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                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                               -------------------
                                   FORM 10-KSB

  [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934

      For the fiscal year ended December 31, 2001

  [ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
      Exchange Act of 1934

                       Commission file number: 0000796655

                               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 Road, Suite G,
                              Burlingame, CA 94010
           (Address of principal executive offices including zip code)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (650) 692-0240

        SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

    SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON STOCK,
                               $0.0001 PAR VALUE

     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. [X] Yes [ ] No

     Indicate by check mark if disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]

     Registrant's revenues for the fiscal year ended December 31, 2001 were: $0

     The aggregate market value for the Registrant's voting common stock held by
non-affiliates based upon the closing bid price for the common stock on March
11, 2002, as reported on the NASD Bulletin Board system, was approximately $24.6
million. Shares of common stock held by each officer and director and each
person who owns 5% or more of the outstanding common stock have been excluded in
that such persons may be deemed to be affiliates. The determination of affiliate
status is not necessarily a conclusive determination for other purposes.

     As of March 11, 2002 the Registrant had 17,525,651 shares of common stock
outstanding.

     Transitional Small Business Disclosure Format:  Yes [  ]    No [X]

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                                TABLE OF CONTENTS

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


                                     PART I

Item 1. Description of Business..............................................3
Item 2. Description of Property..............................................9
Item 3. Legal Proceedings....................................................9
Item 4. Submission of Matters to a Vote of Security Holders..................10

                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters.............10
Item 6. Management's Plan Of Operation.......................................11
Item 7. Financial Statements.................................................16
Item 8. Changes in and Disagreements with Accountants on Accounting and
            Financial Disclosures............................................16

                                    PART III

Item 9. Directors, Executive Officers and Control Persons; Compliance
            With Section 16(a) of the Exchange Act...........................17
Item 10. Executive Compensation..............................................20
Item 11. Security Ownership of Certain Beneficial Owners and Management......23
Item 12. Certain Relationships and Related Transactions......................25
Item 13. Exhibits and Reports on Form 8-K....................................25
Signatures...................................................................26


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Certain statements contained in this Form 10-KSB 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 Annual Report on Form 10-KSB, 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.

                                     PART I

Item 1. Description of Business

The Company

         We are a Delaware corporation headquartered in Burlingame, California.
Our shares trade on the OTC Bulletin Board under the stock symbol ANTS. We are
the successor to Sullivan Computer Corporation, a Delaware corporation
incorporated in January 1979, which, in 1986 changed its name to CHoPP Computer
Corporation. In 1997, we reincorporated from Delaware to Nevada, and in February
1999 changed our name from CHoPP Computer Corporation to ANTs software.com. In
December 2000, we reincorporated from Nevada to Delaware and changed our name
from ANTs software.com to ANTs software inc.

Current and Planned Operations

         We are engaged in the development and marketing of a proprietary
software technology that is intended to significantly improve the speed at which
computers can manipulate data. Our operations currently consist of research and
development of our proprietary software technology ("ANTs technology"),
marketing our technology to potential customers and partners, and raising
capital for operations. As of the filing of this report, we have funds for
continued operations through April 2002. We have not realized any revenues to
date. We anticipate that, if we are sufficiently funded, over the next six
months our focus will be threefold: continued development of our technology,
marketing our technology, and raising capital for operations.

         We currently have sixteen full-time employees, two part-time employees
and one consultant. In order for us to execute our plans we will ultimately need
to hire and retain a substantially larger number of personnel. Nonetheless, we
plan to grow modestly, increasing the number of our technical personnel by ten
and the number of marketing and sales personnel by five by the end of 2002.

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Technology and Intellectual Property

         We have developed software that, we believe, can radically improve the
speed of data access regardless of the application or the data access model.

         We are a successor to a company originally founded to produce a
supercomputer. The concepts developed for the supercomputer form the basis for
what we believe is an elegant solution to the primary road blocks that have
prevented hardware from running efficiently. The continuing technical dilemma
that limits speed in all but the simplest problems is the fact that the CPU
remains idle most of the time. We believe we have solved these problems with the
ANTs Concurrency Engine (ACE). ACE is comprised of a unique data processing
engine coupled with lock-free data structures. The first implementation of ACE
is the ANTs Data Server (ADS) a standards-compliant SQL relational database
server.

        As network performance improves, ACE's ability to reduce latency and
blocking become more important as a percentage of the total cost of computing.
In a conventional network, locks held during communication dominate performance
in a typical network. ACE reduces contention by more than 99% in many cases,
effectively reducing the associated latency costs by the same factor.

        The same blocking that reduces network performance also reduces
individual server performance. Current technology requires locks and blocking
(waiting for lock release) to coordinate the use and update of common data. The
difficulty with blocking is that it makes the cost of contention for common
resources very high. Although some blocking may be required by the logic of the
program, almost all blocking is to maintain order in program flow. ACE
eliminates the need for this second kind of blocking.

         The Ants Concurrency Engine (ACE)

         We believe our core technology revolutionizes access to data regardless
of the application or the data access model. ACE fully utilizes the resources of
multiprocessor computers (SMP machines) for data manipulation on SMP hardware.
We believe ACE can significantly improve performance in any application that
handles high volumes of shared, updateable data. ACE is well suited for
incorporation in new and existing platforms and applications where contention
would traditionally inhibit performance; these are characterized by the
following:

          o    New data items being added at a high rate, and/or ...
          o    Data items being modified at a high rate, and ...
          o    Retrieval or search operations while items added or modified

         In traditional data manipulation schemes, avoiding contention often
places burdensome limitations on application design. By eliminating the
bottlenecks caused by contention, ACE allows the application designer greater
flexibility to define how the data is organized and manipulated. We believe ACE
is capable of producing significant performance improvements in appropriate
applications. ACE's value increases with memory size, CPU speed (relative to
memory access times and network latencies), network bandwidth, and most
significantly with the number of CPUs. With properly designed applications, we
believe ACE will scale almost linearly with CPUs.

         ACE consists of two key components:

          o    A unique data manipulation engine
          o    Concurrency enabling lock-free data structures

         The Engine

         For many years, shared data manipulation has been the bottleneck in
application implementation. This leads to the well-known performance and scaling
problems experienced by the leading application vendors. The database and
similar caching market exists because data manipulation at the datastore itself
is

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such a bottleneck. Our scientists who studied this problem developed a
revolutionary way of organizing the work associated with manipulating data. This
engine (the "Engine") reorganizes the work of the CPUs on multiprocessor systems
to avoid delays due to data contention. The result is an entirely new approach
to the process by which data is managed.

         Lock-Free Data Structures

         Contention produces two significant performance bottlenecks in
data-intensive applications:

               o    The necessity of locking records, and in some cases entire
                    indexes, to ensure data integrity. This results in
                    significant delays due to lock waiting.
               o    Cache synchronization conflicts that occur when shared data
                    is distributed in multiple caches or multiple clients

         ACE includes several patent-pending designs for the implementation and
deployment of lock-free data structures, which, in tandem with the Engine,
virtually eliminate the necessity of locking any data structures, even in
applications with significant data contention.

         Mathematical modeling and benchmark tests indicate that this lock-free
data structure technology eliminates as much as 99% of the locking that cripples
application performance. Yet it does so without sacrificing data integrity or
security.

         Our innovative technology allows index operations, which are seemingly
impossible with existing technology. Without ACE, indexes cannot be modified
unless they are locked in whole or part, but with ACE locking (and lock waiting)
is totally unnecessary. Locks not only cause waiting, they also can cause severe
cache synchronization conflicts, which ACE also eliminates. Operations that
would significantly decrease performance in an index-dependent application, such
as adding or modifying items, will, when using ACE, all run concurrently at
maximum speed.

         Using ACE, developers can design applications knowing that ACE handles
operations under load that are now generally impossible, even when the data is
rapidly changing. There are alternatives for dealing with contention, but they
are all expensive. Hardware and maintenance costs are high and these
alternatives often eliminate data access flexibility by partitioning the data.
Keeping a single image of the data is optimum and ACE allows data manipulation
on a much larger single image.

         Combining the Technologies

         We believe that the Engine processes work very efficiently, providing
large performance gains over traditional data manipulation techniques and the
Lock-Free Data Structures allow for massive parallelism of operations on data
items. Combined, they make up the ANTs' Concurrency Engine. ACE delivers very
high performance in normal operating situations. But in contentious high-volume
situations, where other mechanisms simply fail, we believe ACE achieves its
greatest successes, scaling almost linearly with CPUs and handling 1000s of
concurrent users (a user being any "client" computer making a request of the
system).

         Application Areas

         ACE is flexible and can be used by a plethora of applications to
manipulate and organize data. Examples include: a real-time object or message
store for web or wireless applications, a naming/directory service, or a DBMS.

         ANTs Data Server

         The first implementation of ACE is the ANTs Data Server (ADS) a
standards-compliant SQL relational database server. Using the lock-free
datastructures developed in ACE, ADS achieves levels of performance that, we
believe, are impossible with other RDBMS products on the market today in cases
of



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high data contention. In a recent benchmark, ADS successfully processed 11 times
as many transactions-per-minute as one of the industry's leading database
servers.

Patents

         We use several separate proprietary technologies, all of which we
believe must be present to achieve results comparable to ACE/ADS. We have been
granted three patents: U.S. Patents No. 4,484,262 (granted on November 20, 1984)
and No. 4,707,781 (granted on November 17, 1987) on our Shared Memory Computer
Method and Apparatus, and U.S. Patent No. 5,438,680 (granted on August 1, 1995)
on our Method and Apparatus for Enhancing Concurrency in a Parallel Digital
Computer. During 2000 and 2001, we filed seven patent applications to obtain
protection for new intellectual property. We also claim certain copyright, trade
secret and trademark protection in aspects of our business and technology and
new intellectual property is under development on an ongoing basis.

Markets, Product Strategy and Market Entry

         Our product offering is comprised of two components, the core
technology, ACE, which represents our intellectual property and ADS, a
relational database which is the first implementation of ACE. ACE can be used as
the engine for any application that manipulates data. It has applicability in
many markets. ADS can be applied to certain segments of the database market.

         Please carefully consider the following in connection with the risk
factors listed herein in the Section entitled "Management's Plan of Operations"
and the cautionary notes therein.

         Four Market Segments

         To date, we have identified four market segments where ACE or ADS may
be well suited. To maximize available resources, we will select and focus on two
of these segments.

         1. Application Servers/JMS - Web Services

         With Java, IBM and BEA are very aggressively competing. With .net,
Microsoft is pitching its MS-Centric story. Our opportunity here could be as
simple as a JMS engine, or as complex as a revolutionary architecture for
application deployment that dominates the industry.

         Market Size. The application server market is estimated by IDC at $5
billion for 2002, growing explosively to $18 billion by 2005. Of this total
market, we believe the segment in which we can provide an advantage is perhaps
$2 billion. This market is intensely competitive. The targeted partner is the
major application server vendor. We believe we could provide a key competitive
advantage for those application server vendors who choose to partner with us.

         Competition.  We provide unique technology in this sector. The caching
vendors currently provide a work-around for the database contention problem.
Traditional RDBMSs with caching is the current solution.

         ANTs' Advantages. We believe that ACE can greatly improve performance
of the JMS Engine by acting as a high-performance persistent message store and
by enabling high-rate routing for publish/subscribe services.

         Positioning. The technology is ideally embedded in the partner's
offering, though bundling a standalone JMS engine is possible with the right
partners.

         2. Wireless Messaging

         This market has grown rapidly in Europe over the last 18 months and is
poised for rapid growth in the U.S. The high-volume, high-contention
characteristics of wireless messaging makes this market a real



                                       6
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opportunity for our technology. Partners would be the application providers,
those who develop and manage applications for the carriers. Depending on the
partner and application either ACE or ADS can be deployed.

     Market Size. The application provider revenue forecast for western Europe
is estimated by IDC at $1 billion in 2002, growing rapidly to $12 billion in
2005. This market is just emerging in North America.

     Competition. Currently, a number of specialized, industry specific software
solution providers compete in this market. Traditional database vendors
generally do not compete in this market and where they do, they require complex
and costly implementations.

     ANTs' Advantages. Our technology can perform high volumes of inserts while
queries are in progress. This set of features is very important for SMS and
other wireless message formats and provides us with significant advantage over
most other solutions.

     Positioning. We intend to position ourselves as enabling technology that
can be incorporated into the platforms and applications sold to the large
carriers by the infrastructure and applications vendors.

     3. High-end OLTP

     This upper edge of the market is where traditional relational databases can
no longer scale due to contention within the data structures. The data is
greatly partitioned to minimize contention, or a mainframe solution is in use.
Both of these are expensive solutions and altering or adding applications to
them are difficult. Our Data Server is targeted at this market, in which SQL,
ODBC, transactional support and isolation levels are dominant concepts.

