations primarily from cash flow from operations
and the proceeds from our 2008 Debentures and our 2009 Debentures. 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 December 31, 2006, we had cash and cash equivalents of $132,000
compared to cash and cash equivalents of $296,000 at December 31, 2005. The
decrease in cash and cash equivalents is primarily attributable to the decrease
in maintenance revenue.

        CASH FLOWS

                                       26

<PAGE>


        In 2001 and 2002, we raised an aggregate of $2,500,000 in two rounds of
debt financing through the sale of our 2008 Debentures, with an aggregate
principal amount of $1,800,000, and our 2009 Debentures, with an aggregate
principal amount of $700,000, respectively. Interest on the unpaid principal
amount of the outstanding debentures is payable monthly at the rate of 8% per
annum. We had been required repay principal on the 2008 Debentures and 2009
Debentures since July 2004 and July 2005, respectively, in monthly installments
of ten dollars ($10) per thousand dollars ($1,000) of the then-remaining
principal amount of such debentures. Since 2004 and 2005, the holders of our
2008 Debentures and 2009 Debentures, respectively, have elected to convert all
of our required monthly installment payments of principal into shares of our
common stock at the conversion rate of $.30 per share in lieu of receiving such
payments in cash. On March 23, 2007, the RENN funds elected to convert all of
their remaining unpaid principal amount due on their 2008 Debentures and 2009
Debentures, totaling $1,631,601. After giving effect to this conversion, as of
March 23, 2007, our only outstanding debentures are an aggregate principal
amount of $295,880 that remains outstanding on the 2008 Debentures. The 2008
Debentures mature on July 1, 2008, unless they are earlier redeemed by us or the
holder or converted into shares of our common stock at the holder's option at a
conversion price of $0.30 per share, subject to adjustment. We may redeem the
debentures for cash at 101% of the principal amount, together with accrued and
unpaid interest through the redemption date, upon the occurrence of certain
events specified in the debentures.

        Our ability to generate cash has depended on a number of different
factors, primarily our ability to continue to secure and retain 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. We may require
a significant amount of cash to service our indebtedness, which consists
primarily of our obligations to make monthly principal and interest payments on
our outstanding debentures.

        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. Income statement items that should be
considered in assessing our liquidity include revenue, cost of revenue (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.

        In December 31, 2006, we had working capital deficit of $898,000
compared to working capital deficit of $237,000 at December 31, 2005. This
decrease in our working capital resulted primarily from a decrease in our
maintenance revenues. Net cash provided from operating activities totaled
approximately $738,000 in 2006 compared to approximately $1,041,000 in 2005. In
2006, 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.

        In 2006, net cash used for investing activities was approximately
$907,000 compared to approximately $910,000 in 2005. We expect capital
expenditures and capital software expenditures to continue to be funded by cash
generated from operations.

        In 2006, net cash provided from financing activities was approximately
$4,000 compared to approximately $21,000 in 2005. The cash provided from
financing activities in 2006 and 2005 consisted of proceeds from the exercise of
stock options.

                                       27

<PAGE>


        FUNDING REQUIREMENTS

        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. In May 2005, we moved our headquarters and purchased
new furniture to meet our current needs and anticipated growth.

        We have been required to repay principal on the 2008 Debentures and 2009
Debentures since July 1, 2004 and July 1, 2005, respectively, in monthly
installments of ten dollars ($10) per thousand dollars ($1,000) of the
then-remaining principal amount of such debentures, and at maturity we will be
required to pay the remaining unpaid principal amount.

        As of December 31, 2006, we were not in compliance with the financial
covenants set forth in the convertible loan agreements governing these
debentures, and as of such date, we received limited waivers to the convertible
loan agreements under which the holders of the debentures waived such
non-compliance.

        In 2006, the holders of the 2008 Debentures and the 2009 Debentures
elected to convert an aggregate of $127,254 in principal of such debentures,
representing a portion of their monthly installments of principal under such
debentures (in lieu of receiving such installment payments in cash), for shares
of our common stock at the conversion price of $0.30 per share. In January 2007,
the holders of the debentures elected to convert the remaining portion of their
monthly principal installments due in 2006, totaling $119,807, into shares of
our common stock at the conversion price of $0.30 per share in lieu of receiving
such installment payments in cash. As of December 31, 2006, we repaid $385,777
aggregate principal amount of the 2008 Debentures and $66,933 aggregate
principal amount of the 2009 Debentures, and after giving effect to the
conversion, as of December 31, 2006, the 2008 Debentures and 2009 Debentures had
an aggregate outstanding principal amount of $2,470,290. We made an aggregate of
$173,308 of interest payments on the debentures during 2006.

        On March 23, 2007, the RENN funds elected to convert the remaining
unpaid principal amount due on their 2008 Debentures and 2009 Debentures. As of
March 23, 2007, an aggregate principal amount of $295,880 remains outstanding on
the 2008 Debentures. In 2007, we will be required to make payments of $33,616 in
principal amount of the 2008 Debentures and we expect to make interest payments
of approximately $2,700 in the aggregate during 2007. In addition, upon maturity
of our 2008 Debentures in July 2008, we will be required to repay the
outstanding principal balance on our 2008 Debentures, which is expected to be
approximately $262,264.

        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. Comparing
estimated cash receipts to estimated payments, we evaluate our ending cash
balance monthly and determine whether our anticipated cash flows from operations
will be sufficient to meet our normal operating needs for at least the next
twelve months.

        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 and make payments on or refinance our
indebtedness 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. If the holders of our
outstanding 2008

                                       28

<PAGE>


Debentures do not elect to convert their debentures, we will require cash to
service our indebtedness, which consists primarily of our obligations to make
monthly principal and interest payments on the debentures.

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

                o       Our ability to generate cash is subject to general
                        economic, financial, competitive and other factors
                        beyond its control.
                o       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.
                o       We experience intense competition in our industry and
                        continuing technological changes.
                o       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.
                o       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.
                o       Our operations continue to depend upon the continuing
                        business of our existing customers and our ability to
                        attract new customers.
                o       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 cannot be assured that our cash flow from operations will be
sufficient, or that future borrowing will be available, to enable us to pay our
indebtedness. Furthermore, we cannot be assured that any or all of the holders
of our outstanding debentures will continue to elect to convert all or a portion
of their monthly cash installments of principal into shares of our common stock
in any future periods. If we are unable to pay our indebtedness through cash
flows from operations, we may need additional financing, and we cannot be
certain that we will be able to obtain additional financing with favorable
terms.

        We do not expect for there to be a change in the mix or relative cost of
our sources of capital. If we were to seek to obtain additional capital, we
would be required to obtain approval from the holders of our debentures. We do
not foresee difficulty in obtaining such approval, but we have not recently
sought approval to raise additional capital.

        NET OPERATING LOSS CARRYFORWARDS

        At December 31, 2006, we had approximately $26,700,000 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 our outstanding convertible debentures and the conversion of
outstanding warrants, 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.

                                       29

<PAGE>



CONTRACTUAL OBLIGATIONS

        The following table summarizes our significant contractual obligations
at December 31, 2006, and the effect such obligations are expected to have on
our liquidity and cash flows in future periods(1):
<TABLE>
<CAPTION>
                                         PAYMENTS DUE BY PERIOD
                                         ----------------------
                                         (DOLLARS IN THOUSANDS)

                                                             LESS                               MORE
                                                             THAN         1-3        3-5        THAN
                                                TOTAL       1 YEAR       YEARS      YEARS      5 YEARS
                                              --------      ------      ------      ------     -------
       CONTRACTUAL OBLIGATIONS
---------------------------------------
<S>                                             <C>         <C>         <C>         <C>         <C>
Operating Leases..........................      $2,556      $  488      $1,361      $1,256      $  359

8% Convertible Debentures due
  2008 - principal(2)(3) .................       1,414         234       1,414          --          --

8% Convertible Debentures due
  2008 - interest(2) .....................         145         100         145          --          --

8% Convertible Debentures due
  2009 - principal(2)(4)..................         621          93         621         468          --

8% Convertible Debentures due
  2009 - interest(2) .....................         109          45         109          24          --
                                              --------      ------      ------      ------     -------
Total.....................................      $4,845      $  960      $3,650      $1,748      $  359
                                              --------      ------      ------      ------     -------
</TABLE>

-------------------------------------------

        (1) On March 23, 2007, the RENN funds elected to convert the remaining
unpaid principal amount due on their 2008 Debentures and 2009 Debentures. As of
March 23, 2007, an aggregate principal amount of $295,880 remains outstanding on
the 2008 Debentures and the 2009 Debentures are no longer outstanding.

        (2) In 2001, we issued 8% Convertible Debentures due 2008 with an
aggregate principal amount of $1,800,000, and in 2002, we issued 8% Convertible
Debentures due 2009 with an aggregate principal amount of $700,000. We have been
required to repay principal on the 2008 Debentures and 2009 Debentures since
July 1, 2004 and July 1, 2005, respectively, in monthly installments of ten
dollars ($10) per thousand dollars ($1,000) of the then remaining principal
amount of such debentures, and at maturity we will be required to pay the
remaining unpaid principal amount.

        (3) Since July 1, 2004, the holders of the 2008 Debentures elected to
convert a portion of their monthly principal installments, totaling $385,777,
under such debentures into shares of our common stock at the conversion price of
$0.30 per share in lieu of receiving such installments in cash.

        (4) Since July 1, 2005, the holders of the 2009 Debentures elected to
convert a portion of their monthly principal installments, totaling $66,933,
under such debentures into shares of our common stock at the conversion price of
$0.30 per share in lieu of receiving such installments in cash.

                                       30

<PAGE>



OFF-BALANCE-SHEET ARRANGEMENTS

        As of December 31, 2006, we did not have any significant
off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation
S-K.

RECENTLY ISSUED ACCOUNTING STANDARDS

        In September 2006, the SEC issued Staff Accounting Bulletin 108 ("SAB
108"), which expresses the Staff's views regarding the process of quantifying
financial statement misstatements. The bulletin was effective at fiscal year end
2006. The implementation of this bulletin had no impact on our results of
operations, cash flows or financial position.

        In September 2006, the FASB issued Statement No. 157, FAIR VALUE
MEASUREMENTS ("SFAS 157"). SFAS 157 defines fair value, establishes a framework
for measuring fair value in GAAP, and expands disclosures about fair value
measurements. SFAS 157 will be applied prospectively and will be effective for
periods beginning after November 15, 2007. We are currently evaluating the
effect, if any, of SFAS 157 on our consolidated financial statements.

        In June 2006, the FASB issued FASB interpretation ("FIN") No. 48.
ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES-AN INTERPRETATION OF FASB STATEMENT
NO. 109 ("FIN 48"). FIN 48 prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return FIN 48 also provides
guidance on derecognition, classification, treatment of interest and penalties,
and disclosure of such positions. FIN 48 will be applied prospectively and will
be effective for fiscal years beginning after December 31, 2006. We will adopt
the provisions of FIN 48 in the first quarter of 2007 as required. The adoption
of FIN 48 is not expected to have a material effect on our consolidated
financial statements.

        In June 2006, the EITF ratified EITF Issue 06-3, How Taxes Collected
From Customers and Remitted to Governmental Authorities Should Be Presented in
the Income Statement (That Is, Gross versus Net Presentation). A consensus was
reached by the EITF that entities may adopt a policy of presenting taxes in the
income statement on either a gross or net basis. An entity should disclose its
policy of presenting taxes and the amount of any taxes presented on a gross
basis should be disclosed, if significant. The guidance is effective for periods
beginning after December 15, 2006. We present revenues net of taxes. We do not
believe that EITF 06-3 will impact the method for recording these sales taxes in
our consolidated financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        We are exposed to the impact of interest rate changes and changes in the
market value of our investments.

        INTEREST RATE RISK. Our exposure to market rate risk for changes in
interest rates relates primarily to our investment portfolio. We have not used
derivative financial instruments in our investment portfolio. We invest our
excess cash in a major bank money market account. We protect and preserve our
invested funds by limiting default, market and reinvestment risk. Investments in
this account carry a degree of interest rate risk. Fixed rate securities may
have their fair market value adversely impacted due to a rise in interest rates,
while floating rate securities may produce less income than expected if interest
rates fall. Due in part to these factors, our future investment income may fall
short of expectations due to changes in interest rates or we may suffer losses
in principal if forced to sell securities which have declined in market value
due to changes in interest rates.

