-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UMl4QLHYHaVoivt6X7luVXlff/+wwR1E2T0gQRt5ZEBqSJYSjdVIjsbytW1utLC7 SeiQARWDAy9v1nIrAIv86Q== 0001157523-04-004929.txt : 20040517 0001157523-04-004929.hdr.sgml : 20040517 20040517161548 ACCESSION NUMBER: 0001157523-04-004929 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANTS SOFTWARE INC CENTRAL INDEX KEY: 0000796655 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING SERVICES [7371] IRS NUMBER: 133054685 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-16299 FILM NUMBER: 04812637 BUSINESS ADDRESS: STREET 1: 801 MAHLER RD STREET 2: SUITE G CITY: BURLINGAME STATE: CA ZIP: 94010 BUSINESS PHONE: 6506920240 MAIL ADDRESS: STREET 1: 801 MAHLER ROAD STREET 2: SUITE G CITY: BURLINGAME STATE: CA ZIP: 94010 FORMER COMPANY: FORMER CONFORMED NAME: ANTS SOFTWARE COM INC DATE OF NAME CHANGE: 19990806 FORMER COMPANY: FORMER CONFORMED NAME: CHOPP COMPUTER CORP /DE/ DATE OF NAME CHANGE: 19990805 FORMER COMPANY: FORMER CONFORMED NAME: SULLIVAN COMPUTER CORP DATE OF NAME CHANGE: 19870108 10QSB 1 a4640693.txt ANTS SOFTWARE INC. 10-QSB ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 2004 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: 000-16299 ---------------- ANTS SOFTWARE INC. (Exact name of registrant as specified in its charter) Delaware 13-3054685 (State or other jurisdiction of (IRS Employer Identification Number) Incorporation or Organization) 801 Mahler Rd, Suite G, Burlingame, CA 94010 (Address of principal executive offices) (Zip Code) (650) 692-0240 (Registrant's Telephone Number, including area code) 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 reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of Common stock, as of the latest practicable date: 31,726,860 shares of Common Stock as of March 31, 2004 Transitional Small Business Disclosure Format: Yes [ ] No [X] ================================================================================ TABLE OF CONTENTS - -------------------------------------------------------------------------------- PART I. Financial Information Item 1. Financial Statements ...............................................3-9 Item 2. Management's Plan of Operation.....................................9-12 Item 3. Controls and Procedures ............................................12 PART II. Other Information Item 1. Legal Proceedings ...................................................12 Item 2. Changes in Securities ................................................13 Item 3. Defaults Upon Senior Securities.......................................13 Item 4. Submission of Matters to a Vote of Security Holders...................13 Item 5. Other Information.....................................................13 Item 6. Exhibits and Reports on Form 8-K...................................13-14 Risk Factors...............................................................14-17 Signatures....................................................................17 2
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ANTs software inc. CONDENSED BALANCE SHEETS March 31, Dec. 31, 2004 2003 ASSETS (Unaudited) (Audited) ------------ ------------- Current assets: Cash $ 3,874,730 $ 541,725 Prepaid insurance 6,375 46,229 Prepaid expenses 1,791 800 ------------ ------------- Total current assets 3,882,896 588,754 ------------ ------------- Computers and software 811,436 774,441 Office furniture and fixtures 29,386 29,386 Leasehold improvements 9,000 9,000 Less accumulated depreciation (532,939) (489,326) ------------ ------------- Property and equipment, net 316,883 323,501 ------------ ------------- Other assets - security deposits 9,100 9,100 ------------ ------------- Total assets $ 4,208,879 $ 921,355 ============ ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 127,696 83,189 Deferred salaries 360,208 340,505 Deferred revenues - 310,943 Capital lease payable, current portion 3,095 2,310 Note payable - former officer, current portion 75,000 75,000 ------------ ------------- Total current liabilities 565,999 811,947 ------------ ------------- Long-term liabilities: Capital lease payable 6,365 7,919 Convertible promissory note, net of unamortized beneficial interest and debt discount of $230,222 and $83,196 in 2004 and 2003, respectively 89,778 236,804 ------------ ------------- Total liabilities 662,142 1,056,670 ------------ ------------- Commitment and contingencies Stockholders' equity: Preferred stock, $0.0001 par value; 50,000,000 shares authorized, no shares issued and outstanding in 2004 and 2003, respectively - - Common stock, $0.0001 par value; 100,000,000 shares authorized; 31,726,860 and 26,381,004 shares issued and outstanding, respectively. 3,173 2,638 Notes receivable from officer for stock purchases - (45,000) Additional paid-in capital 33,690,235 29,668,322 Common stock subscribed, not issued 383,750 - Accumulated deficit (30,530,421) (29,761,275) ------------ ------------- Total stockholders' equity 3,546,737 (135,315) ------------ ------------- Total liabilities and stockholders' equity $ 4,208,879 $ 921,355 ============ ============= The accompanying notes are an integral part of these condensed financial statements.
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ANTs software inc. CONDENSED STATEMENTS OF OPERATIONS Three months ended March 31, 2004 2003 (Unaudited) (Unaudited) ------------ ------------ Cost of goods sold $ - $ - General and administrative expenses 346,407 301,382 Sales and marketing 145,270 128,640 Research and development expenses 459,951 365,438 ------------ ------------ Loss from operations (951,628) (795,460) ------------ ------------ Other income (expense): Income earned from expired contract 310,943 - Interest income 2,083 1,685 Gain on legal settlement 2,000 16,000 Write-off of officer's note receivable for stock purchases (45,000) - Interest expense (87,544) - ------------ ------------ Other income, net 182,482 17,685 ------------ ------------ Net loss $ (769,146) $ (777,775) ============ ============ Basic and diluted net loss per common share $ (0.03) $ (0.03) ============ ============ Shares used in computing basic and diluted net loss per share 27,561,702 23,381,440 ============ ============ The accompanying notes are an integral part of these condensed financial statements.
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ANTs software inc. CONDENSED STATEMENTS OF CASH FLOWS Three months ended March 31, 2004 2003 (Unaudited) (Unaudited) ------------ ------------ Cash flows from operating activities: Net loss $ (769,146) $ (777,775) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 43,613 38,204 Amortization of debt discount and beneficial interest 86,601 - Compensation expense recognized on options granted to non-employees - 38,733 Write-off of note receivable to officer for stock purchases 45,000 - Changes in operating assets and liabilities: Prepaid expenses and prepaid insurance 38,863 46,100 Accounts payable 44,508 14,734 Deferred salaries 19,703 - Deferred revenue (310,943) - ------------ ------------ Net cash used in operating activities (801,801) (640,004) Cash flows used in investing activities-purchase of property and equipment, net (36,995) (39,071) ------------ ------------ Cash flows from financing activities: Proceeds from private placements net of commissions 4,008,280 295,625 Proceeds from exercise of options 164,290 11,485 Payments on capital lease obligations (769) - ------------ ------------ Net cash provided by financing activities 4,171,801 307,110 ------------ ------------ Net increase (decrease) in cash 3,333,005 (371,965) ------------ ------------ Cash at beginning of period 541,725 946,957 ------------ ------------ Cash at end of period $ 3,874,730 $ 574,992 ============ ============ Supplemental disclosures of cash flow information: Cash paid during the quarter for: Interest $ 694 $ - Taxes $ 1,945 $ - The accompanying notes are an integral part of these condensed financial statements.
