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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                              ---------------------

                                    FORM 10-Q
(Mark One)

   [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

               For the quarterly period ended: September 30, 2008

                                       OR

   [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
 ACT OF 1934

      For the transition period from _________________ to ________________

                        Commission file number: 000-16299
                                ----------------

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

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

700 Airport Blvd. Suite 300, Burlingame, CA                 94010
 (Address of principal executive offices)                 (Zip Code)

                                 (650) 931-0500
              (Registrant's Telephone Number, including area code)


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

         Indicate by check mark whether the  registrant  is a large  accelerated
filer,  an accelerated  filer,  or a  non-accelerated  filer.  See definition of
"accelerated  filer and large  accelerated  filer" in Rule 12b-2 of the Exchange
Act. (Check one):
Large accelerated filer [ ]   Accelerated filer [X]   Non-accelerated filer [ ]

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

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

            90,648,369 shares of common stock as of October 31, 2008

<PAGE>

                                TABLE OF CONTENTS
--------------------------------------------------------------------------------



                          PART I. Financial Information
<TABLE>
<CAPTION>
<S>       <C>                                                                                      <C>
Item 1.   Condensed Consolidated Financial Statements

            Condensed Consolidated Balance Sheets as of September 30, 2008 and December 31, 2007.......3
            Condensed Consolidated Statements of Operations for the Three and Nine Months
               ended September 30, 2008 and 2007.......................................................4
            Condensed Consolidated Statements of Cash Flows for the Nine Months ended
               September 30, 2008 and 2007.............................................................5
            Notes to Condensed Consolidated Financial Statements....................................6-26
Item 2.   Management's Discussion and Analysis of Financial Condition and
            Results of Operations .................................................................27-40
Item 3.   Quantitative and Qualitative Disclosures About Market Risk..................................41
Item 4.   Controls and Procedures.....................................................................41


                           PART II. Other Information

Item 1.   Legal Proceedings  .........................................................................41
Item 1A.  Risk Factors.............................................................................42-45
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.................................47
Item 3.   Defaults Upon Senior Securities.............................................................47
Item 4.   Submission of Matters to a Vote of Security Holders.........................................47
Item 5.   Other Information...........................................................................48
Item 6.   Exhibits....................................................................................48
          Signatures..................................................................................49
</TABLE>

                                       2
<PAGE>

                          PART I. FINANCIAL INFORMATION
               ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                               ANTS SOFTWARE INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S>                                                                              <C>               <C>
                                                                                  September 30,       December 31,
                                     ASSETS                                            2008               2007
                                                                                 -----------------  -----------------
                                                                                     Unaudited           Audited
                                                                                 -----------------  -----------------
Current assets:
  Cash and cash equivalents                                                           $ 2,329,453        $ 4,480,694
  Accounts receivable                                                                     606,988              8,204
  Notes receivable from customer                                                        2,500,000                  -
  Current portion of prepaid debt issuance cost                                            93,672            434,630
  Restricted cash                                                                         125,000            192,574
  Prepaid expenses and other current assets                                               218,528            173,331
  Prepaid expense from warrant issued to customer, net                                          -             57,674
                                                                                 -----------------  -----------------
     Total current assets                                                               5,873,641          5,347,107
Long-term portion of prepaid debt issuance cost                                           115,295             47,786
Property and equipment, net                                                               463,301            510,490
Goodwill                                                                               23,354,931                  -
Intangible assets, net                                                                  3,450,535                  -
Security deposits                                                                          67,018             34,420
                                                                                 -----------------  -----------------
     Total assets                                                                    $ 33,324,721        $ 5,939,803
                                                                                 =================  =================

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Accounts payable and other accrued expenses                                           $ 735,833          $ 788,460
  Accrued bonuses and commissions payable                                                  47,774            143,750
  Accrued vacation payable                                                                201,260             89,316
  Line of credit                                                                          100,000                  -
  Current portion of convertible promissory notes, includes
         premium of $9,503 and $60,440, respectively                                      259,503          1,060,440
  Accrued interest on convertible promissory notes                                        287,581            208,780
  Deferred revenues                                                                       366,162             48,818
                                                                                 -----------------  -----------------
     Total current liabilities                                                          1,998,113          2,339,564

Commitments and contingencies (Note 14)

Long-term liabilities:
  Convertible promissory notes, includes debt premium of $212,272
         and $380,311, respectively and discount of $0 and $238,418,
         respectively                                                                   9,468,497          8,645,119
  Convertible promissory notes                                                          2,000,000                  -
                                                                                 -----------------  -----------------
     Total liabilities                                                                 13,466,610         10,984,683
                                                                                 -----------------  -----------------

  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                                                          104,766,989         69,914,339
  Accumulated deficit                                                                 (84,917,943)       (74,964,959)
                                                                                 -----------------  -----------------
Stockholders' equity (deficit)                                                         19,858,111         (5,044,880)
                                                                                 -----------------  -----------------
     Total liabilities and stockholders' equity                                      $ 33,324,721        $ 5,939,803
                                                                                 =================  =================
</TABLE>

                            See accompanying notes.

                                       3
<PAGE>

<TABLE>
<CAPTION>

                                                      ANTS SOFTWARE INC.
                                        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                         (Unaudited)


                                                For the Three Months Ended          For the Nine Months Ended
                                                        September 30,                     September 30,
                                             --------------------------------    --------------------------------
                                                  2008              2007              2008              2007
                                             --------------    --------------    --------------    --------------
<S>                                          <C>               <C>               <C>               <C>
Revenues:
  Products                                   $           --    $      200,000    $    4,904,165    $      200,000
  Services                                        1,441,422            26,964         1,992,180           117,558
                                             --------------    --------------    --------------    --------------
      Total revenues                              1,441,422           226,964         6,896,345           317,558

Cost of Revenues:
  Products                                               --                --           511,993             9,476
  Services                                        1,163,692             2,401         1,523,424             2,401
                                             --------------    --------------    --------------    --------------
        Gross profit                                277,730           224,563         4,860,927           305,681

Operating  Expenses:
  Sales and marketing                               754,296           547,455         1,840,164         2,396,756
  Research and development                        1,386,250         2,637,841         5,774,756         6,908,858
  General and administrative                        988,324           935,618         3,648,837         3,364,623
                                             --------------    --------------    --------------    --------------
      Total operating expenses                    3,128,870         4,120,914        11,263,756        12,670,237
                                             --------------    --------------    --------------    --------------
        Loss from operations                     (2,851,140)       (3,896,351)       (6,402,829)      (12,364,556)
                                             --------------    --------------    --------------    --------------

Other (expense) income:
  Interest income                                    18,527            70,803            66,163           270,864
  Debt modification costs                                --                --        (2,238,206)               --
  Gain on legal settlement and other                     --             1,599                --             3,599
  Interest expense                                 (262,810)          (64,090)       (1,378,112)         (167,704)
                                             --------------------------------------------------------------------
        Total (expense) income                     (244,283)            8,312        (3,550,155)          106,759

        Net loss                             $   (3,095,422)   $   (3,888,039)   $   (9,952,984)   $  (12,257,797)
                                             ==============    ==============    ==============    ==============
Basic and diluted net loss
   per common share                          $        (0.03)   $        (0.07)   $        (0.14)   $        (0.22)
                                             ==============    ==============    ==============    ==============
Shares used in computing basic and diluted
   net loss per share                            90,648,369        56,622,605        73,549,703        56,361,987
                                             ==============    ==============    ==============    ==============


                                                   See accompanying notes.
</TABLE>


                                       4
<PAGE>

*T
                                            ANTS SOFTWARE INC.
                             CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                               (Unaudited)
<TABLE>
<CAPTION>
<S>                                                              <C>                  <C>
                                                                  For the Nine Months Ended September 30,
                                                                 -----------------------------------------
                                                                        2008                  2007
                                                                 ------------------   --------------------
Cash flows from operating activities:
 Net loss                                                         $     (9,952,984)    $      (12,257,797)
 Adjustments to reconcile net loss to net cash used in operating
  activities:
   Depreciation and amortization                                           539,034                322,562
   Debt modification costs                                               2,238,206                      -
   Interest expense related to convertible promissory note
    issuance                                                               750,000                      -
   Amortization of accrued rent, net of cash payments                        3,772                (22,265)
   Amortization of warrant issued to customer                               57,674                 43,255
   Amortization of debt premium and discount, net                         (161,603)              (265,041)
   Amortization of debt issuance costs                                     237,194                278,186
   Stock-based compensation                                              2,807,589              1,097,066

 Changes in operating assets and liabilities:
   Accounts receivable                                                     136,102                (10,184)
   Restricted cash                                                          67,574                 (1,616)
   Prepaid expenses and other assets                                         1,787                (97,597)
   Notes receivable from customer                                       (2,500,000)                     -
   Accounts payable and other accrued expenses                            (324,444)               110,758
   Accrued bonuses and commissions payable                                 (95,976)              (152,877)
   Accrued vacation payable                                                111,942                 48,806
   Accrued interest on convertible promissory notes                         78,801                      -
   Deferred revenue                                                       (211,843)                25,943
                                                                 ------------------   --------------------
     Net cash used in operating activities                              (6,217,175)           (10,880,801)
                                                                 ------------------   --------------------

Cash flows used in investing activities:
   Purchases of office furniture, fixtures and equipment, net              (92,101)              (196,053)
   Acquisition of Inventa, net of cash acquired                         (3,047,444)                     -
                                                                 ------------------   --------------------

     Net cash used in investing activities                              (3,139,545)              (196,053)
                                                                 ------------------   --------------------

Cash flows from financing activities:
   Proceeds from private placements - equity, net of cash
    commissions                                                          7,247,800              5,018,574
   Proceeds from private placements - convertible promissory
     notes, net of commission                                                    -              4,881,426
   Proceeds from exercise of options and warrants, net of
    commissions                                                             32,679                716,850
   Principal payments on line of credit                                    (75,000)                     -
                                                                 ------------------   --------------------
     Net cash provided by financing activities                           7,205,479             10,616,850
                                                                 ------------------   --------------------

Net decrease in cash and cash equivalents                               (2,151,241)              (460,004)
                                                                 ------------------   --------------------
Cash and cash equivalents at beginning of period                         4,480,694              4,698,949
                                                                 ------------------   --------------------
Cash and cash equivalents at end of period                        $      2,329,453     $        4,238,945
                                                                 ==================   ====================


Supplemental disclosure of cash flow information:
  Cash paid during the period for:
       Interest                                                   $        787,910     $          432,746
</TABLE>

                                         See accompanying notes.

                                       5
<PAGE>

                               ANTS SOFTWARE INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


1.   Basis of Presentation

         The accompanying  unaudited condensed consolidated financial statements
(Interim Financial  Statements) include the accounts of ANTs software,  inc. and
its wholly-owned subsidiary Inventa Technologies, Inc. (Inventa). The results of
Inventa's  operations are included in the interim financial  statements from May
30, 2008, the date of acquisition.  Intercompany  accounts and transactions have
been eliminated in consolidation.

         These  Interim  Financial  Statements  have been prepared in accordance
with generally accepted  accounting  principles in the United States (U.S. GAAP)
and the rules and  regulations of the Securities and Exchange  Commission  (SEC)
for interim financial  statements and contemplate  continuation of ANTs software
inc. (the  "Company") as a going concern.  However,  we have suffered  recurring
losses  from  operations  that  raises  substantial  doubt  about our ability to
continue  as a going  concern.  In May 2008,  we  acquired  Inventa,  a Delaware
company, which had not shown consistent profitability prior to its purchase. Our
ability to continue as a going concern is dependent upon our ability to generate
profitable  operations  as a  consolidated  entity  in the  future  through  the
operations  of either  ANTs or our  subsidiary  and/or our ability to obtain the
necessary  financing to meet our obligations  and repay our liabilities  arising
from  normal  business  operations  when they come  due.  We have  plans to seek
additional  capital through  private  placements of equity or debt as necessary.
Our plans, if successful, will mitigate the factors that raise substantial doubt
about our ability to continue as a going concern.

         The December 31, 2007  Condensed  Consolidated  Balance Sheet  included
herein was derived from audited financial statements filed with our Form 10-K as
of December 31, 2007 and therefore may not include all  disclosures  required by
accounting principles generally accepted in the United States of America (U.S.).
Reference should be made to our Form 10-K for the fiscal year ended December 31,
2007  for  additional  disclosures.   The  information  furnished  reflects  all
adjustments  (all of which were of a normal  recurring  nature),  which,  in the
opinion of  management,  are  necessary  to make the  financial  statements  not
misleading and to fairly present the financial position,  results of operations,
and cash flows on a consistent  basis.  The results for the interim  periods are
not necessarily indicative of the results for the entire year.

         There have been no significant  changes in our  significant  accounting
policies  during the nine  months  ended  September  30, 2008 as compared to the
significant  accounting policies described in our Annual Report on Form 10-K for
the fiscal year ended December 31, 2007.

         Management has evaluated our current financial position and anticipates
that cash on hand together with expected  receivables will be sufficient to fund
operations and investments in capital equipment into the third fiscal quarter of
2009 at expected levels of revenue and expenditures.

2.   Business Combination

         On May 30,  2008 we  completed  the  acquisition of Inventa, a Delaware
corporation. We acquired Inventa in order to expand our presence in the database
compatibility  and  consolidation  technology  market by using its  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 has been
allocated  to the  tangible  assets less  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 $1.10 per share to the
shareholders of Inventa. The value of the Company's stock was valued at the fair
market value of the Company's  free trading  shares at the time the terms of the
acquisition  were agreed to and  announced.  The purchase  price  allocation  is
preliminary  and  subject  to  change  as the  Company  evaluates  the value and
estimated lives of other identifiable intangibles.

                                       6
<PAGE>

The following table summarizes a preliminary  estimate of the fair value of the
assets  acquired and liabilities assumed at the date of acquisition:
<TABLE>
<CAPTION>
<S>                                                        <C>                         <C>
Purchase price:
Cash paid to seller                                                                      $  3,000,000
Fair value of common stock issued to seller                                                22,000,000
Convertible notes payable issued to seller                                                  2,000,000
Acquisition costs, comprised of legal and accounting fees                                      57,357
                                                                                        --------------
     Total purchase price                                                                $ 27,057,357
                                                                                        ==============

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:
------------------
Developed software                                            2,085,000 (5 year life)
Customer relationships                                        1,612,000 (5 year life)
                                                          -------------
Identified intangibles                                                                      3,697,000
Goodwill                                                                                   23,354,931
                                                                                        --------------
     Total purchase price                                                                $ 27,057,357
                                                                                        ==============
</TABLE>

         The following unaudited pro forma consolidated results of operations
have been prepared as if the acquisition of Inventa had occurred at January 1,
2007:

<TABLE>
<CAPTION>
<S>                                       <C>                <C>                 <C>                 <C>
                                           Three months ended September 30,        Nine months ended September 30,
                                         ------------------------------------   --------------------------------------
                                                 2008              2007                 2008                2007
                                         ------------------------------------   --------------------------------------
Revenues                                   $     1,441,422    $    1,575,014      $      9,139,695    $     4,361,709
Net loss                                         3,095,422        (4,001,650)          (10,272,214)       (12,598,629)
                                         ------------------------------------   --------------------------------------
Net loss per share - basic and diluted     $         (0.03)   $        (0.07)     $          (0.14)   $         (0.22)
                                         ====================================   ======================================
</TABLE>

         The 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.