                                       31

<PAGE>


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The financial statements and supplementary data listed in Item 15(a)(1)
and (2) of this report are included beginning on page F-1 herein.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

        None.

ITEM 9A.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). Based upon that evaluation, we concluded that our disclosure controls and
procedures are effective in timely alerting them to material information
relating to us (including our consolidated subsidiaries) required to be
disclosed in the our reports filed or submitted under the Exchange Act. There
has been no change in the our internal control over financial reporting during
the quarter ended December 31, 2006 that has materially affected, or is
reasonably likely to materially affect, the our internal control over financial
reporting.

ITEM 9B.OTHER INFORMATION

        Not applicable.

                                       32

<PAGE>



                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        The information required by this Item regarding directors of the
registrant will be included in the Proxy Statement under the caption "Election
of Directors" and is incorporated herein by reference.

        The information required by this Item concerning our Audit Committee
financial expert will be included in the Proxy Statement and is incorporated
herein by reference.

        The information required by this Item concerning our Code of Ethics and
Business Conduct will be included in the Proxy Statement and is incorporated
herein by reference.

EXECUTIVE OFFICERS OF THE REGISTRANT

        The following table sets forth certain information, as of March 30,
2007, regarding our executive officers:

        NAME                      AGE            POSITION
        ----                      ---            --------
        John W. Roblin             62      President and Chief Executive Officer
        Maryanne Z. Gallagher      45      Chief Operating Officer
        Manish D. Shah             35      Chief Technology Officer
        Ann F. Massey              48      Chief Financial Officer

        The biographies of our executive officers are set forth below:

        JOHN W. ROBLIN has served as our President and Chief Executive Officer
since December 1999 and as a director since March 2000. He was named Chairman of
the Board of Directors in February 2001. Prior to joining us, Mr. Roblin was
Chief Information Officer and Senior Vice President for CIGNA Property and
Casualty, positions he held since 1998. From 1994 until 1998, he was Chief
Information Officer and Senior Vice President for Advanta Corporation. Prior to
1994, he was the Chief Information Officer at Chubb & Son, USF&G and Traveler's
Personal Lines Division.

        MARYANNE Z. GALLAGHER has served as our Chief Operating Officer since
February 2001. Prior to holding that position, Ms. Gallagher served as our
Senior Vice President since January 2000. From November 1998 until December
1999, Ms. Gallagher served as our Vice President - Customer Service. Ms.
Gallagher joined us in 1990 and has held various development and support
positions in our Classic division through 1998.

        MANISH D. SHAH has served as our Chief Technology Officer since May
2004. Mr. Shah served as our Director of Technology from December 2002 through
May 2004 and served as our technology consultant from September 2000 through
December 2001. Prior to joining us, Mr. Shah held several technology management
positions at various companies such as Andersen Consulting, P&O Nedlloyd and
Tata Consultancy Services in different industries for over 10 years.

        ANN F. MASSEY has served as our Chief Financial Officer since February
2001, as our Secretary since April 1997 and as our Controller since March 1997.
From March 1996 to March 1997, Ms. Massey served as

                                       33

<PAGE>


our Assistant Treasurer. From 1994 until February 1996, Ms. Massey served as
Assistant Controller for our insurance services division. Prior to 1994, Ms.
Massey had served as our Accounting Manager.

ITEM 11. EXECUTIVE COMPENSATION

        The information required by this Item will be included in the Proxy
Statement and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The information required by this Item will be included in the Proxy
Statement and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        The information required by this Item will be included in the Proxy
Statement and is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

        The information required by this Item will be included in the Proxy
Statement and is incorporated herein by reference.

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

   (a)   THE FOLLOWING ARE FILED AS A PART OF THIS REPORT.

        (1)     FINANCIAL STATEMENTS

                Reference is made to the Index to Financial Statements on Page
                42.

        (2)     FINANCIAL STATEMENT SCHEDULE

                II - Valuation and qualifying
                accounts....................................................F-25

                All other schedules are omitted since the required information
                is not present or is not present in amounts sufficient to
                require submission of the schedules, or because the information
                required is included in the financial statements and notes
                thereto.

        (3)     EXHIBITS.

        The following is a list of exhibits required by Item 601 of Regulation
S-K filed as part of this Form 10-K. For exhibits incorporated by reference, the
location of the exhibit in the previous filing is indicated in parentheses.

                                       34

<PAGE>


EXHIBIT NO.       DESCRIPTION
-----------       -----------
     2          Certificate of Merger of the Company Computer Systems, Inc. (a
                New York corporation) into the Registrant, filed on June 11,
                1985 [incorporated by reference to Exhibit 2 to the Registrant's
                Annual Report on Form 10-K (Commission File No. 0-13124) filed
                on January 29, 1986].

     3(a)       Certificate of Incorporation of the Registrant filed on April
                22, 1985 [incorporated by reference to Exhibit 3(a) to the
                Registrant's Annual Report on Form 10-K (Commission File No.
                0-13124) filed on January 29, 1986].

     3(b)       Certificate of Amendment of Certificate of Incorporation of the
                Registrant filed on May 6, 1987 [incorporated by reference to
                Exhibit 3.2 to the Registrant's Registration Statement on Form
                S-1 (Commission File No. 33-17533) filed on September 29, 1987].

     3(c)       Certificate of Amendment of Certificate of Incorporation of the
                Registrant filed on March 26, 1990 [incorporated by reference to
                Exhibit 3(d) to the Registrant's Quarterly Report on Form 10-Q
                (Commission File No. 0-13124) filed on June 14, 1990].

     3(d)       Certificate of Amendment of Certificate of Incorporation of the
                Registrant filed on March 18, 1992 [incorporated by reference to
                Exhibit 1 to the Registrant's Current Report on Form 8-K
                (Commission File No. 0-13124) filed on March 30, 1992].

     3(e)       Certificate of Amendment of Certificate of Incorporation of the
                Registrant [incorporated by reference to Exhibit 3(e) to the
                Registrant's Amendment No. 1 to Registration Statement on Form
                S-3 (Commission File No. 0-13124) filed on July 10, 1996].

     3(f)       Certificate of Amendment of Certificate of Incorporation of the
                Registrant filed on July 12, 2000 [incorporated by reference to
                Exhibit 3(g) to the Registrant's Quarterly Report on Form 10-Q
                (Commission File No. 0-13124) filed on August 11, 2000].

     3(g)       Bylaws of the Registrant, as amended [incorporated by reference
                to Exhibit 3(g) to the Registrant's Amendment No. 1 to
                Registration Statement on Form S-3 (Commission file No. 0-13124)
                filed on July 10, 1996].

     4          Form of Common Stock Certificate of the Registrant [incorporated
                by reference to Exhibit 4(a) to the Registrant's Annual Report
                on Form 10-K (Commission File No. 0-13124) filed on January 29,
                1986].

     10(a)      Warner Insurance Services, Inc. Tax Saver 401(k) Salary
                Reduction Plan adopted May 31, 1985 and restated as of August
                11, 1992 [incorporated by reference to Exhibit 10(k) to the
                Registrant's Annual Report on Form 10-K (Commission File No.
                0-13124) filed on January 28, 1993].

     10(b)(1)+  1994 Stock Option Plan for Independent Directors adopted by
                the Board of Directors of the Registrant on November 10, 1994
                [incorporated by reference to Exhibit 10(n)(1) to the
                Registrant's Annual Report on Form 10-K (Commission File No.
                0-13124) filed on April 17, 1995].

     10(c)(2)+  The 1995 Employee Stock Option Plan, adopted by the Board of
                Directors of the Registrant on March 22, 1995 [incorporated by
                reference to Exhibit 10(o)(1) to the Registrant's Annual Report
                on Form 10-K (Commission File No. 0-13124) filed on April 17,
                1995].

     10(c)(3)+  Form of Incentive Stock Option Agreement under the 1995 Employee
                Stock Option Plan [incorporated by reference to Exhibit 10(o)(2)
                to the Registrant's Annual Report on Form 10-K (Commission File
                No. 0-13124) filed on April 17, 1995].

                                       35

<PAGE>


     10(c)(4)+  Form of Non-Qualified Stock Option Agreement under the 1995
                Employee Stock Option Plan [incorporated by reference to Exhibit
                10(o)(3) to the Registrant's Annual Report on Form 10-K
                (Commission File No. 0-13124) filed on April 17, 1995].

     10(c)(5)+  The 1995 Employee Stock Option Plan, as amended on April 29,
                1997 by the stockholders of the Registrant [incorporated by
                reference to Exhibit 10(o)(4) to the Registrant's Annual Report
                on Form 10-K (Commission File No. 0-13124) filed on March 31,
                1998].

     10(c)(6)+  The 1995 Employee Stock Option Plan, as amended on June 22, 2000
                by the stockholders of the Company [incorporated by reference to
                Exhibit 10(c)(5) to the Registrant's Quarterly Report on Form
                10-Q (Commission File No. 0-13124) filed on May 13, 2002].

     10(c)(7)+  Summary of 2005 Non-Employee Director Compensation dated March
                23, 2005 [incorporated by reference to Exhibit 99.1 the
                Registrant's Form 8-K (Commission File No. 0-13124) filed on
                March 24, 2005].

     10(c)(8)+  Amendment to Non-Qualified Stock Option Agreement, dated as of
                December 20, 2004, between the Registrant and Mark D. Johnston
                [incorporated by reference to Exhibit 10(c)(8) to the
                Registrant's Quarterly Report on Form 10-Q (Commission File No.
                0-13124) filed on August 15, 2005].

     10(c)(9)+  Amendment to Non-Qualified Stock Option Agreement, dated as of
                December 20, 2004, between the Registrant and Earl Gallegos
                [incorporated by reference to Exhibit 10(c)(9) to the
                Registrant's Quarterly Report on Form 10-Q (Commission File No.
                0-13124) filed on August 15, 2005].

     10(c)(10)+ Amendment to Incentive Stock Option Agreement, dated as of
                December 20, 2004, between the Registrant and John Roblin
                [incorporated by reference to Exhibit 10(c)(10) to the
                Registrant's Quarterly Report on Form 10-Q (Commission File No.
                0-13124) filed on August 15, 2005].

     10(c)(11)+ Amendment to Incentive Stock Option Agreement, dated as of
                December 20, 2004, between the Registrant and John Roblin
                [incorporated by reference to Exhibit 10(c)(11) to the
                Registrant's Quarterly Report on Form 10-Q (Commission File No.
                0-13124) filed on August 15, 2005].

     10(c)(12)+ Cover-All Technologies Inc. 2005 Stock Incentive Plan
                [incorporated by reference to Exhibit 10(a) the Registrant's
                Form 8-K (Commission File No. 0-13124) filed on June 8, 2005].

     10(c)(13)+ Cover-All Technologies, Inc. Amended and Restated 2005 Stock
                Incentive Plan [incorporated by reference to Exhibit 10(c)(13)
                the Registrant's Quarterly Report on Form 10-Q (Commission File
                No. 0-13124) filed on May 15, 2006].

     10(c)(14)+ Form of Non-Qualified Stock Option Agreement [incorporated by
                reference to Exhibit 10(c)(14) the Registrant's Quarterly Report
                on Form 10-Q (Commission File No. 0-13124) filed on May 15,
                2006].

     10(c)(15)+ Form of Incentive Stock Option Agreement [incorporated by
                reference to Exhibit 10(c)(15) the Registrant's Quarterly Report
                on Form 10-Q (Commission File No. 0-13124) filed on May 15,
                2006].

     10(c)(16)+ Form of Restricted Stock Grant Agreement [incorporated by
                reference to Exhibit 10(c)(16) the Registrant's Quarterly Report
                on Form 10-Q (Commission File No. 0-13124) filed on May 15,
                2006].

                                       36

<PAGE>


     10(c)(17)+ Form of Non-Qualified Stock Option Agreement (for
                Consultants) [incorporated by reference to Exhibit 10(c)(13) the
                Registrant's Quarterly Report on Form 10-Q (Commission File No.
                0-13124) filed on May 15, 2006].

     10(d)(1)   Lease Agreement, dated March 3, 2005, by and between the
                Registrant and Fairfield 80 Venture, LLC [incorporated by
                reference to Exhibit 10(d)(4) to the Registrant's Annual Report
                on Form 10-K (Commission File No. 0-13124) filed on March 25,
                2005].

