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
      1934For the fiscal year ended
      December 31, 2007.o
            Transition Report Pursuant to
      Section 13 or 15(d) of the Securities Exchange Act of
      1934For the transition period from
      ________
  to  _________.




Commission file number
0-13124




COVER-ALL
TECHNOLOGIES INC.


(Exact
name of Registrant as specified in its charter)




Delaware
              (State
      or other jurisdiction of incorporation or organization)
            13-2698053
              (I.R.S.
      Employer Identification No.)55
      Lane Road, Fairfield, New Jersey
              (Address
      of principal executive office)
            07004
              (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 o 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 o 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 o




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§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, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “larger accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.  (Check one):


Large
accelerated filer o                                          Accelerated
filer o


Non-accelerated
filer (Do not check if a smaller reporting company) o             Smaller
reporting company x




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


Yes  o No x




The
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant as of June 29, 2007, the last business day of
the registrant’s most recently completed second fiscal quarter, was
$15,966,000.




As of
March 17, 2008, there were 23,262,302 shares outstanding of our common
stock.




Documents
Incorporated by Reference:




Portions
of the Registrant’s Proxy Statement for the 2008 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.












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.
















Table
of Contents






PART
IITEM
      1.
            BUSINESS
            4ITEM 1A.
            RISK
      FACTORS
            10ITEM 1B.
            UNRESOLVED
      STAFF COMMENTS
            14ITEM2.
            PROPERTIES
            15ITEM3.
            LEGAL
      PROCEEDINGS
            15ITEM 4.
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
            15PART
      IIITEM
      5.
            MARKET FOR
      REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES
            16ITEM6.
            SELECTED
      FINANCIAL DATA
            18ITEM7.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
            20ITEM7A.
            QUANTITATIVE AND
      QUALITATIVE DISCLOSURES ABOUT MARKET RISK
            30ITEM 8.
            FINANCIAL STATEMENTS
      AND SUPPLEMENTARY DATA
            30ITEM9.
            CHANGES IN AND
      DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
            31ITEM
9A(T).
            CONTROLS AND
      PROCEDURES
            31ITEM9B.
            OTHER
      INFORMATION
            32PART
    IIIITEM 10.
            DIRECTORS
      AND EXECUTIVE OFFICERS OF THE REGISTRANT
            32ITEM 11.
            EXECUTIVE
      COMPENSATION
            33ITEM 12.
            SECURITY OWNERSHIP
      OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
            33ITEM 13.
            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS
            33ITEM 14.
            PRINCIPAL
      ACCOUNTING FEES AND SERVICES
            33PART
    IVITEM 15.
            EXHIBITS,
      FINANCIAL STATEMENT SCHEDULES
            33SIGNATURES












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 creation 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. We
continue to expand MIC with new capabilities in response to customer
needs.




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 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.




4




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, support for insurance binders, new billing functionality including
commission management and installment support,  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, an
innovative structure that supports policy level profitability 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 is
designed to fully support STP (Straight Through Processing). 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 our 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:




·
            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.


·
            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.


·
            Broad
      Accessibility – MIC is an Internet application, which utilizes a
      sophisticated portal capability.


·
            Integrated Data
      Representation – MIC provides a consolidated view of information
      from disparate systems.


●
            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
      control the accessibility to content for each user and also facilitates
      changes to content in MIC as business needs change, without additional
      programming.


●
            Scalability –
      MIC can grow with our customer’s needs, measured in terms of the numbers
      of concurrent users, response times and other
  variables.


·
            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.


·
            Compliance –
      MIC is designed to enable our customers to respond quickly and efficiently
      to the growing number of  federal, state and insurance
      regulations to help them meet their compliance
  obligations.






5





MIC
utilizes technology based on Oracle® 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 &
Insurance– 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.




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




·
            Data
      capture and editing


·
            Rating


·
            Policy
      issuance including multiple recipient
print


·
            All
      policy transactions including quotes, new lines, endorsements, renewals,
      audits and cancellations


·
            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.  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
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.






6




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 35 companies.




During
2007, Cover-All developed a number of new MIC Rating & Issuance capabilities
that are designed to fundamentally improve the ability to customize and
introduce insurance products in very short time frames based upon the latest
technological advances and innovative architecture.  These
capabilities include a new print engine, document packaging, a sophisticated set
of data capture/screen creation tools, and a number of other
components.  These capabilities were deployed in two customers in 2007
and early 2008.




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:




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




7





We expect
to utilize and expand 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 have
been 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
have also developed 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.




8




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 2008 as we focus on the Internet
as a valuable 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.  We also communicate with our
existing customers in a variety of ways including an annual Customer
Conference.




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 $510,000, $464,000 and $809,000 for the years
ended December 31, 2007, 2006 and 2005, respectively.




BACKLOG




We had no
license, maintenance, professional services or ASP backlog of unbilled work as
of December 31, 2007.




MAJOR
CUSTOMERS




Our
product line is in use in over 35 companies.  For the years ended
December 31, 2007, 2006 and 2005, we had two, three and one customer(s) who
contributed revenues in excess of 10% of our total revenues for the respective
years.  AIGT generated 19%, 27% and 23% of our revenues for the years
ended December 31, 2007, 2006 and 2005, respectively.  One other
customer generated 25% of our revenue for the year ended December 31,
2007.




We had no
export sales in 2007, 2006 and 2005.




EMPLOYEES




We had 44
employees as of December 31, 2007.  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 reports 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.






9




ITEM
1A. RISK FACTORS




RISK
FACTORS




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




RISKS
RELATED TO OUR BUSINESS AND OUR INDUSTRY




While we were profitable in 2007, we
incurred 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 of $1,231,000 in 2007,
$767,000 in 2004 and $392,000 in 2003, there is no assurance that we will be
able to maintain profitability in the future.  Our ability to invest
in sales and marketing programs, to expand and upgrade our technology
infrastructure and to fund our research and development efforts will depend on
existing cash balances and our ability to generate cash in the
future.  This, to a certain extent, is subject to general economic,
financial, competitive, regulatory and other factors that are beyond our
control.  If we are unable to achieve or maintain profitability in the
future, we may be unable to fund our liquidity needs.




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




We may
need additional financing to continue to fund the research and development of
our software products and to expand and grow our business
generally.  To the extent that we will be required to fund operating
losses, our financial position would deteriorate.  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, 2007, we had a net stockholders’ equity of approximately $2,285,000
and a net working capital of approximately $545,000.




We
may not have sufficient cash to service our indebtedness.




As of
December 31, 2007, our outstanding indebtedness consisted in aggregate principal
amount of $262,265 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 converted into shares of our common
stock at the holder’s option at a conversion price of $0.30 per share, subject
to adjustment.  Our ability to make payments on and to refinance our
indebtedness, to the extent the holders of our debentures do not 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.  Although
as of December 31, 2007, we had working capital of $545,000, 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.




10




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.




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.  We
maintain key man life insurance on Mr. Roblin and Ms. Gallagher in the amount of
$1,000,000 per individual.  We are in the process of obtaining key man
life insurance on Mr. Shah in the amount of $1,000,000.  The loss of
the service of one or more key managers or other key employees could have a
significant and adverse effect upon our business, operating results or financial
condition.  In addition, we believe that our future success will
depend in large part upon our ability to attract and retain additional highly
skilled technical, management, sales and marketing
personnel.  Competition for such personnel in the computer software
industry is intense.  We may not be successful in attracting and
retaining such personnel, and the failure to do so could have a material adverse
effect on our business, operating results or financial condition.




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




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




11




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:




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


·
            devote
      more resources to product
development;


·
            adopt
      more aggressive pricing policies;
and


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





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




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




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




We
depend on existing major customers.




In 2007
and 2006, our software products operations depended primarily on certain
existing major customers.  One of these major customers accounted for
approximately 19% and 27% of our total revenues in 2007 and 2006,
respectively.  One new other major customer accounted for
approximately 25% of our total revenue in 2007.  We anticipate that
our operations will continue to depend upon the continuing business of our
existing customers, particularly the major customers, and the ability to attract
new customers.  As a result, the loss of one or more of our existing
major customers or our inability to continue to attract new customers could
significantly and adversely affect our business, operating results and financial
condition.




12




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, 2007, we had approximately $25,700,000
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.




RISKS
RELATED TO OUR COMMON STOCK




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




Our
common stock is not traded on any securities exchange or an inter-dealer
quotation system.  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 securities exchange or an inter-dealer quotation
system.  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.”






13




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.




Our
shares are subject to dilution as a result of the conversion of our convertible
debentures and the exercise of our warrants.




Debentures.  As of
December 31, 2007, a total of $262,265 was outstanding on our 2008 Debentures,
which, at the conversion price of $0.30 per share, were convertible into an
aggregate of 874,217 shares of our common stock.  The 2008 Debentures
mature on July 1, 2008, unless they are earlier redeemed by us or converted into
shares of our common stock at the holder’s option.  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 significant
dilution to our stockholders and may depress the market price of our common
stock.  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
121,429 warrants, expiring in 2011, to purchase such number of shares of our
common stock issued to the sameinvestors, were
outstanding as of December 31, 2007 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 our
common stock.  Further, if the exercise price of the warrants is
adjusted, the additional shares of our common stock that would be issued upon
exercise of the warrants as a result of such adjustment may also result in
significant dilution to our stockholders.




ITEM
1B. UNRESOLVED STAFF COMMENTS




Not applicable.


14




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.




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,
2007.








15







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, 2006 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.




