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

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

                                    FORM 10-K

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

                      For the year ended December 31, 2008

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

                        Commission file number: 000-16299

                               ANTS SOFTWARE INC.
             (Exact name of registrant as specified in its charter)


        Delaware                                     13-3054685
(State or other jurisdiction of             (IRS Employer Identification Number)
 Incorporation or Organization)


           700 Airport Blvd., Suite 300, Burlingame, California 94010
           (Address of principal executive offices including zip code)

                                 (650) 931-0500
              (Registrant's telephone number, including Area Code)

           Securities registered under Section 12(b) of the Act: None

             Securities Registered under Section 12(g) of the Act:
                        Common Stock, $0.0001 par value


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

Indicate by check mark if the  registrant is a well-known  seasoned  issuer,  as
defined in Rule 405 of the Securities Act.      Yes [ ]   No [X]

Indicate  by  check  mark if the  registrant  is not  required  to file  reports
pursuant to Section 13 or 15 (d) of the Exchange Act.   Yes [ ] No [X]

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

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-K (section  229.405 of this chapter) is not contained herein and
will not be  contained,  to the best of  registrant's  knowledge,  in definitive
proxy or information  statements  incorporated  by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.           Yes [X] No [ ]

Indicate  by check  mark if the  registrant  is a large  accelerated  filer,  an
accelerated  filer, a non-accelerated  filer, or a smaller reporting company (in
Rule 12b-2 of the Exchange Act). Large  accelerated  filer [ ]
Accelerated filer [X] Non-accelerated filer [ ] Smaller reporting company [ ]

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

<PAGE>

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates  computed by reference to the price at which the common equity
was last sold, or average bid and asked price of such common  equity,  as of the
last business day of the registrant's most recently completed second quarter. As
of June 30, 2008 the  aggregate  market value of the  registrant's  common stock
held by  non-affiliates of the registrant was approximately $80 million based on
the average  bid and asked  price of such  common  stock as reported on the NASD
Bulletin Board system.  Shares of common stock held by each officer and director
and each person who owns more than 10% or more of the  outstanding  common stock
have been excluded  because these  persons may be deemed to be  affiliates.  The
determination  of  affiliate  status  for  purpose  of this  calculation  is not
necessarily a conclusive determination for other purposes.

The issuer had  90,648,369  shares of common stock  outstanding  as of March 31,
2009.


DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the 2009 Annual Meeting of Stockholders (the
"Proxy  Statement"),  to be filed  within  120 days of the end of the year ended
December 31, 2008, are incorporated by reference in Part III hereof. Except with
respect to information specifically incorporated by reference in this Form 10-K,
the Proxy Statement is not deemed to be filed as part hereof.


                                       2
<PAGE>
<TABLE>
<CAPTION>
<S>  <C>                                                                                                <C>
                                TABLE OF CONTENTS
----------------------------------------------------------------------------------------------------------

                                     PART I
Item 1.    Business......................................................................................4
Item 1A.   Risk Factors.................................................................................10
Item 1B.   Unresolved Staff Comments....................................................................15
Item 2.    Properties...................................................................................15
Item 3.    Legal Proceedings............................................................................15
Item 4.    Submission of Matters to a Vote of Security Holders..........................................15

                                     PART II

Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters and Issuer
           Purchases of Equity Securities...............................................................16
Item 6.    Selected Financial Data......................................................................19
Item 7.    Management's Discussion and Analysis of Financial Conditions and Results of
           Operations...................................................................................19
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk...................................33
Item 8.    Financial Statements and Supplementary Data..................................................33
Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.........34
Item 9A.   Controls and Procedures......................................................................34
Item 9B.   Other Information............................................................................37

                                    PART III

Item 10.   Directors, Executive Officers and Corporate Governance ......................................38
Item 11.   Executive Compensation.......................................................................38
Item 12.   Security Ownership of Certain Beneficial Owners and Management
           and Related Stockholder Matters..............................................................38
Item 13.   Certain Relationships and Related Transaction and Director Independence......................38
Item 14.   Principal Accountant Fees and Services.......................................................38

                                     PART IV

Item 15.  Exhibits, Financial Statements and Schedules..................................................39
Signatures..............................................................................................81
Exhibits................................................................................................83
</TABLE>

                                       3
<PAGE>

This Annual Report and the information  incorporated herein by reference contain
forward-looking statements that involve a number of risks and uncertainties,  as
well as assumptions  that, if they never materialize or if they prove incorrect,
would  likely  cause our results to differ  materially  from those  expressed or
implied  by  such  forward-looking  statements.   Although  our  forward-looking
statements  reflect the good faith judgment of our management,  these statements
can only be based on facts  and  factors  currently  known by us.  Consequently,
forward-looking  statements are inherently  subject to risks and  uncertainties,
and actual results and outcomes may differ  materially from results and outcomes
discussed in the forward-looking statements.

Forward-looking statements can be identified by the use of forward-looking words
such as  "believes,"  "expects,"  "hopes,"  "may," "will,"  "plans,"  "intends,"
"estimates,"  "could," "should," "would,"  "continue," "seeks" or "anticipates,"
or other similar words (including their use in the negative),  or by discussions
of future matters such as the development of new products,  problems incurred in
establishing sales and sales channels, technology enhancements, possible changes
in legislation and other  statements that are not historical.  These  statements
include, but are not limited to, statements under the captions "Business," "Risk
Factors," and "Management's  Discussion and Analysis of Financial  Condition and
Results of  Operations,"  as well as other sections in this Annual  Report.  You
should be aware that the  occurrence  of any of the events  discussed  under the
heading  "Item 1A -- Risk  Factors" and  elsewhere  in this Annual  Report could
substantially harm our business,  results of operations and financial condition.
If any of these  events  occurs,  the  trading  price of our common  stock could
decline  and you  could  lose all or a part of the  value of your  shares of our
common stock.

The  cautionary  statements  made in  this  Annual  Report  are  intended  to be
applicable to all related forward-looking statements wherever they may appear in
this  Annual  Report.  We  urge  you  not  to  place  undue  reliance  on  these
forward-looking  statements,  which  speak  only as of the  date of this  Annual
Report.


                                     PART I

ITEM 1. BUSINESS

The Company

ANTs software  inc. is  developing  the ANTs  Compatibility  Server  ("ACS") and
develops,  markets and supports the ANTs Data Server  "ADS".  ACS is  middleware
that is intended  to offer a fast,  cost-effective  method to move  applications
from one database to another and enable enterprises to achieve cost efficiencies
by consolidating their applications onto fewer databases.

Restatement

We have  restated  our balance  sheets as of December  31, 2007 and 2006 and the
related statements of operations,  stockholders' (deficit) equity, and cash
flows for the years ended  December 31, 2007 and 2006 to correct errors in such
consolidated financial statements.

The  restatement  of our  financial  statements  is based  upon a review  of the
accounting treatment of certain transactions entered into with certain investors
in 2006 and 2007 (see Note  14 of the  Consolidated Financial  Statements for  a
description  of these  transactions).  During  this  review,  we  discovered  of
the  Consolidated  Financial  Statements  that  we  had  incorrectly  applied  a
restriction discount  to the market  value  of  our  common  stock  based  on  a
long  history of selling  restricted  common stock  to  a  group  of  investors.
The  discounted  stock  price  was  then  used  in the allocation  between  debt
and  equity  for Units of  convertible promissory  notes  and restricted  common
shares, which were sold to investors in late 2006 and early 2007. The discounted
stock price was also used to  determine if  there  was  a beneficial  conversion
related to the  convertible promissory  notes.  The  same  methodology  was used
in late  2007 when we issued  convertible promissory  notes  along  with  common
stock warrants. See Note 2 of  the  Consolidated  Financial  Statements for  the
impact of the restatements to 2007 and 2006.

                                       4
<PAGE>

In light of this  restatement,  the Company  concluded that a material  weakness
existed  at  December  31,  2008 in the  design and  effectiveness  of  internal
controls  related to  accounting  for the issuance of Warrants  and  Convertible
Notes Payable. See Item 9A below.

Corporate History

ANTs  software  inc.  (sometimes  referred  to  herein  as  "ANTs" or "we") is a
Delaware  corporation  headquartered in Burlingame,  California.  Our shares are
traded  on the OTC  Bulletin  Board  under the stock  symbol  ANTSE.  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 to ANTs  software.com.  In July  2000,  we  merged  with  Intellectual
Properties and Technologies, Inc., a wholly owned subsidiary with no significant
assets. In December 2000, we reincorporated  from Nevada to Delaware and changed
our name from ANTs software.com to ANTs software inc.

Since 2006, we have focused our efforts on development related to the ACS, which
is based on research and development  related to the ADS which began in 2000. We
either license this technology to customers or sell the  proprietary  technology
and related licenses to the customers.

Technology and Intellectual Property

Beginning   in  2000,   we   focused  on   development   of  the  ADS  and  core
high-performance   database   technologies.   In  May   2008,   we  sold   those
high-performance  technologies  and the  intellectual  property related to them,
retaining  a  license  to use  those  technologies  in ACS.  The sale of the ADS
technology  was recorded as revenue in the  financial  statements.  In 2007,  we
began developing ACS. We have developed proprietary  technologies related to ACS
which we regard as trade  secrets and we are  pursuing  patent  protection  on a
number of these technologies.  Our Professional Services team has also developed
proprietary  technologies  used in the monitoring and management of applications
and databases. We regard these technologies as trade secrets.

The ANTs Compatibility ServerTM

Applications   written  to  work  with  one  database   product  are   typically
incompatible  with  other  database  products  due  to  proprietary   extensions
developed  and  popularized  by the  database  vendors.  This has the  effect of
locking  customers  into one  database  vendor  because  it would  generally  be
cost-prohibitive  and too  time-consuming  to  migrate an  application  from one
database  to another.  ACS  translates  these  proprietary  extensions  from one
database  product to another and allows customers to migrate  applications  from
one database product to another more easily and at less cost.

Migrating applications is intended to be a three-step process when using ACS:

     1.   Move the data - the  large  database  vendors  all have  full-featured
          tools that allow customers to move data from other products to theirs.
     2.   Install  ACS -  once  the  data  is  migrated,  ACS is  installed  and
          connected to the application and the new database.
     3.   Test and deploy - the  application  is first  tested to ensure that it
          functions  properly with the new database,  and then the customer goes
          "live" with the application.

We  have  developed  the  underlying  technologies  related  to ACS  and we have
conducted  successful pilot tests. In April 2008, we announced the launch of the
first  version of ACS as a generally  available  commercial  product.  The first
version of ACS  allows  applications  currently  running  on  Sybase's  database
product to run on Oracle's database  product.  In the future, we expect to build
versions  of ACS  that  will  enable  applications  to be  migrated  from and to
numerous  other  database  products.  We are in  discussions  with four database
vendors about building additional versions of ACS.

                                       5
<PAGE>

Professional Services

Established in 1993,  Inventa  Technologies,  Inc.  ("Inventa"),  our IT managed
services and professional services division (together, "Professional Services"),
provides  pre-  and  post-sales  services  related  to the ACS  and  application
migration,  application  and database  architecting,  monitoring and management.
Inventa provides the following services:

ACS  Services.  This  service  assists  customers  in  establishing  a  database
consolidation strategy,  action plan for migrating applications among databases,
installation, deployment and post-deployment monitoring and tuning.

Monitoring  Infrastructure  Management.  This  service  provides  management  of
monitoring infrastructure including: architecture planning, agent deployment and
support,   and  agent   configuration  with  threshold   management.   The  core
infrastructure  for this  service  can  either be hosted  and  managed  by us or
deployed directly within a customer's environment and individual events / alarms
transitioned back to customer employees.

Monitoring  and Event  Management.  This  service  provides  a fully  functional
24x7x365 Network  Operations Center ("NOC")  responsible for isolating  critical
events,  opening trouble tickets,  and escalating the event's  visibility within
the customer's organization.  This service can be hosted entirely within our NOC
or portions can be  integrated  with or hosted  directly  within the  customer's
environment.

Visualization and Trending. Our ESM Integrator(TM) portal captures,  centralizes
and integrates  performance  metrics collected by the monitoring  infrastructure
deployed as a component  of our other  services or layered  upon  existing  data
sources  residing  within the  customer's  environment.  Sources of data are not
limited to components  monitored by our service;  we can integrate virtually any
business metrics, or other third party data for enterprise-wide  reporting which
is platform independent.

Performance  Management.  The most  popular way  organizations  attempt to solve
their  performance  issues is with faster,  more powerful  hardware.  While this
generally  produces  some positive  results,  the benefit is very costly in both
hardware and tiered software.  Additionally,  performance is typically addressed
only when business or system reliability is impacted thereby creating additional
pressure  to the  already  constrained  customer  staff  to fix the  issue.  Our
Performance   Management  Service  is  pro-active  and  can  help  maximize  the
customer's existing resources in a cost-effective and manageable way.

Capacity  Planning.  This  service  provides  organizations  with the ability to
anticipate the effects of growth and plan for that growth. Customers are able to
map out a strategy  to  accommodate  spikes in  transaction  volumes and overall
growth while maintaining response time and uptime.

Code Quality  Management.  Performance  quality,  reliability,  and capacity are
results of how well applications are designed and implemented.  Our Code Quality
Management  service uses our time-tested code analysis tools to assist customers
in tracking  overall code quality and  improvements as new application  versions
are released.

We provide Professional Services to customers in the banking, insurance, gaming,
automotive  and  high-technology  industries.  We have  extensive  experience in
architecting  enterprise  application  and  database  deployments,  upgrades and
migrations and in installing,  configuring,  deploying and maintaining  database
products from major vendors such as IBM, Oracle,  Microsoft and Sybase.  We have
developed proprietary software that enables us to remotely monitor, diagnose and
maintain  customer  applications  and  databases,  saving  customers the cost of
having to maintain  in-house IT resources  needed to deliver these services.  We
typically sign annual and multi-year contracts and the majority of our customers
renew.

We deliver  our  services  through a remote  delivery  model from our New Jersey
office which contains a network  operations  center and our Center of Excellence
for database  migrations.  The network operation center provides  customers with
remote  assessment,  diagnostic  and tuning  capabilities  through secure remote
connection  24 hours a day,  seven  days a week.  The Center of  Excellence  was
established to demonstrate  for customers that our database  migration  services
are capable of  assisting in the  migration of data either  remotely or on-site.
The Center of Excellence is also a  state-of-the-art  training  facility for the
new  services  personnel  we  expect  to  recruit  from  numerous  colleges  and
universities in the Mid-Atlantic region.

                                       6
<PAGE>

We integrate our  professional  services  capabilities  tightly into the pre and
post-sales process, enabling us to:

     o    Accurately assess the customer's operating environment;
     o    Propose the most  efficient  database  consolidation  and  application
          migration solution;
     o    Efficiently  deploy  ACS and  assist the  customer  in testing  before
          "going live"; and
     o    Post-deployment,   provide  application  monitoring,  maintenance  and
          service past deployment

Sales and Marketing

The Market

According to IDC Research, the market for database products was $18.6 billion in
2007.  Oracle,  Microsoft  and IBM  control  approximately  84% of this  market.
According to the numerous CTOs, database  architects and application  developers
at the  target  Global  2000  enterprises  with  whom we have  spoken,  database
infrastructure  costs have become one of the most expensive line items in the IT
budget. These Global 2000 enterprises typically have annual database "spends" in
excess of tens and,  in some  cases,  hundreds  of millions of dollars and their
database budgets are growing  annually.  The migration cost from one database to
another,  even to a low-cost open-source  database,  is extensive due to lack of
compatibility between the products' proprietary extensions. There is significant
interest,  confirmed by our discussions with industry  analysts and user groups,
for a product that can provide the capability to migrate an application from one
database to another.

According  to IDC  Research,  the  markets  in which our  Professional  Services
division operates, IT services and application management, was projected at $122
billion in 2007 with IBM Global  Services,  HP/EDS and Accenture being among the
largest  vendors in those markets.  We have a unique  combination of experience,
skills  and  proprietary  software  that allow us to address a segment of the IT
services market centered on database and application monitoring, maintenance and
services.  In  addition  to this  established  market  we  anticipate  that  our
professional  services  group  will  be the  first  provider  of  migration  and
consulting  services  resulting  from pre- and  post-sales  of our ACS products.
Customers will look to us as the experts in database  consolidation to provide a
full range of services related to ACS  installation,  deployment and use. To the
extent that this becomes a new "market" for professional  services,  we are in a
position to capitalize on it.

Strategy

Our  go-to-market  strategy adapts with changes in the competitive  structure of
the  database  market.  The  refinement  of our  strategy  is a  continuous  and
iterative  process,  reflecting our goal of providing a cost-effective  solution
across a wide variety of applications. Our strategy has recently included:

     o    Developing partnerships with IBM, Oracle, Microsoft, Sybase and others
          to bring our products to market;
     o    Focusing on large  enterprise  customers  who can realize  significant
          savings by migrating applications among leading database products;
     o    Selling or licensing our products directly;
     o    Selling our products and technologies through partners; and
     o    Developing custom versions of our products for partners and selling or
          licensing that technology to them.

ACS can provide a solution  for  enterprises  to address the  problems of vendor
lock-in and cost  escalation  by  enabling  them to migrate  applications  among
database  products.  ACS  can  provide  a  potentially  significant  competitive
advantage for database vendors such as Oracle, IBM, Microsoft, Sybase and others
because  they would have the ability to  cost-effectively  migrate  applications
from their competitors' products to their own.

If we are successful in our go-to-market strategy, we intend to generate revenue
through a range of activities which may include:  sales of developed technology,
licenses,  royalties,  custom development and professional  services.  If one or
more of the large  database  vendors  resells our  products,  we would expect to
share in that  license and  maintenance  revenue.  Each sale of our  products or
related  technology  will  require  installation,   testing,  tuning  and  other
professional  services.  We  intend  to  generate  revenue  by  providing  those
services.

                                       7
<PAGE>

We  generated  significant  revenues  related to the license and sale of our ADS
technologies  during the  year-ended  December 31,  2008.  We expect to generate
revenues  from  existing  and  new  contracts  with  our  Professional  Services
customers, and if successful,  we expect to generate additional revenues related
to ACS.

Competition

We have  not  identified  a direct  competitor  for our ACS  database  migration
products.  Other database vendors encourage migration from competitive  products
through use of their  proprietary  migration  tools.  These tools often  require
substantial investment to rewrite applications. Potential customers with whom we
have spoken are not receptive to migrating  applications  due to the expense and
risk  of  such  rewrites.  While  database  vendors  do  not  offer  a  directly
competitive  product,  we fully expect database  vendors to offer incentives for
customers to keep applications deployed on their database products.

Competitors in the Professional  Services market are large and well-established,
with vendors such as IBM Global  Services,  Accenture and HP/EDS offering a wide
range of services. We have maintained long-term relationships with our customers
and have  been  successful  in  renewing  contracts  and in  signing  multi-year
contracts.

Current Operations

Our operations consist of:

     (i)  Developing  Database  Migration  Technologies and the ACS - we develop
          and market ACS, a faster, cost-effective way to consolidate databases,
          allowing  customers to  efficiently  use IT  resources  and drive down
          operating costs.

     (ii) Professional  Services - we have extensive  experience in architecting
          enterprise   application  and  database   deployments,   upgrades  and
          migrations and in installing,  configuring,  deploying and maintaining
          database  products from major vendors such as IBM,  Oracle,  Microsoft
          and Sybase. We provide application migration services, application and
          database managed services and consulting services.

Our headquarters are located in Burlingame,  California and we have an office in
Mt. Laurel, New Jersey. We have financed operations through private offerings to
accredited  investors to whom we have sold common  stock and issued  convertible
promissory  notes and  warrants.  We expect to  continue  to raise  capital  for
operations  through such private offerings until we generate positive cash flows
from  operations.  We believe we have sufficient  funds to cover operations into
the third quarter of  2009  at  our  expected  expense  rate.  This  expectation
includes the anticipated receipt of the final payment from a customer  as  shown
in the Consolidated Balance Sheet. We expect that our focus over  the next  year
will be on  the  development  and  marketing  of ACS and  on  the growth of  our
Professional Services offerings.

Employees

As of December 31, 2008, we had 45 full-time employees,  all based in the United
States.  Of the total  number,  30 were  engaged  in  managed  and  professional
services,  4 in  research,  development  and  customer  support,  6 in  business
development/marketing, and 5 in general, administrative and finance. We have not
experienced  work  stoppages,  are  not  subject  to any  collective  bargaining
agreement and believe that our relationship with our employees is good.

Available Information

Our Annual Report on Form 10-K,  Quarterly Reports on Form 10-Q, Current Reports
on Form 8-K and  amendments to reports  filed or furnished  pursuant to Sections
13(a) and 15 (d) of the  Securities  and Exchange Act of 1934,  as amended,  are
available free of charge on our Investor  Relations Web site at  www.ants.com as
soon as reasonably  practicable after we electronically file such material with,
or  furnish  it to,  the SEC.  The  information  posted  on our  website  is not
incorporated into this Annual Report on Form 10-K.

                                       8
<PAGE>

Executive Officers

ANTs executive officers and principal employees as of December 31, 2008:
<TABLE>
<CAPTION>
<S>                       <C>                                                            <C>
Name                      Age     Position

Joseph Kozak...............58     Chairman, President and Chief Executive Officer, Class 1 Director,
                                  term expires in 2010

</TABLE>

Joseph Kozak - Chairman, President and Chief Executive Officer

Joseph Kozak joined ANTs in June 2005 as President and was named Chief Executive
Officer and appointed to the Board of Directors in August 2006 and was appointed
Chairman of the Board of Directors in October 2007. Mr. Kozak brings 25 years of
front-line leadership  experience in sales,  marketing and business development.
Mr. Kozak joined ANTs from Oracle  Corporation,  where he was Vice  President of
Industry Sales.  While with Oracle he defined and executed global strategies for
retail, distribution, life science, process manufacturing, and consumer packaged
goods  industries.  He also managed Oracle's  acquisition of Retek,  Inc. a $630
million purchase in the retail  applications  space.  Prior to Oracle, Mr. Kozak
was CEO of  Lombardi  Software a  manufacturer  of business  process  management
solutions.  He was also a partner  with Ernst and Young,  LLP, in the retail and
consumer packaged goods division; Vice President of Sales for SAP America, where
he was responsible for the retail distribution and consumer goods business units
for the Americas; and Mr. Kozak held numerous management positions with AT&T and
IBM.

                                       9
<PAGE>

ITEM 1A. RISK FACTORS

In addition to other  information  in this Form 10-K, the following risk factors
should be carefully considered in evaluating our business since it operates 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-K,  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 face  significant  risks,  and the risks  described below may not be the only
risks  we face.  Additional  risks  that we do not know of or that we  currently
consider  immaterial  may also  impair our  business  operations.  If any of the
events or circumstances  described in the following risks actually  occurs,  our
business,  financial  condition or results of operations could be harmed and the
trading price of our common stock could decline.

Economic Risks

The fragile state of the worldwide  economy could impact the company in numerous
ways.

The effects of the recent worldwide  economic crisis has caused  disruptions and
extreme volatility in global financial  markets,  increased rates of default and
bankruptcy,  has  impacted  levels of  consumer  spending,  and may  impact  our
business,  operating  results,  or financial  condition.  The ongoing  worldwide
economic  crisis,  weakness  in the credit  markets  and  significant  liquidity
problems  for the  financial  services  industry  may also impact our  financial
condition in a number of ways. For example,  current or potential  customers may
delay or decrease  spending with us or may not pay us or may delay paying us for
previously-purchased  products and services.  Also, we may have  difficulties in
securing additional financing.

Business Risks

We have a history of losses and a large  accumulated  deficit  and we may not be
able to achieve profitability in the future.

For the  years  ended  December  31,  2008 and 2007 we  incurred  net  losses of
$11,628,584  and  $17,643,219,  respectively.  Our  accumulated  deficit  totals
$87,929,614. There can be no assurance that we will be profitable in the future.
If we are not profitable and cannot obtain  sufficient  capital,  we may have to
cease our operations.

We may be  unable  to  successfully  execute  any  of  our  identified  business
opportunities that we determine to pursue.

We  currently  have a  limited  corporate  infrastructure.  In order  to  pursue
business opportunities, we will need to continue to build our infrastructure and
operational  capabilities.  Our ability to do any of these successfully could be
affected by any one or more of the following factors:

     o    Our  ability  to  raise  substantial  additional  capital  to fund the
          implementation  of our  business  plan;
     o    Our ability to execute our business strategy;
     o    The ability of our products and services to achieve market acceptance;
     o    Our  ability  to  manage  the  expansion  of our  operations  and  any
          acquisitions  that we may make, which could result in increased costs,
          high employee turnover or damage to customer relationships;
     o    Our ability to attract and retain qualified  personnel;
     o    Our ability to manage our third party relationships effectively; and
     o    Our ability to accurately  predict and respond to rapid  technological
          changes in our  industry  and the  evolving  demands of the markets we
          serve.

Our failure to  adequately  address any one or more of the above  factors  could
have a significant  adverse effect on our ability to implement our business plan
and our ability to pursue other opportunities that arise.

                                       10
<PAGE>

We rely on key  personnel  and,  if we are  unable  to retain  or  motivate  key
personnel or hire qualified personnel, we may not able to grow effectively.

Our success  depends in large part upon the abilities  and continued  service of
our executive officers, including Joseph Kozak, our Chief Executive Officer, and
other key  employees.  There can be no assurance  that we will be able to retain
the services of such officers and employees.  Our failure to retain the services
of our key  personnel  could have a material  adverse  effect on us. In order to
support our projected growth, we will be required to effectively recruit,  hire,
train and retain additional  qualified  management  personnel.  Our inability to
attract and retain the necessary  personnel could have a material adverse affect
on us.

We depend on a limited  number of  customers  for a  significant  portion of our
revenue.

During 2008 our three largest  customers  accounted for approximately 92% of our
revenue.  Revenue from one of these customers was $3.6 million,  or 44% of total
revenues. Revenues from the second and third customers were $2.4 million, or 28%
of total revenues,  and $1.7 million or 19% of total revenues,  respectively.  A
decrease in revenue from any of our largest customers for any reason,  including
a decrease  in pricing or  activity,  or a decision  to either  utilize  another
vendor or to no longer use some or all of the  products and services we provide,
could have a material adverse affect on our revenue.

Our ANTs Data Server product competes with products offered by large companies.

We operate in a highly competitive  industry.  Although we believe that our ANTs
Data Server technology is unique, can be protected, and, if adopted, will confer
benefits to customers, 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.  We are aware of efforts by competitors to
introduce  doubt about our  financial  stability as we compete to make sales and
win  customers  and  business.  Large  competitors  may also seek to hinder  our
operations through attempts to recruit key staff with  exceptionally  attractive
terms  of  employment,   including  signing  bonuses,  or  by  offer  of  highly
competitive terms to potential or newly acquired customers.

We rely upon reselling  partners and  independent  software  vendors for product
sales.

A significant portion of our sales has been, and we believe will continue to be,
made through  reselling  partners and  independent  software  vendors  (together
"Partners").  As a result, our success may depend on the continued sales efforts
of Partners,  and  identifying  and entering  into  agreements  with  additional
Partners.  The use of Partners involves certain risks, including risks that they
will not effectively  sell or support our products,  that they will be unable to
satisfy  their  financial   obligations  with  us,  and  that  they  will  cease
operations.  Any  reduction,  delay or loss of orders from Partners may harm our
results.  There can be no assurance  that we will  identify or engage  qualified
Partners  in a timely  manner,  and the  failure  to do so could have a material
adverse affect on our business, financial condition and results of operations.

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.  However, we have not yet filed any patent
applications on any technology or inventions included or incorporated in the ACS
product.  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  filed 13 patent  applications  with the United
States  Patent and  Trademark  Office and intend to file more.  Six patents have
been granted;  however,  we do not know if the remaining seven applications will
be granted or whether we will be successful in prosecuting  any future  patents.
In  addition,  the laws of some  foreign  countries  do not protect  proprietary
rights to the same  extent  as do the laws of the  United  States.  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 an 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,  all of
which would materially adversely affect our business.

                                       11
<PAGE>

If we experience rapid growth, we will need to manage such 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, will possibly need to
create departments that do not now exist, and hire, train, motivate and manage a
growing  number  of  staff.  Due to a  competitive  employment  environment  for
qualified  technical,  marketing  and sales  personnel,  we expect to experience
difficulty  in  filling  our  needs  for  qualified  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.