5 ANTs software inc. NOTES TO CONDENSED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The accompanying unaudited condensed financial statements are presented in accordance with the requirements for Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all the disclosures normally required by generally accepted accounting principles. Reference should be made to the ANTs software inc. (the "Company") Form 10-KSB for the twelve months ended December 31, 2003, for additional disclosures including a summary of the Company's accounting policies, which have not significantly changed. The information furnished reflects all adjustments (all of which were of a normal recurring nature), which, in the opinion of management, are necessary to fairly present the financial position, results of operations, and cash flows on a consistent basis. Operating results for the three months ended March 31, 2004 and 2003 are not necessarily indicative of the results that may be expected in the future. The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. Management has evaluated the Company's current financial position and its available resources and plans to raise additional funds through the issuance of equity securities during 2004 and possibly thereafter. Should the Company be unsuccessful in raising additional funds, it is unlikely that the Company will continue operations beyond December 2004. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basic And Diluted Net Loss Per Share - Basic net loss per share is calculated using the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed using the weighted-average number of common and dilutive common equivalent shares outstanding during the period. The following table presents the calculation of basic and diluted net loss per share: Three Months Ended March 31, ---------------------------- 2004 2003 ---------------------------- Net loss $ (769,146) $ (777,775) Weighted average shares of common stock outstanding - basic and dilutive 27,561,702 23,381,440 ---------------------------- Basic and diluted net loss per share $ (0.03) $ (0.03) As of March 31, 2004 and 2003, outstanding options and warrants for the purchase of up to 12,379,867 shares of common stock at prices ranging from $0.52 to $11.63 per share, and 7,426,390 shares of common stock at prices ranging from $0.25 to $14.00 per share, respectively, were anti-dilutive, and therefore, not included in the computation of diluted loss per share. Stock-Based Compensation - In December 2002, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 148, "Accounting for Stock-Based Compensation--Transition and Disclosure." This Statement amends SFAS No. 123, "Stock-Based Compensation," to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company follows APB 25 in accounting for its employee stock options. The disclosure provisions of SFAS 148 have been incorporated into these financial statements and accompanying footnotes. 6 At March 31, 2004, the Company had a stock-based employee compensation plan. The Company accounts for this plan under the recognition and measurement principles of Accounting Principles Board (APB) Opinion 25, Accounting for Stock Issued to Employees, and related Interpretations. The following table illustrates the effect on net loss if the Company had applied the fair value recognition provisions of Financial Accounting Standard No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation. Three Months Ended March 31, 2004 2003 ----------------------------- Net loss, as reported $ (769,146) $ (777,775) Less: Stock-based employee compensation expense determined under the fair-value based method (461,660) (328,599) ------------- ------------- Net loss, pro forma $ (1,230,806) $ (1,106,374) ============= ============= Basic and diluted loss per share: As reported $ (0.03) $ (0.03) ============= ============= Pro forma $ (0.04) $ (0.05) There were 405,000 options granted during the three-month period ended March 31, 2004. The weighted average fair value of options granted during the three-month periods ended March 31, 2004 and 2003 were $0.69 and $1.19 per share, respectively. The pro forma amounts were estimated using the Black-Scholes option-pricing model with the following assumptions for the periods ended March 31, 2004 and 2003, respectively. Three Months Ended March 31, 2004 2003 ------------------- ------------------ Interest rate 2.24% - 5.82% 3.83% - 3.98% Dividend yield 0% 0% Expected volatility 123.18% - 192.12% 141.58% - 143.05% Expected life in years 1.5-5 Years 1-10 years Recent Accounting Pronouncements - The Financial Accounting Standards Board (FASB) issued Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities, in January 2003 and amended the Interpretation in December 2003. This Interpretation requires the consolidation of Variable Interest Entities in which a company holds a qualifying variable interest. The provisions of this Interpretation do not have a significant effect on our financial position or operating results. In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. SFAS No. 150 establishes standards for how a company classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after September 15, 2003. The provisions of this Standard do not have a significant effect on our financial position or operating results. Certain reclassifications have been made to conform the prior year financial statements to the presentation of the current period. 3. EQUITY TRANSACTIONS From January 1, 2004 through March 31, 2004, the Company sold to accredited investors, through a private offering, 5,703,159 D Units at a price of seventy-five cents ($0.75) per D Unit, with each D Unit consisting of (i) one (1) share of common stock of the Company, and (ii) a warrant to purchase up to one (1) share of common stock of the Company at a per share price of two dollars ($2.00), exercisable until March 31, 2006. In connection with this offering, the Company paid $269,100 in cash commissions, issued 23,666 D Units to finders, and will issue 239,697 D Units to the placement agent. The gross proceeds from the offering were $4,277,379. As of March 31, 2004, the shares related to 511,664 D Units are unissued and are categorized on the balance sheets as common stock subscribed. The Company expects to issue these shares by June 30, 2004. On or about February 17, 2004, the Company sold to an accredited investor 66 shares of common stock at a price of $.75 per share. The accredited investor paid for the shares by assigning all rights in certain shares of common stock of the Company which had been escheated. The sales of these securities were made in reliance upon Rule 506 and Section 4(2) of the Securities Act of 1933. 7 On or about April 23, 2004, the Company and Gary Ebersole, the Company's former President and Chief Operating Officer, entered into an Amendment Agreement pursuant to which the parties agreed to extend the period during which Mr. Ebersole can exercise the vested portion of his stock options to purchase shares of common stock of the Company until June 30, 2004. 4. WARRANTS AND STOCK OPTIONS As of March 31, 2004, the Company had outstanding warrants to purchase up to 8,699,461 shares of common stock and options to purchase up to 3,680,406 shares of common stock. These securities give the holder the right to purchase shares of the Company's common stock in accordance with the terms of the instrument.
