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                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                              _____________________

                                   FORM 10-QSB

(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, 2004

                                       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
          Incorporation or Organization)               Identification Number)

     801 Mahler Rd, Suite G, Burlingame, CA                   94010
    (Address of principal executive offices)                (Zip Code)

                                 (650) 692-0240
              (Registrant's Telephone Number, including area code)



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

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

           34,137,717 shares of common stock as of September 30, 2004

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

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<PAGE>


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



                          PART I. Financial Information

Item 1.  Financial Statements .............................................3-10
Item 2.  Management's Plan of Operation ..................................10-14
Item 3.  Controls and Procedures ............................................14

                           PART II. Other Information

Item 1.  Legal Proceedings ..................................................15
Item 2.  Unregistered Sales of Equity Securities ............................15
Item 3.  Defaults Upon Senior Securities ....................................15
Item 4.  Submission of Matters to a Vote of Security Holders ................16
Item 5.  Other Information ..................................................16
Item 6.  Exhibits ...........................................................16
Risk Factors .............................................................16-19
Signatures ..................................................................19







                                       2
<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                               ANTS SOFTWARE INC.
                            CONDENSED BALANCE SHEETS

                                                     Sept. 30,        Dec. 31,
                                                        2004            2003
                      ASSETS                        (Unaudited)      (Audited)
                                                   -------------   -------------
Current assets:
  Cash                                             $  1,500,221    $    541,725
  Prepaid insurance                                      42,750          46,229
  Prepaid expenses                                       33,676             800
                                                   -------------   -------------
       Total current assets                           1,576,647         588,754
                                                   -------------   -------------
   Computers and software                               912,015         774,441
   Office furniture and fixtures                         29,386          29,386
   Leasehold improvements                                16,675           9,000
   Less accumulated depreciation                       (623,913)       (489,326)
                                                   -------------   -------------
       Property and equipment, net                      334,163         323,501
                                                   -------------   -------------
Other assets - security deposits                          9,100           9,100
                                                   -------------   -------------
       Total assets                                $  1,919,910    $    921,355
                                                   =============   =============

       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and other accrued expenses      $    146,823    $     83,189
  Deferred salaries                                           -         340,505
  Deferred revenues                                           -         310,943
  Capital lease payable, current portion                  2,100           2,310
  Note payable - former officer, current portion              -          75,000
                                                   -------------   -------------
       Total current liabilities                        148,923         811,947
                                                   -------------   -------------
Long-term liabilities:
  Capital lease payable                                   5,121           7,919
  Convertible promissory note, net of unamortized
   beneficial interest and debt discount of
   $83,196 in 2003                                            -         236,804
                                                   -------------   -------------
       Total liabilities                                154,044       1,056,670
                                                   -------------   -------------
Commitment and contingencies

Stockholders' equity:
  Preferred stock, $0.0001 par value; 50,000,000
   shares authorized, no shares issued and
   outstanding in 2004 and 2003, respectively                 -               -
  Common stock, $0.0001 par value; 100,000,000
   shares authorized; 34,137,717 and 26,381,004
   shares issued and outstanding, respectively.           3,414           2,638
  Notes receivable from officer for stock
   purchases                                                  -         (45,000)
  Additional paid-in capital                         34,981,049      29,668,322
  Accumulated deficit                               (33,218,597)    (29,761,275)
                                                   -------------   -------------
       Total stockholders' equity                     1,765,866        (135,315)
                                                   -------------   -------------
Total liabilities and stockholders' equity         $  1,919,910    $    921,355
                                                   =============   =============

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


                                       3
<PAGE>

                               ANTS SOFTWARE INC.
                       CONDENSED STATEMENTS OF OPERATIONS

                                Three Months Ended         Nine Months Ended
                                   September 30,             September 30,
                                 2004         2003         2004         2003
                             (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
                             ------------ ------------ ------------ ------------

Cost of goods sold           $         -  $         -  $         -  $         -
General and administrative
 expenses                        317,770      326,421    1,078,294      938,300
Sales and marketing              477,659      156,335      933,824      478,854
Research and development
 expenses                        560,646      450,549    1,594,884    1,253,753
                             ------------ ------------ ------------ ------------
       Loss from operations   (1,356,075)    (933,305)  (3,607,002)  (2,670,907)
                             ------------ ------------ ------------ ------------