                                       7
<PAGE>

3.    Summary of Significant Accounting Policies

Revenue Recognition

         Total revenues consist of (i) product sales,  which consist of sales of
intellectual property, licenses, and royalties, and (ii) services, which include
maintenance  and  professional   services,  and  with  the  acquisition  of  our
wholly-owned  subsidiary,  Inventa,  managed  services.  Revenue  from  software
license arrangements, which are comprised of prepaid license and maintenance and
support fees, is recognized when all of the following criteria are met:

     o    Persuasive evidence of an arrangement exists.
     o    Delivery  has  occurred  and there are no future  deliverables  except
          post-contract customer support ("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.
     o    Collection is probable.

         We recognize revenue on intellectual  property,  licenses and royalties
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." 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 defer revenue based on vendor-specific
objective  evidence,  or 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.

         Services revenue relating to maintenance and support is deferred and
recognized over the related contract period, generally twelve months, beginning
with customer acceptance of the product. Managed services revenue is recognized
ratably over the service period of our contracts. We recognize consulting
revenues (under pre-sales project contracts) whereby we contract with customers
to provide recommendations on performance and capacity; under these contracts we
recognize revenue as the services are rendered or upon completion of the
services contract. If we can reliably evaluate progress to completion (based on
total projected hours to be incurred as compared with hours already incurred),
we recognize the revenue as the services are rendered and recognize the related
costs as they are incurred. In instances where we cannot reliably estimate the
total projected hours, we recognize revenue and the associated costs upon
completion of the services contract. For fixed price professional services
contracts when the current estimates of total contract revenue and contract cost
indicate a loss, the estimated loss is recognized in the period the loss becomes
evident.

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

Research and Development Expenditures

         We account for research and  development  ("R&D")  costs in  accordance
with SFAS 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, our 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.

                                       8
<PAGE>

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
stock-based  compensation  expense for the three and nine months ended September
30,  2008  and  2007,   respectively   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.

         In March 2005, the SEC issued Staff  Accounting  Bulletin No. 107 ("SAB
107"),  which  offers  guidance  on SFAS  123(R).  SAB 107 was  issued to assist
preparers by simplifying  some of the  implementation  challenges of SFAS 123(R)
while  enhancing  the  information  that  investors  receive.  SAB 107 creates a
framework that is premised on two over arching themes: (a) considerable judgment
will  be  required  by  preparers  to   successfully   implement   SFAS  123(R),
specifically   when  valuing   employee  stock   options;   and  (b)  reasonable
individuals, acting in good faith, may conclude differently on the fair value of
employee stock options.  Key topics covered by SAB 107 include valuation models,
expected  volatility  and expected  term. We apply the  principles of SAB 107 in
conjunction with SFAS 123(R).

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 the deferred tax assets shall be offset with
a valuation allowance.

         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.

Business combinations

         We apply  the  provisions  of SFAS  141,  Business  Combinations,  when
accounting  for our  acquisitions,  which  requires us to allocate  the purchase
price of acquired  companies  to the tangible and  intangible  assets  acquired,
liabilities  assumed,  as well as in-process  research and development  based on
their  estimated  fair  values.  Such a valuation  requires  management  to make
significant  estimates and  assumptions,  especially  with respect to intangible
assets. All acquisitions are included in our financial  statements from the date
of acquisition.

         Management  makes  estimates  of  fair  value  based  upon  assumptions
believed to be reasonable.  These  estimates are based on historical  experience
and information  obtained from the management of the acquired company.  Critical
estimates  in  valuing  certain of the  intangible  assets  include  but are not
limited to: future  expected cash flows;  acquired  developed  technologies  and
patents;  expected costs to develop the in-process research and development into
commercially  viable  products and estimating  cash flows from the projects when
completed;  the acquired company's brand awareness and market position,  as well
as  assumptions  about the period of time the acquired brand will continue to be
used in the combined  company's  product  portfolio;  and discount rates.  These
estimates  are  inherently  uncertain  and  unpredictable.  Assumptions  may  be
incomplete or inaccurate,  and unanticipated  events and circumstances may occur
which may affect the  accuracy  or validity of such  assumptions,  estimates  or
other actual results.

                                       9
<PAGE>

         Our financial  projections  may  ultimately  prove to be inaccurate and
unanticipated events and circumstances may occur. Therefore, no assurance can be
given that the  underlying  assumptions  used to forecast  revenues and costs to
develop such  projects  will  transpire as  projected.  We allocate the purchase
price of an acquired company to the tangible and intangible  assets acquired and
liabilities  assumed,  as well as  in-process  research  and  development  where
appropriate,  based  on their  estimated  fair  values.  We  engage  independent
third-party  appraisal  firms  to  assist  in  determining  the fair  values  of
intangible assets acquired in all material acquisitions.

Valuation analysis of intangible assets and goodwill

         With our acquisition of Inventa in May 2008, we have recorded  goodwill
and other intangible  assets as a result of the allocation of the purchase price
to  tangible  and  intangible  assets.  Under  SFAS  142,  "Goodwill  and  Other
Intangible  Assets" (SFAS 142), we are required to perform an impairment  review
of goodwill.  We will assess the  impairment  of  identifiable  intangibles  and
long-lived assets whenever events or changes in circumstances  indicate that the
carrying  value may not be recoverable or that the life of the asset may need to
be revised in accordance  with SFAS 144,  "Accounting  for  Long-Lived  Assets."
Factors we consider  important which could trigger an impairment  review include
the following:


     o    significant changes in the manner of our use of the acquired assets or
          the strategy for our overall business;

     o    significant negative industry or economic trends;

     o    significant decline in our stock price for a sustained period; and

     o    our market capitalization relative to net book value.

         When we determine that the carrying  value of goodwill,  intangibles or
long-lived assets may not be recoverable based upon the existence of one or more
of the above  indicators of  impairment,  we measure any  impairment  based on a
projected  discounted  cash flow method using a discount rate  determined by our
management to be  commensurate  with the risk  inherent in our current  business
model. Net intangible  assets and goodwill totaled $26.8 million as of September
30, 2008.  Our  intangible  assets are amortized over an estimated 5 year useful
life.


Recent Accounting Pronouncements

         In  September   2006,   the  FASB  issued  SFAS  No.  157,  Fair  Value
Measurements  (SFAS 157).  SFAS 157 defines fair value,  establishes a framework
for measuring fair value in generally accepted accounting principles and expands
disclosures about fair value  measurements.  SFAS 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007 and interim
periods within those fiscal years.  In February 2008, FASB issued Staff Position
157-1,  Application of FASB Statement No. 157 to FASB Statement No. 13 and Other
Accounting  Pronouncements  That Address Fair Value Measurements for Purposes of
Lease  Classification or Measurement  under Statement 13 (FSP 157-1).  FSP 157-1
excludes from the scope of SFAS 157 accounting  pronouncements that address fair
value  measurements for purposes of lease  classification  or measurement.  This
scope exception does not apply to assets  acquired and liabilities  assumed in a
business combination that are required to be measured at fair value,  regardless
of whether  those assets and  liabilities  are related to leases.  FSP 157-1 was
effective upon the initial adoption of SFAS 157. . In February 2008, FASB issued
Staff  Position  157-2,  Effective  Date of FASB  Statement No. 157, (FSP 157-2)
that, as of February 12, 2008,  indefinitely  delayed the effective date of SFAS
157 for nonfinancial assets and nonfinancial liabilities,  except for items that
are  recognized  or disclosed  at fair value in the  financial  statements  on a
recurring  basis. On October 10, 2008, the FASB issued FASB Staff Position (FSP)
FAS 157-3,  Determining  the Fair Value of a Financial Asset When the Market for
That Asset Is Not Active. The FSP clarifies the application of SFAS No. 157 in a
market  that  is  not  active  and  provides  an  example  to   illustrate   key
considerations  in  determining  the fair  value of a  financial  asset when the
market  for  that  financial  asset is not  active.  The FSP is  effective  upon
issuance,  including prior periods for which financial  statements have not been
issued.  Revisions  resulting  from a change in the  valuation  technique or its
application should be accounted for as a change in accounting estimate following
the guidance in SFAS No. 154, Accounting Changes and Error Corrections. However,
the disclosure  provisions in Statement 154 for a change in accounting  estimate
are not required for revisions resulting from a change in valuation technique or
its application.  The adoption of SFAS 157, SFAS 157-1, SFAS 157-2 and 157-3 did
not have a material impact on our financial position,  results of operations, or
cash flows.

                                       10
<PAGE>

         In February  2007,  the FASB issued  Statement of Financial  Accounting
Standard No. 159,  "The Fair Value  Option for  Financial  Assets and  Financial
Liabilities"  ("SFAS  159").  SFAS 159  permits  companies  to choose to measure
certain  financial  instruments  and  certain  other  items at fair  value.  The
standard  requires that unrealized  gains and losses on items for which the fair
value option has been elected be reported in  earnings.  SFAS 159 was  effective
beginning in the first quarter of 2008. We have  determined that the adoption of
this  Standard  did  not  have a  material  impact  on the  Company's  financial
condition, results of operations, or cash flows.

         In June 2007,  the EITF  reached a consensus  on EITF Issue No.  06-11,
"Accounting for Income Tax Benefits of Dividends on Share-Based  Payment Awards"
("EITF  06-11").  EITF 06-11  provides  that a realized  income tax benefit from
dividends  that is charged to retained  earnings  and is paid to  employees  for
equity-classified  unvested  equity  shares and units should be recognized as an
increase to additional  paid-in  capital.  The provisions of this EITF should be
applied   prospectively   to  the   income  tax   benefits   of   dividends   on
equity-classified  employee  share-based  payment  awards  that are  declared in
fiscal years  beginning  after  September  15,  2007.  We do not  currently  pay
dividends  on shares of  unvested  restricted  common  stock and  therefore  the
provisions  of EITF  Issue No.  06-11 do not  impact  our  financial  condition,
results of operations, or cash flows.

         In  December   2007,   the  FASB  issued  SFAS  No.   141R,   "Business
Combinations",  which replaces SFAS No. 141, "Business  Combinations" ("SFAS No.
141"). SFAS No. 141R establishes principles and requirements for determining how
an  enterprise  recognizes  and  measures  the fair value of certain  assets and
liabilities  acquired  in  a  business  combination,   including  noncontrolling
interests,  contingent consideration,  and certain acquired contingencies.  SFAS
No.   141R  also   requires   acquisition-related   transaction   expenses   and
restructuring  costs be  expensed  as  incurred  rather  than  capitalized  as a
component  of the  business  combination.  SFAS  No.  141R  will  be  applicable
prospectively  to business  combinations for which the acquisition date is on or
after January 1, 2009.

         In March 2008, the FASB issued SFAS 161,  "Disclosures about Derivative
Instruments  and Hedging  Activities - an Amendment of FASB Statement 133". SFAS
161 enhances required disclosures  regarding derivatives and hedging activities,
including  enhanced  disclosures  regarding  how (a) an entity  uses  derivative
instruments;  (b) derivative  instruments and related hedged items are accounted
for under FASB  Statement No. 133,  Accounting for  Derivative  Instruments  and
Hedging  Activities,  and (c)  derivative  instruments  and related hedged items
affect an entity's financial position,  financial  performance,  and cash flows.
SFAS 161 is  effective  for fiscal  years and interim  periods  beginning  after
November 15, 2008 and is not expected to have a material impact on our financial
condition, results of operations, or cash flows.

         In April 2008,  the FASB issued FASB Staff  Position No. FSP FAS 142-3,
Determination of the Useful Life of Intangible Assets ("FSP FAS 142-3"). FSP FAS
142-3 amends the list of factors that an entity  should  consider in  developing
renewal  or  extension  assumptions  used  in  determining  the  useful  life of
recognized   intangible   assets  under  SFAS  No.  142,  both  those   acquired
individually  or as part of a group of  other  assets,  and  those  acquired  in
business combinations or asset acquisitions. The FSP also expands the disclosure
requirements  of SFAS No. 142. The FSP is  effective  for  financial  statements
issued for fiscal years  beginning  after December 15, 2008, and interim periods
within those fiscal years. Although the guidance regarding an intangible asset's
useful life is to be applied  prospectively  only to intangible  assets acquired
after FSP FAS  142-3's  effective  date,  the  disclosure  requirements  must be
applied  prospectively to all intangible  assets  recognized as of the effective
date.  The Company is  currently  evaluating  the impact that FSP FAS 142-3 will
have on its financial statements when adopted.

         In May 2008,  the FASB issued SFAS No. 162, The  Hierarchy of Generally
Accepted  Accounting  Principles  ("SFAS No. 162").  SFAS No. 162 is intended to
improve financial reporting by providing a consistent  framework for determining
the accounting  principles to be used in the preparation of financial statements
in conformity with GAAP.  Currently,  GAAP hierarchy is outlined in the American
Institute of Certified Public  Accountants  Statement on Auditing  Standards No.
69,  "The  Meaning of  Present  Fairly in  Conformity  With  Generally  Accepted
Accounting  Principles",  which  is  directed  to  auditors  rather  than to the
entities responsible for the preparation of financial  statements.  SFAS No. 162
will be effective 60 days  following  the SEC's  approval of the Public  Company
Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present
Fairly in Conformity With Generally Accepted  Accounting  Principles".  The FASB
does not believe that SFAS No. 162 will result in a change to current  practice,
but has provided  transition  provisions.  The Company does not believe that the
adoption of SFAS No. 162 will have any effect on its financial statements.

                                       11
<PAGE>

         In May  2008,  the FASB  issued  FASB  Staff  Position  No.  FSP  14-1,
Accounting for  Convertible  Debt  Instruments  That May Be Settled in Cash upon
Conversion  (Including  Partial Cash Settlement) ("FSP APB 14-1").  FSP APB 14-1
addresses the accounting for convertible  debt securities that, upon conversion,
may be settled by the issuer fully or partially in cash.  It does not change the
accounting for traditional types of convertible debt securities that do not have
a cash  settlement  feature,  and does not apply  if,  under  existing  GAAP for
derivatives,  the embedded  conversion  feature must be accounted for separately
from the rest of the instrument.  FSP APB 14-1 is effective for fiscal years and
interim  periods  beginning  after  December  15,  2008.  It should  be  applied
retrospectively  to all past periods  presented,  even if the  convertible  debt
security has matured,  been converted or otherwise  extinguished as of the FSP's
effective date. The Company is currently evaluating the impact that FSP APB 14-1
will have on its financial statements when adopted.