     Market Size. The database market is estimated by IDC at $12 billion for
2002, growing to $16 billion by 2004. Our targeted segment represents an
estimated $3 billion opportunity. It is a specialized and profitable segment of
the database market. The targeted customer profile is Fortune 1000 companies in
the financial services, travel/hospitality, retail, logistics, and manufacturing
sectors.

     Competition. Oracle Parallel Server, IBM Sysplex, Compaq Himalaya, Teradata

     Positioning. Our Data Server is being positioned as a specialized high
contention relational database with real-time replication and instantaneous
failover.

     ANTs' Advantages. We believe our technology has the following advantages in
the high-end OTLP market:

          o    Significant cost savings in: licensing, hardware, management
               application development and maintenance
          o    Application Flexibility

     4. Storage

     The market is characterized by the rapid commoditization hardware, leading
to decreased profitibility for the leading vendors. These vendors are developing
high-performance software management applications as a means of differentiating.
As of March 2002, we have begun an in-depth analysis of this market to determine
where our technology fits.

     Market Size. According to IDC, the software market for storage was
approximately $6 billion in 2001, growing to $9 billion in 2004. Initial
indications are that ACE could provide benefit in file system functionality for
the rapidly growing Network Attached Storage segment.

     Competition. To be determined.

     Positioning. To be determined.

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         ANTs' Advantages. We believe our lock-free datastructure technology
enables very fast and scalable file systems.

         Go-To-Market Plan

         Given our size, strength in technology development, and the types of
high-end enterprise sectors we're targeting, we believe our best go-to-market
strategy is to leverage the marketing and sales infrastructure of our partners.
We do not intend to develop an extensive sales and marketing organization for
the purpose of selling directly to customers, though we will sell direct in some
cases. We intend to develop an organization designed primarily to incentivize
and support our key partners.

         Our go-to-market strategy includes two partner models, which we intend
to pursue in this order:

     o    OEM - where the partner brands, supports and markets and sells our
          products as part of their solution. We support the partner's sales,
          support and marketing efforts.
     o    Co-Marketing - where the partner distributes our products through
          their channels under our brand. The cost of marketing and support is
          shared with the partner.

         In return for bearing the majority of marketing and sales costs, OEM
partners will receive heavily discounted license fees. Co-marketing partners
will receive a smaller license fee discount depending on how much they invest in
sales and marketing support.

         We believe that there are compelling reasons why companies will want to
partner with us:

     o    Competitive advantage through higher performance and scalability
     o    Their customers could benefit through:
          o    Scalability - enabling their businesses to grow beyond current
               limitations
          o    Speed - leading to increased productivity or better customer
               response
          o    Savings through less costly hardware and less complicated
               application development and maintenance
     o    Development of new applications not currently possible

         Revenue Model

         We intend to generate revenue through licensing (ACE and ADS) and
services. We envision three methods of licensing (from most to least tightly
integrated):

         OEM - We will license our core technology to ISV's for incorporation in
their products. We will provide customization services so the integration is
seamless and takes maximum advantage of our technology.

         Co-Marketing - We will sign distribution agreements providing certain
partners the ability to resell ACE or ADS as part of their complete solution.

         End-User - We will license ADS directly to customers where appropriate
and customize it for use with their applications.

         We intend to charge the license fee on a "per CPU" basis (a common
mechanism in the enterprise software space).

         Service revenue would be generated through: integration and
customization, maintenance, and training fees as follows:



                                       8
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         Integration and Customization - We intend to build out a professional
services organization whose goal is to customize ACE or ADS and optimize their
performance for partners and customers. We will charge an hourly fee to perform
these services.

         Maintenance - We intend to charge a maintenance fee for each license
sold. This pays for certain levels of support and software updates. A typical
fee is 20% of the retail license fee per year.

         Training - We intend to charge an hourly rate to provide customized
training for licensees.

         Beta Test - ANTs Data Server

         On or about October 30, 2001 we entered into a beta test agreement with
Data Trak Technologies of California, Inc., (Data Trak) a supply chain provider
and integrator of small package and LTL shipping solutions. In the agreement,
Data Trak agreed to evaluate our proprietary database technology for inclusion
into its product and service offerings and agreed to introduce us to key clients
and partners. As of the filing of this report, beta testing has been delayed
while we refocus on Data Trak's new enterprise-level solutions.

Item 2.  Description of Property.

         Our headquarters are currently located at 801 Mahler Road, Suite G,
Burlingame, California. We now occupy approximately 5000 square feet. We believe
that our facilities are adequate for our present needs and our near term growth,
and that additional facilities will be available at acceptable rates as we need
them.

Item 3.  Legal Proceedings.

         On or about January 31, 2001, the British Columbia Securities
Commission ("B.C. Commission") requested that we provide information regarding
the distribution of securities to British Columbia residents to ensure that such
distributions were made in compliance with the British Columbia Securities Act
("BC Act"). On or about October 12, 2001, the B.C. Commission informed us by
letter that it had decided not to take formal enforcement action against us at
this time in connection with our breaches of the BC Act. On or about March 15,
2002, the B.C. Commission issued a Revocation Order that revokes a long-standing
Cease Trade Order and has the Company deemed a "non-reporting company". This
relieves us of any requirement to file periodic reports with the B.C.
Commission.

         In March 2001, we were informed that the staff of the SEC had drafted a
"Wells Letter" in which it was considering recommending to the Commission that
an action be brought against us alleging that: (i) we incorrectly identified Mr.
Peter Patton as a director in a January 2000 registration statement on form S-8;
(ii) we failed to disclose a 1996-97 attempted involuntary bankruptcy proceeding
in our 1999 registration statement on form 10-SB; (iii) a former director signed
a consent in our January 2000 registration statement on form S-8 that should
have been signed by our auditor; and (iv) we failed to file periodic reports
from 1988 to 1999. In August 2001, we reached a tentative agreement with the
staff of the SEC to settle the matter by consenting, without admitting or
denying the SEC's allegations, to an injunction prohibiting us from future
violations of the periodic reporting requirements. On November 7, 2001, our
counsel received a letter from the staff of the SEC that stated the SEC did not
intend to bring enforcement action against the Company and on December 18, 2001
our counsel received a letter from the staff of the SEC confirming that the
investigation was terminated as to the Company.

         On October 12, 2001, a class action complaint, titled Joseph Chatham v.
ANTs Software.com, et al., was filed in Los Angeles County Superior Court
against us and certain of our former officers and former directors. The
plaintiff claims to be suing on behalf of a class of persons who purchased the
Company's stock from October 5, 1999, through March 23, 2001. The complaint
claims violations of certain provisions of the California Corporations Code in
connection with the following alleged misrepresentations: (i) we misrepresented
that Dr. Peter Patton was a member of our board of directors; (ii) we failed to
disclose an effort by a creditor to force us into involuntary bankruptcy; and
(iii) Donald Hutton falsely identified himself as a certified public accountant
in an SEC filing. We believe these claims to be

                                       9
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without merit and intend to defend this case vigorously. However, there can be
no assurance that this matter will be resolved without costly litigation, or in
a manner that is not materially adverse to our financial position, results of
operations or cash flows. No estimate can be made of the possible loss or
possible range of loss associated with the resolution of this contingency.
Preliminary court scheduling and alternate resolution meetings are scheduled in
March 2002.

         We were a defendant in a case entitled Hubert P. Lauffs v. Mosaic
Multisoft Corporation, in which the plaintiff asserted a cause of action against
us for breach of fiduciary duty. The plaintiff purported to base his cause of
action on allegations that we 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, we 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 our favor by affirming the Superior Court's March 2000 summary judgment.
Lauffs' time to petition for hearing in the California Supreme Court has
expired, and no further review is now possible. In September 1999, we had filed
an action for malicious prosecution against the lawyer and the plaintiff in this
case. Since May 4, 2000, the malicious prosecution action had been stayed
pending resolution of the appeal. On January 3, 2002, the stay was lifted. We
are pursuing recovery of our legal fees incurred in connection with the
proceedings.

Item 4. Submission of Matters to a Vote of Security Holders.

         There were no matters submitted to our shareholders from October 1,
2001 to December 31, 2001.

                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters.

         Our common equity is traded on the Over-The-Counter Bulletin Board
("OTCBB") under the symbol "ANTS".

         The following is the range of high and low closing prices of our stock,
for the periods indicated below. This information was obtained from Yahoo!
Finance Historical Quotes, and can be found at the following Internet address:
http://chart.yahoo.com/d.

                                                     High              Low

Quarter Ended December 31, 2001                      2.50              1.70
Quarter Ended September 30, 2001                     3.59              2.50
Quarter Ended June 30, 2001                          4.20              2.50
Quarter Ended March 31, 2001                         5.00              2.75

November 1, 2000 to December 31, 2000                7.25              2.00
Quarter Ended October 31, 2000                      15.25              6.94
Quarter Ended July 31, 2000                         16.63              5.50

Quarter Ended April 30, 2000                        40.13              8.00
Quarter Ended January 31, 2000                      52.75              8.09
Quarter Ended October 31, 1999                      11.31              1.00
Quarter Ended July 30, 1999                          1.69              1.13


         The quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions.

         As of March 11, 2002 there were 2,506 holders of record of our common
stock.

                                       10
<PAGE>

         From October 1, 2001 through December 31, 2001, we sold to accredited
investors, through a private offering, 1,085,997 units, at a price of $0.75 per
unit (the "Units"), with each 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 One Dollar ($1.00),
exercisable until December 31, 2002. In connection with this offering, we paid
$17,950 and issued 28,667 units in commissions and finder's fees. The gross
proceeds of the offering were $814,500. The proceeds will be 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 6. Management's Plan of Operation.

         We are engaged in the development and marketing of a proprietary
software technology that is intended to significantly improve the speed at which
computers can manipulate data. We anticipate that, if we are sufficiently
funded, over the next twelve months our operations will be focused on: the
continued development of our technology, marketing our technology, and raising
capital for operations.

Technology Development

         Over the next twelve months we intend to continue to improve and add
functionality both to the ANTs Concurrency Engine (ACE) and to the ANTs Data
Server. We have built out the basic functionality to the point where virtually
all additional functionality will be driven by partner or customer demand. We
intend to actively engage prospective partners and customers in technical
discussions to determine what features are and will be most in demand for the
markets we are targeting. We intend to then mobilize our engineering resources
around developing those features. Once we are successful in developing partner
or customer relationships, we anticipate that the specific needs of the partner
or customer will drive the development of ACE and ADS functionality.

Marketing

         Our product offering is comprised of two components, the core
technology, ACE, which represents our intellectual property and ADS, a
relational database which is the first implementation of ACE. ACE can be used as
the engine for any application that manipulates data. ADS can be applied to
certain segments of the database market. Target markets include: application
server, wireless messaging, high-end on-line transaction processing (OLTP) and
storage. Our go-to-market strategy includes potential OEM and co-marketing
partnerships with leading vendors in each market and limited sales directly to
customers.

Raising Capital

         To carry out our plan of operation, we anticipate that over the next
twelve months we will require approximately $5-10 million. We will pursue a
number of avenues to raise these operating funds: 1) in the past we have been
successful raising funds through a series of private placements of our stock, we
anticipate that we will continue to raise funds through private placements, 2)
as we develop close relationships with large partners, we will pursue strategic
investments from those partners, and 3) this year we expect to begin generating
revenue, which will be a source of operating funds. We are currently seeking
investment from additional investors to support continued operations, although
there can be no assurance that we will be able to obtain such investment.

         The majority of our operating expenses and costs over the next twelve
months are expected to be for and in connection with existing and additional
personnel. We currently have sixteen full-time employees, two part-time employee
and one consultant. We view the recruitment of additional qualified technical
personnel as essential to the further development and commercialization of our
proprietary technologies. Should we be successful in our recruitment efforts, we
expect that our personnel and other operating costs will increase over current
levels.

                                       11
<PAGE>

Selling, General and Administrative

         Selling, general and administrative expenses increased from $2,983,638
during the eight-month transition period ending December 31, 2000 to $3,688,927
for the year ended December 31, 2001. Approximately $490,000 of the expenses for
year 2001 was non-cash, equity compensation on the vested portion of
non-employee option grants. We expect that our general and administrative
expenses will continue to increase moderately as additional staff is recruited
to sell and support our products.

Research and Development

         Research and development expenses increased from $1,155,751 during the
eight-month transition period ending December 31, 2000 to $2,185,321 for the
year ended December 31, 2001. These expenses are related to the research,
testing and product development of our proprietary software. We expect that our
research and development expenses will increase moderately as additional staff
is recruited to customize our products and develop new ones.

Significant 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 and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those and other estimates.

         Property and Equipment - Property and equipment are carried at cost and
are depreciated on the straight-line basis over their estimated useful lives of
three to five years. Repairs and maintenance are expensed as incurred. When the
assets are sold or retired, their cost and related accumulated depreciation are
removed from the accounts with the resulting gain or loss reflected in the
statement of operations.