2007:
            
            High
            
            
            Low4th
      Quarter
            
            $
            1.53
            
            
            $
            1.123rd
      Quarter
            
            
            1.50
            
            
            
            1.242nd
      Quarter
            
            
            1.25
            
            
            
            0.921st
      Quarter
            
            
            1.30
            
            
            
            0.662006:
            
            High
            
            
            Low4th
      Quarter
            
            $
            0.79
            
            
            $
            0.423rd
      Quarter
            
            
            0.51
            
            
            
            0.312nd
      Quarter
            
            
            0.43
            
            
            
            0.311st
      Quarter
            
            
            0.58
            
            
            
            0.35


As of
March 12, 2008, there were 508 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 12, 2008 was $1.10, as
reported by the OTC Bulletin Board.







16







PERFORMANCE
GRAPH





The graph below compares the cumulative
total stockholder returns (including reinvestment of dividends) from the period
from December 31, 2002 through December 31, 2007 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.









Comparison
      of 5 Year Cumulative Total Return among Cover-All
              Technologies
      Inc., the Russell 2000 Index and a Peer Group12/31/02
            
            
            12/31/03
            
            
            12/31/04
            
            
            12/31/05
            
            
            12//31/06
            
            
            12//31/07Cover-All
      Technologies Inc.
            
            $
            100.00
            
            
            $
            115.22
            
            
            $
            139.13
            
            
            $
            119.57
            
            
            $
            171.74
            
            
            $
            300.00Russell
      2000 Index
            
            $
            100.00
            
            
            $
            147.25
            
            
            $
            174.24
            
            
            $
            182.18
            
            
            $
            215.64
            
            
            $
            212.26Peer
      Group (1)
            
            $
            100.00
            
            
            $
            131.77
            
            
            $
            164.62
            
            
            $
            147.56
            
            
            $
            157.10
            
            
            $
            149.35


__________________




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







17








ITEM
6. SELECTED FINANCIAL DATA




The
following selected historical financial information as of December 31, 2007 and
2006, and for each of the years ended December 31, 2007, 2006 and 2005, 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, 2005, 2004 and 2003 and for the years ended
December 31, 2004 and 2003 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, 2007, 2006, 2005, 2004 and 2003:




Year
      ended December 31,2007
            
            
            2006
            
            
            2005
            
            
            2004
            
            
            2003Statement
      of Operations Data:
            
            (in
      thousands, except per share amounts)Revenues
            
            $
            9,777
            
            
            $
            7,288
            
            
            $
            7,255
            
            
            $
            9,274
            
            
            $
            7,524Income
      (loss) before income tax
            
            
            1,231
            
            
            
            (1,000
            )
            
            
            (1,434
            )
            
            
            816
            
            
            
            392Net
      income (loss)
            
            
            1,231
            
            
            
            (1,000
            )
            
            
            (1,434
            )
            
            
            767
            
            
            
            392Net
      income (loss) per share – basic
            
            
            0.06
            
            
            
            (0.06
            )
            
            
            (0.09
            )
            
            
            0.05
            
            
            
            0.03Net
      income (loss) per share – diluted
            
            
            0.05
            
            
            
            (0.06
            )
            
            
            (0.09
            )
            
            
            0.04
            
            
            
            0.02Cash
      dividends per share
            
            $
            —
            
            
            $
            —
            
            
            $
            —
            
            
            $
            —
            
            
            $
            —Balance
      Sheet Data:Cash
      and cash equivalents
            
            $
            11
            
            
            $
            132
            
            
            $
            296
            
            
            $
            144
            
            
            $
            1,193Working
      capital (deficiency)
            
            
            545
            
            
            
            (898
            )
            
            
            (237
            )
            
            
            900
            
            
            
            177Total
      assets
            
            
            5,864
            
            
            
            3,556
            
            
            
            4,677
            
            
            
            6,388
            
            
            
            5,485Short-term
      debt
            
            
            262
            
            
            
            339
            
            
            
            247
            
            
            
            220
            
            
            
            105Long-term
      debt
            
            
            —
            
            
            
            1,708
            
            
            
            1,927
            
            
            
            2,175
            
            
            
            2,395Stockholders’
      equity (deficit)
            
            
            2,285
            
            
            
            (1,024
            )
            
            
            (265
            )
            
            
            928
            
            
            
            41




Selected Quarterly Financial
Data (Unaudited)




The
following is a summary of selected quarterly financial data for the years ended
December 31, 2007, 2006 and 2005:




2007Q1
            
            
            Q2
            
            
            Q3
            
            
            Q4(in
      thousands, except per share amounts)Total
      revenues
            
            $
            1,931
            
            
            $
            1,939
            
            
            $
            1,889
            
            
            $
            4,018Operating
      income
            
            
            177
            
            
            
            8
            
            
            
            9
            
            
            
            1,093Net
      income
            
            
            140
            
            
            
            3
            
            
            
            2
            
            
            
            1,086Basic
      earnings per common share
            
            $
            0.01
            
            
            $
            0.00
            
            
            $
            0.00
            
            
            $
            0.05Diluted
      earnings per common share
            
            $
            0.01
            
            
            $
            0.00
            
            
            $
            0.00
            
            
            $
            0.04






18






2006Q1
            
            
            Q2
            
            
            Q3
            
            
            Q4(in
      thousands, except per share amounts)Total
      revenues
            
            $
            1,739
            
            
            $
            1,638
            
            
            $
            1,618
            
            
            $
            2,293Operating
      income (loss)
            
            
            (246
            )
            
            
            (270
            )
            
            
            (310
            )
            
            
            2Net
      income (loss)
            
            
            (290
            )
            
            
            (314
            )
            
            
            (353
            )
            
            
            (43
            )Basic
      earnings (loss) per common share
            
            $
            (0.02
            )
            
            $
            (0.02
            )
            
            $
            (0.02
            )
            
            $
            (0.00
            )Diluted
      earnings (loss) per common share
            
            $
            (0.02
            )
            
            $
            (0.02
            )
            
            $
            (0.02
            )
            
            $
            (0.00
            )2005Q1
            
            
            Q2
            
            
            Q3
            
            
            Q4(in
      thousands, except per share amounts)Total
      revenues
            
            $
            2,087
            
            
            $
            1,713
            
            
            $
            1,638
            
            
            $
            1,817Operating
      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
            )







19








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




2007
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 2007 increased to $9,777,000 from $7,288,000 in 2006 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 two new customer licenses in
2007.  The increase in license revenue, to $2,683,000 in 2007 from
$1,376,000 in 2006, was mainly a result of sales to existing customers in 2007
and two new customer license sales in 2007.  In 2007 our growth in
license revenue was 95%.




Maintenance.The
decrease in maintenance revenue, to $3,210,000 in 2007 from $3,471,000 in 2006,
was mainly due to the non-renewal of several existing customers.  We
expect that our new customer license sales will generate significant additional
maintenance revenue beginning in 2008.




Professional
Services.  The increase in professional services revenue, to
$2,316,000 in 2007 from $1,176,000 in 2006, was a result of increased demand for
new software capabilities and customizations from our current customer base and
significant customizations related to the two new customer sales in
2007.




ASP.ASP revenue
increased to $1,568,000 in 2007 from $1,265,000 in 2006, due primarily to an
expanded and extended contractual relationship with two large
customers.




Income (Loss) Before Provision For
Income Taxes.Income before provision for income taxes was
$1,231,000 in 2007 compared to a loss of $(1,000,000) in 2006, primarily due to
an increase in license, professional services and ASP revenue.  Our
growth in revenue of 34% significantly exceeded our growth in expenses of
3%.




Net Income
(Loss).Net income for 2007 increased to $1,231,000 from a net
loss of $(1,000,000) in 2006 as a result of an increase in license, professional
services and ASP revenue.  Our growth in revenue of 34% significantly
exceeded our growth in expenses of 3%.




We
continue to face several challenges to growth in 2008 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.




20




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:




•           Revenue
Recognition


•           Valuation
of Capitalized Software


•           Valuation
of Allowance for Doubtful Accounts Receivable




Revenue
Recognition





Revenue
recognition rules are very complex, and certain judgments affect the application
of our revenue policy.  The amount and timing of our 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.




License
Revenue





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






21




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.






22





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:





Year
      Ended December 31,2007
            
            
            2006
            
            
            2005Revenues:License
            
            
            27.4
            %
            
            
            18.9
            %
            
            
            18.2
            %Maintenance
            
            
            32.8
            
            
            
            47.6
            
            
            
            50.1Professional
    Services
            
            
            23.7
            
            
            
            16.1
            
            
            
            14.7Applications Service Provider
      (“ASP”) Services
            
            
            16.1
            
            
            
            17.4
            
            
            
            17.0Total Revenues
            
            
            100.0
            
            
            
            100.0
            
            
            
            100.0Cost
      of Revenues:License
            
            
            11.7
            
            
            
            17.6
            
            
            
            21.6Maintenance
            
            
            28.6
            
            
            
            41.3
            
            
            
            39.0Professional
    Services
            
            
            13.1
            
            
            
            7.8
            
            
            
            6.9ASP Services
            
            
            4.8
            
            
            
            5.2
            
            
            
            2.6Total Cost of
      Revenues
            
            
            58.2
            
            
            
            71.9
            
            
            
            70.1Direct Margin
            
            
            41.8
            
            
            
            28.1
            
            
            
            29.9Operating
      Expenses:Sales and
    Marketing
            
            
            8.2
            
            
            
            12.9
            
            
            
            16.9General and
      Administrative
            
            
            14.7
            
            
            
            20.1
            
            
            
            19.7Research and
      Development
            
            
            5.2
            
            
            
            6.4
            
            
            
            11.1Provision for Doubtful
      Accounts
            
            
            0.5
            
            
            
            —
            
            
            
            —Total Operating
      Expenses
            
            
            28.6
            
            
            
            39.4
            
            
            
            47.7Operating Income
      (Loss)
            
            
            13.2
            
            
            
