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

FORM 10-Q

☒		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
		SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended March 31, 2015

OR

☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
		SECURITIES EXCHANGE ACT OF 1934

		For the transition period from __________ to __________

Commission file number: 1-09228

COVER-ALL TECHNOLOGIES INC.
(Exact Name of Registrant as Specified in Its Charter)

Delaware	13-2698053
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

412 Mt. Kemble Avenue, Suite 110C,	07960
Morristown, New Jersey	(Zip code)
(Address of principal executive offices)

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

None
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]

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

Large accelerated filer [ ]	Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)	Smaller reporting company [X]

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at May 8, 2015
Common Stock, $0.01 par value per share		27,003,241 shares

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

INDEX TO FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2015

PART I:	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets as of March 31, 2015 (Unaudited)
	and December 31, 2014	3

	Consolidated Statements of Operations for the three
	months ended March 31, 2015 and 2014 (Unaudited)	5

	Consolidated Statements of Cash Flows for the three
	months ended March 31, 2015 and 2014 (Unaudited)	6

	Notes to Consolidated Financial Statements (Unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial
	Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures
	About Market Risk	22

Item 4.	Controls and Procedures	22

PART II:	OTHER INFORMATION

Item 1A.	Risk Factors	24

Item 6.	Exhibits	24

SIGNATURES		25

· · · · · · · · · ·

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements.

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

	March 31,		December 31,
	2015		2014
	(Unaudited)
Assets:
Current Assets:
Cash and Cash Equivalents	$	4,303,405	$	4,564,595
Accounts Receivable (Less Allowance for Doubtful Accounts
of $25,000)		2,477,745		2,532,853
Prepaid Expenses		614,125		361,930
Deferred Tax Asset		864,037		864,037

Total Current Assets		8,259,312		8,323,415

Property and Equipment – Net		454,302		499,639

Goodwill		1,039,114		1,039,114

Capitalized Software (Less Accumulated Amortization of
$24,168,382 and $23,795,743 in 2015 and 2014, respectively)		6,101,392		6,474,031

Deferred Tax Asset		2,661,391		2,661,391

Deferred Financing Costs (Net Amortization of $76,327 and $67,800
in 2015 and 2014, respectively)		15,956		24,483

Other Assets		148,290		148,290

Total Assets	$	18,679,757	$	19,170,363

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

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
	2015			2014
	(Unaudited)
Liabilities and Stockholders’ Equity:
Current Liabilities:
Accounts Payable	$	1,415,327		$	1,413,353
Accrued Expenses		453,911			1,253,298
Deferred Charges		168,510			183,219
Short-Term Debt		1,897,535			1,842,780
Current Portion of Capital Lease		120,883			119,608
Unearned Revenue		2,254,674			2,454,435

Total Current Liabilities		6,310,841			7,266,693

Long-Term Liabilities:
Long-Term Portion of Capital Lease		202,828			233,531

Total Liabilities		6,513,669			7,500,224

Commitments and Contingencies		—			—

Stockholders’ Equity:
Common Stock ($0.01 Par Value, Authorized 75,000,000 Shares;
27,003,241 and 26,786,693 Shares Issued and Outstanding in
2015 and 2014, respectively)		270,032			267,867

Additional Paid-In Capital		33,352,114			33,057,142

Accumulated Deficit		(21,456,059	)		(21,654,870	)

Total Stockholders’ Equity		12,166,088			11,670,139

Total Liabilities and Stockholders’ Equity	$	18,679,757		$	19,170,363

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

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three months ended March 31,
	2015		2014
Revenues:
Licenses	$	179,587	$	807,599
Support Services		2,116,966		2,129,663
Professional Services		2,992,816		2,270,288
Total Revenues		5,289,369		5,207,550
Cost of Revenues:
Licenses (exclusive of Amortization of Capitalized
Software)		—		—
Support Services		1,413,263		1,685,454
Professional Services		1,582,221		1,110,657
Total Cost of Revenues		2,995,484		2,796,111
Direct Margin		2,293,885		2,411,439
Operating Expenses:
Sales and Marketing		339,855		478,358
General and Administrative		828,928		733,797
Amortization of Capitalized Software		372,638		372,638
Acquisition Costs		152,546		—
Research and Development		239,770		295,437
Total Operating Expenses		1,933,737		1,880,230
Operating Income		360,148		531,209
Other (Income) Expense:
Interest Expense		98,501		93,672
Total Other (Income) Expense		98,501		93,672
Income Before Income Taxes		261,648		437,537
Income Taxes Expense		62,836		3,688
Net Income	$	198,812	$	433,849
Basic Earnings Per Common Share	$	0.01	$	0.02
Diluted Earnings Per Common Share	$	0.01	$	0.02
Weighted Average Number of Common Shares
Outstanding for Basic Earnings
Per Common Share		26,909,000		26,543,000
Weighted Average Number of Common Shares
Outstanding for Diluted Earnings
Per Common Share		26,909,000		26,555,000

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

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Three months ended March 31,
	2015			2014
Cash Flows Provided By (Used For) Operating Activities:
Net Income	$	198,812		$	433,849
Adjustments to Reconcile Net Income to
Net Cash Provided By Operating Activities:
Depreciation		46,338			81,829
Amortization of Capitalized Software		372,638			372,638
Amortization of Customer Lists/Relationships		—			15,167
Amortization of Stock Based Compensation		93,213			107,017
Amortization of Deferred Financing Costs		8,527			7,585
Stock Based Compensation Provided for Services		55,333			12,083
Changes in Assets and Liabilities:
(Increase) Decrease in:
Accounts Receivable		55,108			766,167
Prepaid Expenses		(252,195	)		(131,548	)
Other Assets		—			96,522
Increase (Decrease) in:
Accounts Payable		1,974			(105,626	)
Accrued Liabilities		(596,040	)		(781,179	)
Deferred Charges		(14,709	)		(11,372	)
Unearned Revenue		(199,761	)		(504,247	)
Net Cash Provided By (Used For) Operating Activities		(230,762	)		358,885