Other income (expense):
  Income earned from expired
   contract                            -            -      310,943            -
  Interest income                  5,289        4,190       14,435        6,668
  Gain on legal settlement         1,500          500        5,000       17,500
  Loss on extinguishment of
   debt                                -      (53,386)           -      (53,386)
  Write-off of officer's note
   receivable for stock
   purchases                           -            -      (45,000)           -
  Interest expense                (7,067)           -     (135,698)           -
                             ------------ ------------ ------------ ------------
       Other income, net            (278)     (48,696)     149,680      (29,218)
                             ------------ ------------ ------------ ------------
       Net loss              $(1,356,353) $  (982,001) $(3,457,322) $(2,700,125)
                             ============ ============ ============ ============

Basic and diluted net loss
 per common share            $     (0.04) $     (0.04) $     (0.11) $     (0.11)
                             ============ ============ ============ ============
Shares used in computing
 basic and diluted net loss
 per share                    33,891,287   25,065,098   31,819,854   24,213,116
                             ============ ============ ============ ============

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


                                       4
<PAGE>

                               ANTS SOFTWARE INC.
                       CONDENSED STATEMENTS OF CASH FLOWS

                                                    Nine Months Ended Sept. 30,
                                                        2004            2003
                                                    (Unaudited)     (Unaudited)
                                                   -------------   -------------
Cash flows from operating activities:
  Net loss                                         $ (3,457,322)   $ (2,700,125)
  Adjustments to reconcile net loss to net cash
   used in operating activities:
    Depreciation and amortization                       134,587         121,242
    Amortization of debt discount and beneficial
     interest                                           134,306               -
    Compensation expense recognized on options
     granted to non-employees                            36,560          98,913
    Loss on extinguishment of debt                            -          53,386
    Write-off of note receivable to officer for
     stock purchases                                     45,000          45,000
  Changes in operating assets and liabilities:
    Prepaid insurance and expenses                      (29,397)        (36,471)
    Accounts payable and other accrued expenses          63,635          57,288
    Deferred salaries                                  (340,505)        281,323
    Deferred revenue                                   (310,943)        100,000
                                                   -------------   -------------
        Net cash used in operating activities        (3,724,079)     (1,979,444)

Cash flows used in investing activities:
  Purchase of property and equipment, net              (145,249)        (63,935)

Cash flows from financing activities:
  Proceeds from private placements net of
   commissions                                        4,443,279       1,141,512
  Common stock subscribed, not issued                                    75,000
  Proceeds from exercise of options                     387,553          13,565
  Proceeds from exercise of warrants                          -         108,750
  Proceeds from convertible promissory note                             320,000
  Payments on capital lease obligations                  (3,008)              -
                                                   -------------   -------------
        Net cash provided by financing activities     4,827,824       1,658,827
                                                   -------------   -------------
Net increase (decrease) in cash                         958,496        (384,552)
                                                   -------------   -------------
Cash at beginning of period                             541,725         946,957
                                                   -------------   -------------
Cash at end of period                              $  1,500,221    $    562,405
                                                   =============   =============

Supplemental disclosures of cash flow information:
  Cash paid during the period for:
    Interest                                       $      1,393    $          -
    Taxes                                                     -               -

Non-cash investing and financing activities:
  Purchase of property and equipment with capital
   lease                                           $          -    $     11,809
  Conversion of convertible promissory note into
   common stock, net                                    182,518               -
  Issuance of common stock in settlement of note
   payable to former officer                             75,000          75,000

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


                                       5
<PAGE>

                               ANTS SOFTWARE INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS

1.   BASIS OF PRESENTATION

     The accompanying  unaudited condensed financial statements are presented in
accordance with the  requirements  for Form 10-QSB and Item 310(b) of Regulation
S-B.  Accordingly,  they do not include all the disclosures normally required by
generally accepted accounting  principles.  Reference should be made to the ANTs
software inc. (the  "Company")  Form 10-KSB for the twelve months ended December
31,  2003,  for  additional  disclosures  including  a summary of the  Company's
accounting policies, which have not significantly changed.