            (11.3
            )
            
            
            (17.8
            )Other
      Expense (Income):Interest Expense
            
            
            0.5
            
            
            
            2.3
            
            
            
            2.5Interest
      Expense - Related Party
            
            
            0.1
            
            
            
            0.1
            
            
            
            0.1Interest Income
            
            
            —
            
            
            
            —
            
            
            
            (0.1
            )Other Expense
            
            
            —
            
            
            
            —
            
            
            
            —Other Income
            
            
            —
            
            
            
            —
            
            
            
            (0.5
            )Total Other
    Expense
            
            
            0.6
            
            
            
            2.4
            
            
            
            2.0(Loss) Income Before Income Taxes
      Expense
            
            
            12.6
            
            
            
            (13.7
            )
            
            
            (19.8
            )Income
      Taxes (Expense):
            
            
            —
            
            
            
            —
            
            
            
            —Net (Loss) Income
            
            
            12.6
            %
            
            
            (13.7
            )%
            
            
            (19.8
            )%




YEAR
ENDED DECEMBER 31, 2007 COMPARED WITH YEAR ENDED DECEMBER 31, 2006




Revenues




Total
revenues were $9,777,000 for the year ended December 31, 2007 compared to
$7,288,000 for the year ended December 31, 2006, an increase of
34%.  License fees were $2,683,000 for the year ended December 31,
2007 compared to $1,376,000 in 2006, an increase of 95%, as a result of two new
customer license sales and sales to existing customers in 2007.  For
the year ended December 31, 2007, maintenance revenues were $3,210,000 compared
to $3,471,000 of the prior year, due to the non-renewal of several existing
customers.  We expect that the new license sales in 2007 will generate
significant additional maintenance revenue in 2008.  Professional
services revenue contributed $2,316,000 for the year ended December 31, 2007
compared to $1,176,000 for the year ended December 31, 2006 as a result of
increased demand for new software capabilities and customizations from our two
new customers signed in 2007 and our current customer base.  ASP
revenues were $1,568,000 for the year ended December 31, 2007 compared to
$1,265,000 for the year ended December 31, 2006 due primarily to an expanded and
extended contractual relationship with two large customers.






23




Cost of
sales increased to $5,688,000 for the year ended December 31, 2007 as compared
to $5,244,000 for 2006, due to higher salaries and personnel-related expenses
associated with staffing changes.  Non-cash capitalized software
amortization was $880,000 for the year ended December 31, 2007 as compared to
$1,114,000 in 2006.  We capitalized software development costs of
$1,084,000 in 2007 compared to $888,000 in 2006.




Expenses




Research and
Development.  Research and development expenses increased to
$510,000 for the year ended December 31, 2007 from $464,000 in 2006, primarily
due to the need for our research and development staff to work on various new
software capabilities for our new and prospective customers.  We
intend to continue to maintain our ongoing effort to enhance the functionality
of our products and solutions to remain competitive.




Sales and
Marketing.  Sales and marketing expenses decreased to $800,000
for the year ended December 31, 2007 from $943,000 in 2006, primarily due to a
reduction in our personnel-related expenses associated with a reduction in
staffing in 2007.




General and
Administrative.  General and administrative expenses were
$1,442,000 in 2007 as compared to $1,461,000 in 2006.  The decrease in
the general and administrative expenses was mainly due to a reduction in our
legal fees in 2007 partially offset by an increase in stock-based
compensation.  In 2006, the increase in legal fees was related to a
potential acquisition.




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




Other Income.  We
had $0 of other income for the year ended December 31, 2006 compared to $3,000
of other income for the year ended December 31, 2006.  In 2006, other
income was related to late fees collected from customers.




Provision for Doubtful
Accounts.  We had $51,000 provision for doubtful accounts in
2007 compared to $0 for 2006, due to the write-off of the account receivable
balances of two customers who decided not to purchase our software.





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, 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.




24




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
2006and
2005.





LIQUIDITY
AND CAPITAL RESOURCES




Sources of
Liquidity




We have
funded our operations primarily from cash flow from operations and the proceeds
from our issuance in 2001 of $1,800,000 aggregate principal amount of 8%
convertible debentures due in 2008, which we refer to as the 2008 Debentures,
and our issuance in 2002 of $700,000 aggregate principal amount of 8%
convertible debentures due 2009, which we refer to as the 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.




25




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, 2007, we had cash and cash equivalents of $11,000 compared to
cash and cash equivalents of $132,000 at December 31, 2006.  The
decrease in cash and cash equivalents is primarily attributable to the decrease
in maintenance revenue and the timing of one of our large license sales in
2007.  We had a significant increase in accounts receivable due to a
license sale in the fourth quarter of 2007 to a major insurance
company.




Cash
Flows




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 and 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.  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.  In June 2007,
the remaining holders of the 2008 Debentures elected to convert their monthly
principal installments due in 2007 totaling $33,617.  After giving
effect to these conversions, as of December 31, 2007, our only outstanding
debentures were an aggregate principal amount of $262,265 that remained
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.




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.




26




In
December 31, 2007, we had working capital of $545,000 compared to working
capital deficit of $898,000 at December 31, 2006.  This increase in
our working capital resulted primarily from a increase in our license,
professional services and ASP revenues.  Net cash provided from
operating activities totaled approximately $907,000 in 2007 compared to
approximately $738,000 in 2006.  In 2007, 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 2007,
net cash used for investing activities was approximately $1,101,000 compared to
approximately $907,000 in 2006.  We expect capital expenditures and
capital software expenditures to continue to be funded by cash generated from
operations.  We use cash to invest in capital and other assets to
support our growth.




In 2007,
net cash provided from financing activities was approximately $73,000 compared
to approximately $4,000 in 2006.  The cash provided from financing
activities in 2007 and 2006 consisted of proceeds from the exercise of stock
options and warrants.




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.




In
January 2007, the holders of the 2008 Debentures and 2009 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.




On March
23, 2007, the RENN funds elected to convert the remaining unpaid principal
amount due on their 2008 Debentures and 2009 Debentures (representing all of our
outstanding 2009 Debentures).  In June 2007, the remaining holders of
the 2008 Debentures elected to convert their monthly principal installments due
in 2007 totaling $33,617.  As of December 31, 2007, an aggregate
principal amount of $262,265 remained outstanding on the 2008
Debentures.




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 $262,265.




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.




27




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 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:




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


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


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


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


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


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


·
            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, 2007, we had approximately $25,700,000 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.




28




CONTRACTUAL
OBLIGATIONS




The
following table summarizes our significant contractual obligations at December
31, 2007, and the effect such obligations are expected to have on our liquidity
and cash flows in future periods:




Payments due by
period


(dollars in
thousands)




Contractual
      Obligations
            
            Total
            
            
            Less
      than
              1 Year
            
            
            1-3Years
            
            
            3-5Years
            
            
            More
      than
              5 YearsOperating
      Leases
            
            $
            2,175
            
            
            $
            518
            
            
            $
            868
            
            
            $
            789
            
            
            $
            —8%
      Convertible Debentures due2008
      – principal(1)
            
            
            262
            
            
            
            262
            
            
            
            —
            
            
            
            —
            
            
            
            —8%
      Convertible Debentures due2008
      – interest
            
            
            10
            
            
            
            10
            
            
            
            —
            
            
            
            —
            
            
            
            —Total
            
            $
            2,447
            
            
            $
            790
            
            
            $
            868
            
            
            $
            789
            
            
            $
            —




___________________________




(1)Since
July 1, 2004, the holders of the 2008 Debentures elected to convert a portion of
their monthly principal installments 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.




OFF-BALANCE-SHEET
ARRANGEMENTS




During
the fiscal year ended December 31, 2007, 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




Business
Combinations:  In December 2007, the FASB issued Statement No.
141 (revised), Business Combinations.  The standard changes the
accounting for business combinations including the measurement of acquirer
shares issued in consideration for a business combination, the recognition of
contingent consideration, the accounting for preacquisition gain and loss
contingencies, the recognition of capitalized in-process research and
development, the accounting for acquisition-related restructuring cost accruals,
the treatment of acquisition related transaction costs and the recognition of
changes in the acquirer’s income tax valuation allowance.  Statement
141(R) is effective for fiscal years beginning after December 15, 2008, with
early adoption prohibited.  We are currently evaluating the impact, if
any, of the pending adoption of Statement 141(R) on our consolidated financial
statement.




29




Accounting and Reporting of
Noncontrolling Interests:  In December 2007, the FASB issued
Statement No. 160, Noncontrolling Interests in Consolidated Financial Statement,
an amendment of ARB No. 51.  The standard changes the accounting for
noncontrolling (minority) interests in consolidated financial statements
including the requirements to classify noncontrolling interests as a component
of consolidated stockholders’ equity, and the elimination of “minority interest”
accounting in results of operations with earnings attributable to noncontrolling
interests reported as part of consolidated earnings.  Additionally,
Statement 160 revises the accounting for both increases and decreases in a
parent’s controlling ownership interest.  Statement 160 revises the
accounting for both increases and decreases in a parent’s controlling ownership
interest.  Statement 160 is effective for fiscal years beginning after
December 15, 2008, with early adoption prohibited.  We are currently
evaluating the impact, if any, of the pending adoption of Statement 160 on our
consolidated financial statements.




Fair Value
Measurements:  In September 2006, the FASB issued Statement No.
157, Fair Value Measurements.  Statement 157 defines fair value,
establishes a framework for measuring fair value and expands fair value
measurement disclosures.  Statement 157 is effective for fiscal years
beginning after November 15, 2007.  We are currently evaluating the
impact, if any, of the pending adoption of Statement 157 on our consolidated
financial statements.