Cash Flows (Used For) Investing Activities:
Capitalized Expenditures		(1,000	)		(7,895	)
Net Cash (Used For) Investing Activities		(1,000	)		(7,895	)

Cash Flows (Used For) Financing Activities:
Capital Lease – Principal Payments		(29,428	)		(28,206	)
Net Cash (Used for) Financing Activities		(29,428	)		(28,206	)

Net (Decrease) Increase in Cash and Cash Equivalents		(261,190	)		322,784

Cash and Cash Equivalents – Beginning of Periods		4,564,595			1,848,571
Cash and Cash Equivalents – End of Periods	$	4,303,405		$	2,171,355

Supplemental Disclosures of Cash Flow Information
Cash Paid During the Periods for:
Interest	$	43,746		$	44,968
Income Taxes	$	102,263		$	3,688

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

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

[1] Description of Business

Cover-All Technologies Inc., through its wholly-owned subsidiary, Cover-All Systems, Inc. (collectively, the “Company”), 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.

On December 14, 2014, the Company and Majesco, a California corporation (“Majesco”), entered into an Agreement and Plan of Merger, pursuant to which, subject to shareholder approval and the satisfaction or waiver of certain conditions, the Company will merge with and into Majesco (the “Merger”), with Majesco continuing as the surviving corporation in the Merger. Upon the consummation of the Merger, each share of Company common stock issued and outstanding immediately prior to the effective time of the Merger (the “Effective Time”) will be cancelled and automatically converted into the right to receive shares of Majesco common stock, such that, at the Effective Time, the shares of Majesco common stock issued in respect of the issued and outstanding Company common stock and such shares of Majesco common stock issued or issuable with respect to issued and outstanding options and other equity awards of the Company will in the aggregate represent approximately 16.5% of the total capitalization on a fully diluted basis of Majesco at closing.

[2] Basis of Presentation

The consolidated balance sheet as of December 31, 2014 has been derived from audited financial statements, and the unaudited interim financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s latest shareholders’ annual report on Form 10-K filed with the SEC on March 31, 2015 for the fiscal year ended December 31, 2014 (“Form 10-K”).

The Company’s policy is to periodically review the estimated useful lives and value of its capitalized software costs. During the quarter ended March 31, 2014, this review indicated that the revised estimated life (5 years) for capitalized software differed from the useful lives (3 years) that had been previously used for amortization purposes in the Company’s financial statements. This revision in the estimated life is based upon the period over which the asset is expected to contribute directly or indirectly to the future cash flows of the Company. As a result, the Company revised the estimated useful lives of capitalized software, effective January 1, 2014. The effect of this change in estimate was to decrease amortization expense by $248,000 and to increase operating income and net income by $248,000 for the quarter ended March 31, 2014.

In the opinion of management, all adjustments (which include normal and recurring nature adjustments) necessary to present a fair statement of the Company’s financial position as of March 31, 2015, and results of operations for the three months ended March 31, 2015 and 2014 and the cash flows for the three months ended March 31, 2015 and 2014, as applicable, have been made.

The results of operations for the three months ended March 31, 2015 and 2014 are not necessarily indicative of the operating results for the full fiscal year or any future periods.

[3] Capitalized Software Development Costs

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

[4] Earnings Per Share

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share (“EPS”) computations:

	For the three months ended
	March 31, 2015
	Income		Shares	Per Share
	(Numerator)		(Denominator)	Amount
Basic EPS:
Income Available to Common Stockholders	$	198,812	26,909,403	$	0.01
Effect of Dilutive Securities:
Options and Restricted Stock		—	—		—
Diluted EPS:
Income Available to Common Stockholders
Plus Assumed Exercises	$	198,812	26,909,403	$	0.01

	For the three months ended
	March 31, 2014
	Income		Shares	Per Share
	(Numerator)		(Denominator)	Amount
Basic EPS:
Income Available to Common Stockholders	$	433,849	26,542,644	$	0.02
Effect of Dilutive Securities:
Options and Restricted Stock		—	12,318		—
Diluted EPS:
Income Available to Common Stockholders
Plus Assumed Exercises	$	433,849	26,554,962	$	0.02

[5] Stock-Based Compensation and Stock Purchase Plans

Stock Options

In the three months ended March 31, 2015 and 2014, we recognized $93,791 and $70,396, respectively, of stock-based compensation expense in our consolidated financial statements.

In June 2005, we adopted the 2005 Stock Incentive Plan (which was amended in 2006 and in 2008). Options and stock awards for the purchase of up to 5,000,000 shares may be granted by the Board of Directors to our employees and consultants at an exercise or grant price determined by the Board of Directors on the date of grant. 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. On March 31, 2015, an aggregate of $1,459,814 shares were available for grant under the 2005 Stock Incentive Plan.

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Company uses the Black-Scholes-Merton option-pricing model (“Black-Scholes”) to measure fair value of the share-based awards. The Black-Scholes model requires us to make significant judgments regarding the assumptions used within the model, the most significant of which are the expected stock price volatility, the expected life of the option award, the risk-free interest rate of return and dividends during the expected term.

-	Expected volatilities are based on historical volatility of the Company’s stock during the preceding periods.

-	The Company uses historical data to estimate the expected life of option awards. The expected term of options granted represents the period of time that options granted are expected to be outstanding.

-	The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yields for an equivalent term at the time of grant.

-	The Company does not anticipate issuance of dividends during the expected term.

	2015		2014
Expected volatility	41%–50%		41%–50%
Weighted-average volatility	41	%	41	%
Expected dividends	0	%	0	%
Expected term (in years)	3–5		3–5
Risk-free interest rate	0.46	%	0.46	%

As of March 31, 2015, there was $121,499 of total unrecognized compensation cost related to nonvested share-based compensation arrangements previously granted by the Company. That cost is expected to be recognized over a weighted-average period of 2.9 years.