Our products may be used to manage data from critical business 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 target of
lawsuits from injured or disgruntled businesses or other users. We carry product
and information  liability and errors and omissions insurance,  but in the event
that we are required to defend more than a few such actions, or in the event our
products are found liable in  connection  with such an action,  our business and
operations may be severely and materially adversely affected.

We have a long corporate existence and were inactive during much of our
corporate history.

Up until  approximately  2004, the Company did not have significant  operations.
Since  that time,  we have been in the  process  of  developing  our ADS and ACS
products.

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.

Market  acceptance  of our  products  and  services  is not  guaranteed  and our
business model is evolving.

We are at an early stage of development  and our revenue will depend upon market
acceptance and utilization of our products and services,  including ACS which is
now under development. Our products are under constant development and are still
maturing.  Customers may be reluctant to purchase  products from us because they
may be concerned about our financial viability and our ability to provide a full
range of support services.  Given these risks,  customers may only be willing to
purchase  our  products   through  partners  who  are  not  faced  with  similar
challenges.  We may have  difficulty  finding  partners to resell our  products.
Also, due to current economic conditions,  including the current recession, some
potential  customers may have tightened  budgets for evaluating new products and
technologies  and the  evaluation  cycles may be much  longer  than in the past.
There can be no assurance that our product and technology development or support
efforts  will  result  in new  products  and  services,  or  that  they  will be
successfully introduced.

Technology Risks

If we deliver  products with  defects,  our  credibility  will be harmed and the
sales and market acceptance of our products will decrease.

Our product and services are complex and have at times contained errors, defects
and bugs. If we deliver  products with errors,  defects or bugs, our credibility
and the market acceptance and sales of our products would be harmed. Further, if
our  products  contain  errors,  defects or bugs,  we may be  required to expend
significant  capital and resources to alleviate such  problems.  We may agree to
indemnify our customers in some  circumstances  against  liability  arising from
defects in our  products.  Defects  could also lead to  product  liability  as a
result of product  liability  lawsuits  against us or against our customers.  We
carry product and information liability and errors and omissions insurance,  but
in the event that we are required to defend more than a few such actions,  or in
the  event  that we are found  liable in  connection  with such an  action,  our
business and operations may be severely and materially adversely affected.

                                       12
<PAGE>

Our ANTs Compatibility  Server (ACS) product is at an early stage and a business
model is not yet established.

We began developing the ANTs Compatibility Server in 2007 and have not yet begun
selling the  product.  We  anticipate  that we will sell ACS  through  partners,
although  we have  not yet  executed  reselling  agreements  with  any  partner.
Consequently,  we have  not yet  established  pricing  for  ACS  and  have  only
preliminary  estimates as to the possible revenues and expenses  associated with
sales,  support and delivery.  It is possible  that we will not generate  enough
revenue to offset the  expenses  and that the ACS line of  business  will not be
profitable.

We will need to continue our product development efforts.

We believe that the market for our products 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 lead in
our  product  development,  and  believe  that our  patents on the ACS and trade
secrets  provide some  protection,  we will likely need  significant  additional
capital in order to maintain that lead over competitors who have more resources.

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 develop and enhance ACS and to develop,  manufacture  and
market new products and services.  As a result,  we expect to continue to make a
significant investment in engineering and 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  products 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.

Financing Risks

A failure to obtain  financing could prevent us from executing our business plan
or operate as a going concern.

We anticipate  that current cash  resources will be sufficient for us to execute
our business plan into the third  quarter of 2009. This expectation includes the
anticipated receipt of  the final  payment from  a  customer  as  shown  in  the
Consolidated Balance Sheet.  If further  financing is not obtained  we will not
be able to  continue  to  operate as a going  concern.  We believe that securing
additional  sources of financing to enable us to continue the development and
commercialization  of our proprietary  technologies will be difficult and there
is no assurance of our ability to secure such  financing.  A failure to obtain
additional financing could prevent us from making expenditures that  are  needed
to  pay  current  obligations,  allow  us  to  hire  additional  personnel   and
continue  development of our product and  technology.  If  we  raise  additional
financing by  selling  equity  or  convertible  debt  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 and be subject to adverse consequences in the event of a default.

We have incurred indebtedness.

We have incurred debt in the past year and may incur substantial additional debt
in the future.  A  significant  portion of our future  cash flow from  operating
activities  may be  dedicated  to the payment of interest  and the  repayment of
principal on our  indebtedness.  There is no  guarantee  that we will be able to
meet our debt service obligations.  If we are unable to generate sufficient cash
flow or obtain  funds for  required  payments,  or if we fail to comply with our
debt  obligations,  we will be in default.  In  addition,  we may not be able to
refinance our debt on terms acceptable to us, or at all. Our indebtedness  could
limit our ability to obtain  additional  financing for working capital,  capital
expenditures,  debt service requirements,  acquisitions or other purposes in the
future,  as needed;  to plan for, or react to,  changes in technology and in our
business and competition; and to react in the event of an economic downturn.

                                       13
<PAGE>

Shareholder Risk

There is a limited market for our common stock.

Our   common   stock  is  not  listed  on  any   exchange   and  trades  in  the
over-the-counter  ("OTC")  market.  As such,  the market for our common stock is
limited  and is not  regulated  by the rules and  regulations  of any  exchange.
Further,  the price of our common  stock and its volume in the OTC market may be
subject to wide  fluctuations.  Our stock price could decline  regardless of our
actual operating performance,  and stockholders could lose a substantial part of
their investment as a result of industry or market-based fluctuations. Our stock
trades  relatively  thinly.  If a more active public market for our stock is not
sustained,  it may be difficult  for  stockholders  to sell shares of our common
stock.  Because we do not  anticipate  paying cash dividends on our common stock
for the foreseeable future, stockholders will not be able to receive a return on
their shares  unless they are able to sell them.  The market price of our common
stock will likely  fluctuate in response to a number of factors,  including  but
not limited to, the following:

     o    sales, sales cycle and market acceptance or rejection of our products;
     o    our  ability  to sign  Partners  who are  successful  in  selling  our
          products;
     o    economic conditions within the database industry;
     o    our failure to develop and commercialize the ACS;
     o    the timing of  announcements  by us or our  competitors of significant
          products,  contracts or acquisitions or publicity  regarding actual or
          potential results or performance thereof; and
     o    domestic  and   international   economic,   business   and   political
          conditions.

Failure to maintain  effective  internal controls in accordance with Section 404
of the  Sarbanes-Oxley  Act of 2002 could have a material  adverse effect on our
stock price.

Section  404 of the  Sarbanes-Oxley  Act of  2002  and  the  related  rules  and
regulations   of  the  SEC  require   annual   management   assessments  of  the
effectiveness of our internal  control over financial  reporting and a report by
our independent registered public accounting firm on these internal controls. If
we fail to adequately maintain compliance with, or maintain the adequacy of, our
internal  control over  financial  reporting,  as such  standards  are modified,
supplemented  or amended from time to time, we may not be able to ensure that we
can conclude on an ongoing basis that we have  effective  internal  control over
financial  reporting in accordance with Section 404 of the Sarbanes-Oxley Act of
2002 and the related rules and  regulations  of the SEC. If we cannot  favorably
assess,  or our  independent  registered  public  accounting  firm is  unable to
provide an unqualified  attestation  report on the effectiveness of our internal
controls over financial reporting, investor confidence in the reliability of our
financial reports may be adversely affected, which could have a material adverse
effect on our stock price. As discussed in Section 9A, we have concluded that we
had a material  weakness in the  internal  control  environment.  This  material
weakness was related to the restated 2006 and 2007 financial statements.

Our  actual  results  could  differ  materially  from those  anticipated  in our
forward-looking statements.

This  report  contains  forward-looking  statements  within  the  meaning of the
federal  securities  laws  that  relate to  future  events  or future  financial
performance.  When  used  in  this  report,  you  can  identify  forward-looking
statements  by   terminology   such  as  "believes,"   "anticipates,"   "plans,"
"predicts,"  "expects,"   "estimates,"  "intends,"  "will,"  "continue,"  "may,"
"potential,"  "should"  and  similar  expressions.  These  statements  are  only
expressions of expectations.  Our actual results could, and likely will,  differ
materially from those anticipated in such forward-looking statements as a result
of many  factors,  including  those set forth above and elsewhere in this report
and including factors  unanticipated by us and not included herein.  Although we
believe that the expectations  reflected in our  forward-looking  statements are
reasonable, we cannot guarantee future results, levels of activity,  performance
or achievements.  Neither we nor any other person assumes responsibility for the
accuracy and completeness of these  statements.  We assume no duty to update any
of the  forward-looking  statements  after the date of this report or to conform
these statements to actual results. Accordingly, we caution readers not to place
undue reliance on these statements.

                                       14
<PAGE>

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 us by using a proxy contest, since the acquirer would only be able to
elect  approximately  one-third of the directors at each  shareholders'  meeting
held for that purpose.

Our securities may  be de-listed  from  the OTC Bulletin Board if we do not meet
continued listing requirements.

If we do not meet the continued listing requirements  of the  OTC Bulletin Board
("OTC") and our securities are de-listed by the OTC,  trading of  our securities
would likely be halted. In such case,  the market would  be negatively  affected
and  we  could  face  difficulty raising  capital  necessary  for  our continued
operations.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our headquarters are located in Burlingame,  California.  We lease approximately
15,000  square feet of office  space,  of which  approximately  20% is currently
utilized.  We also maintain a facility in Mt. Laurel, New Jersey, where we lease
approximately  7,300  square  feet of  office  space as of  December  31,  2008.
Effective  January  6,  2009,  leased  square  foot at our Mt.  Laurel  facility
increased to approximately 12,000 square feet.

ITEM 3. LEGAL PROCEEDINGS

On July 10, 2008, Sybase,  Inc.  ("Sybase") an enterprise  software and services
company,  filed a  complaint  for  common  law unfair  business  practices,  and
tortuous  interference  with contractual  relations,  among other things, in the
Superior Court of the State of California,  County of Alameda. Sybase is seeking
an injunction,  and damages,  among other legal and equitable relief. We believe
that this lawsuit is without merit and intends to continue vigorously  defending
itself.

On August 22,  2008,  a former  ANTs  employee,  filed a putative  class  action
complaint  for all current  and former  software  engineers,  for failure to pay
overtime  wages,  and failure to provide meal  breaks,  among other  things,  in
Superior  Court of the State of  California,  County of San  Mateo.  The  former
employee is seeking an injunction,  damages,  attorneys' fees, and penalties. We
believe  that this lawsuit is without  merit and intends to continue  vigorously
defending itself.

On October 14, 2008, Bayside Plaza ("Bayside"), a partnership, filed a complaint
for breach of contract in Superior Court of the State of  California,  County of
San  Mateo.  Bayside  is seeking  approximately  $50,000 in rent,  late fees and
operating  expenses per month from October 2008. The Company intends to continue
defending itself.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters  submitted to our  shareholders for a vote from October 1,
2008 to December 31, 2008.


                                       15
<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S  COMMON EQUITY,  RELATED STOCKHOLDER MATTERS AND
        ISSUER PURCHASES OF EQUITY SECURITIES

     (a) Price Range of Common Stock

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

The following is the range of high and low closing bid 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://finance.yahoo.com/q/hp?s=ANTSE.OB.

                                                     High              Low
Quarter Ended June 30, 2009
  through April 24, 2009                            $0.59             $0.42
Quarter Ended March 31, 2009                         0.68              0.32

Quarter Ended December 31, 2008                      $.71             $0.30
Quarter Ended September 30, 2008                     0.92              0.52
Quarter Ended June 30, 2008                          1.26              0.80
Quarter Ended March 31, 2008                         1.30              0.71

Quarter Ended December 31, 2007                     $1.45             $0.65
Quarter Ended September 30, 2007                     2.14              1.50
Quarter Ended June 30, 2007                          2.00              1.49
Quarter Ended March 31, 2007                         2.56              1.92

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

As of March 31, 2009 there were  90,648,369  shares of common  stock  issued and
outstanding and approximately  1,358 registered  holders of record of our common
stock.

COMPANY STOCK PRICE PERFORMANCE

The following  information shall not be deemed to be "soliciting material" or to
be  "filed"  with  the  Securities  and  Exchange   Commission  nor  shall  this
information  be  incorporated  by  reference  into any future  filing  under the
Securities Act of 1933, as amended,  or the Securities  Exchange Act of 1934, as
amended,  except  to  the  extent  that  ANTs  specifically  incorporates  it by
reference into a filing.

The graph below compares the cumulative total shareholder  return on ANTs common
stock for the last five full  years  with the  cumulative  return on the  NASDAQ
composite  and the Peer group for the same period.  The graph  assumes that $100
was invested in ANTs common  stock and in each of the other  indices on December
31,  2003 and that all  dividends  were  reinvested.  ANTs has  never  paid cash
dividends  on its  stock.  The  comparisons  in the  graph  below  are  based on
historical data, with ANTs common stock prices based on the closing price on the
dates indicated and are not intended to forecast the possible future performance
of ANTs common stock.

                                       16
<PAGE>
<TABLE>
<CAPTION>
<S>                                       <C>       <C>       <C>       <C>       <C>       <C>
                                          Dec-2003  Dec-2004  Dec-2005  Dec-2006  Dec-2007  Dec-2008
                                          --------  --------  --------  --------  --------  --------
ANTs Software, Inc.                        100.00    234.41    223.66    260.22     76.34     39.78
NASDAQ Composite                           100.00    109.16    111.47    123.05    140.12     84.12
NASDAQ Computer and Data Processing Index  100.00    110.23    113.97    127.96    156.36     90.00
Peer Group Only                            100.00     68.28     59.45     73.07    159.82     53.86
</TABLE>

                [SEE SUPPLEMENTAL PDF FOR GRAPHIC OF ABOVE CHART]


     (b) Dividend Policy

We have not declared or paid cash dividends or made  distributions  in the past,
and do not anticipate that we will pay cash dividends or make  distributions  in
the foreseeable future.

     (c) Recent Sales of Unregistered Securities

In 2008, the  Company  received  $7,615,000  from  accredited  investors for the
sale of 12,691,667  shares of common  stock,  at a price of $0.60  per share and
incurred commission costs of  $367,200.  The Company issued  510,757  shares  of
common stock and a warrant to purchase up to 50,166  shares at an exercise price
of $0.60 in connection  with this private  placement.

Other equity transactions:

2008

As discussed in Note 4 of the Consolidated Financial Statements, on May 30, 2008
Inventa Technologies,  Inc. was  acquired for  a total  purchase  price of $28.8
million,  which included cash payments of $3,000,000  and issuance of 20 million
shares of the  Company's  common  stock valued at $1.20 per share.  The  Company
also  issued $2 million in  promissory notes to the seller, with a fair value of
approximately $1.4 million convertible  into 2.5 million shares of common stock.
As a result of the acquisition  of  certain  intangible assets,  we  recorded  a
deferred tax liability of approximately $344,000.  As  discussed   in   Note  14
of the Consolidated Financial Statements,  the notes had a beneficial conversion
feature  approximating  $1,355,600  which  was  allocated  to additional paid-in
capital.

                                       17
<PAGE>

On March 26 and March 31, 2008,  the Board of Directors  approved a repricing of
certain stock options and warrants for employees,  consultants and Board members
to the  then-current  market price of the Company's  common stock.  Officers and
Board members forfeited  1,193,667 vested and unvested shares in connection with
the  repricing.  In accordance  with the  provisions of FAS 123(R),  $786,545 in
stock  compensation  expense was  recognized,  net of forfeiture  credits,  as a
result of the repricing.

For the year ended  December  31,  2008 a total of  $3,015,662  in  compensation
expense was recognized  related to the vesting of employee stock options and the
repricing  and  $132,281  in  professional  fees was  recognized  related to the
vesting of  non-employee  stock  options  and  warrants in  accordance  with the
accounting guidelines set forth in SFAS 123 (R) and EITF 96-18, respectively.

During  2008, a total of 47,500  shares of common stock were issued  through the
exercise of stock options with  original  exercise  prices  ranging from $.52 to
$.81, resulting in gross proceeds of $32,670.

2007

Funds raised through private offerings to accredited investors:

In the  first  quarter  of  2007,  the  Company  entered  into  agreements  with
accredited investors to purchase 220 J Units,  raising $11,000,000.  Pursuant to
the sale, the Company issued  3,142,700 shares of common stock with share prices
between $1.92 and $2.35 (restated),  and issued Notes with an initial face value
of $5,500,000.  In accordance  with EITF 00-27,  the Company  allocated the cash
received  between debt and equity based on the relative fair value of each piece
of the  instrument.  As a  result,  value  ascribed  to  the  debt  portion  was
$4,150,577 and the value ascribed to the equity portion was $6,849,423.

The Company paid  $1,100,000 in cash  commissions  and issued  145,440 shares of
common  stock  which  were valued between $1.92 and $2.35 per share or $449,228.
The  total  commission  value   of  $1,549,228  (restated) was allocated between
debt  issuance  costs  and  additional  paid-in capital as a cost of raising the
equity  portion of the  offering,  in the  same  proportion  that  was  used  to
allocate   the  gross  proceeds  of  the  offering  between  notes  payable  and
stockholders'  equity.  This  resulted  in  a recognition of $584,166 (restated)
prepaid debt issue costs and a reduction of additional paid in capital of
$956,061 (restated).

As more fully discussed in Note 14,  "Convertible  Notes Payable with Warrants",
in the fourth  quarter of 2007 the  Company  issued two  convertible  promissory
notes  payable  with a  principal  value of  $3,003,226,  along  with  2,002,150
warrants  exercisable  at $0.80 (after modification) per share.  The $3,003,226
in cash proceeds were allocated  between notes payable and equity in proportion
to their relative fair values on the date of each  issuance,  which  resulted in
a  discount  on notes payable and an increase of additional paid-in capital of
$479,829 (restated).

Funds raised through cash exercises of stock options and warrants:

For the year ended December 31, 2007,  stock options  covering a total of 60,000
shares were exercised,  generating  $60,600 in cash proceeds to the Company.  In
the last two quarters of 2007,  warrants  covering 796,900 shares were exercised
at a modified discounted  price of $1.25 per share,  resulting in proceeds of
$996,125 to the Company.

Other equity transactions:

For the year ended December 31, 2007,  $1,488,405 was recognized in compensation
expense   related  to  vesting  of  employee  stock  options,   and  $99,417  in
professional  fees was recognized  related to the vesting of non-employee  stock
options and warrants in accordance  with the accounting  guidelines set forth in
SFAS 123 (R) and EITF 96-18, respectively.

Stock Repurchases

There were no shares repurchased by us during 2008.

                                       18
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data are derived from our financial statements.
This data should be read in conjunction with the financial  statements and notes
and with Item 7, Management's Discussion and Analysis of Financial Condition and
Results of Operations.
<TABLE>
<CAPTION>
<S>                                     <C>              <C>              <C>            <C>             <C>
                                                                Fiscal Years ended December 31,
                                        -------------------------------------------------------------------------------
                                                              2007            2006
                                             2008          (restated)      (restated)         2005            2004
                                        ---------------  ---------------  -------------  --------------  --------------
Operations:
   Revenue                              $    8,282,729   $      359,706   $    287,832   $     466,620   $           -
   Operating expenses                       13,449,745       16,305,299     15,532,252       9,154,979       5,060,292
   Net loss                                (11,628,584)     (17,643,219)   (15,131,978)     (8,704,497)     (5,060,061)
   Basic and diluted net loss per share $        (0.15)  $        (0.31)  $      (0.30)  $       (0.22)  $       (0.16)

Financial Position:
   Cash and cash equivalents            $    2,051,807   $    4,480,694   $  4,698,949   $   6,381,932   $   1,448,724
   Working capital                           2,358,848        3,494,081      4,154,858       5,525,616       1,196,604
   Total assets                             33,456,805        5,886,727      5,986,238       7,436,357       1,868,616
   Stockholders' equity (deficit)       $   28,043,297   $   (1,338,192)  $  4,628,771   $   6,412,586   $   1,529,181
</TABLE>

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

Results of Operations

The results of operations for the years ended  December 31, 2008,  2007 and 2006
are summarized in the table below.
<TABLE>
<CAPTION>
<S>                           <C>              <C>      <C>               <C>    <C>
                                                             2007                     2006
                                   2008      % Change     (Restated)   % Change    (Restated)
                              -------------- ---------  -------------- --------- --------------

Revenues                      $   8,282,729    2203%    $     359,706      25%    $     287,832
Cost of revenues                  3,230,490   25383%           12,677     -47%           23,893
                              --------------            --------------           --------------
   Gross profit                   5,052,239    1356%          347,029      31%          263,939
Operating expenses               13,507,419     -17%       16,305,299       5%       15,532,252
                              --------------            --------------           --------------
   Loss from operations          (8,455,180)    -47%      (15,958,270)      5%      (15,268,313)

Other (expense) income, net      (3,700,584)    120%       (1,684,949)  -1336%          136,335
Income tax benefit                  527,180                         -                         -
                              --------------            --------------           --------------
   Net loss                     (11,628,584)    -34%      (17,643,219)     17%     (15,131,978)
                              ==============            ==============           ==============

Net loss per share -
   basic and diluted          $       (0.15)    -52%    $       (0.31)      3%   $        (0.30)
                              ==============            ==============           ==============

Shares used in computing basic
 and
   diluted net loss per share    77,847,729      37%       56,618,971      12%       50,474,155
                              ==============            ==============           ==============
</TABLE>

Revenues

Revenues for 2008 consist of product revenues  representing sales  of customized
platforms using our intellectual property,  licenses and royalties  and services
revenues representing managed and professional services fees for maintenance and
support services. Future revenues are  expected  to include  sales and  licenses
of our ACS  product  and related technology,  managed   services revenue related
to existing  and  new contracts and  professional  services revenue from pre and
post-sales  consulting  related  to  ACS  and  other  database  consolidation
technologies we may develop.

                                       19
<PAGE>

Revenues  for 2007 and 2006  relate  to the ADS and  consist  of  license  fees,
recognition of maintenance and support services over the term of the agreements,
royalties  from third parties that resell ADS, and  professional  services fees.
Professional services revenues relate to post-sales consulting.

During 2008, we recognized approximately $8.3 million in revenue, an increase of
approximately $7.9 million over 2007. Of the total recognized (in thousands):

     o    $3,100 for the sale of our ADS technology;
     o    $3,000  represents  seven  month's  services  revenue from our Inventa
          subsidiary;
     o    $1,200 in ADS license fees;
     o    $107 were ADS license  revenues under a revenue sharing  agreement;
     o    $42 were maintenance and support fees;
     o    $42 was professional services revenue performed by ANTs.

During 2007, we recognized approximately $360,000 in revenue, an increase of
approximately $72,000 from 2006. Of the total recognized:

     o    $258,000  was license and  royalty  revenues,  an increase of $101,000
          versus 2006.  The increase was primarily  due to a first-time  minimum
          royalty payment, which was offset by lower license revenue from direct
          sales;
     o    $101,000 was  maintenance and support fees, a $5,000 decrease from the
          prior year; and
     o    We did not provide any professional services during 2007, resulting in
          a $24,000  decrease in professional  services  revenue from 2006 as no
          such services were requested by our customers in 2007.

Cost of Revenues

Cost of revenues was approximately  $3.2 million,  $13,000 and $24,000 for 2008,
2007 and 2006,  respectively.  Cost of  revenues in 2008  consists of  personnel
costs to  provide  managed  and  professional  services,  separation  costs  for
personnel  related to the license and sale of ADS, software  development  costs,
and  third-party  licenses  related  to the sale  and  license  of ADS.  Cost of
revenues in 2007 and 2006 consisted of third-party licenses and services.

Operating Expenses

Operating  expenses for the years ending  December 31, 2008, 2007 (restated) and
2006 were as follows:
<TABLE>
<CAPTION>
<S>                    <C>           <C>     <C>     <C>          <C>     <C>     <C>          <C>
                                    % of               2007      % of               2006      % of
                           2008     Total  % Change  (Restated)  Total  % Change  (Restated)  Total
                       ------------------  --------  ----------- -----  --------  ----------- ------

Sales and marketing    $  2,097,537  16%    -29%     $ 2,939,481  18%    -43%     $ 5,164,937   33%
Research and
 development              6,652,346  49%    -30%       9,442,521  58%     40%       6,736,381   43%
General and
 administrative           4,699,862  35%     20%       3,923,297  24%      8%       3,630,934   24%
                       ------------ -----  -------- ------------ -----  --------  ----------- ------
Total operating
 expenses              $ 13,449,745 100%    -17%     $16,305,299 100%      5%     $15,532,252  100%
                       ============ =====  ========  =========== =====  ========  =========== ======
</TABLE>



Our primary  expenses are  salaries,  benefits and  consulting  fees relating to
developing and marketing the ANTs  Compatibility  Server,  marketing and selling
managed and professional services, and general and administrative expenses.

The number and distribution of full-time employees as of December 31, 2008, 2007
and 2006 were as follows:

                                       20
<PAGE>

                                 % of      2007      % of      2006      % of
                        2008     Total   (Restated)  Total   (Restated)  Total
                      ----------------------------------------------------------
Cost of Revenues         30       67%        -         0%        -         0%
Sales and marketing       6       13%        3         8%       12        23%
Research and
 development              4        9%       29        78%       32        62%
General and
 administrative           5       11%        5        14%        8        15%
                      ----------------------------------------------------------
Headcount at end of
 period                  45      100%       37       100%       52       100%
                      ----------------------------------------------------------



Sales and Marketing Expenses

Sales and marketing expense consists primarily of employee salaries, commissions
and benefits, stock-based compensation, professional fees, travel and
entertainment and corporate overhead allocations.

The components of sales and marketing expenses are presented in the table below.
<TABLE>
<CAPTION>
<S>                              <C>               <C>  <C>               <C>  <C>
                                               For the years ended December 31,
                                 ------------------------------------------------------------
                                                           2007                    2006
                                      2008    % Change   (Restated)  % Change    (Restated)
                                 ------------------------------------------------------------
Employee compensation and
 benefits                        $    908,444     -33%  $1,348,694       -34%  $  2,049,870
Stock-based compensation              359,286      90%     189,188        -9%       208,085
Professional fees                     308,447     -53%     660,534       -24%       868,046
Travel and entertainment              169,546     -42%     290,324       -45%       526,770
Amortization of customer
 relationships                        138,916     ---            -       ---              -
Corporate allocations from
 general and
   administrative expenses             56,073     -36%      87,009       -51%       177,417
Events and promotions and other       156,825     -57%     363,732       -73%     1,334,749
                                 ------------   ------  ----------    -------  --------------
Total                            $  2,097,537     -29%  $2,939,481       -43%  $  5,164,937
                                 ------------   ------  ----------    -------  --------------

Headcount at end of period                  6     100%           3       -75%            12
</TABLE>


* For the purposes of our analysis of key expenses, 2006 results have been
reclassified from previously reported amounts in both employee compensation and
benefits and stock-based compensation, as follows:

          o    We have combined certain  employee-related  benefits  together in
               our presentation of employee compensation and benefits.

2008 versus 2007 Results
------------------------

Total sales and marketing expense decreased by approximately $842,000
(restated), a 29% decrease in 2008 versus 2007, due primarily to the following:

     o    Employee  compensation and benefits decreased by 33% due to reductions
          in our  direct  sales  team as we  implemented  our  partner  strategy
          relying  less on  direct  sales  efforts  and due to the  transfer  of
          pre-sales  technical  staff  to  research  and  development.  Somewhat
          offsetting the savings is the addition of four Inventa staff.
     o    Stock-based  compensation increased 90% primarily due the repricing of
          certain  stock  options and warrants to the market value of our common
          stock as of March 26 and March 31, 2008. We do not expect the expenses
          incurred due to the repricing and the option grant to recur.
     o    Professional  fees  decreased  53% due to our  change in  go-to-market
          strategy. By pursuing partner sales, we reduced end-user marketing and
          lead-generation programs.
     o    Travel and  entertainment  decreased 42% as we decreased our sales and
          marketing team from 2007 levels.

                                       21
<PAGE>

     o    Corporate  allocations  decreased 36% due to lower  headcount in sales
          and marketing and cost savings in employee benefits.
     o    2008  results  reflect  seven  months'  expenses  related  to  Inventa
          (acquired  May 30,  2008),  whereas 2007  results  include no expenses
          related to Inventa.