Warrants Stock Options Total ----------- ------------- ------------ Outstanding at December 31, 2003 3,484,300 3,841,162 7,325,462 Granted 5,215,161 405,000 5,620,161 Forfeited - (435,127) (435,127) Expired - - - Exercised through cash consideration - (130,629) (130,629) ----------- ------------- ------------ Outstanding at March 31, 2004 8,699,461 3,680,406 12,379,867 =========================================================
5. LEGAL SETTLEMENT The Company was a defendant in a case entitled Hubert P. Lauffs et al. v. Mosaic Multisoft Corporation, in which the plaintiff asserted a cause of action against the Company for breach of fiduciary duty. The plaintiff purported to base his cause of action on allegations that the Company and others caused the shareholders of Mosaic Multisoft Corporation ("Mosaic") to elect outside directors to its board of directors who subsequently voted to remove Mosaic's president from office, thus interfering with Mosaic's ability to raise capital and causing Mosaic to be unable to repay its debt to the plaintiff. In March 2000, the Company won this case on summary judgment. In April 2000, the plaintiff filed an appeal of the summary judgment ruling. On November 21, 2001, the Fourth District Court of Appeal ruled in the Company's favor by affirming the Superior Court's March 2000 summary judgment. In September 1999, the Company had filed an action for malicious prosecution against Lauffs and his attorney seeking recovery of the Company's legal fees incurred in connection with the proceedings. The Company entered into Settlement Agreements in December 2002, pursuant to which the plaintiffs agreed to pay the Company an aggregate of $400,000. Per an agreement the Company entered into with the Company's attorneys on or about September 27, 2002, almost all of the money recovered will be paid to the Company's attorneys. From January 1, 2004 through March 31, 2004, the Company received $2,000 as its portion of the settlement, which was recognized as a gain from legal settlement. 6. DEFERRED REVENUES On or about August 22, 2003 the Company signed a Letter of Intent ("LOI") with Net Soft Systems, Inc. of Vancouver, British Columbia, Canada ("Net Soft"). The LOI included the following terms: o Net Soft agreed to pay the Company $400,000 (non-refundable) o The Company agreed to negotiate only with Net Soft for the exclusive rights to sell and distribute the ANTs Data Server (the "Rights") in Poland, Russia, the Czech Republic, and the European Common Market o The negotiation process would determine what additional payments would be required of Net Soft to obtain the Rights 8 o If, by November 30, 2003, terms of a deal regarding the Rights had not been agreed to, the Company could negotiate the Rights with any other entity o The LOI itself contained no grant of Rights On November 30, 2003 the Company and Net Soft agreed to extend the LOI through January 31, 2004 and on January 31, 2004 the Company and Net Soft agreed to extend the LOI through March 31, 2004. On March 31, 2004, the LOI terminated and no future agreements between Net Soft and the Company are contemplated. As of March 31, 2004, the Company had received $310,943 of the $400,000 due pursuant to the LOI. The remaining $89,057 is considered uncollectible. In accordance with Generally Accepted Accounting Principles the Company did not consider the earnings process complete until collection was reasonably assured and all applicable revenue recognition conditions were met according to the Security and Exchange Commission's Staff Accounting Bulletin: No 104 -"Revenue Recognition." Therefore, the payments pursuant to the LOI were recorded in prior financial statements as deferred revenue. With the termination of the LOI and no future agreements contemplated, the Company is removing the deferred revenue liability. Since Net Soft did not receive either a license to use the Company's product or services related to the Company's product, the Company has recognized the $310,943 as other income in the statements of operations. 7. CONVERTIBLE PROMISSORY NOTES On or about August 15, 2003, the Company sold to two accredited investors, through a private offering, one convertible promissory note each, without interest, in principal face amount of $160,000 per note, each with maturity on August 15, 2005, and each convertible at the option of the holder into one share of Common Stock of the Company and a warrant to purchase one share of Common Stock of the Company at a per share price of $2.00, exercisable until March 31, 2006. The stated conversion price was $0.75 per share, however, the Company had agreed to set the conversion price at $0.40 per share in the event an anticipated $5 million financing did not close shortly after the note financing. The $5 million financing did not close, accordingly, the active conversion price was $0.40 per share and the Company has agreed to and intends to enter into Amendment Agreements with each convertible promissory note holder setting the conversion price at $0.40 per share. The intrinsic value of the conversion option of $280,000 was recorded to additional paid-in-capital and a corresponding amount recorded as a beneficial interest discount to convertible debt. For the period ended March 31, 2004, beneficial interest discount amounting to $87,500 and imputed interest (classified as debt discount on the balance sheets and statements of cash flows) were amortized as interest expense. The proceeds of the private offering were used for general working capital purposes. The sales of these securities were made in reliance upon Rule 506 and Section 4(2) of the Securities Act of 1933. 