Fair Value Option for Financial
Assets and Financial Liabilities:  In February 2007, the FASB
issued Statement No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities, including an amendment of FASB Statement No. 115, which
allows an entity the irrevocable option to elect fair value for the initial and
subsequent measurement for certain financial assets and liabilities on an
instrument-by-instrument basis.  Subsequent measurements for the
financial assets and liabilities an entity elects to record at fair value will
be recognized in earnings.  Statement 159 also establishes additional
disclosure requirements.  Statement 159 is effective for fiscal years
beginning after November 15, 2007, with early adoption permitted provided that
the entity also adopts Statement 157.  We are currently evaluating the
impact, if any, of the pending adoption of Statement 159 on our consolidated
financial statements.




Accounting for Advanced Payments for
Future Research and Development:In June 2007, the FASB
ratified EITF 07-3, Accounting for Nonrefundable Advance Payments for Goods or
Services Received for Use in Future Research and Development Activities (EITF
07-3).  EITF 07-3 requires that nonrefundable advance payments for
goods or services that will be used or rendered for future research and
development activities be deferred and capitalized and recognized as an expense
as the goods are delivered or the related services are
performed.  EITF 07-3 is effective, on a prospective basis, for fiscal
years beginning after December 15, 2007.  We are currently evaluating
the impact, if any, of the pending adoption of EITF 07-3 on our consolidated
financial statements.




ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




We are a
smaller reporting company and this Item is not applicable to us.




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.




30




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




None.




ITEM 9A(T).CONTROLS AND PROCEDURES




DISCLOSURE
CONTROLS AND PROCEDURES




As of the
end of the period covered by this report, we carried out an evaluation, under
the supervision and with the participation of our management, including our
Chief Executive Officer and our Chief Financial Officer, of the effectiveness of
the design and operation of the Company’s “disclosure controls and procedures”
(as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)).  Based upon that evaluation, 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.




MANAGEMENT’S
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING




The
management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting. The Exchange Act defines
internal control over financial reporting in Rule 13a-15(f) and 15d-15(f) as a
process designed by, or under the supervision of, the company’s principal
executive and principal financial officers and effected by the company’s board
of directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles and includes those policies and procedures
that:





·
            pertain
      to the maintenance of records that in reasonable detail accurately and
      fairly reflect the transactions and dispositions of the assets of the
      company;


·
            provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the company
      are being made only in accordance with authorizations of management and
      directors of the company; and


·
            provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of the company’s assets that
      could have a material effect on the consolidated financial
      statements.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.




The
Company’s management assessed the effectiveness of the Company’s internal
control over financial reporting as of December 31, 2007. In making this
assessment, the Company’s management used the criteria set forth by the
Committee of Sponsoring Organizations, or COSO, of the Treadway Commission in
“Internal Control – Integrated Framework”.




Based
upon its assessment, management concluded that, as of December 31, 2007, the
Company’s internal control over financial reporting is effective based upon
those criteria.




31




This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the Company to provide only management’s report
in this annual report.




CHANGES
IN INTERNAL CONTROL OVER FINANCIAL REPORTING




There has
been no change in our internal control over financial reporting during the
quarter ended December 31, 2007 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.




ITEM 9B.OTHER
INFORMATION




Not
applicable.




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 27, 2008, regarding
our executive officers:




Name
            Age
            PositionJohn
      W. Roblin
            63
            President
      and Chief Executive OfficerMaryanne
      Z. Gallagher
            46
            Chief
      Operating OfficerManish
      D. Shah
            36
            Chief
      Technology OfficerAnn
      F. Massey
            49
            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.




32




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. Shahhas 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 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 STATEMENTS 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 35.




33











(2)
            Financial Statement
      ScheduleII - Valuation and
      qualifying accounts
            F-25All 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.




See
Exhibit Index.






34


COVER-ALL
TECHNOLOGIES INC.
 
  INDEX
TO FINANCIAL STATEMENTS
 
 
 
 
 PageReport
      of Independent Registered Public Accounting Firm
                F-1Consolidated
      Balance Sheets - December 31, 2007 and 2006
                F-2Consolidated
      Statements of Operations - Years Ended December 31, 2007,2006 and
      2005
                F-4Consolidated
      Statements of Changes in Stockholders' Equity [Deficit] -Years Ended December
      31, 2007, 2006 and 2005
                F-6Consolidated
      Statements of Cash Flows - Years Ended December 31,2007, 2006 and
      2005
                F-7Notes
      to Consolidated Financial Statements
                F-9Financial
      Statement Schedule II -Valuation and
      Qualifying Accounts
                F-25
 
 
 
 
 
 
 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, 2007 and 2006, and the related
consolidated statements of operations, changes in stockholders' equity
[deficit], and cash flows for each of the three years in the period ended
December 31, 2007.  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, 2007 and 2006, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2007, 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 28,
2008
  F-1
  COVER-ALL
TECHNOLOGIES INC. AND SUBSIDIARY
 
 CONSOLIDATED
BALANCE SHEETS
 
  December 31,2 0 0 7
                
                
                2 0 0 6Assets:Current
      Assets:Cash
      and Cash Equivalents
                
                $
                10,914
                
                
                $
                131,847Accounts
      Receivable [Less Allowance for Doubtful Accountsof
      $25,000 in 2007 and 2006]
                
                
                3,672,421
                
                
                
                1,356,069Prepaid
      Expenses
                
                
                293,396
                
                
                
                322,372Total
      Current Assets
                
                
                3,976,731
                
                
                
                1,810,288Property and Equipment - At
      Cost:Furniture,
      Fixtures and Equipment
                
                
                466,622
                
                
                
                449,796Less:
      Accumulated Depreciation
                
                
                (297,074
                )
                
                
                (251,304
                )Property
      and Equipment - Net
                
                
                169,548
                
                
                
                198,492Capitalized
      Software [Less Accumulated Amortization of$10,180,752
      and $9,301,096 in 2007 and 2006, Respectively]
                
                
                1,580,971
                
                
                
                1,376,437Deferred
      Financing Costs [Net of Accumulated Amortization of$215,038
      and $180,565 in 2007 and 2006, Respectively]
                
                
                26,273
                
                
                
                60,746Other
      Assets
                
                
                110,151
                
                
                
                110,151Total
      Assets
                
                $
                5,863,674
                
                
                $
                3,556,114
 
 
 See Notes
to Consolidated Financial Statements.
 F-2
  COVER-ALL
TECHNOLOGIES INC. AND SUBSIDIARY
 
 
 CONSOLIDATED
BALANCE SHEETS
 
 
 
 December 31,2 0 0 7
                
                
                2 0 0 6Liabilities
      and Stockholders' Equity [Deficit]:Current
      Liabilities:Accounts
      Payable
                
                $
                579,446
                
                
                $
                459,879Accrued
      Liabilities
                
                
                1,080,136
                
                
                
                609,510Deferred
      Charges
                
                
                22,503
                
                
                
                2,532Convertible
      Debentures
                
                
                196,699
                
                
                
                325,796Convertible
      Debentures - Related Party
                
                
                65,566
                
                
                
                13,002Unearned
      Revenue
                
                
                1,487,545
                
                
                
                1,297,581Total
      Current Liabilities
                
                
                3,431,895
                
                
                
                2,708,300Long-Term
      Liabilities:Deferred
      Charges
                
                
                146,347
                
                
                
                163,787Convertible
      Debentures
                
                
                --
                
                
                
                1,642,926Convertible
      Debentures - Related Party
                
                
                --
                
                
                
                65,566Total
      Long-Term Liabilities
                
                
                146,347
                
                
                
                1,872,279Total
      Liabilities
                
                
                3,578,242
                
                
                
                4,580,579Commitments
      and Contingencies
                
                
                --
                
                
                
                --Stockholders'
      Equity [Deficit]:Common
      Stock, $.01 Par Value, Authorized 75,000,000 Shares;23,192,302
      and 19,491,504 Shares Issued and 23,192,302 and16,991,504
      Shares Outstanding in 2007 and 2006, Respectively
                
                
                231,923
                
                
                
                194,915Capital
      In Excess of Par Value
                
                
                28,073,659
                
                
                
                26,735,207Accumulated
      Deficit
                
                
                (26,020,150
                )
                
                
                (27,251,587
                )Treasury
      Stock - At Cost - 2,500,000 Shares
                
                
                --
                
                
                
                (703,000
                )Total
      Stockholders' Equity [Deficit]
                
                
                2,285,432
                
                
                
                (1,024,465
                )Total
      Liabilities and Stockholders' Equity [Deficit]
                
                $
                5,863,674
                
                
                $
                3,556,114
 
 
 See Notes
to Consolidated Financial Statements.
 F-3
 
 COVER-ALL
TECHNOLOGIES INC. AND SUBSIDIARY
 
 
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 
 
 Y e a r s   e n d e
    dD e c e m b e r   3
      1,2 0 0 7
                
                
                2 0 0 6
                
                
                2 0 0 5Revenues:Licenses
                
                $
                2,682,840
                
                
                $
                1,375,713
                
                
                $
                1,322,733Maintenance
                
                
                3,210,423
                
                
                
                3,471,480
                
                
                
                3,637,470Professional
      Services
                
                
                2,316,211
                
                
                
                1,176,562
                
                
                
                1,063,933Application
      Service Provider ["ASP"] Services
                
                
                1,567,843
                
                
                
                1,264,740
                
                
                
                1,230,750Total
      Revenues
                
                
                9,777,317
                
                
                
                7,288,495
                
                
                
                7,254,886Costs
      of Revenues:Licenses
                
                
                1,142,824
                
                
                
                1,280,232
                
                
                
                1,566,018Maintenance
                
                
                2,796,465
                
                
                
                3,013,900
                
                
                