         Research and Development Expenses - Development costs incurred in the
research and development of new software products are expensed as incurred until
technological feasibility in the form of a working model has been established.
To date, the Company's software development has been completed concurrent with
the establishment of technological feasibility and, accordingly, all software
development costs have been charged to research and development expense in the
accompanying statements of operations.

         Income Taxes - The Company accounts for income taxes using the asset
and liability method. Under this method, deferred tax assets and liabilities are
recognized for operating loss and tax credit carryforwards and for the future
tax consequences attributable to differences between financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. A valuation allowance is
recorded to reduce the carrying amounts of deferred tax assets unless it is more
likely than not that such assets will be realized.

         Long-lived Assets - Long-lived assets such as property and equipment
are evaluated for impairment when events or changes in circumstances indicate
that the carrying amount of the assets may not be recoverable. When the
indicators of impairment are present and the estimated undiscounted future cash
flows from the use of these assets are less than the assets' carrying value, the
related assets will be written down to fair value.

                                       12
<PAGE>

         Operating Segment Information - The Company operates in a single
industry segment, computer software. Substantially all of the Company's assets
and employees are located at the corporate headquarters in Burlingame,
California.

         Stock-based Compensation - The Company accounts for stock-based
employee compensation arrangements in accordance with the provisions of
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees, and complies with the disclosure provision of (SFAS) No. 123,
Accounting for Stock-Based Compensation. Under APB No. 25, compensation expense
is based upon the excess of the estimated fair value of the Company's stock over
the exercise price, if any, on the grant date.

         Basic 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.
Since common equivalent shares outstanding during the periods were antidilutive,
basic and diluted loss per share are the same.

         Reclassification - Certain reclassifications have been made to the
prior year financial statements in order for them to conform to the current year
presentation.

         Recent Accounting Pronouncements - In June 2001, the Financial
Accounting Standards Board (FASB) issued SFAS No. 141, Accounting for Business
Combinations. This statement requires the purchase method of accounting be used
for all business combinations initiated after June 30, 2001, and establishes
specific criteria for the recognition of intangible assets separately from
goodwill.

         In June 2001, the FASB issued SFAS No. 142, Goodwill and Other
Intangible Assets. Under SFAS No. 142, goodwill and intangible assets with an
indefinite life are not amortized. Instead of amortizing goodwill and intangible
assets deemed to have an indefinite life, the statement requires a test for
impairment to be performed annually, or immediately if conditions indicate that
such an impairment could exist. The amortization period of intangible assets
with finite lives will no longer be limited to forty years. This statement is
effective for fiscal years beginning after December 15, 2001, and permits early
adoption for fiscal years beginning after March 15, 2001.

         In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long Lived Assets" which addresses financial
accounting and reporting for the impairment and disposal of long-lived assets
with adoption required no later than fiscal year 2003.

         The Company does not believe that any of these recent accounting
pronouncements will have a material impact on their financial position or
results of operations.

Notes Receivable from Officers

         Notes receivable from officers decreased during the eight months ended
December 31, 2000 from $337,500 to $180,000. In August of 2001, we forgave
one-fifth, $45,000, of the note receivable from our former President in
satisfaction of our obligations pursuant to the terms of his settlement
agreement. The balance remaining on this note at December 31, 2001 was $135,000.

Capital and Liquidity Resources

         We anticipate significantly increasing expenditures over the coming
months as we continue to develop our technology. We expect to begin recognizing
revenues in calendar year 2002. Our cash balance as of December 31, 2001 was
approximately $700,000, which, when added to funds raised since



                                       13
<PAGE>

then, we believe will be adequate to fund our activities through April 2002 at
our current rate of spending. There can be no assurance that our continued
product development and infrastructure development will not require a much
higher rate of spending. We are currently seeking investment from additional
investors to support continued operations, although there can be no assurance
that we will be able to obtain such investment.

Risk Factors Associated With The Company's Business and Future Operating Results

         In addition to other information in this 10-KSB, the following risk
factors should be carefully considered in evaluating our business since we
operate in a highly changing and complex business environment that involves
numerous risks, some of which are beyond our control. The following discussion
highlights a few of these risk factors, any one of which may have a significant
adverse impact on our business, operating results and financial condition. As a
result of the risk factors set forth below and elsewhere in this 10-KSB, and the
risks discussed in our other Securities and Exchange Commission filings, actual
results could differ materially from those projected in any forward-looking
statements.

         We focus on the research and development of our proprietary
technologies. Our present focus is on the research and development of our
proprietary technologies. We believe that these technologies will be the basis
for the development of highly marketable commercial products. However, there can
be no assurance of this and it is possible that our proprietary technologies
have no commercial benefit or potential. In addition, from our inception to the
present, we have had no commercial products and have not recognized any
operating revenues.

         We have a long corporate existence and were inactive during much of our
corporate history. We were formed as the Sullivan Computer Corporation,
incorporated in Delaware in January 1979. We were privately owned until late
1986, at which time our common stock began trading in the over-the-counter
market. This was a result of the registration of our common stock pursuant to
the merger with CHoPP Computer Corporation, a British Columbia corporation.
During the period from mid-1987 through late 1999, we had few or no employees.
Our operating activities were limited and were largely administered personally
by our former Chairman, Donald R. Hutton. 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 time.

         If we are unable to protect our intellectual property, our competitive
position would be adversely affected. We rely on patent protection, as well as
trademark and copyright law, trade secret protection and confidentiality
agreements with our employees and others to protect our intellectual property.
Despite our precautions, unauthorized third parties may copy our products and
services or reverse engineer or obtain and use information that we regard as
proprietary. We have also filed patent applications and intend to file more. We
do not know if any of our intended future patents will be issued or whether we
will be successful in prosecuting any additional 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. Our means of protecting our proprietary
rights may not be adequate and third parties may infringe or misappropriate our
patents, copyrights, trademarks and similar proprietary rights. If we fail to
protect our intellectual property and proprietary rights, our business,
financial condition and results of operations would suffer. We believe that we
do not infringe upon the proprietary rights of any third party, and no third
party has asserted a patent infringement claim against us. It is possible,
however, that such a claim might be asserted successfully against us in the
future. We may be forced to suspend our operations to pay significant amounts to
defend our rights, and a substantial amount of the attention of our management
may be diverted from our ongoing business, which can materially affect our
ability to attain and maintain profitability.

         We face possible competition from large companies. The industry that we
are in is highly competitive. Although we believe that our technology is unique,
can be protected, and, if adopted, will confer benefits that will be otherwise
unavailable for some significant time, we face very large competitors with
greater resources who may adopt various strategies to block or slow our market
penetration, thereby straining our more limited resources. They may also seek to
hinder our operations through attempts to



                                       14
<PAGE>

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.

         We depend on our key personnel and may have difficulty attracting and
retaining the skilled staff we need to execute our growth plans. Our success
will be dependent largely upon the personal efforts of our 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 our business and
prospects. To execute our plans, we will need to hire and retain more staff. We
plan to increase our technical personnel in the near term. We are recruiting
personnel to meet this objective. Competition for highly skilled employees with
technical, management, marketing, sales, product development and other
specialized training is intense. We may not be successful in attracting or
retaining such qualified personnel. Specifically, we may experience increased
costs in order to attract and retain skilled employees. If we are unable to
hire, train and manage new skilled and experienced employees as needed, we would
be unable to support our planned growth and future operations.

         We face rapid technological change. The market for our products and
services is characterized by rapidly changing technologies, extensive research
and the introduction of new products and services. We believe that our future
success will depend in part upon our ability to continue to enhance our existing
products and to develop, manufacture and market new products and services. As a
result, we expect to continue to make a significant investment in engineering,
research and development. There can be no assurance that we will be able to
develop and introduce new products and services or enhance our initial intended
products and services in a timely manner to satisfy customer needs, achieve
market acceptance or address technological changes in our target markets.
Failure to develop products and services and introduce them successfully and in
a timely manner could adversely affect our competitive position, financial
condition and results of operations.

         We will need to manage growth well. We may experience substantial
growth in the size of our staff and the scope of our operations, resulting in
increased responsibilities for management. To manage this possible growth
effectively, we will need to continue to improve our operational, financial and
management information systems and to hire, train, motivate and manage a growing
number of staff. We expect to experience difficulty in filling our needs for
qualified engineers and other personnel. There can be no assurance that we will
be able to effectively achieve or manage any future growth, and our failure to
do so could delay product development cycles and market penetration or otherwise
have a material adverse effect on our financial condition and results of
operations.

         We could face information and product liability risks and may not have
adequate insurance. Because we intend to provide middleware solutions to
critical business and Internet applications, we may become the subject of
litigation alleging that our products were ineffective or disruptive in their
treatment of data, or in the compilation, processing or manipulation of critical
business information. Thus, we may become the targets of lawsuits from injured
or disgruntled businesses or other users. We do not presently carry product or
information liability or errors and omissions insurance, and although we intend
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 we
are required to defend more than a few such actions, or in the event that we
were found liable in connection with such an action, our business and operations
would be severely and materially adversely affected.

         We are dependent on new demand for our products and services. The
success of our business depends upon demand for and use of our technology,
products and services in general and the demand for additional computing power,
cost effectiveness and speed in particular. Our technology introduces a new kind
of middleware, so we may encounter substantial market resistance. In the event
sufficient demand does not develop, our business and results of operations would
be materially adversely affected. We believe that there appears to be increased
demand for computing power, cost



                                       15
<PAGE>

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 our products and services may be
materially adversely affected.

         We will need to continue our product development efforts. We believe
that our market will be characterized by increasing technical sophistication. We
also believe that our eventual success will depend on our ability to continue to
provide increased and specialized technical expertise. There is no assurance
that we will not fall technologically behind competitors with greater resources.
Although we believe that we enjoy a significant lead in our product development
and introduction, and are hopeful that our patents provide some protection, we
will likely need significant additional capital in order to continue to enjoy
such a technological lead over competitors with more resources.

         A failure to obtain additional financing could prevent us from
executing our business plan. A failure to obtain additional funding could
prevent us from continuing our business after April 2002. We anticipate that
current cash resources will be sufficient to fund our operations through April
2002 at our current rate of spending. We are currently seeking investment from
additional investors to support continued operations, although there can be no
assurance that we will be able to obtain such investment. A failure to obtain
additional funding could also prevent us from making expenditures that are
needed to allow us to hire additional personnel and continue development of the
technology. If we raise additional funds by selling equity securities, the
relative equity ownership of our existing investors could be diluted or the new
investors could obtain terms more favorable than previous investors. If we raise
additional funds through debt financing, we could incur significant borrowing
costs.

         Market acceptance of our products and services is not guaranteed. We
are at an early stage of development and our earnings will depend upon broad
market acceptance and utilization of our intended products and services. There
can be no assurance that our product and technology development efforts will
result in new products and services, or that they will be successfully
introduced.

         Future profitability is not guaranteed. We have not recognized any
operating revenues to date. We expect to begin recognizing revenues from the
sale of products and services in calendar 2002. There is no assurance that our
plans will be realized, that we will be able to generate revenues in 2002 or
that we will achieve profitability in the future.

         Limited market for our common stock. Our common stock is not listed on
any exchange and trades in the over-the-counter (the "OTC") market. As such, the
market for our common stock is limited and is not regulated by the authorities
of any exchange. Further, the price of our common stock and its volume in the
OTC market may be subject to wide fluctuations.

         We have indemnified our officers and directors. We have indemnified our
Officers and Directors against possible monetary liability to the maximum extent
permitted under Delaware law.

         Limitation on ability for control through proxy contest. Our 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
two directors out of six directors at each shareholders meeting held for that
purpose.

Item 7. Financial Statements.

            See the Consolidated Financial Statements annexed hereto.

Item 8.  Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.

         We incorporate by reference the Form 8-K filed with the SEC on January
31, 2000 and Form 8-K/A filed with the SEC on April 3, 2000, disclosing the
resignation of Jaak Olesk, CPA our former auditor.

                                       16
<PAGE>

         We incorporate by reference the Form 10-KSB filed with the SEC on March
22, 2001, disclosing our change of independent accountants from Farber & Hass,
LLP to Burr, Pilger & Mayer, LLP.

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
With Section 16(a) of the Exchange Act.

         The following table sets forth information with respect to our current
executive officers, principal employees and directors.