     10(e)(1)+  Employment Agreement, dated December 31, 2003, by and between
                the Registrant and John Roblin [incorporated by reference to
                Exhibit 10(e)(3) to the Registrant's Annual Report on Form 10-K
                (Commission File No. 0-13124) filed on March 29, 2004].

     10(e)(2)+  Letter Agreement, dated May 11, 2005, between the Registrant
                and John Roblin [incorporated by reference to Exhibit 10(e)(4)
                to the Registrant's Quarterly Report on Form 10-Q (Commission
                File No. 0-13124) filed on May 13, 2005].

     10(e)(3)+  Tuition Reimbursement Agreement, dated September 1, 2006,
                between the Registrant and Manish D. Shah [incorporated by
                reference to Exhibit 10(p) to the Registrant's Form 8-K
                (Commission File No. 0-13124) filed on September 1, 2006].

     10(e)(4)+  Employment Agreement, dated December 26, 2006, by and between
                the Registrant and John Roblin [incorporated by reference to
                Exhibit 10(e)(5) to the Registrant's Form 8-K (Commission File
                No. 0-13124) filed on December 27, 2006].

     10(f)(1)   Stock Purchase Agreement, dated as of June 9, 2000, between the
                Registrant and Vault Management Limited [incorporated by
                reference to Exhibit 10(p)(2) to the Registrant's Quarterly
                Report on Form 10-Q/A (Commission File No. 0-13124) filed on
                August 24, 2000].

     10(g)(1)   Convertible Loan Agreement, dated June 28, 2001, by and among
                the Company, Renaissance US Growth & Income Trust PLC, a public
                limited company registered in England and Wales, BFSUS Special
                Opportunities Trust PLC, a public limited company registered in
                England and Wales, as lenders, and Renaissance Capital Group,
                Inc., a Texas corporation, as agent [incorporated by reference
                to Exhibit 10(q)(1) to the Registrant's Form 8-K (Commission
                File No. 0-13124) filed on July 11, 2001].

     10(g)(2)   Convertible Debenture No. 1, dated June 28, 2001, issued to
                Renaissance US Growth & Income [incorporated by reference to
                Exhibit 10(q)(2) to the Registrant's Form 8-K (Commission File
                No. 0-13124) filed on July 11, 2001].

     10(g)(3)   Convertible Debenture No. 2, dated June 28, 2001, issued to
                BFSUS Special Opportunities Trust PLC [incorporated by reference
                to Exhibit 10(q)(3) to the Registrant's Form 8-K (Commission
                File No. 0-13124) filed on July 11, 2001].

     10(g)(4)   Pledge Agreement, dated as of June 28, 2001, between the
                Company, Renaissance US Growth & Income Trust PLC, BFSUS Special
                Opportunities Trust PLC and Renaissance Capital Group, Inc.
                [incorporated by reference to Exhibit 10(q)(4) to the
                Registrant's Form 8-K (Commission File No. 0-13124) filed on
                July 11, 2001]. 10(g)(5) Security Agreement (with IP Schedule),
                dated as of June 28, 2001, among the Company, Renaissance US
                Growth & Income Trust PLC, BFSUS Special Opportunities Trust PLC
                and Renaissance Capital Group, Inc. [incorporated by reference
                to Exhibit 10(q)(5) to the Registrant's Form 8-K (Commission
                File No. 0-13124) filed on July 11, 2001].

     10(g)(6)   Subsidiary Guaranty, dated as of June 28, 2001, by Cover-All
                Systems, Inc. in favor of Renaissance US Growth & Income Trust
                PLC and BFSUS Special Opportunities Trust PLC

                                       37

<PAGE>


                [incorporated by reference to Exhibit 10(q)(6) to the
                Registrant's Form 8-K (Commission File No. 0-13124) filed on
                July 11, 2001].

     10(g)(7)   Subsidiary Security Agreement (with IP Schedule), dated as of
                June 28, 2001, among Cover-All Systems, Inc. and Renaissance US
                Growth & Income Trust PLC, BFSUS Special Opportunities Trust PLC
                and Renaissance Capital Group, Inc. [incorporated by reference
                to Exhibit 10(q)(7) to the Registrant's Form 8-K (Commission
                File No. 0-13124) filed on July 11, 2001].

     10(g)(8)   Security Agreement, dated as of June 28, 2001, among the
                Registrant, Renaissance US Growth & Income Trust PLC, BFSUS
                Special Opportunities Trust PLC and Renaissance Capital Group,
                Inc. [incorporated by reference to Exhibit 10(g)(8) to the
                Registrant's Form 10-K/A (Commission File No. 0-13124) filed on
                August 17, 2004].

     10(g)(9)   Subsidiary Security Agreement, dated as of June 28, 2001, among
                Cover-All Systems, Inc. and Renaissance US Growth & Income Trust
                PLC, BFSUS Special Opportunities Trust PLC and Renaissance
                Capital Group, Inc. [incorporated by reference to [Exhibit
                10(g)( )] to the Registrant's Form 10-K/A (Commission File No.
                0-13124) filed on August 17, 2004].

     10(h)(1)   Convertible Loan Agreement, dated June 28, 2001, by and among
                the Company, John Roblin, Arnold Schumsky and Stuart Sternberg,
                and Stuart Sternberg, as agent [incorporated by reference to
                Exhibit 10(r)(1) to the Registrant's Form 8-K (Commission File
                No. 0-13124) filed on July 11, 2001].

     10(h)(2)   Convertible Debenture No. 3, dated June 28, 2001, issued to
                John Roblin [incorporated by reference to Exhibit 10(r)(2) to
                the Registrant's Form 8-K (Commission File No. 0-13124) filed on
                July 11, 2001].

     10(h)(3)   Convertible Debenture No. 4, dated June 28, 2001, issued to
                Arnold Schumsky [incorporated by reference to Exhibit 10(r)(3)
                to the Registrant's Form 8-K (Commission File No. 0-13124) filed
                on July 11, 2001].

     10(h)(4)   Convertible Debenture No. 5, dated June 28, 2001, issued to
                Stuart Sternberg [incorporated by reference to Exhibit 10(r)(4)
                to the Registrant's Form 8-K (Commission File No. 0-13124) filed
                on July 11, 2001].

     10(h)(5)   Security Agreement (with Schedule I), dated as of June 28,
                2001, among the Company, John Roblin, Arnold Schumsky and Stuart
                Sternberg [incorporated by reference to Exhibit 10(r)(5) to the
                Registrant's Form 8-K (Commission File No. 0-13124) filed on
                July 11, 2001].

     10(h)(6)   Subsidiary Guaranty, dated as of June 28, 2001, by Cover-All
                Systems, Inc. in favor of John Roblin, Arnold Schumsky and
                Stuart Sternberg [incorporated by reference to Exhibit 10(r)(6)
                to the Registrant's Form 8-K (Commission File No. 0-13124) filed
                on July 11, 2001].

     10(h)(7)   Subsidiary Security Agreement (with Schedule I), dated as of
                June 28, 2001, among Cover-All Systems, Inc. and John Roblin,
                Arnold Schumsky and Stuart Sternberg [incorporated by reference
                to Exhibit 10(r)(7) to the Registrant's Form 8-K (Commission
                File No. 0-13124) filed on July 11, 2001].

     10(h)(8)   Security Agreement, dated as of June 28, 2001, among the
                Company, John Roblin, Arnold Schumsky and Stuart Sternberg
                [incorporated by reference to Exhibit 10(h)(8) to the
                Registrant's Form 10-K/A (Commission File No. 0-13124) filed on
                August 17, 2004].

     10(h)(9)   Subsidiary Security Agreement, dated as of June 28, 2001, among
                Cover-All Systems, Inc. and John Roblin, Arnold Schumsky and
                Stuart Sternberg [incorporated by reference to Exhibit 10(h)(9)
                to the Registrant's Annual Report on Form 10-K/A (Commission
                File No. 0-13124) filed on August 17, 2004].

                                       38

<PAGE>


     10(h)(10)  Intercreditor Agreement, dated as of June 28, 2001, among
                Renaissance US Growth & Income Trust PLC, BFSUS Special
                Opportunities Trust PLC, and the other debenture holders who are
                signatories to this Agreement [incorporated by reference to
                Exhibit 10(h)(13) to the Registrant's Annual Report on Form
                10-K/A (Commission File No. 0-13124) filed on August 17, 2004].

     10(i)(1)   First Amendment to Convertible Loan Agreements, dated as of
                March 30, 2002, by and among the Company, Renaissance US Growth
                & Income Trust PLC, BFSUS Special Opportunities Trust PLC and
                Renaissance Capital Group, Inc. [incorporated by reference to
                Exhibit 10(l)(10) to the Registrant's Quarterly Report on Form
                10-Q (Commission File No. 0-13124) filed on May 13, 2002].

     10(i)(2)   Form of Warrant issued by the Company to each of the holders
                under the Convertible Loan Agreements [incorporated by reference
                to Exhibit 10(l)(11) to the Registrant's Quarterly Report on
                Form 10-Q (Commission File No. 0-13124) filed on May 13, 2002].

     10(i)(3)   Second Amendment to the Convertible Loan Agreements and First
                Amendment to Intercreditor Agreement, dated as of August 21,
                2002, by and among the Company, Renaissance US Growth & Income
                Trust PLC, a public limited company registered in England and
                Wales, BFSUS Special Opportunities Trust PLC, a public limited
                company registered in England and Wales, as lenders, and
                Renaissance Capital Group, Inc., a Texas corporation, as agent
                [incorporated by reference to Exhibit 10(o)(1) to the
                Registrant's Form 8-K (Commission File No. 0-13124) filed on
                August 23, 2002].

     10(i)(4)   First Amendment to 8.00% Convertible Debentures, dated as of
                August 21, 2002, by and among the Company, Renaissance US Growth
                & Income Trust PLC, a public limited company registered in
                England and Wales, BFSUS Special Opportunities Trust PLC, a
                public limited company registered in England and Wales, as
                lenders, and Renaissance Capital Group, Inc., a Texas
                corporation, as agent, and John Roblin, Arnold Schumsky and
                Stuart Sternberg, as additional lenders, and Stuart Sternberg,
                as agent for the additional lenders [incorporated by reference
                to Exhibit 10(o)(2) to the Registrant's Form 8-K (Commission
                File No. 0-13124) filed on August 23, 2002].

     10(i)(5)   Form of 8.00% Convertible Debentures, dated August 21, 2002,
                issued by the Registrant to Renaissance US Growth & Income Trust
                PLC and BFSUS Special Opportunities Trust PLC [incorporated by
                reference to Exhibit 10(o)(3) to the Registrant's Form 8-K
                (Commission File No. 0-13124) filed on August 23, 2002].

     10(i)(6)   Acknowledgment, Agreement and Reaffirmation of Guarantors,
                dated as of August 21, 2002, by Cover-All Systems, Inc. in favor
                of Renaissance US Growth & Income Trust PLC and BFSUS Special
                Opportunities Trust PLC [incorporated by reference to Exhibit
                10(o)(4) to the Registrant's Form 8-K (Commission File No.
                0-13124) filed on August 23, 2002].

     10(i)(7)   First Amendment to 8.00% Convertible Debentures Due 2009 and
                Second Amendment to 8.00% Convertible Debentures Due 2008, dated
                as of June 29, 2004 [incorporated by reference to Exhibit
                10(i)(11) to the Registrant's Quarterly Report on Form 10-Q
                (Commission File No. 0-13124) filed on August 13, 2004.]

     10(i)(8)   Third Amendment to the Convertible Loan Agreements, dated as of
                June 29, 2004, by and among the Company, Renaissance US Growth &
                Income Trust PLC, BFSUS Special Opportunities Trust PLC and
                Renaissance Capital Group, Inc. [incorporated by reference to
                Exhibit 10(i)(12) to the Registrant's Quarterly Report on Form
                10-Q (Commission File No. 0-13124) filed on August 13, 2004.]

                                       39

<PAGE>


     10(i)(9)   Form of Revised 8.00% Convertible Debenture Due 2008
                [incorporated by reference to Exhibit 10(i)(13) to the
                Registrant's Quarterly Report on Form 10-Q (Commission File No.
                0-13124) filed on August 13, 2004.]

     10(i)(10)  Form of Revised 8.00% Convertible Debenture Due 2009
                [incorporated by reference to Exhibit 10(i)(14) to the
                Registrant's Quarterly Report on Form 10-Q (Commission File No.
                0-13124) filed on August 13, 2004.]