2007 versus 2006 Results
------------------------

Total sales and marketing expenses decreased by $2.2 million, a 43% decrease in
2007 versus 2006 due primarily to the following:

     o    Employee  compensation and benefits  decreased 34% in 2007 versus 2006
          due to reductions in our direct sales team as we  implemented  our ADS
          partner strategy and due to the transfer of pre-sales  technical staff
          to research and development.
     o    Marketing  programs  decreased  73% due to our change in  go-to-market
          strategy.  By selling through partners rather than selling directly to
          end-users,   we  eliminated  end-user  marketing  and  lead-generation
          programs and reduced advertising and trade-show attendance.
     o    Stock-based   compensation  decreased  9%  primarily  due  to  reduced
          headcount from 12 at the end of 2006 to 3 at the end of 2007.
     o    Travel  decreased 45% because our  partnering  strategy  required less
          travel and due to the reduction in our sales team.

Research and Development Expenses

Research and development expense consists primarily of employee compensation and
benefits, contractor fees, stock-based compensation and equipment and software.

The components of research and development expense are presented in the table
below.
<TABLE>
<CAPTION>
<S>                           <C>            <C>  <C>             <C>   <C>
                                             Years ended December 31,
                             -------------------------------------------------------
                                                     2007                   2006
                                  2008  % Change   (Restated) % Change    (Restated)
                             -------------------------------------------------------
Employee compensation
 and benefits                 $3,005,928    -44%  $ 5,366,836     33%   $4,046,325
Contractor fees                1,891,884    -16%    2,245,030     60%    1,401,728
Stock-based compensation         966,673     30%      741,312     46%      507,600
Equipment and computer
 supplies                        284,304    -28%      396,449     -6%      423,966
Corporate allocations
 from general and
 administrative expenses         380,400    -22%      489,116     43%      342,407
Other                            123,157    -40%      203,778   1320%       14,355
                              ----------   ------ -----------   -----   ----------
Total                         $6,652,346    -30%  $ 9,442,521     40%   $6,736,381
                              ----------   ------ -----------   -----   ----------

Headcount at end of period             4    -86%           29     -9%           32
</TABLE>


* For the  purposes of our  analysis of key  expenses,  2006  results  have been
revised from  previously  reported  amounts in both  employee  compensation  and
benefits and stock-based compensation, as follows:

     o    We have combined  certain  employee-related  benefits  together in our
          presentation of employee compensation and benefits.
     o    Due   to   reductions    in   headcount   and   multiple    functional
          responsibilities  of certain employees,  effective January 1, 2007, we
          began allocating a portion of certain employees'  salaries and bonuses
          between  departments  based on each  employee's  contribution  to that
          department.
     o    Stock-based   compensation   has  been  revised  to  include  expenses
          recognized on issuances of warrants and options to non-employees.

                                       22
<PAGE>

2008 versus 2007 Results
------------------------

Total research and development expense decreased by $2.8 million, a 30% decrease
in 2008 versus 2007, due primarily to the following:

     o    Employee  compensation and benefits decreased 44% due to a decrease in
          headcount  from 29 as of December  31,  2007 to 4 as of  December  31,
          2008.  The decrease is primarily due to the sale of ADS and separation
          of the ADS team and migration of most product  engineering to contract
          organizations  and is  offset  by the  addition  of three  staff  from
          Inventa.
     o    Contractor fees decreased 16% as we decreased use of contract research
          and  development  services  on the ACS  product  and  eliminated  such
          services for the ADS product in May 2008.
     o    Stock-based  compensation  increased primarily due to i) the impact of
          our  repricing  of certain  stock  options and  warrants to the market
          value of our common stock as of March 26, 2008,  offset by a reduction
          in employees and  associated  vesting  expense on their options versus
          the prior year,  ii) separation  expense  related to  modification  of
          grants to former  employees on the ADS team, and iii) expense  related
          to stock option grants issued to Inventa  staff.  We do not expect the
          expenses in (i) and (ii) above to recur.
     o    2008  results  reflect  seven  months of  expenses  related to Inventa
          (acquired  May 30,  2008),  whereas 2007  results  include no expenses
          related to Inventa.

2007 versus 2006 Results
------------------------

Total research and development expenses increased by $2.7 million, a 40%
increase in 2007 versus 2006 due primarily to the following:

     o    Employee  compensation and benefits  increased 33% in 2007 versus 2006
          due  to  an  increase  in  average  full-time  equivalent   employees.
          Full-time  equivalent  employees represent the sum of the headcount at
          the end of each month,  divided by the number of months in the period,
          which  differs  from  actual  headcount  at the  end of  each  year as
          presented  above.  Full-time  equivalent  employees  increased from an
          average of 25 in year 2006 to an average of 33 in 2007.  This increase
          includes the transfer of pre-sales  technical staff from our sales and
          marketing  department  to our  research  and  development  department.
          Although the actual  headcount in research and development on December
          31, 2007,  was less than on December 31, 2006, the decrease was due to
          a reduction in force at the end of 2007,  and those  employees were on
          staff for almost the entire year, leading to higher overall expense.
     o    We increased use of contract research and development teams.
     o    Stock-based  compensation increased 46% in 2007 versus 2006 due to the
          increase in headcount.
     o    Equipment and computer  supplies expense decreased 6% primarily due to
          decreased  purchases  of computer  equipment.  During  early 2007,  we
          completed  the  purchase  of the  majority  of  computers  and related
          equipment  required  for our  development  and test lab,  offset by an
          increase  in  depreciation  expense  on  computer  equipment  that was
          purchased in the third quarter of 2006 but impacted all of 2007.

General and Administrative Expenses

General and administrative  expenses consists primarily of employee salaries and
benefits,   professional  fees  (legal,  accounting,   director  fees,  investor
relations and placement  agent fees related to financing),  facilities  expenses
and insurance.

                                       23
<PAGE>

The components of general and administrative expenses are presented in the table
below.
<TABLE>
<CAPTION>
<S>                                <C>               <C>   <C>              <C>   <C>
                                                     Years ended December 31,
                                   -----------------------------------------------------------
                                                              2007                    2006
                                       2008     % Change    (Restated)  % Change    (Restated)
                                   -----------------------------------------------------------
Employee compensation
 and benefits                      $  1,200,350     -28%   $1,663,826       26%   $1,324,176
Stock-based compensation              1,448,734     120%      657,322        6%      619,060
Facilities, director fees,
 insurance and other                  1,357,289      24%    1,095,894       11%      985,943
Professional fees                     1,129,962       4%    1,082,380      -11%    1,221,579
Corporate allocations to Sales
 and marketing and Research
 and development                       (436,473)    -24%     (576,125)      11%     (519,824)
                                   -------------  ------   -----------    ------  -----------
Total                              $  4,699,862      20%   $3,923,297        8%   $3,630,934
                                   ------------   ------   -----------    ------  -----------

Headcount at end of period                    3      40%            5      -38%            8
</TABLE>


* For the  purposes of our  analysis of key  expenses,  2006  results  have been
revised from previously reported amounts in stock-based  compensation to include
expenses recognized on issuances of warrants and options to non-employees.

2008 versus 2007 Results
------------------------

Total general and  administrative  expense  increased by approximately  $777,000
(restated), a 20% increase in 2008 versus 2007, due primarily to the following:

     o    Employee compensation and benefits expense decreased 28% due primarily
          to the  non-recurring  nature of a  severance  payment  to our  former
          chairman  during the quarter  ended June 30, 2007.  In addition,  ANTs
          headcount  decreased  from  five at  December  31,  2007 to  three  at
          December  31,  2008  where  it was for  most  of  2008,  resulting  in
          significant savings.
     o    Stock-based  compensation  increased  120%  due to the  impact  of the
          repricing of certain stock options and warrants to the market value of
          our common stock as of March 26 and March 31, 2008 and the issuance of
          two stock option grants during the second quarter,  one to our CEO and
          one to our  CFO.  The  grants  were  fully  vested  when  granted  and
          therefore  immediately  expensed. We do not expect the expenses due to
          the repricing and the option grants to recur.
     o    Professional  fees  increased  4% primarily  due to  increased  use of
          contract accounting personnel.
     o    Allocations  of overhead  costs  decreased  24% versus the prior year.
          Allocations  are based on  headcount in the other  departments.  These
          allocations  decreased as the number of personnel in other departments
          decreased.
     o    2008  results  reflect  seven  months'  expenses  related  to  Inventa
          (acquired  May 30,  2008),  whereas 2007  results  include no expenses
          related to Inventa.


2007 versus 2006 Results
------------------------

Total general and administrative  expenses  increased by approximately  $292,000
(restated), an 8% increase in 2007 versus 2006 due primarily to the following:

     o    Employee  compensation and benefits expense increased 26% in 2007 from
          2006,  primarily due to a $500 thousand  obligation  incurred  under a
          severance agreement between us and our former chairman.  This increase
          was offset by lower  salaries and  benefits of $272  thousand due to a
          reduction in full-time employees.
     o    Professional  fees decreased  primarily due to reduced  Sarbanes Oxley
          compliance costs as activities switched from first-time  compliance in
          2006 to maintenance in 2007.
     o    Stock-based  compensation  expense includes expense related to options
          issued to employees,  including members of our Board of Directors, and
          options and warrants issued to non-employees. Stock-based compensation
          increased marginally by 6% in 2007 over 2006.
     o    Director fees  increased in 2007 as we began to pay outside  directors
          cash  compensation in consideration  for their service on the Board of
          Directors.  Prior to 2007 we  compensated  directors by issuing  stock
          options.

                                       24
<PAGE>

Other Income (Expense), Net

The components of other income (expense), net are presented in the table below.
<TABLE>
<CAPTION>
<S>                                      <C>              <C>   <C>           <C>         <C>

                                                         Years ended December 31,
                                        ----------------------------------------------------------
                                                                  2007                   2006
                                           2008     % Change    (Restated) % Change    (Restated)
                                        ---------------------  ---------------------  ------------
Other (expense) income:
Interest expense, convertible notes
 payable                                $(3,675,056)      78%  $(2,008,544)  -14755%  $   (13,521)
Loss on extinguishment of convertible
    promissory notes payble                 (49,940)                     -                      -
Interest income                              82,816      -74%      320,928       58%      203,133
Other                                       (58,404)   -2290%        2,667      105%      (53,277)
                                        ------------  -------  ------------  -------  ------------
Total other (expense) income, net       $(3,700,584)    -120%  $(1,684,949)   -1336%  $   136,335
                                        ============  =======  ============  =======  ============
</TABLE>

2008 versus 2007 Results
------------------------

Other (expense)  income,  net primarily  consists of interest expense related to
our convertible notes payable and, to a lesser extent, income earned on our cash
and cash equivalents.  Total other (expense) income decreased approximately $2.0
million (restated) in 2008 versus 2007 primarily due to the ongoing amortization
of the discount on  convertible  notes payable.  Detail  regarding the change in
other (expense) income follows:

     o    Interest  expense  totaling  approximately  $3.7  million  is  due  to
          amortizing the discount on our convertible notes payable.


2007 versus 2006 Results
------------------------

Other income,  net decreased by  approximately  $1.8 million in 2007  (restated)
compared to  2006 (restated), due primarily to:

     o    The  issuance  of $6.5  million  in  convertible  promissory  notes in
          December  2006 and  March  2007  and an  additional  issuance  of $3.0
          million  in the  fourth  quarter  of  2007,  all  containing  embedded
          beneficial   conversion   features  and  an  associated   Discount  on
          Convertible Promissory Notes Payable. This discount is being amortized
          to interest  expense using the  effective  interest  method.  Interest
          expense in 2006  consisted  primarily of interest paid on credit cards
          used in operations.

     o    Interest  income  increased,  which  somewhat  offset the  increase in
          interest expense.

We recorded approximately $2.0 million (restated) in interest expense
(approximately $1 million  (restated) of which was non-cash  (non-GAAP  measure)
related to the Convertible  Notes issued in December 2006 and March 2007 and the
Convertible  Notes issued with warrants in October and December 2007 compared to
$14,000  (restated) in 2006. In 2006,  interest expense  primarily  consisted of
interest incurred on company credit cards.

Interest income  increased by $118,000 in 2007 compared to 2006. The combination
of  higher  average  balances  and  investments  in  higher-yielding  investment
products was responsible for the increase.  Balances averaged approximately $7.0
million  in  invested  funds  during  2007  compared  to an  average  balance of
approximately   $6.3  million  in  2006.   Cash   balances   were   invested  in
higher-yielding money market accounts in 2007 compared with 2006.

                                       25
<PAGE>

Income Tax Benefit

In  November  2008,  we were  approved  by the New Jersey  Economic  Development
Authority (the "NJEDA") to participate in the 2008 NJEDA Technology Business Tax
Certificate  Transfer  Program.  This  program  enables  approved,  unprofitable
technology  companies  based on the State of New Jersey to sell their unused net
operating loss  carryovers and unused  research and  development  tax credits to
unaffiliated,  profitable  corporate taxpayers in the State of New Jersey for at
least 75% of the value of the tax  benefits.  On November 25, 2008,  we received
$527,180 of net  proceeds  ($563,959  gross  proceeds  less  $36,779 of expenses
incurred) from a third party related to the sale of approximately  $7,297,000 of
unused net operating loss carryovers for the State of New Jersey.

Liquidity, Capital Resources and Financial Condition

As of and for the year ended December 31,
<TABLE>
<CAPTION>
<S>                            <C>          <C>          <C>           <C>        <C>
                                                             2007                     2006
                                   2008        Change      (Restated)    Change     (Restated)
                               -----------------------------------------------------------------
Net cash used in operating
 activities                    $ (6,531,711) $ 7,450,488  $(13,982,199) $ (643,643) $(13,338,556)
Net cash used in investing
 activities                      (3,202,651) $(3,006,640)     (196,011)    423,762      (619,773)
Net cash provided by financing
 activities                       7,305,475  $(6,654,480)   13,959,955   1,684,609    12,275,346
                               ------------- ------------ ------------- ----------  ------------
Net (decrease) increase in cash
 and cash equivalents          $ (2,428,887) $(2,210,632) $   (218,255) $1,464,728  $ (1,682,983)
                               ============= ============ ============= ==========  ============
</TABLE>


Details regarding the cash flows by activity follows.

Cash Used in Operating Activities
---------------------------------

In 2008, cash used in operating activities totaled approximately $6.5 million, a
decrease of $7.5 million from 2007. The following items significantly impacted
our cash used in operating activities during 2008:

     o    Our net loss included  approximately  $6.8 million in non-cash charges
          (non-GAAP measure),  which were comprised primarily of $3.1 million in
          stock-based compensation,  $2.5 million in interest expense related to
          the  amortization  of the Discount on Convertible  Notes Payable,  and
          $800,000   in  fixed   asset   depreciation   and   intangible   asset
          amortization.
     o    An increase in notes receivable from a customer.
     o    A decrease in research and development expense

In 2007, cash used in operating activities totaled  approximately $14.0 million,
approximately  $644,000 (restated) higher than cash used in operating activities
in 2006. The following items  significantly  impacted our cash used in operating
activities during 2007:

     o    Our net loss  included  $3.4  million in  non-cash  charges  (non-GAAP
          measure), which were comprised primarily of approximately $1.6 million
          in stock-based compensation,  approximately $1.2 million (restated) in
          amortization of Discount on Convertible Notes Payable, and $421,000 in
          fixed asset depreciation.
     o    An increase in salaries and benefits  paid,  primarily  due to average
          full-time headcount increases in research and development.
     o    Severance payments to our former chairman and former employees.
     o    An increase in contract research and development fees.
     o    An increase in interest  payments  related to  convertible  promissory
          notes.

                                       26
<PAGE>

In 2006, cash used in operating  activities totaled  approximately $13.3 million
(restated).  The  following  items  significantly  impacted  our  cash  used by
operating activities during 2006:

     o    Our 2006 net loss included $1.9 million in non-cash charges  (non-GAAP
          measure),  which were  comprised  primarily  of $1.3  million in stock
          based compensation and $363,000 in depreciation of fixed assets; and
     o    An  increase  in  total  company  salaries  and  benefits  paid  as we
          increased  headcount  to  support  bringing  the ANTs  Data  Server to
          market.

Cash Used in Investing Activities
---------------------------------

In 2008, cash used in investing  activities totaled  approximately $3.2 million,
an increase of $3.0 million over 2007, primarily due to $3 million that was paid
in  conjunction  with issuing  20,000,000  shares of common stock to acquire the
stock  of  Inventa  Technologies  (see  Note  4 of  the  consolidated  financial
statements).

In 2007, cash used in investing  activities totaled  approximately  $196,000,  a
decrease  of $424,000  from 2006,  primarily  due to a $340,000  decrease in the
purchase of computer and lab equipment required to design and test our products.
By early 2007, we had  purchased  substantially  all of the equipment  needed to
support our design, testing and quality assurance requirements.

Cash Provided by Financing Activities
-------------------------------------

From time to time, we engage in private  placement  activities  with  accredited
investors.  The private  placements  sometimes consist of Units,  which give the
investor  shares of  restricted  common stock at a discount to the  then-current
market price, and a warrant to purchase a number of restricted  shares of common
stock at a fixed price set at a premium to the  then-current  market price.  The
warrants generally have a life of two to three years.  Following is a discussion
and history of the sales of these instruments.

"J" Unit Sales
--------------

During the period from  December  2006  through  March 2007,  we issued  bundled
securities  consisting of convertible  promissory notes (the "Notes") and common
stock  (collectively  referred to as the "J Units").  This private  offering was
approved by the Board of Directors in December 2006 to raise additional  working
capital. The J Units were sold at a per unit price of $50,000 and were comprised
of (i) 14,285  shares of our  common  stock  (issued at the market  value of our
common stock on the date of purchase (restated)) and (ii) a Note with an initial
face value of  $25,000.  Each Note had a stated  interest  rate of 10% per annum
(simple  interest)  due  and  payable  at the  end of each  quarter.  Each  Note
originally  matured 24 months from the issuance date, and was  convertible  into
shares of common stock,  at the election of the holder,  at a per share price of
$2.00.  Each Note was  prepayable  without  penalty  upon 30 days notice and was
convertible  at our election in the event the closing  price of the common stock
equals or exceeds  $4.00 per share if  converted at our  election,  it agreed to
register  the shares of stock upon  conversion.  Substantially  all of the Notes
were extinguished in May 2008 as discussed below.

In  December  2006,  40 J Units were sold to  accredited  investors,  raising $2
million  and 571,400  shares of common  stock and Notes with an  aggregate  face
value of $1  million  were  issued.  In January  2007,  180 J Units were sold to
accredited  investors,  raising $9 million, and 2,571,300 shares of common stock
and Notes with an aggregate  face value of $4.5  million  were issued.  In March
2007,  40 J Units were sold to  accredited  investors,  raising $2 million,  and
571,400  shares of common  stock and Notes  with an  aggregate  face value of $1
million were issued.

The Common Stock issued in connection  with the December 2006 J Units was valued
at  $1,265,444  (restated).  The notes were then  evaluated and deemed to have a
beneficial  conversion  feature with an intrinsic value of $435,444  (restated),
which was  recorded  to  Discount  on Notes  Payable  with the  offset  going to
Additional  Paid-in  Capital.  In  addition,  we  paid  cash  and  issued  stock
commissions to a placement agent in connection with the issuance of the December
2006 J Units.  Cash  commissions  of $40,000 were paid to the  placement  agent;
10,380 shares of common stock were issued to the placement  agent; and we agreed
to issue 9,080 shares of Common Stock to the placement  agent upon conversion of
the Notes.  The Common Stock issued to the placement agent was valued at $23,874
(restated) based on market value of our stock on the date we issued the J Units.
Based on these  commissions,  the  Discount on Notes  Payable was  increased  by
$23,713  (restated)  and  Additional  Paid-in  Capital  was  reduced  by $25,150
(restated).  The Discount on  Convertible  Notes Payable issued in December 2006
totaled $700,888. The Notes were extinguished in May 2008 (see below).

                                       27
<PAGE>

The Common  Stock issued in  connection  with the January and March 2007 J Units
was valued at $6,849,423 (restated). The notes were then evaluated and deemed to
have a beneficial conversion feature valued at $2,026,923 (restated),  which was
recorded  to  Discount  on Notes  Payable  with the offset  going to  Additional
Paid-in  Capital.  In addition,  we paid cash and issued stock  commissions to a
placement  agent in  connection  with  the  issuance  of the 2007 J Units.  Cash
commissions of $1,100,000  were paid to the placement  agent;  145,440 shares of
common stock were issued to the placement  agent; and we agreed to issue 127,200
shares of Common Stock to the placement agent upon conversion of the Notes.  The
Common Stock  issued to the  placement  agent was valued at $449,228  (restated)
based on market  value of our stock on the date we issued the J Units.  Based on
these  commissions,  the  Discount on Notes  Payable was  increased  by $584,166
(restated) and Additional  Paid-in  Capital was reduced by $965,061  (restated).
The  Discount  on  Convertible  Notes  Payable  issued in January and March 2007
totaled $3,376,346. The Notes were extinguished in May 2008 (see below).

Convertible Notes Payable with Warrants
---------------------------------------

During  October  2007 we sold a  convertible  promissory  note in the  amount of
$2,000,000 to an accredited investor.  Pursuant to the sale, we issued a warrant
to the  investor  covering  1,333,333  shares of common  stock  with a per share
exercise price of $3.25.  The warrant expired 36 months from issuance.  The note
had a stated interest rate of 10% per annum (simple interest) due and payable at
the end of each calendar quarter, matured in 36 months from the date of issuance
and was convertible  into shares of common stock, at the election of the holder,
at a per share price of $1.50, and is prepayable  without penalty if (i) the bid
price of our common stock equals or exceeds $4.00 per share for ten  consecutive
trading  days and (ii) we provide the investor  with 20 trading  days' notice of
its intent to prepay. The note was deemed  extinguished in May 2008. As a result
of the extinguishment,  the maturity date of the debt and warrants were extended
to January 2011 and the  per-share  conversion  price was reduced to $0.80;  all
other terms remained unchanged.

During  December  2007 we sold a  convertible  promissory  note in the amount of
$1,003,226.  Pursuant to the sale, a warrant was issued to the investor covering
668,817  shares of common stock with a per share  exercise  price of $3.25.  The
warrant expired 36 months from issuance.  The note had a stated interest rate of
10% per annum  (simple  interest)  due and  payable at the end of each  calendar
quarter,  matured 36 months from  issuance  and was  convertible  into shares of
common stock, at the election of the holder,  at a per share price of $1.50, and
is prepayable without penalty if (i) the bid price of our common stock equals or
exceeds $4.00 per share for ten consecutive trading days and (ii) we provide the
investor  with 20 trading  days'  notice of its  intent to prepay.  The note was
deemed extinguished in May 2008. As a result of the extinguishment, the maturity
date of the debt and warrants  were  extended to January 2011 and the  per-share
conversion price was reduced to $0.80; all other terms remained unchanged.

Upon  original  issuance of the  convertible  promissory  note, we allocated the
proceeds  of these  sales  between  the  warrants  and the notes  based on their
relative fair values.  The  allocation  resulted in a total discount of $479,829
(restated)  related to the warrants for the Notes issued in October and December
2007. In addition,  the Note issued in October 2007 had a beneficial  conversion
feature  based on the computed fair value of the note. We recorded a discount of
$191,363 for the beneficial  conversion  feature.  The total discount  issued in
relation to these notes was $671,193.

Extinguishment of Debt
----------------------

On May 15, 2008 we negotiated  with certain  holders of the Notes to both extend
the maturity  date and reduce the price at which each note is  convertible  into
shares of common stock (the "Conversion Price") from $1.50 to $2.00 per share to
either  $0.80 or $1.20 per  share.  A total of $9.3  million  in  principal  was
renegotiated and the due dates were extended from their original  maturity dates
of December 2008 through  December  2010, to a revised  maturity date of January
31, 2011. The Notes that were renegotiated represent both those issued under the
"J" Unit Sales  discussed above as well as those issued under  Convertible  Debt
with  Warrants,  also  discussed  above.  The other terms of the Notes  remained
unchanged.

                                       28
<PAGE>

On the date of  modification  all of the Notes were  deemed  extinguished.  Upon
extinguishment, we recorded a loss of $49,940.

All of the Modified Notes were deemed to have a beneficial  conversion  feature,
as the closing  price of our stock on May 15, 2008 was greater  than the imputed
conversion value. The fair value of the beneficial  conversion  features totaled
$5,226,069  and were  recorded to Discount  on Notes  Payable  with an offset to
Additional Paid-in Capital. In addition,  the warrants issued in connection with
the October and December 2007 Notes were modified.  Consequently,  we calculated
the relative value of the debt and warrants.  The discount  associated with this
allocation  resulted  in  an  additional   $291,774   recorded  to  Discount  on
Notes Payable  with an offset to  Additional  Paid-in  Capital. A total
additional discount of  $5,517,943  was  recorded  as  a result  of the
extinguishment of debt. The discount will be  amortized  over  the  life of the
Modified  Notes  using  the effective or straight line interest method as
appropriate.

Line of Credit
--------------

On May 30, 2008,  we assumed a revolving  credit  facility (the  "Facility")  in
connection with the  acquisition of Inventa,  which remains in force through May
15, 2009.  The Facility  consists of a $250,000  revolving  line of credit which
bears interest at a daily rate of LIBOR plus 2.00% (0.44% at December 31, 2008).
At December 31, 2008,  there was $200,000  outstanding  under the line of credit
and  $50,000  available  pursuant  to the  terms of the  Facility.  There are no
commitment  fees due  under the  facility.  The  terms of the  Facility  require
consecutive  monthly  interest-only  payments  with the principal due on May 15,
2009.  The  Facility is secured by all of the assets of Inventa and requires the
net solvency of Inventa.

Convertible Notes Related to Acquisition of Inventa Technologies, Inc.
----------------------------------------------------------------------

In May 2008 and as part of the purchase price of Inventa, we issued $2.0 million
in unsecured  promissory  notes due January 31, 2011,  bearing  interest at 10%,
with interest  payable at the end of each quarter.  The  convertible  promissory
notes are  immediately  convertible to 2.5 million shares of our common stock at
the  election of the holders at a per share  conversion  price of $0.80.  At the
time of  issuance,  the  conversion  price was  $0.30  per  share  less than the
then-market  price of our common  stock.  The  intrinsic  value of the  embedded
beneficial  conversion feature totaling $2.0 million was recorded as an increase
to additional  paid-in capital and will be amortized to using the  straight-line
interest method over the life of the promissory notes.

Contractual Obligations and Contingencies

The following table summarizes our contractual obligations as of December 31,
2008:
<TABLE>
<CAPTION>
<S>                           <C>              <C>        <C>
                                        Payments Due                 Payments  Payments Due
                                            in Less    Payments Due   Due in      After
Contractual Obligations        Total     Than 1 Year   in 1-2 Years  3-4 Years   4 Years
                            ---------------------------------------------------------------
Convertible Notes           $ 11,703,226  $    450,000  $ 11,253,226  $       -  $        -
Non-cancelable operating
 leases                        1,401,846       326,098       391,181    391,181     293,386
                            ------------  ------------  ------------  ---------  ----------
Total contractual
 obligations                 $13,105,072  $    776,098  $ 11,644,407  $ 391,181  $  293,386
                            ============  ============  ============  =========  ==========
</TABLE>


                                       29
<PAGE>

Off-Balance-Sheet Arrangements

On April 27,  2005,  we entered  into a lease with a  partnership,  for  general
commercial  offices located in,  Burlingame,  California (the  "Premises").  The
Premises  are used for the  purposes  of  general  office  use and for  software
development. The lease had an initial term of three years and was subject to our
right to extend the term of the lease for a total of six  additional  years.  In
July 2007 we extended  this lease for the period May 1, 2008  through  April 30,
2009 at the rate of $34,200 per month. Through April 30, 2008 we recognized rent
expense for this lease in  accordance  with  Financial  Technical  Bulletin 85-3
("FTB 85-3"),  "Accounting for Operating  Leases with Scheduled Rent Increases."
The base rent, the effects of the scheduled rent  increases,  and the effects of
the rent abatement were recognized on a straight-line basis over the lease term;
rent expense for the periods May 1, 2008 through  April 30, 2009 are recorded at
the payment  amount.  During the years ended December 31, 2008, 2007 and 2006 we
recognized a net total of  $396,673,  $200,020  and  $200,020  respectively,  in
rental  expense for this lease.  During the year ended  December  31,  2008,  we
recognized  a total of $56,000 of  sublease  income,  which was offset to rental
expense. There are no asset retirement obligations under this operating lease.