<TABLE>
<CAPTION>
         Name                       Age     Position

<S>                                <C>      <C>
Francis K. Ruotolo..................64      Chairman, President and Chief Executive Officer
                                            Class 3 Director, term expires in 2003

Papken S. Der Torossian.............63      Class 1 Director, term expires in 2004

John R. Gaulding....................55      Class 3 Director, term expires in 2003

Homer G. Dunn.......................61      Class 2 Director, term expires in 2002

Thomas Holt.........................56      Class 1 Director, term expires in 2004

Kenneth Ruotolo.....................41      Secretary, Chief Financial Officer and
                                            Executive Vice President of Finance and Operations

Clifford Hersh......................54      Managing Director and Chief Scientist

Jeffrey R. Spirn, Ph.D..............53      Vice President, Research and Development

Girish Mundada......................34      Vice President, Engineering
</TABLE>

Francis K. Ruotolo, Age 64
Chairman, President and Chief Executive Officer

         Frank Ruotolo became Chairman of the Board, Chief Executive Officer and
President in January 2001. Prior to that time, he was a member of the Board of
Advisors. Most recently, he was a director in the consulting practice of
Deloitte & Touche for a period of three years. From 1993 to 1998, Mr. Ruotolo
served as the President of The Futures Group. Mr. Ruotolo holds a BA degree in
English/Journalism from Northeastern University, Boston, MA, and is a member of
the Northeastern University National Council.

Papken S. Der Torossian, Age 63

         Papken S. Der Torossian joined the Company's Board of Directors in
March 2001. Mr. Der Torossian currently serves as Chairman of the Board of
Directors and Chief Executive Officer for Silicon Valley Group, Inc. (SVGI). He
joined SVGI in 1984 as President and became CEO in 1986. In 1991, Mr. Der
Torossian was appointed SVGI's Chairman of the Board. Mr. Der Torossian serves
as a director of Nanometrics Inc. since July 2001. Mr. Der Torossian holds a
B.S.M.E. degree from MIT and a M.S.M.E. degree from Stanford University.


                                       17
<PAGE>

John R. Gaulding, Age 55

         John R. Gaulding joined the Company's Board of Directors in January
2001. John R. Gaulding is a private investor and consultant in the fields of
strategy and organization. Most recently, he served as a Senior Advisor to
Deloitte Consulting specializing in e-Business strategy with responsibility for
advising such clients as Hewlett Packard, 3Com, Bergen Brunswig, Longs
Drugstores, SCE, and PG&E.

Homer G. Dunn, Age 61

         Homer G. Dunn joined the Company's Board of Directors in January 2001.
Mr. Dunn has almost 35 years of business experience encompassing sales,
marketing, product management, and consulting. At present, he is Chairman and
Founder of Nonstop Solutions Corporation, a leading provider of demand chain
optimization technology, information and services solutions to manufacturers,
wholesale distributors and retailers.

Thomas Holt, Age 56

         Thomas Holt joined the Company's Board of Directors in November 2000.
Mr. Holt is currently Vice President and CIO for Lucent's Services organization.
Mr. Holt was VP of Information Services and Chief Information Officer at
International Network Services ("INS") from May 1997 before its merger with
Lucent. He has also acted as VP of MIS and CIO at Informix and held senior
positions at Motorola after starting his career with IBM.

Kenneth Ruotolo, Age 41
Secretary, Chief Financial Officer and Executive Vice President of Finance and
Operations

         Mr. Ruotolo joined the Company in June of 2001. Before joining the
Company, Mr. Ruotolo was a founder and served as Vice President of Finance and
Operations for eStar, Inc. a content developer and syndicator. Prior to eStar,
Mr. Ruotolo was a partner for twelve years with era2, an interactive design and
internet consulting agency. Mr. Ruotolo holds a B.A. degree in Economics from
the University of California at Davis and an M.B.A. from Northeastern
University. Mr. Kenneth Ruotolo is Mr. Frank Ruotolo's son.

Clifford Hersh, Age 54
Managing Director and Chief Scientist

         Mr. Hersh joined the Company in March 1997. Previously, he was a
founder and Chief Executive Officer of Move Resources, Inc. He was also Vice
President of Engineering for Array Technologies, Inc. and Director of Advanced
Development at Genigraphics Corporation. Mr. Hersh received a bachelor degree in
mathematics from the University of California at Berkeley, and a Master of
Science degree in engineering from the Federal Institute of Technology, Zurich,
Switzerland.

Jeffrey R. Spirn, Ph.d., Age 53
Vice President, Research and Development

         Dr. Spirn joined ANTs software inc. March 2000, and became Director of
Engineering in February 2001 and was promoted Vice President of Research and
Development in September 2001. Before joining ANTs, Dr. Spirn was a software
architect at Oracle, where he worked on application server, naming, and
multithreading issues. Prior to that, he worked for Sun Microsystems and in the
HP and DEC research labs. Before his industrial career, Dr. Spirn was a Computer
Science Professor at Brown and Penn State Universities, and held visiting
positions at Bell Laboratories and the University of Hawaii. During this period,
he published one book and many technical articles on network and operating
system design and performance modeling. Dr. Spirn holds a Ph.D. in Electrical
Engineering/Computer Science from Princeton University, and a B.S. in Electrical
Engineering from M.I.T.

                                       18
<PAGE>

Girish Mundada, Age 34
Vice President, Engineering

          Mr. Mundada joined the Company in September 2001. Prior to joining
ANTs, he was a Senior Vice President and General Manager at NetSol
International. He has also held positions at Informix Corporation, including
those in development, management and senior management. Mr. Mundada completed a
bachelor degree in Computer Science from the University of Pune, India, and
obtained an MBA from the University of California at Berkeley.

         Our Bylaws provide that the Board of Directors is divided into three
classes, each nearly as equal in number as possible, so that each director will
serve for three years, with one class of directors being elected each year. The
Board is currently comprised of two Class 1 Directors, one Class 2 Director and
two Class 3 Directors. The terms of the Class 1, Class 2 and Class 3 Directors
expire at the end of each respective three-year term and upon the election and
qualification of successor directors at annual meetings of stockholders held at
the end of each fiscal year. The term of the present Class 2 Director ends at
the annual meeting of the stockholders for the year ending December 31, 2001.

Board Committees

         The Company has an Audit Committee, which consists of Thomas Holt and
John R. Gaulding. Dr. Clive G. Whittenbury resigned as a Director of the Company
and a member of the Audit Committee on March 3, 2002. This committee, among
other things, reviews the annual audit with the Company's independent
accountants. In addition, the audit committee will make annual recommendation to
the Board of Directors for the appointment of auditors for the following fiscal
year.

         The Company also has a Compensation Committee, which was formed in June
2001 and consists of Homer G. Dunn and John R. Gaulding. Mr. Richard Lee
resigned as a Director of the Company and a member of the Compensation Committee
on November 27, 2001. This committee, among other things, reviews the
compensation policies applicable to our senior officers.

Compliance with Section 16(a) of the Exchange Act of 1934

         To the best of our knowledge, all our officers and directors appointed
in fiscal year 2001 timely filed a Form 3 to report their appointment to our
Board of Directors or as an officer of our Company. Additionally, to the best of
our knowledge all of our officers and directors who were granted options by us
reported such grants on a Form 5 filed for the fiscal year ending December 31,
2001. Such grants were approved by our Board of Directors. To the best of our
knowledge, Mr. Donald Hutton did not file a Form 4 to report the exercise of a
warrant to purchase 500,000 shares of common stock on or about December 9, 2001,
but reported such exercise on a Form 5 filed for the fiscal year ending December
31, 2001.



                                       19
<PAGE>



Item 10.  Executive Compensation

Summary Compensation Table

         This Table sets forth the annual compensation for the three most recent
completed fiscal years and the transition period from May 1, 2000 to December
31, 2000 (the "Transition Period") of the named officers who were serving as
executive officers during the last completed fiscal year or at the end of the
last completed fiscal year.


<TABLE>
<CAPTION>
                                   Annual compensation                                    Long term compensation
                         ----------------------------------------------------------------------------------------------------
                                                                                 Award                      Payouts
                                                                     --------------------------------------------------------

                                                                                      Securities
Name and principal                                      Other Annual    Restricted    underlying      LTIP     All other
position                Year        Salary     Bonus    compensation  stock award(s) options/SARs    payouts  compensation
-----------------------------------------------------------------------------------------------------------------------------
<S>                     <C>         <C>     <C>          <C>            <C>             <C>           <C>      <C>
                                             400,000
Francis K. Ruotolo (2)   2001      $362,473  $  (7)                                     982,500
Chief Executive Officer  2000(1)       -         -           -              -            25,000        -           -
President and Chairman   2000          -         -           -              -              -           -           -
of the Board             1999          -         -           -              -              -           -           -

John H. Williams (3)     2001      $184,491   $10,000        -              -           200,000        -           -
Former Chief Executive   2000(1)    $66,666      -           -              -           360,000        -      $20,382(4)
Officer and Executive    2000          -         -           -              -              -           -      $10,400(4)
Vice President, Quality  1999          -         -           -              -              -           -           -
Assurance and
Operations


Clifford Hersh  (5)      2001      $200,000   $10,000        -              -           144,000        -           -
Executive Vice           2000(1)   $133,333      -           -              -           120,000        -           -
President and            2000      $200,000      -           -              -              -           -           -
Chief Scientist          1999          -         -           -              -           200,000        -           -

Kenneth Ruotolo (5)      2001      $106,666      -           -              -           239,320               $61,600(4)
Secretary, Chief         2000(1)       -         -           -              -              -           -           -
Financial Officer and    2000          -         -           -              -              -           -           -
Executive Vice           1999          -         -           -              -              -           -           -
President of Finance
and Operations

Jeff Spirn (5)           2001      $155,833   $2,186         -              -            60,000        -           -
Vice President,          2000(1)       -         -           -              -            60,000        -           -
Research                 1999          -         -           -              -               -          -           -
and Development


Joan Cronin (6)          2001       $43,976   $10,000        -              -           150,000        -           -
Former Executive Vice    2000(1)   $133,333      -           -              -           360,000        -           -
President, Human         2000      $200,000      -           -              -              -           -           -
Resources                1999          -         -           -              -              -           -           -
</TABLE>

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


                                       20
<PAGE>

(1) Represents the Transition Period from May 1, 2000 to December 31, 2000.
(2) Mr. Frank Ruotolo joined the Company on January 8, 2001. On October 1, 2001,
he voluntarily took a 30% pay cut. On March 16, 2002, he voluntarily took a
further 70% pay cut, bringing his salary to 21% of its original amount.
(3) Dr. Williams served as interim Chief Executive Officer from December 12,
2000 to January 8, 2001.
(4) Represents compensation for consulting services rendered by Dr. Williams and
Mr. Kenneth Ruotolo before they became employees of the Company.
(5) On October 1, 2001, Mr. Clifford Hersh, Mr. Jeff Spirn and Mr. Kenneth
Ruotolo each voluntarily took a 20% pay cut. Subsequently, on March 16, 2002:
Mr. Clifford Hersh voluntarily took a further 92% pay cut, bringing his salary
to 6% of its original amount, Mr. Jeff Spirn voluntarily took a further 90% pay
cut, bringing his salary to 8% of its original amount and Mr. Kenneth Ruotolo
voluntarily took a further 50% pay cut, bringing his salary to 40% of its
original amount.
(6) Ms. Cronin resigned on March 2, 2001.
(7) Represents a sign-on bonus paid to Mr. Francis K. Ruotolo on or about
January 8, 2001.

Option/SAR Grants in the Last Fiscal Year

         The following table sets forth certain information concerning grants of
options and warrants to purchase shares of Common Stock of the Company made
during the last completed fiscal year to the executive officers named in the
Summary Compensation Table.

<TABLE>
<CAPTION>
Name                          Number of         Percent of total        Per share         Expiration date
                              securities        options/ SARs granted   exercise price
                              underlying        to employees in         (2)
                              options/ SARs     fiscal year (1)
                              granted

<S>                                 <C>              <C>                  <C>             <C>
Francis K. Ruotolo                  750,000          34.98                $2.75           01/08/2011
Francis K. Ruotolo (3)              155,000           7.23                $2.00           11/28/2011
Francis K. Ruotolo (3)               77,500           3.61                $2.00           10/03/2011
John H. Williams                    200,000           9.32                $2.75           12/31/2002
Kenneth Ruotolo                     175,000           8.16                $3.18           06/21/2011
Kenneth Ruotolo (4)                  30,000           1.39                $2.91           02/06/2011
Kenneth Ruotolo (3)                  17,500           0.81                $2.00           10/03/2011
Kenneth Ruotolo (3)                  17,500           0.81                $2.00           11/28/2011
Kenneth Ruotolo (5)                  10,000           0.46                $2.75           01/08/2011
Clifford Hersh (3)                   72,000           3.35                $2.00           10/03/2011
Clifford Hersh (3)                   72,000           3.35                $2.00           11/28/2011
Jeff Spirn                           40,000           1.86                $2.91           02/21/2011
Jeff Spirn (3)                       10,000           0.46                $2.00           10/03/2011
Jeff Spirn (3)                       10,000           0.46                $2.00           11/28/2011
Joan Cronin                         150,000           6.99                $2.75           05/28/2002
</TABLE>

(1) During the fiscal year ended December 31, 2001, the Company granted to its
employees options covering 2,143,690 shares of Common Stock. All options granted
are immediately exercisable, subject to the Company's right to repurchase the
unvested shares.
(2) The exercise price is equal to the closing sale price of the Common Stock of
the Company traded on the Over the Counter Bulletin Board on the grant date.
(3) These Options were granted in connection with Mr. Francis K. Ruotolo's 30%
pay cut and Mr. Clifford Hersh, Mr. Kenneth Ruotolo and Mr. Jeff Spirn's 20% pay
cut. Such Options are fully vested as of the date of filing of this report.
(4) Represents consideration granted in connection with consulting services
rendered by Mr. Ruotolo before he became an employee of the Company. Mr. Ruotolo
forfeited 10,020 options when he became an employee of the Company, he retains
ownership of 19,980 options.