8. NOTE RECEIVABLE FROM OFFICER The Company entered into an agreement with a former officer, effective January 11, 2001, in which the Company agreed to forgive, on August 4, 2001 and on each year anniversary thereafter, $45,000 of the principal amount and all accrued interest on a loan made to the former officer in August 1999 in the original amount of $225,000. In August 2003 the Company forgave $45,000 of the loan balance pursuant to the terms of the agreement. In light of the fact that the remaining loan balance of $45,000 has been deemed to be uncollectible as of March 31, 2004, the Company has elected to charge the entire $45,000 to other expense as of March 31, 2004. ITEM 2. MANAGEMENT'S PLAN OF OPERATION Certain statements contained in this Form 10-QSB constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements herein are based on current expectations that involve a number of risks and uncertainties. Such forward-looking statements are based on assumptions that the Company will have adequate financial resources to fund the development and operation of its business, and there will be no material adverse change in the Company's operations or business. The foregoing assumptions are based on judgments with respect to, among other things, information available to the Company, future economic, competitive and market conditions and future business decisions. All are difficult or impossible to predict accurately and many of which are beyond the Company's control. Accordingly, although the Company believes that the assumptions underlying the forward-looking statements are reasonable, any such assumption could prove to be inaccurate and therefore there can be no assurance that the results contemplated in the forward-looking statements will be realized. There are a number of risks presented by the Company's business and operations, which could cause the Company's financial performance to vary markedly from prior results, or results contemplated by the forward-looking statements. Such risks include failure of the ANTs technology to work properly, failure to develop commercially viable products or services from the ANTs technology, delays or failure in fundraising efforts, delays in or lack of market acceptance, failures to recruit adequate personnel, and problems with protection of intellectual property, among others. Management decisions, including budgeting, are subjective in many respects and periodic revisions must be made to reflect actual conditions and business developments, the impact of which may cause the Company to alter its capital investment and other expenditures, which may also adversely affect the Company's results of operations. In light of significant uncertainties inherent in forward-looking information included in this Quarterly Report on Form 10-QSB, the inclusion of such information should not be regarded as a representation by the Company that the Company's objectives or plans will be achieved. The Company undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements. 9 The Company is engaged in the development and marketing of the ANTs Data Server a software product that is intended to significantly improve the speed at which computers can manipulate data. The Company anticipates that, if sufficiently funded, over the next twelve months its focus will be marketing its first product, supporting customers, and continued research and development. Technology Development - ---------------------- Over the next twelve months, assuming the Company is sufficiently funded, the Company intends to continue to improve and add functionality to the ANTs Data Server. The Company has built out the basic functionality to the point where it believes that virtually all additional functionality will be driven by partner or customer demand. The Company intends to actively engage prospective partners and customers in technical discussions to determine what features are and will be most in demand for the markets the Company is targeting. The Company intends to mobilize its engineering resources around developing those features. Marketing - --------- In October 2003, the Company began marketing the first commercial version of its first product. The Company's go-to-market strategies include: o Focus on the high-performance, high-volume, transaction intensive industry segments where cost constraints and performance demands might dictate a willingness to adopt new technology. Company and product messaging will focus on the "high-performance, no compromise" value proposition. o Sell to Independent Software Vendors ("ISV's") and directly to end-users in targeted markets. o Execute a "compatible with," not a "replacement of," strategy for the leading RDBMS's such as: Oracle, IBM's DB2, and Microsoft's SQL Server, since the RDBMS market is mature and customers have substantial investment in infrastructure, development, and support, in the leading RDBMS vendors' products. Raising Capital - --------------- During February and March 2004, the Company raised approximately $4.3 million in financing through a private offering of Company securities. To carry out its plan of operations, the Company anticipates that, over the next twelve months, it will require an additional $2 million. The Company intends to pursue a number of avenues to raise these additional operating funds: 1) in the past the Company has been successful in raising funds through private placements of its stock and anticipates that it will continue to raise funds through private placements, 2) as the Company develops close relationships with large partners, it will pursue strategic investments from those partners, and 3) the Company expects to begin generating revenue in 2004 and, if successful, this should be a source of some operating funds. The Company is pursuing all three avenues, but believes that securing additional capital will be difficult. Personnel - --------- The Company currently has 17 full-time employees and 2 full-time consultants. The Company views the recruitment of additional qualified marketing, sales, and technical personnel as essential to the further development and commercialization of its proprietary technologies. If the Company is sufficiently funded and it is successful in its recruitment efforts, the Company expects that its personnel and other operating costs will increase moderately over current levels. During 2003 and through February 29, 2004, to conserve cash, all employees agreed to reduce their salary to 85% of their then-current salary ("New Salary") and the employees further agreed to defer part of their New Salary. In connection with this deferral the Company agreed to accrue the difference between the New Salary and the employees' actual pay, until the Company received sufficient funding. During February and March 2004, the Company raised approximately $4.3 million. On March 1, 2004, the salary accruals and deferrals were discontinued. The total accrued salary on March 1, 2004 was $462,589. On March 31st, 2004 the Company paid employees $102,381 in accrued salary and expects to pay the remaining accrued salary, totaling approximately $360,208, by the end of June 2004. 