On May 30, 2008 we acquired Inventa. As part of the acquisition ANTs assumed the
Inventa  operating  lease of a general  commercial  facility in Mt. Laurel,  New
Jersey at the monthly rent of approximately $10,000. The lease expires March 31,
2015 and was  amended  effective  August 1, 2008 to add 4,590  square  feet upon
receipt of a Certificate  of  Occupancy,  effective  January 5, 2009.  The total
monthly rent will  approximate  $16,300.  The amendment also restates the end of
the lease  commitment  to be seven  years  from the date of the  Certificate  of
Occupancy or January 5, 2016 for the additional space.

Under  our  leases  we are  obligated  to  restore  facilities  to their  former
condition;  these requirements consist of normal maintenance which is considered
to be  immaterial.  Effective  June 1, 2008, we agreed to sub-lease a portion of
our Burlingame  facility to a customer on a  month-to-month  lease through April
2009 for $13,000 for rent and utilities,  payable each month in advance.  Rental
expense is shown net of sub-lease income.

Critical Accounting Policies

Use of Estimates

The  preparation  of the  financial  statements in  accordance  with  accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management to make estimates and  assumptions  that affect  reported  amounts of
assets,  liabilities,  revenues and expenses and disclosure of contingent assets
and liabilities.  We evaluate such estimates and assumptions on an ongoing basis
and base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which
form the basis for  making  judgments  about the  carrying  values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these  estimates and probably will differ from these estimates under
different  assumptions  or  conditions.  On a  regular  basis  we  evaluate  our
assumptions,  judgments  and  estimates  and make changes  accordingly.  We also
discuss our critical accounting  estimates with the Audit Committee of the Board
of Directors.  We believe the assumptions,  judgments and estimates  involved in
the accounting for the  recoverability of long-lived  assets,  the relative fair
value  allocation  of  debt  and  equity   instruments,   revenue   recognition,
stock-based  compensation,  and  research  and  development  have  the  greatest
potential impact on our financial statements.  These areas are key components of
our results of operations and are based on complex rules that require us to make
judgments and estimates;  as a result,  we consider these to be our  significant
accounting  policies.  Historically,  our  assumptions,  judgments and estimates
relative to our  significant  accounting  policies have not differed  materially
from actual results.

Revenue Recognition

We recognize  license and royalty  revenue in accordance  with the provisions of
Statement of Position ("SOP") 97-2, Software Revenue Recognition,  and SOP 98-9,
Modification of SOP 97-2, Software Revenue Recognition,  With Respect to Certain
Transactions.  Revenue consists primarily of revenue earned under agreements for
software  licenses,  maintenance and support  (otherwise  known as post-contract
customer  support or "PCS") and professional  services.  Maintenance and support
revenue is deferred and recognized over the related contract  period,  generally
twelve months, beginning with customer acceptance of the product.

We use the  residual  method  to  recognize  revenue  when a  license  agreement
includes one or more  elements to be delivered at a future date.  If there is an
undelivered element under the license  arrangement,  we will defer revenue based
on  vendor-specific  objective  evidence  ("VSOE"),  of the  fair  value  of the
undelivered element, as determined by the price charged when the element is sold
separately.  If VSOE of fair value does not exist for all undelivered  elements,
we defer all revenue until sufficient  evidence exists or all elements have been
delivered.  Under the  residual  method,  discounts  are  allocated  only to the
delivered  elements  in a  multiple  element  arrangement  with any  undelivered
elements  being  deferred  based  on  VSOE of fair  values  of such  undelivered
elements.  Revenue from software  license  arrangements,  which comprise prepaid
license  and  maintenance  and  support  fees,  is  recognized  when  all of the
following criteria are met:

                                       30
<PAGE>

     o    Persuasive evidence of an arrangement exists;
     o    Delivery has occurred and there are no future deliverables except PCS;
     o    The fee is fixed and determinable. If we cannot conclude that a fee is
          fixed and  determinable,  then  assuming all other  criteria have been
          met, revenue is recognized,  as payments become due in accordance with
          paragraph 29 of SOP 97-2; and
     o    Collection is probable.

Revenue from professional fees,  consisting primarily of consulting services, is
recognized as services are provided.

Revenues resulting from the sale of developed technology are recognized when the
technology is transferred to the customer.  Evidence of the transfer occurs when
a sale agreement is executed by both the customer and the Company.

Research and Development Expenses

We account for research and development expenses in accordance with Statement of
Financial  Accounting  Standards No. 86,  "Accounting  for the Costs of Computer
Software to be Sold, Leased, or Otherwise Marketed."

We have not yet  established  technological  feasibility  of our ACS product and
believe that the difference  between  completion of research and development and
technological  feasibility  is difficult to  distinguish;  therefore,  all costs
relating to its  development  have been expensed in accordance with SFAS No. 86.
Upon  the  establishment  of such  feasibility  and  once  the  product  is made
available  for  release to  customers,  we will  capitalize  these  costs in our
Balance  Sheet.  Our  research and  development  expenses  consist  primarily of
salaries and benefits and outside contractor expenses.

Employee Stock-Based Compensation Expense

We have two  stock-based  employee  and  director  compensation  plans (the ANTs
software  inc.  2000 Stock  Option Plan and the ANTs  software  inc.  2008 Stock
Plan).  Since January 1, 2006, we have been using the provisions of SFAS 123(R),
"Share-Based Payment" to account for stock-based award compensation expense. Our
employee   stock-based   compensation   expense  for  2007  and  2006   includes
compensation  expense for all stock-based  compensation awards granted prior to,
but not fully vested,  as of January 1, 2006, based on the grant date fair value
estimated in accordance  with the original  provisions of SFAS 123,  "Accounting
for Stock  Compensation".  Stock-based  compensation expense for all stock-based
compensation  awards granted subsequent to January 1, 2006 is based on the grant
date fair value estimated in accordance  with the provisions of SFAS 123(R).  We
recognize  compensation expense for stock option awards on a straight-line basis
over the requisite service period of the award, generally three years.

Income Taxes

The carrying  value of our deferred tax assets is dependent  upon our ability to
generate  sufficient future taxable income in certain tax  jurisdictions.  Until
such time as we  establish  a taxable  income in such  jurisdictions,  the total
amount of our  deferred  tax assets  shall be offset with a valuation  allowance
equal to our deferred tax asset balance.

Our judgment,  assumptions and estimates used for the current tax provision take
into account the potential impact of the interpretation of FIN No. 48 ("FIN 48")
"Accounting for Uncertainty in Income Taxes, an Interpretation of SFAS No. 109,"
issued by the Financial  Accounting  Standards Board, and its  interpretation of
current  tax  laws  and  possible  future  audits  conducted  by  the  U.S.  tax
authorities.  FIN 48 required  that we examine the effects of our tax  position,
based on the use of our  judgments,  assumptions,  and estimates when it is more
likely  than not,  based on  technical  merits,  that our tax  position  will be
sustained if an examination is performed. We adopted the provisions of FIN 48 on
January 1, 2007.

                                       31
<PAGE>

Recent Accounting Pronouncements

In February 2008, the FASB issued  Financial Staff Position  ("FSP") SFAS 157-2,
Effective  Date of FASB  Statement  No.  157 ("FSP  157-2"),  which  delays  the
effective  date of SFAS 157, Fair Value  Measurements  ("SFAS  157"),  which was
issued  in  September  2006,  for  all  nonfinancial   assets  and  nonfinancial
liabilities,  except those that are recognized or disclosed at fair value in the
financial  statements  on a  recurring  basis  (at  least  annually).  SFAS  157
establishes a framework for measuring fair value and expands  disclosures  about
fair value  measurements.  FSP 157-2 partially defers the effective date of SFAS
157 to fiscal years  beginning  after  November 15,  2008,  and interim  periods
within  those  fiscal  years for the  items  within  the scope of this FSP.  The
adoption of SFAS 157 for all nonfinancial assets and nonfinancial liabilities is
effective for us beginning  January 1, 2009.  Adoption of this  statement is not
expected to be material.


In December  2007,  the FASB issued SFAS 141(R),  Business  Combinations  ("SFAS
141R") and SFAS 160,  Accounting and Reporting of  Non-controlling  Interests in
Consolidated Financial Statements, an amendment of ARB No. 51 ("SFAS 160"). SFAS
141R and SFAS 160 expand the scope of acquisition accounting to all transactions
and circumstances  under which control of a business is obtained.  SFAS 141R and
SFAS  160 are  effective  for  financial  statements  issued  for  fiscal  years
beginning after December 15, 2008 and interim periods within those fiscal years,
with early adoption prohibited and these standards must be adopted concurrently.
These standards will impact the Company for any  acquisitions  subsequent to the
adoption date. The most  significant  effect of adoption of SFAS 141R on results
of operations is that success fees, due diligence, legal, accounting, valuation,
and similar costs incurred in connection with acquisitions  (acquisition-related
costs) are  required to be expensed as incurred.  Current  practice is that such
costs are capitalized as part of the costs of the acquisition.

In April 2008, the FASB issued FSP SFAS 142-3,  Determination of the Useful Life
of  Intangible  Assets ("FSP  142-3").  This guidance is intended to improve the
consistency between the useful life of a recognized  intangible asset under SFAS
142 and the period of expected  cash flows used to measure the fair value of the
assets  under  SFAS 141R when the  underlying  arrangement  includes  renewal or
extension of terms that would require  substantial costs or result in a material
modification  to the asset upon renewal or extension.  Companies  estimating the
useful life of a recognized  intangible asset must now consider their historical
experience in renewing or extending  similar  arrangements or, in the absence of
historical experience,  must consider assumptions that market participants would
use about  renewal or  extension  as adjusted  for the  entity-specific  factors
included in SFAS 142. FSP 142-3 is effective  for us beginning  January 1, 2009.
Adoption of FSP 142-3 is not expected to be material.


In May 2008, the FASB issued FSP No. APB 14-2,  Accounting for Convertible  Debt
Instruments that may be Settled in Cash upon Conversion  (including Partial Cash
Settlement) ("FSP 14-1"). FSP 14-1 requires that issuers of certain  convertible
debt  instruments  that may be settled  in cash upon  conversion  to  separately
account for the  liability  and equity  components in a manner that will reflect
the  entity's  nonconvertible  debt  borrowing  rate when  interest  expense  is
recognized in subsequent periods.  The accounting for these types of instruments
under FSP 14-1 is intended to appropriately  reflect the underlying economics by
capturing  the value of the  conversion  options as borrowing  costs,  therefore
recognizing  their  potential  dilutive  effects  on  earnings  per  share.  The
effective date of APB 14-1 is for financial  statements  issued for fiscal years
and  interim  periods  beginning  after  December  15,  2008 and does not permit
earlier  adoption.  However,  the  transition  guidance  requires  retrospective
application  to  all  periods  presented  and  does  not  grandfather   existing
instruments. The Company is currently evaluating the impact FSP 14-1will have on
the financial statements.

In June 2008, the FASB issued EITF No. 07-5,  Determining  Whether an Instrument
(or Embedded  Feature) is Indexed to an Entity's Own Stock ("EITF  07-5").  EITF
07-5  provides  guidance  to  determine  whether an  instrument  (or an embedded
feature) is indexed to an entity's own stock when evaluating the instrument as a
derivative under SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities  ("SFAS No. 133").  An instrument that is both indexed to an entity's
own stock and classified in  stockholder's  equity in the entity's  statement of
financial  position is not  considered a derivative for the purposes of applying
the guidance in SFAS No. 133. EITF 07-5 provides a two-step process to determine
whether an equity-linked  instrument (or embedded feature) is indexed to its own
stock first by evaluating the instrument's  contingent exercise  provisions,  if
any, and second, by evaluating the instrument's settlement provisions. EITF 07-5
is applicable to outstanding  instruments as of the beginning of the fiscal year
in which the issue is adopted and is effective for financial  statements  issued
for fiscal years  beginning  after December 15, 2008, and interim periods within
those  fiscal  years.  We will adopt  EITF 07-5 on  January 1, 2009,  and do not
expect the adoption will be material to our consolidated financial condition and
results of operations.

                                       32
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Exchange Risk

Our  revenue is  invoiced  and  received in United  States  dollars.  One of our
partners bundles our product with its own and sells to customers in the U.S. and
abroad.  For the year ended December 31, 2008,  approximately  4% of our revenue
was generated  through these non-U.S.  royalties.  As a result,  our net royalty
receipts may have been impacted by any foreign exchange risk experienced by this
partner;  however,  we believe that our  financial  results were not and are not
expected  to be  materially  affected  by  factors  such as  changes  in foreign
currency  exchange rates or weak economic  conditions in foreign markets.  We do
not enter into foreign currency  hedging  transactions to mitigate any potential
exposure to foreign currency exchange risks.

Interest Rates

Our exposure to market risk for changes in interest  rates relates  primarily to
the  increase  or  decrease  in the  amount  of  interest  income we earn on our
investment  portfolio.  Our investment  portfolio consists of liquid investments
that  have  maturities  of three  months  or  less.  Our  risk  associated  with
fluctuating interest income is limited to investments in interest rate sensitive
financial  instruments.  Under our current  policy,  we do not use interest rate
derivative instruments to manage this exposure to interest rate changes. We seek
to ensure the safety and  preservation  of its  invested  principal  by limiting
default risk,  market risk, and  reinvestment  risk. We mitigate default risk by
investing in short-term investment grade securities.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
<S>                                <C>             <C>             <C>              <C>             <C>
                                                    Fiscal 2008 Quarters Ended,
                                  ----------------------------------------------------------------
                                                                                                     Year Ended
                                     March 31         June 30       September 30                     December 31,
                                     (Restated)      (Restated)       (Restated)     December 31         2008
                                  ---------------------------------------------------------------- ----------------

Revenues                           $     32,384    $  5,422,539    $   1,441,422    $   1,386,384   $    8,282,729
Gross profit                            (12,035)      4,536,395          263,311          206,894        5,052,239
Net loss                             (4,736,460)       (155,412)      (3,828,952)      (2,907,760)     (11,628,584)
Basic and diluted net loss per
 common share                             (0.08)          (0.00)           (0.04)           (0.03)           (0.15)
Shares used in computing basic
 and diluted net loss per share      57,792,266      71,986,666       90,648,369       90,648,369       77,847,729
</TABLE>

                                       33
<PAGE>
<TABLE>
<CAPTION>
<S>                                <C>             <C>             <C>              <C>             <C>
                                                    Fiscal 2007 Quarters Ended,
                                  ----------------------------------------------------------------
                                                                                                     Year Ended
                                     March 31         June 30       September 30     December 31     December 31,
                                     (Restated)      (Restated)       (Restated)      (restated)    2007 (Restated)
                                  ---------------------------------------------------------------------------------

Revenues                           $     69,127    $     21,467    $     226,964    $      42,148   $      359,706
Gross profit                             66,415          14,703          224,563           41,348          347,029
Net loss                             (3,840,130)     (5,016,472)      (4,267,235)      (4,519,382)     (17,643,219)
Basic and diluted net loss per
 common share                             (0.07)          (0.09)           (0.08)           (0.08)           (0.31)
Shares used in computing basic
 and diluted net loss per share      55,995,934      56,460,534       56,622,605       57,381,544       56,618,971
</TABLE>


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

On January 13, 2009, the registrant terminated the engagement of Burr, Pilger,
Mayer LLP ("BPM") as the Company's independent registered public accounting
firm. The decision to change accountants was recommended and approved by the
Audit Committee of the Board of Directors of the registrant.

BPM's audit report on the financial statements of the Company as of and for
the two most recent years ended December 31, 2007 and 2006 contained no adverse
opinion or disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope, or accounting principles.

During the registrant's two most recent fiscal years and any subsequent interim
period preceding the termination of BPM, there were no disagreements with BPM on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreement(s) if not
resolved to the satisfaction of BPM, would have caused BPM to make reference to
the subject matter of the disagreement(s) in connection with its report.

During the Company's two most recent fiscal years and any subsequent interim
period preceding the dismissal of BPM, there have been no reportable events of
the type required to be disclosed by Item 304(a)(1)(v) of Regulation S-K.

The Company has provided BPM with a copy of the disclosures it is making in
response to Item 304(a) of Regulation S-K. The Company has requested that BPM
review the disclosures and furnish the Company with a letter addressed to the
Commission stating whether it agrees with the statements made by the Company in
response to Item 304(a) of Regulation S-K and, if not, stating the respects in
which it does not agree. Such letter is attached hereto as exhibit 16.2.

     (b) On January 15, 2009, the Company engaged Weiser, LLP as its new
independent accountant. Prior to the engagement, and for the preceding two most
recent fiscal years and any subsequent interim period prior to the engagement,
the registrant did not consult with Weiser, LLP regarding either: the
application of accounting principles to any specified transaction, either
completed or proposed; or the type of audit opinion that might be rendered on
the registrant's financial statements, and where either a written report was
provided to the registrant or oral advice was provided that the new accountant
concluded was an important factor considered by the registrant in reaching a
decision as to the accounting, auditing or financial reporting issue; or any
matter that was either the subject of a disagreement (as defined in paragraph
(a)(1)(iv) and the related instructions of item 304 of Regulation S-K) or a
reportable event (as described in paragraph (a)(1)(v) of item 304 of Regulation
S-K).

ITEM 9A. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures

Our management,  with the participation of our Chief Executive Officer and Chief
Financial  Officer,  evaluated the effectiveness of our disclosure  controls and
procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as
amended  (the  "Exchange  Act").  In designing  and  evaluating  the  disclosure
controls and procedures, management recognizes that any controls and procedures,
no matter how well designed and operated,  can provide only reasonable assurance
of achieving the desired control objectives.

Based  on  management's  evaluation,  our  Chief  Executive  Officer  and  Chief
Financial  Officer  concluded  that,  as of December  31, 2008,  our  disclosure
controls and  procedures  are designed at a reasonable  assurance  level and are
effective to provide  reasonable  assurance that  information we are required to
disclose in reports  that we file or submit  under the Exchange Act is recorded,
processed,  summarized  and  reported  within  the  time  periods  specified  in
Securities and Exchange Commission rules and forms, and that such information is
accumulated and  communicated  to our management,  including our chief executive
officer and chief financial officer,  as appropriate,  to allow timely decisions
regarding required disclosure.

(b) Changes in internal control over financial reporting.

We regularly review our system of internal control over financial  reporting and
make  changes to our  processes  and systems to improve  controls  and  increase
efficiency,  while  ensuring  that we maintain  an  effective  internal  control
environment.  Changes may include such  activities  as  implementing  new,  more
efficient systems, consolidating activities, migrating processes, or acquisition
of  subsidiaries.  No  changes to  internal  controls  were made  during the 4th
quarter of 2008.

                                       34
<PAGE>

(c) Management's report on internal control over financial reporting.

Management is responsible for  establishing  and maintaining  adequate  internal
control  over  financial  reporting  (as  defined  in Rule  13a-15(f)  under the
Exchange  Act). Our internal  control over  financial  reporting are designed to
provide reasonable  assurance  regarding the reliability of financial  reporting
and the preparation of financial  statements for external purposes in accordance
with  generally  accepted  accounting   principles.   Because  of  its  inherent
limitations, internal control over financial reporting may not prevent or detect
misstatements.

To evaluate the effectiveness of internal control over financial  reporting,  as
required by Section  404 of the  Sarbanes-Oxley  Act,  management  conducted  an
assessment,    including    testing,    using   the    criteria    in   Internal
Control--Integrated   Framework,   issued  by  the   Committee   of   Sponsoring
Organizations of the Treadway  Commission (COSO).  Management elected to exclude
Inventa  from their  assessment  of internal  control over  financial  reporting
pursuant  to the SEC  guidance,  Management's  Report on Internal  Control  Over
Financial  Reporting  and  Certification  of Disclosure in Exchange Act Periodic
Reports. Inventa represents approximately 38.5% of the Company's total revenues.

Based on our  assessment  we concluded  that at December  31, 2008,  there was a
material weakness in our internal control over financial  reporting.  A material
weakness is a deficiency, or a combination of deficiencies, in internal controls
that can result in a reasonable  possibility that a material misstatement of the
annual or interim  financial  statements  will not be prevented or detected on a
timely  basis.  Management  reported  to the  Audit  committee  that a  material
weakness was identified  related to a lack of adequate resources during the year
to evaluate and correctly  report specific  technical  interpretations  of GAAP.

Management has concluded that our internal control over financial reporting was
not effective as of December 31, 2008 to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external reporting purposes in accordance with GAAP. As
mentioned, we reviewed the results of management's assessment with our audit
committee.

(d) Remediation Steps to Address Material Weakness

Management  has  recognized the need to raise the level of experience and acumen
within  the  accounting  department,   especially  pertaining  to  reporting  of
non-routine,  highly complex  technical  transactions.  In the fourth quarter of
2008  management  hired a third  party  contract  consulting  company to provide
financial   management   expertise,   thought   leadership   and  SEC  reporting
capabilities to the Company.




            The remainder of this page was intentionally left blank.


                                       35
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


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


We have audited ANTs software inc's internal control over financial reporting as
of December 31, 2008, based on criteria established in Internal
Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company's management is
responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management's Report on Internal Control
Over Financial Reporting. Our responsibility is to express an opinion on the
Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating
the design and operating effectiveness of internal control based on the assessed
risk. Our audit also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion. As described in Management's Report on Internal Control
over Financial Reporting, management has excluded Inventa from its assessment of
internal control over financial reporting as of December 31, 2008 because it was
acquired by the Company in a purchase business combination during 2008. We have
also excluded Inventa from our audit of internal control over financial
reporting. Inventa represents approximately 38.5% of total consolidated revenue.

A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

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

A material weakness is a control deficiency, or combination of deficiencies, in
internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of the Company's annual or interim
financial statements will not be prevented or detected on a timely basis. The
following material weakness has been identified and included in management's
assessment. There was a lack of adequate resources during the year to evaluate
and correctly report specific technical interpretations of GAAP. This material
weakness was considered in determining the nature, timing, and extent of audit
tests applied in our audit of the 2008 consolidated financial statements, and
this report does not affect our report dated December 31, 2008 on those
financial statements.

                                      36
<PAGE>

In our opinion, because of the effect of the material weakness described above
on the achievement of the objectives of the control criteria, the Company has
not maintained effective internal control over financial reporting as of
December 31, 2008, based on criteria established in Internal Control--Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).

We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet as of
December 31, 2008 and the related consolidated statements of operations,
stockholders' equity and cash flows of the Company for the year ended December
31, 2008, and our report dated April 29, 2009 expressed an unqualified opinion.



/s/ Weiser LLP
New York, NY
April 29, 2009






ITEM 9B.  OTHER INFORMATION

None


                                       37
<PAGE>

                                    PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The  information  required  by this  item is  incorporated  in  this  report  by
reference  to  the  Company's  Proxy  statement  to be  filed  with  the  SEC in
connection  with its 2009 Annual Meeting of  Stockholders  within 120 days after
the end of our year ended December 31, 2008.

ITEM 11. EXECUTIVE COMPENSATION

The  information  required  by this  item is  incorporated  in  this  report  by
reference  to  the  Company's  Proxy  statement  to be  filed  with  the  SEC in
connection  with its 2009 Annual Meeting of  Stockholders  within 120 days after
the end of our year ended December 31, 2008.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

The  information  required  by this  item is  incorporated  in  this  report  by
reference  to  the  Company's  Proxy  statement  to be  filed  with  the  SEC in
connection  with its 2009 Annual Meeting of  Stockholders  within 120 days after
the end of our year ended December 31, 2008.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
         INDEPENDENCE

The  information  required  by this  item is  incorporated  in  this  report  by
reference  to  the  Company's  Proxy  statement  to be  filed  with  the  SEC in
connection  with its 2009 Annual Meeting of  Stockholders  within 120 days after
the end of our year ended December 31, 2008.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The  information  required  by this  item is  incorporated  in  this  report  by
reference  to  the  Company's  Proxy  statement  to be  filed  with  the  SEC in
connection  with its 2009 Annual Meeting of  Stockholders  within 120 days after
the end of our year ended December 31, 2008.



                                       38
<PAGE>

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Documents filed as part of this report:

Consolidated Financial Statements
<TABLE>
<CAPTION>
<S>                                                                                                     <C>
                                                                                                     Page

Report of Independent Registered Public Accounting Firm                                               F-1

Report of Independent Registered Public Accounting Firm                                               F-2

Balance Sheets as of December 31, 2008 and 2007                                                       F-3

Statements of Operations for the years ended December 31, 2008, 2007 and 2006                         F-4

Statements of Stockholders' Equity (Deficit) for the years ended December 31, 2008, 2007 and 2006     F-5

Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006                         F-6

Notes to Financial Statements                                                                         F-8
</TABLE>


                                       39
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


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


We have audited the accompanying consolidated balance sheet of ANTs software,
inc. and subsidiary as of December 31, 2008, and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for the
year then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of ANTs
software, inc. and subsidiary as of December 31, 2008, and the consolidated
results of their operations and their cash flows for the year then ended in
conformity with U.S. generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
consolidated financial statements, the Company has incurred significant
recurring operating losses and negative cash flows from operations. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 3. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the Company's internal control over
financial reporting as of December 31, 2008, based on criteria established in
Internal Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated April 29,
2009 expressed an adverse opinion.



/s/ Weiser LLP
New York, NY
April 29, 2009

                                       F-1
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


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

We have  audited the  accompanying  balance  sheet of ANTs  software  inc. as of
December  31,  2007  (restated)  and  the  related   statements  of  operations,
stockholders'  (deficit)  equity and cash flows for each of the two years in the
period ended December 31, 2007 (as restated). These financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the 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  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position of ANTs  software  inc. as of
December 31, 2007 and the results of its  operations and its cash flows for each
of the two years in the period  ended  December  31, 2007,  in  conformity  with
accounting principles generally accepted in the United States of America.

As  discussed  in Note 1 "Basis  of  Presentation  and  Continuation  as a Going
Concern" to the  financial  statements  as of December  31, 2007 (not  presented
herein   separately),   the   Company's   recurring   losses  from   operations,
stockholders'  deficit,  and  cash  flows  used in  operating  activities  raise
substantial doubt about its ability to continue as a going concern. Management's
plans  regarding  those  matters  are  also  described  in  Note  1,  "Basis  of
Presentation  and  Continuation as a Going Concern" as of December 31, 2007 (not
presented  herein  separately).  The  financial  statements  do not  include any
adjustments that might result from the outcome of this uncertainty.

As discussed in Note 1 to the financial statements, as of December 31, 2007 (not
presented  herein  separately),  the  Company  adopted  Statement  of  Financial
Accounting  Standard No. 123 (revised 2004),  "Share-Based  Payment",  effective
January  1,  2006  applying  the  modified  perspective  method,  and  Financial
Accounting  Standards Board Interpretation No. 48 "Accounting for Uncertainty in
Income Taxes", effective January 1, 2007.

As discussed  in Note 2 to the  financial  statements,  the Company has restated
previously  issued financial  statements as of December 31, 2007 and for each of
the two years in the period  ended  December  31, 2007 for the  correction  of a
misstatement in the respective periods.