         On June 25, 2008,  the FASB ratified  Emerging  Issues Task Force Issue
07-5,  Determining  Whether an Instrument (or an Embedded Feature) Is Indexed to
an Entity's Own Stock ("EITF  07-5").  The Task Force reached a consensus on how
an entity  should  evaluate  whether an instrument  (or an embedded  feature) is
indexed  to its  own  stock,  how  the  currency  in  which  the  instrument  is
denominated  affects the determination of whether the instrument is indexed to a
company's own stock, and how an issuer should account for market-based  employee
stock option valuation instruments.  EITF 07-5 is effective for fiscal years and
interim  periods  beginning  after  December  31,  2008,  and must be applied to
outstanding instruments as of the beginning of the fiscal year of adoption, with
a  cumulative-effect  adjustment  to the opening  balance of retained  earnings.
Early adoption is not permitted.  The Company is currently evaluating the impact
that EITF 07-5 will have on its financial statements when adopted.

Reclassifications

         Certain  reclassifications  have been made to  conform  the prior  year
financial statements to be consistent with the current period's presentation.


4.   Basic and Diluted Net Loss per Share

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

         The following table presents basic and diluted earnings per share for
the three and nine months ended September 30, 2008 and 2007.
<TABLE>
<CAPTION>
<S>                                          <C>              <C>                <C>             <C>
                                             Three months ended September 30,    Nine months ended September 30,
                                             --------------------------------------------------------------------
                                                    2008            2007               2008            2007
                                             --------------------------------   ---------------------------------
Net loss available to common shareholders      $  (3,095,422)  $  (3,888,039)     $  (9,952,984)  $  (12,257,797)
                                             ================================   =================================
Weighted average common shares outstanding        90,648,369      56,622,605         73,549,703       56,361,987
                                             --------------------------------   ---------------------------------
Basic and diluted net loss per common share    $       (0.03)  $       (0.07)     $       (0.14)  $        (0.22)
                                             ================================   =================================
</TABLE>

         Stock  options,  warrants and potential  shares  outstanding  upon note
holders' conversion of our convertible  promissory notes are not included in the
computation  of diluted  earnings per share because to do so would  decrease the
reported loss per common share and are considered antidilutive.

         Total potential shares outstanding resulting from the exercise of stock
options  and  warrants  and  assuming  full  conversion  of all our  outstanding
convertible  notes payable totals  27,782,686 and 19,556,760 shares at September
30, 2008 and 2007, respectively, which consists of:

                                       12
<PAGE>

     o    Stock  options  and  warrants  for  the  purchase  of  15,676,571  and
          16,306,760  shares of our common stock at prices ranging from $0.52 to
          $3.20 per share and $0.52 to $6.38 per share, as of September 30, 2008
          and 2007, respectively, and

     o    The  conversion of all  convertible  promissory  notes  outstanding at
          prices in effect as of September 30, 2008 and 2007 would have resulted
          in an additional 12,106,115 and 3,250,000 common shares outstanding at
          September 30, 2008 and 2007, respectively.


5. Note Receivable from Customer

         In May 2008,  we sold the ANTs Data Server  ("ADS"),  its  intellectual
property rights and patents,  and certain computer equipment to a customer.  The
total  sales  price was $3.5  million,  consisting  of $1  million in cash and a
secured  promissory note due the earlier of a) the customer's sale of securities
aggregating  $5 million in proceeds or b) $500 thousand on November 21, 2008 and
$2 million on May 21, 2009. The promissory note is  collateralized by all assets
sold  under  the  agreement,  is  non-interest  bearing  and in the  opinion  of
management stated at its current fair value.

6.  Prepaid Debt Issuance Cost

         As more fully  discussed in Note 13, we incurred  $869,260 in placement
agent fees,  paid in cash and equity,  related to convertible  promissory  notes
(the "Notes") issued from December 2006 through March 2007. These fees are being
amortized  into  general  and  administrative  expense  using the  straight-line
method,  which is not materially  different from the effective  interest method,
over the life of the Notes.

         During May 2008 we  restructured  substantially  all of our outstanding
convertible  notes payable to extend the maturity date and modify the conversion
price. As a result of the restructuring,  during the quarter ended June 30, 2008
we expensed $36,255 in related prepaid debt issuance costs, which is included in
debt  modification  costs.  Unamortized debt issuance costs totaled $208,967 and
$482,416  as  of  September  30,  2008  and  December  31,  2007,  respectively.
Amortization of these costs commenced on January 1, 2007 and totaled $25,218 and
$237,194 for the three and nine months ended September 30, 2008, respectively.

7.  Restricted Cash

         Restricted cash  represents a certificate of deposit ("CD")  maintained
at a financial  institution.  The CD secures the outstanding  balance of Company
credit cards issued by that institution.  We reduced the number and credit limit
of our Company  credit cards and reduced the  corresponding  CD from $192,574 at
December 31, 2007 to $125,000 as of September 30, 2008.

8.  Prepaid Expenses and Other Current Assets

         As of September 30, 2008,  prepaid  expenses and other  current  assets
were $218,528,  primarily  consisting of $115,391 in prepaid insurance and other
employee  benefit  costs,  $39,707 in prepaid  maintenance  and license fees for
software  used in the  development  of our products  and  provision of services,
$32,057  in  unbilled  revenue  and  $13,094  in  prepaid  marketing  costs  for
subscriptions to industry  analyst services and conferences.  As of December 31,
2007,  prepaid  expenses  and other  current  assets  were  $173,331,  primarily
consisting of $112,440 in prepaid insurance and other employee benefit costs and
$37,267  in  prepaid  marketing  costs for  subscriptions  to  industry  analyst
services and conferences.

9.   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 the ANTs Data Server (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 July 2008.

                                       13
<PAGE>

         Effective  May  2008 we  sold  the  underlying  ADS  technology  to the
customer and the remaining  prepaid was expensed.  The prepaid expense was being
amortized into the 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  $43,255  and  $57,674  for the three and nine
months ended  September  30, 2008,  respectively.  Amortization  expense for the
three  and  nine  months  ended  September  30 2007  was  $14,418  and  $43,255,
respectively.

10.  Deferred Revenue

         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 was as follows:

Balance, December 31, 2007           $        48,818
Invoiced                                   2,041,074
Recognized                                (1,723,730)
                                     ----------------
Balance, September 30, 2008          $       366,162
                                     ================


11.  Industry Segment, Customer and Geographic Information

         We  operate  in a  single  industry  segment,  computer  software.  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).  Upon  our
acquisition of Inventa in May 2008, we immediately consolidated our sales force,
research and  development  and  operations  teams in order to provide  sales and
implementation  support.  Our services  revenue consists of both maintenance and
services revenue arising from managed services and consulting services generated
by our newly acquired  subsidiary,  Inventa,  as well as those from professional
services and consulting  provided to customers of our database  technology.  Our
engineering and IT support teams provide support to both our database technology
and managed services lines of business.  As we continue to integrate Inventa our
CODM evaluates both revenues and expenses on a consolidated functional basis. As
a result,  our CODM considers  consolidated  financial  information on revenues,
gross  margins and  operating  expenses on an  aggregate  basis for  monitoring,
review and decision making.

Customer Information
--------------------

For the nine months ending September 30, 2008, revenue from three customers
individually exceeded 10% of total revenues, at 51%, 28% and 13% of total
revenues.

Geographic Information
----------------------

           All of our customers are billed in U.S. dollars and  substantially
all our revenues are generated by customers domiciled in the U.S.


12.  Income Taxes

         Effective  January 1, 2007, we adopted Financial  Accounting  Standards
Interpretation,  FIN  48,  "Accounting  for  Uncertainty  in  Income  Taxes - An
Interpretation  of FASB  Statement  No. 109." FIN 48  prescribes  a  recognition
threshold and measurement  attribute for the financial statement recognition and
measurement  of  uncertain  tax  positions  taken or  expected  to be taken in a
company's  income tax  return,  and also  provides  guidance  on  derecognition,
classification,   interest  and  penalties,   accounting  in  interim   periods,
disclosure,  and transition.  FIN 48 utilizes a two-step approach for evaluating
uncertain  tax  positions  accounted  for  in  accordance  with  SFAS  No.  109,
"Accounting for Income Taxes" (SFAS No. 109). Step One, Recognition,  requires a
company to determine if the weight of available  evidence  indicates  that a tax
position  is  more  likely  than  not  to be  sustained  upon  audit,  including
resolution  of  related  appeals  or  litigation  processes,  if any.  Step Two,
Measurement,  is based on the largest  amount of  benefit,  which is more likely
than not to be realized on ultimate settlement.

                                       14
<PAGE>

         We have elected to record  interest  charges  recognized  in accordance
with  FIN 48 in the  financial  statements  as  income  tax  expense.  Penalties
recognized  in  accordance  with this  standard  will also be  classified in the
financial statements as income taxes. Any subsequent change in classification of
FIN 48  interest  and  penalties  will be  treated  as a  change  in  accounting
principle subject to the requirements of FAS 154,  "Accounting Changes and Error
Corrections."

         Upon  adoption of FIN 48, our policy to include  interest and penalties
related to  unrecognized  tax benefits  within our provision for (benefit  from)
income tax expense did not change.  As of September  30, 2008,  we had no amount
accrued  for payment of  interest  and  penalties  related to  unrecognized  tax
benefits (and no amounts as of the adoption date of FIN 48). For the nine months
ended  September  30, 2008,  we  recognized no amounts of interest and penalties
related to unrecognized tax benefits in our provision for income taxes.

         The  cumulative  effect  of  adopting  FIN 48 on  January  1,  2007  is
recognized as a change in accounting principle, recorded as an adjustment to the
opening  balance of retained  earnings on the adoption  date. As a result of the
implementation  of  FIN  48,  we  recognized  no  change  in the  liability  for
unrecognized tax benefits  related to tax positions taken in prior periods,  and
no corresponding change in retained earnings. At December 31, 2007 we recorded a
valuation   allowance  for  the  total  deferred  tax  assets  as  a  result  of
uncertainties  regarding  the  realization  of the asset  based upon the lack of
profitability  and the  uncertainty  of  future  profitability.  This  valuation
allowance offsets any changes to the liability.  Additionally,  FIN 48 specifies
that tax positions for which the timing of the ultimate  resolution is uncertain
should be  recognized  as long-term  liabilities.  We made no  reclassifications
between  current taxes payable and long-term  taxes payable upon adoption of FIN
48. Our total  amount of  unrecognized  tax  benefits  as of the January 1, 2007
adoption date and for the nine months ended September 30, 2008 was $685,000.  On
January 1, 2007, although the implementation of FIN 48 did not impact the amount
of our liability or impact beginning retained earnings,  we reduced our deferred
tax asset and valuation allowance by $685,000.

         Our only major tax  jurisdiction  is the United  States.  The tax years
1993  through  2007 remain open and subject to  examination  by the  appropriate
governmental agencies in the U.S.

13.   Debt

Debt Restructuring
------------------

         Effective  May 15,  2008 we  negotiated  with  certain  holders  of our
convertible  promissory notes (the "Notes") to both extend the maturity date and
reduce the price at which  each note is  convertible  into  shares of our common
stock (the "Conversion Price") from $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" as well
as those issued under  "Convertible  Debt with Warrants"  discussed  below.  The
other terms of the Notes remained unchanged.

                                       15
<PAGE>

         Conversion prices and amounts outstanding at September 30, 2008 and
2007 were as follows:
<TABLE>
<CAPTION>
<S>                 <C>             <C>                <C>                 <C>
                   -----------------------------------------------------------------
                                           As of September 30,
                    -----------------------------------------------------------------
                           2008            2007              2008           2007
                    --------------------------------   ------------------------------
Conversion Price       Convertible Notes Payable        Potential Convertible Shares
     per share                Outstanding
------------------  --------------------------------   ------------------------------
          $0.80      $     6,248,226 $             -          7,810,282
          $1.20            5,005,000               -          4,170,833
          $2.00              250,000       6,500,000            125,000     3,250,000
                    --------------------------------   ------------------------------
Total                $    11,503,226 $     6,500,000         12,106,115     3,250,000
                    ================================   ==============================
</TABLE>


         On the date of modification  and in accordance with EITF 96-19 "Debtors
Accounting for  Modification  or Exchange of Debt  Instruments"  we compared the
discounted  present  value  of  the  cash  flows  of  the  modified  convertible
promissory notes (the "Modified  Notes") to the discounted  present value of the
original Notes to determine whether the change in cash flows exceeded 10% of the
carrying value of the original  Notes. As the change in cash flows was less than
10%, we then determined  whether the intrinsic  value of the revised  Conversion
Price  exceeded 10% of the carrying value of the original  Notes.  The intrinsic
value of the Modified Notes with a revised  Conversion  Price of $1.20 per share
did not  exceed  10% of the  carrying  value of the  Notes,  while  those with a
revised Conversion Price of $0.80 per share did exceed 10% of the carrying value
of the Notes.  Those  Notes  with an $0.80  conversion  price were  deemed to be
extinguished  for accounting  purposes while those with a $1.20 conversion price
were not.

         We also  valued the  intrinsic  value of the  modified  notes (the "New
Notes") as equal to the difference  between the market value of our common stock
and the modified  Conversion Price times the number of shares into which the New
Notes are  convertible  and  recorded  that  intrinsic  value as an  increase in
paid-in-capital of $2,017,907 and discount on the notes payable of $2,017,907.

         All of our convertible  promissory  notes  outstanding can be converted
into shares of our common stock  immediately  upon issuance at the option of the
Note holders;  accordingly we also immediately expensed the $2,017,907 discount.
The  modified  Notes were deemed to be reissued and are recorded in this Interim
Financial  Statement  at their  face  value of $4.3  million,  which  includes a
premium of $39,481. The premium will be amortized using the straight-line method
over  the life of the New  Notes,  which is not  materially  different  than the
effective-interest method.

         The total debt modification  costs consist of a net loss of $2,238,206,
which includes a loss of $184,044 on the note modification,  a $36,255 write off
of prepaid  debt  issuance  costs and  expensing of  $2,017,907  relating to the
discount.

         "J" Unit Sales

         The J Unit Sales  consist of the  issuance  of  convertible  promissory
notes  and  equity  over  periods  from  December  2006  through  March of 2008.
Substantially  all  convertible  notes issued were  restructured  in May 2008 as
discussed above. This private offering was approved by our Board of Directors in
December 2006 to raise additional working capital and consisted of units (the "J
Units")  sold at a per unit price of $50,000  with each J Unit  comprised of (i)
14,285  shares of our common  stock  (issued at a per share  price of $1.75) and
(ii) a  convertible  promissory  note (the "Note") with an initial face value of
$25,000.  The Notes bear interest at the rate of 10% per annum (simple interest)
due and payable at the end of each fiscal quarter.  Each Note originally matured
24 months from its issuance date, and was convertible  into shares of our common
stock, at the election of the holder,  at a per share price of $2.00.  The Notes
are prepayable without penalty upon 30 days notice. The Notes are convertible at
our  election  in the event the  closing  price of our  common  stock  equals or
exceeds  $4.00 per share,  and if converted at our  election,  we have agreed to
register the shares of stock issuable upon conversion.