     The information  furnished reflects all adjustments (all of which were of a
normal recurring nature), which, in the opinion of management,  are necessary to
make the financial statements not misleading and to fairly present the financial
position, results of operations, and cash flows on a consistent basis. Operating
results for the three and nine month periods  ended  September 30, 2004 and 2003
are not  necessarily  indicative  of the  results  that may be  expected  in the
future.

     The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America,  which
contemplates continuation of the Company as a going concern.

     Management has evaluated the Company's current  financial  position and its
available  resources and plans to raise additional funds through the issuance of
equity  securities  during 2004 and possibly  thereafter.  Should the Company be
unsuccessful in raising  additional  funds, it is unlikely that the Company will
continue operations beyond December 31, 2004.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basic  And  Diluted  Net Loss  Per  Share - Basic  net  loss  per  share is
calculated  in  accordance  with FASB 128 using the  weighted-average  number of
common  shares  outstanding  during the  period.  Diluted  net loss per share is
computed  using  the  weighted-average  number  of common  and  dilutive  common
equivalent shares outstanding during the period.

     The following  table presents the calculation of basic and diluted net loss
per share:
<TABLE>
<CAPTION>


                                                       Three Months ended                      Nine Months ended
                                                          September 30,                          September 30,
                                                ----------------------------------    ----------------------------------
                                                     2004              2003                2004                2003
                                                ----------------------------------    ----------------------------------
<S>                                             <C>               <C>                 <C>                 <C>


Net loss                                        $ (1,356,353)     $   (982,001)       $ (3,457,322)       $ (2,700,125)
Weighted average shares of common stock
 outstanding - basic and dilutive                 33,891,287        25,065,098          31,819,854          24,213,116
                                                ----------------------------------    ---------------------------------

Basic and diluted net loss per share            $      (0.04)     $      (0.04)       $      (0.11)       $      (0.11)
                                                ==================================    =================================
</TABLE>

     As of September 30, 2004 and 2003, outstanding options and warrants for the
purchase of up to 13,043,192 shares of common stock at prices ranging from $0.52
to $11.63 per share, and 8,496,160 shares of common stock at prices ranging from
$0.25 to $11.63 per share, respectively, were anti-dilutive,  and therefore, not
included in the computation of diluted loss per share.

     Stock-Based  Compensation  - In December  2002,  the  Financial  Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 148, "Accounting for Stock-Based  Compensation--Transition  and Disclosure."
This  Statement  amends SFAS No.  123,  "Stock-Based  Compensation,"  to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee  compensation.  In addition,  this
Statement  amends  the  disclosure  requirements  of  SFAS  No.  123 to  require
prominent  disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported  results.  The Company  follows APB 25 in accounting for
its employee  stock  options.  The  disclosure  provisions of SFAS 148 have been
incorporated into these financial statements and accompanying footnotes.


                                       6
<PAGE>


     At September 30, 2004, the Company had a stock-based employee  compensation
plan. The Company  accounts for this plan under the  recognition and measurement
principles of Accounting Principles Board (APB) Opinion 25, Accounting for Stock
Issued to Employees, and related Interpretations.

     The following  table  illustrates the effect on net loss if the Company had
applied the fair value recognition  provisions of Financial  Accounting Standard
No. 123,  Accounting  for  Stock-Based  Compensation,  to  stock-based  employee
compensation.

<TABLE>
<CAPTION>

                                                     Three Months ended                   Nine Months ended
                                                       September 30,                        September 30,
                                            ------------------------------------- ----------------------------------
                                                2004               2003                 2004              2003
                                            ------------------------------------- ----------------------------------
<S>                                             <C>                <C>                   <C>              <C>

Net loss, as reported                       $ (1,356,353)     $   (982,001)        $  (3,457,322)  $   (2,700,125)
Less: Stock-based employee compensation
  expense determined under the fair-
  value based method                            (173,147)         (100,827)             (787,047)        (755,218)
                                            --------------- --------------------- ----------------- ----------------


Net loss, pro forma                         $ (1,529,500)     $ (1,082,828)        $  (4,244,369)   $  (3,455,343)
                                            =============== ===================== ================= ==============
Basic and diluted net loss per share:

   As reported                              $      (0.04)     $      (0.04)        $       (0.11)   $       (0.11)
                                            =============== ===================== ================= ================
   Pro forma                                $      (0.05)     $      (0.04)        $       (0.13)   $       (0.14)

</TABLE>


     Employee  options for the  purchase of up to an  aggregate of 396,186 and 0
shares of common  stock  were  granted  during  the  three-month  periods  ended
September 30, 2004 and 2003,  respectively.  The weighted  average fair value of
employee options granted during the three-month  period ended September 30, 2004
was $1.55.