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

				Weighted-Average
		Exercise Price		Remaining	Weighted-Average
	Shares	Per Share		Contractual Life	Exercise Price
Balance, January 1, 2015	992,500	$	1.50 – 1.67	1.76 years	$	1.63
Exercised	—		—	—		—
Cancelled	—		—	—		—
Balance, March 31, 2015	992,500	$	1.50 – 1.67	1.5 years	$	1.63

Of the stock options outstanding, an aggregate of 992,500 are currently exercisable.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because our employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion the existing models do not necessarily provide a reliable single measure of the fair value of our employee stock options.

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Warrants

As of March 31, 2015, there were 1,442,000 warrants outstanding. A summary of the changes in outstanding warrants is as follows:

	Outstanding			Weighted-Average
	and Exercisable	Exercise Price		Remaining	Weighted-Average
	Warrants	Per Warrant		Contractual Life	Exercise Price
Balance, January 1, 2015	1,442,000	$	1.48	0.7	$	1.48
Balance, March 31, 2015	1,442,000	$	1.48	0.5	$	1.48

Time-Based Restricted Stock Units

A summary of our time-based restricted stock units, or RSUs, for the three months ended March 31, 2015 is as follows:

			Weighted-Average
			Grant Date Fair Value
	Shares		Per Share
Balance, January 1, 2015	53,061		$	1.58
Granted	133,870			1.24
Cancelled	—			—
Vested	(41,250	)		1.67
Balance, March 31, 2015	145,681		$	1.24

We follow Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718, Accounting for Stock Options and Other Stock-Based Compensation. Among other items, ASC 718 requires companies to record the compensation expense for shared-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. For restricted stock awards, the calculation of compensation expense under ASC 718 is based on the intrinsic value of the grant.

[6] Income Taxes

The deferred tax asset from tax net operating loss carryforwards of approximately $3,920,000 represents approximately $9,900,000 of net operating loss carryforwards which are subject to expiration beginning in fiscal 2019 through 2032. During the three months ended March 31, 2015, the deferred tax asset valuation allowance was decreased for the assumed utilization of prior period net operating loss carryforwards utilized to offset taxable income for the current period, subject to federal alternative minimum tax limitations. In assessing the realizability of deferred tax assets, management considers, within each taxing jurisdiction, whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Factors that may affect the Company’s ability to achieve sufficient forecasted taxable income in future periods may include, but are not limited to, the following: increased competition, a decline in sales or margins, a loss of market share, and a decrease in demand for professional services. Based upon the levels of historical taxable income and projections for future taxable income over the years in which the deferred tax assets are deductible, at March 31, 2015, management believes it is more likely than not that the Company will realize the benefits, net of the established valuation allowance, of these deferred tax assets in the future.

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, and the conversion of outstanding warrants, or as a result of other changes in ownership of our outstanding stock, the Company may experience an ownership change and consequently our utilization of net operating loss carryforwards could be significantly limited.

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

[7] Recently Issued Accounting Standards

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or consolidated results of operations upon adoption.

In May 2014, the FASB issued accounting standard update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” The ASU is the result of a joint project by the FASB and the International Accounting Standards Board to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP and International Financial Reporting Standards that would: remove inconsistencies and weaknesses; provide a more robust framework for addressing revenue issues; improve comparability of revenue recognition practices across entities, jurisdictions, industries, and capital markets; improve disclosure requirements and resulting financial statements; and simplify the presentation of financial statements. The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU is effective for annual reporting periods beginning after December 15, 2016. Early adoption is not permitted. We are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures.

In February 2015, the FASB issued ASU No. 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis", which makes changes to both the variable interest model and the voting model. These changes will require re-evaluation of certain entities for consolidation and will require us to revise our documentation regarding the consolidation or deconsolidation of such entities. ASU No. 2015-02 is effective for reporting periods after December 15, 2015 and interim periods within those fiscal years. We are currently evaluating the effect that this ASU will have on our consolidated financial statements and related disclosures.

In April 2015, the FASB issued ASU No. 2015-03, “Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs,” which requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability, rather than as a deferred charge asset. ASU No. 2015-03 is effective for us January 1, 2016 and is to be applied retrospectively. We are currently evaluating the effect that this ASU will have on our consolidated financial statements and related disclosures.

In April 2015, the FASB issued ASU No. 2015-06, “Earnings Per Share (Topic 260): Effects on Historical Earnings per Unit of Master Limited Partnership Dropdown Transactions (a consensus of the FASB Emerging Issues Task Force),” which applies to master limited partnerships that receive net assets through a dropdown transaction. ASU 2015-06 specifies that for purposes of calculating historical earnings per unit under the two-class method, the earnings (losses) of a transferred business before the date of a dropdown transaction should be allocated entirely to the general partner. Qualitative disclosures about how the rights to the earnings (losses) differ before and after the dropdown transaction occurs for purposes of computing earnings per unit under the two-class method also are required. ASU 2015-06 is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years and will be applied retrospectively. Earlier application is permitted. We are currently evaluating the effect that this ASU will have on our consolidated financial statements and related disclosures.

We believe there is no additional new accounting guidance adopted, but not yet effective, that is relevant to the readers of our financial statements. However, there are numerous new proposals under development which may have a significant impact on the Company’s financial reporting, if and when enacted.