Burr, Pilger & Mayer LLP
San Francisco, California
March 13, 2008, except for Notes 2, 14 and 16
         as to which the date is April 29, 2009




                                       F-2
<PAGE>
<TABLE>
<CAPTION>
<S>                                                               <C>             <C>
                       ANTS SOFTWARE INC.
                   CONSOLIDATED BALANCE SHEETS
------------------------------------------------------------------------------------------------

                                                                          December 31,
                                                                 -------------------------------
                                                                                       2007
                             ASSETS                                    2008         (restated)
                                                                 ---------------  --------------
Current assets:
  Cash and cash equivalents                                       $   2,051,807   $   4,480,694
  Accounts receivable                                                   383,445           8,204
  Notes receivable from customer                                      2,000,000               -
  Restricted cash                                                       125,000         192,574
  Current portion of prepaid debt issuance costs                          4,121         376,165
  Prepaid expenses and other current assets                             160,723         173,331
  Prepaid expense from warrant issued to customer, net                        -          57,674
                                                                 ---------------  --------------
      Total current assets                                            4,725,096       5,288,642
Property and equipment, net                                             399,093         510,490
Other intangible assets (net)                                         5,504,081               -
Goodwill                                                             22,761,517               -
Long-term portion of prepaid debt issuance costs                              -          53,175
Other assets                                                             67,018          34,420
                                                                 ---------------  --------------
      Total assets                                                $  33,456,805   $   5,886,727
                                                                 ===============  ==============

              LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and other accrued expenses                     $   1,445,043   $   1,230,308
  Line of credit                                                        200,000               -
  Current portion of convertible promissory notes, net of debt
    discount of $15,916 and $484,565, respectively                      234,084         515,435
  Deferred revenues                                                     487,121          48,818
                                                                 ---------------  --------------
      Total current liabilities                                       2,366,248       1,794,561

Long-term liabilities:
  Convertible promissory notes, net of debt discount of
   $8,549,964 and $3,072,868, respectively                            2,703,260       5,430,358
      Deferred tax liability                                            344,000               -
                                                                 ---------------  --------------
      Total liabilities                                               5,413,508       7,224,919
                                                                 ---------------  --------------

Commitments and contingencies

Stockholders' equity (deficit):
  Preferred stock, $0.0001 par value; 50,000,000 shares
   authorized, no shares issued and outstanding                               -               -
  Common stock, $0.0001 par value; 200,000,000 shares authorized;
  90,648,369 and 57,398,445 shares issued and outstanding,
   respectively                                                           9,065           5,740
  Additional paid-in capital                                        115,963,846      74,957,098
  Accumulated deficit                                               (87,929,614)    (76,301,030)
                                                                 ---------------  --------------
      Total stockholders' equity (deficit)                           28,043,297      (1,338,192)
                                                                 ---------------  --------------
Total liabilities and stockholders' equity (deficit)              $  33,456,805   $   5,886,727
                                                                 ===============  ==============

See accompanying notes to consolidated financial statements
</TABLE>

                                       F-3
<PAGE>

<TABLE>
<CAPTION>
<S>                                <C>              <C>              <C>
                               ANTS SOFTWARE INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
------------------------------------------------------------------------------------

                                                Years Ended December 31,
                                    ------------------------------------------------
                                                          2007             2006
                                         2008          (restated)       (restated)
                                    --------------   --------------   --------------
Revenues:
  Products                          $   4,970,385    $     258,829    $     157,958
  Services                              3,312,344          100,877          129,874
                                    --------------   --------------   --------------
      Total revenues                    8,282,729          359,706          287,832

Cost of Revenues:
  Products                                511,993            9,476           15,136
  Services                              2,718,497            3,201            8,757
                                    --------------   --------------   --------------
Gross profit                            5,052,239          347,029          263,939

Operating Expenses:
  Sales and marketing                   2,155,211        2,939,481        5,164,937
  Research and development              6,652,346        9,442,521        6,736,381
  General and administrative            4,699,862        3,923,297        3,630,934
                                    --------------   --------------   --------------
      Total operating expenses         13,507,419       16,305,299       15,532,252
                                    --------------   --------------   --------------
       Loss from operations            (8,455,180)     (15,958,270)     (15,268,313)
                                    --------------   --------------   --------------

Other (expense) income:
   Interest income                         82,816          320,928          203,133
   Other                                  (58,404)           2,667          (53,277)
   Loss on extinguishment of
    convertible
    promissory notes payable              (49,940)               -                -
   Interest expense                    (3,675,056)      (2,008,544)         (13,521)
                                    --------------   --------------   --------------
       Total other (expense) income    (3,700,584)      (1,684,949)         136,335
                                    --------------   --------------   --------------
Net loss before income tax benefit     12,155,764                -                -

Income tax benefit                        527,180                -                -
                                    --------------   --------------   --------------

       Net loss                     $ (11,628,584)   $ (17,643,219)   $ (15,131,978)
                                    ==============   ==============   ==============
Basic and diluted net loss
   per common share                 $       (0.15)   $       (0.31)   $       (0.30)
                                    ==============   ==============   ==============
Shares used in computing basic and
 diluted
   net loss per share                  77,847,729       56,618,971       50,474,155
                                    ==============   ==============   ==============
</TABLE>

See accompanying notes to consolidated financial statements

                                       F-4
<PAGE>
<TABLE>
<CAPTION>
<S>                    <C> <C>                    <C>         <C>          <C>          <C>           <C>            <C>
                               ANTS SOFTWARE INC.
                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
                                EQUITY (DEFICIT)

                                                      Common Stock           Common      Additional
                                               --------------------------    Stock        Paid-in      Accumulated
                                                  Shares        Amount     Subscribed     Capital        Deficit        Total
                                               -----------------------------------------------------------------------------------
   Balance at January 1, 2006                     44,862,058  $     4,487  $   243,608  $ 49,690,324  $ (43,525,833) $  6,412,586
Proceeds from private placements, net of cash
 commissions of $754,400                           7,398,129          740            -    10,311,837              -    10,312,577
Prepaid commission                                                                             8,833                        8,833
 Beneficial conversion feature                             -            -            -       435,444              -       435,444
 Common stock issued for shares subscribed a
 December 31, 2005                                   137,230           14     (243,608)      243,594              -             -
Common stock subscribed as commission to
 placement agent at December 31, 2006                      -            -            1            (1)             -             -
Proceeds from warrant exercises, net of cash
 commissions of $39,125                              302,500           30            -       529,179              -       529,209
Options exercised through cash consideration         477,902           47            -       713,807              -       713,854
Stock-based compensation expense                      10,666            1            -     1,348,246              -     1,348,247
Net loss                                                   -            -            -                  (15,131,978)  (15,131,978)
                                               -------------  -----------  -----------  ------------  -------------- -------------
   Balance at December 31, 2006 (restated)        53,188,485        5,319            1    63,281,262    (58,657,811)    4,628,771

Proceeds from private placements, net of cash
 commissions of $684,942                           3,142,700          314            -     6,644,000              -     6,644,314
Beneficial conversion feature                              -            -            -     2,218,286              -     2,218,286
Prepaid commission                                         -            -            -       169,109              -       169,109
Common stock issued for shares subscribed at
 December 31, 2006                                   210,360           22           (1)          (21)             -             -
Proceeds from option and warrant exercises           856,900           85                  1,056,640              -     1,056,725
Stock-based compensation expense                           -            -            -     1,587,822              -     1,587,822
Net loss                                                   -            -            -             -    (17,643,219)  (17,643,219)
                                               -------------  -----------  -----------  ------------  -------------- -------------
   Balance at December 31, 2007 (restated)        57,398,445        5,740            -    74,957,098    (76,301,030)   (1,338,192)

Proceeds from private placements, net of cash
 commissions of $367,200                          13,202,424        1,320            -     7,246,485              -     7,247,805
Shares issued in connection with acquisition
 of Inventa Technologies, Inc.                    20,000,000        2,000            -    23,998,000              -    24,000,000
Beneficial conversion feature                                                              1,355,586                    1,355,586
Fair value of conversion feature of upon
 modification of convertible
 promissory notes                                          -            -            -     5,226,069                    5,226,069
Proceeds from option and warrant exercises            47,500            5            -        32,665              -        32,670
Stock-based compensation expense                                                           3,147,943              -     3,147,943
Net loss                                                   -            -            -             -    (11,628,584)  (11,628,584)
                                               -------------  -----------  -----------  ------------  -------------- -------------
   Balance at December 31, 2008                   90,648,369  $     9,065  $         -  $115,963,846  $ (87,929,614) $ 28,043,297
                                               =============  ===========  ===========  ============  ============== =============

See accompanying notes to consolidted financial statements
</TABLE>

                                       F-5
<PAGE>
<TABLE>
<CAPTION>
<S>                                                   <C>             <C>             <C>
                                          ANTS SOFTWARE INC.
                               CONSOLIDATED STATEMENTS OF CASH FLOWS
----------------------------------------------------------------------------------------------------

                                                                Years Ended December 31,
                                                     -----------------------------------------------
                                                                           2007            2006
                                                           2008         (restated)      (restated)
                                                     --------------- ---------------- --------------
Cash flows from operating activities:
 Net loss                                             $ (11,628,584)  $  (17,643,219) $ (15,131,978)
 Adjustments to reconcile net loss to net cash used
  in operating activities:
   Depreciation and amortization                            827,155          421,000        363,062
   Amortization of warrant issued to customer                57,674           57,673         57,674
   Amortization of discount on notes payable              2,509,496        1,184,922          6,076
   Amortization of debt issuance costs                       83,404          178,537              -
   Stock-based compensation expense                       3,147,942        1,587,822      1,348,246
   Bad debt expense                                               -                -         28,738
   Loss on disposal of fixed assets                          78,645           (1,041)        57,614
   Loss on extinguishment of convertible promissory notes    49,940                -              -
 Changes in operating assets and liabilities:
   Accounts receivable                                      348,395           47,115        (51,655)
   Restricted cash                                           67,574                -              -
   Prepaid expenses and other current assets                 83,424          (41,851)       (44,843)
   Notes receivable from customer                        (2,500,000)               -              -
   Payments received on notes receivable from
    customer                                                500,000                -              -
   Other assets                                             (12,582)               -              -
   Accounts payable and other accrued expenses              (53,310)         234,844         30,294
   Deferred revenues                                        (90,884)          (8,001)        (1,784)
                                                     --------------- ---------------- --------------
     Net cash used in operating activities               (6,531,711)     (13,982,199)   (13,338,556)
                                                     --------------- ---------------- --------------

Cash flows from investing activities:
   Transfer operating funds to restricted cash                    -           (1,616)       (85,559)
   Purchases of property and equipment                     (161,065)        (194,395)      (534,214)
   Proceeds from disposal of property and equipment           5,861                -              -
   Acquisition of Inventa, net of cash acquired          (3,047,444)               -              -
                                                     --------------- ---------------- --------------
     Net cash used in investing activities               (3,202,651)        (196,011)      (619,773)
                                                     --------------- ---------------- --------------

Cash flows from financing activities:
   Proceeds from private placements - equity, net of
    cash commissions                                      7,247,805        6,644,314     10,312,577
   Proceeds from private placements - convertible
    promissory notes, net of commissions                                   6,258,916        719,706
   Proceeds from exercise of options and warrants            32,670        1,056,725      1,243,063
   Net proceeds from line of credit                          25,000                -              -
                                                     --------------- ---------------- --------------
     Net cash provided by financing activities            7,305,475       13,959,955     12,275,346
                                                     --------------- ---------------- --------------

Net decrease in cash and cash equivalents                (2,428,887)        (218,255)    (1,682,983)
Cash and cash equivalents at beginning of year            4,480,694        4,698,949      6,381,932
                                                     --------------- ---------------- --------------
Cash and cash equivalents at end of year              $   2,051,807   $    4,480,694  $   4,698,949
                                                     =============== ================ ==============


See accompanying notes to consolidated financial statements
</TABLE>

                                       F-6
<PAGE>

                             ANTS SOFTWARE INC.
                  CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                 Years Ended December 31,
                                            -----------------------------------
                                                            2007        2006
                                                2008    (restated)  (restated)
                                            ----------- ----------- -----------
Supplemental disclosure of cash flow
 information:
  Cash paid during the period for:
    Interest                                $ 1,003,358 $   433,014 $     4,295
                                            =========== =========== ===========

Non-cash investing and financing activities:
  Value of beneficial conversion feature
   related to issuance
  of "J" Units                              $         - $ 2,218,286 $   435,444
  Common stock paid for private placement
   agent commission                         $         - $   169,109 $     8,833
  Common stock issued to placement agent
   allocated to additional paid in capital  $        51 $   168,920 $         -
  Common stock issued for subscribed shares
   at end of prior year                     $         - $         - $   198,450

  See accompanying notes to consolidated
   financial statements                                    (cont'd)

                                      F-7
<PAGE>

                               ANTS SOFTWARE INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  Description of Business

Nature of Operations

ANTs  software  inc.  is  developing  the ANTs  Compatibility  Server.  The ANTs
Compatibility  Server  ("ACS") is middleware  that brings the promise of a fast,
cost-effective  method to move  applications  from one database to another - and
enables   enterprises  to  achieve  cost  efficiencies  by  consolidating  their
applications  onto  fewer  databases.   The  Company  also  develops  technology
software to sell to their customers.

Principles of Consolidation

The consolidated financial statements include the accounts of ANTs software inc.
and its wholly-owned subsidiary, Inventa Technologies, Inc. ("Inventa") from the
date of  acquisition  (May 30, 2008)  through  December  31, 2008  (collectively
referred to as the "Company").  All significant  intercompany  transactions  and
accounts have been eliminated.

2.  Restatement

The Company  has  restated  its  balance  sheet as of December 31, 2007 and 2006
and the related statements of operations,  stockholders'  equity (deficit),  and
cash flows for the years ended  December 31, 2007 and 2006 to correct  errors in
such financial statements.

The restatement of the Company's financial  statements is based upon a review of
the  accounting  treatment of certain  transactions  entered into by the Company
with certain  investors in 2006 and 2007 (see Note 14 for a description of these
transactions).   During  this  review,   the  Company  discovered  that  it  had
incorrectly  applied a  restriction  discount to the market  value of its common
stock based on a long history of selling  restricted  common stock to a group of
investors.  The  discounted  stock  price  was then  used in the  allocation  of
proceeds  between debt and equity for Units of convertible  promissory notes and
restricted  common  shares,  which were sold to investors in late 2006 and early
2007.  The  discounted  stock  price was also used to  determine  if there was a
beneficial  conversion  related to the convertible  promissory  notes.  The same
methodology was used in late 2007 when the Company issued convertible promissory
notes  along  with  common  stock  warrants.

The following  tables present the effects of the restatement  adjustments on the
Company's balance sheet as of December 31, 2007 and its consolidated  statements
of operations and cash flows for the years ended December 31, 2007 and 2006.


                                      F-8
<PAGE>
<TABLE>
<CAPTION>
<S>                                                        <C>            <C>              <C>
                           CONSOLIDATED BALANCE SHEET
---------------------------------------------------------------------------------------------------------

                                                                         December 31, 2007
                                                           ----------------------------------------------
                          ASSETS                           As Previously
                                                               Reported    Adjustments      As Restated
                                                           ------------- ---------------   --------------
Current assets:
  Cash and cash equivalents                                $   4,480,694  $           -    $   4,480,694
  Accounts receivable                                              8,204              -            8,204
  Restricted cash                                                192,574              -          192,574
  Current portion of prepaid debt issuance cost                  434,630        (58,465)(a)      376,165
  Prepaid expenses and other current assets                      173,331              -          173,331
  Prepaid expense from warrant issued to customer, net            57,674              -           57,674
                                                           -------------- --------------   --------------
     Total current assets                                      5,347,107        (58,465)       5,288,642
Property and equipment, net                                      510,490              -          510,490
Long-term portion of prepaid debt issuance cost                   47,786          5,389 (b)       53,175
Other assets                                                      34,420              -           34,420
                                                           -------------- --------------   --------------
     Total assets                                          $   5,939,803  $     (53,076)   $   5,886,727
                                                           ============== ==============   ==============

           LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and other accrued expenses              $   1,230,306  $           2    $   1,230,308
  Current portion of convertible promissory notes, net of                             -
    premium of $60,440 and discount of $484,565 (restated),
    respectively                                               1,060,440       (545,005)(c)      515,435
  Deferred revenues                                               48,818              -           48,818
                                                           -------------- --------------   --------------
     Total current liabilities                                 2,339,564       (545,003)       1,794,561


Long-term liabilities:
  Convertible promissory notes, net of premium of $141,893
   (net) and discount $3,072,868 (restated), respectively      8,645,119     (3,214,761)(d)    5,430,358
                                                           -------------- --------------   --------------

     Total liabilities                                        10,984,683     (3,759,764)       7,224,919
                                                           -------------- --------------   --------------
Commitments and contingencies

Stockholders' equity (deficit):
  Preferred stock, $0.0001 par value; 50,000,000 shares
   authorized, no shares issued and outstanding                        -              -                -
  Common stock, $0.0001 par value; 200,000,000 shares
   authorized; 57,398,445 shares issued and outstanding            5,740              -            5,740
  Common stock subscribed, not issued                                  -              -                -
  Additional paid-in capital                                  69,914,339      5,042,759 (e)   74,957,098
  Accumulated deficit                                        (74,964,959)    (1,336,071)(f)  (76,301,030)
                                                           -------------- --------------   --------------
     Total stockholders' (deficit) equity                     (5,044,880)     3,706,688       (1,338,192)
                                                           -------------- --------------   --------------
Total liabilities and stockholders' equity (deficit)       $   5,939,803  $     (53,076)   $   5,886,727
                                                           ============== ==============   ==============

(a) & (b)-- Adjustment to eliminate prepaid debt issuance costs related to issuance of Convertible Notes Payable
(c) & (d)-- Adjustment to record discount related to issuance of "J" Units
(e)-- Adjustment to record impact of discount related to issuance of "J" Units
(f)-- Adjustment to record net impact to 2007 and 2006 Statements of Operations
</TABLE>

                                       49
<PAGE>

<TABLE>
<CAPTION>
<S>                                           <C>              <C>              <C>
                              CONSOLIDATED STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------------------------

                                                        For the Year Ended December 31, 2007
                                               -------------------------------------------------
                                               As Previously
                                                  Reported       Adjustments       As Restated
                                               --------------   --------------    --------------
Revenues:
  Products                                     $     258,829    $           -     $     258,829
  Services                                           100,877                -           100,877
                                               --------------   --------------    --------------
      Total revenues                                 359,706                -           359,706

Cost of Revenues:
  Products                                             9,476                -             9,476
  Services                                             3,201                -             3,201
                                               --------------   --------------    --------------
        Gross profit                                 347,029                -           347,029

Operating Expenses:
  Sales and marketing                              2,939,487                -         2,939,487
  Research and development                         9,442,521                -         9,442,521
  General and administrative                       4,310,141         (386,844) (a)    3,923,297
                                               --------------   --------------    --------------
      Total                                       16,692,143         (386,844)       16,305,299
                                               --------------   --------------    --------------
        Income (loss) from operations            (16,345,114)         386,844       (15,958,270)
                                               --------------   --------------    --------------

Other (expense) income:
  Interest income                                     320,928                -           320,928
  Other                                                 2,667                -             2,667
  Interest expense                                   (291,704)      (1,716,840) (b)   (2,008,544)
                                               --------------   --------------    --------------
        Total (expense) income                         31,891       (1,716,840)       (1,684,949)
                                               --------------   --------------    --------------
        Net loss                                $ (16,313,223)   $  (1,329,996)    $ (17,643,219)
                                               ==============   ==============    ==============
Basic and diluted net loss
   per common share                             $       (0.29)   $       (0.02)    $       (0.31)
                                               ==============   ==============    ==============
Shares used in computing basic and diluted
   net loss per share                              56,618,971       56,618,971        56,618,971
                                               ==============   ==============    ==============
</TABLE>

(a)-- Adjustment to reverse amortization of Prepaid Debt Issuance Costs
(b)-- Adjustment to record increase of interest expense related to amortization
       of Discount on Convertible Notes Payable

                                       50
<PAGE>

<TABLE>
<CAPTION>
<S>                                         <C>              <C>                 <C>
                            CONSOLIDATED STATEMENT OF OPERATIONS
---------------------------------------------------------------------------------------------

                                                    For the Year Ended December 31, 2006
                                             --------------------------------------------------
                                              As Previously
                                                  Reported      Adjustments       As Restated
                                             --------------   ---------------    --------------
Revenues:
  Products                                   $     157,958    $            -     $     157,958
  Services                                         129,874                 -           129,874
                                             --------------   ---------------    --------------
      Total revenues                               287,832                 -           287,832

Cost of Revenues:
  Products                                          15,136                 -            15,136
  Services                                           8,757                 -             8,757
                                             --------------   ---------------    --------------
      Gross profit                                 263,939                 -           263,939

Operating Expenses:
  Sales and marketing                            5,164,937                 -         5,164,937
  Research and development                       6,736,381                 -         6,736,381
  General and administrative                     3,630,934                 -         3,630,934
                                             --------------   ---------------    --------------
      Total operating expenses                  15,532,252                 -        15,532,252
                                             --------------   ---------------    --------------
       Loss from operations                    (15,268,313)                -       (15,268,313)
                                             --------------   ---------------    --------------

Other (expense) income:
  Interest income                                  203,133                 -           203,133
  Other                                            (53,277)                -           (53,277)
  Interest expense                                  (7,446)           (6,075) (a)      (13,521)
                                             --------------   ---------------    --------------
      Total (expense) income                       142,410            (6,075)          136,335
                                             --------------   ---------------    --------------
      Net loss                               $ (15,125,903)   $       (6,075)    $ (15,131,978)
                                             ==============   ===============    ==============
Basic and diluted net loss
   per common share                          $       (0.30)   $        (0.00)    $       (0.30)
                                             ==============   ===============    ==============
Shares used in computing basic and diluted
   net loss per share                           50,474,155        50,474,155        50,474,155
                                             ==============   ===============    ==============
</TABLE>

(a)-- Adjustment to record increase of interest expense related to amortization
      of Discount on Convertible Notes Payable

                                       51
<PAGE>

<TABLE>
<CAPTION>
<S>                                                   <C>              <C>              <C>
                                 CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------------------------------------------------------------------------

                                                            For the Year Ended December 31, 2007
                                                      ------------------------------------------------
                                                       As Previously
                                                          Reported      Adjustments      As Restated
                                                      --------------- ---------------   --------------
Cash flows from operating activities:
  Net loss                                            $  (16,313,223)  $  (1,329,996)(a)$ (17,643,219)
  Adjustments to reconcile net loss to net cash used
   in operating activities:
    Depreciation and amortization                            421,000               -          421,000
    Amortization of warrant issued to customer                57,673               -           57,673
    Amortization of premium and discount on notes
     payable                                                (353,377)      1,538,299 (b)    1,184,922
    Amortization of debt issuance costs                      386,844        (208,307)(c)      178,537
    Stock-based compensation expense                       1,587,822               -        1,587,822
    Write-off of fixed assets, security deposits and
     other                                                    (1,041)              -           (1,041)

  Changes in operating assets and liabilities:
    Accounts receivable                                       47,115               -           47,115
    Prepaid expenses and other current assets                (41,851)              -          (41,851)
    Accounts payable and other accrued expenses              234,844               -          234,844
    Deferred revenues                                         (8,001)              -           (8,001)
                                                      --------------- ---------------   --------------
      Net cash used in operating activities              (13,982,195)             (4)     (13,982,199)
                                                      --------------- ---------------   --------------

Cash flows used in investing activities:
  Transfer operating funds to restricted cash                 (1,616)              -           (1,616)
  Purchases of property and other assets                    (194,395)              -         (194,395)
                                                      --------------- ---------------   --------------
    Net cash used in investing activities                   (196,011)              -         (196,011)
                                                      --------------- ---------------   --------------

Cash flows from financing activities:
  Proceeds from private placements - equity, net of
   cash commissions                                        5,018,574       1,625,740 (d)    6,644,314
  Proceeds from private placements - convertible
   promissory notes, net of commissions                    7,884,652      (1,625,736)(e)    6,258,916
  Proceeds from exercise of options and warrants, net
   of commissions                                          1,056,725               -        1,056,725
                                                      --------------- ---------------   --------------
    Net cash provided by financing activities             13,959,951               4       13,959,955
                                                      --------------- ---------------   --------------

Net decrease in cash and cash equivalents                   (218,255)              -         (218,255)
Cash and cash equivalents at beginning of period           4,698,949               -        4,698,949
                                                      --------------- ---------------   --------------
Cash and cash equivalents at end of period            $    4,480,694   $           -    $   4,480,694
                                                      =============== ===============   ==============

(a)-- Adjustment to record net impact to the 2007 Statement of Operations
(b)-- Adjustment to record the amortization of Discount on Convertible Notes Payable
(c)-- Adjustment to record the reversal of amortization of Debt Issuance Costs
(d) & (e)-- Adjustment to record difference in allocation between Convertible Notes Payable and Additional Paid in Capital
</TABLE>

                                       52
<PAGE>
<TABLE>
<CAPTION>
<S>                                               <C>           <C>              <C>
                                                         Year Ended December 31, 2007
                                                  -------------------------------------------
                                                  As Previously
                                                     Reported   Adjustments      As Restated
                                                  -----------   ------------    -------------
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest                                          $   433,014   $         -      $    433,014
                                                  ===========   ============    =============

Non-cash investing and financing activities:
Allocation of stockholders' equity to discount on
 convertible note                                 $         -   $ 2,218,286  (a) $  2,218,286
Premium on convertible notes payable              $   936,650      (936,650) (a)            -
Common stock paid for private placement agent
 commission                                       $   217,041   $   (47,932) (b) $    169,109
Common stock issued to placement agent allocated
to additional paid in capital                     $   168,920   $         -      $    168,920


(a)-- Adjustment to record the different allocations between Convertible Notes Payable and
 Additional Paid in Capital
(b)-- Adjustment to record the different allocations between Convertible Notes Payable and
 Additional Paid in Capital based on commissions paid and issued
</TABLE>

                                       53
<PAGE>

<TABLE>
<CAPTION>
<S>                                                  <C>              <C>               <C>  <C>
                                   CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------------------------------------------------------------------------------
                                                               For the Year Ended December 31, 2006
                                                      ------------------------------------------------------
                                                        As Previously
                                                           Reported      Adjustments           As Restated
                                                      ---------------  ----------------       --------------
Cash flows from operating activities:
 Net loss                                             $   (15,125,903) $        (6,075)  (a)  $(15,131,978)
 Adjustments to reconcile net loss to net cash used
  in operating activities:
  Depreciation and amortization                               363,062                -             363,062
  Amortization of warrant issued to customer                   57,674                -              57,674
  Amortization of discount on notes payable                         -            6,076   (b)         6,076
  Stock-based compensation expense                          1,348,246                -           1,348,246
  Bad debt expense                                             28,738                -              28,738
  Write-off of fixed assets, security deposits and             57,614                -              57,614
   other

 Changes in operating assets and liabilities:
  Accounts receivable                                         (51,655)               -             (51,655)
  Prepaid expenses and other current assets                   (78,457)          33,614   (c)       (44,843)
  Accounts payable and other accrued expenses                  30,294                -              30,294
  Deferred revenues                                            (1,784)               -              (1,784)
                                                      ---------------- ----------------       --------------
    Net cash used in operating activities                 (13,372,171)          33,615         (13,338,556)
                                                      ---------------- ----------------       --------------

Cash flows used in investing activities:
  Transfer operating funds to restricted cash                 (85,559)               -             (85,559)
  Purchases of property and other assets                     (534,214)               -            (534,214)
                                                      ---------------- ----------------       --------------
    Net cash used in investing activities                    (619,773)               -            (619,773)
                                                      ---------------- ----------------       --------------

Cash flows from financing activities:
   Proceeds from private placements - equity, net of       10,065,898          246,679   (d)    10,312,577
    cash commissions
   Proceeds from private placements - convertible
    promissory notes, net of commissions                    1,000,000         (280,294)  (e)       719,706
   Proceeds from exercise of options and warrants,          1,243,063                -           1,243,063
    net of commissions
                                                      ---------------- ----------------       --------------
Net cash provided by financing activities                  12,308,961          (33,615)         12,275,346
                                                      ---------------- ----------------       --------------

Net decrease in cash and cash equivalents                  (1,682,983)               -          (1,682,983)
Cash and cash equivalents at beginning of period            6,381,932                -           6,381,932
                                                      ---------------- ----------------       --------------
Cash and cash equivalents at end of period            $     4,698,949  $             -        $  4,698,949
                                                      ================ ================       ==============

(a)-- Adjustment to record net impact to the 2006 Statement of Operations
(b)-- Adjustment to record the amortization of Discount on Convertible Notes Payable
(c)-- Adjustment to record the reversal of amortization on Debt Issuance Costs
(d) & (e)-- Adjustment to record difference in allocation between Converible Promissory Notes and Add
</TABLE>

                                       54
<PAGE>

<TABLE>
<CAPTION>
<S>                                                         <C>              <C>           <C> <C>
                                                                         Years Ended December 31, 2006
                                                             ------------------------------------------------
                                                             As Previously
                                                                Reported       Adjustments       As Restated
                                                             -------------    -------------     -------------
Supplemental disclosure of cash flow information:
  Cash paid during the period for:
       Interest                                              $       4,295    $           -     $       4,295

Non-cash investing and financing activities:
  Beneficial conversion feature                              $           -    $     435,444 (a) $     435,444
  Premium on convertible notes payable                       $     120,888    $    (120,888)(a)             -
  Common stock paid for private placement agent commission   $       6,355    $       2,508 (b) $       8,833
  Common stock issued for subscribed shares at end of prior  $     198,450    $           -     $     198,450
   year
  Common stock subscribed for private placement agent        $           1    $           -     $           1
   commission

  (a)-- Adjustment to record the different allocations between Convertible Notes Payable and Additional Paid
   in Capital
  (b)-- Adjustment to record the different allocations between Convertible Notes
   Payable and Additional Paid in Capital based on commissions paid and issued
</TABLE>


3.  Significant Accounting Policies

Basis of Presentation and Continuation as a Going Concern

The accompanying  financial statements are in accordance with generally accepted
accounting  principles  of the  United  States of  America,  which  contemplates
continuation of the Company as a going concern.  However,  the Company  suffered
recurring  losses from  operations and has a net capital  deficiency that raises
substantial doubt about its ability to continue as a going concern.  The Company
has had minimal revenues since inception,  incurred losses from operations since
its inception and has a net stockholders'  deficit  accumulated during its years
of operations totaling $87,929,614. The Company's ability to continue as a going
concern is dependent upon management's ability to generate profitable operations
in the future and/or obtain the necessary  financing to meet our obligations and
repay our  liabilities  arising from normal  business  operations when they come
due. The Company plans to seek additional  capital through private placements of
equity or debt. If the Company is successful in its efforts to generate  revenue
in  2009,  it will be a  source  of  operating  funds  through  the end of 2009.
Management's  plans,  if  successful,  will  mitigate  the  factors  that  raise
substantial doubt about our ability to continue as a going concern.