                                       21
<PAGE>

(5) Represents consideration granted in connection with consulting services
rendered by Mr. Ruotolo before he became an employee of the Company. Mr. Ruotolo
forfeited 660 options when he became an employee of the Company, he retains
ownership of 9,340 options.

Option/SAR Exercises in the Last Fiscal Year

         The following table sets forth certain information concerning the
exercise of options and warrants to purchase shares of Common Stock of the
Company made during the last completed fiscal year by the executive officers
named in the Summary Compensation Table.

<TABLE>
<CAPTION>
Name                Shares         Value Realized   Number of Securities            Value of unexercised
                    Acquired on                     underlying unexercised       in-the-money options/SARs
                    Exercise                        options/SARs at FY-end               at FY-end
                                                    (#)                         ($)exercisable/unexercisable
                                                    exercisable/unexercisable
<S>                  <C>              <C>                 <C>                       <C>

Joan Cronin (1)       3,000            $8,250              384,500 / 0                 $0.00 / $0.00

(1)  Ms. Cronin resigned on March 2, 2001 and exercised her option on July 25, 2001.
</TABLE>


Director Compensation

         Directors who are employees of our Company do not receive any
compensation for service on the Board. We do not currently pay any cash
compensation to non-employee directors. We generally grant options or warrants
to purchase up to 75,000 shares of Common Stock to our non-employee directors,
subject to a two-year vesting schedule. We paid consulting fees in the amount of
$1,750 to Richard Lee for consulting services rendered in 2001.

Separation Agreement

         On January 8, 2001, we entered into a Separation Agreement with Mr.
Francis K. Ruotolo pursuant to which we agreed to pay Mr. Ruotolo his salary for
a period of six months following the termination of his employment in the event
Mr. Ruotolo terminates his employment for Good Cause or in the event we
terminate Mr. Ruotolo's employment without Cause. We also agreed to continue to
pay Mr. Ruotolo his salary for a period of 24 months in the event of a Corporate
Transaction (a merger or acquisition in which we are not the surviving entity,
the sale of all or substantially all of our assets, or any reverse merger in
which we remain the surviving entity) where the consideration received by us is
less than five dollars ($5.00) per share on a full dilution and full conversion
basis and where the successor company does not offer Mr. Ruotolo a position of
similar title, office and responsibilities and equal salary, to the position
held and salary received by Mr. Ruotolo with us immediately prior to such
Corporate Transaction. Under this Agreement Good Cause is defined as (i) a
decrease in Mr. Ruotolo's compensation of greater than twenty-five percent (25%)
of his compensation (x) immediately prior to such decrease or (y) in the
aggregate over a period not exceeding two years (not including any decrease in
compensation that is applied to each of our executive officers equally), (ii) a
material change in Mr. Ruotolo's corporate position, title or responsibilities,
or (iii) the relocation of our principal offices more than 80 miles from their
present location without Mr. Ruotolo's consent. Termination of Mr. Ruotolo's
employment is deemed to be "for Cause" in the event that Mr. Ruotolo (i)
violates any material provisions of the Letter Agreement by which he was
employed, the Separation Agreement or our standard form of Proprietary
Information and Inventions Agreement, (ii) is charged with or indicted for a
felony, any criminal act other than minor traffic violations, or (iii) commits
any act of willful misconduct, gross negligence, or dereliction of his duties
under the Separation Agreement.

                                       22
<PAGE>

Item 11.  Security Ownership of Certain Beneficial Owners and Management.

Security Ownership by Beneficial Owners

         The following table sets forth, as of March 11, 2002, information
regarding ownership of our common stock by any person or entity, known by us to
be the beneficial owner of more than five percent of the outstanding shares of
common stock. The percentages are calculated on the basis of the amount of
outstanding shares of Common Stock on March 11, 2002 which is 17,525,651 plus,
for each person, any securities that person has the right to acquire within 60
days following March 11, 2002 pursuant to options or warrants.

<TABLE>
<CAPTION>
                                                            Amount and Nature
                                                              of Beneficial      Percent of
        Name and Address of Beneficial Owner                    Ownership          Class
        ------------------------------------                    ---------          -----
<S>                                                              <C>              <C>
Donald R. Hutton, 10995 Boas Road
Sidney, B. C. Canada V8L 5J1.......................            3,602,500 (1)       20.55

Alison B. Hicks, 10995 Boas Road
Sidney, B. C. Canada V8L 5J1.......................            3,602,500 (2)       20.55

Whistler Design, 94 Dowdeswell Street
Box N-75-71, Nassau................................            2,502,500           14.28
</TABLE>

------------------------------
(1) Includes 700,000 shares of Common Stock owned by Mr. Hutton, 2,502,500
shares of Common Stock in the name of Whistler Design, controlled by Mr. Hutton,
400,000 shares of Common Stock in the name of Ms. Alison B. Hicks, Mr. Hutton's
spouse; does not include 90,000 shares of Common Stock which Mr. Hutton held in
joint tenancy with Ms. Josephine C. Hutton and for which Mr. Hutton has
disclaimed any beneficial interest in or ownership of such shares.
(2) Includes 400,000 shares of Common Stock owned by Ms. Hicks, 2,502,500 shares
of Common Stock in the name of Whistler Design, controlled by Donald R. Hutton,
Ms. Hicks' spouse, 700,000 shares of Common Stock in the name of Mr. Hutton;
does not include 90,000 shares of Common Stock which Mr. Hutton held in joint
tenancy with Ms. Josephine C. Hutton and for which Mr. Hutton has disclaimed any
beneficial interest in or ownership of such shares.

Security Ownership by Directors and Executive Officers

         The following table sets forth certain information regarding the
beneficial ownership of the shares of Common Stock as of March 11, 2002, by each
of our directors and executive officers. The table also shows the beneficial
ownership of our stock by all directors and executive officers as a group. The
table includes the number of shares subject to outstanding options and warrants
to purchase shares of Common Stock. The percentages are calculated on the basis
of the amount of outstanding shares of Common Stock on March 11, 2002 which is
17,525,651 plus, for each person, any securities that person has the right to
acquire within 60 days following March 11, 2002 pursuant to options or warrants.


                                       23
<PAGE>


<TABLE>
<CAPTION>
                                                                          Shares of
                                                                          Common
                         Name and Address of Beneficial Owner (1)         Stock
                                                                          Beneficially    Percent
                                                                          Owned           of Class
                                                                          -----           --------
<S>                                                                        <C>             <C>
Directors and Nominees for Director
   Francis K. Ruotolo.................................................    1,007,500 (2)     5.44
   Thomas Holt........................................................       75,000 (3)        *
   John R. Gaulding...................................................       75,000 (4)        *
   Homer G. Dunn......................................................       75,000 (5)        *
   Papken S. Der Torossian............................................       75,000 (6)        *

Executive Officers
   Clifford Hersh.....................................................      864,000 (7)     4.70
   Jeffrey Spirn......................................................      120,000 (8)        *
   Kenneth Ruotolo....................................................      239,320 (9)     1.35
   8 directors and executive officers as a group......................    2,530,820        12.62
</TABLE>

------------------------
     * means less than 1%

     (1) Unless otherwise indicated, the address of each director and officer is
     c/o ANTs software inc., 801 Mahler Road, Suite G, Burlingame, CA 94010.
     (2) Includes a Warrant to purchase up to 25,000 shares of Common Stock, an
     Option to purchase up to 750,000 shares of Common Stock, an Option to
     purchase up to 155,000 shares of Common Stock, and an Option to purchase up
     to 77,500 shares of Common Stock. Mr. Ruotolo can acquire 25,000 shares
     from his Warrant and 763,750 shares from his Options in the next 60 days.
     Mr. Ruotolo may also purchase the remaining shares under his Option at any
     time during the next 60 days, however such purchase would be subject to our
     right to repurchase unvested shares.
     (3) Includes an Option to purchase up to 50,000 shares of Common Stock and
     a second Option to purchase up to 25,000 shares of Common Stock. Mr. Holt
     can acquire 39,583 shares from his first Option and 17,708 shares from his
     second Option in the next 60 days. Mr. Holt may also purchase the remaining
     shares under his Options at any time during the next 60 days, however such
     purchase would be subject to our right to repurchase unvested shares. The
     address of Mr. Holt is 203 Montclair Road, Los Gatos, CA 95032.
     (4) Includes an Option to purchase up to 75,000 shares of Common Stock. Mr.
     Gaulding can acquire 53,125 shares from his Option in the next 60 days. Mr.
     Gaulding may also purchase the remaining shares under his Option at any
     time during the next 60 days, however such purchase would be subject to our
     right to repurchase unvested shares. The address of Mr. Gaulding is 115
     Margarita Dr., San Rafael, CA 94901.
     (5) Includes an Option to purchase up to 75,000 shares of Common Stock. Mr.
     Dunn can acquire 53,125 shares from his Option in the next 60 days. Mr.
     Dunn may also purchase the remaining shares under his Option at any time
     during the next 60 days, however such purchase would be subject to our
     right to repurchase unvested shares. The address of Mr. Dunn is Non Stop
     Solutions, 235 Montgomery Street, 13th Floor, San Francisco, CA 94014.

                                       24
<PAGE>

     (6) Includes an Option to purchase up to 75,000 shares of Common Stock. Mr.
     Der Torossian can acquire 46,875 shares from his Option in the next 60
     days. Mr. Der Torossian may also purchase the remaining shares under his
     Option at any time during the next 60 days, however such purchase would be
     subject to our right to repurchase unvested shares. The address of Mr. Der
     Torossian is Silicon Valley Group, Inc., 101 Metro Drive, Suite 400, San
     Jose, CA 95110.
     (7) Includes two fully vested Warrants to purchase an aggregate of up to
     600,000 shares of Common Stock, an Option to purchase up to 120,000 shares
     of Common Stock, a second Option to purchase up to 72,000 shares of Common
     Stock, and a third Option to purchase up to 72,000 shares of Common Stock.
     Mr. Hersh may acquire 600,000 shares of Common Stock under his Warrants in
     the next 60 days. Mr. Hersh may also acquire 203,999 shares of Common Stock
     under his Options in the next 60 days. Mr. Hersh may also purchase the
     remaining shares under his Option at any time during the next 60 days,
     however such purchase would be subject to our right to repurchase unvested
     shares.
     (8) Includes a Warrant to purchase up to 50,000 shares of Common Stock, an
     Option to purchase up to 10,000 shares of Common Stock, a second Option to
     purchase up to 40,000 shares of Common Stock, a third Option to purchase up
     to 10,000 shares of Common Stock, and a forth Option to purchase up to
     10,000 shares of Common Stock. Mr. Spirn may acquire 34,722 shares of
     Common Stock under his Warrant in the next 60 days. Mr. Spirn may also
     acquire 41,388 shares of Common Stock under his Option in the next 60 days.
     Mr. Spirn may also purchase the remaining shares under his Options at any
     time during the next 60 days, however such purchase would be subject to our
     right to repurchase unvested shares.
     (9) Includes an Option to purchase up to 10,000 shares of Common Stock (of
     which 660 have been forfeited), a second Option to purchase up to 30,000
     shares of Common Stock (of which 10,020 have been forfeited), a third
     Option to purchase up to 175,000 shares of Common Stock, a forth Option to
     purchase up to 17,500 shares of Common Stock, and a fifth Option to
     purchase up to 17,500 shares of Common Stock. Mr. Ruotolo may acquire
     117,792 shares of Common Stock under his Options. Mr. Ruotolo may also
     purchase the remaining shares under his Options at any time during the next
     60 days, however such purchase would be subject to our right to repurchase
     unvested shares.

Item 12.  Certain Relationships and Related Transactions.

         On January 11, 2001, we entered into an agreement with Mr. Frederick D.
Pettit, our former President and Chief Executive Officer, in connection with
which we agreed to forgive $45,000 (one fifth) plus interest, of a note
receivable by Mr. Pettit on August 4, 2001 and on each 1 year anniversary
thereof, until the entire amount of principal and interest have been discharged,
and we agreed to pay Mr. Pettit the sum of $300,000, payable $75,000 per year
for four (4) years on August 4 of each year.