                                       16
<PAGE>

         In December 2006, we sold 40 J Units to accredited  investors,  raising
$2 million and issued 571,400 shares of common stock and Notes with an aggregate
face value of $1 million.  In January  2007,  we sold 180 J Units to  accredited
investors,  raising $9 million,  and issued 2,571,300 shares of common stock and
Notes with an aggregate face value of $4.5 million.  In March 2007, we sold 40 J
Units to accredited investors,  raising $2 million, and issued 571,400 shares of
common stock and Notes with an aggregate face value of $1 million.  The sales of
these  securities  were made in reliance  upon Rule 506 and Section  4(2) of the
Securities Act of 1933.

         We applied the guidance in Accounting  Principles Board ("APB") No. 14,
"Accounting for Convertible  Debt and Debt Issued with Stock Purchase  Warrants"
and  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"  to allocate  the  proceeds  between the common stock and the Notes
based on their  relative fair values.  The  allocation  resulted in a premium of
$533,700 and $152,040 respectively, for the January 2007 and March 2007 Notes.

         As a commission  for the sale of the January 2007 and March 2007 J Unit
sales and placement of the Notes,  we paid  $1,100,000 in cash  commissions  and
issued  199,980  shares of common  stock to a  placement  agent.  The shares are
contractually valued at $1.93 per share or $385,961.  The total commission value
of $1,485,961 was allocated  between debt issuance costs and additional  paid-in
capital as a cost of raising the funds,  in the same proportion that was used to
allocate  the  gross  proceeds  of  the  offering   between  notes  payable  and
stockholders' equity. This resulted in (i) an increase to debt issuance costs of
$835,616,  amortizable  over the life of each  Note  and  (ii) and  increase  to
additional paid-in capital of $650,345.

         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 our common stock with a per
share exercise price of $3.25. The warrant expires 36 months from issuance.  The
note  bears  interest  at the rate of 10% per annum  (simple  interest)  due and
payable at the end of each calendar  quarter.  Upon issuance the note matured 36
months from issuance and was convertible into shares of our common stock, at the
election of the holder, at a per share price of $1.50. This note was modified in
May of 2008 such that the maturity date was extended to January 31, 2011 and the
per share conversion price was reduced to $0.80. The note 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 our intent to prepay.  This note was deemed extinguished
in May 2008 as noted in Debt  Restructuring  above,  and was  revalued at a fair
value  of  $2,015,046,  including  a  premium  of  $15,046.  The  sales of these
securities  were  made  in  reliance  upon  Rule  506  and  Section  4(2) of the
Securities Act of 1933.

         During  December  2007 we  sold a  convertible  promissory  note in the
amount of $1,003,226.  Pursuant to the sale, we issued a warrant to the investor
covering  668,817  shares of our common stock with a per share exercise price of
$3.25.  The warrant expires 36 months from issuance.  The note bears interest at
the rate of 10% per annum  (simple  interest) due and payable at the end of each
calendar  quarter.  The note matures 36 months from issuance and is  convertible
into shares of our common stock,  at the election of the holder,  at a per share
price of $1.50.  The note 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 our intent
to  prepay.  This  note  was  deemed  extinguished  in May 2008 as noted in Debt
Restructuring  above,  and was revalued at a estimated fair value of $1,010,773,
including  a  premium  of  $7,547.  The sales of these  securities  were made in
reliance upon Rule 506 and Section 4(2) of the Securities Act of 1933.

         In accordance with APB 14 and EITF 00-27,  upon original  issuance,  we
allocated  the proceeds of these sales  between the warrants and the notes based
on their relative fair values. The allocation resulted in a discount of $250,910
for both notes.  Upon  modification  the discount on these notes was revalued to
result in a loss on modification of debt totaling $229,647.

                                       17
<PAGE>

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

         On  May  30,  2008,  we  assumed  a  revolving   credit  facility  (the
"Facility")  in connection  with our  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%  (6.875% at
September 30, 2008). At September 30, 2008, there was $100,000 outstanding under
the line of credit and $150,000 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,
among other covenants, the net solvency of Inventa.

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

         On May 30, 2008 and as part of the purchase price of Inventa, we issued
$2.0  million in  unsecured  promissory  notes due  January 31, 2011 and bearing
interest at 10%, with interest  payable at the end of each ANTs fiscal  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.  In
accordance  with  EITF  98-5,   "Accounting  for  Convertible   Securities  with
Beneficial  Conversion Feature or Contingent with Adjustable  Conversion Ratios,
to Certain Convertible  Instruments" we recorded $750 thousand as an increase to
paid-in-capital.  In addition,  as the notes are  immediately  convertible  into
shares of our common  stock,  the discount  was  expensed  and we recorded  $750
thousand to interest expense.

14.   Commitments and Contingencies

Lease Commitment
----------------

As of September 30, 2008, we leased office facilities under non-cancelable
operating leases. Future minimum lease payments required under these
non-cancelable leases are as follows:

       Payments Due by Period                       Operating Leases
       ---------------------------                  ----------------
       Less than 1 Year                               $      409,822
       More than 1 Year                                    1,124,645
                                                    ----------------
          Total minimum lease payments                $    1,534,467
                                                    ================

         On April 27,  2005,  we entered  into a lease  with  Bayside  Plaza,  a
partnership,  for approximately 15,000 square feet of general commercial offices
located  at 700  Airport  Boulevard,  Suite  300,  Burlingame,  California  (the
"Premises").  The Premises  are used for the purposes of general  office use and
for  software  development.  The lease has an initial term of three years and is
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 $34,200 per month.

         As discussed in Note 2, 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 $10,007.  The lease
expires March 15, 2015.  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.

                                       18
<PAGE>

         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. Total rental expense for the three and
nine months ended September 30, 2008 was $112,913 and $241,356 respectively, and
$50,004 and  $160,012 for the three and nine months  ended  September  30, 2007,
respectively.

Contingencies
-------------

         As required by SFAS No.5,  Accounting  for  Contingencies  (SFAS 5), we
accrue for contingencies when we believe that a loss is probable and that we can
reasonably  estimate the amount of any such loss.  We have made an assessment of
the  probability  of incurring any such losses and such amounts are reflected in
our condensed consolidated financial statements. As more fully disclosed in Part
II Item 1. Legal Proceedings,  we are currently a party to certain pending legal
proceedings.  Litigation  is  inherently  unpredictable,  and it is difficult to
predict  the  outcome of  particular  matters  with  reasonable  certainty  and,
therefore,  the actual amount of any loss may prove to be larger or smaller than
the amounts reflected in our consolidated financial statements. No reserves have
been  accrued for the pending  legal  proceedings  in the  accompanying  Interim
Financial Statements.

                                       19
<PAGE>

15.   Stockholders' Equity Transactions

       Stockholders' equity transactions by cash and non-cash activity for the
nine months ended September 30, 2008 and 2007 is presented below.
<TABLE>
<CAPTION>
<S>                                                              <C>          <C>             <C>         <C>
                                                                           Changes in Stockholders' Equity
                                                                For the nine months ended         For the year ended
                                                                    September 30, 2008            December 31, 2007
                                                               ----------------------------   --------------------------

Total stockholders' (deficit) equity, beginning of period                      $(5,044,880)                $  3,823,010
Cash transactions:
------------------
   Proceeds from private placements:
      Sales of common stock at $0.60 per share                      7,615,000                           -
      Cash commissions on sales of common stock                      (367,200)                          -
      Sales of 220 "J" units at $25,000 per unit (equity
       portion of units)                                                    -                   5,500,000
      Total cash commissions on sales of "J" units (equity)                 -                    (481,426)
                                                               ---------------                ------------
          Total                                                      7,247,800                  5,018,574

   Proceeds from stock exercises:
      Warrants with exercise priceof $2.00-$3.50 per share
       discounted to $1.25 per share                                        -                     996,125
      Cash proceeds from exercise of stock options                     32,679                      60,600
                                                               ---------------                ------------
          Total                                                        32,679                   1,056,725
                                                               ---------------                ------------
          Total cash transactions                                                7,280,479                    6,075,299

Non-cash transactions:
----------------------
   Acquisition of Inventa Technologies, Inc.:
      Issuance of 20,000,000 shares valued at $1.10 per share   $  22,000,000                 $         -
      Discount on $2 million in convertible promissory notes         750,000
                                                               ---------------                ------------
      Total                                                        22,750,000                           -

   Intrinsic value of conversion feature of reissued
      convertible promissory notes                                  2,017,907                           -

   Related to private placements:
      Prepaid debt issuance costs on note payable                           -                    (685,740)
      Discount on note payable                                                                    250,910
      Common stock issued to placement agent on
          sales of 220 "J' units, net                                       -                     217,042
                                                               ---------------                ------------
          Total                                                             -                    (217,788)
                                                               ---------------                ------------

   Related to stock vesting and warrant-based compensation:
      Employee compensation expense                                 2,678,599                   1,488,405
      Non-employee compensation expense                               128,990                      99,417
                                                               ---------------                ------------
          Total                                                     2,807,589                   1,587,822
                                                               ---------------                ------------

          Total non-cash transactions                                           27,575,496                    1,370,034

Net loss for fiscal period                                                      (9,952,984)                 (16,313,223)
                                                                              -------------               --------------
             Total stockholders' equity (deficit), end of period              $  19,858,111                $ (5,044,880)
                                                                              =============               ==============
</TABLE>

         Following is a summary of equity transactions for the nine months ended
September  2008 and year ended  December  31, 2007.  Sales of equity  securities
(with the exception of stock option exercises) or equity-linked  securities were
made in reliance upon Rule 506 and Section 4(2) of the Securities Act of 1933.

                                       20
<PAGE>

Nine months ended September 30, 2008:

         Funds raised through private offerings to accredited investors:
         ---------------------------------------------------------------

         We  received  $7,615,000  from  accredited  investors  for the  sale of
12,691,667  shares  of our  common  stock,  at a price of $0.60  per  share  and
incurred  commission  costs of $367,200.  We issued 558,257 shares of our 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.  The  558,257  shares  are
contractually valued at $0.66 per share or $368,450.

         Other equity transactions:
         --------------------------

         As  discussed  in  Note  2,  on  May  30,  2008  we  acquired   Inventa
Technologies,  Inc. for a total purchase price of $27.1 million,  which included
our issuance of 20 million shares of our common stock valued at $1.10 per share.
We also issued $2 million in promissory  notes to the seller,  convertible  into
2.5 million shares of our common stock. As discussed in Note 13, the notes had a
beneficial  conversion  feature  totaling in aggregate  $750 thousand  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),
we recognized $768,024 in stock compensation expense, net of forfeiture credits,
as a result of the repricing.

         For the nine months ended  September  30, 2008 we recognized a total of
$2,678,599  in  compensation  expense  related to the vesting of employee  stock
options and the  repricing  and  $128,990 in  professional  fees  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 the nine months  ended  September  30,  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 $32,679.

Fiscal Year 2007:

         Funds raised through private offerings to accredited investors:

         In  the  first  quarter  of  2007,  we  entered  into  agreements  with
accredited investors to purchase 180 J Units,  raising $11,000,000.  Pursuant to
the sale,  we issued  3,142,700  shares of our common  stock at a share price of
$1.75  totaling  $5,500,000  and  issued  Notes  with an  initial  face value of
$5,500,000.  The sales of these  securities  were made in reliance upon Rule 506
and Section 4(2) of the Securities Act of 1933.

         We paid $1,100,000 in cash commissions and issued 199,980 shares of our
common  stock  which  were  valued  at $1.93 per  share or  $385,961.  The total
commission  value of $1,485,961  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 paid-in-capital of $650,345 and $835,616 to debt issuance costs.

         As more fully discussed in Footnote 9, "Convertible  Notes Payable with
Warrants",  in the fourth quarter of 2007 we issued two  convertible  promissory
notes  payable  with a  principal  value of  $3,003,186,  along  with a total of
2,002,150 in warrants  exercisable  at $3.25 per share.  The  $3,003,186 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 reduction of additional  paid-in-capital  of $250,910.  The
sales of these  securities  were made in reliance upon Rule 506 and Section 4(2)
of the Securities Act of 1933.

                                       21
<PAGE>

         Funds raised through cash exercises of stock options and warrants:

         For the fiscal 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 fiscal 2007, warrants covering 796,900
shares were  exercised  at a discounted  price of $1.25 per share,  resulting in
proceeds of $996,125.

         Other equity transactions:

         For the fiscal year ended  December 31, 2007, we recognized  $1,488,405
in  compensation  expense  related to vesting of  employee  stock  options,  and
$99,417 in  professional  fees  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.

16.   Stock-Based Compensation Expense

         We have two stock-based compensation plans (the ANTs software inc. 2000
Stock Option Plan and the ANTs  software inc.  2008 Stock Plan,  together,  "the
Plans")  which are  intended  to  attract,  retain and  provide  incentives  for
talented  employees,   officers,   directors  and  consultants,   and  to  align
stockholder  and  employee  interests.  We  consider  stock-based   compensation
critical to our operation and productivity; essentially all of our employees and
directors participate,  as well as certain consultants.  Under the Plans, we 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 Plans generally vest within three years after
the date of grant,  and expire 10 years after  grant.  Stock  option  vesting is
generally  time-based,   but  stock  options  sometimes  vest  as  a  result  of
achievement of milestones.  Options granted to new hires generally vest 16.7% or
33% beginning six months and twelve months,  respectively,  after the employee's
date of hire, then at 2.78% each month  thereafter such that the option is fully
vested  three years from date of hire.  Options  granted to  existing  employees
generally start vesting monthly following their 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.  Outside  directors  generally  receive an option to purchase
50,000  shares of common stock for each 12 months of service,  and an additional
10,000  shares for each 12 months of service as chairman  of a Board  committee,
all vesting over the period of service.  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.

         As  disclosed  above in Note 15, on March 26 and March  31,  2008,  the
Board of Directors  approved 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 of vested
and unvested  shares in connection  with the repricing.  In accordance  with the
provisions of FAS 123(R), we recognized $768,024 in stock compensation  expense,
net of forfeiture credits, as a result of the repricing.

         The  following  table  sets  forth the total  stock-based  compensation
expense for employees,  outside directors and consultants for the three and nine
months ended September 30, 2008 and 2007.