10 The majority of the Company's operating expenses and costs over the next twelve months are expected to be for and in connection with: marketing and selling the ANTs Data Server, continuing technical development, and supporting customers. Sales and Marketing Expenses - ---------------------------- Marketing and sales expenses consist primarily of employee salaries and consultant fees, travel, marketing programs (trade shows, public relations, lead generation programs) and marketing and sales literature and presentations. Marketing and sales expenses increased from $128,640 for the quarter ended March 31, 2003 to $145,270, for the quarter ended March 31, 2004, an increase of $16,630 or 13%. The change from 2003 to 2004 resulted primarily from increased expenditures on events and promotions, sales-related travel and marketing-related communications in 2004. Marketing and sales expenses for the quarter ended March 31, 2004 include salaries, benefits and consultant costs (78%), travel (8%), marketing programs (3%) and other expenses (11%). The Company expects that its marketing and sales expenses will continue to increase moderately to substantially as additional staff is recruited and as marketing sales programs are implemented. Research and Development Expenses - --------------------------------- Research and development expenses consist primarily of employee salaries and consultant fees, equipment and software purchases and depreciation. Research and development expenses increased from $365,438 for the quarter ended March 31, 2003 to $459,951 for the quarter ended March 31, 2004, an increase of $94,513, or 26%. The increase results primarily from an increase in salaries and benefits of $86,537 in 2004. Three new engineers were added to the team in the first quarter of 2004. Components of research and development expense for the quarter ended March 31, 2004 include salaries and benefits (79%), equipment, software and depreciation (8%), and other expenses (13)%. The Company expects that its research and development expenses will increase moderately as additional staff is recruited to customize its product. General and Administrative Expenses - ----------------------------------- General and administrative expenses consist primarily of salaries, legal and audit fees, facilities, and insurance. General and administrative expenses increased from $301,382 for the quarter ended March 31, 2003 to $346,407, an increase of $45,025, or 15%, for the quarter ended March 31, 2004. The increase is largely due to an increase in legal fees of $50,006 related to private placement activity in 2004, an increase in investor relations consulting fees of $22,951, both partially offset by a reduction of $23,436 in salaries and benefits expense in the first quarter of 2004. Components of general and administrative expense for the quarter ended March 31, 2004 include salaries and benefits (35%), legal (19%), audit (12%), business liability insurance (11%), and other expenses such as facilities, supplies and travel (23%). The Company expects that its general and administrative expenses will increase moderately as the Company expands. 11 Critical Accounting Policies - ---------------------------- Use of Estimates - The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. The Company evaluates such estimates and assumptions on an ongoing basis and bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and probably will differ from these estimates under different assumptions or conditions. The Company believes the following represents its critical accounting policies: o Stock-based Compensation o Income Taxes Stock-based Compensation - The Company uses the fair value recognition provisions of Financial Accounting Standard No. 123, Accounting for Stock-Based Compensation, to value stock options granted to employees and independent consultants. The values are derived from a model which requires historical assumptions and management judgment. Stock-based compensation for employees is disclosed in the pro-forma net loss statement in note 1 of the Company's annual financial statements. Stock-based compensation for independent consultants is expensed in the statement of operations. Income Taxes - The carrying value of the Company's deferred tax assets are dependent upon the Company's ability to generate sufficient future taxable income in certain tax jurisdictions. Until such time as the Company establishes a taxable income in such jurisdictions, the total amount of the deferred tax assets shall be offset with a valuation allowance. Capital and Liquidity Resources - ------------------------------- The Company intends to increase expenditures moderately to substantially over the next twelve months as it actively markets and sells the ANTs Data Server and hires additional sales, marketing, and technical personnel. The Company's cash balance as of March 23, 2004 was approximately $4 million which it believes, will be adequate to fund its activities through 2004 at its expected rate of spending. There can be no assurance that the Company's continued product development and infrastructure development will not require a much higher rate of spending. The Company is involved in discussions from time to time with prospective investors in order to raise capital to support its continued operations, although there can be no assurance that it will be able to obtain investment proceeds on acceptable terms, or at all. ITEM 3. CONTROLS AND PROCEDURES The effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) was evaluated under the supervision and with the participation of the Company's management, including the Chief Executive Officer and Chief Financial Officer, as of the end of the period covered by this quarterly report. Based on that evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures are effective in providing reasonable assurance that the information required to be disclosed in this quarterly report is recorded, processed, summarized and reported within the time period required for the filing of this quarterly report. There was no change in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended) identified in connection with the evaluation of the Company's internal control performed during its last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 12 The Company is not a party to any material pending legal proceeding and, to best of its knowledge, no such action by or against the Company, has been threatened. ITEM 2. CHANGES IN SECURITIES From January 1, 2004 through March 31, 2004, the Company sold to accredited investors, through a private offering, 5,703,159 D Units at a price of seventy-five cents ($0.75) per D Unit, with each D Unit consisting of (i) one (1) share of common stock of the Company, and (ii) a warrant to purchase up to one (1) share of common stock of the Company at a per share price of two dollars ($2.00), exercisable until March 31, 2006. In connection with this offering, the Company paid $269,100 in cash commissions, issued 23,666 D Units to finders, and will issue 239,697 D Units to the placement agent. The gross proceeds from the offering were $4,277,379. As of March 31, 2004, the shares related to 511,664 D Units are unissued and are categorized on the balance sheets as common stock subscribed. The Company expects to issue these shares by June 30, 2004. The proceeds of the private offering will be used for sales, marketing and general working capital purposes. The sales of these securities were made in reliance upon Rule 506 and Section 4(2) of the Securities Act of 1933. On or about August 15, 2003, the Company sold to two accredited investors, through a private offering, one convertible promissory note each, without interest, in principal face amount of $160,000 per note, each with maturity on August 15, 2005, and each convertible at the option of the holder into one share of Common Stock of the Company and a warrant to purchase one share of Common Stock of the Company at a per share price of $2.00, exercisable until March 31, 2006. The stated conversion price was $0.75 per share, however, the Company had agreed to set the conversion