Item 13.  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-KSB filed on March 22, 2001, 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.
              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

                                       25
<PAGE>

                       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.
              23.1     Letter of Consent from Auditor Burr, Pilger & Mayer, LLP.
              23.2     Letter of Consent from Auditor Farber & Hass, LLP.

         (b)  Reports on Form 8-K

         On November 13, 2001, we filed a report on Form 8-K to disclose that
our counsel received a letter from the staff of the SEC that stated that the SEC
did not intend to bring enforcement action against us in connection with the
staff's March 8, 2001 Wells letter. The Wells letter is identified in our Form
10-KSB filed with the SEC on March 22, 2001.

SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf as of the 28th day of
March 2002 by the undersigned, thereunto duly authorized.

                                          ANTs software inc.



                                          By /s/ Francis K. Ruotolo
                                              ------------------------
                                          Francis K. Ruotolo, Chairman,
                                          Chief Executive Officer and President


         In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities indicated as of March 28, 2002.


                                          By /s/ Francis K. Ruotolo
                                              ------------------------
                                          Francis K. Ruotolo, Chairman,
                                          Chief Executive Officer and President


                                          Date     March 28, 2002
                                              ------------------------

                                       26
<PAGE>



                                          By /s/ Kenneth Ruotolo
                                            ---------------------------------
                                          Kenneth Ruotolo, Secretary and
                                          Chief Financial Officer


                                          Date     March 28, 2002
                                            ---------------------------------


                                          DIRECTORS


                                          By /s/ Francis K. Ruotolo
                                            ---------------------------------
                                          Francis K. Ruotolo, Chairman of the
                                          Board Of Directors


                                          Date     March 28, 2002
                                            ---------------------------------


                                          By /s/ Papken S. Der Torossian
                                            ---------------------------------
                                          Papken S. Der Torossian, Director

                                          Date      March 28, 2002
                                            ---------------------------------


                                          By  /s/ Homer G. Dunn
                                            ---------------------------------
                                          Homer G. Dunn, Director


                                          Date      March 28, 2002
                                            ---------------------------------


                                          By /s/ John R. Gaulding
                                            ---------------------------------
                                          John R. Gaulding, Director


                                          Date         March 28, 2002
                                            ---------------------------------


                                          By /s/ Thomas Holt
                                            ---------------------------------
                                          Thomas Holt, Director


                                          Date         March 28, 2002
                                            ---------------------------------



                                       27
<PAGE>




                               ANTs Software Inc.
                          (Formerly ANTs Software.com)
                         -------------------------------





                                    CONTENTS


                                                                    Page

Independent Auditors' Report                                          F-2

Balance Sheets                                                        F-3

Statements of Operations                                              F-4

Statements of Stockholders' Equity (Deficit)                          F-5

Statements of Cash Flows                                              F-6

Notes to Financial Statements                                         F-7-16





                                      F-1
<PAGE>



                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders of
ANTs software inc.

We have audited the balance sheet of ANTs software inc. (formerly ANTs
Software.com) (the Company), a Delaware corporation, as of December 31, 2001 and
the related statements of operations, stockholders' equity, and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based upon our audit. The financial statements of the
Company as of December 31, 2000 were audited by other auditors, whose report
dated February 9, 2001 expressed an unqualified opinion on those statements.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2001, and the
results of its operations and its cash flows for the year then ended in
conformity with accounting standards generally accepted in the United States of
America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 13 to the
financial statements, the Company has incurred losses since inception and
expects to fully utilize its existing cash prior to December 31, 2002. These
conditions raise substantial doubt about its ability to continue as a going
concern. Management's plans regarding those matters are described in Note 13.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.




Burr, Pilger & Mayer LLP
San Francisco, California
March 6, 2002
(except for Note 14, as to
which the date is March 26, 2002)




                                      F-2
<PAGE>


                               ANTS SOFTWARE INC.
                          (FORMERLY ANTS SOFTWARE.COM)
                                 BALANCE SHEETS
                           December 31, 2001 and 2000
                                  ------------


                                     ASSETS


                                                  December 31,     December 31,
                                                      2001             2000
                                                  --------------   -------------
Current assets:
 Cash                                                $ 734,319      $ 2,609,084
 Interest receivable                                         -            4,860
 Prepaid insurance                                     139,208          102,947
 Prepaid expenses                                       22,931                -
                                                   ------------     -----------
  Total current assets                                 896,458        2,716,891
                                                   ------------     -----------


Property and equipment, net                            455,753          526,204
                                                   ------------     -----------
Other assets - security deposits                         5,100            3,700
                                                   ------------     -----------
  Total assets                                     $ 1,357,311      $ 3,246,795
                                                   ============     ===========


                             LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Accounts payable                                     $ 44,443        $ 174,891
 Accrued expenses                                       66,598           56,161
 Accrued legal fees                                    112,199          258,742
 Premium financing note payable                              -           29,981
 Note payable - former officer, current portion         75,000                -
 Other current liability                               125,000                -
                                                       --------         -------
  Total current liabilities                            423,240          519,775
                                                       --------         -------
Long-term note payable - former officer, net of
     current portion                                   150,000                -
                                                       --------         -------
<TABLE>
<S>                                                                          <C>               <C>

Commitment and contingencies

Stockholders' equity:
 Common stock, $0.0001 par value; 100,000,000 shares authorized;
  16,731,552 shares issued and outstanding at December 31, 2001.
  $0.001 par value; 100,000,000 shares authorized; 13,082,038 shares
  issued and outstanding at December 31, 2000                                        1,674           13,082
 Common stock subscribed - 925,000 shares at December 31, 2000                           -        1,815,000
 Treasury stock, at cost                                                                 -         (121,078)
 Notes receivable from officer for stock purchases                                (135,000)        (180,000)
 Additional paid-in capital                                                     24,328,549       18,804,974
 Accumulated deficit                                                           (23,411,152)     (17,604,958)
                                                                               ------------     ------------
  Total stockholders' equity                                                       784,071        2,727,020
                                                                               -----------      -----------
Total liabilities and stockholders' equity                                     $ 1,357,311      $ 3,246,795
                                                                               ===========      ===========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-3

<PAGE>



                               ANTS SOFTWARE INC.
                          (FORMERLY ANTS SOFTWARE.COM)
                            STATEMENTS OF OPERATIONS
                      for the year ended December 31, 2001,
                    the eight months ended December 31, 2000,
                        and the year ended April 30, 2000
                                  ------------


<TABLE>
<S>                                                  <C>             <C>                <C>

                                                     December 31,     December 31,        April 30,
                                                        2001             2000              2000
                                                     ------------    --------------    --------------
Selling, general and administrative expenses          $3,688,927        $2,983,638       $ 1,570,983
Research and development expenses                      2,185,321         1,155,751           261,973
Loss on lease termination                                      -           636,480                 -
Compensation expense - warrant reprice                         -         3,767,654                 -
                                                     ------------      ------------      ------------
  Loss from operations                                (5,874,248)       (8,543,523)       (1,832,956)
                                                     ------------      ------------      ------------

Other income:

 Interest income                                          74,095            84,856            90,137
 Interest expense                                        (10,819)          (10,164)             (173)
 Other income                                              4,778                 -                 -
                                                     ------------      -----------      ------------
  Other income, net                                       68,054            74,692            89,964
                                                     ------------      ------------     -------------
  Net loss                                           $(5,806,194)      $(8,468,831)     $ (1,742,992)
                                                     ============      ============     =============

Basic and diluted net loss per common share          $     (0.39)      $     (0.67)     $      (0.15)
                                                     ============      ============     =============


Shares used in computing basic and diluted net
 loss per share                                       15,028,976        12,723,039        11,576,673
                                                     ============      ============     =============

</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-4

<PAGE>


                               ANTS SOFTWARE INC.
                          (FORMERLY ANTS SOFTWARE.COM)
                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                    for the year ended December 31, 2001, the
                      eight months ended December 31, 2000,
                        and the year ended April 30, 2000
                                  ------------

<TABLE>
<S>                                                          <C>             <C>         <C>          <C>                  <C>

                                                                                                      Notes Receivable
                                                                                         Common        from Officers
                                                                  Common Stock            Stock           for Stock       Treasury
                                                              -----------------------    ------------------------------------------
                                                               Shares         Amount     Subscribed       Purchases         Stock
                                                              -----------    ----------  ------------ ---------------- ------------

Ending balance, April 30, 1999                                 10,179,665    $ 10,180             -                -            -
                                                              ------------   ----------  ------------ ---------------- ------------

Proceeds from private placements                                1,911,000       1,911             -                -            -
Stock subscriptions                                                     -           -     $ 119,500                -            -
Stock issued in exchange for notes                                450,000         450             -       $ (337,500)           -
Net loss                                                                -           -             -                -            -
                                                              -----------     -------      --------   --------------      ---------
Ending balance, April 30, 2000                                 12,540,665      12,541       119,500         (337,500)           -
                                                              -----------     -------      --------   ----------------    ---------

Proceeds from private placements                                  233,332         233             -                -            -
Subscribed stock issued                                            29,005          29      (119,500)               -            -
Warrants exercised                                                289,440         289             -                -            -
December 2000 private placement                                         -           -     1,815,000                -            -
Fair value of warrant reprice                                           -           -             -                -            -
Officer note exchanged for common stock                                 -           -             -           45,000            -
Former officer note repayment                                     (10,436)        (10)            -          112,500    $(121,078)
Other - fractional shares                                              32           -             -                -            -
Net loss                                                                -           -             -                -            -
                                                              -----------     -------    ----------   ---------------   ----------
Ending balance, December 31, 2000                              13,082,038      13,082     1,815,000         (180,000)    (121,078)
                                                              -----------     -------    ----------   ----------------  ----------


Proceeds from private placements                                2,150,014         215             -                -            -
Subscribed stock issued                                           925,000          93    (1,815,000)               -            -
Warrants exercised                                                107,000          11             -                -            -
Options exercised through cash consideration                        3,000           -             -                -            -
Options exercised through non-cash consideration                   27,000           3             -                -            -
Reclassification of treasury stock to common stock                      -           -             -                -      121,078
Officer note forgiveness                                                -           -             -           45,000            -
Change of par value on common stock                                     -     (11,774)            -                -            -
Common stock issued in settlement of lawsuit                      400,000          40             -                -            -
Stock issued in settlement of note payable to former officer       37,500           4             -                -            -
Equity compensation recognized on vested portion of
 nonemployee option grants                                              -           -             -                -            -
Net loss                                                                -           -             -                -            -
                                                              -----------     --------- -----------   --------------    ----------
Ending balance, December 31, 2001                              16,731,552     $ 1,674             -       $ (135,000)           -
                                                              ===========     ========= ===========   ===============   ==========
</TABLE>



  Additional       Accumulated
Paid-in Capital      Deficit          Total
----------------  ---------------  -------------

$   7,016,627      $ (7,393,135)    $ (366,328))
--------------     -------------    ------------

    5,883,490                -       5,885,401
            -                -         119,500
         (450)               -        (337,500)
            -       (1,742,992)     (1,742,992)
 ------------     ---------------   -----------
   12,899,667       (9,136,127)      3,558,081
 ------------     ---------------   -----------

    1,732,267                -       1,732,500
      119,482                -              11
      286,399                -         286,688
            -                -       1,815,000
    3,767,654                -       3,767,654
            -                -          45,000
            -                -          (8,588)
         (495)               -            (495)
            -        (8,468,831)    (8,468,831)
 ------------      -------------    -----------
   18,804,974      (17,604,958)      2,727,020
 ------------      -------------   ------------

    2,765,535                -       2,765,750
    1,814,907                -               -
      120,989                -         121,000
        8,250                -           8,250
       61,797                -          61,800
     (121,078)               -               -
            -                -          45,000
       11,774                -               -
      296,421                -         296,461
       74,996                -          75,000

      489,984                -         489,984

            -        (5,806,194)    (5,806,194)
  -----------     -------------    -----------
  $24,328,549     $ (23,411,152)     $ 784,071
  ============    ==============   ===========


   The accompanying notes are an integral part of these financial statements.