     10(i)(11)  Limited Waiver to Convertible Loan Agreements, dated as of
                September 30, 2004, by and between Renaissance US Growth
                Investment Trust PLC and BFSUS Special Opportunities Trust PLC
                [incorporated by reference to Exhibit 10(i)(15) to the
                Registrant's Quarterly Report on Form 10-Q (Commission File No.
                0-13124) filed on November 15, 2004.]

     10(i)(12)  Limited Waiver to Convertible Loan Agreements, dated as of
                December 31, 2005, by Renaissance US Growth Investment Trust PLC
                and BFSUS Special Opportunities Trust PLC [incorporated by
                reference to Exhibit 10(i)(12) to the Registrant's Annual Report
                on Form 10-K (Commission File No. 0-13124) filed on March 31,
                2006.]

     10(i)(13)  Limited Waiver to Convertible Loan Agreements, dated as of
                March 31, 2006, by and between Renaissance US Growth Investment
                Trust PLC and BFSUS Special Opportunities Trust PLC
                [incorporated by reference to Exhibit 10(i)(19) to the
                Registrant's Quarterly Report on Form 10-Q (Commission File No.
                0-13124) filed on May 15, 2006.]

     10(i)(14)  Limited Waiver to Convertible Loan Agreements, dated as of
                June 30, 2006, by Renaissance US Growth Investment Trust PLC
                (formerly known as Renaissance US Growth & Income Trust PLC) and
                BFSUS Special Opportunities Trust PLC [incorporated by reference
                to Exhibit 10(i)(20) to the Registrant's Quarterly Report on
                Form 10-Q (Commission File No. 0-13124) filed on August
                14, 2006.]

     10(i)(15)  Limited Waiver to Convertible Loan Agreements, dated as of
                September 30, 2006, by and between Renaissance US Growth
                Investment Trust PLC and BFSUS Special Opportunities Trust PLC
                [incorporated by reference to Exhibit 10(i)(21) to the
                Registrant's Quarterly Report on Form 10-Q (Commission File No.
                0-13124) filed on November 14, 2006.]

     10(i)(16)* Limited Waiver to Convertible Loan Agreements, dated as of
                December 31, 2006, by Renaissance US Growth Investment Trust PLC
                and BFSUS Special Opportunities Trust PLC.

     14         Code of Ethics and Business Conduct [incorporated by reference
                to Exhibit 14 to the Registrant's Annual Report on Form 10-K
                (Commission File No. 0-13124) filed on March 31, 2006.]

     21         Subsidiaries of the Registrant [incorporated by reference to
                Exhibit 21 to the Registrant's Annual Report on Form 10-K
                (Commission File No. 0-13124) filed on April 11, 1996].

     23.1*      Consent of Moore Stephens, P.C.

     23.2*      Consent of Moore Stephens, P.C.

     31.1*      Certification of John W. Roblin, President and Chief Executive
                Officer, pursuant to Securities Exchange Act Rules 13a-14(a) and
                15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.

     31.2*      Certification of Ann F. Massey, Chief Financial Officer,
                pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14,
                as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002.

                                       40

<PAGE>


     32.1*      Certification of President and 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.

+    Denotes a management contract or compensatory plan or arrangement.



                                       41



<PAGE>



COVER-ALL TECHNOLOGIES INC.
--------------------------------------------------------------------------------

INDEX TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


                                                                            PAGE
                                                                            ----

Report of Independent Registered Public Accounting Firm.................    F-1

Consolidated Balance Sheets - December 31, 2006 and 2005................    F-2

Consolidated Statements of Operations - Years Ended December 31, 2006,
2005 and 2004...........................................................    F-4

Consolidated Statements of Changes in Stockholders' [Deficit] -
Years Ended December 31, 2006, 2005 and 2004............................    F-6

Consolidated Statements of Cash Flows - Years Ended December 31,
2006, 2005 and 2004.....................................................    F-7

Notes to Consolidated Financial Statements..............................    F-9

Financial Statement Schedule II -
Valuation and Qualifying Accounts.......................................    F-25

                                       42

<PAGE>



             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of
   Cover-All Technologies Inc.

We have audited the accompanying consolidated balance sheets of Cover-All
Technologies Inc. and its subsidiary as of December 31, 2006 and 2005, and the
related consolidated statements of operations, changes in stockholders'
[deficit], and cash flows for each of the three years in the period ended
December 31, 2006. These consolidated financial statements and the consolidated
financial statement schedule referred to below are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and the consolidated financial statement
schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements, assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Cover-All Technologies Inc. and its subsidiary as of December 31, 2006 and 2005,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 2006, in conformity with
accounting principles generally accepted in the United States of America. Our
audit was made for the purpose of forming an opinion on the basic consolidated
financial statements taken as a whole. The schedule listed in the index to
consolidated financial statements is the responsibility of Cover-All
Technologies Inc.'s management and is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not part of the basic
consolidated financial statements. The schedule has been subjected to the
auditing procedures applied in the audit of the basic consolidated financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.

As discussed in Note 1 to the consolidated financial statements, effective
January 1, 2006, the Company adopted Statement of Financial Accounting Standards
No. 123(R).

                                                    MOORE STEPHENS, P. C.
                                                    Certified Public Accountants

New York, New York
March 27, 2007

                                      F-1

<PAGE>



COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY
--------------------------------------------------------------------------------

CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                              DECEMBER 31,
                                                                              ------------
                                                                        2006               2005
                                                                    -----------         -----------
<S>                                                                 <C>                 <C>
ASSETS:
CURRENT ASSETS:
   Cash and Cash Equivalents                                        $   131,847         $   296,159
   Accounts Receivable [Less Allowance for Doubtful Accounts
     of $25,000 in 2006 and 2005]                                     1,356,069           1,803,333
   Prepaid Expenses                                                     322,372             526,311
                                                                    -----------         -----------

   TOTAL CURRENT ASSETS                                               1,810,288           2,625,803
                                                                    -----------         -----------

PROPERTY AND EQUIPMENT - AT COST:
   Furniture, Fixtures and Equipment                                    449,796             431,077
   Less: Accumulated Depreciation                                      (251,304)           (188,154)
                                                                    -----------         -----------

   PROPERTY AND EQUIPMENT - NET                                         198,492             242,923
                                                                    -----------         -----------

CAPITALIZED SOFTWARE [LESS ACCUMULATED AMORTIZATION OF
   $9,301,096 AND $8,186,661 IN 2006 AND 2005, RESPECTIVELY]          1,376,437           1,602,836
                                                                    -----------         -----------

DEFERRED FINANCING COSTS [NET OF ACCUMULATED AMORTIZATION OF
   $180,565 AND $146,092 IN 2006 AND 2005, RESPECTIVELY]                 60,746              95,219
                                                                    -----------         -----------

OTHER ASSETS                                                            110,151             110,151
                                                                    -----------         -----------

   TOTAL ASSETS                                                     $ 3,556,114         $ 4,676,932
                                                                    ===========         ===========
</TABLE>


See Notes to Consolidated Financial Statements.

                                      F-2

<PAGE>



COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY
--------------------------------------------------------------------------------

CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                   DECEMBER 31,
                                                                                   ------------
                                                                             2006                 2005
                                                                         ------------         ------------
<S>                                                                      <C>                  <C>
LIABILITIES AND STOCKHOLDERS' [DEFICIT]:
CURRENT LIABILITIES:
   Accounts Payable                                                      $    459,879         $    538,889
   Accrued Liabilities                                                        609,510              484,047
   Deferred Charges                                                             2,532                7,539
   Convertible Debentures                                                     325,796              237,499
   Convertible Debentures - Related Party                                      13,002                9,562
   Unearned Revenue                                                         1,297,581            1,585,556
                                                                         ------------         ------------

   TOTAL CURRENT LIABILITIES                                                2,708,300            2,863,092
                                                                         ------------         ------------

LONG-TERM LIABILITIES:
   Deferred Charges                                                           163,787              151,241
   Convertible Debentures                                                   1,642,926            1,853,594
   Convertible Debentures - Related Party                                      65,566               73,889
                                                                         ------------         ------------

   TOTAL LONG-TERM LIABILITIES                                              1,872,279            2,078,724
                                                                         ------------         ------------

   TOTAL LIABILITIES                                                        4,580,579            4,941,816
                                                                         ------------         ------------

COMMITMENTS AND CONTINGENCIES                                                      --                   --
                                                                         ------------         ------------

STOCKHOLDERS' [DEFICIT]:
   Common Stock, $.01 Par Value, Authorized 75,000,000 Shares;
     19,491,504 and 19,059,823 Shares Issued and 16,991,504 and
     16,559,823 Shares Outstanding in 2006 and 2005, Respectively             194,915              190,598

   Capital In Excess of Par Value                                          26,735,207           26,499,240

   Accumulated Deficit                                                    (27,251,587)         (26,251,722)

   Treasury Stock - At Cost - 2,500,000 Shares                               (703,000)            (703,000)
                                                                         ------------         ------------

   TOTAL STOCKHOLDERS' [DEFICIT]                                           (1,024,465)            (264,884)
                                                                         ------------         ------------

   TOTAL LIABILITIES AND STOCKHOLDERS' [DEFICIT]                         $  3,556,114         $  4,676,932
                                                                         ============         ============
</TABLE>


See Notes to Consolidated Financial Statements.

                                      F-3

<PAGE>



COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY
--------------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                            YEARS ENDED
                                                        ---------------------------------------------------
                                                                            DECEMBER 31,
                                                        ---------------------------------------------------
                                                           2006                2005                2004
                                                        -----------         -----------         -----------
<S>                                                     <C>                 <C>                 <C>
REVENUES:
   Licenses                                             $ 1,375,713         $ 1,322,733         $ 3,435,353
   Maintenance                                            3,471,480           3,637,470           4,355,730
   Professional Services                                  1,176,562           1,063,933             866,186
   Application Service Provider ["ASP"] Services          1,264,740           1,230,750             616,792
                                                        -----------         -----------         -----------

   TOTAL REVENUES                                         7,288,495           7,254,886           9,274,061
                                                        -----------         -----------         -----------

COSTS OF REVENUES:
   Licenses                                               1,280,232           1,566,018           1,504,587
   Maintenance                                            3,013,900           2,834,195           2,773,481
   Professional Services                                    570,222             498,254             431,815
   ASP Services                                             379,767             188,851             126,315
                                                        -----------         -----------         -----------

   TOTAL COSTS OF REVENUES                                5,244,121           5,087,318           4,836,198
                                                        -----------         -----------         -----------

   DIRECT MARGIN                                          2,044,374           2,167,568           4,437,863
                                                        -----------         -----------         -----------

OPERATING EXPENSES:
   Sales and Marketing                                      943,187           1,221,511           1,256,589
   General and Administrative                             1,461,209           1,431,361           1,403,729
   Research and Development                                 464,088             808,847             760,120
   Provision for Doubtful Accounts                               --                  --              22,400
                                                        -----------         -----------         -----------

   TOTAL OPERATING EXPENSES                               2,868,484           3,461,719           3,442,838
                                                        -----------         -----------         -----------

   OPERATING [LOSS] INCOME                                 (824,110)         (1,294,151)            995,025
                                                        -----------         -----------         -----------

OTHER EXPENSE [INCOME]:
   Interest Expense                                         170,829             181,367             191,357
   Interest Expense - Related Party                           6,512               7,169               8,584
   Interest Income                                              (15)             (9,883)             (3,840)
   Other Expense                                              1,377                  --                  --
   Other Income                                              (2,948)            (38,600)            (17,380)
                                                        -----------         -----------         -----------

   TOTAL OTHER EXPENSE                                      175,755             140,053             178,721
                                                        -----------         -----------         -----------

   [LOSS] INCOME BEFORE INCOME TAXES EXPENSE               (999,865)         (1,434,204)            816,304

INCOME TAXES EXPENSE                                             --                  --              48,905
                                                        -----------         -----------         -----------

   NET [LOSS] INCOME                                    $  (999,865)        $(1,434,204)        $   767,399
                                                        ===========         ===========         ===========

See Notes to Consolidated Financial Statements.
</TABLE>

                                      F-4

<PAGE>



COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY
--------------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                               YEARS ENDED
                                                      -----------------------------------------------------------
                                                                               DECEMBER 31,
                                                      -----------------------------------------------------------
                                                           2006                  2005                  2004
                                                      -----------------------------------------------------------
<S>                                                   <C>                   <C>                    <C>
BASIC [LOSS] EARNINGS PER COMMON SHARE                $         (.06)       $          (.09)       $          .05
                                                      ==============        ===============        ==============

DILUTED [LOSS] EARNINGS PER COMMON SHARE              $         (.06)       $          (.09)       $          .04
                                                      ==============        ===============        ==============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
   OUTSTANDING FOR BASIC [LOSS] EARNINGS PER
   COMMON SHARE                                           16,732,000             16,141,000            15,515,000
                                                      ==============        ===============        ==============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
   OUTSTANDING FOR DILUTED [LOSS] EARNINGS PER
   COMMON SHARE [SEE NOTE 6]                              16,732,000             16,141,000            23,995,000
                                                      ==============        ===============        ==============
</TABLE>

See Notes to Consolidated Financial Statements.