price at $0.40 per share in the event an anticipated $5 million financing did not close shortly after the note financing. The $5 million financing did not close, accordingly, the active conversion price was $0.40 per share and the Company has agreed to and intends to enter into Amendment Agreements with each convertible promissory note holder setting the conversion price at $0.40 per share. The intrinsic value of the conversion option of $280,000 was recorded to additional paid-in-capital and a corresponding amount recorded as a beneficial interest discount to convertible debt. For the period ended March 31, 2004, beneficial interest discount amounting to $87,500 and imputed interest (classified as debt discount on the balance sheets and statements of cash flows) were amortized as interest expense. The proceeds of the private offering were used for general working capital purposes. The sales of these securities were made in reliance upon Rule 506 and Section 4(2) of the Securities Act of 1933. ITEM 3. DEFAULTS UPON SENIOR SECURITIES No changes during the period covered by this report. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of security holders during the period covered by this report. ITEM 5. OTHER INFORMATION On or about April 23, 2004, the Company and Gary Ebersole, the Company's former President and Chief Operating Officer, entered into an Amendment Agreement pursuant to which the parties agreed to extend the period during which Mr. Ebersole can exercise the vested portion of his Stock Options to Purchase Shares of Common Stock of the Company until June 30, 2004. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 3.1 Amended and Restated Certificate of Incorporation of the Company, as listed in Exhibit 3.1 to the Company's 10-QSB filed on August 14, 2003, is hereby incorporated by reference. 3.2 Amended and Restated Bylaws of the Company, as listed in Exhibit 3.2 to the Company's 10-KSB filed on March 22, 2001, are hereby incorporated by reference. 10.1 2000 Stock Option Plan of the Company, as amended, attached as Exhibit 4 to the Company's Form S-8 filed on May 23, 2003, is hereby incorporated by reference. 13 10.2 Agreement and Plan of Merger dated December 8, 2000 between ANTs software inc. and ANTs software.com, as listed in Exhibit 10.2 to the Company's 10-KSB filed on March 22, 2001, is hereby incorporated by reference. 10.3 Settlement Agreement and Full Release of All Claims dated January 11, 2001, between the Company and Frederick D. Pettit, as listed in Exhibit 10.3 to the Company's 10-KSB filed on March 22, 2001, is hereby incorporated by reference. 10.4 Separation Agreement dated January 8, 2001, between the Company and Francis K. Ruotolo, as listed in Exhibit 10.4 to the Company's 10-KSB filed on March 22, 2001, is hereby incorporated by reference. 10.5 Form of Indemnification Agreement signed with officers and directors of the Company, as listed in Exhibit 10.5 to the Company's 10-KSB filed on March 22, 2001, is hereby incorporated by reference. 10.6 Registration Agreement between the Company and Karen Buechler and Eric Scott Buechler dated September 15, 2000, as listed in Exhibit 10.6 to the Company's 10-KSB filed on March 22, 2001, is hereby incorporated by reference. 10.7 Registration Agreement between the Company and Arcade Investment Limited dated September 7, 2000, as listed in Exhibit 10.7 to the Company's 10-KSB filed on March 22, 2001, is hereby incorporated by reference. 10.8 Amended Agreement between the Company and Arcade Investment dated October 6, 2000, as listed in Exhibit 10.8 to the Company's 10-KSB filed on March 22, 2001, is hereby incorporated by reference. 10.9 Form of Registration Agreement between the Company and each of Discount Bank and Trust Company, Lemanik Sicav Convertible Bond, and Pershing Keen Nominees, as listed in Exhibit 10.9 to the Company's 10-KSB filed on March 22, 2001, is hereby incorporated by reference. 10.10 Employment Agreement dated March 24, 2003, between the Company and Gary Ebersole, as listed in Exhibit 10.10 to the Company's 10-QSB filed on May 8, 2003, is hereby incorporated by reference. 10.11 Separation and Settlement Agreement and Full Release of All Claims dated January 14, 2004, between the Company and Gary Ebersole, as listed in Exhibit 10.11 to the Company's 10-KSB filed on March 30, 2004, is hereby incorporated by reference. 14. Code of Ethics, as listed in Exhibit 14 to the Company's 10-KSB filed on March 30, 2004, is hereby incorporated by reference. 31.1 Certification of the Chief Executive Officer required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of the Chief Financial Officer required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of the 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 the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K During the period covered by this report, the Company filed the following reports on Form 8-K: (i) on January 14, 2004, the Company announced that Gary Ebersole was going to resign as President, COO and a Director of the Company at the end of January 2004, (ii) on February 24, 2004, the Company provided an update on product progress, status of potential sales, Wireless Services Corporation and Net Soft Systems, Inc. and (iii) on March 22, 2004, the Company announced that it raised four million dollars in a private offering. RISK FACTORS In addition to other information in this 10-QSB, the following risk factors should be carefully considered in evaluating the Company's business since it operates in a highly changing and complex business environment that involves numerous risks, some of which are beyond its control. The following discussion highlights a few of these risk factors, any one of which may have a significant adverse impact on the Company's business, operating results and financial condition. As a result of the risk factors set forth below and elsewhere in this 10-QSB, and the risks discussed in the Company's other Securities and Exchange Commission filings, actual results could differ materially from those projected in any forward-looking statements. 14 A failure to obtain additional financing could prevent the Company from executing its business plan. A failure to raise additional funding could prevent the Company from continuing its business after 2004. The Company anticipates that current cash resources will be sufficient to fund its operations only through 2004 at its expected rate of spending. The Company believes that, due to an uncertain investment climate, securing additional sources of financing to enable it to complete the development and commercialization of its proprietary technologies is uncertain and there is no assurance of its ability to secure such financing. A failure to obtain additional funding could prevent the Company from making expenditures that are needed to pay current obligations, allow it to hire additional personnel, continue development of the technology or attract customers who are concerned about its ability to continue operations. If the Company raises additional funds by selling equity securities, the relative equity ownership of its existing investors could be diluted or the new investors could obtain terms more favorable than previous investors. If the Company raises additional