     Employee  options for the purchase of up to an  aggregate of 1,107,936  and
1,000,000  shares of common stock were  granted  during the  nine-month  periods
ended September 30, 2004 and 2003, respectively. The weighted average fair value
of employee  options  granted during the nine-month  periods ended September 30,
2004 and 2003 was $1.27 and $0.96 per share, respectively.

     The pro  forma  amounts  for net loss per  share in the  table  above  were
estimated  using  the  Black-Scholes  option-pricing  model  with the  following
weighted average  assumptions for the periods ended September 30, 2004 and 2003,
respectively.


<TABLE>
<CAPTION>

                                     Three Months ended               Nine Months ended
                                       September 30,                    September 30,
                               -------------------------------  ------------------------------
                                    2004            2003             2004           2003
                               -------------------------------  ------------------------------

        <S>                              <C>             <C>               <C>            <C>
        Interest rate                    3.85%          1.95%            1.91%          2.11%
        Dividend yield                   0.00%          0.00%            0.00%          0.00%
        Expected volatility            121.59%         97.98%          107.06%        117.51%
        Expected life in years            5.00           2.57             2.56           3.56

</TABLE>

     Recent Accounting Pronouncements - The Financial Accounting Standards Board
(FASB) issued Interpretation No. 46 (FIN 46), Consolidation of Variable Interest
Entities,  in January 2003 and amended the Interpretation in December 2003. This
Interpretation requires the consolidation of Variable Interest Entities in which
a  company  holds  a  qualifying  variable  interest.  The  provisions  of  this
Interpretation  do not have a  significant  effect  on the  Company's  financial
position  or  operating  results.  In May 2003,  the FASB  issued  SFAS No. 150,
Accounting  for  Certain  Financial  Instruments  with  Characteristics  of Both
Liabilities  and Equity.  SFAS No. 150  establishes  standards for how a company
classifies and measures certain financial  instruments with  characteristics  of
both liabilities and equity. SFAS No. 150 is effective for financial instruments
entered into or modified  after May 31, 2003,  and otherwise is effective at the
beginning of the first interim period  beginning  after  September 15, 2003. The
provisions of this  Standard do not have a  significant  effect on the Company's
financial position or operating results.


                                       7

<PAGE>


     Certain  reclassifications  have  been  made  to  conform  the  prior  year
financial statements to the presentation of the current period.

3.   EQUITY TRANSACTIONS

     From January 1, 2004 through March 31, 2004, the Company sold to accredited
investors,  through  a  private  offering,  5,703,159  D  Units  at a  price  of
seventy-five  cents ($0.75) per D Unit,  with each D Unit  consisting of (i) one
(1) share of common stock of the  Company,  and (ii) a warrant to purchase up to
one (1) share of common stock of the Company at a per share price of two dollars
($2.00),  exercisable until March 31, 2006. The gross proceeds from the offering
were $4,277,379.  In connection with this offering,  the Company issued 33,666 D
Units to finders and paid $269,100 in cash  commissions.  The Company  issued an
aggregate  of  367,240 D Units to the  placement  agent in  connection  with the
private  offering  of D Units that  commenced  in the first  quarter of 2003 and
closed at the end of the first  quarter of 2004.  The sales of these  securities
were made in reliance  upon Rule 506 and Section 4(2) of the  Securities  Act of
1933.

     On or about February 17, 2004,  the Company sold to an accredited  investor
66 shares of common stock at a price of $.75 per share. The accredited  investor
paid for the shares by assigning all rights in certain shares of common stock of
the Company, which shares had been escheated.