                                      F-5

<PAGE>



COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY
--------------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' [DEFICIT]
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                                                    TOTAL
                                                            CAPITAL IN                                           STOCKHOLDERS'
                                                             EXCESS OF          ACCUMULATED     TREASURY           EQUITY
                                       COMMON STOCK          PAR VALUE           DEFICIT          STOCK           [DEFICIT]
                                       ------------        ------------        ------------    ------------     ------------
<S>                <C>                 <C>                 <C>                 <C>             <C>              <C>
BALANCE AT JANUARY 1, 2004             $    178,462        $ 26,150,447        $(25,584,917)   $   (703,000)    $     40,992

   Exercise of 50,750 Stock
     Options                                    508              13,705                  --              --           14,213
   Conversion of $105,335 of
     Convertible Debt [See Note
     10]                                      3,511             101,824                  --              --          105,335
   Net Income                                    --                  --             767,399              --          767,399
                                       ------------        ------------        ------------    ------------     ------------

BALANCE AT DECEMBER 31, 2004                182,481          26,265,976         (24,817,518)       (703,000)         927,939

   Exercise of 78,000 Stock
     Options                                    780              20,480                  --              --           21,260
   Conversion of $220,121 of
     Convertible Debt [See Note
     10]                                      7,337             212,784                  --              --          220,121
   Net [Loss]                                  --                  --            (1,434,204)             --       (1,434,204)
                                       ------------        ------------        ------------    ------------     ------------

BALANCE AT DECEMBER 31, 2005                190,598          26,499,240         (26,251,722)       (703,000)        (264,884)

   Exercise of 7,500 Stock
     Options                                     75               3,900                  --              --            3,975
   Conversion of $127,254 of
     Convertible Debt [See Note
     10]                                      4,242             123,012                  --              --          127,254
   Non-Cash Stock Based
     Compensation                              --               109,055                  --              --          109,055
   Net [Loss]                                  --                  --              (999,865)             --         (999,865)
                                       ------------        ------------        ------------    ------------     ------------

BALANCE AT DECEMBER 31, 2006           $    194,915        $ 26,735,207        $(27,251,587)   $  (703,000)     $ (1,024,465)
                                       ============        ============        ============    ============     ============
</TABLE>

See Notes to Consolidated Financial Statements.

                                      F-6

<PAGE>



COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY
--------------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                YEARS ENDED
                                                            ---------------------------------------------------
                                                                                DECEMBER 31,
                                                            ---------------------------------------------------
                                                               2006                2005                 2004
                                                            -----------         -----------         -----------
<S>                                                         <C>                 <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   [Loss] Income from Continuing Operations                 $  (999,865)        $(1,434,204)        $   767,399
   Adjustments to Reconcile Net [Loss] Income to Net
     Cash Provided by Operating Activities:
     Depreciation                                                63,150              96,146              74,819
     Amortization of Capitalized Software                     1,114,435             981,168           1,008,015
     Amortization of Deferred Financing Costs                    34,473              34,473              34,473
     Provision for Doubtful Accounts                                 --                  --              22,400
     Noncash Stock-Based Compensation                           109,055                  --                  --

   Changes in Assets and Liabilities:
     [Increase] Decrease in:
       Accounts Receivable                                      447,264           1,810,548          (1,956,198)
       Prepaid Expenses                                         203,939             (98,320)            (74,927)
       Other Current Assets                                          --             (50,816)                309

     Increase [Decrease] in:
       Accounts Payable                                         (79,010)              2,420             414,322
       Taxes Payable                                                 --             (48,905)             48,905
       Accrued Liabilities                                      125,464            (345,469)            453,969
       Deferred Charges                                           7,539             197,943                  --
       Unearned Revenue                                        (287,975)           (103,750)           (796,137)
                                                            -----------         -----------         -----------

   NET CASH PROVIDED FROM [USED FOR] CONTINUING
     OPERATING ACTIVITIES                                       738,469           1,041,234              (2,651)
                                                            -----------         -----------         -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital Expenditures                                         (18,719)           (209,403)            (73,118)
   Capitalized Software Expenditures                           (888,037)           (700,556)           (987,993)
                                                            -----------         -----------         -----------

   NET CASH [USED FOR] INVESTING ACTIVITIES                    (906,756)           (909,959)         (1,061,111)
                                                            -----------         -----------         -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from Exercise of Stock Options                        3,975              21,260              14,213
                                                            -----------         -----------         -----------

   [DECREASE] INCREASE IN CASH AND CASH EQUIVALENTS            (164,312)            152,535          (1,049,549)

CASH AND CASH EQUIVALENTS - BEGINNING OF YEARS                  296,159             143,624           1,193,173
                                                            -----------         -----------         -----------

   CASH AND CASH EQUIVALENTS - END OF YEARS                 $   131,847         $   296,159         $   143,624
                                                            ===========         ===========         ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid during the years for:
     Interest                                               $   170,829         $   181,367         $   191,357
     Interest - Related Party                               $     6,512         $     7,169         $     8,584
     Income Taxes                                           $        --         $    50,000         $        --
</TABLE>

See Notes to Consolidated Financial Statements.

                                      F-7

<PAGE>



COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY
--------------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------


SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES:

        In 2006, the holders of the 2008 Debentures and the 2009 Debentures
elected to convert a portion of their monthly principal installments due in
2006, totaling $127,254, under such debentures into shares of our common stock
at the conversion price of $0.30 per share in lieu of receiving such installment
payments in cash. In connection with this conversion, we issued to the holders
of the 2008 Debentures and the 2009 Debentures an aggregate of 424,181 shares of
our common stock. In January 2007, the holders of the 2008 Debentures and the
2009 Debentures elected to convert the remaining portion of their monthly
principal installments due in 2006, totaling $119,807, under such debentures
into shares of our common stock at the conversion price of $0.30 per share in
lieu of receiving such installment payments in cash. In connection with this
conversion, we issued to the holders of the 2008 Debentures and the 2009
Debentures an aggregate of 399,358 shares of our common stock. We made an
aggregate of $173,000 of interest payments on the debentures during 2006.

        In 2005, the holders of the 2008 Debentures and the 2009 Debentures
elected to convert all of their monthly principal installments due in 2005,
totaling $220,121, under such debentures into shares of our common stock at the
conversion price of $0.30 per share in lieu of receiving such installment
payments in cash. In connection with this conversion, we issued to the holders
of the 2008 Debentures and the 2009 Debentures an aggregate of 733,739 shares of
our common stock. We made an aggregate of $189,000 of interest payments on the
debentures during 2005.


        In 2004, the holders of the 2008 Debentures elected to convert all of
their monthly principal installments due in 2004, totaling $105,335, under such
debentures into shares of our common stock at the conversion price of $0.30 per
share in lieu of receiving such installment payments in cash. In connection with
this conversion, we issued to the holders of the 2008 Debentures an aggregate of
351,116 shares of our common stock. We made an aggregate of $200,000 of interest
payments on the debentures during 2004.


See Notes to Consolidated Financial Statements.

                                      F-8

<PAGE>



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


[1] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS - Cover-All Technologies Inc., through its wholly-owned
subsidiary, Cover-All Systems, Inc., licenses and maintains its software
products for the property/casualty insurance industry throughout the United
States and Puerto Rico. The subsidiary also provides professional consulting
services to its customers interested in customizing their software.

PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of Cover-All Technologies Inc. and its wholly-owned subsidiary. All
material intercompany balances and transactions have been eliminated.

USE OF ESTIMATES - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

REVENUE RECOGNITION - Our revenues are recognized in accordance with SOP 97-2,
"Software Revenue Recognition" ["SOP 97-2"], as amended by SOP 98-4, "Deferral
of the Effective Date of SOP 97-2, Software Revenue Recognition" and SOP 98-9,
"Modification of SOP 97-2 with Respect to Certain Transactions." Revenue from
the sale of software licenses is recognized when standardized software modules
are delivered to 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 are recognized ratably over the
lives of the contracts. Revenue from professional services is recognized when
the service is provided.

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.

CASH AND CASH EQUIVALENTS - We consider all highly liquid investments, with a
maturity of three months or less when purchased, to be cash equivalents.

RISK CONCENTRATIONS - Financial instruments which potentially subject us to
concentrations of credit risk consist principally of cash and cash equivalents
and trade accounts receivable. We place our cash and cash equivalents with high
credit quality institutions to limit credit exposure. We believe no significant
concentration of credit risk exists with respect to these investments. The
amount of cash beyond insured amounts at December 31, 2006 and 2005 was
approximately $269,974 and $282,370, respectively.

Concentrations of credit risk with respect to trade accounts receivable are
limited due to the wide variety of customers principally major insurance
companies, who are dispersed across many geographic regions. As of December 31,
2006, four customers accounted for approximately 68% of our trade accounts
receivable portfolio. We routinely assess the financial strength of customers
and, based upon factors concerning credit risk, we establish an allowance for
doubtful accounts. Management believes that accounts receivable credit risk
exposure beyond such allowance is limited.


                                      F-9


<PAGE>



COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #2
--------------------------------------------------------------------------------


[1] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]

IMPAIRMENT OF LONG-LIVED ASSETS - We review our long-lived assets and
identifiable intangibles for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. When such factors and circumstances exist, we compare the projected
undiscounted future cash flows associated with the future use and disposal of
the related asset or group of assets to their respective carrying amounts.
Impairment, if any, is measured as the excess of the carrying amount over the
fair value based on market value (when available) or discounted expected cash
flows of those assets, and is recorded in the period in which the determination
is made.

STOCK-BASED COMPENSATION - On January 1, 2006, we adopted SFAS No. 123R,
"SHARE-BASED PAYMENT," or SFAS 123R, which is a revision of SFAS No. 123
"ACCOUNTING FOR STOCK-BASED COMPENSATION," or SFAS 123, and supersedes APB No.
25, "ACCOUNTING FOR STOCK ISSUES TO EMPLOYEES," or APB 25. Among other items,
SFAS 123R requires companies to record compensation expense for share-based
awards issued to employees and directors in exchange for services provided. The
amount of the compensation expense is based on the estimated fair value of the
awards on their grant dates and is recognized over the required service periods.
Our share-based awards include stock options and restricted stock awards. Prior
to our adoption of SFAS 123R, we applied the intrinsic value method set forth in
APB 25 to calculate the compensation expense for share-based awards.
Historically, we have generally set the exercise price for our stock options
equal to the market value on the grant date. As a result, the options generally
had no intrinsic value on their grant dates, and we did not record any
compensation expense unless the terms of the options were subsequently modified.
For restricted stock awards, the calculation of compensation expense under APB
25 and SFAS 123R is the same.

We adopted SFAS 123R using the modified prospective transition method, which
requires the application of the accounting standard to all share-based awards
issued on or after January 1, 2006 and any outstanding share-based awards that
were issued but not vested as of January 1, 2006. Accordingly, our consolidated
financial statements for the years ended December 31, 2005 and 2004 have not
been restated to reflect the impact of SFAS 123R. For the year ended December
31, 2006, we recognized $109,055 of stock-based compensation expense in our
consolidated financial statements. We recognized expense because we had (a)
stock options granted prior to January 1, 2006 that had not yet vested as of
January 1, 2006 and (b) stock options granted subsequent to January 1, 2006.

The estimated fair value underlying our calculation of compensation expense for
stock options is based on the Black-Scholes 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 the pro-forma
information required under SFAS 123 for periods prior to January 1, 2006, we
accounted for forfeitures as they occurred.