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,  the disclosure of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses  during the reporting  period.  Actual  results could differ from those
estimates.  The significant  estimates made by management  include allowance for
doubtful  accounts  receivable,  recoverability  of  long-lived  and  intangible
assets,  the fair value of the warrants and debt issued in conjunction  with the
issuance of the promissory  notes,  and assumptions  incorporated in determining
stock-based compensation.

Fair value of Financial Instruments

The Company's carrying amount reported in the balance sheet for cash and
cash equivalents,  accounts  receivable,  and accounts payable approximates fair
value  due  to  the  immediate  or  short-term   maturity  of  these   financial
instruments. The carrying values of the convertible promissory notes approximate
their fair values.  To determine  the fair value of the  convertible  promissory
notes, the Company  estimated the fair value by first  determining the Company's
effective  borrowing  rate.  The  effective  borrowing  rate  was  estimated  by
considering the Company's high credit risk and high risk of  nonperformance. The
Company  then  evaluated  the  present  value  of  the  future  cash  flows  for
convertible promissory notes.

Cash and Cash Equivalents

All highly liquid investments having original maturities of three months or less
are  considered to be cash and cash  equivalents.  Cash  equivalents  consist of
short-term money market instruments.

                                       55
<PAGE>

Accounts Receivable

Receivables are stated at net realizable  value.  All but $2,000 of the accounts
receivable outstanding as of December 31, 2008 were collected in February 2009.

Allowance for Doubtful Accounts

Allowances  for doubtful  accounts  are  maintained  to reserve for  potentially
uncollectible  trade  receivables.   Management  reviews  trade  receivables  to
identify  customers with known disputes or collection  issues. For customers not
specifically identified, the Company also provides a reserve based on the age of
the  receivable.  In  determining  the  reserve,  judgments  are made  about the
credit-worthiness   of  the  customer  based  on  ongoing  credit   evaluations.
Historical  level of credit losses and current economic trends that might impact
the level of future credit losses are also considered.  Balances are written off
when the company determines they are uncollectible.

As of December 31, 2008 trade receivables  totaled $383,445,  the majority which
was collected in January 2009 with the remaining amount expected to be collected
in early 2009;  therefore  no reserve was  required  as of  December  31,  2008.
Historical allowances for doubtful accounts follows:

<TABLE>
<CAPTION>
<S>                                <C>         <C>          <C>            <C>
                                                Charged to
                                    Beginning    Operating                    Ending
                                     Balance      Expenses     Deductions     Balance
                                    ----------  -----------  -------------  ----------
Allowance for doubtful accounts:
  Years Ended December 31,
           2008                     $        -  $         -  $          -   $        -
           2007                     $        -  $         -  $          -   $        -
           2006                     $   16,000  $    28,738  $    (44,738)  $
</TABLE>


Restricted Cash

Restricted cash consists of a 365-day certificate of deposit in the principal
amount of $125,000, held by Silicon Valley Bank with an annual interest rate of
0.85% that matures on July 31, 2009. The funds are pledged to collateralize the
Company's revolving credit card facility. Management intends to maintain the
certificate of deposit as long as the revolving credit card facility is in
place. Amounts due on the credit card facility are included in accounts payable
and other accrued expenses on the Consolidated Balance Sheet.

Property and Equipment

Property and equipment is carried at cost and is depreciated using a
straight-line method over estimated useful lives of three to five years. The
costs of leasehold improvements are amortized over the term of the lease or
estimated economic lives, whichever is shorter. Expenditures for improvement or
expansion of property and equipment are capitalized. Repairs and maintenance are
charged to expense 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 Consolidated Statements of Operations.

Goodwill and Intangible Assets

Under the provisions of SFAS No. 142 Goodwill and Other Intangible Assets ("SFAS
142"), goodwill is tested for impairment on an annual basis as of December 31,
or whenever impairment indicators arise. The Company utilizes one reporting unit
in evaluating goodwill for impairment and assesses the estimated fair value of
the reporting unit based on discounted future cash flows. If the carrying value
of  the  reporting  unit  exceeds the  fair value of the reporting unit, further
analysis will take place to determine whether or not the Company should
recognize an impairment charge.

                                       56
<PAGE>

The Company evaluates the recoverability of intangible assets periodically and
takes into account events or circumstances that warrant revised estimates of
useful lives or that indicate that an impairment may exist. All of our
intangible assets are subject to amortization. Intangible assets include
proprietary technology, amortized on a straight line basis over a 5-year period;
customer relationships, amortized on a straight-line basis over a
10-year period; and trade name, which has an indefinite useful life and is not
being amortized.

Deferred Revenues

As of December 31, 2008, deferred revenues consisted of annual support and
maintenance fees paid in advance by customers. The fees are amortized into
revenue ratably over the related contract period, generally twelve months,
beginning with customer acceptance of the product. Deferred revenue also
includes license fees for any customer who has been invoiced, but has not yet
signed the customer acceptance of delivery and acknowledgment form as required
under our revenue recognition policy. For Inventa, revenue contracts are
generally written for a period of one year or more. The billing frequencies
vary, based on the contract. Revenue is deferred until services are rendered.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases.  Deferred tax assets,  tax loss and credit  carryforwards 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.  The effect on deferred tax assets and  liabilities  of a change in tax
rates is recognized  in income in the period that  includes the enactment  date.
Deferred  income tax  expense  represents  the  change  during the period in the
deferred tax assets and deferred tax liabilities. The components of the deferred
tax  assets  and  liabilities  are   individually   classified  as  current  and
non-current based on their characteristics. Deferred tax assets are reduced by a
valuation  allowance when, in the opinion of management,  it is more likely than
not  that  the  same  portion  or all of the  deferred  tax  assets  will not be
realized.  The Company adopted the provisions of Financial  Accounting Standards
Board ("FASB")  Interpretation No. 48 ("FIN 48"),  Accounting for Uncertainty in
Income  Taxes,  on January 1, 2007.  As a result of this  adoption,  the Company
reduced its deferred tax assets by $685,000.

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 is
less than the assets' carrying value, the related assets will be written down to
fair value.

Revenue Recognition

The Company recognizes license and royalty revenue in accordance with the
provisions of Statement of Position ("SOP") 97-2, Software Revenue Recognition,
and SOP 98-9, Modification of SOP 97-2, Software Revenue Recognition, With
Respect to Certain Transactions. Revenue consists primarily of revenue earned
under agreements for software licenses, maintenance and support (otherwise known
as post-contract customer support or "PCS") and professional services.
Maintenance and support revenue is deferred and recognized over the related
contract period, generally twelve months, beginning with customer acceptance of
the product.

The Company uses the residual method to recognize revenue when a license
agreement includes one or more elements to be delivered at a future date. If
there is an undelivered element under the license arrangement, the Company will
defer revenue based on vendor-specific objective evidence ("VSOE"), of the fair
value of the undelivered element, as determined by the price charged when the
element is sold separately. If VSOE of fair value does not exist for all
undelivered elements, the Company defers all revenue until sufficient evidence
exists or all elements have been delivered. Under the residual method, discounts
are allocated only to the delivered elements in a multiple element arrangement
with any undelivered elements being deferred based on VSOE of fair values of
such undelivered elements. Revenue from software license arrangements, which
comprise prepaid license and maintenance and support fees, is recognized when
all of the following criteria are met:

                                       57
<PAGE>

     o    Persuasive evidence of an arrangement exists;
     o    Delivery has occurred and there are no future deliverables except PCS;
     o    The fee is fixed and determinable. If the Company cannot conclude that
          a fee is fixed and determinable, then assuming all other criteria have
          been met,  revenue is recognized as payments  become due in accordance
          with paragraph 29 of SOP 97-2.
     o    Collection is probable.

Revenue from professional fees, consisting primarily of consulting services, is
recognized as services are provided and the revenues are earned.


Research and Development Expenses

The Company accounts for research and development ("R&D") costs in accordance
with Statement of Financial Accounting Standards No. 86, Accounting for the
Costs of Computer Software to be Sold, Leased, or Otherwise Marketed. Costs
related to the research, design, and development of products are charged to
research and development expenses as incurred. Software development costs are
capitalized beginning when a product's technological feasibility has been
established and ending when a product is available for general release to
customers. Generally, products are released soon after technological feasibility
has been established. As a result, costs subsequent to achieving technological
feasibility have not been significant and all software development costs have
been expensed as incurred.

Advertising Costs

The Company expenses advertising costs as incurred. The expense recognized for
the years ended December 31, 2008, 2007 and 2006 was $18,049, $33,425 and
$242,882, respectively.

Stock-Based Compensation

The Company has two stock-based employee and director compensation plans (the
ANTs software inc. 2000 Stock Option Plan and the ANTs software inc. 2008 Stock
Plan). Since January 1, 2006, the Company has been using the provisions of SFAS
123(R), Share-Based Payment ("SFAS 123(R)"), to account for stock-based awards
compensation expense. The Company elected to use the modified prospective
transition method as permitted by SFAS 123(R). Under this transition method,
stock-based compensation expense for the year ended December 31, 2006 includes
compensation expense for all stock-based compensation awards granted prior to,
but not fully vested, as of January 1, 2006, based on the grant date fair value
estimated in accordance with the original provisions of SFAS 123, Accounting for
Stock Compensation ("SFAS 123"). Stock-based compensation expense for all
stock-based compensation awards granted subsequent to January 1, 2006 is based
on the grant date fair value estimated in accordance with the provisions of SFAS
123(R). The Company recognizes compensation expense for stock option awards on a
straight-line basis over the requisite service period of the award, generally
three years; however, the Company has also issued stock options with
performance-based vesting criteria.

All stock-based awards to nonemployees are accounted for at their fair value in
accordance with Emerging Issues Task Force ("EITF") 96-18, Accounting for Equity
Instruments that are Issued to Other than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services. The Company has recorded the fair
value of each stock option issued to non-employees as determined at the date of
grant using the Black-Scholes option pricing model.

Recent Issued Accounting Pronouncements

In February 2008, the FASB issued Financial Staff Position ("FSP") SFAS 157-2,
Effective Date of FASB Statement No. 157 ("FSP 157-2"), which delays the
effective date of SFAS 157, Fair Value Measurements ("SFAS 157"), which was
issued in September 2006, for all nonfinancial assets and nonfinancial
liabilities, except those that are recognized or disclosed at fair value in the
financial statements on a recurring basis (at least annually). SFAS 157
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. FSP 157-2 partially defers the effective date of SFAS
157 to fiscal years beginning after November 15, 2008, and interim periods
within those fiscal years for the items within the scope of this FSP. The
adoption of SFAS 157 for all nonfinancial assets and nonfinancial liabilities is
effective for the Company beginning January 1, 2009. Adoption of this statement
is not expected to be material.

                                       58
<PAGE>

In December 2007, the FASB issued SFAS 141(R), Business Combinations ("SFAS
141R") and SFAS 160, Accounting and Reporting of Non-controlling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51 ("SFAS 160"). SFAS
141R and SFAS 160 expand the scope of acquisition accounting to all transactions
and circumstances under which control of a business is obtained. SFAS 141R and
SFAS 160 are effective for financial statements issued for fiscal years
beginning after December 15, 2008 and interim periods within those fiscal years,
with early adoption prohibited and these standards must be adopted concurrently.
These standards will impact the Company for any acquisitions subsequent to the
adoption date. The most significant effect of adoption of SFAS 141R on results
of operations is that success fees, due diligence, legal, accounting, valuation,
and similar costs incurred in connection with acquisitions (acquisition-related
costs) are required to be expensed as incurred. Current practice is that such
costs are capitalized as part of the costs of the acquisition.

In April 2008, the FASB issued FSP SFAS 142-3, Determination of the Useful Life
of Intangible Assets ("FSP 142-3"). This guidance is intended to improve the
consistency between the useful life of a recognized intangible asset under SFAS
142 and the period of expected cash flows used to measure the fair value of the
assets under SFAS 141R when the underlying arrangement includes renewal or
extension of terms that would require substantial costs or result in a material
modification to the asset upon renewal or extension. Companies estimating the
useful life of a recognized intangible asset must now consider their historical
experience in renewing or extending similar arrangements or, in the absence of
historical experience, must consider assumptions that market participants would
use about renewal or extension as adjusted for the entity-specific factors
included in SFAS 142. FSP 142-3 is effective for us beginning January 1, 2009.
Adoption of FSP 142-3 is not expected to be material.

In May 2008, the FASB issued FSP No. APB 14-2, Accounting for Convertible Debt
Instruments that may be Settled in Cash upon Conversion (including Partial Cash
Settlement) ("FSP 14-1"). FSP 14-1 requires that issuers of certain convertible
debt instruments that may be settled in cash upon conversion to separately
account for the liability and equity components in a manner that will reflect
the entity's nonconvertible debt borrowing rate when interest expense is
recognized in subsequent periods. The accounting for these types of instruments
under FSP 14-1 is intended to appropriately reflect the underlying economics by
capturing the value of the conversion options as borrowing costs, therefore
recognizing their potential dilutive effects on earnings per share. The
effective date of APB 14-1 is for financial statements issued for fiscal years
and interim periods beginning after December 15, 2008 and does not permit
earlier adoption. However, the transition guidance requires retrospective
application to all periods presented and does not grandfather existing
instruments. The Company is currently evaluating the impact FSP 14-1will have on
the financial statements.

In June 2008, the FASB issued EITF No. 07-5, Determining Whether an Instrument
(or Embedded Feature) is Indexed to an Entity's Own Stock ("EITF 07-5"). EITF
07-5 provides guidance to determine whether an instrument (or an embedded
feature) is indexed to an entity's own stock when evaluating the instrument as a
derivative under SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities ("SFAS No. 133"). An instrument that is both indexed to an entity's
own stock and classified in stockholder's equity in the entity's statement of
financial position is not considered a derivative for the purposes of applying
the guidance in SFAS No. 133. EITF 07-5 provides a two-step process to determine
whether an equity-linked instrument (or embedded feature) is indexed to its own
stock first by evaluating the instrument's contingent exercise provisions, if
any, and second, by evaluating the instrument's settlement provisions. EITF 07-5
is applicable to outstanding instruments as of the beginning of the fiscal year
in which the issue is adopted and is effective for financial statements issued
for fiscal years beginning after December 15, 2008, and interim periods within
those fiscal years. We will adopt EITF 07-5 on January 1, 2009, and do not
expect the adoption will be material to our consolidated financial condition and
results of operations.

4.  Business Combination

On May 30, 2008 the Company completed the acquisition of Inventa, a Delaware
corporation. Inventa was acquired in order to expand the Company's presence in
the database compatibility and consolidation technology market by using
Inventa's workforce to increase exposure to the market. The acquisition was
accounted for as a purchase business combination and, accordingly, a portion of
the purchase price was allocated to the tangible assets fewer liabilities
assumed and identifiable intangible assets. The balance of the purchase price
was allocated to goodwill. Fair values were estimated using the discounted cash
flow method based on information currently available, including estimates of
future operating results. The primary method used in determining fair value
estimates was the income approach, which attempts to estimate the income
producing capability of the asset. The Company issued 20,000,000 shares valued
at $1.20 per share to the shareholders of Inventa. The value of the Company's
stock was valued at the average fair market value of the Company's free trading
shares from two days before the date of announcement through two days after the
date of the announcement.

                                       59
<PAGE>

The following table summarizes the fair value of the assets acquired and
liabilities assumed at the date of the acquisition:

<TABLE>
<CAPTION>
<S>                                                           <C>
Purchase price:
Cash paid to seller                                           $                 3,000,000
Deferred tax liability                                                            344,000
Fair value of common stock issued to seller                                    24,000,000
Fair value of convertible notes payable issued to seller                        1,355,586
Acquisition costs, comprised of legal and accounting fees                          57,357
                                                              ---------------------------

Total purchase price                                          $                28,756,943
                                                              ===========================

Net assets acquired:
Assets acquired:
----------------
Cash                                                          $                     9,913
Accounts receivable                                                               734,886
Prepaids and other current assets                                                  59,567
Property and equipment                                                            153,277
Security deposit                                                                   20,015
                                                              ---------------------------

Total                                                                             977,658

Less liabilities assumed:
-------------------------
Line of credit                                                                    175,000
Trade payables and other accrued expenses                                         268,045
Deferred revenues                                                                 529,187
                                                              ---------------------------

Total                                                                             972,232
                                                              ---------------------------

Tangible assets in excess of liabilities assumed                                    5,426

Intangible assets:
------------------
Trade name                                                                        860,000 (Indefinite life)
Proprietary technology                                                          3,200,000 (5 year life)
Customer relationships                                                          1,930,000 (10 year life)
                                                              ---------------------------

Identified intangible assets                                                    5,990,000
Goodwill                                                                       22,761,517
                                                              ---------------------------

Total purchase price                                          $                28,756,943
                                                              ===========================
</TABLE>

Had the acquisition of Inventa taken  place at  January 1, 2007, the  pro  forma
consolidated results of operations would have had revenues  totaling $10,532,003
(unaudited) and $5,751,907 (unaudited) for the  years  ending  December 31, 2008
and  2007,  respectively;   net   loss  totaling   $11,884,574  (unaudited)  and
$17,628,800 (restated and unaudited) for the years ending  December 31, 2008 and
2007, respectively; and net loss per share - basic and  diluted totaling $(0.15)
(unaudited) and $(0.31) (restated and unaudited) for  the years  ended  December
31, 2008 and 2007, respectively. This  pro forma  information is  presented  for
informational purposes only and is not necessarily  indicative of the results of
operations that actually would have  been  achieved  had  the  acquisition  been
consummated as of that time, nor  is  it  intended  to be a projection of future
results.

                                       60
<PAGE>

5.   Basic and Diluted Net Loss per Share

Basic net loss per share is calculated in accordance with SFAS No. 128, Earnings
per Share, using the weighted-average number of common shares outstanding during
the period. Diluted net loss per share is computed using the weighted-average
number of common and dilutive common equivalent shares outstanding during the
period.

The following table presents the calculation of basic and diluted net loss per
share for the years ended December 31, 2008, 2007 and 2006:
<TABLE>
<CAPTION>
<S>                                                  <C>                             <C>        <C>
                                                             Loss                 Shares              Loss per
                                                          (Numerator)         (Denominator)            Share
                                                     --------------------- -------------------- --------------------
Year ended December 31, 2008
      Basic and diluted net loss per share           $        (11,628,584)           77,847,729 $             (0.15)
Year ended December 31, 2007 (restated)
      Basic and diluted net loss per share           $        (17,643,219)           56,618,971 $             (0.31)
Year ended December 31, 2006 (restated)
      Basic and diluted net loss per share           $        (15,131,978)           50,474,155 $             (0.30)
*T
</TABLE>

At December 31, 2008, 2007 and 2006, stock options and warrants for the purchase
of 14,960,453, 16,813,430 and 16,354,480 shares of common stock at prices
ranging from $0.52 to $6.38 per share respectively, were antidilutive and
therefore not included in the computation of diluted earnings per share. At
December 31, 2008, 2007 and 2006, the Company had 10,402,512, 8,689,050,
and 8,091,569 antidilutive shares related to stock options, respectively. At
December 31, 2008, 2007, and 2006, the Company had 12,106,115, 5,252,150, and
500,000 antidilutive shares related to convertible promissory notes,
respectively.


6.  Prepaid Expenses and Other Current Assets

As of December 31, 2008 and 2007, prepaid expenses consisted of the following
items:

<TABLE>
<CAPTION>
<S>                                          <C>                     <C>
                                                       2008                    2007
                                                       ----                    ----
     Prepaid-Insurance and Employee-Related  $              38,403   $             112,440
     Unbilled Revenues                                      13,415                       -
     Prepaid marketing                                       2,064                  37,267
     Other                                                 106,841                  23,624
                                             ---------------------   ---------------------
     Total                                   $             160,723   $             173,331
                                              =====================  =====================
</TABLE>

7.   Prepaid Expense from Warrant

Prepaid expense from warrant consists of an original charge of $173,021 related
to the issuance of a warrant to a customer in 2005 to purchase 100,000 shares of
the our Common Stock, in exchange for a guarantee by that customer to provide
maintenance and support services for ADS to our customers should we be unable to
provide such services. The fair value of the warrant was calculated using the
Black-Scholes valuation model. The warrant had an exercise price of $3.50 per
share and expired in July 2008.

Effective May 2008, the Company sold the underlying ADS technology to the
customer and the remaining prepaid asset was expensed. The prepaid expense was
being   amortized  into   the  Consolidated  Statements  of   Operations   on  a
straight-line basis, over 36 months, commencing January 2006. Amortization
expense, including the amount written off in May 2008 totaled $57,674 for the
year ended December 31, 2008. Amortization expense for the year ended December
31, 2007 and 2006 totaled $57,673 and $57,674, respectively.

                                       61
<PAGE>

8. Property and Equipment

Property and equipment, summarized by major category, at December 31,

<TABLE>
<CAPTION>
<S>                                                        <C>              <C>
                                                               2008            2007
                                                               ----            ----
      Computers and software                               $  609,221      $  2,005,337
      Furniture and fixtures                                  154,729            85,215
      Leasehold improvements                                  202,450            96,804
                                                           -------------   --------------
      Total property and equipment                            966,400         2,187,356

      Less: accumulated depreciation and amortization        (567,307)       (1,676,866)
                                                           -------------   --------------

      Property and equipment, net                           $ 399,093      $    510,490
                                                           =============   ==============
</TABLE>

Depreciation expense for 2008, 2007 and 2006 was $341,236, $421,000 and
$363,062, respectively. During 2008 we performed a physical inventory of
property and equipment and wrote off $62,377 in fixed assets, net of accumulated
depreciation. In 2007 we performed a physical inventory of our property and
equipment and no adjustment to the financial statements was required. During
2006 we performed a physical inventory of property and equipment and wrote off
$57,614 in fixed assets, net of accumulated depreciation.

As of December 31, 2008 and 2007, the Company had $84,110 and $1,010,235,
respectively, in fully depreciated assets in use, consisting primarily of
computer equipment and software. As of December 31, 2008, net property of
approximately $226,000 has been used as collateral on the line of credit
discussed in Note 14. During the year ended December 31, 2008, the Company
determined that $1,535,301 of equipment was obsolete or should be sold. As a
result, accumulated depreciation was reduced by $1,450,805.

9.  Intangible Assets

Intangible assets at December 31, 2007 were $-0-. Intangible assets at December
31, 2008 consisted of the following:
<TABLE>
<CAPTION>
<S>                                                          <C>                <C>            <C>
                                                                                   2008
                                                             -------------------------------------------------
                                                                   Gross                             Net
                                                                  Carrying       Accumulated      Carrying
                                                                   Amount        Amortization      Amount
                                                             ------------------ -------------- ---------------

      Goodwill                                               $       22,761,517 $           -  $    22,761,517
                                                             ================== ============== ===============

      Trade Name (indefinite useful life)                    $          860,000 $           -  $       860,000
      Proprietary Technology (5-year useful life)                     3,200,000      (373,333)       2,826,667
      Customer Relationships (10-year useful life)                    1,930,000      (112,586)       1,817,414
                                                             ------------------ -------------- ---------------

      Total                                                  $        5,990,000 $    (485,919) $     5,504,081
                                                             ================== ============== ===============
</TABLE>

Aggregate amortization expense for the years ended December 31, 2008, 2007, and
2006 was approximately $485,919, $-0-, and $-0-, respectively.

Estimated amortization expense for the intangible assets for the next five years
is as follows:
<TABLE>
<CAPTION>
<S>                                                                          <C>        <C>      <C>        <C>        <C>
                                                                                           Years Ending December 31
                                                                             -----------------------------------------------------
                                                                                2009      2010      2011       2012        2013
                                                                             -----------------------------------------------------
      Proprietary Technology                                                 $  640,000 $640,000 $  640,000 $  640,000 $   266,667
      Customer Relationships                                                    193,000  193,000    193,000    193,000     193,000
                                                                             ---------- -------- ---------- ---------- -----------
      Total                                                                  $  833,000 $833,000 $  833,000 $  833,000 $   459,667
                                                                             ========== ======== ========== ========== ===========
</TABLE>


                                       62
<PAGE>

10.  Accounts Payable and Other Accrued Expenses

At December 31, 2008 and 2007, accounts payable and other accrued expenses
consisted of the following:
<TABLE>
<CAPTION>
<S>                                                                      <C>              <C>
                                                                               2008              2007
                                                                               ----              ----
      Trade payables                                                   $       900,176  $        788,460
      Accrued bonuses and commissions payable                                    180,111           143,750
      Accrued vacation payable                                                    77,175            89,318
      Accrued interest on convertible promissory notes                           287,581           208,780
                                                                         ---------------  ----------------
          Total                                                          $     1,445,043  $      1,230,308
                                                                         ===============  ================
</TABLE>

11.  Deferred Revenues

Deferred revenue is comprised of license fees and annual maintenance and support
fees. License fees are recognized upon customer acceptance of the product.
Annual maintenance and support fees are amortized ratably into revenue on the
statements of operations over the life of the contract, which is generally a
12-month period beginning with customer acceptance of the product.

Deferred revenue activity for the years ending December 31, 2008 and 2007 was as
follows:
<TABLE>
<CAPTION>
<S>                                                                   <C>                              <C>
                                                                   2008                              2007
                                                     --------------------------------- --------------------------------
      Beginning balance                                               $        48,818                  $        56,819
      Invoiced current year                                                 3,255,842                          382,770
       Deferred revenue recognized from prior year    $      (36,606)                  $       (26,820)
       Invoiced and recognized current year               (2,780,933)                         (332,886)
                                                     ----------------                  ----------------
      Total revenue recognized current year                                (2,817,539)                        (359,706)
      Amounts transferred to Four J's                                               -
      Write-offs                                                                    -                          (31,065)
                                                                      ----------------                 ----------------
      Ending balance                                                  $       487,121                  $        48,818
                                                                      ================                 ================
</TABLE>

Write-offs consist of bad debt expense charged on deferred revenues outstanding
as of the beginning of each period as well as amounts charged to deferred
revenue during each period but that became unrealizable.

12.  Industry Segment, Customer and Geographic Information

We operate in a single industry segment, computer software. Substantially all of
our assets and employees are located at the corporate headquarters in
Burlingame, California. Our organization is primarily structured in a functional
manner. During the periods presented, our current Chief Executive Officer was
identified as our Chief Operating Decision Maker (CODM) as defined by SFAS No.
131, Disclosures About Segments of an Enterprise and Related Information ("SFAS
131"). Generation of revenues from ADS were not segregated from operating
expenses between those incurred for maintenance and support of ADS and research
and development expenses incurred on ACS. Therefore our CODM reviews
consolidated financial information on revenues, gross margins and operating
expenses; discrete information between ADS and the ACS product under
development, is not currently maintained or reviewed.