                2,834,195Professional
      Services
                
                
                1,278,004
                
                
                
                570,222
                
                
                
                498,254ASP
      Services
                
                
                470,781
                
                
                
                379,767
                
                
                
                188,851Total
      Costs of Revenues
                
                
                5,688,074
                
                
                
                5,244,121
                
                
                
                5,087,318Direct
      Margin
                
                
                4,089,243
                
                
                
                2,044,374
                
                
                
                2,167,568Operating
      Expenses:Sales
      and Marketing
                
                
                800,322
                
                
                
                943,187
                
                
                
                1,221,511General
      and Administrative
                
                
                1,441,842
                
                
                
                1,461,209
                
                
                
                1,431,361Research
      and Development
                
                
                509,629
                
                
                
                464,088
                
                
                
                808,847Provision
      for Doubtful Accounts
                
                
                50,661
                
                
                
                --
                
                
                
                --Total
      Operating Expenses
                
                
                2,802,454
                
                
                
                2,868,484
                
                
                
                3,461,719Operating
      Income [Loss]
                
                
                1,286,789
                
                
                
                (824,110
                )
                
                
                (1,294,151
                )Other
      Expense [Income]:Interest
      Expense
                
                
                49,782
                
                
                
                170,829
                
                
                
                181,367Interest
      Expense - Related Party
                
                
                5,579
                
                
                
                6,512
                
                
                
                7,169Interest
      Income
                
                
                (9
                )
                
                
                (15
                )
                
                
                (9,883
                )Other
      Expense
                
                
                --
                
                
                
                1,377
                
                
                
                --Other
      Income
                
                
                --
                
                
                
                (2,948
                )
                
                
                (38,600
                )Total
      Other Expense
                
                
                55,352
                
                
                
                175,755
                
                
                
                140,053Income
      [Loss] Before Income Taxes Expense
                
                
                1,231,437
                
                
                
                (999,865
                )
                
                
                (1,434,204
                )Income
      Taxes Expense
                
                
                --
                
                
                
                --
                
                
                
                --Net
      Income [Loss]
                
                $
                1,231,437
                
                
                $
                (999,865
                )
                
                $
                (1,434,204
                )
 
 See Notes
to Consolidated Financial Statements.
 F-4
  COVER-ALL
TECHNOLOGIES INC. AND SUBSIDIARY
 
 
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 
 
 Y e a r s   e n d e
    dD e c e m b e r   3
      1,2 0 0 7
                
                
                2 0 0 6
                
                
                2 0 0 5Basic
      Income [Loss] Earnings Per Common Share
                
                $
                .06
                
                
                $
                (.06
                )
                
                $
                (.09
                )Diluted
      Income [Loss] Earnings Per Common Share
                
                $
                .05
                
                
                $
                (.06
                )
                
                $
                (.09
                )Weighted
      Average Number of Common SharesOutstanding
      for Basic Earnings PerCommon
      Share
                
                
                21,806,000
                
                
                
                16,732,000
                
                
                
                16,141,000Weighted
      Average Number of Common SharesOutstanding
      for Diluted Income Earnings PerCommon
      Share [See Note 6]
                
                
                23,463,000
                
                
                
                16,732,000
                
                
                
                16,141,000
 
 
 
 See Notes
to Consolidated Financial Statements.
 F-5
  COVER-ALL
TECHNOLOGIES INC. AND SUBSIDIARY
 
 CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY [DEFICIT]
 
 
 TotalCapital in
                
                
                
                
                
                
                
                
                Stockholders'Excess of
                
                
                Accumulated
                
                
                Treasury
                
                
                EquityCommon Stock
                
                
                Par Value
                
                
                Deficit
                
                
                Stock
                
                
                [Deficit]Balance
      at January 1, 2005
                
                $
                182,481
                
                
                $
                26,265,976
                
                
                $
                (24,817,518
                )
                
                $
                (703,000
                )
                
                $
                927,939Exercise
      of 78,000 StockOptions
                
                
                780
                
                
                
                20,480
                
                
                
                --
                
                
                
                --
                
                
                
                21,260Conversion
      of $220,121 ofConvertible
      Debt [See Note 10]
                
                
                7,337
                
                
                
                212,784
                
                
                
                --
                
                
                
                --
                
                
                
                220,121Net
      [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 StockOptions
                
                
                75
                
                
                
                3,900
                
                
                
                --
                
                
                
                --
                
                
                
                3,975Conversion
      of $127,254 ofConvertible
      Debt [See Note 10]
                
                
                4,242
                
                
                
                123,012
                
                
                
                --
                
                
                
                --
                
                
                
                127,254Non-Cash
      Stock BasedCompensation
                
                
                --
                
                
                
                109,055
                
                
                
                --
                
                
                
                --
                
                
                
                109,055Net
      [Loss]
                
                
                --
                
                
                
                --
                
                
                
                (999,865
                )
                
                
                --
                
                
                
                (999,865
                )Balance
      at December 31, 2006
                
                
                194,915
                
                
                
                26,735,207
                
                
                
                (27,251,587
                )
                
                
                (703,000
                )
                
                
                (1,024,465
                )Exercise
      of 250,715 StockOptions
      and Warrants
                
                
                2,507
                
                
                
                70,279
                
                
                
                --
                
                
                
                --
                
                
                
                72,786Conversion
      of $1,785,024 ofConvertible
      Debt [See Note 10]
                
                
                59,501
                
                
                
                1,725,523
                
                
                
                --
                
                
                
                --
                
                
                
                1,785,024Retirement
      of 2,500,000 Sharesof
      Treasury Stock
                
                
                (25,000
                )
                
                
                (678,000
                )
                
                
                --
                
                
                
                703,000
                
                
                
                --Non-Cash
      Stock BasedCompensation
                
                
                --
                
                
                
                220,650
                
                
                
                --
                
                
                
                --
                
                
                
                220,650Net
      Income
                
                
                --
                
                
                
                --
                
                
                
                1,231,437
                
                
                
                --
                
                
                
                1,231,437Balance
      at December 31, 2007
                
                $
                231,923
                
                
                $
                28,073,659
                
                
                $
                (26,020,150
                )
                
                $
                --
                
                
                $
                2,285,432
 
 See Notes
to Consolidated Financial Statements.
 F-6
  COVER-ALL
TECHNOLOGIES INC. AND SUBSIDIARY
 
 
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 
 
 Y e a r s  e n d e dD e c e m b e r   3
      1,2 0 0 7
                
                
                2 0 0 6
                
                
                2 0 0 5Cash
      Flows from Operating Activities:Income
      [Loss] from Continuing Operations
                
                $
                1,231,437
                
                
                $
                (999,865
                )
                
                $
                (1,434,204
                )Adjustments
      to Reconcile Net Income [Loss] to NetCash
      Provided by Operating Activities:Bad
      Debt Expense
                
                
                50,661
                
                
                
                --
                
                
                
                --Depreciation
                
                
                45,770
                
                
                
                63,150
                
                
                
                96,146Amortization
      of Capitalized Software
                
                
                879,656
                
                
                
                1,114,435
                
                
                
                981,168Amortization
      of Deferred Financing Costs
                
                
                34,473
                
                
                
                34,473
                
                
                
                34,473Noncash
      Stock-Based Compensation
                
                
                220,650
                
                
                
                109,055
                
                
                
                --Changes
      in Assets and Liabilities:[Increase]
      Decrease in:Accounts
      Receivable
                
                
                (2,367,013
                )
                
                
                447,264
                
                
                
                1,810,548Prepaid
      Expenses
                
                
                28,976
                
                
                
                203,939
                
                
                
                (98,320
                )Other
      Current Assets
                
                
                --
                
                
                
                --
                
                
                
                (50,816
                )Increase
      [Decrease] in:Accounts
      Payable
                
                
                119,567
                
                
                
                (79,010
                )
                
                
                2,420Taxes
      Payable
                
                
                --
                
                
                
                --
                
                
                
                (48,905
                )Accrued
      Liabilities
                
                
                470,625
                
                
                
                125,464
                
                
                
                (345,469
                )Deferred
      Charges
                
                
                2,531
                
                
                
                7,539
                
                
                
                197,943Unearned
      Revenue
                
                
                189,964
                
                
                
                (287,975
                )
                
                
                (103,750
                )Net
      Cash Provided from ContinuingOperating
      Activities
                
                
                907,297
                
                
                
                738,469
                
                
                
                1,041,234Cash
      Flows from Investing Activities:Capital
      Expenditures
                
                
                (16,826
                )
                
                
                (18,719
                )
                
                
                (209,403
                )Capitalized
      Software Expenditures
                
                
                (1,084,190
                )
                
                
                (888,037
                )
                
                
                (700,556
                )Net
      Cash [Used for] Investing Activities
                
                
                (1,101,016
                )
                
                
                (906,756
                )
                
                
                (909,959
                )Cash
      Flows from Financing Activities:Proceeds
      from Exercise of Stock Options
                
                
                72,786
                
                
                
                3,975
                
                
                
                21,260Increase
      [Decrease] in Cash and Cash Equivalents
                
                
                (120,933
                )
                
                
                (164,312
                )
                
                
                152,535Cash
      and Cash Equivalents - Beginning of Years
                
                
                131,847
                
                
                
                296,159
                
                
                
                143,624Cash
      and Cash Equivalents - End of Years
                
                $
                10,914
                
                
                $
                131,847
                
                
                $
                296,159Supplemental
      Disclosures of Cash Flow Information:Cash
      paid during the years for:Interest
                
                $
                49,782
                
                
                $
                170,829
                
                
                $
                181,367Interest
      - Related Party
                
                $
                5,579
                
                
                $
                6,512
                
                
                $
                7,169Income
      Taxes
                
                $
                --
                
                
                $
                --
                
                
                $
                50,000
 
 
 See Notes
to Consolidated Financial Statements.
 F-7
  COVER-ALL
TECHNOLOGIES INC. AND SUBSIDIARY
 
 
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 
 
 
 Supplemental
Disclosures of Non-Cash Financing Activities:
 In March
2007, the RENN Funds, the holders of a portion of the 2008 Debentures and all of
the 2009 Debentures, elected to convert all of their remaining unpaid principal
amount due on their 2008 Debentures and 2009 Debentures, totaling $1,631,601,
into an aggregate of 5,438,670 shares of our common stock at the conversion
price of $0.30 per share.  In June 2007, the holders of the 2008
Debentures converted an aggregate of $33,617 in principal of such debentures
into a total of 112,055 shares of our common stock at the conversion price of
$0.30 per share.  We made an aggregate of $52,000 of interest payments
on the debentures during 2007.
 