     On or about May 31,  2004,  the Company  sold to one  accredited  investor,
through  a  private  offering,  400,000  E units  at a price of one  dollar  and
twenty-five cents ($1.25) per E unit for gross proceeds of $500,000, with each E
Unit consisting of (i) one (1) share of common stock of the Company,  and (ii) a
warrant to purchase up to one (1) share of common  stock of the Company at a per
share price of two dollars and fifty cents  ($2.50),  exercisable  until May 31,
2007.  In  connection  with this  offering,  the  Company  paid  $65,000 in cash
commissions and issued 36,363 E Units to the placement  agent. The sale of these
securities was made in reliance upon Rule 506 and Section 4(2) of the Securities
Act of 1933.

     On or about  April 23,  2004,  the Company  and Gary  Ebersole,  its former
President and Chief  Operating  Officer,  agreed to amend Mr.  Ebersole's  Stock
Option  Agreements to extend the period during which Mr. Ebersole could exercise
the vested  portion of his stock  options  from April 30, 2004 to June 30, 2004.
The  Company  recognized  non-employee  compensation  expense  of $29,498 in the
statement  of  operations  (included  in general  and  administrative  expenses)
related to this transaction. As of June 30, 2004, Mr. Ebersole had exercised all
his vested stock options.

     On or about July 14, 2004, the holders of two convertible  promissory notes
elected to convert such notes.  Pursuant to the terms of the notes,  the company
issued  each  noteholder  400,000  shares of Common  Stock of the  Company and a
warrant to purchase 400,000 shares of Common Stock of the Company at a per share
exercise price of $2.00, exercisable until March 31, 2006.

     In August 2004, a former officer purchased 60,000 E Units. The E Units were
issued in lieu of a $75,000 cash payment due on August 4, 2004 on a note payable
to the former  officer.  The sale of these  securities was made in reliance upon
Rule 506 and Section 4(2) of the Securities Act of 1933.

     During the nine months ended  September 30, 2004, a total of 356,219 shares
of common  stock of the Company  were  purchased  through the  exercise of stock
options resulting in proceeds to the Company of $387,553.

4.   WARRANTS AND STOCK OPTIONS

     As of September 30, 2004, the Company had outstanding  warrants to purchase
up to  9,146,125  shares of common stock and options to purchase up to 3,897,067
shares of common stock.  These  securities give the holder the right to purchase
shares  of the  Company's  common  stock in  accordance  with  the  terms of the
instrument.


                                       8

<PAGE>


<TABLE>
<CAPTION>

                                                                      Stock
                                                      Warrants       Options           Total
                                                      --------       -------           -----
               <S>                                      <C>             <C>              <C>
      Outstanding at December 31, 2003                3,484,300      3,841,162       7,325,462
            Granted                                   6,136,825      1,107,936       7,244,761
            Retired/forfeited                                 -       (695,812)       (695,812)
            Expired                                    (475,000)             -        (475,000)
            Exercised                                         -       (356,219)       (356,219)
                                                --------------------------------------------------
      Outstanding at September 30, 2004               9,146,125      3,897,067      13,043,192
                                                ==================================================
</TABLE>

5.   LEGAL SETTLEMENT

     The Company was a defendant in a case  entitled  Hubert P. Lauffs et al. v.
Mosaic Multisoft Corporation,  in which the plaintiff asserted a cause of action
against the Company for breach of fiduciary  duty.  The  plaintiff  purported to
base his cause of action on  allegations  that the Company and others caused the
shareholders  of  Mosaic  Multisoft  Corporation  ("Mosaic")  to  elect  outside
directors to its board of directors who  subsequently  voted to remove  Mosaic's
president from office,  thus  interfering with Mosaic's ability to raise capital
and  causing  Mosaic to be unable to repay its debt to the  plaintiff.  In March
2000,  the  Company  won this  case on  summary  judgment.  In April  2000,  the
plaintiff filed an appeal of the summary judgment ruling.  On November 21, 2001,
the Fourth  District  Court of Appeal ruled in the Company's  favor by affirming
the Superior Court's March 2000 summary judgment. In September 1999, the Company
had filed an action for malicious  prosecution  against  Lauffs and his attorney
seeking  recovery of the Company's  legal fees  incurred in connection  with the
proceedings.  The Company entered into  Settlement  Agreements in December 2002,
pursuant  to which the  plaintiffs  agreed to pay the  Company an  aggregate  of
$400,000. Per an agreement the Company entered into with the Company's attorneys
on or about  September 27, 2002,  almost all of the money recovered will be paid
to the Company's attorneys. From January 1, 2004 through September 30, 2004, the
Company  received $5,000 as its portion of the settlement,  which was recognized
as a gain from legal settlement.