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

[8] Short-Term Debt

On September 11, 2012, the Company entered into a Loan and Security Agreement (“Loan Agreement”) between and among Imperium Commercial Finance Master Fund, LP, a Delaware limited partnership (“Imperium”), as lender, Cover-All Systems, Inc., a wholly-owned subsidiary of the Company (the “Subsidiary”), as borrower, and the Company, as a guarantor. The Loan Agreement provides for a three-year term loan to the Subsidiary of $2,000,000, evidenced by a Term Note in favor of Imperium, and a three-year revolving credit line to the Subsidiary of up to $250,000, evidenced by a Revolving Credit Note in favor of Imperium (together with the Term Note, the “Imperium Notes”). The amount available to be borrowed under the revolving credit line may not exceed eighty percent of Eligible Accounts (as defined in the Loan Agreement). All amounts borrowed under the term loan and the revolving credit line are secured by a security interest in all of the assets of the Subsidiary and guaranteed by the Company, which guarantee is secured by a pledge by the Company of all of the outstanding shares of capital stock of the Subsidiary. As of March 31, 2015, no balance was outstanding under the Revolving Credit Line. As of March 31, 2015 the Short-Term Debt balance consists of the following:

Principal Balance Outstanding	$	2,000,000
Discount		(102,465	)
Short-Term Debt	$	1,897,535

Interest on the outstanding principal balance under the Imperium Notes accrues at a fixed rate equal to eight percent per annum and is payable monthly. The $2,000,000 principal balance and any remaining interest under the Imperium Notes will be immediately due and payable on the earlier of (1) September 10, 2015, or (2) the date Imperium’s obligation to advance funds under the revolving credit line is terminated following an event of default pursuant to the terms and conditions of the Loan Agreement. Payments and prepayments received by Imperium will be applied against principal and interest as provided for in the Loan Agreement.

The Loan Agreement contains customary representations, warranties, affirmative and negative covenants, and events of default. If an event of default occurs and is continuing, Imperium has certain rights and remedies under the Loan Agreement. Additionally, the Loan Agreement requires the Company to maintain minimum revenues and EBITDA, tested annually, commencing with the twelve months ending September 30, 2013.

In connection with the Loan Agreement, the Company issued to Imperium a five-year warrant (the “Stock Purchase Warrant”) to purchase 1,400,000 shares of the Company’s common stock at an exercise price of $1.48 per share. The Stock Purchase Warrant is not exercisable until the earliest of (i) the date when Current Market Value (as defined therein) exceeds the exercise price multiplied by two, (ii) the date of a Change of Control (as defined therein), and (iii) the third anniversary of the date of issuance of the Stock Purchase Warrant. The Stock Purchase Warrant provides for adjustments to the exercise price and the number of shares issuable upon exercise in certain events to protect against dilution and for cashless exercise. The Stock Purchase Warrant also required the Company to file a registration statement with the SEC, with respect to the shares issuable upon exercise of the Stock Purchase Warrant, within 45 days of the date of issuance of the Stock Purchase Warrant, and that the Company use its best efforts to obtain the effectiveness of such registration statement within 90 days (subject to extension to 120 days) of the date of issuance of the Stock Purchase Warrant. The Company filed the Registration Statement and it was effective in the required time frame. If the Company failed to comply with its obligations to file the registration statement and obtain its effectiveness within the specified periods, and in certain other events, the Company would have been required to pay Imperium, for each month such failure continued, the amount of $22,500. The Stock Purchase Warrant also provided for piggyback registration rights. The proceeds from the $2,000,000 Imperium Note were allocated using the relative fair value method to both the notes payable balance and warrants issued.

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Company also issued five-year warrants (the “Monarch Warrants”) to purchase 42,000 shares, in the aggregate, of the Company’s common stock at an exercise price of $1.48 per share, to Monarch Capital Group, LLC (“Monarch”), which acted as the Company’s financial adviser in connection with the loan transaction, and an officer of Monarch. The Monarch Warrants are not exercisable until the earliest of (i) the date when the Current Exercise Price (as defined therein) exceeds the exercise price multiplied by two, (ii) the date of a Change of Control transaction (as defined therein), and (iii) the third anniversary of the date of issuance. The Monarch Warrants provide for adjustment to the exercise price and the number of shares issuable upon exercise in certain events to protect against dilution and for cashless exercise. The Monarch Warrants also provided for piggyback registration rights. On April 10, 2013, the Company amended and restated the terms of the Imperium Warrant and each of the Finder’s Warrants to provide that the aggregate number of shares issuable on exercise of the Imperium Warrant and the Finder’s Warrants shall not exceed 19.9% of the Company’s issued and outstanding shares of common stock at the date of original issuance (i.e., 5,171,145 shares of common stock based on 25,857,730 shares of common stock issued and outstanding on September 11, 2012) without first obtaining the approval of the Company’s stockholders.

In connection with the Imperium Loan Agreement financing, the Company incurred deferred financing costs of approximately $92,000, which will be amortized over the life of the loan (or earlier if the loan becomes due or is repaid before its fixed maturity).

[9] Commitments and Contingencies

Sales and Use Tax Audit

The New York State Department of Taxation and Finance (the “Department”) commenced an examination of the Company for state sales and use tax for audit periods March 1, 2009 through February 28, 2013. In February 2014, the Company received a Statement of Proposed Audit Change from the Department. The Change asserts proposed Sales and Use Tax due in the amount of approximately $191,600 together with interest of approximately $46,400. On March 11, 2014, the Company paid the Department an aggregate of approximately $238,000 in satisfaction in full of all amounts owed in connection with such examination.

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Certain of the matters discussed in this report, including, without limitation, matters discussed under this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may constitute forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act) and are subject to the occurrence of certain contingencies which may not occur in the time frames anticipated or otherwise, and, as a result, could cause actual results to differ materially from such statements. In addition to other factors and matters discussed elsewhere in this report on Form 10-Q and in our other filings filed with the Securities and Exchange Commission (“SEC”) over the last 12 months, including our Form 10-K filed with the SEC on March 31, 2015, these risks, uncertainties and contingency include, but are not limited to, risks associated with increased competition, customer decisions, the successful completion of continuing development of new products, the successful negotiation, execution and implementation of anticipated new software contracts, the successful addition of personnel in the marketing and technical areas and our ability to complete development and sell and license our products at prices which result in sufficient revenues to realize profits, and other business factors beyond our control.