                                       22
<PAGE>

<TABLE>
<CAPTION>
<S>                                           <C>          <C>             <C>           <C>
                                             For the Three Months Ended   For the Nine Months Ended

                                                    September 30,                September 30,
                                             ---------------------------  ---------------------------
                                                  2008          2007            2008          2007
                                             ---------------------------  ---------------------------

Cost of Revenues                               $   47,288   $          -    $     69,739  $         -
Sales and marketing                                31,560         50,969         327,499      158,982
Research and development                          136,740      165,418         1,169,345      471,089
General and administrative                        184,680        197,431       1,241,006      466,995
                                             ---------------------------  ---------------------------
   Stock-based compensation before income
    taxes                                         400,268        413,818       2,807,589    1,097,066
   Income tax benefit                                   -              -               -            -
                                             ---------------------------  ---------------------------
   Total stock-based compensation expense
    after income taxes                         $  400,268   $    413,818    $  2,807,589  $ 1,097,066
                                             ===========================  ===========================

Stock-based compensation expense charged to:
Employee compensation expense (includes
   outside directors)                          $  395,061   $    392,484    $  2,678,599  $ 1,060,235
Professional fees - S&M consultants                     -         14,190           4,664       26,788
Professional fees - R&D consultants                  (785)         5,081          75,575        7,980
Professional fees - G&A consultants                 5,992          2,063          48,751        2,063
                                             ---------------------------  ---------------------------
   Stock-based compensation before income
    taxes                                         400,268        413,818       2,807,589    1,097,066
   Income tax benefit                                   -              -               -            -
                                             ---------------------------  ---------------------------
   Total stock-based compensation expense
    after income taxes                         $  400,268   $    413,818    $  2,807,589  $ 1,097,066
                                             ===========================  ===========================
</TABLE>


         Stock-based  compensation  expense for the three and nine months  ended
September 30, 2008  increased  basic and diluted net loss per share by $0.00 and
$0.04,  respectively  and for the three and nine months ended September 30, 2007
increased basic and diluted net loss per share by $0.01 and $0.02, respectively.
Stock -based compensation had no impact on cash flows used in operations or cash
flows from financing activities.

         The fair value of employee and non-employee stock-based awards, and the
stock-based  compensation  expense for the nine months ended  September 30, 2008
and  2007  was  estimated  using  the  Black-Scholes  valuation  model  with the
following assumptions:

                                           Nine Months Ended
                                             September 30,
                                  ------------------------------------
                                         2008              2007
                                  ------------------------------------
   Expected life in years            3.00 - 10.00      3.00 - 10.00
   Average Volatility                 66% - 70%         66% - 67%
   Interest rate                    1.38% - 2.87%     3.82 %- 5.02%
   Dividend Yield                       0.00%             0.00%


         The expected life of the options  represents  the  estimated  period of
time until  exercise and is based on historical  experience  of similar  awards,
giving   consideration  to  the  contractual   terms,   vesting   schedules  and
expectations  of future behavior of employee and  non-employees.  Expected stock
price volatility is based on historical  volatility of our common stock over the
expected life of the options.  The risk-free interest rate is based on the yield
available  on U.S.  Treasury  zero-coupon  issues with an  equivalent  remaining
expected  life. We have not paid  dividends in the past and do not expect to pay
any dividends in the near future.

         As of September 30, 2008, there was approximately $2.1 million of total
unrecognized compensation expense,  adjusted for estimated forfeitures,  related
to unvested  stock-based  compensation  granted to employees and  non-employees,
which we  expect  to  recognize  over a  remaining  weighted-average  period  of
approximately 2.1 years. Total  unrecognized  compensation cost will be adjusted
for future changes in estimated forfeitures.

                                       23
<PAGE>

17.   Stock Options and Warrants

         As of September 30, 2008, we had outstanding  options to purchase up to
11,118,630 of common stock of which  6,867,629  were  exercisable  and 4,557,941
warrants outstanding to purchase common stock, all of which were exercisable.
<TABLE>
<CAPTION>
<S>                                  <C>             <C>           <C>           <C>
                                         Stock Option Shares                     Total Options
                                       Available                     Warrants    and Warrants
                                       for Grant    Outstanding     Outstanding   Outstanding
                                     ------------- -------------   ------------- -------------
Balance, December 31, 2007                652,789     8,689,050       8,124,380    16,813,430
  Authorized                            5,000,000             -               -             -
  Granted                              (4,922,000)    4,922,000          50,166     4,972,166
  Exercised                                47,500       (47,500)              -       (47,500)
  Retired/forfeited                     2,444,920    (2,444,920)     (3,616,605)   (6,061,525)
                                     ---------------------------   ---------------------------
Balance, September 30, 2008             3,223,209    11,118,630       4,557,941    15,676,571
                                     ===========================   ===========================

Exercisable at September 30, 2008                     6,867,629       4,557,941    11,425,570
                                                   -------------   ---------------------------
</TABLE>

         Net cash  proceeds  from the  exercise  of  stock  options  were $0 and
$32,679  for the three  and nine  months  ended  September  30,  2008 and $0 and
$60,600 for the three and nine months ended  September  30, 2007,  respectively.
There was no income tax benefit  realized  from stock  option  exercises  during
these  periods  due to our  net  loss  from  operations  for  both  periods.  In
accordance with SFAS 123(R), we present excess tax benefits from the exercise of
stock options, if any, as financing cash flows rather than operating cash flows.

         Average exercise prices and aggregate intrinsic values of stock option
activity for the nine months ended September 30, 2008, is as follows:
<TABLE>
<CAPTION>
<S>                                             <C>              <C>             <C>
                                                                    Weighted
                                                                    Average       Aggregate
                                                  Outstanding       Exercise      Intrinsic
                                                 Stock Options       Price          Value
                                                 -------------     ----------    -----------

Outstanding at December 31, 2007                    8,689,050     $      2.05     $        -
  Granted                                           4,922,000            1.04
  Exercised through cash consideration                (47,500)              -
  Retired or forfeited                             (2,444,920)
                                                 -------------                   -----------
Outstanding at September 30, 2008                  11,118,630            1.03     $        -
                                                 =============                   -----------
Exercisable at September 30, 2008                   6,867,629     $      1.04     $        -
                                                 -------------                   -----------
</TABLE>


         The aggregate  intrinsic  value of total stock options  outstanding and
exercisable  and of total stock options  exercised  during the nine months ended
September  30, 2008 in the table above  represents  the total  pretax  intrinsic
value (i.e.,  the  difference  between our closing  stock price on September 30,
2008 and the weighted average  exercise price,  times the number of shares) that
would have been received by the option holders had all option holders  exercised
their options on September 30, 2008.  Aggregate  intrinsic  value changes as the
fair market value of our stock changes. The closing market price of the stock on
September 30, 2008 was $0.54.

                                       24
<PAGE>

         The weighted  average  grant-date  fair value of stock options  granted
during  the three  months  ended  September  30,  2008 was  $0.63.  The range of
exercise  prices for options  outstanding  and exercisable at September 30, 2008
are summarized as follows:
<TABLE>
<CAPTION>
<S>                           <C>              <C>                  <C>               <C>
                                               Total Options Outstanding as of September 30 ,2008
                                               --------------------------------------------------------------
                                                                        Weighted               Weighted
                                                                    Average Exercise       Average Remaining
                                                     Options        Price per Share   Contractual Life (in Years)
                                               -------------------  ----------------  -------------------------
Range of exercise prices:
    $    0.52 - $0.99                                   6,505,357    $         0.84                       6.91
    $    1.00 - $1.99                                   4,439,871    $         1.25                       8.97
    $    2.00 - $2.99                                     156,761    $         2.43                       5.46
    $    3.00 - $3.99                                      16,641    $         3.13                       2.69
                                               -------------------  ----------------  -------------------------
            Total stock options outstanding
                at September 30, 2008                   11,118,630    $         1.03                       7.70
                                               ===================  ================  =========================

                                               Total Options Exercisable at September 30, 2008
                                               ----------------------------------------------------------------
                                                                        Weighted               Weighted
                                                                    Average Exercise       Average Remaining
                                                     Options        Price per Share      Contractual Life (in
                                                                                                 Years)
                                               -------------------  ----------------  -------------------------
Range of exercise prices:
    $    0.52 - $0.99                                    4,777,688    $         0.87                       6.02
    $    1.00 - $1.99                                    1,916,539    $         1.33                       8.12
    $    2.00 - $2.99                                      156,761    $         2.43                       5.46
    $    3.00 - $3.99                                       16,641    $         3.13                       2.69
                                               -------------------  ----------------  -------------------------
            Total stock options exercisable
                at September 30, 2008                    6,867,629    $         1.04                       6.58
                                               ===================  ================  =========================
</TABLE>

                                       25
<PAGE>

         Warrants outstanding as of September 30, 2008 are summarized in the
table below:

<TABLE>
<CAPTION>
<S>                                    <C>                <C>              <C>               <C>
                                                            Exercise          Weighted
                                                             Prices            Average            Year of
                                          Warrants          per Share      Exercise Price       Expiration
                                      -----------------  ---------------  ----------------  -------------------
Warrants purchased in private
   placements:                                1,000,000   $         0.80                           2011
                                              2,002,150   $         0.80                           2011
                                      -----------------                   ----------------
     Subtotal                                 3,002,150                     $         0.80

Warrants issued to consultants and              150,000   $ 1.85 - $1.99                           2009
placement agent:                                 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   $ 0.94 - $2.31                           2011
                                                198,750   $         0.94                           2015
                                                256,875   $         0.94                           2016
                                      -----------------                   ----------------
     Subtotal                                 1,355,625                               1.70
                                      -----------------                   ----------------
     Total warrants outstanding at
        September 30, 2008                    4,557,941                     $         1.09
                                      =================                   ================
</TABLE>

                                       26
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

         The  following  information  should  be read in  conjunction  with  the
financial  statements and notes thereto in Part 1 Item 1,  Financial  Statements
for this Quarterly Report on Form 10-Q and with Item 7, Management's  Discussion
and Analysis of Financial  Condition  and Results of  Operations,  in our Annual
Report on Form 10-K for the year ended December 31, 2007.

         Certain   statements   contained   in   this   Form   10-Q   constitute
forward-looking  statements  within the meaning of Section 27A of the Securities
Act of 1933, as amended and Section 21E of the Securities  Exchange Act of 1934,
as  amended.  Such  forward-looking  statements  herein  are  based  on  current
expectations   that   involve  a  number  of  risks  and   uncertainties.   Such
forward-looking  statements are based on assumptions  that we will have adequate
financial resources to fund the development and operation of our business,  that
there will be no material adverse change in our operations or business,  that we
will meet success in marketing and selling our products and  services,  and that
we will be able to continue to attract and retain  skilled  employees  necessary
for our business,  among other things.  The foregoing  assumptions  are based on
judgments  with respect to,  among other  things,  information  available to our
future  economic,   competitive  and  market   conditions  and  future  business
decisions.  All of these  assumptions  are  difficult or  impossible  to predict
accurately  and many are beyond our  control.  Accordingly,  although we believe
that the assumptions  underlying the forward-looking  statements are reasonable,
any such  assumption  could prove to be inaccurate and therefore there can be no
assurance that the results  contemplated in the forward-looking  statements will
be  realized.  There  are a  number  of  risks  presented  by our  business  and
operations,  which could cause our financial  performance  to vary markedly from
prior results, or results contemplated by the forward-looking  statements.  Such
risks  include  failure of our  technology  or products to work as  anticipated,
failure to develop commercially viable products or services from our technology,
delays or failure in financing efforts,  delays in or lack of market acceptance,
failure  to  recruit  adequate  personnel,   and  problems  with  protection  of
intellectual property,  among others. The words "believe," "estimate," "expect,"
"intend," "anticipate" "should",  "could", "may", "plan" and similar expressions
and  variations  thereof  identify  some of  these  forward-looking  statements.
Management decisions,  including budgeting,  are subjective in many respects and
periodic  revisions  must be made to  reflect  actual  conditions  and  business
developments,  the impact of which may cause us to alter our capital  investment
and  other  expenditures,  which  may  also  adversely  affect  our  results  of
operations.  In light of significant  uncertainties  inherent in forward-looking
information  included in this  Quarterly  Report on Form 10-Q,  the inclusion of
such  information  should not be  regarded  as a  representation  by us that our
objectives  or plans will be achieved.  We undertake no  obligation to revise or
publicly   release  the  results  of  any  revision  to  these   forward-looking
statements.

The Company

         ANTs  software  inc.  (sometimes  referred to herein as "ANTs" or "we")
designs,  develops and sells software and services for the database market.  Our
areas of focus are:  software and services that enable  customers to consolidate
databases more quickly and  cost-effectively  and services to monitor and manage
applications and databases.

         The ANTs  Compatibility  ServerTM  ("ACS"),  launched in April 2008, is
intended to provide a fast,  cost-effective  way to move  applications  from one
database to another and to enable  enterprises to achieve cost  efficiencies  by
consolidating  applications  onto fewer  databases.  ACS is built on proprietary
compatibility technologies that we developed. End-users of database products and
database vendors can use ACS to lower data management costs and gain competitive
advantages.

         In May 2008, we expanded our business to include application  migration
services and application and database monitoring and management services via the
acquisition of Inventa Technologies, Inc. of Mt. Laurel, New Jersey ("Inventa").
Inventa is a 24/7 managed services and consulting  services  provider that helps
customers   maximize  the   effectiveness  of  their  application  and  database
infrastructure  to support their  business  initiatives.  Inventa's  experienced
professional  services and sales teams  complement the ANTs engineering team and
allow us to offer a complete product-to-implementation solution for customers.

                                       27
<PAGE>

         In May 2008,  we sold  certain  technology  and  intellectual  property
related  to our  first  product,  the  ANTs  Data  Server  ("ADS"),  to  Four Js
Development Tools, Inc. As part of a revenue-sharing arrangement we will receive
50% of the  revenue  earned  by Four J's in our  previously  executed  reselling
agreement with IBM. The revenue-sharing agreement terminates in May 2012.

Corporate History

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

The ANTs Compatibility ServerTM ("ACS")

         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.

Professional Services

         Established in 1993, 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 their 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.

                                       28
<PAGE>

         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
is a result 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 the 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 has been established to demonstrate for customers, either remotely or
on-site, our database migration capabilities and as 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.

         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"

     o    Post-deployment,   provide  application  monitoring,  maintenance  and
          services

Technology and Intellectual Property

         Beginning in 2000,  we focused on  development  of the ANTs Data Server
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 ANTs  Compatibility  Server. 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.

                                       29
<PAGE>

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  around  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 Oracle, Microsoft, IBM, 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  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.  It is  our  intention  to  generate  revenue  by
providing those services.

         We generated  significant  revenues  related to the license and sale of
our ADS  technologies  during  the  quarter-ended  June 30,  2008.  We expect to
generate  revenues from existing and new contracts  with  Professional  Services
customers, and if successful,  we expect to generate additional revenues related
to ADS and ACS.