6.   DEFERRED REVENUES

     On or about August 22, 2003 the Company  signed a Letter of Intent  ("LOI")
with Net Soft Systems, Inc. of Vancouver, British Columbia, Canada ("Net Soft").
The LOI included the following terms:

     o    Net Soft agreed to pay the Company $400,000 (non-refundable)

     o    The Company  agreed to negotiate  only with Net Soft for the exclusive
          rights to sell and  distribute  the ANTs Data Server (the "Rights") in
          Poland, Russia, the Czech Republic, and the European Common Market

     o    The negotiation process would determine what additional payments would
          be required of Net Soft to obtain the Rights

     o    If, by November 30, 2003, terms of a deal regarding the Rights had not
          been agreed to, the Company could  negotiate the Rights with any other
          entity

     o    The LOI itself contained no grant of Rights

     On  November  30,  2003 the  Company  and Net Soft agreed to extend the LOI
through January 31, 2004 and on January 31, 2004 the Company and Net Soft agreed
to extend the LOI through March 31, 2004. On March 31, 2004,  the LOI terminated
and on that date,  no future  agreements  between Net Soft and the Company  were
contemplated  in connection with such LOI. As of March 31, 2004, the Company had
received $310,943 of the $400,000 due pursuant to the LOI. The remaining $89,057
was considered  uncollectible.  In accordance with Generally Accepted Accounting
Principles  the Company did not  consider the earnings  process  complete  until
collection  was  reasonably  assured  and  all  applicable  revenue  recognition
conditions  were met according to the Security and Exchange  Commission's  Staff
Accounting  Bulletin:  No 104 -"Revenue  Recognition."  Therefore,  the payments
pursuant to the LOI were recorded in the financial  statements  prior to January
1,  2004 as  deferred  revenue.  With the  termination  of the LOI and no future
agreements  contemplated in connection with such LOI at the time of termination,
the Company was under no obligation to return the monies to Net Soft.  Since Net
Soft did not receive  either a license to use the Company's  product or services
related to the Company's  product,  the Company has  recognized  the $310,943 as
other income in the  statements of operations  and has  eliminated  the deferred
revenue liability.


                                       9


<PAGE>


7.   CONVERTIBLE PROMISSORY NOTES

     On or about August 15, 2003, the Company sold to two accredited  investors,
through a private  offering,  one  convertible  promissory  note  each,  without
interest, in principal face amount of $160,000 per note, each maturing on August
15, 2005, and each convertible at the option of the holder into shares of Common
Stock of the Company,  at a conversion price of $0.75 per share. The Company had
agreed to grant the holder of each note,  upon conversion of the note, a warrant
to purchase  213,333  shares of Common Stock of the Company at a per share price
of $2.00,  exercisable  until March 31, 2006. The stated conversion price of the
notes was $0.75 per share, however, the Company had agreed to set the conversion
price at $0.40 per share in the event an  anticipated  $5 million  financing did
not  close  shortly  after the note  financing,  and,  since  the  intent of the
agreement was for the conversion  price to include one share of common stock and
a warrant to purchase  another share of common stock, the Company further agreed
to increase the number of shares of Common Stock  underlying  each warrant to be
granted upon  conversion  of the notes from  213,333 to 400,000.  The $5 million
financing  did not  close,  accordingly,  the  Company  entered  into  Amendment
Agreements with each convertible  promissory note holder, setting the conversion
price at $0.40 per share and  increasing  the  number of shares of Common  Stock
underlying  the warrant to be granted upon  conversion of each note from 213,333
to 400,000.  Since,  for accounting  purposes,  the active  conversion price was
$0.40 per share,  the intrinsic  value of the conversion  option of $280,000 was
recorded both in additional  paid-in  capital and as a beneficial  interest debt
discount to the convertible  debt. For the nine month period ended September 30,
2004,  beneficial interest discount amounting to $128,334,  and imputed interest
of $5,972  attributable to the  interest-rate-related  debt discount,  were both
amortized to interest  expense.  The proceeds of the private  offering were used
for general working capital purposes. The sales of these securities were made in
reliance  upon Rule 506 and Section 4(2) of the  Securities  Act of 1933.  On or
about July 14,  2004,  the  noteholders  elected to  convert  their  convertible
promissory  notes.  Pursuant to the terms of the notes,  the company issued each
noteholder,  400,000  shares of Common  Stock of the  Company  and a warrant  to
purchase  400,000  shares of Common Stock of the Company at a per share exercise
price of $2.00, exercisable until March 31, 2006.