SFAS 123R requires us to calculate the pool of excess tax benefits, or the APIC
pool, available as of January 1, 2006, to absorb tax deficiencies recognized in
subsequent periods, assuming we had applied the provisions of the standard in
prior periods. Pursuant to the provisions of FASB Staff Position 123R-3,
"TRANSITION ELECTION RELATED TO ACCOUNTING FOR THE TAX EFFECTS OF SHARE-BASED
PAYMENT AWARDS," we adopted the alternative method for determining the tax
effects of share-based compensation, which, among other things, provides a
simplified method for estimating the beginning APIC pool balance.

                                      F-10

<PAGE>


COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #3
--------------------------------------------------------------------------------


[1] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]

PROPERTY AND EQUIPMENT - Furniture, fixtures and equipment are carried at cost.
Depreciation is recorded on the straight-line method over three to ten years,
which approximates the estimated useful lives of the assets. Depreciation
expense in 2006, 2005 and 2004 was $63,150, $96,146 and $74,819, respectively.

Routine maintenance and repair costs are charged to expense as incurred and
renewals and improvements that extend the useful life of the assets are
capitalized. Upon sale or retirement, the cost and related accumulated
depreciation are eliminated from the respective accounts and any resulting gain
or loss is reported in the statement of operations.

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

ADVERTISING EXPENSE - We expense advertising costs as incurred. Advertising
expense in 2006, 2005 and 2004 was $63,198, $127,682 and $166,731, respectively.

INCOME TAXES - Pursuant to SFAS No. 109, "Accounting for Income Taxes," income
tax expense [or benefit] for the year is the sum of deferred tax expense [or
benefit] and income taxes currently payable [or refundable]. Deferred tax
expense [or benefit] is the change during the year in a company's deferred tax
liabilities and assets. Deferred tax liabilities and assets are determined based
on differences between financial reporting and tax bases of assets and
liabilities, and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.


                                      F-11


<PAGE>


COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #4
--------------------------------------------------------------------------------


[1] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]

EARNINGS PER SHARE - We have adopted the provisions of SFAS No. 128. Basic
earnings per share is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding during
the period. SFAS No. 128 also requires a dual presentation of basic and diluted
earnings per share on the face of the statement of operations for all companies
with complex capital structures. Diluted earnings per share reflects the amount
of earnings for the period available to each share of common stock outstanding
during the reporting period, while giving effect to all dilutive potential
common shares that were outstanding during the period, such as common shares
that could result from the potential exercise or conversion of securities into
common stock.

The computation of diluted earnings per share does not assume conversion,
exercise or contingent issuance of securities that would have an antidilutive
effect on per share amounts [i.e., increasing earnings per share or reducing
loss per share]. The dilutive effect of outstanding options and warrants and
their equivalents are reflected in dilutive earnings per share by the
application of the treasury stock method which recognizes the use of proceeds
that could be obtained upon exercise of options and warrants in computing
diluted earnings per share. It assumes that any proceeds would be used to
purchase common stock at the average market price during the period. Options and
warrants will have a dilutive effect only when the average market price of the
common stock during the period exceeds the exercise price of the options or
warrants. Equity instruments that may dilute earnings per share in the future
are listed in Note 5.

The dilutive effect of convertible debt is reflected in diluted earnings per
share by the application of the if-converted method. The convertible debt could
potentially dilute basic earnings per share in future periods.

[2] RECENTLY ISSUED ACCOUNTING STANDARDS

In September 2006, the SEC issued Staff Accounting Bulletin 108 ("SAB 108"),
which expresses the Staff's views regarding the process of quantifying financial
statement misstatements. The bulletin was effective at fiscal year end 2006. The
implementation of this bulletin had no impact on the Company's results of
operations, cash flows or financial position.

In September 2006, the FASB issued Statement No. 157, FAIR VALUE MEASUREMENTS
("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring
fair value in GAAP, and expands disclosures about fair value measurements. SFAS
157 will be applied prospectively and will be effective for periods beginning
after November 15, 2007. The Company is currently evaluating the effect, if any,
of SFAS 157 on the Company's consolidated financial statements.

In June 2006, the FASB issued FASB Interpretation ("FIN") No. 48, ACCOUNTING FOR
UNCERTAINTY IN INCOME TAXES-AN INTERPRETATION OF FASB STATEMENT NO. 109 ("FIN
48"). FIN 48 prescribes a recognition threshold and measurement attribute for
the financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, treatment of interest and penalties, and
disclosure of such positions. FIN 48 will be applied prospectively and will be
effective for fiscal years beginning after December 31, 2006. The Company will
adopt the provisions of FIN 48 in the first quarter of 2007 as required. The
adoption of FIN 48 is not expected to have a material effect on the Company's
consolidated financial statements.

In June 2006, the EITF ratified EITF Issue 06-3, HOW TAXES COLLECTED FROM
CUSTOMERS AND REMITTED TO GOVERNMENTAL AUTHORITIES SHOULD BE PRESENTED IN THE
INCOME STATEMENT (THAT IS, GROSS VERSUS NET PRESENTATION). A consensus was
reached that entities may adopt a policy of presenting taxes in the income
statement on either a gross or net basis. An entity should disclose its policy
of presenting taxes and the amount of any taxes presented on a gross basis
should be disclosed, if significant. The guidance is effective for periods
beginning after December 15, 2006. We present revenues net of taxes. EITF 06-3
will not impact the method for recording these sales taxes in our consolidated
financial statements.

                                      F-12

<PAGE>



COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #5
--------------------------------------------------------------------------------


[3] COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS

OPERATING LEASES - We lease approximately 20,000 square feet of office space
under a lease which expires in October 2012.

Rent expense was $412,135, $383,101 and $341,756 for the years ended December
31, 2006, 2005 and 2004, respectively.

Our future minimum rental commitments under the noncancellable operating lease
in effect at December 31, 2006 were as follows:

Year Ending
December 31,
------------
   2007                                                       $       453,886
   2008                                                               448,304
   2009                                                               419,683
   2010                                                               405,567
   2011                                                               430,602
   Thereafter                                                         358,835
                                                              ---------------

   TOTAL                                                      $     2,516,877
   -----                                                      ===============

EMPLOYMENT CONTRACTS - We have an employment contract with one of our executives
with an expiration date of December 31, 2007. The aggregate commitment for
future salary at December 31, 2006 was approximately $300,000.

[4] INCOME TAXES

An analysis of the components of the income tax provision is as follows:

                                                     YEARS ENDED
                               -------------------------------------------------
                                                    DECEMBER 31,
                               -------------------------------------------------
                                    2006                2005              2004
                               -------------        -------------        -------
Current:
   Federal                     $          --        $          --        $    --
   State                                  --                   --         48,905
                               -------------        -------------        -------

   Totals                                 --                   --         48,905
                               -------------        -------------        -------

Deferred:
   Federal                                --                   --             --
   State                                  --                   --             --
                               -------------        -------------        -------

   Totals                                 --                   --             --
                               -------------        -------------        -------

   NET INCOME TAXES PROVISION  $          --        $          --        $48,905
   --------------------------  =============        =============        =======


                                      F-13


<PAGE>



COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #6
--------------------------------------------------------------------------------



[4] INCOME TAXES [CONTINUED]

The income tax for continuing operations differs from the amount computed by
applying the statutory federal income tax rate as follows:
<TABLE>
<CAPTION>
                                                                                     YEARS ENDED
                                                              ------------------------------------------------------
                                                                                     DECEMBER 31,
                                                              ------------------------------------------------------
                                                                    2006                  2005                2004
                                                              ---------------        --------------        ---------
<S>                                                           <C>                    <C>                   <C>
Computed Federal Statutory Tax [Benefit]                      $      (340,000)       $     (488,000)       $ 278,000
Valuation Allowance to Reduce Deferred Tax Asset                      340,000               488,000               --
Tax Benefit of Federal Net Operating Loss Carryforward                     --                    --         (278,000)
Sale of State Net Operating Loss Carryforward                              --                    --               --
Effect of State Taxes [Net of Federal Benefit]                             --                    --           48,905
                                                              ---------------        --------------        ---------

   ACTUAL TAX                                                 $            --        $           --        $  48,905
   ----------                                                 ===============        ==============        =========
</TABLE>

The components of the net deferred tax asset and liability were as follows:

                                                        YEARS ENDED
                                                        DECEMBER 31,
                                                        ------------
                                                  2006                 2005
                                               -----------         -----------
Deferred Tax Assets - Current:
   Accounts Receivable Allowance               $    10,000         $    10,000
   Vacation Accrual                                 15,000              15,000
   Valuation Allowance                             (25,000)            (25,000)
                                               -----------         -----------

   CURRENT DEFERRED TAX ASSET                  $        --         $        --
   --------------------------                  ===========         ===========

Deferred Tax Asset [Liability] - Long-Term:
   Net Operating Loss Carryforward             $ 9,190,000         $ 8,760,000
   Stock Options                                    80,000              80,000
   Capitalized Software                           (550,000)           (640,000)
   Depreciation and Amortization                    15,000              15,000
   Valuation Allowance                          (8,735,000)         (8,215,000)
                                               -----------         -----------

   LONG-TERM DEFERRED TAX ASSET                $       --          $        --
   ----------------------------                ===========         ===========

A 100% valuation allowance has been established due to the uncertainty about the
realization of the deferred tax asset. The net change during 2006 and 2005 in
the total valuation allowance is $520,000 and $235,000, respectively

                                      F-14

<PAGE>


COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #7
--------------------------------------------------------------------------------


[4] INCOME TAXES [CONTINUED]

At December 31, 2006, we had approximately $26,700,000 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 an 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 related
to our outstanding convertible debentures [See Note 8] and the conversion of
outstanding warrants, 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.

[5] STOCK OPTION AND STOCK PURCHASE PLANS

In June 2005, we adopted the 2005 Stock Incentive Plan (which we amended and
restated in 2006 and refer to as the 2005 Plan). Options and stock awards for
the purchase of up to 5,000,000 shares may be granted by the Board of Directors
to our employees as consultants at an exercise or grant price determined by the
Board of Directors on the date of grant. 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 debentures
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 December 31, 2006 and 2005, 4,780,000 and
5,000,000 shares, respectively, were available for grant under the 2005 Stock
Incentive Plan.

In March 1995, we adopted the 1995 Employee Stock Option Plan, which was amended
in April 1997 and June 2000. Options for the purchase of up to 5,000,000 shares
may be granted by the Board of Directors to our employees at an exercise price
determined by the Board of Directors on the date of grant. Options may be
granted as incentive or non-qualified stock options with a term of not more than
ten years. At December 31, 2006, 2005 and 2004, -0-, -0- and 1,784,525 shares,
respectively, were available for grant under the 1995 Employee Stock Option
Plan. The 1995 Employee Stock Option Plan expired in March 2005.

On November 15, 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 ["non-employee directors"]. 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. 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 December 31, 2006, 2005 and 2004, 750,000,
750,000 and 750,000 shares, respectively, were available for grant under the
1994 Stock Option Plan for Independent Directors.

In October 1994, we adopted the 1994 Non-Qualified Stock Option Plan for
Consultants. Options for the purchase of up to 200,000 shares may be granted by
the Board of Directors to any individual who has entered into a written
consulting contract with us. The non-qualified stock options will have up to a 5
year term from date of grant and will be exercisable at a price and time as
determined by the Board of Directors on the date of grant. At December 31, 2006,
2005 and 2004, -0-, -0- and -0- shares, respectively, were available for grant
under the 1994 Non-Qualified Stock Option Plan for Consultants. This Plan
expired in October 2004.