                                       30
<PAGE>

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.  What  sets us  apart is our deep
experience and skill in database managed services and our proprietary monitoring
and management  software.  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  ANTs
               Compatibility Server (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 fiscal  quarter of 2009 at our expected  expense rate
and  expect  that our  focus  over  the next  year  will be on  development  and
marketing of ACS and on the growth of our Professional Services offerings.

Results of Operations

         Our results of operations for the three and nine months ended September
30, 2008 and 2007 are summarized below (in thousands):

                                       31
<PAGE>

<TABLE>
<CAPTION>
<S>                                   <C>           <C>           <C>                  <C>           <C>           <C>
                                          Three Months ending September 30,                Nine Months ending September 30,
                                      ------------------------------------------       -----------------------------------------
                                          2008          2007        % Change               2008          2007        % Change
                                      -----------   -----------   --------------       -----------   -----------   -------------
Revenues                               $   1,441     $     227              535 %       $   6,896     $     318           2,069 %
Cost of revenues                           1,163             2           58,050 %           2,035            12          16,858 %
                                      -----------   -----------   --------------       -----------   -----------   -------------
   Gross profit (loss)                 $     278     $     225               24 %       $   4,861     $     306           1,489 %
Operating expenses                         3,129         4,121              (24)%          11,264        12,670             (11)%
                                      -----------   -----------   --------------       -----------   -----------   -------------
   Loss from operations                   (2,851)       (3,896)             (27)%          (6,403)      (12,364)            (48)%

Other (expense) income, net                 (244)            8           (3,150)%          (3,550)          106          (3,449)%
                                      -----------   -----------   --------------       -----------   -----------   -------------
   Net loss                               (3,095)       (3,888)             (20)%          (9,953)      (12,258)            (19)%
                                      ===========   ===========   ==============       ===========   ===========   =============
Net loss per share -
   basic and diluted                   $   (0.03)    $   (0.07)             (57)%       $   (0.14)    $   (0.22)            (36)%
                                      ===========   ===========   ==============       ===========   ===========   =============
Shares used in computing basic and
   diluted net loss per share             90,648        56,623               60 %          73,550        56,362              30 %
                                      ===========   ===========   ==============       ===========   ===========   =============
</TABLE>

Revenues

         Revenues consist of product revenues representing sales of intellectual
property,  licenses and royalties and services revenues representing managed and
professional  services fees and recognition of deferred maintenance and support.
Future  revenues are  expected to include  sales and licenses of our ACS product
and related  technology,  ADS license revenues under a revenue sharing agreement
that is in effect through May 2012, 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.

         During the three and nine months ended  September  30,  2008,  revenues
increased  $1.2 million and $6.6 million  versus the three and nine months ended
September 30, 2007, respectively.  Revenues for the three months ended September
30, 2008 represents  services revenue from our Inventa subsidiary  totaling $1.4
million. Revenues for the nine months ended September 30, 2008 includes the $3.5
million sale of ADS technology,  $1.4 million in ADS license fees, both of which
occurred in the second quarter of 2008, and four month's services  revenues from
our Inventa subsidiary totaling $1.9 million.

Cost of Revenues

         Costs 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.  The three months  ended  September  30,
2008 includes  operating  activity related to the managed and consulting service
delivery  personnel of our Inventa  subsidiary.  Cost of revenues in fiscal 2007
consisted of third-party licenses and services.

Operating Expenses

         Operating  expenses by department for the three months ending September
30, 2008 and 2007 were as follows (in thousands):

                                       32
<PAGE>

                                    Three Months ended September 30,
                             ----------------------------------------------
                                         2008                    2007
                             -----------------------------  ---------------
                                         %       % Change              %
                                      --------  ----------          -------

Sales and marketing          $   754       24%         38%  $  547      13%
Research and development       1,386       44%        -47%   2,638      64%
General and administrative       988       32%          6%     936      23%
                             -------  --------  ----------  ------  -------
Total operating expenses     $ 3,128      100%        -24%  $4,121     100%
                             =======  ========  ==========  ======  =======

         Operating  expenses by department for the nine months ending  September
30, 2008 and 2007 were as follows (in thousands):

                                     Nine Months ended September 30,
                            -------------------------------------------------
                                        2008                      2007
                            -----------------------------  ------------------
                                         %      % Change                 %
                                      -------  ----------             -------

Sales and marketing         $  1,840      16%        -23%  $   2,397      19%
Research and development       5,775      51%        -16%      6,909      54%
General and administrative     3,649      33%          8%      3,364      27%
                            --------  -------  ----------  ---------  -------
Total operating expenses    $ 11,264     100%        -11%  $  12,670     100%
                            ========  =======  ==========  =========  =======

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

         The number and distribution of full-time employees as of September 30,
2008 and 2007 were as follows:

                              September     % of     September     % of
                                  30,                    30,
                                 2008       Total       2007       Total
                              ----------  ---------  ----------  ---------

Cost of revenues                      29       56%            -         -
Sales and marketing                    7       13%            3         7%
Research and development              10       19%           33        81%
General and administrative             6       12%            5        12%
                              ----------  ---------  ----------  ---------
                Totals                52      100%           41       100%
                              ----------  ---------  ----------  ---------

         Full-time  employees  included in cost of revenues as of September  30,
2008 represent those devoted to service delivery at our Inventa subsidiary.  The
increase  in total  employees  reflects  the  acquisition  of Inventa and its 36
employees in May 2008, offset by a net decrease of 25 employees, primarily those
in research and development.


Sales and Marketing

         Sales and marketing  expense consists  primarily of employee  salaries,
commissions and benefits,  stock-based  compensation,  professional fees, travel
and  entertainment  and  corporate  overhead  allocations.  Sales and  marketing
expense  for the three and nine  months  ended  September  30,  2008 and 2007 is
presented in the table below (in thousands):

                                       33
<PAGE>
<TABLE>
<CAPTION>
<S>                             <C>           <C>           <C>    <C>    <C>    <C>
                                    Three Months Ended September 30,       Nine Months Ended September 30,
                                    2008            2007    % Change        2008        2007     % Change
                                ------------ ------------- ------------   ---------  ----------  ---------
Employee compensation and
 benefits                                338          220           54%         763       1,077       -29%
Stock-based compensation                  32           51          -37%         327         159       106%
Professional fees                        127          124            2%         275         542       -49%
Travel and entertainment                  76           62           23%         154         239       -36%
Amortization of intangibles              107            -          N/A          107           -       N/A
Corporate allocations from
 general and administrative
 expenses                                 18            7          157%          37         116       -68%
Events and promotions and
 other                                    56           83          -33%         177         264       -33%
                                ---------------------------------------   --------------------------------
Total                                  $ 754     $    547           38%      $1,840      $2,397       -23%
                                ---------------------------------------   --------------------------------

Headcount at end of period                 7            3          133%           7           3       133%
</TABLE>


         Total sales and marketing  expense  increased by $207  thousand,  a 38%
increase,  during the three months ended  September  30, 2008 as compared to the
same period in 2007, due primarily to the following:

     o    Employee  compensation and benefits  increased by 54% due primarily to
          the  addition of five  Inventa  staff.  The  additional  staff  offset
          savings realized by reducing our sales and marketing staff by three.
     o    Stock-based compensation decreased 37% because in 2008 fewer employees
          have options vesting and in the quarter ending September 30, 2007, the
          company  recorded stock  compensation  expense related to a consultant
          who received a performance-based grant.
     o    Amortization of customer  relationships relates to amortization of the
          value of Inventa's customer list.
     o    Travel  and  entertainment  increased  23% as we  added  five  Inventa
          employees  to  sales  and   marketing.   In   addition,   the  company
          participated in a trade show during the reporting  period and incurred
          event and travel costs as a result.
     o    Corporate  allocations  increased  157% as  headcount  in research and
          development decreased, placing a relatively larger burden on sales and
          marketing.
     o    Results reflect a full quarter's worth of expenses related to recently
          acquired Inventa Technologies, Inc.

         Total sales and marketing  expense  decreased by $556  thousand,  a 23%
decrease,  during the nine months  ended  September  30, 2008 as compared to the
same period in 2007, due primarily to the following:

     o    Employee  compensation and benefits decreased by 29% 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 five Inventa staff.
     o    Stock-based compensation increased 106% 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  and the  issuance  of a
          fully-vested  and  expensed  stock  option grant to our CEO during the
          second  quarter.  Compensation  expense related to our CEO is recorded
          50% to sales and marketing and 50% to general and  administrative.  We
          do not expect  the  expenses  incurred  due to the  repricing  and the
          option grant to recur.
     o    Professional  fees  decreased  49% 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 36% as we decreased our sales and
          marketing team from 2007 levels.
     o    Corporate  allocations  decreased 68% due to lower  headcount in sales
          and marketing and cost savings in employee benefits.
     o    2008  results  reflect  four  months'   expenses  related  to  Inventa
          (acquired  May 30,  2008),  whereas 2007  results  include no expenses
          related to Inventa.

                                       34
<PAGE>

Research and Development

         Research  and  development   expense  consists  primarily  of  employee
compensation  and  benefits,   contractor  fees,  stock-based  compensation  and
equipment and software.  Research and  development for the three and nine months
ended  September  30,  2008  and  2007  is  presented  in the  table  below  (in
thousands):
<TABLE>
<CAPTION>
<S>                              <C>          <C>          <C>        <C>         <C>           <C>
                                 Three Months Ended September 30,        Nine Months Ended September 30,
                                 -----------------------------------  ---------------------------------------
                                    2008         2007      % Change      2008        2007         % Change
                                 -----------  ----------  ----------  ----------  ------------  -------------
Employee compensation and
 benefits                         $      659   $   1,502        -56%  $    2,739   $    4,441           -38%
Contractor fees                          384         844        -55%       1,478        1,658           -11%
Stock-based compensation                 137         165        -17%         910          471            93%
Equipment and computer supplies           74          17        335%         237           34           597%
Corporate allocations from
   general and administrative
    expenses                              91          73         25%         293          338           -13%
Other                                     41          37         11%         118          (33)         -458%
                                 -----------------------------------  ---------------------------------------
Total                             $    1,386   $   2,638        -47%  $    5,775   $    6,909           -16%
                                 -----------------------------------  ---------------------------------------

Headcount at end of period                10          33        -70%          10           33           -70%
</TABLE>

         Total research and development expense decreased by $1.3 million during
     the three months ended September 30, 2008 as compared to the same period in
     2007, a 47% decrease, due primarily to the following:

     o    Employee  compensation and benefits  decreased 56% due to decreases in
          headcount  from 33 as of September  30, 2007 to 10 as of September 30,
          2008.  The decrease in  headcount is primarily  due to the sale of ADS
          and  separation  of the ADS  development  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 55% as the bulk of development of the first
          version of our ACS product was  completed by mid-2008 when compared to
          a period of intense development in 2007.  Additionally,  with the sale
          of our ADS product,  we did not incur  development  expense whereas in
          2007, we were still developing and supporting ADS.
     o    Stock-based  compensation  decreased primarily due to reduced research
          and development headcount.
     o    2008  results  reflect  three  months'  expenses  related  to  Inventa
          (acquired  May 30,  2008),  whereas 2007  results  include no expenses
          related to Inventa.

         Total research and development expense decreased by $1.5 million during
     the nine months ended September 30, 2008 as compared to the same period in
     2007, a 20% decrease, due primarily to the following:

     o    Employee  compensation and benefits decreased 38% due to a decrease in
          headcount  from 33 as of September  30, 2007 to 10 as of September 30,
          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 11% 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 be recurring.
     o    2008  results  reflect  four  months'   expenses  related  to  Inventa
          (acquired  May 30,  2008),  whereas 2007  results  include no expenses
          related to Inventa.

                                       35
<PAGE>

General and Administrative

         General  and  administrative  expense  consists  primarily  of employee
salaries  and  benefits,  professional  fees  (legal,  accounting,  and investor
relations),  facilities  expenses,  and  insurance.  General and  administrative
expense  for the three and nine  months  ended  September  30,  2008 and 2007 is
presented in the table below (in thousands):

<TABLE>
<CAPTION>
<S>                              <C>           <C>         <C>          <C>          <C>        <C>
                                   Three Months Ended September 30,      Nine Months Ended September 30,
                                 ------------------------------------   ----------------------------------
                                    2008          2007     % Change        2008        2007     % Change
                                 ------------  ----------- ----------   ----------- ---------- -----------
Employee compensation and
 benefits                         $      318    $     202         57%    $     710   $  1,450         -51%
Stock-based compensation                 185          197         -6%        1,241        467         166%
Facilities, director fees,
 insurance and other                     302          257         18%          977        854          14%
Professional fees                        267          251          6%          820        771           6%
Debt issuance costs                       25          109        -77%          237        278         -15%
Corporate allocations to
sales and marketing
   and research and
    development                         (109)         (80)        36%         (336)      (455)        -26%
                                 ------------------------------------   ----------------------------------
Total                             $      988    $     936          6%    $   3,649   $  3,365           8%
                                 ------------------------------------   ----------------------------------

Headcount at end of period                 6            5         20%            6          5          20%
</TABLE>


         Total  general and  administrative  expense  increased  by $53 thousand
during the three months ended  September 30, 2008 as compared to the same period
in 2007, a 6% increase, due primarily to the following:

     o    Employee compensation and benefits expense increased 57% due primarily
          to two headcount added with the purchase of Inventa.
     o    Stock-based  compensation  decreased  6%  due  primarily  to  director
          warrants  that were  vesting  in 2007 but which are now fully  vested,
          offset somewhat by expense related to options issued to Inventa staff.
     o    Professional  fees  increased  6% primarily  due to  increased  use of
          contract accounting personnel.
     o    Allocation of overhead costs  increased in Q3 2008 compared to Q3 2007
          due to a  nonrecurring  adjustment  made  in Q3  2007;  excluding  the
          nonrecurring  adjustment,  allocations  decreased  as  the  number  of
          personnel in other departments decreased.
     o    2008  results  reflect  three  months'  expenses  related  to  Inventa
          (acquired  May 30,  2008),  whereas 2007  results  include no expenses
          related to Inventa.

         Total  general and  administrative  expense  increased by $283 thousand
during the nine months ended  September  30, 2008 as compared to the same period
in 2007, an 8% increase, due primarily to the following:

     o    Employee compensation and benefits expense decreased 51% 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 September 30, 2007 to three where it
          has been for most of 2008, resulting in significant savings.  Somewhat
          offsetting  the savings from reduced  headcount at ANTs,  consolidated
          headcount  as of September  30, 2008 has  increased to six as we added
          three G&A staff from Inventa.
     o    Stock-based  compensation  increased  166%  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 each to our CEO
          and 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  6% primarily  due to  increased  use of
          contract accounting personnel.
     o    Debt issuance costs relate to the amortization of placement agent fees
          that we incurred on the issuance of our J Unit convertible  promissory
          notes (the "Notes") in December 2006 and in the first quarter of 2007.
          As noted in Note 13 in the  accompanying  Interim  Statements,  in May
          2008  substantially  all  of our  convertible  promissory  notes  were
          modified  such that the  principal  maturity date was extended and the
          conversion price was decreased.  For those with new conversion  prices
          that were less than the  market  value of our  stock,  we  immediately
          expensed the debt issuance costs related to those extinguished  notes.
          The  amortization  of debt issuance costs on the remaining  notes will
          continue through the maturity dates of each note.