8.   NOTE RECEIVABLE FROM OFFICER

     The Company  entered into an  agreement  with a former  officer,  effective
January 11, 2001, in which the Company agreed to forgive,  on August 4, 2001 and
on each year  anniversary  thereafter,  $45,000 of the principal  amount and all
accrued  interest  on a loan made to the former  officer  in August  1999 in the
original  amount of $225,000.  In August 2003 the Company forgave $45,000 of the
loan balance  pursuant to the terms of the agreement.  In light of the fact that
the remaining loan balance of $45,000 has been deemed to be  uncollectible as of
March 31, 2004,  the Company has elected to charge the entire $45,000 to general
and administrative expense as of March 31, 2004.

ITEM 2.  MANAGEMENT'S PLAN OF OPERATION

     Certain statements contained in this Form 10-QSB constitute forward-looking
statements  within the meaning of Section 27A of the  Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as amended. Such
forward-looking statements herein are based on current expectations that involve
a number of risks and uncertainties.  Such forward-looking  statements are based
on assumptions that the Company will have adequate  financial  resources to fund
the  development  and operation of its  business,  and there will be no material
adverse  change  in  the  Company's   operations  or  business.   The  foregoing
assumptions  are  based on  judgments  with  respect  to,  among  other  things,
information  available to the Company,  future economic,  competitive and market
conditions  and future  business  decisions.  All are difficult or impossible to
predict  accurately  and  many  of  which  are  beyond  the  Company's  control.
Accordingly,  although the Company believes that the assumptions  underlying the
forward-looking statements are reasonable, any such assumption could prove to be
inaccurate and therefore there can be no assurance that the results contemplated
in the forward-looking  statements will be realized. There are a number of risks
presented  by the  Company's  business  and  operations,  which  could cause the
Company's financial  performance to vary markedly from prior results, or results
contemplated by the  forward-looking  statements.  Such risks include failure of
the ANTs  technology to work properly,  failure to develop  commercially  viable
products or services from the ANTs technology,  delays or failure in fundraising
efforts,  delays in or lack of market  acceptance,  failures to recruit adequate
personnel,  and problems with protection of intellectual property, among others.
Management decisions,  including budgeting,  are subjective in many respects and
periodic  revisions  must be made to  reflect  actual  conditions  and  business
developments,  the impact of which may cause the  Company  to alter its  capital
investment and other expenditures, which may also adversely affect the Company's
results  of  operations.  In  light of  significant  uncertainties  inherent  in
forward-looking  information  included in this Quarterly  Report on Form 10-QSB,
the inclusion of such information  should not be regarded as a representation by
the Company that the Company's objectives or plans will be achieved. The Company
undertakes  no  obligation  to revise or  publicly  release  the  results of any
revision to these forward-looking statements.

                                       10

<PAGE>

     The Company is engaged in the  development  and  marketing of the ANTs Data
Server, a software  product that is intended to significantly  improve the speed
at which  computers  can  manipulate  data.  The Company  anticipates  that,  if
sufficiently funded, over the next twelve months its focus will be marketing its
first product, supporting customers, and continued research and development.

Technology Development

     Over the next twelve months,  assuming the Company is sufficiently  funded,
the Company  intends to continue  to improve and add  functionality  to the ANTs
Data  Server.  The  Company has built out the basic  functionality  to the point
where it believes that virtually all additional  functionality will be driven by
partner or customer demand.  The Company intends to actively engage  prospective
partners and customers in technical  discussions  to determine what features are
and will be most in demand for the markets the Company is targeting. The Company
intends to mobilize its engineering resources around developing those features.