Customer Information

For the year ended December, 31, 2008, $7,585,933, or 92%, of our revenues were
derived from three customers, which represented $3,611,441, $2,376,871 and
$1,597,621, or 44%, 28% and 20% of our total revenues, respectively. For the
year ended December, 31, 2007, $336,493, or 94%, of our revenues were derived
from three customers, which represented $213,212, $63,281 and $60,000, or 59%,
18% and 17% of our total revenues, respectively. For the year ended December 31,
2006, $118,800, or 41%, of our revenues were from two customers, which
represented $69,000 and $49,800 or 24% and 17% of our total revenues,
respectively.


                                       63
<PAGE>

Geographic Information

Revenues by geographic area were as follows:

                                       Years ended December 31,
                     -----------------------------------------------------------
                             2008                2007                2006
                     -------------------  ------------------  ------------------
    Domestic         $  8,280,939   100%  $  146,494     41%  $  240,009     83%
    International           1,790     0%     213,212     59%      47,823     17%
                     -------------------  ------------------  ------------------
    Total            $  8,282,729   100%  $  359,706    100%  $  287,832    100


13.  Income Taxes

The difference between the statutory federal income tax rate on the Company's
pre-tax loss and the Company's effective income tax rate is summarized as
follows:
<TABLE>
<CAPTION>
<S>                                                     <C>            <C>   <C>            <C>   <C>            <C>
                                                                                     2007                 2006
                                                                2008              (Restated)           (Restated)
                                                        -------------------- -------------------- --------------------
                                                           Amount    Percent    Amount    Percent    Amount    Percent
                                                        ------------ ------- ------------ ------- ------------ -------
      U.S. federal income tax benefit
         at federal statutory rate                      $(4,070,005)  -35.0% $(6,175,127)  -35.0% $(5,296,192)  -35.0%
      Sale of net operating loss carryovers                (527,180)   -4.5%           -     0.0%           -     0.0%
      Other permanent items                                 474,033     4.0%     594,212     3.4%     510,360     3.4%
      Change in valuation allowance                       3,588,529    30.9%   5,534,455    31.3%   4,794,198    31.7%
      Other                                                   7,443     0.1%      46,460     0.3%      (8,366)   -0.1%
                                                        ------------ ------- ------------ ------- ------------ -------
          Total                                         $  (527,180)   -4.5% $         -     0.0% $         -     0.0%
                                                        ============ ======= ============ ======= ============ =======
</TABLE>

The Company accounts for income taxes in accordance with SFAS 109, "Accounting
for Income Taxes." Due to our loss position for the periods ended December 31,
2008, 2007 and 2006, there was no provision for income taxes during these
periods.

In November 2008, the Company was approved by the New Jersey Economic
Development Authority (the "NJEDA") to participate in the 2008 NJEDA Technology
Business Tax Certificate Transfer Program. This program enables approved,
unprofitable technology companies based on the State of New Jersey to sell their
unused net operating loss carryovers and unused research and development tax
credits to unaffiliated, profitable corporate taxpayers in the State of New
Jersey for at least 75% of the value of the tax benefits. On November 25, 2008,
the Company received $527,180 of net proceeds ($563,959 gross proceeds less
$36,779 of expenses incurred) from a third party related to the sale of
approximately $7,297,000 of unused net operating loss carryovers for the State
of New Jersey.

Based upon the Company's history of losses, management believes it is more
likely than not that the total deferred tax assets will not be fully realizable.
Accordingly, the Company provided for a full valuation allowance against its
total deferred tax assets at December 31, 2008 and 2007.

The tax effects of significant temporary differences representing deferred tax
assets as of December 31, 2008, 2007 and 2006 are as follows:

                                       64
<PAGE>

<TABLE>
<CAPTION>
<S>                                  <C>               <C>                <C>
                                                         As of December 31,
                                            2008               2007                2006
                                      ----------------- ------------------- ------------------

Deferred long-term tax assets:
  Net operating loss carryforward     $     44,120,237  $       24,941,951  $      18,767,303
  Research tax credit carryforward           2,515,581           2,114,422          1,922,882
  Expenses deductible in later years           132,922              96,098             79,833
  Non-Cash interest expense                  1,827,147                   -                  -
                                      ----------------- ------------------- ------------------

Gross deferred tax assets                   48,595,887          27,152,471         20,770,018

Less: valuation allowance                  (46,543,887)        (27,152,471)       (20,770,018)
                                      ----------------- ------------------- ------------------
    Total                                    2,052,000                    -                  -
                                      ----------------- ------------------- ------------------
Deferred long-term tax liabilities:
  Basis difference purchase
   accounting adjustment                    (2,396,000)                   -                  -
                                      ----------------- ------------------- ------------------

    Total                                   (2,396,000)                   -                  -
                                      ----------------- ------------------- ------------------

  Net deferred tax liabilities        $       (344,000) $                 -  $               -
                                      ================= =================== ==================
</TABLE>

As of December 31, 2008, we had net operating loss carryforwards of
approximately $117.0 million for federal tax purposes and $74.5 ("NOL's")
million for state tax purposes. If not earlier utilized, the federal net
operating loss carryforwards will expire in various years from 2009 through 2028
and the state net operating loss carryforwards will expire in various years from
2013 through 2028.

Following is a summary of the years in which the NOL's will expire:

       Federal NOL's    State NOL's
               --------------  --------------
  2009-2012    $            -  $   20,424,000
  2013-2016                 -      31,097,000
  2017-2020        30,572,000      13,618,000
  2021-2024        38,485,000               -
  2025-2028        47,932,000       9,350,000
               --------------  --------------

    Total      $  116,989,000  $   74,489,000
               ==============  ==============

Section 382 limits the use of the NOL's based on the purchase price and the
existing applicable Federal Rate("AFR"). For May of 2008, the AFR was 4.4%. As
the purchase price was $28.5 million, the result is an annual limitation of
$731,500. For 2008 it is prorated to $426,700. If the Company does not use the
loss in a given year, the unused limit can be carried forward. In addition as
Inventa is part of a consolidated group, the Company is subject to a Separate
Return Limitation Year ("SRLY") that limits the losses from the years prior to
the purchase to the profits of Inventa. Any losses after May 2008 are not
subject to either limitation and can be used fully to offset profits of Inventa
or ANTs.

As of December 31, 2008, we had research credit carryforwards of approximately
$2.0 million for federal tax purposes and $1.6 million for state tax purposes.
If not earlier utilized the federal research credit carryforwards will expire in
various years from 2013 through 2028. The state research credit carries forward
indefinitely until utilized.

A summary of the valuation allowance for the Company's deferred tax assets is as
follows:

<TABLE>
<CAPTION>
<S>                               <C>            <C>           <C>          <C>
                                    Charged to
                                     Beginning    Deferred Tax                  Ending
                                      Balance        Assets     Deductions      Balance
                                   -------------  ------------  -----------  -------------
Deferred Tax Allowance Accounts:
    Years Ended December 31,
              2008                 $  27,152,471  $ 21,443,416  $       -    $  48,595,887
              2007                 $  20,770,018  $  6,382,453  $       -    $  27,152,471
              2006                 $  14,861,104  $  5,908,914  $       -    $  20,770,018
</TABLE>


Uncertain Tax Positions

Effective January 1, 2007, we adopted FASB Interpretation No. 48, "Accounting
for Uncertainty in Income Taxes" (FIN 48). This interpretation clarifies the
criteria for recognizing income tax benefits under FASB Statement No. 109,
"Accounting for Income Taxes", and requires additional disclosures about
uncertain tax positions. Under FIN 48 the financial statement recognition of the
benefit for a tax position is dependent upon the benefit being more likely than
not to be sustainable upon audit by the applicable taxing authority. If this
threshold is met, the tax benefit is then measured and recognized at the largest
amount that is greater than 50 percent likely of being realized upon ultimate
settlement. On January 1, 2007, although the implementation of FIN 48 did not
impact the amount of the Company's liability or impact beginning retained
earnings, the Company reduced its deferred tax asset and valuation allowance by
$685,000.

A reconciliation of the beginning and ending amount of the liability for
unrecognized income tax benefits during the tax year ended December 31, 2008 and
2007 is as follows:

                                       65
<PAGE>

<TABLE>
<CAPTION>
<S>                                                                             <C>
Balance at January 1, 2007                                                       $   684,954
Additions for tax positions related to the year ended December 31, 2007                  -
                                                                                 -----------
Balance at December 31, 2007                                                     $   684,954
                                                                                 ===========

Balance at January 1, 2008                                                       $   684,954
Additions for tax positions related to the year ended December 31, 2008                  -
                                                                                 -----------
Balance at December 31, 2008                                                     $   684,954
                                                                                 ===========
</TABLE>


The $684,954 of unrecognized tax benefits, if recognized, will affect our
effective income tax rate. We account for any applicable interest and penalties
on uncertain tax positions as a component of income tax expense. Our only major
tax jurisdictions are the United States, California and New Jersey. The tax
years 1994 through 2008 remain open and are subject to examination by the
appropriate governmental agencies in the U.S and 2001 through 2008 in California
and New Jersey.

14.  Debt

Long-term debt consists of the following at December 31, 2008 and 2007:
<TABLE>
<CAPTION>
<S>                                 <C>                     <C>             <C>        <C>    <C>      <C>     <C>       <C>

                                                                                                                 Balance as of
                                                                                                                  December 31,
                                                                                                             -----------------------
                                                                     Extinguishment   Stated      Effective                 2007
        Type                Issue Date               Due Date            Date     Interest Rate Interest Rate   2008     (Restated)
        ----                ----------               --------            ----     ------------- -------------   ----     ----------
Convertible Promissory
 Notes                     December 2006           December 2008        May 2008       10%    75.12% - 91.18%  $      -  $1,000,000

Convertible Promissory
 Notes                   January - March 2007   January - March 2009    May 2008       10%     6.65% - 84.63%         -   5,250,000

Convertible Promissory
 Note                          March 2007              March 2009          N/A         10%         29.55%       250,000     250,000

Convertible Promissory
 Notes with
 Attached Warrants     October - December 2007 October - December 2010  May 2008       10%     2.18% - 23.87%        -    3,003,226

Convertible Promissory
 Notes                        May 2008              February 2011          N/A         10%          N/A       3,245,000           -

Convertible Promissory
 Notes                        May 2008              February 2011          N/A         10%     5.66% - 86.34% 5,005,000

Convertible Promissory
 Notes with
 Attached Warrants            May 2008              February 2011          N/A         10%           N/A      3,003,226          -

Line of Credit                May 2008                May 2009             N/A      LIBOR + 2%      2.44%       200,000           -
                                                                                                               --------   ----------

Total debt                                                                                                   11,703,226   9,503,226

Less discount                                                                                                (8,565,882) (3,557,433)

Less current portion                                                                                           (434,084)   (515,435)
                                                                                                              ---------   ---------

Long-term portion of convertible notes payable                                                                2,703,260   5,430,358
                                                                                                             ==========   =========

</TABLE>


Scheduled future maturities of long-term debt are as follows at December 31,
----------------------------------------------------------------------------
2008:
-----
      Years Ending December 31

      2009                                $                          450,000
      2010                                                                 -
      2011                                                        11,253,226
      2012                                                                 -
      2013                                                                 -
      Thereafter                                                           -
                                          ----------------------------------

         Total                            $                       11,703,226
         Less discount on notes payable                           (8,565,882)
                                          ----------------------------------
         Net value of notes at
           December 31, 2008              $                        3,137,344
                                          ===================================

                                       66
<PAGE>

"J" Unit Sales

During the period from December 2006 through March 2007, the Company issued
bundled securities consisting of convertible promissory notes (the "Notes") and
common stock (collectively referred to as the "J Units"). This private offering
was approved by the Board of Directors in December 2006 to raise additional
working capital. The J Units were sold at a per unit price of $50,000 and were
comprised of (i) 14,285 shares of the Company's common stock (issued at the
market value of the Company's common stock on the date of purchase (restated))
and (ii) a Note with an initial face value of $25,000. Each Note had a stated
interest rate of 10% per annum (simple interest) due and payable at the end of
each quarter. Each Note originally matured 24 months from the issuance date, and
was convertible into shares of common stock, at the election of the holder, at a
per share price of $2.00. Each Note was prepayable without penalty upon 30 days
notice and was convertible at the Company's election in the event the closing
price of the common stock equals or exceeds $4.00 per share. If converted at the
Company's election, the Company agreed to register the shares of stock upon
conversion. Substantially all of the Notes were extinguished in May 2008 as
discussed below.

In December 2006, 40 J Units were sold to accredited investors, raising $2
million, and 571,400 shares of common stock and Notes with an aggregate face
value of $1 million were issued. In January 2007, 180 J Units were sold to
accredited investors, raising $9 million, and 2,571,300 shares of common stock
and Notes with an aggregate face value of $4.5 million were issued. In March
2007, 40 J Units were sold to accredited investors, raising $2 million, and
571,400 shares of common stock and Notes with an aggregate face value of $1
million were issued.

The Company applied the guidance in Accounting Principles Board ("APB") No. 14,
Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants,
Emerging Issues Task Force ("EITF") 00-27, Application of EITF 98-5, Accounting
for Convertible Securities with Beneficial Conversion Feature or Contingent with
Adjustable Conversion Ratios, to Certain Convertible Instruments, and EITF 98-5,
Accounting for Convertible Securities with Beneficial Conversion Features or
Contingently Adjustable Conversion Ratios ("EITF 98-5"), to allocate the
proceeds between the common stock and the Notes and to determine whether or not
a beneficial conversion feature existed as part of the Notes.

The Common Stock issued in connection with the December 2006 J Units was valued
at $1,265,444 (restated). The notes were then evaluated and deemed to have a
beneficial conversion feature in accordance with EITF 98-5 with an intrinsic
value of $435,444 (restated), which was recorded to Discount on Notes Payable
with the offset going to Additional Paid-in Capital. In addition, the Company
paid cash and issued stock commissions to a placement agent in connection with
the issuance of the December 2006 J Units. Cash commissions of $40,000 were paid
to the placement agent; 10,380 shares of common stock were issued to the
placement agent; and the Company agreed to issue 9,080 shares of Common Stock to
the placement agent upon conversion of the Notes. The Common Stock issued to the
placement agent was valued at $23,874 (restated) based on market value of the
Company's stock on the date the Company issued the J Units. Based on these
commissions, the Company recognized prepaid debt issuance costs of $23,713
(restated) and Additional Paid-in Capital was reduced by $25,150 (restated). The
Discount on Convertible Notes Payable issued in December 2006 totaled $700,888.
The Notes were extinguished in May 2008 (see below).

The Common Stock issued in connection with the January and March 2007 J Units
was valued at $6,849,423 (restated). The notes were then evaluated and deemed to
have an embedded conversion feature in accordance with EITF 98-5 with an
intrinsic value of $2,026,923 (restated), which was recorded to Discount on
Notes Payable with the offset going to Additional Paid-in Capital. In addition,
the Company paid cash and issued stock commissions to a placement agent in
connection with the issuance of the 2007 J Units. Cash commissions of $1,100,000
were paid to the placement agent; 145,440 shares of common stock were issued to
the placement agent; and the Company agreed to issue 127,200 shares of Common
Stock to the placement agent upon conversion of the Notes. The Common Stock
issued to the placement agent was valued at $449,228 (restated) based on market
value of the Company's stock on the date the Company issued the J Units. Based
on these commissions, the Company recognized prepaid debt issuance costs of
$584,166 (restated) and Additional Paid-in Capital was reduced by $956,061
(restated). The Discount on Convertible Notes Payable issued in January and
March 2007 totaled $3,376,346. The Notes were extinguished in May 2008 (see
below).

Convertible Notes Payable with Warrants

During October 2007 the Company sold a convertible promissory note in the amount
of $2,000,000 to an accredited investor. Pursuant to the sale, the Company
issued a warrant to the investor covering 1,333,333 shares of common stock with
a per share exercise price of $3.25. The warrant expired 36 months from
issuance. The note had a stated interest rate of 10% per annum (simple interest)
due and payable at the end of each calendar quarter, matured in 36 months from
the date of issuance and was convertible into shares of common stock, at the
election of the holder, at a per share price of $1.50, and is prepayable without
penalty if (i) the bid price of the Company's common stock equals or exceeds
$4.00 per share for ten consecutive trading days and (ii) the Company provides
the investor with 20 trading days' notice of its intent to prepay. The note was
deemed extinguished in May 2008. As a result of the extinguishment, the maturity
date of the debt and warrants were extended to January 2011 and the per-share
conversion price was reduced to $0.80; all other terms remained unchanged.

                                       67
<PAGE>

During December 2007 the Company sold a convertible promissory note in the
amount of $1,003,226. Pursuant to the sale, a warrant was issued to the investor
covering 668,817 shares of common stock with a per share exercise price of
$3.25. The warrant expired 36 months from issuance. The note had a stated
interest rate of 10% per annum (simple interest) due and payable at the end of
each calendar quarter, matured 36 months from issuance and was convertible into
shares of common stock, at the election of the holder, at a per share price of
$1.50, and is prepayable without penalty if (i) the bid price of the Company's
common stock equals or exceeds $4.00 per share for ten consecutive trading days
and (ii) the Company provides the investor with 20 trading days' notice of its
intent to prepay. The note was deemed extinguished in May 2008. As a result of
the extinguishment, the maturity date of the debt and warrants were extended to
January 2011 and the per-share conversion price was reduced to $0.80; all other
terms remained unchanged.

In accordance with APB 14 and EITF 00-27, upon original issuance, the Company
allocated the proceeds of these sales between the warrants and the notes based
on their relative fair values. The allocation resulted in a total discount of
$479,829 (restated) related to the warrants for the Notes issued in October and
December 2007. In addition, the Note issued in October 2007 had a beneficial
conversion feature based on the computed fair value of the note. The Company
accounted for the beneficial conversion feature in accordance with EITF 98-5 and
recorded a discount of $191,363 for the beneficial conversion feature. The total
discount issued in relation to these notes was $671,192.

Extinguishment of Debt

On May 15, 2008 the Company negotiated with certain holders of the Notes to both
extend the maturity date and reduce the price at which each note is convertible
into shares of common stock (the "Conversion Price") from $1.50 or $2.00 per
share to either $0.80 or $1.20 per share. A total of $9.3 million in principal
was renegotiated and the due dates were extended from their original maturity
dates of December 2008 through December 2010, to a revised maturity date of
January 31, 2011. The Notes that were renegotiated represent both those issued
under the "J" Unit Sales discussed above as well as those issued under
Convertible Debt with Warrants, also discussed above. The other terms of the
Notes remained unchanged.

On the date of modification and in accordance with EITF 96-19, Debtors
Accounting for Modification or Exchange of Debt Instruments, the discounted
present value of the cash flows of the modified convertible promissory notes
(the "Modified Notes") was compared with the discounted present value of the
Notes to determine whether the change in cash flows exceeded 10% of the carrying
value of the Notes. Based on this test, all of the Notes were deemed
extinguished. Upon extinguishment, the Company recorded a loss on the
extinguishment of $49,940.

In accordance with EITF 06-6, Debtor's Accounting for a Modification (or
Exchange) of Convertible Debt Instruments, all of the Modified Notes were deemed
to have a beneficial  conversion  feature, as the closing price of the Company's
stock on May 15, 2008 was greater than the imputed  conversion  value.  The fair
value of the beneficial conversion features totaled $5,226,069 and were recorded
to Discount on Notes Payable with an offset to Additional  Paid-in  Capital.  In
addition,  the warrants  issued in connection with the October and December 2007
Notes were modified.  Consequently, the Company calculated the relative value of
the debt and warrants.  The discount associated with this allocation resulted in
an additional  $291,874  recorded to Discount on Notes Payable with an offset to
Additional  Paid-in  Capital.  A total  additional  discount of  $5,517,943  was
recorded  as a result  of the  extinguishment  of  debt.  The  discount  will be
amortized  over the life of the Modified  Notes using the  effective or straight
line interest method as appropriate.

                                       68
<PAGE>

Line of Credit

On May 30, 2008, the Company assumed a revolving credit facility (the
"Facility") in connection with the acquisition of Inventa, which remains in
force through May 15, 2009. The Facility consists of a $250,000 revolving line
of credit which bears interest at a daily rate of LIBOR plus 2.00% (0.436% at
December 31, 2008). At December 31, 2008, there was $200,000 outstanding under
the line of credit and $50,000 available pursuant to the terms of the Facility.
There are no commitment fees due under the facility. The terms of the Facility
require consecutive monthly interest-only payments with the principal due on May
15, 2009. The Facility is secured by all of the assets of Inventa.

Convertible Notes Related to Acquisition of Inventa Technologies, Inc.

In May 2008 and as part of the purchase price of Inventa, the Company issued
$2.0 million in unsecured promissory notes due January 31, 2011, bearing
interest at 10%, with interest payable at the end of each quarter. The
convertible promissory notes are immediately convertible to 2.5 million shares
of the Company's common stock at the election of the holders at a per share
conversion price of $0.80. At the time of issuance, the conversion price was
$0.30 per share less than the then-market price of our common stock. In
accordance with EITF 98-5, the intrinsic value of the embedded beneficial
conversion feature totaling $2.0 million was recorded as an increase to
paid-in-capital and will be amortized to using the straight-line interest method
over the life of the promissory notes.

15.  Commitments and Contingencies

As of December 31, 2008, the Company leased office facilities under a
non-cancelable operating lease. Future minimum lease payments required under the
non-cancelable leases are as follows:

Year ending December 31              Operating Leases
-----------------------             ------------------
2009                                 $         326,098
2010                                           195,591
2011                                           195,591
2012                                           195,591
2013                                           195,591
                                    -------------------
Total minimum lease payments         $       1,108,462
                                    ===================


The Company leases approximately 15,000 square feet of general commercial
offices located in Burlingame, California (the "Premises"). The Premises are
used for the purposes of general office use and for software development. The
base rent under this lease is $16,060 per month for the first year, $17,520 per
month for the second year and $20,440 per month for the third year. The Company
received abated rent for the period from May 1, 2005 to July 30, 2005 and the
initial term of the lease was accounted for in accordance with Financial
Technical Bulletin 85-3, Accounting for Operating Leases with Scheduled Rent
Increases ("FTB 85-3"), which required the effects of the scheduled rent
increases and effects of rent abatement to be recognized on a straight-line
basis over the initial term of the lease. This results in monthly rental expense
of $16,668 through April 30, 2008, the original lease term. During the years
ended December 31, 2008, 2007 and 2006 the Company recognized a total of
$396,673, $200,020 and $200,020 respectively, in rental expense for this lease.
In July 2007 this lease was extended for the period May 1, 2008 through April
30, 2009 at the rate of $34,200 per month. During the year ended December 31,
2008, we recognized a total of $56,000 of sublease income, which was offset to
rental expense. There are no asset retirement obligations under this operating
lease.

Effective June 1, 2008, the Company entered into a sub-lease for a portion of
the Burlingame facility to a customer on a month-to-month basis through April
2009 for $13,000 for rent and utilities, payable each month in advance.
Sub-lease income for the year ended December 31, 2008 was approximately $91,000.

As discussed in Note 4, on Inventa was acquired May 30, 2008. As part of the
acquisition the Company assumed the Inventa operating lease of a general
commercial facility in Mt. Laurel, New Jersey at the monthly rent of $10,007.
The lease expires June 30, 2015 and has the option to renew the terms of the
lease for an additional five years at the greater of $10,768 or an increase in
the consumer price index.

                                       69
<PAGE>

The lease was amended effective August 1, 2008 to add 4,590 square feet upon
receipt of a Certificate of Occupancy, currently scheduled for February 1, 2009.
The total monthly rent will be $16,299. The amendment also restates the end of
the lease commitment to be seven years from the date of the Certificate of
Occupancy for the additional space. At expiration of the amended lease, the
Company has the option to renew the terms of the lease for an additional five
years at the greater of $18,467 or an increase in the consumer price index.

Litigation

On July 10, 2008, Sybase, Inc. ("Sybase") an enterprise software and services
company, filed a complaint for common law unfair business practices, and
tortious interference with contractual relations, among other things, in the
Superior Court of the State of California, County of Alameda. Sybase is seeking
an injunction, and damages, among other legal and equitable relief. ANTs
believes that this lawsuit is without merit and intends to continue vigorously
defending itself.

On August 22, 2008, a former ANTs employee, filed a putative class action
complaint for all current and former software engineers, for failure to pay
overtime wages, and failure to provide meal breaks, among other things, in
Superior Court of the State of California, County of San Mateo. The former
employee is seeking an injunction, damages, attorneys' fees, and penalties. ANTs
believes that this lawsuit is without merit and intends to continue vigorously
defending itself.

On October 14, 2008, Bayside Plaza ("Bayside"), a partnership, filed a complaint
for breach of contract in Superior Court of the State of California, County of
San Mateo. Bayside is seeking approximately $50,000 in rent, late fees and
operating expenses per month from October 2008. The Company intends to continue
defending itself.

                                       70
<PAGE>

16. Stockholders' Equity

         Stockholders' equity transactions by cash and non-cash transactions for
the years ending December 31, 2008, 2007 and 2006 is presented below.

<TABLE>
<CAPTION>
<S>                                                                                                  <C>             <C>
                                                                                                     2007            2006
                                                                                      2008        (restated)      (restated)
                                                                                --------------- --------------- --------------
Total stockholders' equity, beginning of year                                   $   (1,338,192) $    4,628,771  $   6,412,586
                                                                                --------------- --------------- --------------
Cash transactions:
------------------
   Proceeds from private placements:
      Sales of "H" units at $1.60 per unit                                                   -               -        204,000
      Cash commissions on sales of "H" units                                                 -               -        (20,000)
      Sales of restricted shares of common stock at $1.50 per share                          -               -      9,597,503
      Cash commissions on sales of restricted stock                                          -               -       (709,250)
      Sales of "J" units at $25,000 per unit (equity portion of units)                       -       6,849,427      1,265,474
      Cash commissions on sales of "J" units                                                 -        (684,942)       (25,150)
      Sales of debt with attached warrants                                                             479,829              -
      Sales of common stock at $0.60 per share                                       7,615,056               -              -
      Cash commissions on sales of common stock                                       (367,251)              -              -
                                                                                --------------- --------------- --------------
     Total                                                                           7,247,805       6,644,314     10,312,577
                                                                                --------------- --------------- --------------

   Proceeds from stock and warrant exercises:
        Warrants with exercise price of $2.00 per share modified
              $1.50 per share in 2006                                                        -               -        109,998
        Warrants with exercise price of $2.00 exercised at $2.00 per share                   -               -        458,336
        Cash commissions on exercise of warrants                                             -               -        (39,125)
      Warrants with exercise price of $2.00-$3.50 per share modified
              $1.25 per share                                                                -         996,125              -
      Cash proceeds from exercise of stock options                                      32,670          60,600        713,854
                                                                                --------------- --------------- --------------
     Total                                                                              32,670       1,056,725      1,243,063
                                                                                --------------- --------------- --------------
           Total cash transactions                                                   7,280,475       7,701,039     11,555,640
                                                                                --------------- --------------- --------------

Non-cash transactions:
----------------------
    Acquisition of Inventa Technologies, Inc.:
     Issuance of 20,000,000 shares valued at $1.20 per share                        24,000,000               -              -
     Fair value of $2 million in convertable promissory notes                        1,355,586               -              -
                                                                                ---------------
     Total                                                                          25,355,586               -              -

     Fair value of conversion feature of reissued convertible
             promissory notes                                                        5,226,069               -              -

   Related to private placements:
      Beneficial conversion feature                                                          -       2,218,286        435,444
      Common stock issued for commission                                                     -         169,109          8,833
      Common stock issued for shares subscribed at December 31, 2006                         -               -              -
                                                                                --------------- --------------- --------------
     Total                                                                                   -       2,387,395        444,276
                                                                                --------------- --------------- --------------

   Related to stock vesting and warrant-based compensation:
      Employee compensation expense                                                  3,015,662       1,488,405      1,253,159
      Non-employee compensation expense                                                132,281          99,417         95,088
                                                                                --------------- --------------- --------------
     Total                                                                           3,147,943       1,587,822      1,348,247
                                                                                --------------- --------------- --------------
        Total non-cash transactions                                                 33,729,598       3,975,217      1,792,523
                                                                                --------------- --------------- --------------

Net loss for year                                                                  (11,628,584)    (17,643,219)   (15,131,978)
                                                                                --------------- --------------- --------------

Total stockholders' equity, end of year                                         $   28,043,297  $   (1,338,192) $   4,628,771
                                                                                =============== =============== =============
</TABLE>

Details of these transactions by quarter for the years ending December 31, 2008,
2007 and 2006 are presented below.