                                       36
<PAGE>

o        Allocations  of  overhead  costs  decreased  26% 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 four months' expenses related to Inventa (acquired
         May 30,  2008),  whereas  2007 results  include no expenses  related to
         Inventa.

Other (Expense) Income, Net

         The  components  of other  (expense)  income,  net for the three months
ended September 30, 2008 and 2007, were as follows (in thousands):

<TABLE>
<CAPTION>
<S>                                       <C>          <C>           <C>             <C>            <C>          <C>
                                             Three Months Ended September 30,             Nine Months Ended September 30,
                                          ---------------------------------------    ------------------------------------------
                                              2008         2007        % Change          2008          2007         % Change
                                          ------------ ------------  ------------    ------------  ------------  --------------
Other (expense) income:
Debt modification costs                             -            -           N/A          (2,238)            -             N/A
Interest expense, convertible notes
 payable                                         (263)         (65)          305%         (1,378)         (165)            735%
Interest income                                    19           71           -73%             66           271             -76%
Gain on legal settlement and other                  -            2          -100%              -             -             N/A
                                          ------------ ------------  ------------    ------------  ------------  --------------
Other (expense) income, net                $     (244)  $        8         -3150%     $   (3,550)   $      106           -3449%
                                          ------------ ------------  ------------    ------------  ------------  --------------
</TABLE>

         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 changed by $252
thousand and $3.7 million  during the three and nine months ended  September 30,
2008 as compared to the same periods in 2007 primarily due to a modification  of
the terms of substantially  all of our outstanding  notes and to a lesser extent
from the issuance of  approximately  $5 million in new  convertible  notes since
September  of 2007.  Detail  regarding  the  change  in other  (expense)  income
follows:

     o    Interest  expense and loss on debt  modification  totaled $2.2 million
          and represents two components:
          o    The non-cash  cost of modifying  $4.2 million of our  outstanding
               convertible  notes  payable  to  a  conversion  price  below  the
               then-market price of our common stock; this amount was originally
               recorded  to  discount  on   convertible   debt  and   additional
               paid-in-capital  at an amount equal to the difference between the
               conversion  price and the  then-market  price of the stock on the
               date of  modification  times the  number  of shares  the note was
               convertible into (the "beneficial conversion feature"). Each note
               is  immediately  convertible  into shares of our common stock and
               accordingly,   the  portion  of  the  discount  relating  to  the
               beneficial   conversion  feature  was  immediately   recorded  to
               interest expense.
          o    A non-cash  loss  representing  the  difference  between the fair
               value of the  modified  notes  discussed  above and the  carrying
               value  of the  notes at the time of  modification  totaling  $184
               thousand  and a $36 thousand  charge on the related  prepaid debt
               issuance   costs.   For   further   information   on   the   Note
               modifications,  see Note 13  "Debt" in the  accompanying  Interim
               Statements.
     o    Interest expense on convertible promissory notes payable issued in the
          acquisition of Inventa  resulted in a $750 thousand  interest  expense
          charge.  The charge represents the difference  between the then-market
          price on the date of  issuance  and the  price  per share at which the
          notes are convertible into shares of our common stock.
     o    Interest  expense  on  convertible   notes  payable  for  all  periods
          presented  relates to the  quarterly  payment of 10% of the  principal
          amount of our $6.5 million  outstanding J Unit convertible  promissory
          notes and the  amortization  of discount and accretion of discounts on
          those notes. It also includes  interest  expense related to $3 million
          in  convertible  notes  issued in the  fourth  quarter  of 2007 and $2
          million in convertible  promissory  notes issued in the second quarter
          of 2008  as  part of the  acquisition  of  Inventa.  Interest  expense
          increased  during the three and nine months ended  September  30, 2008
          from the same periods in 2007 due to the additional notes issued.  All
          of our convertible  promissory  notes accrue interest at 10% per year,
          payable each quarter end.

                                       37
<PAGE>

         Interest  income  decreased by $52  thousand  and $205  thousand in the
three and nine months ended September 30, 2008 versus the same periods in fiscal
2007 due to lower  invested  cash  balances and lower rates of return.  Interest
income is shown net of interest expense incurred on ANTs company credit cards

Liquidity, Capital Resources and Financial Condition

         Cash flows as of and for the nine months ended  September  30, 2008 and
2007, are as follows (in thousands):

<TABLE>
<CAPTION>
<S>                                                          <C>                       <C>
                                                                              Nine Months Ended September 30,
                                                             -------------------------------------------------
                                                                          2008                  2007
                                                             -------------------------------------------------
         Net cash used in operating activities                            $(6,217)                 $ (10,881)
         Net cash used in investing activities                             (3,139)                      (196)
         Net cash provided by financing activities                          7,205                     10,617
                                                             ----------------------    -----------------------
         Net change in cash and cash equivalents                          $(2,151)                   $  (460)
                                                             ======================    =======================
</TABLE>

         From inception,  we have reported  negative cash flow from  operations.
During  periods from fiscal 2000 through  fiscal 2004,  we focused  primarily on
research  and  development  of ADS with our first sales  occurring  in the first
quarter  of  2005.  Throughout  our  history,  we  have  funded  operations  and
investments in operating assets with cash raised through financing activities in
the form of private  offerings to  accredited  investors.  The funds raised have
been primarily in the form of sales of our common stock and, to a lesser degree,
through the issuance of convertible  promissory notes.  Since our acquisition of
Inventa in May 2008, we are generating  cash from its operations;  however,  our
consolidated  operating  expenses have exceeded  revenues from Inventa.  We have
reduced expenses  significantly over the past year and intend to reduce expenses
further when possible and seek additional  funding sources to finance operations
as necessary.

         Details regarding the cash flows by activity follow.

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

         During the nine months ended September 30, 2008, cash used in operating
activities totaled $6.2 million, a decrease of $4.7 million compared to the nine
months ended September 31, 2007. The following items significantly  impacted our
cash used in operating activities in the nine months ended September 30, 2008 as
compared to the same period of 2007:

     o    Our net loss in the nine months ended September 30, 2008 totaled $10.0
          million versus $12.3 million in the same period of 2007, a decrease of
          $2.3  million.  The decrease was primarily due to an increase in gross
          profit of $4.6 million over the previous year's results.

     o    Our net loss for the three months ended  September  30, 2008  included
          $6.7 million in non-cash  charges,  which were comprised  primarily of
          $2.8  million  in  stock-based  compensation,  $2.2  million  in  debt
          modification  costs,  $750 thousand in interest  expense relating to a
          discount on convertible  promissory notes issued in the second quarter
          of 2008  and  $539  thousand  in fixed  asset  depreciation.  Non-cash
          charges in the nine months ended September 30, 2007 were $1.5 million,
          consisting  primarily of stock based  compensation of $1.1 million and
          $323 thousand in depreciation  expense.  For 2008, the $2.8 million in
          stock-based  compensation primarily relates to the impact of our first
          quarter 2008  repricing of certain  option  grants and the issuance of
          two fully-vested option grants to the CFO and CEO. The $2.2 million in
          debt  modification  costs relates to the May 2008 debt  extensions and
          conversion  price  modifications  and  consists  primarily  of a  $2.0
          million interest charge that will not recur.

                                       38
<PAGE>

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

         During the nine months ended September 30, 2008, cash used in investing
activities  totaled $3.1  million,  an increase of $2.9 million  versus the same
period in 2007,  primarily  due to our  payment  of $3.0  million in cash to the
sellers of Inventa.

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

         During the nine months  ended  September  30,  2008,  cash  provided by
financing activities totaled $7.2 million from:

     o    $7.2 million in  proceeds,  net of  commissions,  for the sale of 12.7
          million shares out common stock at a price of $0.60 per share,
     o    $33 thousand  received as proceeds from the exercise of stock options,
          offset by
     o    $75 thousand repayment of borrowings under a line of credit.

         During the nine months  ended  September  30,  2007,  cash  provided by
financing activities totaled $10.6 million from:

     o    $9.9 million in proceeds, net of commissions, for the sale of 220 debt
          and equity units ("J Units") at $50 thousand per unit,
     o    $656  thousand  from the  exercise of warrants to purchase  our common
          stock and
     o    $61 thousand from the exercise of stock options.

         Capital Resources and Going Concern
         -----------------------------------

         Our ACS  business is at an early  stage,  sales are  unpredictable  and
revenues could fluctuate  substantially.  We have recently acquired  Inventa,  a
company with steady sales that to date has not been  profitable.  We continue to
record losses,  anticipate  doing so in the future,  and have not yet recognized
revenue from the sales of our ACS product.

         As of October 31, 2008,  we had  approximately  $1.5 million in cash on
hand to fund  operations and equipment  purchases.  We anticipate  this balance,
together with expected  receivables and revenue will fund operations at expected
expense  levels  into the third  quarter of 2009.  Our  strategy  for  financing
operations consists of:

     o    Selling our ACS products - We have  license and services  proposals in
          review by customers and partners which, if accepted, would be a source
          of operating capital.
     o    Providing managed and professional services - we have signed contracts
          with  predictable  revenue to deliver services to a group of customers
          that have long-term relationships with us.
     o    Raising  funds - through sales of our common stock and the issuance of
          convertible notes to accredited  investors through private  offerings.
          As we continue to develop close relationships with large partners,  we
          are also pursuing strategic investments from those partners.

         We  believe  that  due to an  uncertain  investment  climate,  securing
additional  investment  will be difficult.  Our sale of ADS  technology for $3.5
million in the second  quarter of 2008 is the largest  sale we have made to date
and  similar  technology  sales  may not  recur.  As a result,  our  uncertainty
regarding  the ability to raise  additional  financing or  executing  additional
license and services  agreements  raises  substantial doubt about our ability to
continue as a going concern.

         Off-Balance Sheet Arrangements

         On April 27,  2005,  we entered  into a lease  with  Bayside  Plaza,  a
partnership,  for approximately 15,000 square feet of general commercial offices
located  at 700  Airport  Boulevard,  Suite  300,  Burlingame,  California  (the
"Premises").  The Premises  are used for the purposes of general  office use and
for  software  development.  The lease has an initial term of three years and is
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.

                                       39
<PAGE>

         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 $10,007.  The lease expires March 15,
2015.  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 $16,298.  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.

         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. Total rental expense for the three and
nine months ended September 30, 2008 was $87,300 and $214,372 respectively,  and
$50,004 and  $110,008 for the three and nine months  ended  September  30, 2007,
respectively.

         The table below presents our total long-term contractual obligations as
of September 30, 2008, for both on and off-balance sheet categories.
<TABLE>
<CAPTION>
<S>                                       <C>           <C>           <C>          <C>         <C>
                                                           Payments Due by Period
                                                       Payments Due by Period
                                          ----------------------------------------------------------------
                                                        Less than        1-3          3-5      More than
Contractual Obligations                      Total        1 Year        Years        Years      5 Years
----------------------------------------------------------------------------------------------------------
Convertible Notes                          $11,503,226   $  250,000   $11,253,226   $       -    $       -
Operating lease obligations                  1,534,467      409,822       391,181     391,181      342,283
                                          ------------ ------------ ------------- ----------- ------------
Total contractual obligations              $13,037,693   $  659,822   $11,644,407   $ 391,181    $ 342,283
                                          ------------ ------------ ------------- ----------- ------------
</TABLE>


Critical Accounting 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  revenue  recognition,  stock-based
compensation,  research  and  development  and income  taxes  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.

         There  have been no  significant  changes  in our  critical  accounting
estimates  during the three months ended  September  30, 2008 as compared to the
critical  estimates  disclosed  in  Management's   Discussion  and  Analysis  of
Financial  Condition and Results of Operations  included in our Annual Report on
Form 10-K for the year ended December 31, 2007.

                                       40
<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Exchange Risk

         Our  revenue is invoiced  and  received in United  States  dollars.  We
currently  have no customers  outside the U.S. and therefore have no exposure to
foreign currency exchange risk.

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 4. CONTROLS AND PROCEDURES

         The  effectiveness  of the  design  and  operation  of  our  disclosure
controls and  procedures  (as defined in Rules  13a-15(e)  and  15d-15(e) of the
Securities Exchange Act of 1934, as amended) was evaluated under the supervision
and with the  participation  of our  management,  including the Chief  Executive
Officer and Chief Financial Officer, as of the end of the period covered by this
quarterly  report.  Based on that  evaluation,  our Chief Executive  Officer and
Chief  Financial  Officer  have  concluded  that  our  disclosure  controls  and
procedures are effective in providing  reasonable assurance that the information
required  to be  disclosed  in this  quarterly  report is  recorded,  processed,
summarized and reported  within the time period  required for the filing of this
quarterly report.

         There was no change in our internal  control over  financial  reporting
(as defined in Rules  13a-15(f) and 15d-15(f) of the Securities  Exchange Act of
1934, as amended)  identified in connection  with the evaluation of our internal
control  performed during our last fiscal quarter that has materially  affected,
or is  reasonably  likely  to  materially  affect,  our  internal  control  over
financial reporting.

         Our  management,  including  our  Chief  Executive  Officer  and  Chief
Financial Officer,  does not expect that our disclosure  controls and procedures
or our internal controls will prevent all errors and all fraud. A control system
no matter how well  conceived  and  operated can provide  only  reasonable,  not
absolute  assurance that the objectives of the control system are met.  Further,
the design of a control  system must  reflect  the fact that there are  resource
constraints and the benefits of control  systems must be considered  relative to
their cost. As a result of the inherent  limitations in all control systems,  no
evaluation of controls can provide absolute assurance that all control issues of
fraud, if any, have been detected.

                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         On or about July 10, 2008 Sybase, Inc. filed a complaint against us and
other defendants,  claiming breach of contract and related claims arising from a
license  agreement  between us and Sybase.  Sybase  alleges that we breached the
license  agreement by disclosing two items related to the license agreement in a
shareholder  update,  and by allegedly  allowing a third party to make offers of
employment  to former ANTs'  employees  who joined Sybase as part of the license
agreement.  The lawsuit, filed in Alameda County Superior Court seeks damages in
excess of $25,000 and injunctive  relief.  We are  evaluating  the claims,  both
legally and factually,  but based on the information available to us to date, we
believe that we have meritorious  defenses,  and that Sybase has suffered little
in the way of damages, and we intend to vigorously defend ourselves.