                                      F-15

<PAGE>



COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #8
--------------------------------------------------------------------------------

[5] STOCK OPTION AND STOCK PURCHASE PLANS [CONTINUED]

A summary of the changes in outstanding common stock options for all outstanding
plans is as follows:
<TABLE>
<CAPTION>
                                                 EXERCISE      WEIGHTED-AVERAGE
                                                   PRICE           REMAINING       WEIGHTED-AVERAGE
                                  SHARES         PER SHARE      CONTRACTUAL LIFE     EXERCISE PRICE
                                  ------         ---------      ----------------     --------------
<S>                             <C>           <C>      <C>         <C>                  <C>
Balance, December 31, 2003      2,903,750     $  .27 - 4.00        2.4 Years            $   .75

   Granted                         10,000        .31 -  .31        2.7 Years                .31
   Exercised                      (50,750)       .26 -  .31                                 .28
   Canceled                       (31,500)       .46 -  .60                                 .58
   Expired                             --                --                                  --

Balance, December 31, 2004      2,831,500     $  .23 - 4.00        1.7 Years            $   .76

   Granted                        100,000        .61 -  .61        4.0 Years                .61
   Exercised                      (78,000)       .27 -  .29                                 .27
   Canceled                       (54,000)       .31 -  .60                                 .50
   Expired                        (29,000)       .27 -  .29                                 .28

Balance, December 31, 2005      2,770,500     $  .23 - 4.00        1.7 Years            $   .78

   Granted                        220,000        .36 -  .41        4.6 Years                .41
   Exercised                       (7,500)       .53 -  .53                                 .53
   Canceled                       (78,000)       .27 -  .61                                 .44
   Expired                       (887,000)       .23 - 4.00                                 .36

Balance, December 31, 2006      2,018,000     $  .23 - 2.00        1.8 Years            $   .93
</TABLE>

The options granted during 2006 are distributed as follows, relative to the
difference between the exercise price and the stock price at grant date:
<TABLE>
<CAPTION>
                                       NUMBER         WEIGHTED-AVERAGE   WEIGHTED-AVERAGE
                                       GRANTED         EXERCISE PRICE       FAIR VALUE
                                  ---------------      ---------------     -----------
<S>                                       <C>          <C>                 <C>
Exercise Price at Stock Price             220,000        $         .41     $       .27
                                  ===============      ===============     ===========
</TABLE>

The options granted during 2005 are distributed as follows, relative to the
difference between the exercise price and the stock price at grant date:
<TABLE>
<CAPTION>
                                        NUMBER        WEIGHTED-AVERAGE   WEIGHTED-AVERAGE
                                        GRANTED        EXERCISE PRICE       FAIR VALUE
                                  ---------------      ---------------     -----------
<S>                                         <C>        <C>                 <C>
Exercise Price at Stock Price               100,000    $           .61     $       .40
                                  =================    ===============     ===========
</TABLE>

The options granted during 2004 are distributed as follows, relative to the
difference between the exercise price and the stock price at grant date:
<TABLE>
<CAPTION>
                                        NUMBER        WEIGHTED-AVERAGE   WEIGHTED-AVERAGE
                                        GRANTED        EXERCISE PRICE       FAIR VALUE
                                  ---------------      ---------------     -----------
<S>                                          <C>       <C>                 <C>
Exercise Price at Stock Price                10,000    $           .31     $       .31
                                  =================    ===============     ===========
</TABLE>

                                      F-16

<PAGE>


COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #9
--------------------------------------------------------------------------------

[5] STOCK OPTION AND STOCK PURCHASE PLANS [CONTINUED]

Exercisable options at December 31, 2006, 2005 and 2004 were as follows:

                              NUMBER OF                    WEIGHTED-AVERAGE
DECEMBER 31,             EXERCISABLE OPTIONS                EXERCISE PRICE
------------             -------------------                --------------

   2006                      1,773,250                      $        1.00
   2005                      2,734,167                      $         .78
   2004                      2,442,589                      $         .80

The following table summarizes information about stock options at December 31,
2006:
<TABLE>
<CAPTION>
                                                                                         EXERCISABLE
                                    OUTSTANDING STOCK OPTIONS                           STOCK OPTIONS
                         ---------------------------------------------------      --------------------------
                                       WEIGHTED-AVERAGE
   RANGE OF                                REMAINING        WEIGHTED-AVERAGE                WEIGHTED-AVERAGE
EXERCISE PRICES          SHARES        CONTRACTUAL LIFE     EXERCISE PRICE        SHARES     EXERCISE PRICE
---------------          ------        ----------------     --------------        ------     --------------
<C>      <C>                <C>            <C>                <C>                 <C>            <C>
$ .23 -  $ .36              170,000        3.2 Years          $    .32            160,000        $    .32
$ .41 -  $ .53              685,000        5.7 Years          $    .49            475,000        $    .53
$ .60 -  $1.13              280,000        2.0 Years          $    .84            255,250        $    .86
$ 1.25 - $1.25              688,000        0.9 Years          $   1.25            688,000        $   1.25
$ 2.00 - $2.00              195,000        0.6 Years          $   2.00            195,000        $   2.00
--------------        -------------        ---------          --------          ---------        --------

                          2,018,000        1.8 Years          $    .93          1,773,250        $   1.00
                      =============        =========          ========          =========        ========
</TABLE>

On January 1, 2006, we adopted SFAS No. 123R, "SHARE-BASED PAYMENT," or SFAS
123R, which is a revision of SFAS No. 123 "ACCOUNTING FOR STOCK-BASED
COMPENSATION," or SFAS 123, and supersedes APB No. 25, "ACCOUNTING FOR STOCK
ISSUES TO EMPLOYEES," or APB 25. Among other items, SFAS 123R requires companies
to record compensation expense for share-based awards issued to employees and
directors in exchange for services provided. The amount of the compensation
expense is based on the estimated fair value of the awards on their grant dates
and is recognized over the required service periods. Our share-based awards
include stock options and restricted stock awards. Prior to our adoption of SFAS
123R, we applied the intrinsic value method set forth in APB 25 to calculate the
compensation expense for share-based awards. Historically, we have generally set
the exercise price for our stock options equal to the market value on the grant
date. As a result, the options generally had no intrinsic value on their grant
dates, and we did not record any compensation expense unless the terms of the
options were subsequently modified. For restricted stock awards, the calculation
of compensation expense under APB 25 and SFAS 123R is the same.

We adopted SFAS 123R using the modified prospective transition method, which
requires the application of the accounting standard to all share-based awards
issued on or after January 1, 2006 and any outstanding share-based awards that
were issued but not vested as of January 1, 2006. Accordingly, our consolidated
financial statements for the years ended December 31, 2005 and 2004 have not
been restated to reflect the impact of SFAS 123R. For the year ended December
31, 2006, we recognized $109,055 of stock-based compensation expense in our
consolidated financial statements. We recognized expense because we had (a)
stock options granted prior to January 1, 2006 that had not yet vested as of
January 1, 2006 and (b) stock options granted subsequent to January 1, 2006. The
exercise price for all stock options issued during 2005 and 2004 were equal to
or greater than the market price of our stock at the date of the grant.
Accordingly, no compensation expense has been recognized for our stock-based
compensation plans for fiscal years 2005 and 2004.

                                      F-17

<PAGE>



COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #10
--------------------------------------------------------------------------------


[5] STOCK OPTION AND STOCK PURCHASE PLANS [CONTINUED]

There were 257,144 warrants outstanding at December 31, 2006. The exercise
prices for all the warrants issued and outstanding as of December 31, 2006 were
equal to or greater than the market price of our stock at the date of grant.

A summary of the changes in outstanding warrants is as follows:
<TABLE>
<CAPTION>
                                    OUTSTANDING        EXERCISE       WEIGHTED-AVERAGE
                                  AND EXERCISABLE       PRICE             REMAINING      Weighted-Average
                                     WARRANTS        PER WARRANT      CONTRACTUAL LIFE     EXERCISE PRICE
                                     --------        -----------      ----------------     --------------
<S>                                   <C>             <C>    <C>         <C>                 <C>
  Balance, December 31, 2004          768,572         $.22 - .62         .80 Years           $   .56

  Granted                                  --
  Expired                            (640,000)                                                    --
                                     ---------                                               -------


  Balance, December 31, 2005          128,572         $.22 - .22         1.25 Years          $   .22

  Granted                             128,572          .35 - .35         4.35 Years              .35
                                     ---------                                               -------

   BALANCE, DECEMBER 31, 2006         257,144         $.22 - .35         2.30 Years          $   .29
                                     =========                                               =======
</TABLE>

Exercisable options at December 31, 2006, 2005 and 2004 were as follows:

                               NUMBER OF                      WEIGHTED-AVERAGE
DECEMBER 31,              EXERCISABLE OPTIONS                  EXERCISE PRICE
------------              -------------------                  --------------

  2006                       1,773,250                         $        1.00
  2005                       2,734,167                         $         .78
  2004                       2,442,589                         $         .80

The Black-Scholes 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. The weighted average fair value of stock
options granted to employees used in determining pro forma amounts was estimated
at $.40 and $.31 during 2005 and 2004, respectively.

                                      F-18

<PAGE>



COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #11
--------------------------------------------------------------------------------


[5] STOCK OPTION AND STOCK PURCHASE PLANS [CONTINUED]

Pro forma information regarding net income or loss and net income or loss per
share has been determined as if we had accounted for our employee stock options
under the fair value method prescribed under SFAS No. 123, Accounting for Stock
Based Compensation. The fair value of these options was estimated at the date of
grant using the Black-Scholes option-pricing model for the pro forma amounts
with the following weighted average assumptions:

                                                        DECEMBER 31,
                                                        ------------
                                                  2005               2004
                                                 -------            -------

Risk-Free Interest Rate                           3.90%             3.90%
Expected Life                                     3.0 Years         3.0 Years
Expected Volatility                               79%               78%
Expected Dividends                                None              None

We applied the provisions of APB 25 to determine our stock-based compensation
expense for all periods prior to January 1, 2006. The following table
illustrates the effect on net income and net income per share if we had applied
the fair value recognition provision of SFAS 123 to our stock-based compensation
plans for the years ended December 31, 2005 and 2004.

                                                                YEARS ENDED
                                                                DECEMBER 31,
                                                                ------------
                                                            2005          2004
                                                          -------        -------

Net [Loss] Income as Reported                              $ (1,434)     $   767
Deduct: Amount by which Stock-Based Employee
 Compensation as Determined under Fair Value
  Based Method for all Awards Exceeds the Compensation
   as Determined under the Intrinsic Value Method          $     102     $   101
Pro Forma Net [Loss] Income                                $  (1,536)    $   666
Basic [Loss] Earnings Per Share as Reported                $    (.09)    $   .04
Pro Forma Basic [Loss] Earnings Per Share                  $    (.10)    $   .03

                                      F-19

<PAGE>


COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #12
--------------------------------------------------------------------------------


[6] BASIC EARNINGS PER SHARE DISCLOSURES

The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share ["EPS"] computations.
<TABLE>
<CAPTION>
                                                                     2 0 0 6            2 0 0 5              2 0 0 4
                                                                   -----------        -----------         --------------
<S>                                                                <C>                <C>                 <C>
  Numerator:
     Net [Loss] Income                                             $ (999,865)        $(1,434,204)        $      767,399
  Effect of Dilutive Securities:
     Interest Reversal Convertible Debentures [Net of Tax]                  --                 --                118,800
     Incentive Bonus Adjustment [Net of Tax Benefit]                        --                 --                     --
                                                                   -----------        -----------         --------------

     NUMERATOR FOR DILUTED [LOSS] EARNINGS PER
       COMMON SHARE                                               $  (999,865)        $(1,434,204)        $      886,199
                                                                   ===========        ===========         ==============

  Denominator:
     Weighted Average Number of Common Shares
       Outstanding for Basic Earnings Per Common Share              16,732,000         16,141,000             15,515,000
  Effect of Dilutive Securities:
     Exercise of Options                                                    --                 --                424,000
     Exercise of Warrants                                                   --                 --                 73,000
     Conversion of Convertible Debentures                                   --                 --              7,983,000
                                                                   -----------        -----------         --------------

     DENOMINATOR FOR DILUTED [LOSS] EARNINGS PER
       COMMON SHARE                                                 16,732,000         16,141,000             23,995,000
                                                                   ===========        ===========         ==============

  BASIC [LOSS] EARNINGS PER COMMON SHARE                           $      (.06)       $      (.09)        $          .05
                                                                   ===========        ===========         ==============

  DILUTED [LOSS] EARNINGS PER COMMON SHARE                         $      (.06)       $      (.09)                   .04
                                                                   ===========        ===========         ==============
</TABLE>

Equity instruments that may dilute earnings per share in the future are listed
in Note 5.

The Company's options and warrants were not included in the computation of EPS
at December 31, 2006 and 2005 because to do so would be antidilutive. The
Company's convertible debt does not affect the EPS calculation at December 31,
2006 and 2005 because it would be antidilutive.

Options to purchase 1,682,000 shares of common stock at prices ranging from $.53
to $4.00 per share were outstanding at December 31, 2004, 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.