funds through debt financing, it could incur significant borrowing costs. If the Company is unable to protect its intellectual property, its competitive position would be adversely affected. The Company relies on patent protection, as well as trademark and copyright law, trade secret protection and confidentiality agreements with its employees and others to protect its intellectual property. Despite the Company's precautions, unauthorized third parties may copy its products and services or reverse engineer or obtain and use information that it regards as proprietary. The Company has filed patent applications and intends to file more. The Company has been notified that two patent applications have been granted, however the Company does not know if the remaining applications will be granted or whether it will be successful in prosecuting any future patents. In addition, the laws of some foreign countries do not protect proprietary rights to the same extent as do the laws of the United States. The Company's means of protecting its proprietary rights may not be adequate and third parties may infringe or misappropriate its patents, copyrights, trademarks and similar proprietary rights. If the Company fails to protect its intellectual property and proprietary rights, its business, financial condition and results of operations would suffer. The Company believes that it does not infringe upon the proprietary rights of any third party, and no third party has asserted a patent infringement claim against it. It is possible, however, that such a claim might be asserted successfully against the Company in the future. The Company may be forced to suspend its operations to pay significant amounts to defend its rights, and a substantial amount of the attention of its management may be diverted from its ongoing business, which can materially affect its ability to attain and maintain profitability. The Company focuses on the research and development of its proprietary technologies and the marketing of its first product. The Company's present focus is on the research and development of its proprietary technologies and the marketing of its first product. The Company believes that these technologies are the basis for highly marketable commercial products. However, there can be no assurance of this and it is possible that the Company's proprietary technologies and products will have no commercial benefit or potential. In addition, from the Company's inception to the present, it has not recognized any operating revenues. The Company faces possible competition from large companies. The Company operates in a highly competitive industry. Although the Company believes that its technology is unique, can be protected, and, if adopted, will confer benefits that will be otherwise unavailable for some significant time, it faces very large competitors with greater resources who may adopt various strategies to block or slow its market penetration, thereby straining its more limited resources. They may also seek to hinder the Company's operations through attempts to recruit key staff with exceptionally attractive terms of employment, including signing bonuses, or by offer of highly competitive terms to potential or newly acquired customers. The Company depends on its key personnel and may have difficulty attracting and retaining the skilled staff it needs to execute its growth plans. The Company's success will be dependent largely upon the personal efforts of its Chairman and Chief Executive Officer, Francis K. Ruotolo, as well as other senior managers. The loss of key staff could have a material adverse effect on the Company's business and prospects. To execute its plans, the Company will need to hire additional staff and retain current employees. Competition for highly skilled employees with technical, management, marketing, sales, product development and other specialized training is intense. The Company may not be successful in attracting or retaining such qualified personnel. Specifically, the Company may experience increased costs in order to attract and retain skilled employees. If the Company is unable to hire, train and manage new skilled and experienced employees as needed, it would be unable to support its planned growth and future operations. 15 The Company faces rapid technological change. The market for the Company's products and services is characterized by rapidly changing technologies, extensive research and the introduction of new products and services. The Company believes that its future success will depend in part upon its ability to continue to enhance its existing products and to develop, manufacture and market new products and services. As a result, the Company expects to continue to make a significant investment in engineering, research and development. There can be no assurance that the Company will be able to develop and introduce new products and services or enhance its initial intended products and services in a timely manner to satisfy customer needs, achieve market acceptance or address technological changes in its target markets. Failure to develop products and services and introduce them successfully and in a timely manner could adversely affect the Company's competitive position, financial condition and results of operations. The Company may need to manage growth well. The Company may experience substantial growth in the size of its staff and the scope of its operations, resulting in increased responsibilities for management. To manage this possible growth effectively, the Company will need to continue to improve its operational, financial and management information systems and to hire, train, motivate and manage a growing number of staff. Due to a competitive employment environment for qualified technical, marketing and sales personnel, the Company expects to experience difficulty in filling its needs for qualified personnel. There can be no assurance that the Company will be able to effectively achieve or manage any future growth, and its failure to do so could delay product development cycles and market penetration or otherwise have a material adverse effect on its financial condition and results of operations. The Company could face information and product liability risks and may not have adequate insurance. The Company's product may be used to manage data from critical business applications. The Company may become the subject of litigation alleging that its product was ineffective or disruptive in its treatment of data, or in the compilation, processing or manipulation of critical business information. Thus, the Company may become the target of lawsuits from injured or disgruntled businesses or other users. The Company does not presently carry product or information liability or errors and omissions insurance, and although it intends to acquire such insurance prior to commencing substantial sales, such insurance may not be available in an acceptable or affordable form. In the event that the Company is required to defend more than a few such actions, or in the event that it was found liable in connection with such an action, its business and operations would be severely and materially adversely affected. The Company is dependent on new demand for its products