 During 2007, we retired 2,500,000 shares
of Treasury Stock that had been previously repurchased for
$703,000.
 
 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.
 
 
 See Notes
to Consolidated Financial Statements.
 F-8
  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, 2007 and 2006 was approximately $14,151 and $269,974,
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, 2007, two customers
accounted for approximately 69% of our trade accounts receivable portfolio
compared to four customers whom accounted for approximately 68% in 2006. 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
 
 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 year ended December 31, 2005 have not been restated
to reflect the impact of SFAS 123R. For the year ended December 31, 2007, we
recognized $220,650 of stock-based compensation expense in our consolidated
financial statements. 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
 
 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 2007, 2006 and 2005 was $45,770,
$63,150 and $96,146, 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 2007, 2006 and 2005 was $47,897,
$63,198 and $127,682, 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
  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.
 
 Deferred
Charges - The Company's lease on its premises provides for periodic
increases over the lease term.  Pursuant to SFAS No. 13, "Accounting
for Leases," the Company records rent expense on a straight-line
basis.  The effect of this difference is recorded as deferred
charges.
 
 [2]
Recently Issued Accounting Standards
 
 In December 2007, the FASB issued Statement No. 141 (revised),
"Business Combinations."  The standard changes the accounting for
business combinations including the measurement of acquirer shares issued in
consideration for a business combination, the recognition of contingent
consideration, the accounting for preacquistion gain and loss contingencies, the
recognition of capitalized in -process research and development, the accounting
for acquisition-related restructuring cost accruals, the treatment of
acquisition related transaction costs and the recognition of changes in the
acquirer's income tax valuation allowance.  Statement 141(R) is
effective for fiscal years beginning after December 15, 2008, with early
adoption prohibited.  We are currently evaluating the impact of the
pending adoption of Statement 141(R) on our consolidated financial
statements.
 
 In
December 2007, the FASB issued Statement No. 160, "Noncontrolling Interests in
Consolidated Financial Statements," an amendment of ARB No. 51.  The
standard changes the accounting for non-controlling (minority) interests in
consolidated financial statements including the requirements to classify
noncontrolling interests as a component of consolidated stockholders' equity,
and the elimination of "minority interest" accounting in results of operations
with earnings attributable to noncontrolling interests reported as part of
consolidated earnings.  Additionally, Statement 160 revises the
accounting for both increases and decreases in a parent's controlling ownership
interest.  Statement 160 is effective for fiscal years beginning after
December 15, 2008, with early adoption prohibited.  We are currently
evaluating the impact of the pending adoption of Statement 160 on our
consolidated financial statements.
  F-12
 COVER-ALL
TECHNOLOGIES INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #5
 
 
 [2]
Recently Issued Accounting Standards [Continued]
 
 In
September 2006, the FASB issued Statement No. 157, "Fair Value
Measurements.  Statement 157 defines fair value, establishes a
framework for measuring fair value and expands fair value measurement
disclosure.  Statement No. 157 is effective for fiscal years beginning
after November 15, 2007.  We are currently evaluating the impact, if
any, of the pending adoption of Statement 157 on our consolidated financial
statements.
 
 In
February 2007, the FASB issued Statement No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities," including an amendment of FASB
Statement No. 115, which allows an entity the irrevocable option to elect fair
value for the initial and subsequent measurement for certain financial assets
and liabilities on an instrument-by-instrument basis.  Subsequent
measurements for the financial assets and liabilities an entity elects to record
at fair value will be recognized in earnings.  Statement 159 also
establishes additional disclosure requirements.  Statement 159 is
effective for fiscal years beginning after November 15, 2007, with early
adoption permitted provided that the entity also adopts Statement
157.  We are currently evaluating the impact, if any, of the pending
adoption of Statement 159 on our consolidated financial statements.
 
 In June
2007, the FASB ratified EITF 07-3, "Accounting for Nonrefundable Advance
Payments for Goods or Services Received for Use in Future Research and
Development Activities (EITF 07-3).  EITF 07-3 requires that
nonrefundable advance payments for goods or services that will be used or
rendered for future research and development activities be deferred and
capitalized and recognized as an expense as the goods are delivered or the
related services are performed.  EITF 07-3 is effective, on a
prospective basis, for fiscal years beginning after December 15,
2007.  We are currently evaluating the impact, if any, of the pending
adoption of EITF 07-3 on our consolidated financial statements.
 
 [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 $389,930, $412,135 and $383,101 for the years ended December 31,
2007, 2006 and 2005, respectively.
 
 Our
future minimum lease commitments under the noncancellable operating leases for
rental of our office space in effect at December 31, 2007 were as
follows:
 
 Year
      endingDecember
      31,2008
                
                $
                400,5602009
                
                
                400,5602010
                
                
                405,9392011
                
                
                430,6022012
                
                
                358,835Thereafter
                
                
                --Total
                
                $
                1,996,496
  F-13
 COVER-ALL
TECHNOLOGIES INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #6
 
 
 [3]
Commitments, Contingencies and Related Party Transactions
[Continued]
  Employment
Contracts - Effective January 1, 2008, we have an employment contract
with one of our executives with an expiration date of December 31,
2009.  The aggregate commitment for future salary at December 31, 2007
was approximately $650,000.  The contract also includes a bonus based
on the performance of the Company.  The contract also grants 72, 463
stock options and 150,000 shares of restricted stock on the effective
date.
 
 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:
 
 Y e a r s  e n d e dD e c e m b e r  
    31,2 0 0 7
                
                
                2 0 0 6
                
                
                2 0 0 5Current:Federal
                
                $
                --
                
                
                $
                --
                
                
                $
                --State
                
                
                --
                
                
                
                --
                
                
                
                --Totals
                
                
                --
                
                
                
                --
                
                
                
                --Deferred:Federal
                
                
                --
                
                
                
                --
                
                
                
                --State
                
                
                --
                
                
                
                --
                
                
                
                --Totals
                
                
                --
                
                
                
                --
                
                
                
                --Net Income Taxes
      Provision
                
                $
                --
                
                
                $
                --
                
                
                $
                --
 
 The
income tax for continuing operations differs from the amount computed by
applying the statutory federal income tax rate as follows:
 
 Y e a r s  e n d e dD e c e m b e r  
    31,2 0 0 7
                
                
                2 0 0 6
                
                
                2 0 0 5Computed
      Federal Statutory Tax [Benefit]
                
                $
                418,688
                
                
                $
                (340,000
                )
                
                $
                (488,000
                )Valuation
      Allowance to Reduce Deferred Tax Asset
                
                
                --
                
                
                
                340,000
                
                
                
                488,000Tax
      Benefit of Federal Net Operating Loss Carryforward
                
                
                (418,688
                )
                
                
                --
                
                
                
                --Actual
Tax
                
                $
                --
                
                
                $
                --
                
                
                $
                --
  F-14
 COVER-ALL
TECHNOLOGIES INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #7
 
  [4]
Income Taxes [Continued]
 
 The
components of the net deferred tax asset and liability were as
follows:
 
 Years endedDecember 31,2 0 0 7
                
                
                2 0 0 6Deferred
      Tax Assets - Current:Accounts
      Receivable Allowance
                
                $
                10,000
                
                
                $
                10,000Vacation
      Accrual
                
                
                15,000
                
                
                
                15,000Valuation
      Allowance
                
                
                (25,000
                )
                
                
                (25,000
                )Current Deferred Tax
      Asset
                
                $
                --
                
                
                $
                --Deferred
      Tax Asset [Liability] - Long-Term:Net
      Operating Loss Carryforward
                
                $
                8,750,000
                
                
                $
                9,190,000Stock
      Options
                
                
                80,000
                
                
                
                80,000Capitalized
      Software
                
                
                (630,000
                )
                
                
                (550,000
                )Depreciation
      and Amortization
                
                
                15,000
                
                
                
                15,000Valuation
      Allowance
                
                
                (8,215,000
                )
                
                
                (8,735,000
                )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 2007 and
2006 in the total valuation allowance is $520,000 and $520,000,
respectively
 
 At
December 31, 2007, we had approximately $25,700,000 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-Based Compensation
 
 Stock
Options
 
 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, 2007 and 2006, an aggregate of 3,900,000 and
4,780,000 shares, respectively, were available for grant under the 2005 Stock
Incentive Plan.
  F-15
 COVER-ALL
TECHNOLOGIES INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #8
 
 
 [5]
Stock-Based Compensation [Continued]
 
 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, 2007,
2006 and 2005, -0-, -0- and -0- 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, 2007, 2006 and 2005, 750,000, 750,000 and
750,000 shares, respectively, were available for grant under the 1994 Stock
Option Plan for Independent Directors.
 