[7] SUPPLEMENTAL DATA

Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
                                                                        YEARS ENDED
                                                                        DECEMBER 31,
                                                                        ------------
                                                                 2 0 0 6            2 0 0 5
                                                            ----------------    ---------------
<S>                                                         <C>                 <C>
Accrued Payroll, Benefits, Temporary Help and Consulting    $        173,668    $       175,258
Accrued Professional Fees                                            222,816            210,058
Other                                                                213,026             98,731
                                                            ----------------    ---------------

   TOTALS                                                   $        609,510    $       484,047
   ------                                                   ================    ===============
</TABLE>

                                      F-20

<PAGE>


COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #13
--------------------------------------------------------------------------------


[8] CONVERTIBLE DEBENTURES

In 2001 and 2002, we completed two rounds of debt financing through the sale of
8% convertible debentures due in 2008 ("2008 Debentures") and 2009 ("2009
Debentures"), respectively, to Renaissance US Growth & Income Trust PLC, BFSUS
Special Opportunities Trust PLC and certain other investors (including John
Roblin, our Chairman of the Board, President and Chief Executive Officer) with
an aggregate principal amount of $2,500,000. Interest on the unpaid principal
amount of the debentures is payable monthly at the rate of 8% per annum. The
2008 Debentures mature on July 1, 2008 and the 2009 Debentures mature on
September 1, 2009, unless the debentures are earlier redeemed by us or the
holder or converted into shares of our common stock at the holder's option at a
conversion price of $0.30 per share, subject to adjustment. We may redeem the
debentures for cash at 101% of the principal amount, together with accrued and
unpaid interest through the redemption date, upon the occurrence of certain
events specified in the debentures. The related financing costs incurred of
$187,090 in connection with establishing these debentures have been deferred and
are being amortized over the life of the debt. We have been required to repay
principal on the 2008 Debentures and 2009 Debentures, since July 1, 2004 and
July 1, 2005, respectively, in monthly installments of ten dollars ($10) per
thousand dollars ($1,000) of the then remaining principal amount of such
debentures, and at maturity we will be required to pay the remaining unpaid
principal amount. In 2004, the holders of the 2008 Debentures elected to convert
all of their monthly principal installments due in 2004, totaling $105,335,
under such debentures into shares of our common stock at the conversion price of
$0.30 per share in lieu of receiving such installment payments in cash. In
connection with this conversion, we issued to the holders of the 2008 Debentures
an aggregate of 351,116 shares of our common stock. We made an aggregate of
$198,000 of interest payments on the debentures during 2004.

In 2005, the holders of the 2008 Debentures and 2009 Debentures elected to
convert all of their monthly principal installments due in 2005, totaling
$220,121, under such debentures into shares of our common stock at the
conversion price of $.30 per share in lieu of receiving such installments in
cash. In connection with this conversion, we issued to the holders of the 2008
Debentures and 2009 Debentures an aggregate of 733,739 shares of our common
stock. We made an aggregate of $184,000 of interest payments on the debentures
during 2005.

In 2006, the holders of the 2008 Debentures and the 2009 Debentures elected to
convert a portion of their monthly principal installments due in 2006 totaling
$127,254, under such debentures into shares of our common stock at the
conversion price of $0.30 per share in lieu of receiving such installment
payments in cash. In connection with this conversion, we issued to the holders
of the 2008 Debentures and the 2009 Debentures an aggregate of 424,181 shares of
our common stock. In January 2007, the holders of the 2008 Debentures and the
2009 Debentures elected to convert the remaining portion of their monthly
principal installments due in 2006, totaling $119,807, under such debentures
into shares of our common stock at the conversion price of $0.30 per share in
lieu of receiving such installment payments in cash. In connection with this
conversion, we issued to the holders of the 2008 Debentures and the 2009
Debentures an aggregate of 399,358 shares of our common stock. We made an
aggregate of $173,000 of interest payments on the debentures during 2006.

In March 2002, the holders of our debentures under the Convertible Loan
Agreements agreed to amend one of the financial covenants for the quarters
ending March 31, June 30 and September 30, 2002. As consideration for such
amendments, we issued to such holders an aggregate of 128,572 warrants to
purchase such number of shares of our common stock at an exercise price of $0.22
per share. The warrants expire in 2007 and became exercisable in equal monthly
installments on each of March 31, 2002, June 30, 2002 and September 30, 2002,
respectively. The $16,913 estimated fair market value of the warrants was
charged to financing costs.

                                      F-21

<PAGE>


COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #14
--------------------------------------------------------------------------------


[8] CONVERTIBLE DEBENTURES [CONTINUED]

As of March 31, 2006, we were not in compliance with certain of the financial
covenants of the convertible loan agreements and, as of such date, we received
limited waivers under which the holders of our debentures waived such
non-compliance. As consideration for the receipt of such waivers, we issued to
the holders an aggregate of 128,572 warrants to purchase such number of shares
of our common stock at an exercise price of $0.35 per share. These warrants
expire in 2011.

As of December 31, 2006, we were not in compliance with the financial covenants
of the Convertible Loan Agreements and, as of such date, we received limited
waivers to the Convertible Loan Agreements under which the holders of our
debentures waived such non-compliance.

At December 31, 2006, principal payments due on the convertible debentures were
as follows:

2006                                                       $        119,808
2007                                                                218,991
2008                                                              1,240,210
2009                                                                468,281
Thereafter                                                               --
                                                           ----------------

   TOTAL                                                   $      2,047,290
   -----                                                   ================


[9] 401(K) PLAN

After completing a year of service and working 1,000 hours, employees age 21 and
over are eligible to participate in our Tax Saver 401(k) Salary Reduction Plan.
Employees can save a percentage of pay on a pre-tax basis to an annual maximum
of $15,000 for the year ended December 31, 2006. We match $.50 for each $1.00 of
the first 5% of pay employees elect to defer. Expenses associated with this plan
in 2006, 2005 and 2004 were approximately $73,495, $81,500 and $76,000,
respectively.

[10] STOCKHOLDERS' EQUITY

In January 2007, the holders of the 2008 Debentures and 2009 Debentures elected
to convert an aggregate of $119,807 in principal of such debentures,
representing their monthly installments of principal under such debentures (in
lieu of necessary such installment payments in cash), for 399,358 shares of our
common stock at the conversion price of $0.30 per share [See Note 8].

During 2006, the holders of the 2008 Debentures and 2009 Debentures elected to
convert an aggregate of $127,254 in principal of such debentures, representing a
portion their monthly installments of principal under such debentures (in lieu
of necessary such installment payments in cash), for 424,181 shares of our
common stock at the conversion price of $0.30 per share [See Note 8].

During 2005, the holders of the 2008 Debentures and 2009 Debentures elected to
convert an aggregate of $220,121 in principal of such debentures, representing
their monthly installments of principal under such debentures (in lieu of
necessary such installment payments in cash), for 733,739 shares of our common
stock at the conversion price of $0.30 per share [See Note 8].

                                      F-22

<PAGE>


COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #15
--------------------------------------------------------------------------------


[10] STOCKHOLDERS' EQUITY [CONTINUED]

During 2004, the holders of the 2008 Debentures elected to convert an aggregate
of $105,335 in principal of such debentures, representing their monthly
installments of principal under such debentures (in lieu of receiving such
installment payments in cash), for 351,116 shares of our common stock at the
conversion price of $0.30 per share [See Note 8].

During 2002, we issued an aggregate of 128,572 warrants to purchase such number
of shares of our common stock in exchange for an amendment to the convertible
loan agreements governing our 2008 Debentures pursuant to which one of the
financial covenants was amended for the quarters ending March 31, June 30 and
September 30, 2002 [See Note 8]. The $16,913 estimated fair market value of the
warrants was charged to financing costs and capital in excess of par value.

During 2001, we issued 154,546 shares of our common stock in exchange for
services rendered in connection with the financing described in Note 8. The cost
of $68,000 for the services have been included in deferred financing costs, and
capital in excess of par value has been increased by $66,455, representing the
excess of the cost of the services over the par value of the common stock
issued.

[11] FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," defines
the fair value of a financial instrument as the amount at which the instrument
could be exchanged in a current transaction between willing parties. In
assessing the fair value of our cash and cash equivalents, trade receivables and
accounts payables and accrued expenses, management concluded that the carrying
amount of these financial instruments approximates fair value because of their
short maturities. Management estimates that the carrying amount of our
convertible debentures, based on current rates and terms at which we could
borrow funds, is approximately $2,000,000 and $2,200,000 at December 31, 2006
and 2005, respectively.

[12] SEGMENT INFORMATION

As of January 1, 2003, we merged the management teams and infrastructures of our
two business units, Classic and TAS 2000, into one comprehensive unit. As a
result, we no longer separately assess the performance of these products.

[13] MAJOR CUSTOMERS

For the year ended December 31, 2006, sales to three customers amounted to
approximately 27%, 13% and 11% of revenues, respectively.

For the years ended December 31, 2005 and 2004, sales to one customer amounted
to approximately 23% and 31% of revenues, respectively.

Amounts due from Turkon Line consist of accounts receivable against uncollected
commissions earned by the company in a normal course of business.

                                      F-23

<PAGE>


COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #16
--------------------------------------------------------------------------------


[14] RELATED PARTY TRANSACTIONS

In 2006, the Company paid Mark Johnston total consulting fees plus expenses
related to a potential acquisition of approximately $37,000.

[15] SUBSEQUENT EVENT

On March 23, 2007, we issued an aggregate of 5,438,670 shares of our common
stock to Renaissance US Growth & Income Trust PLC and US Special Opportunities
Trust PLC, two funds managed by RENN Capital Group, Inc., in connection with
their election to convert an aggregate of $1,631,601 principal amount of their
8% convertible debentures due 2008 and 8% convertible debentures due 2009,
representing all of their remaining unpaid principal amount due on the
debentures, at a conversion price of $0.30 per share. After giving effect to
this conversion, as of March 23, 2007, our only outstanding debentures are an
aggregate principal amount of $295,880 that remains outstanding on the 2008
Debentures to John Roblin, our Chairman and Chief Executive Officer, and certain
other investors. The 2008 Debentures were originally issued in July 2001 with an
aggregate principal amount of $1,800,000 and the 2009 Debentures were originally
issued in September 2002 with an aggregate principal amount of $700,000.

No cash proceeds were received by us in connection with each conversion of the
debentures.

                               . . . . . . . . . .


                                      F-24


<PAGE>



COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY
--------------------------------------------------------------------------------

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                         BALANCE AT
                                          BEGINNING                                                  BALANCE AT
                                          OF PERIOD         ADDITIONS           DEDUCTIONS         END OF PERIOD
                                          ---------         ---------           ----------         -------------
<S>                                       <C>               <C>               <C>                     <C>
Accumulated amortization of
   capitalized software and
   software license:

     Year Ended December 31, 2006         $8,186,661        $1,114,435        $           --          $9,301,096

     Year Ended December 31, 2005         $7,205,493        $  981,168        $           --          $8,186,661

     Year Ended December 31, 2004         $6,197,478        $1,008,015        $           --          $7,205,493

  Allowance for Doubtful Accounts:

     Year Ended December 31, 2006         $   25,000        $       --        $           --          $   25,000

     Year Ended December 31, 2005         $   25,000        $       --        $           --          $   25,000

     Year Ended December 31, 2004         $   25,000        $       --        $           --          $   25,000
</TABLE>




                                      F-25

<PAGE>


                                   SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized.

                                        COVER-ALL TECHNOLOGIES INC.


Date:  April 2, 2007                    By: /s/ John W. Roblin
                                            ------------------------------------
                                           John W. Roblin
                                           Chairman of the Board of Directors,
                                           President and Chief Executive Officer

        Pursuant to the requirements of  the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
                SIGNATURES                                    TITLE                               DATE
                ----------                                    -----                               ----

<S>                                          <C>                                              <C>
/s/ John W. Roblin                           Chairman of the Board, President and             April 2, 2007
-----------------------------------          Chief Executive Officer
John W. Roblin                               (Principal Executive Officer)


/s/ Ann F. Massey                            Chief Financial Officer, Controller and          April 2, 2007
-----------------------------------          Secretary (Principal Financial Officer
Ann F. Massey                                and Principal Accounting Officer)


/s/ Russell Cleveland                        Director                                         April 2, 2007
-----------------------------------
Russell Cleveland


/s/ Earl Gallegos                            Director                                         April 2, 2007
-----------------------------------
Earl Gallegos


/s/ Mark D. Johnston                         Director                                         April 2, 2007
-----------------------------------
Mark D. Johnston
</TABLE>