                                      F-5

<PAGE>



                               ANTS SOFTWARE INC.
                          (FORMERLY ANTS SOFTWARE.COM)
                            STATEMENTS OF CASH FLOWS
                      for the year ended December 31, 2001
                    the eight months ended December 31, 2000
                        and the year ended April 30, 2000
                                  ------------

<TABLE>
<S>                                                                            <C>               <C>             <C>
                                                                                December 31,     December 31,      April 30,
                                                                                    2001             2000            2000
                                                                                --------------   -------------   --------------
Cash flows from operating activities:
 Net loss                                                                         $(5,806,194)    $(8,468,831)     $(1,742,992)
 Adjustments to reconcile net loss to net cash used in operating activities:
  Depreciation                                                                        127,375          59,732            2,835
  Common stock issued in settlement of litigation                                     137,235               -                -
  Stock compensation from exercise of employee options                                 61,800               -                -
  Gain on sale of fixed assets                                                         (2,985)              -                -
  Forgiveness of notes and interest receivable from officer for stock purchases        64,260          36,412                -
  Compensation expense recognized in form of notes
   payable to former officer                                                          300,000               -                -
  Compensation expense on options granted to nonemployees                             489,984               -                -
  Abandoned deposit on lease termination                                                    -         208,098                -
  Compensation expense recognized on reprice of warrants                                    -       3,767,654                -
 Changes in operating assets and liabilities:
  Prepaid expenses and interest receivable                                            (73,592)        223,473         (281,328)
  Accounts payable, accrued expenses and other current liabilities                      4,989         154,343           95,313
  Accrued legal fees                                                                   12,683        (142,240)               -
  Security deposits                                                                    (1,400)             -                 -
                                                                                   -----------     -----------      -----------
Net cash used in operating activities                                              (4,685,845)     (4,161,359)      (1,926,172)
                                                                                   -----------     -----------      -----------

Cash flows from investing activities-purchase of property and equipment, net          (53,939)       (474,758)        (114,013)
                                                                                   -----------     -----------      -----------
Cash flows from financing activities:
 Proceeds from private placements                                                   2,765,750       3,547,500        5,667,401
 Cash proceeds from exercise of warrants                                              121,000         286,688                -
 Cash proceeds from exercise of options                                                 8,250               -                -
 Payments on premium financing notes payable                                          (29,981)       (231,769)               -
 Other - fractional shares                                                                 -             (484)               -
                                                                                   ----------      -----------     -----------
  Net cash provided by financing activities                                         2,865,019       3,601,935        5,667,401
Net (decrease) increase in cash                                                    (1,874,765)     (1,034,182)       3,627,216
                                                                                   -----------     -----------     -----------


Cash at beginning of year                                                          2,609,084       3,643,266            16,050
                                                                                   ----------      ----------      -----------
Cash at end of year                                                               $  734,319      $2,609,084       $ 3,643,266
                                                                                  ===========     ===========      ===========


Supplemental disclosures of cash flow information:

  Cash paid during the year for interest                                          $   10,819      $   10,164      $         -
                                                                                  ===========     ==========      ===========

</TABLE>


Noncash financing activity:

In August 2001, the Company issued 37,500 shares of stock and a warrant to
purchase 37,500 shares of stock as cancellation of the $75,000 payment due to a
former officer. (See Note 2).

In February 2001, the Company issued 400,000 shares of stock, which reduced
accrued legal fees by $159,226, as settlement of a lawsuit claim.

In July 2000, the Company accepted 10,436 shares of the Company's stock as
payment in full of a $112,500 note receivable due from a former officer.

In April 2000, the company entered into a note payable to a finance company for
$261,750 in insurance premiums. In 1999, the Company accepted two notes totaling
$337,500 from two Company officers. (See Note 2).

   The accompanying notes are an integral part of these financial statements.


                                      F-6
<PAGE>


                               ANTS SOFTWARE INC.
                          (formerly ANTs Software.com)
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
                                  ------------


1.     Significant Accounting Policies

         Nature of Operations

         ANTs software inc. (the Company) is a Delaware corporation
         headquartered in Burlingame, California. The Company is the successor
         to Sullivan Computer Corporation, a Delaware corporation incorporated
         in January 1979, which, in 1986 changed its name to CHoPP Computer
         Corporation. In 1997, the Company reincorporated from Delaware to
         Nevada, and in February 1999, changed its name from CHoPP Computer
         Corporation to ANTs software.com. In September 2000, the Company's
         Shareholders approved a change in the fiscal year-end from April 30 to
         December 31. In December 2000, the Company reincorporated from Nevada
         to Delaware and changed its name from ANTs software.com to ANTs
         software inc.

         The Company has developed and patented software technology that
         accelerates the speed of data access and manipulation.

         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 and liabilities and disclosure of
         contingent assets and liabilities at the date of the financial
         statements and the reported amounts of revenues and expenses during the
         reporting period. Actual results could differ from those and other
         estimates.

         Property and Equipment

         Property and equipment are carried at cost and are depreciated on the
         straight-line basis over their estimated useful lives of three to five
         years. Repairs and maintenance are expensed as incurred. When the
         assets are sold or retired, their cost and related accumulated
         depreciation are removed from the accounts with the resulting gain or
         loss reflected in the statement of operations.

         Research and Development Expenses

         Development costs incurred in the research and development of new
         software products are expensed as incurred until technological
         feasibility in the form of a working model has been established. To
         date, the Company's software development has been completed concurrent
         with the establishment of technological feasibility and, accordingly,
         all software development costs have been charged to research and
         development expense in the accompanying statements of operations.


         Income Taxes

         The Company accounts for income taxes using the asset and liability
         method. Under this method, deferred tax assets and liabilities are
         recognized for operating loss and tax credit carryforwards and for the
         future tax consequences attributable to differences between financial
         statement carrying amounts of existing assets and liabilities and their
         respective tax bases. Deferred tax assets and liabilities are measured
         using enacted tax rates expected to apply to taxable income in the
         years in which those temporary differences are expected to be recovered
         or settled. A valuation allowance is recorded to reduce the carrying
         amounts of deferred tax assets unless it is more likely than not that
         such assets will be realized.



                                      F-7
<PAGE>


                               ANTS SOFTWARE INC.
                          (formerly ANTs Software.com)
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
                                  ------------


1.     Summary of Significant Accounting Policies, continued

         Long-Lived Assets

         Long-lived assets such as property and equipment are evaluated for
         impairment when events or changes in circumstances indicate that the
         carrying amount of the assets may not be recoverable. When the
         indicators of impairment are present and the estimated undiscounted
         future cash flows from the use of these assets are less than the
         assets' carrying value, the related assets will be written down to fair
         value.

         Operating Segment Information

         The Company operates in a single industry segment, computer software.
         Substantially all of the Company's assets and employees are located at
         the corporate headquarters in Burlingame, California.

         Stock-Based Compensation

         The Company accounts for stock-based employee compensation arrangements
         in accordance with the provisions of Accounting Principles Board (APB)
         Opinion No. 25, Accounting for Stock Issued to Employees, and complies
         with the disclosure provision of (SFAS) No. 123, Accounting for
         Stock-Based Compensation. Under APB No. 25, compensation expense is
         based upon the excess of the estimated fair value of the Company's
         stock over the exercise price, if any, on the grant date.

         Basic 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. Since
         common equivalent shares outstanding during the periods were
         antidilutive, basic and diluted loss per share are the same.

         Reclassification

         Certain reclassifications have been made to the prior year financial
         statements in order for them to conform to the current year
         presentation.


         Recent Accounting Pronouncements

         In June 2001, the Financial Accounting Standards Board (FASB) issued
         SFAS No. 141, Accounting for Business Combinations. This statement
         requires the purchase method of accounting be used for all business
         combinations initiated after June 30, 2001, and establishes specific
         criteria for the recognition of intangible assets separately from
         goodwill.

         In June 2001, the FASB issued SFAS No. 142, Goodwill and Other
         Intangible Assets. Under SFAS No. 142, goodwill and intangible assets
         with an indefinite life are not amortized. Instead of amortizing
         goodwill and intangible assets deemed to have an indefinite life, the
         statement requires a test for impairment to be performed annually, or
         immediately if conditions indicate that such an impairment could exist.
         The amortization period of intangible assets with finite lives will no
         longer be limited to forty years. This statement is effective for
         fiscal years beginning after December 15, 2001, and permits early
         adoption for fiscal years beginning after March 15, 2001.



                                      F-8
<PAGE>

                               ANTS SOFTWARE INC.
                          (formerly ANTs Software.com)
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
                                  ------------



1.     Summary of Significant Accounting Policies, continued

       In August 2001, the FASB issued SFAS No. 144, "Accounting for the
       Impairment or Disposal of Long Lived Assets" which addresses financial
       accounting and reporting for the impairment and disposal of long-lived
       assets with adoption required no later than fiscal year 2003.

       The Company does not believe that any of these recent accounting
       pronouncements will have a material impact on their financial position
       or results of operations.


2.     Related Party Transactions-Note Receivable and Payable to Former Officer

       In 1999, the Company made secured loans of $112,500 and $225,000 to its
       former president. In July 2000, the Company accepted 10,436 shares of the
       Company's stock as payment in full of the $112,500 loan from this former
       officer. Concurrent with the loan of $225,000, the former president
       purchased 300,000 shares of the Company's common stock. The Company
       forgave $45,000 of the note in August 2000. In January 2001, the Company
       entered into an agreement to forgive $45,000 annually on the loan and all
       accrued interest on the loan, subject to certain accelerated terms. In
       August of 2001, the Company forgave $45,000 of the loan balance and
       $14,400 in accrued interest receivable. The balance on this note at
       December 31, 2001 and December 31, 2000 was $135,000 and $180,000
       respectively.

       The Company also agreed to pay the former officer the sum of $300,000
       payable in four $75,000 increments, starting in August, 2001 and on each
       year anniversary thereafter without interest. The aggregate amount
       payable at December 31, 2001 is $225,000. In August, 2001, the officer
       was issued 37,500 units (the Units), with each Unit consisting of one (1)
       share of common stock of the Company and a warrant to purchase one share
       at a per share price of four dollars ($4.00), exercisable until December
       31, 2001. All of these warrants expired without exercise. The Units were
       issued in lieu of the $75,000 cash payment due.

3.     Property and Equipment

       Property and equipment are summarized by major category as follows at
       December 31, 2001 and 2000:

                                                            December 31,
                                                   --------------------------
                                                      2001             2000
                                                   ----------       ---------

         Computers and software                    $  619,708      $  565,110
         Furniture and fixtures                        27,960          26,372
                                                   ----------      ----------
                                                      647,668         591,482
         Less: accumulated depreciation
              and amortization                       (191,915)        (65,278)
                                                   ----------      ----------
         Property and equipment, net               $  455,753      $  526,204
                                                   ==========      ==========

       Depreciation included in the statements of operations amounted to
       $127,375, $59,732, and $2,835 for the year ended December 31, 2001, the
       eight months ended December 31, 2000, and the year ended April 30, 2000,
       respectively.



                                      F-9
<PAGE>


                               ANTS SOFTWARE INC.
                          (formerly ANTs Software.com)
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
                                  ------------



4.     Other Current Liability

       In January 2001, the British Columbia Securities Commission (the
       Commission) requested information regarding the distribution of
       securities to British Columbia residents to ensure that such
       distributions were made in compliance with the British Columbia
       Securities Act. During this period, the Company received $125,000 from an
       individual investor who the Company believed to be a Canadian citizen for
       the exercise of 500,000 warrants. Due to the pending inquiry the Company
       was prohibited from issuing the shares until the Commission completed its
       inquiry. In October 2001, the Commission decided not to take formal
       action against the Company. As of December 31, 2001, these shares had not
       yet been issued. The balance of $125,000 is recorded as an other current
       liability at December 31, 2001. These shares were issued subsequent to
       year-end in the first quarter of 2002 at which time it was determined
       that the investor was not a Canadian citizen.


5.     Income Taxes

       The Company accounts for income taxes in accordance with SFAS 109,
       Accounting for Income Taxes. Due to the Company's loss position for the
       periods ended December 31, 2001 and 2000, there was no provision for
       income taxes during these periods.

       A valuation allowance has been recorded for the total deferred tax assets
       as a result of uncertainties regarding realization of the asset based
       upon the lack of profitability and the uncertainty of future
       profitability.

       The tax effects of significant temporary differences representing
       deferred tax assets as of December 31, 2001 and 2000 are as follows:

                                                  2001             2000
                                              ------------     ------------
       Deferred tax assets:
         Net operating loss carryforwards     $  7,237,356     $  4,936,596
         Less valuation allowance               (7,237,356)      (4,936,596)
                                              ------------     ------------
              Net deferred tax asset                     -                -
                                              ============     ============


       The Company has Federal and California net operating loss (NOL)
       carryforwards totaling approximately $19,103,000 million and $13,256,000
       million, respectively, as shown below.

       At December 31, 2001 the Company had NOL carryforwards for tax purposes
       expiring as follows:

         Year Expires                          Federal         State
         ------------                        ------------    -----------

            2004                                        -    $ 2,830,000
            2010                                        -      4,616,000
            2011                             $  6,983,000      5,810,000
            2019                                1,714,000              -
            2020                                4,596,000              -
            2021                                5,810,000              -
                                             ------------    -----------
            Total loss carryforwards         $ 19,103,000    $13,256,000
                                             ============    ===========



                                      F-10
<PAGE>


                               ANTS SOFTWARE INC.
                          (formerly ANTs Software.com)
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
                                  ------------




5.     Income Taxes, continued

       Due to the "change in ownership" provisions of the Internal Revenue Code,
       the availability of the Company's net operating loss carryforwards may be
       subject to an annual limitation in future periods. Such a change could
       substantially limit the eventual tax utilization of these carryforwards.