 A summary
of the changes in outstanding common stock options for all outstanding plans is
as follows:
 
 Exercise
                
                Weighted-AveragePrice
                
                Remaining
                
                Weighted-AverageShares
                
                
                Per Share
                
                Contractual Life
                
                Exercise PriceBalance,
      December 31, 2004
                
                
                2,831,500
                
                
                $
                0.23
      - 4.00
                
                1.7
      Years
                
                $
                .76Granted
                
                
                100,000
                
                
                
                0.61
      - 0.61
                
                4.0
      Years
                
                
                .61Exercised
                
                
                (78,000
                )
                
                
                0.27
      - 0.29
                
                
                
                
                .27Canceled
                
                
                (54,000
                )
                
                
                0.31
      - 0.60
                
                
                
                
                .50Expired
                
                
                (29,000
                )
                
                
                0.27
      - 0.29
                
                
                
                
                .28Balance,
      December 31, 2005
                
                
                2,770,500
                
                
                $
                0.23
      - 4.00
                
                1.7
      Years
                
                $
                .78Granted
                
                
                220,000
                
                
                
                0.36
      - 0.41
                
                4.6
      Years
                
                
                .41Exercised
                
                
                (7,500
                )
                
                
                0.53
      - 0.53
                
                
                
                
                .53Canceled
                
                
                (78,000
                )
                
                
                0.27
      - 0.61
                
                
                
                
                .44Expired
                
                
                (887,000
                )
                
                
                0.23
      - 4.00
                
                
                
                
                .36Balance,
      December 31, 2006
                
                
                2,018,000
                
                
                $
                0.27
      - 2.00
                
                1.8
      Years
                
                $
                .93Granted
                
                
                880,000
                
                
                
                0.79
      - 1.40
                
                4.3
      Years
                
                
                1.05Exercised
                
                
                (115,000
                )
                
                
                0.27
      - 0.61
                
                
                
                
                .37Canceled
                
                
                --
                
                
                
                --
                
                
                
                
                --Expired
                
                
                (250,000
                )
                
                
                1.25
      - 1.25
                
                
                
                
                1.25Balance,
      December 31, 2007
                
                
                2,533,000
                
                
                $
                0.34
      - 2.00
                
                2.1
      Years
                
                $
                .97
  F-16
 COVER-ALL
TECHNOLOGIES INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #9
 
 [5]
Stock-Based Compensation [Continued]
 
 The
options granted during 2007 are distributed as follows, relative to the
difference between the exercise price and the stock price at grant
date:
  Number
                
                
                Weighted-Average
                
                
                Weighted-AverageGranted
                
                
                Exercise Price
                
                
                Fair ValueExercise
      Price at Stock Price
                
                
                880,000
                
                
                $
                1.05
                
                
                $
                1.05
 
 The
options granted during 2006 are distributed as follows, relative to the
difference between the exercise price and the stock price at grant
date:
 
 Number
                
                
                Weighted-Average
                
                
                Weighted-AverageGranted
                
                
                Exercise Price
                
                
                Fair ValueExercise
      Price at Stock Price
                
                
                220,000
                
                
                $
                .41
                
                
                $
                .41
 
 The
options granted during 2005 are distributed as follows, relative to the
difference between the exercise price and the stock price at grant
date:
 
 Number
                
                
                Weighted-Average
                
                
                Weighted-AverageGranted
                
                
                Exercise Price
                
                
                Fair ValueExercise
      Price at Stock Price
                
                
                100,000
                
                
                $
                .61
                
                
                $
                .61
 
 Exercisable
options at December 31, 2007, 2006 and 2005 were as follows:
 
 Number of
                
                
                Weighted-AverageDecember 31,
                
                Exercisable Options
                
                
                Exercise Price2007
                
                
                1,756,326
                
                
                $
                .942006
                
                
                1,773,250
                
                
                $
                1.002005
                
                
                2,734,167
                
                
                $
                .78
 
 The
following table summarizes information about stock options at December 31,
2007:
 
 ExercisableOutstanding Stock Options
                
                
                Stock OptionsWeighted-AverageRange of
                
                
                
                
                Remaining
                
                Weighted-Average
                
                
                
                
                
                Weighted-AverageExercise Prices
                
                
                Shares
                
                Contractual Life
                
                Exercise Price
                
                
                Shares
                
                
                Exercise Price$.34
      - $ .36
                
                
                
                80,000
                
                1.1
      Years
                
                $
                .34
                
                
                
                73,333
                
                
                $
                .34$.41
      - $ .53
                
                
                
                685,000
                
                1.8
      Years
                
                $
                .49
                
                
                
                544,933
                
                
                $
                .51$.60
      - $1.13
                
                
                
                755,000
                
                2.9
      Years
                
                $
                .81
                
                
                
                505,000
                
                
                $
                .86$1.16
      - $1.40
                
                
                
                818,000
                
                2.3
      Years
                
                $
                1.32
                
                
                
                438,000
                
                
                $
                1.25$2.00
      - $2.00
                
                
                
                195,000
                
                0.2 Years
                
                $
                2.00
                
                
                
                195,000
                
                
                $
                2.002,533,000
                
                2.1 Years
                
                $
                .97
                
                
                
                1,756,326
                
                
                $
                .94
 
 Options
to purchase 758,000 shares of common stock at prices ranging from $1.13 to $2.00
per share, including in the table above, as set to expire in February and March
2008.
  F-17
  COVER-ALL
TECHNOLOGIES INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #10
 
 
 [5]
Stock-Based Compensation [Continued]
 
 Warrants
 
 There
were 121,429 warrants outstanding at December 31, 2007.  The exercise
prices for all the warrants issued and outstanding as of December 31, 2007 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:
 
 Outstanding
                
                
                Exercise
                
                
                Weighted-Averageand Exercisable
                
                
                Price
                
                
                Remaining
                
                
                Weighted-AverageWarrants
                
                
                Per Warrant
                
                
                Contractual Life
                
                
                Exercise PriceBalance,
      December 31, 2005
                
                
                128,572
                
                
                $
                .22
      - .22
                
                
                1.25
      Years
                
                
                $
                .22Granted
                
                
                128,572
                
                
                
                .35
      - .35
                
                
                4.35
      Years
                
                
                
                .35Balance,
      December 31, 2006
                
                
                257,144
                
                
                $
                .22
      - .35
                
                
                2.30
      Years
                
                
                $
                .29Exercised
                
                
                (135,715
                )
                
                
                .22
      - .35
                
                
                
                
                
                
                
                .23Balance, December 31,
      2007
                
                
                121,429
                
                
                $
                .35
      - .35
                
                
                3.35
      Years
                
                
                $
                .35
 
 Exercisable
Warrants at December 31, 2007, 2006 and 2005 were as follows:
 
 Number of
                
                
                Weighted-AverageDecember 31,
                
                
                Exercisable Warrants
                
                
                Exercise Price2007
                
                
                
                121,429
                
                
                $
                .352006
                
                
                
                257,144
                
                
                $
                .292005
                
                
                
                128,572
                
                
                $
                .22
 
 Time-Based
Restricted Stock Units
 
 In 2007,
we granted 125,000 time-based RSU's vest on September 13, 2010.
 
 A summary
of our time-based RSU's for the year ended December 31, 2007 is as
follows:
 
 Weighted-Average Grant DateShares
                
                
                Fair ValueBalance,
      January 1, 2007
                
                
                --
                
                
                $
                --Granted
                
                
                125,000
                
                
                
                1.40Vested
                
                
                --
                
                
                
                --Forfeited
      or Expired
                
                
                --
                
                
                
                --Balance, December 31,
      2007
                
                
                125,000
                
                
                $
                1.40
 
 We did not have any
Time-Based RSU's during the years ended December 31, 2006 and
2005.
  F-18
 COVER-ALL
TECHNOLOGIES INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #11
 
 
 
 [5]
Stock-Based Compensation [Continued]
 
 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 aterially 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 during 2005.
 
 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 31,2 0 0 5Risk-Free
      Interest Rate
                
                3.90%Expected
      Life
                
                3.0
      YearsExpected
      Volatility
                
                79%Expected
      Dividends
                
                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 year ended December 31, 2005.
 
 Year endedDecember 31,2 0 0 5[In
      Thousands]Net
      [Loss] as Reported
                
                $
                (1,434
                )Deduct:
      Amount by which Stock-Based EmployeeCompensation
      as Determined under Fair ValueBased
      Method for all Awards Exceeds the Compensationas
      Determined under the Intrinsic Value Method
                
                $
                102Pro
      Forma Net [Loss]
                
                $
                (1,536
                )Basic
      [Loss] Per Share as Reported
                
                $
                (.09
                )Pro
      Forma Basic [Loss] Per Share
                
                $
                (.10
                )
 
 F-19
 
 COVER-ALL
TECHNOLOGIES INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #12
 
 
 
 [5]
Stock Option and Stock Purchase Plans [Continued]
 
 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, 2007, we recognized $220,650 of stock-based compensation expense in our
consolidated financial statements. 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 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 year 2005.
  F-20
  COVER-ALL
TECHNOLOGIES INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #13
 
 
 [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.
  2 0 0 7
                
                
                2 0 0 6
                
                
                2 0 0 5Numerator:Net
      Income [Loss]
                
                $
                1,231,437
                
                
                $
                (999,865
                )
                
                $
                (1,434,204
                )Effect
      of Dilutive Securities:Interest
      Reversal Convertible Debentures [Net of Tax]
                
                
                12,600
                
                
                
                --
                
                
                
                --Incentive
      Bonus Adjustment [Net of Tax Benefit]
                
                
                --
                
                
                
                --
                
                
                
                --Numerator for Diluted
      Earnings [Loss] PerCommon
      Share
                
                $
                1,244,037
                
                
                $
                (999,865
                )
                
                $
                (1,434,204
                )Denominator:Weighted
      Average Number of Common SharesOutstanding
      for Basic Earnings Per Common Share
                
                
                21,806,000
                
                
                
                16,732,000
                
                
                
                16,141,000Effect
      of Dilutive Securities:Exercise
      of Options
                
                
                697,000
                
                
                
                --
                
                
                
                --Exercise
      of Warrants
                
                
                86,000
                
                
                
                --
                
                
                
                --Conversion
      of Convertible Debentures
                
                
                874,000
                
                
                
                --
                
                
                
                --Denominator for
      Diluted Earnings [Loss] PerCommon
      Share
                
                
                23,463,000
                
                
                
                16,732,000
                
                
                
                16,141,000Basic Earnings [Loss]
      Per Common Share
                
                $
                .06
                
                
                $
                (.06
                )
                
                $
                (.09
                )Diluted Earnings
      [Loss] Per Common Share
                
                $
                .05
                
                
                $
                (.06
                )
                
                $
                (.09
                )
 
 Equity
instruments that may dilute earnings per share in the future are listed in Note
5.
 