Overview

We are a supplier of software products for the property and casualty insurance industry, supplying a wide range of professional services that support product customization, conversion from existing systems and data integration with other software or reporting agencies. We also offer ongoing 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, fees for servicing the product, which we call support services, and professional services. Total revenue for the three months ended March 31, 2015 increased to approximately $5,289,000 from approximately $5,208,000 for the three months ended March 31, 2014, mainly due to an increase in professional services revenue offset by a decrease in license and support revenue in 2015.

The following is an overview of the key components of our revenue and other important financial data for the three months ended March 31, 2015:

Software Licenses. Our license revenue in the three months ended March 31, 2015 was approximately $180,000 compared to approximately $808,000 for the three months ended March 31, 2014, resulting from fewer sales to new customers and fewer sales to existing customers who chose to renew, add onto or extend their use of our software. Our new software license revenue is affected by the strength of general economic and business conditions and the competitive position of our software products. New software license sales are characterized by long sales cycles and intense competition. The timing of new software license sales can substantially affect our quarterly results.

Support Services. Support services revenue was approximately $2,117,000 in the three months ended March 31, 2015 compared to approximately $2,130,000 in the same period in 2014. The decrease in the first three months of 2015 was mainly due to the decrease in annual renewals of existing customers’ support services and fewer new customer sales in the latter part of 2014. Support services revenue is influenced primarily by the following factors: the renewal rate from our existing customer base, the amount of new support services associated with new license sales, and annual price increases.

Professional Services. The increase in professional services revenue, to approximately $2,993,000 in the three months ended March 31, 2015 from approximately $2,270,000 in the same period of 2014, was a result of increased demand for new software capabilities and customizations from our current customer base and new and existing customer implementations resulting from contracts signed in early 2014.

Income before Provision for Income Taxes. Income before provision for income taxes was approximately $262,000 in the three months ended March 31, 2015 compared to approximately $438,000 in the same period of 2014 as a result of a decrease in license and support services revenue in 2015 offset by an increase in professional services revenue in 2015 and various cost saving programs.

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

Net Income. Net income for the three months ended March 31, 2015 decreased to approximately $199,000 from approximately $434,000 in the same period of 2014 as a result of a decrease in license and support services revenue offset by an increase in professional services revenue and various cost saving programs.

EBITDA. Earnings before interest, taxes, depreciation and amortization (“EBITDA”), a non-GAAP metric, was approximately $788,000 for the three months ended March 31, 2015 compared to approximately $1,008,000 for the three months ended March 31, 2014.

Cash Flow. As of March 31, 2015, we had approximately $4,303,000 in cash and cash equivalents on hand and approximately $2,478,000 in accounts receivable.

We continue to face competition for growth in 2015 mainly in the marketing and selling of our products and services to new customers, caused by a number of factors, including long sales cycles and general economic and business conditions. In addition, there are risks related to customers’ acceptance and implementation delays which could affect the timing and amount of license revenue we are able to recognize. However, given the positive response to our new software from existing customers, the significant expansion of our relationship with a very large customer and the introduction of additional software capabilities, we are expanding our sales and marketing efforts to both new and existing customers. Consequently, we continue to incur additional sales and marketing expense in advance of generating the corresponding revenue.

As we shift over time from software development to deployment, from a financial perspective, the non-cash charges for amortization of developed software will increasingly impact our bottom line. Therefore, in order to provide more visibility to investors, we have decided to also report EBITDA to show what we believe is the Company’s earnings power without the impact of, among other items, amortization. In the first three months of 2015, the non-cash charge for amortization of capitalized software was approximately $373,000 compared to approximately $373,000 in the same period in 2014, and we expect this amount to be approximately $1.5 million, or $0.06 per share, in 2015, depending on our sales success. Therefore, we believe that EBITDA will be a useful measure of the true earnings power of the Company while we complete the development and deployment cycle. As such, we expect to increasingly focus on EBITDA to evaluate our progress.

USE OF NON-GAAP FINANCIAL MEASURES

In evaluating our business, we consider and use EBITDA as a supplemental measure of our operating performance. The Company defines EBITDA as earnings before interest, taxes, depreciation and amortization. The Company presents EBITDA because it believes it is frequently used by securities analysts, investors and other interested parties as a measure of financial performance.

The term EBITDA is not defined under U.S. GAAP and is not a measure of operating income, operating performance or liquidity presented in accordance with U.S. GAAP. EBITDA has limitations as an analytical tool and, when assessing the Company’s operating performance, investors should not consider EBITDA in isolation or as a substitute for net income (loss) or other consolidated income statement data prepared in accordance with U.S. GAAP. Among other things, EBITDA does not reflect the Company’s actual cash expenditures. Other companies may calculate similar measures differently than the Company, limiting their usefulness as comparative tools. We compensate for these limitations by relying on our U.S. GAAP results and using EBITDA only supplementally.

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

The following is an unaudited reconciliation of U.S. GAAP net income to EBITDA for the three months ended March 31, 2015 and 2014:

	Three months ended March 31,
	2015		2014
Net Income	$	198,812	$	433,849

Interest (Income) Expense, Net		98,501		93,672

Income Tax Expense		62,836		3,688
Depreciation		46,337		81,829
Amortization:
Amortization of Capitalized Software		372,638		372,638
Amortization of Customer Lists/Relationships		—		15,167
Amortization of Deferred Financing Costs		8,527		7,585
Total Amortization	$	381,165	$	395,390

EBITDA	$	787,651	$	1,008,428

EBITDA per Common Share:
Basic	$	0.03	$	0.04
Diluted	$	0.03	$	0.04

Results of Operations

The following table sets forth, for the periods indicated, certain items from the consolidated statements of operations expressed as a percentage of total revenues:

	Three months ended March 31,
	2015		2014
Revenues:
License	3.4	%	15.5	%
Support Services	40.0		40.9
Professional Services	56.6		43.6
Total Revenues	100.0		100.0
Cost of Revenues:
License (exclusive of
Amortization of Capitalized
Software)	—		—
Support Services	26.7		32.4
Professional Services	29.9		21.3
Total Cost of Revenues	56.6		53.7
Direct Margin	43.4		46.3
Operating Expenses:
Sales and Marketing	6.4		9.2
General and Administrative	15.7		14.1
Amortization of Capitalized
Software	7.1		7.1
Acquisition Costs	2.9		—
Research and Development	4.5		5.7
Total Operating Expenses	36.6		36.1
Operating (Expense) Income	6.8		10.2
Other Expense (Income):
Interest Expense	1.9		1.8
Interest Income	—		—
Other Income	—		—
Total Other Expense (Income)	1.9		1.8
Income Before Income Taxes	4.9		8.4
Income Taxes	1.1		0.1
Net Income (Loss)	3.8	%	8.3	%

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

Three Months Ended March 31, 2015 Compared to Three Months Ended March 31, 2014

Total revenues for the three months ended March 31, 2015 were approximately $5,289,000 as compared to approximately $5,208,000 for the same period in 2014. License fees were approximately $180,000 for the three months ended March 31, 2015, as compared approximately $808,000 in the same period in 2014, as a result of fewer sales to new and existing customers. For the three months ended March 31, 2015, support services revenues were approximately $2,117,000, as compared to approximately $2,130,000 in the same period of the prior year, primarily due to the annual renewals from our existing customers and fewer new customer contracts signed in the latter part of 2014. Professional services revenue contributed approximately $2,993,000 in the three months ended March 31, 2015, as compared to approximately $2,270,000 in the first quarter of 2014, as a result of an increase in demand for new software capabilities and customizations from our current and new customer base and implementation of certain customers who signed contracts in 2014.

Cost of revenues decreased to approximately $2,294,000 for the three months ended March 31, 2015, as compared to approximately $2,796,000 for the same period in 2014, due to various cost saving initiatives in 2015. We are expanding our delivery bandwidth through improved productivity and new technology in order to meet our continually increasing demand. Non-cash capitalized software amortization was approximately $373,000 for the three months ended March 31, 2015 as compared to approximately $373,000 for the same period in 2014. The Company capitalized $0 of software development costs in the first three months of 2015 as compared to $0 in the same period in 2014.

The direct margin during the three month period ended March 31, 2015 was 43.4% compared to 46.3% in the same period of last year. Support services margin increased in the three months ended March 31, 2015 compared to the three months ended March 31, 2014 primarily due to several cost saving initiatives. Professional services direct margin increased for the three months ended March 31, 2015, compared to the three months ended March 31, 2014, primarily due to use of offshore resources to provide customizations to new and existing customers.

We expect our quarterly gross margin to vary in percentage terms in future periods as we experience changes in the mix between higher gross margin license revenues and lower gross margin services revenues.

Amortization of capitalized software was approximately $373,000 for the three months ended March 31, 2015 as compared to approximately $373,000 in the same period of 2014. The Company revised the estimated useful life of its capitalized software, effective January 1, 2014, from three years to five years.

Research and development expenses were approximately $240,000 for the three months ended March 31, 2015 as compared to approximately $295,000 for the same period in 2014, primarily as a result of our efforts to develop new capability to better service our customers. We capitalize certain costs related to the build out of new product capabilities. We are continuing our ongoing efforts to enhance the functionality of our products and solutions and believe that investments in research and development are critical to our remaining competitive in the marketplace.

Sales and marketing expenses were approximately $340,000 for the three months ended March 31, 2015 as compared to approximately $478,000 in the same period of 2014. This decrease in 2015 was primarily due to various cost containment programs.

General and administrative expenses were approximately $829,000 in the three months ended March 31, 2015 as compared to approximately $734,000 in the same period in 2014. This increase in 2015 was mainly due to personnel-related costs and the allocation of facility related costs to general and administrative expenses effective January 1, 2014.

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

Liquidity and Capital Resources

Sources of Liquidity

We have funded our operations primarily from cash flow from operations and from debt facilities. Cash from operations results primarily from net income from the income statement plus non-cash expenses (depreciation and amortization) and is adjusted for changes in working capital from the balance sheet.

Our largest source of operating cash flows is cash collections from our customers following the purchase or renewal of software licenses, product support agreements and other related services. Payments from customers for software licenses are generally received at the beginning of the contract term. Payments from customers for support services 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.

On September 11, 2012, we entered into a $2.25 million credit facility with Imperium Commercial Finance Master Fund, LP, an affiliate of Imperium Partners (the “Loan Agreement”). The $2.25 million credit facility, which will support our product/services expansion and growth initiatives, consists of a $2 million three-year term loan, bearing interest at a fixed rate of 8% per annum, and a $250,000 revolving credit facility, also bearing interest at a fixed rate of 8% per annum. Imperium also received five-year warrants to purchase 1.4 million shares of our common stock, with an exercise price of $1.48 per share.

In connection with the Imperium Loan Agreement financing, we incurred deferred financing costs of $92,283, which will be amortized over the life of the loan (or earlier if the loan becomes due or is repaid before its fixed maturity).

At March 31, 2015, we had cash and cash equivalents of approximately $4,303,000 compared to cash and cash equivalents of approximately $2,171,000 at March 31, 2014. The increase in cash and cash equivalents is primarily attributable to an increase in professional services revenue and various cost saving programs.

Cash Flows

Our ability to generate cash has depended on a number of different factors, primarily our ability to continue to secure and retain existing customers and generate new license sales and related product support agreements. In order to attract new customers and maintain or grow existing revenue streams, we utilize our existing sources of capital to invest in sales and marketing, technology infrastructure and research and development.

Our ability to continue to control expenses, maintain existing revenue streams and anticipate new revenue will impact the amounts and certainty of cash flows. We intend to maintain our expenses in line with existing revenue streams from maintenance support, ASP services and professional services.