6.     Stockholders' Equity

       In December 2000, the Company re-incorporated from Nevada to Delaware. As
       part of the re-incorporation, the Company's common stock par value was
       changed from $0.001 to $0.0001 and the authorized common stock was
       increased from 20,000,000 to 100,000,000 shares.

       In the year ended April 30, 2000, a private offering was completed with
       the net sale of 1,911,000 units. An additional offering was completed
       with the net sale of 29,005 units. The shares were not issued until the
       eight months ended December 31, 2000. The net proceeds received on this
       offering was $5,667,401.

       In the eight months ended December 31, 2000, a private offering was
       completed with the net sale and issuance of 233,332 units. The net
       proceeds received on this offering was $1,732,500.

       A second private offering was completed during the eight months ended
       December 31, 2000 with the sale of 925,000 units at a price of $2.00 per
       unit, with each unit consisting of (i) one share of common stock, (ii) a
       warrant to purchase one share of common stock at $3.00 per share and
       exercisable until April 30, 2001, and (iii) a warrant to purchase one
       share of common stock at $4.00 per share and exercisable until August 31,
       2001. The Company paid $35,000 in commissions in connection with this
       private placement. These shares were not issued until 2001.

       In the first quarter of 2001, the first of four private offerings was
       completed with the sale of 113,500 units, at a price of $2 per unit, with
       each unit consisting of (i) one share of common stock, (ii) a warrant to
       purchase one share of common stock at $3.00 per share and exercisable
       until April 30, 2001, and (iii) a warrant to purchase one share of common
       stock exercisable until August 31, 2001. An additional 11,350 shares were
       issued in exchange for services provided in relation to the private
       offering. These shares were exchanged for stock options, which were
       exercised during the third quarter of 2001. The exercise price of these
       options was fulfilled by services previously rendered.

       In the second quarter of 2001, the second of the four private offerings
       was completed with the sale of 782,500 units, at a price of $2 per unit,
       with each unit consisting of (i) one share of common stock, and (ii) a
       warrant to purchase one share of common stock at $4.00 per share and
       exercisable until December 31, 2001. The Company paid $68,000 in
       commissions in connection with this private placement.

       In the third quarter of 2001, the third of the four private offerings was
       completed with the sale of 126,500 units, at a price of $2 per unit, with
       each unit consisting of (i) one share of common stock, and (ii) a warrant
       to purchase one share of common stock at $4.00 per share and exercisable
       until December 31, 2001. The Company paid $7,800 in commission expense in
       connection with this private placement.


                                      F-11
<PAGE>


                               ANTS SOFTWARE INC.
                          (formerly ANTs Software.com)
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
                                  ------------


6.     Stockholders' Equity, continued

       In the fourth quarter of 2001, the fourth of the four private offerings
       was completed with the sale of 1,085,997 units, at a price of $0.75 per
       unit, with each unit consisting of (i) one share of common stock and (ii)
       a warrant to purchase one share of common stock at $1.00 per share and
       exercisable until December 31, 2002. The Company paid $17,950 in cash and
       authorized the issuance of 35,333 shares in lieu of cash in commissions
       in connection with this private placement. Of the authorized shares,
       28,677 were issued during the fourth quarter of 2001 while 6,666 remained
       unissued at December 31, 2001.

       The Company entered into a settlement agreement effective February 23,
       2001 with the law firm Hughes Hubbard & Reed LLP (HHR) pursuant to which
       the Company agreed to issue 400,000 shares of common stock, for which the
       Company recognized an expense of $137,235. In addition, the settlement
       satisfied accrued legal expenses of $159,226, which had been recorded in
       prior periods. HHR had filed suit against the Company in California
       Superior Court claiming that the Company breached a June 1988 contract by
       failing to deliver certificates representing shares earned as a premium
       for legal work performed between 1993 and 1996.

       During 2001, the Company reclassified $121,078 of Treasury Stock to
       additional paid-in capital as part of the reincorporation in the State of
       Delaware.


7.     Per Share Data

       Basic net loss per share is computed using the weighted-average number of
       shares of common stock outstanding during the periods. Diluted earnings
       per share is computed using the weighted-average number of common shares
       and common share equivalents outstanding during the period. The Company
       excluded all common share equivalents from the calculation because all
       such securities are antidilutive for the two periods presented.

       The computation of the basic and diluted net loss per share was a
       follows:

<TABLE>
<S>                                                     <C>             <C>             <C>

                                                            Loss           Shares       Per Share
                                                        (Numerator)     (Denominator)     Amount
                                                        ------------    -------------   ----------
        Twelve months ended December 31, 2001-
             basic loss per share                       $(5,806,194)      15,028,976     $(0.39)
        Eight months ended December 31, 2000-
             basic loss per share                       $(8,468,831)      12,723,039     $(0.67)
        Twelve months ended April 30, 2000-
             basic loss per share                       $(1,742,992)      11,576,673     $(0.15)

</TABLE>

       At December 31, 2001, options and warrants for the purchase of 6,326,455
       common shares at prices ranging from $.25 to $11.63 per share were
       antidilutive and therefore not included in the computation of diluted
       earnings per share.

       At December 31, 2000 options and warrants, for the purchase of 5,652,950
       common shares at prices ranging from $0.25 to $11.63 per share were
       antidilutive and therefore not included in the computation of diluted
       earnings per share.



                                      F-12
<PAGE>


                               ANTS SOFTWARE INC.
                          (formerly ANTs Software.com)
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
                                  ------------



7.     Per Share Data, continued

       At April 30, 2000 warrants for the purchase of 3,164,000 common shares at
       prices ranging from $0.25 to $14.00 per share were antidilutive and
       therefore not included in the computation of diluted earnings per share.


8.     Commitments and Contingencies

       The Company leases office space on a month-to-month basis at $7,500 per
       month. Total rental expense for all operating leases for the year ended
       December 31, 2001, the eight months ended December 31, 2000, and the year
       ended April 30, 2000 amounted to $82,797, $40,000, and $45,000,
       respectively.

       In October 2001, a class action complaint was filed in Los Angeles
       Superior Court against the Company and certain former officers and former
       directors. The plaintiff claims to be representing a class of persons who
       purchased the Company's common stock from October 5, 1999 through March
       23, 2001. The complaint claims violations of certain provisions of the
       California Corporations Code in connection with the following alleged
       misrepresentations: (i) the Company misrepresented that a certain
       individual was a member of the Company's board of directors; (ii) the
       Company failed to disclose an effort by a creditor to force the Company
       into involuntary bankruptcy; and (iii) a former director falsely
       identified himself as a certified public accountant in an SEC filing.
       Management believes these claims to be without merit and intends to
       defend this case vigorously. However, there can be no assurance that this
       matter will be resolved without costly litigation, or in a manner that is
       not materially adverse to the Company's financial position, results of
       operations or cash flows. No estimate can be made of the possible loss or
       possible range of loss associated with the resolution of this
       contingency.


9.     Concentration of Credit Risk-Cash

       The Company maintains a cash balance at a major financial institution in
       excess of the federally insured limit of $100,000 per institution. At
       December 31, 2001, the Company's uninsured cash balance totaled $681,368.


10.    Employee Benefit Plans

       The Company has a 401(k) Income Deferral Plan (the Plan) immediately open
       to all employees regardless of age or tenure with the Company. The
       Company may make a discretionary contribution to the Plan each year,
       allocable to all Plan participants. However, the Company elected to make
       no contributions for the year ended December 31, 2001. Administrative
       fees for the plan totaled $2,850 for the year ended December 31, 2001.


11.    Warrants

       As of December 31, 2001, the Company had warrants to purchase 3,594,933
       common shares outstanding. These securities give the holder the right to
       purchase shares of the Company's restricted common stock in accordance
       with the terms of the instrument as follows:



                                      F-13
<PAGE>

                               ANTS SOFTWARE INC.
                          (formerly ANTs Software.com)
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
                                  ------------


11.    Warrants, continued

       Number of Warrants Issued   Exercise Price per Share  Year of Expiration
       -------------------------   ------------------------  ------------------
               1,217,500                 $0.25 - $0.75           2002 - 2005
               1,414,667                 $1.00 - $1.12           2002 - 2004
                 213,280                 $2.75 - $4.00           2004 - 2005
                 469,000                     $5.50               2002 - 2005
                  53,334                 $7.25 - $8.25           2005 - 2006
                 227,152                $10.50 - $11.63          2002 - 2005
              ----------
               3,594,933
              ==========

12.    Stock Compensation Plans

       In September 2000, the Company's shareholders approved a stock option
       plan under which incentive stock options and non-qualified stock options
       are granted to employees, directors or consultants at not less than the
       fair market value on the date of grant for incentive stock options and
       85% of fair market for non-qualified options. Options granted under the
       plan are generally vested within three years after the date of grant and
       expire 10 years after issuance. Options are granted at the discretion of
       the Board of Directors.

       Had compensation expense been determined for stock options granted during
       the twelve months ended December 31, 2001 and the eight months ended
       December 31, 2000, based on the fair value at grant dates consistent with
       SFAS No. 123, the Company's condensed Pro Forma Statement of Operations
       for those periods would have been as follows:

                                             December 31,       December 31,
                                                 2001               2000
                                             -------------     -------------

        Net loss:
           As reported                       $  (5,806,194)    $  (8,468,831)
                                             =============     =============
           Pro forma                         $  (9,850,201)    $  (8,502,370)
                                             =============     =============
        Basic and diluted loss per share:
           As reported                       $       (0.39)    $       (0.67)
                                             =============     =============
           Pro forma                         $       (0.66)    $       (0.67)
                                             =============     =============


       The weighted average fair value of options granted during the periods
       ended December 31, 2001 and 2000 were $2.44 and $2.89, respectively. The
       pro forma amounts were estimated using the Black-Scholes option pricing
       model with the following assumptions for the periods ended December 31,
       2001 and 2000, respectively.

                                     December 31, 2001      December 31, 2000
                                     -----------------      -----------------
          Interest rate                  4.1% - 5.2%            5.3% - 5.9%
          Dividend yield                      0%                     0%
          Expected volatility          101.6% - 208.5%        169.1% - 172.2%
          Expected life in years      0.2 - 7.83 years        2.0 - 9.0 years



                                      F-14
<PAGE>


                               ANTS SOFTWARE INC.
                          (formerly ANTs Software.com)
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
                                  ------------


12.    Stock Compensation Plans, continued

       The following table summarizes employee stock option plan activity for
       the twelve months ended December 31, 2001:

<TABLE>
<S>                                                     <C>              <C>

                                                          Number         Weighted Average
                                                        of Options        Exercise Price
                                                        ----------       ----------------
       Outstanding, January 1, 2000                              -                 -
            Granted                                        417,200            $ 2.34
                                                        ----------            ------
       Outstanding, January 1, 2001                        417,200              2.34
                                                        ----------            ------
            Granted                                      2,728,507              2.62
            Exercised through cash consideration            (3,000)             2.75
            Exercised through non-cash consideration       (27,000)             2.60
            Retired and other                             (384,185)             2.62
                                                        -----------           ------
       Outstanding, December 31, 2001                    2,731,522              2.59
                                                        ==========            ======
       Vested at December 31, 2001                       1,495,085            $ 2.59
                                                        ==========            ======
</TABLE>


       The following table summarizes information regarding stock options
       outstanding at December 31, 2001:

<TABLE>
<S>       <C>           <C>              <C>                 <C>                 <C>               <C>

                                            Weighted            Weighted           Number              Weighted
             Exercise     Number             Average             Average           Vested          Average Exercise
               Price    Outstanding      Remaining Life      Exercise Price      at 12/31/01            Price
            ----------  -----------      --------------      --------------      -----------      ----------------

          $1.93-$2.12       689,949        6.670 years           $2.00             390,532             $2.01
          $2.50-$2.59       109,228        8.421 years            2.50              81,475              2.51
             $2.75        1,271,155        6.800 years            2.75             768,551              2.75
          $2.88-$2.91       186,984        9.153 years            2.91              93,013              2.91
          $3.00-$3.10       253,306        7.359 years            3.03             105,095              3.03
          $3.15-$3.59       220,900        9.921 years            3.18              56,415              3.19
                        -----------                                             -----------

                          2,731,522                                              1,495,081
                        ===========                                             ===========

</TABLE>



 13.   Going Concern

       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 convertible debt and equity securities during 2002 and
       thereafter. Should the Company be unsuccessful in raising additional
       funds, it is unlikely that the Company will continue operations beyond
       December 31, 2002.



                                      F-15
<PAGE>


                               ANTS SOFTWARE INC.
                          (formerly ANTs Software.com)
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
                                  ------------



14.    Subsequent Events-march 2002 Private Placement

       From December 31, 2002 through March 26, 2002, the Company raised,
       through private placements of Company stock and convertible debt,
       approximately $660,000. Management believes this will be sufficient to
       fund operations through April 2002.



                                      F-16