 Options
to purchase 1,008,000 shares of common stock at prices ranging from $1.25 to
$2.00 per share were outstanding at December 31, 2007, 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.
 
 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, 2007 and 2006 because it would be
antidilutive.
 
 [7]
Supplemental Data
 
 Accrued
liabilities consist of the following:
 Years endedDecember 31,2 0 0 7
                
                
                2 0 0 6Accrued
      Bonuses, Payroll, Commissions, Benefits, TemporaryHelp
      and Consulting
                
                $
                753,204
                
                
                $
                173,668Accrued
      Professional Fees
                
                
                251,226
                
                
                
                222,816Other
                
                
                75,706
                
                
                
                213,026Totals
                
                $
                1,080,136
                
                
                $
                609,510
  F-21
  COVER-ALL
TECHNOLOGIES INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #14
 
 
 [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
2007, Renaissance US Growth and Income Trust PLC and BFSUS Special Opportunities
Trust PLC, the holders of a portion of the 2008 Debentures and all of the 2009
Debentures, elected to convert all of their remaining unpaid principal amount
due on the 2008 Debentures and 2009 Debentures, totaling $1,631,601, into an
aggregate of 5,438,670 shares of common stock at the conversion price of $0.30
per share.  In June 2007, the holders of the 2008 Debentures converted
an aggregate of $33,617 in principal of such debentures into a total of 112,055
shares of our common stock at the conversion price of $0.30 per
share.  We made an aggregate of $52,000 of interest payments on the
debentures during 2007.
 
 F-22
 
 COVER-ALL
TECHNOLOGIES INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #15
 
 
 
 [8]
Convertible Debentures [Continued]
 
 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 were exercised in 2007 and were 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.
 
 At
December 31, 2007, principal payments due on the convertible debentures were as
follows:
 
 2008
                
                $
                262,265Thereafter
                
                
                --Total
                
                $
                262,265
 
 [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 $15,500 for the year ended December 31, 2007.  We
match $.50 for each $1.00 of the first 5% of pay employees elect to
defer.  Expenses associated with this plan in 2007, 2006 and 2005 were
approximately $75,166, $73,495 and $81,500, respectively.
 
 [10]
Stockholders' Equity
 
 During
2007, the holders of the 2008 Debentures and 2009 Debentures elected to convert
an aggregate of $1,665,217 in principal of such debentures, representing their
monthly installments of principal under such debentures (in lieu of necessary
such installment payments in cash), for an aggregate of 5,550,725 shares of our
common stock at the conversion price of $0.30 per share [See Note
8].
 
 During
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 an aggregate of 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 an aggregate of 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 an aggregate of 733,739 shares of our
common stock at the conversion price of $0.30 per share [See Note
8].
 
 During
2007, we retired 2,500,000 shares of treasury stock that had been previously
repurchased for $703,000.
  F-23
  COVER-ALL
TECHNOLOGIES INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #16
 
 
 
 [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 an aggregate of 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 $300,000 and $2,000,000 at December 31, 2007
and 2006, respectively.
 
 [12]
Major Customers
 
 For the
year ended December 31, 2007, sales to two customers amounted to approximately
25% and 19% of revenues, respectively.
 
 For the
year ended December 31, 2006, sales to three customers amounted to approximately
27%, 13% and 11% of revenues, respectively.
 
 For the
year ended December 31, 2005, sales to one customer amounted to approximately
23% of revenues.
 
 [13]
Related Party Transactions
 
 In 2007
and 2006, the Company paid Mark Johnston, member of the Board of Directors,
total consulting fees plus expenses related to a potential acquisition of
approximately $-0- and $37,000, respectively.
 
 
 .   .   .   .   .   .   .   .   .   .
  F-24
  COVER-ALL
TECHNOLOGIES INC. AND SUBSIDIARY
 
 SCHEDULE
II - VALUATION AND QUALIFYING ACCOUNTS
 
 
 
 Balance atBeginning
                
                
                
                
                
                
                
                
                Balance atof Period
                
                
                Additions
                
                
                Deductions
                
                
                End of PeriodAccumulated
      amortization ofcapitalized
      software andsoftware
      license:Year
      Ended December 31, 2007
                
                $
                9,301,096
                
                
                $
                879,656
                
                
                $
                --
                
                
                $
                10,180,752Year
      Ended December 31, 2006
                
                $
                8,186,661
                
                
                $
                1,114,435
                
                
                $
                --
                
                
                $
                9,301,096Year
      Ended December 31, 2005
                
                $
                7,205,493
                
                
                $
                981,168
                
                
                $
                --
                
                
                $
                8,186,661Allowance
      for Doubtful Accounts:Year
      Ended December 31, 2007
                
                $
                25,000
                
                
                $
                50,661
                
                
                $
                50,661
                
                
                $
                25,000Year
      Ended December 31, 2006
                
                $
                25,000
                
                
                $
                --
                
                
                $
                --
                
                
                $
                25,000Year
      Ended December 31, 2005
                
                $
                25,000
                
                
                $
                --
                
                
                $
                --
                
                
                $
                25,000


F-25







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:  March
      28, 2008
            By:
            /s/ John W. RoblinJohn W.
    RoblinChairman of the
      Board of Directors, President and ChiefExecutive
      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:








Signatures
            
            Title
            
            Date/s/ John W.
      Roblin
            
            Chairman
      of the Board, President and Chief Executive Office(Principal
      Executive Officer)John
      W. Roblin
            
            
            March 28,
    2008Chief
      Financial Officer, Controller and Secretary (Principal Financial Officer
      and Principal Accounting Officer)/s/ Ann F.
      Massey
            
            
            March 28,
      2008Ann
      F. Massey/s/ Russell
      Cleveland
            
            Director
            
            March 28,
    2008Russell
      Cleveland/s/
      Earl Gallegos
            
            Director
            
            March 28,
2008Earl
    Gallegos/s/ Mark D.
      Johnston
            
            Director
            
            March 28,
2008Mark D.
      Johnston

















Exhibit
Index




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.




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].




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].




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(c)(18)†
            Cover-All
      Technologies, Inc. Amended and Restated 2005 Stock Incentive Plan [incorporated
      by reference to Exhibit 10(c)(18) to the Registrant’s Form 8-K (Commission
      File No. 0-13124) filed on March 27, 2008].





10(c)(19)†
            Summary
      of 2008 Non-Employee Director Compensation dated March 25, 2008
      [incorporated by reference to Exhibit 99.1 the Registrant’s Form 8-K
      (Commission File No. 0-13124) filed on March 27,
  2008].





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)(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)(5)†
            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(e)(6)†
            Amendment
      No. 1 to the Employment Agreement, dated April 26, 2007, between the
      Registrant and John Roblin [incorporated by reference to Exhibit 10(e)(6)
      to the Registrant’s Form 8-K (Commission File No. 0-13124) filed on April
      30, 2007].




10(e)(7)†
            Employment
      Agreement, dated December 26, 2007, by and between the Registrant and John
      Roblin [incorporated by reference to Exhibit 10(e)(7) to the Registrant’s
      Form 8-K (Commission File No. 0-13124) filed on December 27,
      2007].




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 ofJohn 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. andJohn 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].




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)(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)(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].




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)(17)
            Limited Waiver to
      the Convertible Loan Agreement, dated as of March 31, 2007, by John Roblin
      and Stuart Sternberg [incorporated by reference to Exhibit
      10(i)(17) to the Registrant’s Quarterly Report on Form 10-Q (Commission
      File No. 0-13124) filed on May 11,
2007].




10(i)(18)
            Limited Waiver to
      Convertible Loan Agreement, dated as of June 30, 2007, by John Roblin and
      Stuart Sternberg [incorporated by reference to Exhibit 10(i)(18) to
      the Registrant’s Quarterly Report on Form 10-Q (Commission File No.
      0-13124) filed on August 10, 2007].




10(i)(19)
            Limited
      Waiver to Convertible Loan Agreement, dated as of September 30, 2007, by
      John Roblin and Stuart Sternberg [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 November 13,
2007].




10(j)(i)
            Asset
      Purchase Agreement, dated January 22, 2007, between the Registrant and
      Maloy Risk Services, Inc. [incorporated by reference to Exhibit 10(j)(i)
      to the Registrant’s Form 8-K (Commission File No. 0-13124) filed on
      January 26, 2007].




10(j)(ii)
            Commission
      Agreement, dated January 22, 2007, between the Registrant and Maloy Risk
      Services, Inc. [incorporated by reference to Exhibit 10(j)(ii) to the
      Registrant’s Form 8-K (Commission File No. 0-13124) filed on January 26,
      2007].




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.






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.




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 amanagement contract or
      compensatory plan or
arrangement.