1996 1995 1994 ---- ---- ---- STATEMENTS OF OPERATIONS DATA: Revenues: $ 5,469 $ 4,119 $ 1,927 Loss from continuing operations(1) (5,608) (3,544) (7,466)
BALANCE SHEET DATA: Working capital (deficiency) $(1,293) $(8,717) $ 3,110 Total assets 8,243 8,369 18,795 Short-term debt -- -- 2,000
Revenues: $ 224 $ 1,740 $ 1,802 Loss from continuing operations(1) (781) (1,943) (850) (Loss) income from discontinued operations less applicable income taxes/(benefit) of none, none, ($924), $670, $3,633 and $2,852, respectively 1,158 5,653 4,116
Net (loss) income per share(2) .04 .40 .36 Cash dividends per share $.01 $.03 -- Balance Sheet Data: Working capital (deficiency) $12,475 $12,843 $17,102
Total assets 22,748 22,443 18,544 Short-term debt -- -- -- Stockholders' equity (deficit) 20,574 20,541 17,637
ISD revenues in 1994 and 1995 primarily consisted of policy administration and claims servicing fees from customers such as Atlantic/Pacific Employers Insurance Company and to a lesser extent, Clarendon National Insurance Company ("Clarendon"), for servicing policies in the New Jersey voluntary and assigned risk markets. The contract with Atlantic/Pacific Employers Insurance Company reached its peak level of activity in 1994 and policy volumes declined sharply in 1995. During 1995 and 1996, Atlantic/Pacific Employers Insurance Company planned to non-renew all of their auto insurance policies in New Jersey in accordance with the accelerated withdrawal order entered into with the New Jersey Department of Insurance in August 1994. In addition, the MTF program had been phasing out since 1994 and, as of March 1, 1996, the Company's contracted activity for the MTF ended.
Cost of sales increased to $4,585,727 for the year ended December 31, 1996 as compared to $1,329,693 for 1995. Significant increases in capitalized software and license fees amortization, and salary and benefit costs relating to dedication of resources to maintenance and professional services, accounted for the bulk of the increase. In addition, the Company wrote off approximately $500,000 of unamortized capitalized software costs representing certain modules of the TAS 2000 product line not expected to be completed in the near future due to reprioritizing of marketing and development efforts.
Research and development expenses in 1996 decreased slightly to $1,846,410 compared to $1,932,920 for the year ended December 31, 1995 due to personnel reductions in the Engineering Department and the decision to focus the Company's Engineering resources on completing several TAS 2000 modules for the marketplace. In the future, the Company will continue to dedicate significant resources to its ongoing research and development efforts since its success depends on its ability to keep products current based on new technologies.
General and administrative expenses increased approximately 27% to $3,519,973 in 1996 from $2,770,186 for the year ended December 31, 1995 due to costs incurred in connection with the procurement of the SIL and CARE contracts and additional staffing. In addition, the Company terminated the lease at the Somerset facility for a cost of $371,408 since the anticipated utilization of this facility to house a significant number of new employees to work on a joint venture project with a new customer did not occur.
A loss from discontinued operations of $392,872 was recorded in the year ended December 31, 1996 as a result of additional loss adjustment expenses in excess of the amount anticipated at December 31, 1995.
The Company is working toward fulfilling long-term objectives. In the Classic line, COVER-ALL has been positioned to increase market share in 1997 as a result of the successful completion of the project making it Windows 95 compliant and maintaining the strengths upon which its current market acceptance is based.
In 1996, COVER-ALL formed an alliance with ORACLE Corporation related to the TAS 2000 product to facilitate the advance of both organizations in the property and casualty insurance marketplace. ORACLE will provide technical assistance, consultative services as well as sales direction and support to the TAS 2000 market entry. The Company has completed some of the major components of the TAS 2000 product. Future development of additional modules will be customer driven.
COVER-ALL has commenced marketing efforts in the United Kingdom. A contract for the TAS 2000 product successfully installed in a large insurer in the United Kingdom is expected to expand in the next year. This successful installation has increased customer awareness of the TAS 2000 product in the United Kingdom and Europe.
A marketing campaign for the Care software is presently under way in Canada.
The preceding forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act) are subject to the occurrence of certain contingencies which may not occur in the time frames anticipated or otherwise, and, as a result, could cause actual results to differ materially from such statements. These contingencies include the successful completion of continuing developmental efforts under existing software contracts within anticipated time frames or otherwise, the successful negotiation, execution and implementation of anticipated new software contracts, the successful utilization of additional personnel in the marketing and technical areas, the continuing favorable responses to the Company's products from existing and potential new customers, and the Company's ability to complete development and sell and license its products at prices which result in sufficient revenues to realize profits.
Total revenues were $4,118,754 for the year ended December 31, 1995 as compared with $1,926,822 for the year ended December 31, 1994, reflecting increasing progress on initial installations of TAS 2000 and increased fee arrangements for professional support to most customers.
In December 1994, management adopted a plan to reduce the COVER-ALL marketing and product development costs until revenues increased to significantly higher levels. The total cash outlay had grown to a level of approximately $1 million per month but the revenues from customers continued to lag expectations. The total head count, including employees and technical consultants, was reduced by approximately one half in the first quarter of 1995 and a business plan was adopted for 1995 which would match slowly growing revenues with reduced costs. In addition, the sales offices in most cities were closed and sales staffing reduced by over 50 percent.
As a result of this reorganization plan for COVER-ALL, special charges were reported in the fourth quarter of 1994 to write down a substantial portion of the unamortized capitalized software development costs (approximately $2.7 million) and accrue for excess facilities and other costs ($.6 million). Additional costs were
incurred in the first quarter of 1995 for executive severance, employee severance, and write-off of software development costs as the COVER-ALL reorganization was completed. These 1995 provisions and write-offs, aggregating $1,165,000, were reflected as special charges in the Statement of Operations for the quarter ended March 31, 1995.
At December 31, 1996, the Company had a working capital deficit of $1,293,128 compared to a working capital deficit of $8,716,643 in 1995. The improvement in working capital was due to the discharging of liabilities relating to the discontinued operations through the issuance of the Company's common stock and warrants with a fair value of approximately $7 million.
At this time the Company does not anticipate having to make any significant investment in software development. The Company believes that the proceeds from the sale of the Debentures, its current cash balances and anticipated cash flows from continuing operations will be sufficient to meet normal operating needs for the continuing COVER-ALL business in 1997.