and services. The success of the Company's business depends upon demand for and use of its technology, products and services in general and the demand for additional computing power, cost effectiveness and speed in particular. The Company's product is new and the Company may encounter substantial market resistance. In the event sufficient demand does not develop, the Company's business and results of operations would be materially adversely affected. The Company believes that there appears to be increased demand for computing power, cost effectiveness and speed, but if general economic conditions decline or hardware and memory advances make such power, cost effectiveness and speed more readily available, then adoption, use and sales of the Company's products and services may be materially adversely affected. The Company will need to continue its product development efforts. The Company believes that its market will be characterized by increasing technical sophistication. The Company also believes that its eventual success will depend on its ability to continue to provide increased and specialized technical expertise. There is no assurance that the Company will not fall technologically behind competitors with greater resources. Although the Company believes that it enjoys a significant lead in its product development and introduction, and is hopeful that its patents provide some protection, it will likely need significant additional capital in order to continue to enjoy such a technological lead over competitors with more resources. Market acceptance of the Company's products and services is not guaranteed. The Company is at an early stage of development and its earnings will depend upon market acceptance and utilization of its intended products and services. Due to economic conditions potential customers have significantly tightened budgets for evaluating new products and technologies and the evaluation cycles are much longer than in the recent past. There can be no assurance that the Company's product and technology development efforts will result in new products and services, or that they will be successfully introduced. 16 Future profitability is not guaranteed. The Company has not recognized any operating revenues to date. There is no assurance that the Company's plans will be realized, that it will be able to generate revenues or that it will achieve profitability in the future. Limited market for the Company's common stock. The Company's common stock is not listed on any exchange and trades in the over-the-counter (the "OTC") market. As such, the market for the Company's common stock is limited and is not regulated by the authorities of any exchange. Further, the price of the Company's common stock and its volume in the OTC market may be subject to wide fluctuations. The Company has a long corporate existence and was inactive during much of its corporate history. The Company was formed as the Sullivan Computer Corporation, incorporated in Delaware in January 1979. The Company was privately owned until late 1986, at which time its common stock began trading in the over-the-counter market. This was a result of the registration of the Company's common stock pursuant to the merger with CHoPP Computer Corporation, a British Columbia corporation. During the period from mid-1987 through late 1999, the Company had few or no employees. The Company's operating activities were limited and were largely administered personally by its former Chairman. Due to the passage of time and the poor condition of financial and other records, there can be no assurance that all matters have been addressed at this date. The Company has indemnified its officers and directors. The Company has indemnified its Officers and Directors against possible monetary liability to the maximum extent permitted under Delaware law. Limitation on ability for control through proxy contest. The Company's Bylaws provide for a Board of Directors to be elected in three classes. This classified Board may make it more difficult for a potential acquirer to gain control of the Company by using a proxy contest, since the acquirer would only be able to elect one or two directors out of four directors at each shareholders meeting held for that purpose. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ANTs software inc. Date: May 17, 2004 By: /s/ Francis K. Ruotolo ------------------------------------- Francis K. Ruotolo, Chairman and Chief Executive Officer Date: May 17, 2004 By: /s/ Kenneth Ruotolo ------------------------------------- Kenneth Ruotolo Chief Financial Officer and Secretary 17 EX-31.1 2 a4640693ex311.txt EXHIBIT 31.1 EXHIBIT 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER REQUIRED BY RULE 13A-14(A) OF THE SECURITIES EXCHANGE ACT 1934, AS AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Francis K. Ruotolo, certify that: 1. I have reviewed this quarterly report of ANTs software inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: May 17, 2004 /s/ Francis K. Ruotolo ------------ ------------------------------ Francis K. Ruotolo, Chairman and Chief Executive Officer EX-31.2 3 a4640693ex312.txt EXHIBIT 31.2 EXHIBIT 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER REQUIRED BY RULE 13A-14(A) OF THE SECURITIES EXCHANGE ACT 1934, AS AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Kenneth Ruotolo, certify that: 6. I have reviewed this quarterly report of ANTs software inc.; 7. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 8. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 9. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 10. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: May 17, 2004 /s/ Kenneth Ruotolo ------------ ------------------------------ Kenneth Ruotolo Chief Financial Officer and Secretary EX-32.1 4 a4640693ex321.txt EXHIBIT 32.1 EXHIBIT 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 Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I hereby certify that, to my knowledge, the quarterly report on Form 10-QSB (the "Report") of ANTs software inc., a Delaware corporation (the "Company"), for the quarter ended March 31, 2004: 1. fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: May 17, 2004 By: /s/ Francis K. Ruotolo ------------ ----------------------------------- Francis K. Ruotolo, Chairman and Chief Executive Officer A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company, and will be retained by the Company, and furnished to the Securities and Exchange Commission upon request. EX-32.2 5 a4640693ex322.txt EXHIBIT 32.2 EXHIBIT 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 Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I hereby certify that, to my knowledge, the quarterly report on Form 10-QSB (the "Report") of ANTs software inc., a Delaware corporation (the "Company"), for the quarter ended March 31, 2004: 1. fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: May 17, 2004 By: /s/ Kenneth Ruotolo ------------ ----------------------------------------- Kenneth Ruotolo Chief Financial Officer and Secretary A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company, and will be retained by the Company, and furnished to the Securities and Exchange Commission upon request. -----END PRIVACY-ENHANCED MESSAGE-----