Balance sheet items that should be considered in assessing our liquidity include cash and cash equivalents, accounts receivable, prepaid expenses, accounts payable and accrued liabilities. Statement of operations items that should be considered in assessing our liquidity include revenues, cost of revenues (net of depreciation and amortization), operating expenses (net of depreciation and amortization) and other expenses. Statement of cash flows items that should be considered in assessing our liquidity include net cash flows from operating activities, net cash flows from investing activities and net cash flows from financing activities.

At March 31, 2015, we had working capital of approximately $1,948,000 compared to working capital of approximately $1,070,000 at March 31, 2014. This increase in our working capital resulted primarily from an increase in professional services revenue and various cost saving programs. For the three months ended March 31, 2015, net cash provided from (used for) operating activities totaled approximately $(231,000) compared to approximately $359,000 for the three months ended March 31, 2014. In 2015, cash flow from operating activities represented the Company’s principal source of cash and results primarily from net income, plus non-cash expense and changes in working capital.

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

For the three months ended March 31, 2015, net cash used for investing activities was approximately $1,000 as compared to approximately $8,000 for the three months ended March 31, 2014. The Company expects capital expenditures and capital software expenditures to continue to be funded by cash generated from operations. For the three months ended March 31, 2015, net cash (used for) financing activities was approximately $(29,000) compared to approximately ($28,000) for the three months ended March 31, 2014. The cash provided from financing activities in 2015 consisted of principal payments on our furniture lease.

Funding Requirements

Our primary uses of cash are for operating expenses, including personnel-related expenditures, facilities and technology costs, and for interest only payments under our Loan Agreement.

We may need additional funding for any large capital expenditures and for continued product development. 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.

Interest on the outstanding principal balance under the Imperium Notes accrues at a fixed rate equal to eight percent per annum and is payable monthly, in arrears. The outstanding principal and any remaining interest under the Imperium Notes will be immediately due and payable to Imperium on the earlier of (1) September 10, 2015 and (2) the date Imperium’s obligation to advance funds under the revolving credit line is terminated following an event of default pursuant to the terms and conditions of the Loan Agreement. Payments and prepayments received by Imperium will be applied against principal and interest as provided for in the Loan Agreement.

On December 16, 2011, we announced that our board of directors authorized a share buyback plan of up to 1,000,000 shares of the Company’s common stock, in accordance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Imperium Loan Agreement prohibits buybacks of our common stock.

We prepare monthly cash flow projections on a rolling twelve-month basis based on a detailed review of anticipated receipts and revenue from licenses, support services and professional services. We also perform a detailed review of our disbursements, including fixed costs, variable costs, legal costs, payroll costs and other specific payments, on a rolling twelve-month basis.

We believe that our current cash balances and anticipated cash flows from operations will be sufficient to meet our normal operating needs for at least the next twelve months. These projections include anticipated sales of new licenses, the exact timing of which cannot be predicted with absolute certainty and can be influenced by factors outside the Company’s control. Our ability to fund our working capital needs and address planned capital expenditures will depend on our ability to generate cash in the future. We anticipate generating future working capital through sales to new customers and continued sales and services to our existing customers.

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

●	Our ability to generate cash is subject to general economic, financial, competitive and other factors beyond our control.
●	Our need to invest resources in product development in order to continue to enhance our current product, develop new products, attract and retain customers and keep pace with competitive product introductions and technological developments.
●	We experience competition in our industry and continuing technological changes.
●	Insurance companies typically are slow in making decisions and have numerous bureaucratic and institutional obstacles, which can make our efforts to attain new customers difficult.

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

●	We compete with a number of larger companies who have greater resources than those of ours. We compete on the basis of insurance knowledge, products, services, price, technological advances and system functionality and performance.
●	Our operations continue to depend upon the continuing business of our existing customers and our ability to attract new customers.
●	A decline in software spending in the insurance industry could result in a decrease in our revenue.

Material risks to cash flow from operations include delayed or reduced cash payments accompanying sales of new licenses or a decline in our services business. There can be no assurance that changes in our plans or other events affecting our operations will not result in materially accelerated or unexpected expenditures.

We do not expect for there to be a need for a change in the mix or relative cost of our sources of capital.

Net Operating Loss Carryforwards

The deferred tax asset from tax net operating loss carryforwards of approximately $3,920,000 represents approximately $9,900,000 of net operating loss carryforwards which are subject to expiration beginning in fiscal 2019 through 2032. During the three months ended March 31, 2015, the deferred tax asset valuation allowance was decreased for the assumed utilization of prior period net operating loss carryforwards utilized to offset taxable income for the current period, subject to federal alternative minimum tax limitations. In assessing the realizability of deferred tax assets, management considers, within each taxing jurisdiction, whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Factors that may affect the Company’s ability to achieve sufficient forecasted taxable income in future periods may include, but are not limited to, the following: increased competition, a decline in sales or margins, a loss of market share, and a decrease in demand for professional services. Based upon the levels of historical taxable income and projections for future taxable income over the years in which the deferred tax assets are deductible, at March 31, 2015 management believes that it is more likely than not that the Company will realize the benefits, net of the established valuation allowance, of these deferred tax assets in the future.

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, and the conversion of outstanding warrants, or the result of other changes in ownership of our outstanding stock, the Company may experience an ownership change and consequently our utilization of net operating loss carryforwards could be significantly limited.

Off-Balance Sheet Transactions

We do not maintain any off-balance sheet transactions, arrangements, obligations or other relationships with unconsolidated entities or others that are reasonably likely to have a material current or future effect on our condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

Critical Accounting Policies and Estimates

The SEC has issued cautionary advice to elicit more precise disclosure in this Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, about accounting policies that management believes are most critical in portraying our financial results and in requiring management’s most difficult subjective or complex judgments.