                                       71
<PAGE>

2008

Funds raised through private offerings to accredited investors:

The Company received $7,615,000 from accredited investors for the sale of
12,691,667 shares of common stock, at a price of $0.60 per share and incurred
commission costs of $367,200. The Company issued 510,757 shares of common stock
and a warrant to purchase up to 50,166 shares at an exercise price of $0.60 in
connection with this private placement.

Other equity transactions:

As discussed in Note 4, on May 30, 2008 Inventa Technologies, Inc. was
acquired  for a total  purchase  price of $28.8  million,  which  included  cash
payments of $3,000,000 and issuance of 20 million shares of the Company's common
stock  valued at $1.20  per  share.  The  Company  also  issued  $2  million  in
promissory notes to the seller,  with a fair value of approximately $1.4 million
convertible  into 2.5 million  shares of common stock.  As discussed in Note 14,
the notes had a beneficial  conversion feature totaling in aggregate  $2,000,000
which was allocated to paid-in-capital.

On March 26 and March 31, 2008, the Board of Directors approved a repricing of
certain stock options and warrants for employees, consultants and Board members
to the then-current market price of the Company's common stock. Officers and
Board members forfeited 1,193,667 vested and unvested shares in connection with
the repricing. In accordance with the provisions of FAS 123(R), $786,545 in
stock compensation expense was recognized, net of forfeiture credits, as a
result of the repricing.

For the twelve months ended December 31, 2008 a total of $3,015,662 in
compensation expense was recognized related to the vesting of employee stock
options and the repricing and $132,281 in professional fees was recognized
related to the vesting of non-employee stock options and warrants in accordance
with the accounting guidelines set forth in SFAS 123 (R) and EITF 96-18,
respectively.

During 2008, a total of 47,500 shares of common stock were issued through the
exercise of stock options with original exercise prices ranging from $.52 to
$.81, resulting in gross proceeds of $32,670.

2007

Funds raised through private offerings to accredited investors:


In the first quarter of 2007, the Company entered into agreements with
accredited investors to purchase 220 J Units, raising $11,000,000. Pursuant to
the sale, the Company issued 3,142,700 shares of common stock with share prices
between $1.92 and $2.35 (restated), and issued Notes with an initial face value
of $5,500,000. In accordance with EITF 00-27, the Company allocated the cash
received between debt and equity based on the relative fair value of each piece
of the instrument. As a result, value ascribed to the debt portion was
$4,150,577 and the value ascribed to the equity portion was $6,849,423.

The Company paid $1,100,000 in cash commissions and issued 145,440 shares of
common stock which were valued at $1.92 to $2.35 per share or $449,228. The
total commission value of $1,549,228 (restated) was allocated between debt
issuance costs and additional paid-in capital as a cost of raising the equity
portion of the offering, in the same proportion that was used to allocate the
gross proceeds of the offering between notes payable and stockholders' equity.
This resulted in an allocation to additional paid-in capital of $965,061
(restated) and $584,166 (restated) to debt issuance costs.

As more fully discussed in Note 14, "Convertible Notes Payable with
Warrants",  in the fourth  quarter of 2007 the  Company  issued two  convertible
promissory  notes  payable  with a  principal  value of  $3,003,226,  along with
2,002,150  warrants  exercisable at $0.80 (after  modification)  per share.  The
$3,003,226 in cash proceeds were  allocated  between notes payable and equity in
proportion  to their  relative fair values on the date of each  issuance,  which
resulted in a discount  on notes  payable and  increase  of  additional  paid-in
capital of $479,829 (restated).

                                       72
<PAGE>

Funds raised through cash exercises of stock options and warrants:

For the year ended December 31, 2007, stock options covering a total of 60,000
shares were exercised, generating $60,600 in cash proceeds to the Company. In
the last two quarters of 2007, warrants covering 796,900 shares were exercised
at a discounted price of $1.25 per share, resulting in proceeds of $996,125 to
the Company.

Other equity transactions:

For the year ended December 31, 2007, $1,488,405 was recognized in compensation
expense related to vesting of employee stock options, and $99,417 in
professional fees was recognized related to the vesting of non-employee stock
options and warrants in accordance with the accounting guidelines set forth in
SFAS 123 (R) and EITF 96-18, respectively.

2006

Funds raised through private offerings to accredited investors:

In the fourth quarter of 2007, the Company entered into agreements with
accredited investors to purchase 40 J Units, raising $2,000,000. Pursuant to the
sale, the Company issued 571,400 shares of common stock with share prices
between $2.30 and $2.38 (restated), and issued Notes with an initial face value
of $1,000,000. In accordance with EITF 00-27, the Company allocated the cash
received between debt and equity based on the relative fair value of each piece
of the instrument. As a result, value ascribed to the debt portion was $734,556
and the value ascribed to the equity portion was $1,265,444.

During the quarter ended June 30, 2006, the Company sold to accredited
investors, through a private offering, 6,398,335 restricted shares of common
stock at a price of one dollar and fifty cents ($1.50) per share. The Company
received $9,597,503 in gross proceeds from the offering and paid $709,250 in
cash commissions on these sales to the placement agent. Commissions paid in
common stock to the placement agent totaled $496,475.

During the quarter ended March 31, 2006, the Company sold to accredited
investors, through a private offering, 127,500 H Units at a price of one dollar
and sixty cents ($1.60) per H Unit, with each H Unit consisting of (i) one (1)
share of common stock, and (ii) a warrant to purchase up to one (1) share of
common stock at a per share exercise price of three dollars and twenty-five
cents ($3.25), exercisable until April 14, 2008. The Company received $204,000
in gross proceeds from the offering. No commissions were incurred for these
sales.

During the quarter ended March 31, 2006, cash commissions totaling $20,000 were
paid in connection with the H Unit offering that occurred during the fourth
quarter of 2005.

Funds raised through cash exercises of warrants:

During the quarter ended September 30, 2006, investors exercised warrants to
purchase 229,168 shares of the Company's common stock (or "shares") at $2.00 per
share for a total of $458,336.

During the three months ended March 31, 2006, an investor exercised a warrant to
purchase 73,332 shares at $2.00 per share for a discounted price of $1.50 per
share, resulting in gross proceeds to the Company of $109,998. The Company paid
$39,125 in cash commissions in connection with the warrant exercises that
occurred during the fourth quarter of 2005.

Funds raised through cash exercises of stock options:

For the year ended December 31, 2006, stock options covering a total of 477,902
shares were exercised, generating $713,854 in cash proceeds.

                                       73
<PAGE>

Other equity transactions:

For the year ended December 31, 2006, the Company recognized $1,253,159 in
compensation expense related to vesting of employee stock options, and $79,087
in professional fees related to the vesting of non-employee stock options in
accordance with the accounting guidelines set forth in SFAS 123 (R).

During 2006, the Company recognized $16,000 in non-cash professional fee expense
(non-GAAP measure) related to issuing 10,666 restricted shares of our common
stock at a price of $1.50 per share to a vendor.

17. Stock-Based Compensation

Stock Option Plans

The Company has two stock-based employee and director compensation plans (the
ANTs software inc. 2000 Stock Option Plan and the ANTs software inc. 2008 Stock
Plan) which are intended to attract, retain and provide incentives for talented
employees, officers, directors and consultants, and to align stockholder and
employee interests. Stock-based compensation is considered to be critical to
operations and productivity and generally all of employees and directors of the
Company participate, as well as certain consultants. Under the Plan, the Company
may grant incentive stock options and non-qualified stock options 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 value for
non-qualified options. Options are granted at the discretion of the Board of
Directors and the Compensation Committee of the Board of Directors.

Options granted under the Plan generally vest within three years after the
date of  grant,  and  expire 10 years  after  grant.  Stock  option  vesting  is
generally  time-based;  however, the Company has also issued grants with certain
performance-based vesting criteria.  Options granted to new hires generally vest
between  one-sixth and  one-third  between six months and twelve months from the
anniversary  date of the grant and then vest monthly  thereafter.  The remaining
unvested  options vest ratably over the reamining  life of the grant.  Following
termination  of employment or consulting  status there is usually a grace period
during  which the vested  portion of the option is  exercisable.  This period is
typically three months, but may be shorter or longer depending on the terms of a
given stock  option  agreement  or upon  managements'  discretion.  Non-employee
directors are typically  granted stock options in  recognition of their service.
Such  directors  are granted an option to purchase up to 150,000  shares,  which
vest monthly over their  three-year board service term.  Non-employee  directors
who chair a committee  are granted an  additional  30,000-share  option with the
same  vesting  schedule.  Directors  generally  serve for terms of three  years.
Options granted to directors may include a one-year lock-up provision  following
termination of their director  status,  during which period the option cannot be
exercised.

Stock-Based Compensation Expense

The following table sets forth the total stock-based compensation expense for
employees, non-employee directors and consultants for the years ended December
31, 2008, 2007 and 2006, respectively.

                                       74
<PAGE>

<TABLE>
<CAPTION>
<S>                                                         <C>            <C>         <C>
                                                                 2008          2007         2006
                                                             ------------  -----------  ------------

Cost of Revenues                                             $    113,864  $         -  $          -
Sales and marketing                                               359,286      189,188       221,586
Research and development                                        1,226,057      741,312       507,600
General and administrative                                      1,448,736      657,322       619,060
                                                             ---------------------------------------
  Stock-based compensation before income taxes                  3,147,943    1,587,822     1,348,246
  Income tax benefit                                                    -            -             -
                                                             ---------------------------------------
  Total stock-based compensation expense after income taxes  $  3,147,943  $ 1,587,822  $  1,348,246
                                                             =======================================

Stock-based compensation expense charged to:
Employee compensation expense (includes
   outside directors)                                        $  3,015,660  $ 1,488,405  $  1,253,159
Professional fees - S&M consultants                                 4,664       55,650        13,500
Professional fees - R&D consultants                                75,735       11,837        65,587
Professional fees - G&A consultants                                51,884       31,930        16,000
                                                             ---------------------------------------
  Stock-based compensation before income taxes                  3,147,943    1,587,822     1,348,246
  Income tax benefit                                                    -            -             -
                                                             ---------------------------------------
  Total stock-based compensation expense after income taxes  $  3,147,943  $ 1,587,822  $  1,348,246
                                                             =====================================
</TABLE>

As of December 31, 2008, there was approximately $1,626,744 of total
unrecognized compensation cost, adjusted for forfeitures, related to non-vested
stock-based payments granted to Company employees and contractors, which is
expected to be recognized over a weighted-average period of approximately 2.5
years. Total unrecognized compensation cost will be adjusted for future changes
in estimated forfeitures.

Net cash proceeds from the exercise of stock options were $32,670, $60,600, and
$713,854 for the years ended December 31, 2008, 2007, and 2006, respectively. No
income tax benefit was realized from stock option exercises during the year, due
to our net loss from operations for the period. In accordance with SFAS 123(R),
if there had been excess tax benefits from the exercise of stock options, these
would have been shown as financing cash flows rather than operating cash flows.

Valuation Assumptions
---------------------

The fair value of employee and non-employee stock-based awards was estimated
using the Black-Scholes valuation model with the following weighted-average
assumptions for the years ended December 31, 2008, 2007 and 2006.

<TABLE>
<CAPTION>
<S>                                    <C>                   <C>                <C>    <C>
                                                Fiscal Years Ended December 31,
                                ----------------------------------------------------------------
                                       2008                  2007                  2006
                                ------------------- ---------------------- ---------------------
      Expected life in years           3.00                  3.00               3.00 - 6.00
      Average Volatility          66.27% - 92.39%         66% - 67%              79% - 96%
      Interest rate               1.48 % - 2.67%        3.50 % - 4.76%        4.55 % - 5.00%
      Dividend Yield                   0.00%                0.00%                  0.00%
</TABLE>


                                       75
<PAGE>

The computation of expected volatility for the years ended December 31, 2008,
2007 and 2006 is based on a combination of historical and market-based implied
volatility. The computation of expected life is based on historical exercise
patterns which generally represent the full vesting date for employee grants and
contractual life of the award for non-employee grants. The interest rate for
periods within the contractual life of the award is based on the U.S. Treasury
yield curve in effect at the time of grant.

18. Stock Options and Warrants

Stock option and warrant activity for the year ending December 31, 2008 is as
follows:

<TABLE>
<CAPTION>
<S>                              <C>           <C>             <C>           <C>
                                      Stock Option Shares                    Total Options
                                   Available                      Warrants    and Warrants
                                   for Grant    Outstanding     Outstanding    Outstanding
                                 ------------- -------------   ------------- -------------
Balance, January 1, 2008              652,789     8,689,050       8,124,380    16,813,430
  Authorized                        5,000,000             -               -             -
  Granted                          (4,947,000)    4,947,000          50,166     4,997,166
  Exercised                                         (47,500)              -       (47,500)
Retired/forfeited                   3,186,038    (3,186,038)     (3,616,605)   (6,802,643)
                                 ---------------------------   ---------------------------
Balance, December 31, 2008          3,891,827    10,402,512       4,557,941    14,960,453
                                 ===========================   ===========================

Exercisable, at January 1, 2008                   6,694,666       4,557,941    11,252,607
                                               -------------   ---------------------------
</TABLE>

Stock Option Activity

The following table summarizes stock option plan activity and shares available
for grant for the years ended December 31, 2008, 2007 and 2006:

<TABLE>
<CAPTION>
<S>                                    <C>          <C>             <C>             <C>       <C>
                                                                        Outstanding Options
                                                     -----------------------------------------------------
                                                                                Weighted
                                                                                 Average
                                                                     Weighted   Remaining
                                          Shares                     Average   Contractual
                                       Available for  Number of      Exercise    Term (in      Aggregat
                                          Grant         Shares        Price       years)    Intrinsic Value
                                       ------------- -------------- --------------------------------------
Outstanding, January 1, 2006             1,818,940     8,060,801         2.17         7.96 $     2,688,761

  Granted                               (3,350,000)    3,350,000         2.25
  Exercised through cash consideration           -      (477,902)        1.49
  Expired/forfeited/cancelled            2,841,330    (2,841,330)        2.45
                                       ------------  ------------   ---------
Outstanding, December 31, 2006           1,310,270     8,091,569         2.14         7.01 $     1,007,974

  Granted                               (1,804,167)    1,804,167         1.77
  Exercised through cash consideration           -       (60,000)        1.01
  Expired/forfeited/cancelled            1,146,686    (1,146,686)        2.32
                                       ------------  ------------   ---------
Outstanding, December 31, 2007             652,789     8,689,050    $    2.05         6.87 $        30,495

  Additional shares reserved             5,000,000             -            -
  Granted                               (4,947,000)    4,947,000         1.04
  Exercised through cash consideration                   (47,500)        0.69
  Expired/forfeited/cancelled            3,186,038    (3,186,038)        1.87
                                       ------------  ------------   ---------
Outstanding, December 31, 2008           3,891,827    10,402,512    $    1.03         7.40 $             -
Exercisable at December 31, 2008                       6,694,666    $    1.03         6.33 $             -
</TABLE>

                                       76
<PAGE>

The aggregate intrinsic value of total stock options outstanding and exercisable
during the year ended December 31, 2008 in the table above represents the total
pretax intrinsic value (i.e., the difference between the closing stock price on
December 31, 2008 and the exercise price, times the number of shares) that would
have been received by the option holders had all option holders exercised their
options on December 31, 2008. Aggregate intrinsic value changes as the fair
market value of Company stock changes. The closing market price of the stock on
December 31, 2008 was $0.37. The weighted average grant date fair value of stock
options granted during 2008, 2007 and 2006 was $0.45, $0.76 and $1.26,
respectively.

A summary of the nonvested shares subject to options granted under the 2000
Stock Option Plan and the 2008 Stock Plan as of December 31, 2008 and 2007 is as
follows:
<TABLE>
<CAPTION>
<S>                         <C> <C>                                      <C>
                                                                          Weighted Average
                                                                           Grant Date Fair
                                                        Option Shares       Value Per Share
                                                     ------------------- --------------------
      Nonvested at January 1, 2007                         2,208,490        $     0.61
      Granted during the period                            1,804,167        $     0.76
      Vested during the period                            (1,160,083)       $     1.00
      Terminated during the period                          (898,265)       $     1.01
                                                     ------------------
      Nonvested at December 31, 2007                       1,954,309        $     0.64
      Granted during the period                            4,947,000        $     0.45
      Vested during the period                            (2,184,621)       $     0.52
      Terminated during the period                        (1,008,842)       $     0.48
                                                     ------------------
      Nonvested at December 31, 2008                       3,707,846        $     0.42
                                                     ==================
</TABLE>

As of December 31, 2008, there was $1,626,744 of total unrecognized
compensation cost related to nonvested shares based compensation agreements
granted under the 2000 Stock Option Plan and the 2008 Stock Plan.  That cost is
expected to be recognized over a weighted average period of approximately 2.5
years.

The range of exercise prices for stock options outstanding and exercisable at
December 31, 2008 are summarized as follows:

                                       77
<PAGE>
<TABLE>
<CAPTION>
<S>         <C>     <C>                       <C>       <C>                                             <C>
                                              Total Options Outstanding as of December 31 ,2008
                                  --------------------------------------------------------------------------
                                                                 Weighted                   Weighted
                                                             Average Exercise          Average Remaining
                                         Options              Price per Share           Contractual Life
                                  --------------------- --------------------------- ------------------------
      Range of exercise prices:
            $0.52 - $0.99                     5,914,239 $                      0.84                     6.52
            $1.00 - $1.99                     4,314,871 $                      1.24                     8.72
            $2.00 - $2.99                       156,761 $                      2.43                     5.21
            $3.00 - $3.99                        16,641 $                      3.13                     2.44
                                  --------------------- --------------------------- ------------------------
         Total stock options outstanding
           at December 31, 2008              10,402,512 $                      1.03                     7.40
                                  ===================== =========================== ========================

                                                Total Options Exercisable at December 31, 2008
                                  --------------------------------------------------------------------------
                                                                 Weighted                   Weighted
                                                             Average Exercise          Average Remaining
                                         Options              Price per Share           Contractual Life
                                  --------------------- --------------------------- ------------------------
      Range of exercise prices:
            $0.52 - $0.99                     4,672,228 $                      0.87                     5.77
            $1.00 - $1.99                     1,849,036 $                      1.31                     7.85
            $2.00 - $2.99                       156,761 $                      2.43                     5.21
            $3.00 - $3.99                        16,641 $                      3.13                     2.44
                                  --------------------- --------------------------- ------------------------
         Total stock options exercisable
          at December 31, 2008                6,694,666 $                      1.03                     6.33
                                  ===================== =========================== ========================
</TABLE>

Stock-based Awards to Board of Directors
----------------------------------------

On August 16, 2006, Mr. Boyd Pearce, former CEO, resigned, and we entered into a
separation agreement pursuant to which (i) a stock option granted to Mr. Pearce
in April 2005, covering 750,000 shares of our common stock, was cancelled and
replaced by a five-year warrant covering the same number of shares at the same
exercise price; (ii) stock options granted in October 2004 covering a total of
750,000 shares of common stock were modified to have a five-year exercise
period, and; (iii) restrictions were placed on Mr. Pearce's ability to sell
stock purchased under both the newly granted warrant and the modified options.
The Company recorded no expense in the Consolidated Statements of Operations
related to the cancellation of the April 2005 option grant and the subsequent
warrant grant since the exercise price of the warrant was greater than the
market price of our common stock on the date of the warrant grant, and the fair
value of the warrant, calculated using the Black-Scholes valuation model, was
less than the fair value of the original option grant. The Company recorded
compensation expense of $198,750 during the period ending September 30, 2006
related to the modification of the October 2004 option grants. No future expense
is anticipated as both the warrant and options were fully vested at the date of
modification.

On August 22, 2006, the Company entered into Cancellation and Regrant Agreements
with directors Thomas Holt, Homer Dunn, John Gaulding, and Robert Henry Kite.
Under these Agreements certain non-qualified options to purchase shares of
common stock were replaced with Warrants to purchase shares of common stock. The
exercise prices and terms of the warrants mirrored the exercise prices and terms
of the non-qualified stock options. The exercise prices ranged from $2.60 per
share to $6.38 per share for Thomas Holt; from $2.60 per share to $2.85 per
share for John Gaulding; from $2.60 per share to $2.85 per share for Homer Dunn;
and from $2.35 per share to $2.85 per share for Robert Henry Kite. The cancelled
stock options and granted warrants covered an aggregate of 192,500 shares for
Thomas Holt; 322,500 shares for John Gaulding; 262,500 shares for Homer Dunn;
and 245,000 shares for Robert Henry Kite. No financial benefit was conferred on
the directors from the exchange of their stock options for warrants as the
exercise prices and terms of the warrants mirrored the exercise prices and terms
of the options. These option cancellations and warrant grants helped the Company
through a period of heavy recruiting. The Company intends to reduce the number
of shares in one or more future intended stock option or equity incentive plans
by the aggregate number of shares covered by these warrants. The Company
recorded no expense in the Consolidated Statements of Operations for these
transactions since the warrants all had exercise prices greater than the market
price of the stock on the date of grant, and the fair value of the warrant
awards calculated using the Black-Scholes valuation model was less than the fair
value of the original option awards.

                                       78
<PAGE>

On September 8, 2006, Mr. Girish Mundada, former vice president of engineering,
resigned and entered into a separation agreement with the Company pursuant to
which: (i) stock options covering an aggregate of 410,000 shares of Company
common stock were modified to extend the standard post-termination exercise
period from three months following termination through June 8, 2008; (ii)
restrictions were placed on Mr. Mundada's ability to sell stock purchased under
the stock options, and; (iii) stock options covering an aggregate of 210,000
shares of Company common stock were cancelled. Compensation expense of $66,000
was recorded during the period ending September 30, 2006 related to the
modification of Mr. Mundada's options. No future expense is anticipated as the
options were fully vested at the date of modification.

Warrants Outstanding
--------------------

Warrants outstanding as of December 31, 2008 are summarized in the table below:
<TABLE>
<CAPTION>
<S>                                                                             <C>       <C>                                   <C>
                                                                                                           Weighted
                                                                                            Exercises       Average
                                                                                            Prices per     Exercise      Year of
                                                                             Warrants          Share         Price      Expiration
                                                                         ---------------- -------------- ------------ --------------
      Warrants issued in private
         placements:
                                                                                3,002,150 $         0.80                        2009
                                                                         ----------------                -----------
           Subtotal                                                             3,002,150                $      0.80
                                                                         ----------------

      Warrants issued to customer and
         vendors
                                                                                  150,000  $1.45 - $1.99                        2009
                                                                                   50,166 $         0.60                        2013
                                                                         ----------------                -----------
           Subtotal                                                               200,166                $      1.42
                                                                         ----------------

      Warrants issued to outside directors
         and former employee:
                                                                                   50,000 $         0.94                        2010
                                                                                  850,000   $.94 - $2.31                        2011
                                                                                  198,750 $         0.94                        2015
                                                                                  256,875 $         0.94                        2016
                                                                         ----------------                -----------
           Subtotal                                                             1,355,625                $      1.70
                                                                         ----------------
           Total warrants outstanding at
            December 31, 2008                                                   4,557,941                $      1.09
                                                                         ================                ===========
</TABLE>


Of the total warrants outstanding at December 31, 2008, all warrants were fully
vested and exercisable.

19.  Concentration of Credit Risk

The Company maintains cash balances at two financial institutions in excess of
federally insured limits. At December 31, 2008, our uninsured cash balances
totaled $1,869,678. At December 31, 2008, two customers accounted for 73% of
trade accounts receivable balance of $383,445. All but $2,000 of the entire
outstanding balance had been collected as of the date of this report.

20.  Employee Benefit Plans

                                      79
<PAGE>

The Company maintains a 401(k) Income Deferral Plan (the "401(k) Plan")
immediately open to all employees regardless of age or tenure. The Company may
make a discretionary contribution to the 401(k) Plan each year, allocable to all
401(k) Plan participants. However, the Company elected to make no contributions
for the years ended December 31, 2008, 2007 and 2006. Administrative fees for
the 401(k) Plan totaled $4,311, $4,378 and $3,600 for the years ended December
31, 2008, 2007 and 2006, respectively.


21.  Subsequent Events

Effective January 6, 2009, the Company took possession of the additional space
at the facilities located in Mt. Laurel, New Jersey. Accordingly, rent increased
from $10,007 per month to $16,299 per month or approximately $195,000 per year.

During the first quarter of 2009, the due date of a convertible promissory note
was extended from April 2009 to the earlier of August 2009 or the receipt of
$2,000,000 in financing.

                                       80
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf as of the 30th Day of April 2009 by the undersigned, thereunto duly
authorized.

                                      ANTs software inc.

                                      By       /s/ Joseph Kozak
                                               --------------------------
                                               Joseph Kozak,
                                               Chairman, Chief Executive Officer
                                               and President


                                       81
<PAGE>



                                      DIRECTORS

                                      By       /s/ Joseph Kozak
                                              ----------------------------------
                                              Joseph Kozak, Chairman, Chief
                                              Executive Officer and President

                                      Date     April 30, 2009
                                               --------------------------


                                      By       /s/ Craig L. Campbell
                                               ---------------------------------
                                               Craig Campbell, Director

                                      Date     April 30, 2009
                                               --------------------------


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

                                      Date     April 30, 2009
                                               --------------------------


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

                                      Date     April 30, 2009
                                               --------------------------


                                      By       /s/ Robert T. Jett
                                               ---------------------------------
                                               Robert Jett, Director

                                      Date     April 30, 2009
                                               --------------------------


                                      By       /s/ Ari Kaplan
                                               Ari Kaplan, Director

                                      Date     April 30, 2009
                                               --------------------------


                                      By       /s/ Robert H. Kite
                                               ---------------------------------
                                               Robert H. Kite, Director

                                      Date     April 30, 2009
                                               --------------------------


                                      By       /s/ Francis K. Ruotolo
                                               ---------------------------------
                                               Francis K. Ruotolo, Director

                                      Date     April 30, 2009
                                               --------------------------


                                       82
<PAGE>

(a)     Exhibits

        3.1      Amended and Restated Certificate of Incorporation of the
                 Company, as listed in Exhibit 3.1 to the Company's 10-QSB filed
                 on August 14, 2003, is hereby incorporated by reference.
        3.2      Amended and Restated Bylaws of the Company.
        3.3      2000 Stock Option Plan of the Company, amended April 5, 2005,
                 as listed in Exhibit 10.1 to the Company's 8-K filed on April
                 12, 2005, is hereby incorporated by reference.
        10.1     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.
        10.2     Standard Multi-Tenant Office Lease, as listed in Exhibit 10.6
                 to the Company's 10-QSB filed on November 14, 2005, is hereby
                 incorporated by reference.
        14       Code of Ethics, as listed in Exhibit 14 to the Company's 10-KSB
                 filed on March 30, 2004, is hereby incorporated by reference.
        23.1     Letter of Consent from Independent Registered Accountants,
                 Weiser, LLP.
        23.2     Letter of Consent from Independent Registered Accountants,
                 BPM LLP
        31.1     Certification of the Chief Executive Officer required by Rule
                 13a-14(a) of the Securities Exchange Act of 1934, as amended,
                 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
                 2002
        31.2     Certification of the Chief Financial Officer required by Rule
                 13a-14(a) of the Securities Exchange Act of 1934, as amended,
                 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
                 2002
        32.1     Certification of the Chief Executive Officer pursuant to 18
                 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
                 Sarbanes-Oxley Act of 2002
        32.2     Certification of the Chief Financial Officer pursuant to 18
                 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
                 Sarbanes-Oxley Act of 2002


(b)     Reports on Form 8-K

We filed the following reports on Form 8-K during the period from October 1,
2008 through December 31, 2008:

        1) On November 10, 2008 we issued a press release that contained
           information regarding our results of operations for the quarter
           ending September 30, 2008.
        2) On November 28, 2008 we disclosed entry into a material definitive
           agreement with Sybase, Inc.


                                       83