                                       41
<PAGE>

         On August 22, 2008 Ronald Peterson,  a former employee of ours, filed a
putative  class action  against us in San Mateo County  Superior  Court.  In his
complaint,  Mr.  Peterson asks for damages in excess of $25,000 and alleges that
we failed to pay required  overtime  pay,  failed to provide  meal  breaks,  and
failed to provide rest periods for software programmers,  among other things. We
are evaluating the claims but based on the information  available to us to date,
we believe that we have meritorious defenses, and we intend to vigorously defend
ourselves.

ITEM 1A.   RISK FACTORS

         In addition to other  information in this Form 10-Q, the following risk
factors  should be carefully  considered  in  evaluating  our business  since we
operate in a highly  changing and complex  business  environment  that  involves
numerous risks, some of which are beyond our control.  The following  discussion
highlights a few of these risk factors,  any one of which may have a significant
adverse impact on our business,  operating results and financial condition. As a
result of the risk factors set forth below and  elsewhere in this 10-Q,  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.

The Current Economic Environment May Affect our Ability to Maintain Revenue.

         The  economy is slowing  and the credit  markets  have  become  acutely
tight.  It is possible that either of these could affect our revenue  prospects.
Our revenue  to-date has resulted from sales of our  technology and provision of
managed services.  The technology sales are highly variable and face exposure in
the  current  economic  climate to the extent  that  customers  who  purchase or
license our  technology are  themselves  contracting.  While it is possible that
economic  conditions  could affect our managed services  business,  this revenue
stream is somewhat insulated since we have long-term contracts and customers use
our  services to manage  important  business  applications  and  infrastructure.
Removing  such  services  would impair their  ability to  effectively  run their
businesses.

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

         We are at an early stage of  development  with our  database  migration
technology  and  related  products  and our  revenue  will  depend  upon  market
acceptance  and  utilization  of our products  and  services.  Customers  may be
reluctant  to  purchase  a  product  from us  because  it is new and they may be
concerned  about our financial  viability or our ability to provide a full range
of support.  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  product.  Also,  due to  economic
conditions,  including a possible  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.

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

         Our  products  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.

                                       42
<PAGE>

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 and expected  receivables and
revenues will be sufficient to cover expected  operating expenses into the third
fiscal  quarter  of  2009.  If  further  financing  is not  obtained  and we are
unprofitable  by then,  we will not be able to  continue  to  operate as a going
concern.  We believe that in the current economic  environment,  with credit and
liquidity  severely  restricted and with prospects  likely for a deep recession,
securing  additional  sources of  financing  to enable us to continue as a going
concern  will be very  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 products and services.
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.

Our sales and revenues could fluctuate substantially.

         The  revenue  generated  during the  quarter  ended  June 30,  2008 far
exceeded the revenue we have generated since inception. Given the early stage of
our  business,  we  may  experience  periods  during  which  revenue  fluctuates
substantially  and this  variability  in revenue  could  continue  well into the
future.  There can be no assurance  that our revenues will grow  predictably  or
evenly.

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

         For  the  nine  months   ended   September   30,  2008  we   recognized
approximately $6.9 million in revenues. Of those revenues  approximately 92% was
derived  from three  customers  and we  anticipate  that our reliance on a small
number of customers will continue. 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.

We may experience difficulty integrating the Inventa business into ANTs

         On May 30, 2008 we closed the acquisition of Inventa Technologies, Inc.
The process of integrating Inventa may create unforeseen operating  difficulties
and  expenditures  and is itself risky.  The areas where we may face difficulty,
among many others, include:

     o    diversion  of  management  time,  as  well as a shift  of  focus  from
          operating  the  businesses  to  issues  related  to  integration   and
          administration;
     o    declining  employee morale and retention issues resulting from changes
          in, or  acceleration  of,  compensation,  or  changes  in  management,
          reporting  relationships,  future  prospects,  or the direction of the
          business;
     o    the need to integrate Inventa's accounting,  management,  information,
          human resource and other  administrative  systems to permit  effective
          management  and the lack of control if such  integration is delayed or
          not implemented;
     o    the need to implement  controls,  procedures and policies  appropriate
          for a public company;
     o    the need to  transition  operations,  users,  and  customers  onto our
          existing platforms; and
     o    liability for activities of Inventa before the acquisition,  including
          violations of laws, rules and regulations,  commercial  disputes,  tax
          liabilities and other known and unknown liabilities.

         Moreover,   we  may  not  realize  the  anticipated  benefits  of  this
acquisition,  or  may  not  realize  them  in  the  time  frame  expected.  This
acquisition may result in a need to issue additional  equity  securities,  spend
our  cash,  or  incur  debt,  liabilities,   amortization  expenses  related  to
intangible  assets or  write-offs  of  goodwill,  any of which could  reduce our
potential for profitability and harm our business.

                                       43
<PAGE>

Our ANTs  Compatibility  Server  products are  marketed in a highly  competitive
market dominated by large companies.

         We operate in a highly competitive  industry.  Although we believe that
our  database  migration  technology  is unique  and,  if  adopted,  will confer
benefits  to  customers,  we face very large  competitors  in  similar  lines of
business with greater  resources  that may adopt various  strategies to block or
slow our market  penetration,  thereby straining our more limited resources.  We
are aware of efforts by a large  database  company to introduce  doubt about our
financial stability as we market our product.  Large database companies 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.
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.

Our database migration technology and ACS products are at an early stage and our
business model is still developing.

         We began  developing  ACS in 2007 and have  just  begun  marketing  the
product  and its  underlying  technology.  We  anticipate  that we will sell ACS
directly and/or through partners,  or develop related  technologies on behalf of
third  parties,  although  we have not yet  executed  such  agreements  with any
partner.  Consequently,  we have only  preliminary  estimates as to the possible
revenues and expenses  associated  with sales,  support,  development  costs and
delivery of ACS and  related  technology.  Our  business  model for  ACS-related
revenue and expenses is evolving as market opportunities present themselves.  It
is possible that we will not generate enough revenue to offset expenses and that
our database migration  technology sales and ACS sales and/or licensing will not
be profitable.

We have incurred indebtedness.

         We have incurred debt in the past 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.

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 face no direct  competition,  we will likely
need significant  additional  revenues or capital in order to maintain that lead
over competitors with more resources.

We provide subcontracting services to partners for a significant portion of our
professional services revenue.

         We recorded  approximately  40% of our  services  revenue for the three
months ended September 2008 as a subcontractor  to our partners.  Our ability to
generate consistent revenues may depend on our continued positive  relationships
with these partners and on developing new partners. The use of partners involves
certain risks,  including risks that they will refer  customers to others,  that
they  will  terminate  partner  programs  or that they  will  offer  competitive
services  themselves.  Any reduction,  delay or loss of referrals or orders from
partners may harm our results.

                                       44
<PAGE>

If we are unable to protect our intellectual  property, our competitive position
would be adversely affected.

         We rely on trademark and copyright  law,  trade secret  protection  and
confidentiality  agreements  with  our  employees  and  others  to  protect  our
intellectual  property.  We have not yet filed any  patent  applications  on any
technology  or  inventions  included  or  incorporated  in the ACS  products  or
software we use to monitor  application  and database  performance.  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. 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.

A significant  portion of our expenses  represent research and development costs
incurred to develop our proprietary technologies.

         We believe  that the first  version of our ACS product  and  subsequent
products related to database  migration are the basis for marketable  commercial
products.  However,  there can be no assurance of this,  and it is possible that
our proprietary technologies and products will have little commercial benefit or
potential.

We depend on our key personnel and may have difficulty  attracting and retaining
the skilled staff we need to execute our growth plans.

         Our success  will be  dependent  largely  upon the efforts of our Chief
Executive   Officer,   Joseph  Kozak,   Chief   Executive   Officer  of  Inventa
Technologies,  Inc.,  Richard  Cerwonka,  key  technologists  and  other  senior
managers.  The loss of key staff  could  have a material  adverse  effect on our
business and  prospects.  To execute our plans,  we will have to retain  current
employees.  Competition for highly skilled employees with technical, management,
marketing, sales, product development and other specialized training is intense.
We may not be successful in retaining qualified personnel.  Specifically, we may
experience  increased  costs in order to  retain  skilled  employees.  If we are
unable to retain experienced  employees as needed, we would be unable to execute
our business plan.

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 and market new
products and services.  As a result, we expect to continue to make a significant
investment in engineering,  research and development.  There can be no assurance
that we will be able to develop  and  introduce  new  products  and  services or
enhance  our  initial  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.

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.

                                       45
<PAGE>

We could face information and product  liability risks and may not have adequate
insurance.

         Our  products  may be used to manage  application  code  from  critical
business applications. We may become the subject of litigation alleging that our
products  were  ineffective  or  disruptive  in our 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.

Future profitability is not guaranteed.

         We have  incurred  significant  operating  losses to date.  Assuming we
continue  as a going  concern,  there  is no  assurance  that  we  will  achieve
break-even status or profitability in the future.

Changes to financial  accounting  standards may affect our results of operations
and cause us to change business practices.

         We prepare  financial  statements  in  conformity  with U.S.  generally
accepted  accounting  principles.  These  accounting  principles  are subject to
interpretation by the American  Institute of Certified Public  Accountants,  the
Public  Company   Accounting   Oversight  Board,  the  Securities  and  Exchange
Commission  and various other bodies formed to interpret and create  appropriate
accounting  principles.  A change  in those  principles  can have a  significant
affect on our  reported  results and may affect the way we report a  transaction
which is completed before a change in those principles is announced.  Changes to
those rules or the  questioning  of current  practices may adversely  affect our
reported financial results or the way we conduct business.

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 (the "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 execute agreements with partners that 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;
     o    the  exercise  and  sale  of  stock  options  by  current  and  former
          employees; and
     o    domestic  and   international   economic,   business   and   political
          conditions.

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

         We were formed as the Sullivan  Computer  Corporation,  incorporated in
Delaware in January 1979. We were privately owned until late 1986, at which time
our common stock began trading on the over-the-counter market. This was a result
of the registration of our common stock pursuant to a merger with CHoPP Computer
Corporation,  a British  Columbia  corporation.  During the period from mid-1987
through late 1999, we had few or no employees.  Our  operating  activities  were
limited and were largely administered  personally by our former Chairman. Due to
the passage of time and the poor condition of financial and other records, there
can be no assurance that all matters relating to our former corporate  existence
have been addressed at this date.

                                       46
<PAGE>

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.

We have indemnified our officers and directors.

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

Limitation on ability for control through proxy contest.

         Our  Bylaws  provide  for a Board of  Directors  to be elected in three
classes.  This  classified  Board  may make it more  difficult  for a  potential
acquirer  to gain  control of 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  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 expectation.  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.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES

         None

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         None

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

         None

                                       47
<PAGE>

ITEM 5.  OTHER INFORMATION

         None

ITEM 6.  EXHIBITS

(a) Exhibits

         3.1      Amended  and  Restated  Certificate  of  Incorporation  of the
                  Company,  as  listed in  Exhibit  3.1 to our  10-QSB  filed on
                  August 14, 2003, is hereby incorporated by reference.
         3.2      Amended  and  Restated  Bylaws  of the  Company,  as listed in
                  Exhibit  3.2 to our 10-K  filed on March 17,  2008,  is hereby
                  incorporated by reference.
         10.1     License  Agreement  between  ANTs  software  inc.  and  Sybase
                  Corporation,  dated  April 30, 2008  (redacted),  as listed in
                  Exhibit 10.1 to our 10-Q filed on August 18,  2008,  is hereby
                  incorporated by reference.
         10.2     Asset Purchase  Agreement  between ANTs software inc. and Four
                  J's Development Tools, Inc., dated May 21, 2008 (redacted), as
                  listed in Exhibit  10.2 to our 10-Q filed on August 18,  2008,
                  is hereby incorporated by reference.
         10.3     Secured  Promissory  Note,  dated May 21,  2008,  as listed in
                  Exhibit 10.3 to our 10-Q filed on August 18,  2008,  is hereby
                  incorporated by reference.
         10.4     Merger  Agreement  between  ANTs  software  inc.  and  Inventa
                  Technologies  Ltd.,  dated May 15, 2008,  as listed in Exhibit
                  10.4  to  our  10-Q  filed  on  August  18,  2008,  is  hereby
                  incorporated by reference.
         10.5     Convertible  Promissory Note 1, dated May 30, 2008 (redacted),
                  as  listed in  Exhibit  10.5 to our 10-Q  filed on August  18,
                  2008, is hereby incorporated by reference.
         10.6     Convertible  Promissory Note 2, dated May 30, 2008 (redacted),
                  as  listed in  Exhibit  10.6 to our 10-Q  filed on August  18,
                  2008, is hereby incorporated by reference.
         10.7     ANTs  software inc. 2008 Stock Plan, as listed in Exhibit 10.7
                  to our 10-Q filed on August 18, 2008,  is hereby  incorporated
                  by reference.
         31.1     Certification of the Chief Executive  Officer required by Rule
                  13a-14(a) of the Securities  Exchange Act of 1934, as amended,
                  as adopted pursuant to Section 302 of the  Sarbanes-Oxley  Act
                  of 2002
         31.2     Certification of the Chief Financial  Officer required by Rule
                  13a-14(a) of the Securities  Exchange Act of 1934, as amended,
                  as adopted pursuant to Section 302 of the  Sarbanes-Oxley  Act
                  of 2002
         32.1     Certification  of the Chief Executive  Officer  pursuant to 18
                  U.S.C.  Section 1350 as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002
         32.2     Certification  of the Chief Financial  Officer  pursuant to 18
                  U.S.C.  Section 1350 as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002

b) Reports on Form 8-K

         During the fiscal quarter covered by this report, we filed the
following reports on Form 8-K:

          1)   On August 13,  2008,  we  announced  an amendment to our Form 8-K
               that provided audited information regarding Inventa Technologies,
               Inc., a pro forma condensed  combined results of operations and a
               pro forma condensed combined balance sheet.
          2)   On August  18,  2008 we  issued a press  release  that  contained
               information  regarding our results of operations  for the quarter
               ended June 30, 2008.
          3)   On August 29, 2008,  we announced a second  amendment to our Form
               8-K that  revised  the  purchase  price  and  accounting  for the
               convertible   notes   issued  in  the   acquisition   of  Inventa
               Technologies, Inc.

                                       48
<PAGE>

                                   SIGNATURES

    In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
<TABLE>
<CAPTION>
<S>                                    <C>
                                                 ANTs software inc.

Date:   November 10, 2008              By:     /s/ Joseph Kozak
                                            -----------------------------------------------
                                           Joseph Kozak, Chairman and Chief Executive Officer



Date:  November 10, 2008               By:     /s/ Kenneth Ruotolo
                                           ------------------------------------------------
                                           Kenneth Ruotolo, Secretary and Chief Financial Officer
</TABLE>

                                       49