The preparation of financial documents in conformity with accounting principles generally accepted in the United States of America requires management to make judgments and estimates. On an ongoing basis, we evaluate our estimates, the most significant of which include establishing allowances for doubtful accounts, a valuation allowance for our deferred tax assets and determining the recoverability of our long-lived assets. The basis for our estimates are historical experience and various assumptions that are believed to be reasonable under the circumstances, given the available information at the time of the estimate, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from the amounts estimated and recorded in our financial statements.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

●	Revenue Recognition
●	Valuation of Capitalized Software
●	Valuation of Allowance for Doubtful Accounts Receivable
●	Deferred Income Taxes

Revenue Recognition

Revenue recognition rules are very complex, and certain judgments affect the application of our revenue policy. The amount and timing of our revenues is difficult to predict, and any shortfall in revenue or delay in recognizing revenue could cause our operating results to vary significantly from quarter to quarter. In addition to determining our results of operations for a given period, our revenue recognition determines the timing of certain expenses, such as commissions, royalties and other variable expenses.

Our revenues are recognized in accordance with FASB ASC 986-605, “Software Revenue Recognition,” as amended. Revenue from the sale of software licenses is predominately related to the sale of standardized software and is recognized when these software modules are delivered and accepted by the customer, the license term has begun, the fee is fixed or determinable and collectibility is probable. Revenue from support services is recognized ratably over the life of the contract. Revenue from professional consulting services is recognized when the service is provided.

Amounts invoiced to our customers in excess of recognizable revenues are recorded as deferred revenues. The timing and amounts invoiced to customers can vary significantly depending on specific contract terms and can therefore have a significant impact on deferred revenues in any given period.

Our revenues are derived from the licensing of our software products, professional services and support services. We recognize revenue when persuasive evidence of an arrangement exists, we have delivered the product or performed the service, the fee is fixed or determinable and collection is probable.

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

Services and Support Revenue. Our services and support revenue is composed of professional services (such as consulting services and training) and support services (maintenance, support and ASP services). Our professional services revenue is recognized when the services are performed. Our support services are recognized ratably over the term of the arrangement.

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

Valuation of Capitalized Software

Costs for the conceptual formulation and design of new software products are expensed as incurred until technological feasibility has been established. Once technological feasibility is established, we capitalize costs to produce the finished software products. Capitalization ceases when the product is available for general release to customers. Costs associated with product enhancements that extend the original product’s life or significantly improve the original product’s marketability are also capitalized once technological feasibility for that particular enhancement has been established. Amortization is calculated on a product-by-product basis as the greater of the amount computed using (a) the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues for that product or (b) the straight-line method over the remaining economic life of the product. At each balance sheet date, the unamortized capitalized costs of each computer software product is compared to the net realizable value of that product. If an amount of unamortized capitalized costs of a computer software product is found to exceed the net realizable value of that asset, such amount will be written off. The net realizable value is the estimated future gross revenues from that product reduced by the estimated future costs of completing and deploying of that product, including the costs of performing maintenance and customer support required to satisfy our responsibility set forth at the time of sale.

Valuation of Allowance for Doubtful Accounts Receivable

Management’s estimate of the allowance for doubtful accounts is based on historical information, historical loss levels, and an analysis of the collectibility of individual accounts. We routinely assess the financial strength of our customers and, based upon factors concerning credit risk, establish an allowance for uncollectible accounts. Management believes that accounts receivable credit risk exposure beyond such allowance is limited.

Deferred Income Taxes

Deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, we consider tax regulations of the jurisdictions in which we operate, estimates of future taxable income and available tax planning strategies. If tax regulations, operating results or the ability to implement tax planning and strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. We estimate our income tax valuation allowance by assessing which deferred tax assets are more-likely-than-not to be recovered in the future. The valuation allowance is based on our estimates of taxable income in each jurisdiction in which we operate and the period over which the deferred tax assets will be recoverable. If it appears that we will not generate such taxable income, we may need to increase the valuation allowance against the related deferred tax asset in a future period.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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

Item 4. Controls and Procedures.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and (2) accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

There has been no change in our internal control over financial reporting during the quarter ended March 31, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

* * * * * * * * *

Statements in this Form 10-Q, other than statements of historical information, are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks which may cause the Company’s actual results in future periods to differ materially from expected results. Those risks include, among others, risks associated with increased competition, customer decisions, the successful completion of continuing development of new products, the successful negotiation, execution and implementation of anticipated new software contracts, the successful addition of personnel in the marketing and technical areas and our ability to complete development and sell and license our products at prices which result in sufficient revenues to realize profits, and other business factors beyond our control. Those and other risks are described in the Company’s filings with the SEC over the last 12 months, including our Form 10-K filed with the SEC on March 31, 2015, copies of which are available from the SEC or may be obtained upon request from the Company.

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

PART II: OTHER INFORMATION

Item 1A. Risk Factors.

The risk factors included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, filed with the SEC on March 31, 2015, have not materially changed.

Item 6. Exhibits.

Exhibit
No.		Description
31.1		Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.1	^*	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets as of March 31, 2015 (Unaudited) and December 31, 2014; (ii) Consolidated Statements of Operations for the three months ended March 31, 2015 and 2014 (Unaudited); (iii) Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014 (Unaudited); and (iv) Notes to Consolidated Financial Statements (Unaudited).

____________________

^* Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files in Exhibit 101.1 hereto are not to be deemed “filed” or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, and are not to be deemed “filed” for purposes of Section 18 of the Exchange Act, and otherwise are not subject to liability under those sections, except as shall be expressly set forth by specific reference in such filing.

COVER-ALL TECHNOLOGIES INC. AND SUBSIDIARY

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		COVER-ALL TECHNOLOGIES INC.

Date:	May 14, 2015	By:	/s/ Manish D. Shah
			Manish D. Shah, President and Chief Executive
			Officer



Date:	May 14, 2015	By:	/s/ Ann F. Massey
			Ann F. Massey, Chief Financial Officer

COVER ALL TECHNOLOGIES INC 10-Q