Marketing

     In October 2003, the Company began marketing the first  commercial  version
of the ANTs Data Server. The Company's go-to-market strategies include:

     o    Focus  on the  high-performance,  high-volume,  transaction  intensive
          industry segments where cost constraints and performance demands might
          dictate a willingness to adopt new technology.  Messaging will feature
          the "high-performance, no compromise" value proposition.

     o    Execute a "compatible  with," not a "replacement of," strategy for the
          leading  RDBMS's  such as:  Oracle,  IBM's DB2,  and  Microsoft's  SQL
          Server,   since  the  RDBMS  market  is  mature  and  customers   have
          substantial investment in infrastructure, development, and support, in
          the leading RDBMS vendors' products.

     o    Sell the ANTs Data Server through three sales channels;

          o    Direct sales to end-users

          o    Through   Independent   Software   Vendors   ("ISV's")  who  will
               incorporate  the ANTs Data Server  with their own  product  which
               they will sell to their customers

          o    Through  Value  Added   Resellers   ("VARs")  -  companies  which
               generally have deep expertise in certain vertical markets and who
               integrate  the best  products to develop  complete  solutions for
               their customers.

Raising Capital

     To carry out its plan of operations, the Company anticipates that, over the
next twelve  months,  it will  require an  additional  $5  million.  The Company
intends to pursue a number of avenues to raise these additional operating funds:
1) in the past the Company has been  successful in raising funds through private
placements  of its stock and  anticipates  that it will  continue to raise funds
through private placements,  2) as the Company develops close relationships with
large partners, it will pursue strategic investments from those partners, and 3)
the Company  expects to begin  generating  revenue during the next twelve months
and, if successful, this should be a source of some operating funds. The Company
intends to pursue all three  avenues,  but  believes  that  securing  additional
capital will be difficult.

                                       11


<PAGE>

Personnel and Appointment of Officers

     The  Company  currently  has 24  full-time  employees,  1  full-time  and 3
part-time consultants. The Company views the recruitment of additional qualified
marketing,   sales,  and  technical   personnel  as  essential  to  the  further
development  and  commercialization  of  its  proprietary  technologies.  If the
Company is sufficiently funded and it is successful in its recruitment  efforts,
the Company  expects that its personnel and other  operating costs will increase
moderately over current levels.

     As previously reported by the Company on Form 8-K filed on October 20, 2004
and  November 2, 2004  respectively,  the Company  appointed  Mr. Boyd Pearce as
President and Chief Operating  Officer of the Company effective October 18, 2004
and designated Mr. Girish Mundada,  the Company's Vice President of Engineering,
as an officer of the Company effective November 1, 2004.

     On October 29, 2004, the Company entered into a Salary  Agreement with each
of the following  persons:  Francis K. Ruotolo,  the Company's  Chief  Executive
Officer and Chairman,  Boyd Pearce, the Company's  President and Chief Operating
Officer,  Kenneth Ruotolo,  the Company's Chief Financial Officer and Secretary,
Clifford Hersh,  the Company's Chief  Scientist,  Girish Mundada,  the Company's
Vice  President,  Engineering  and Jeffrey R. Spirn,  Ph.D.,  the Company's Vice
President  of Research and  Development  (each an  "Officer").  Pursuant to such
Salary  Agreements,  each Officer's  salary was reduced,  effective  October 16,
2004, to 50 percent of his then current  salary.  The Company agreed to pay each
Officer a contingent  bonus equal to such Officer's new monthly salary times the
number of full  months  from  October 16, 2004 until the date of payment of such
bonus, in the event the Company raises $2.5 million (net of commissions) between
November  1, 2004 and  February  1, 2005 and in the event such  Officer is still
employed by the Company at such time. As of October 31, 2004 the aggregate total
of the contingent bonuses was approximately $25,000.

Patents

     On July 6, 2004,  the United  States Patent and  Trademark  Office  ("PTO")
issued patent  6,760,726  for the ANTs System and Method of Managing  Concurrent
Operations on Linked Lists and on July 13, 2004, the PTO issued patent 6,763,447
for the ANTs  Lock-Free List for use with Computer  System  Utilizing FIFO Queue
for  Tracking  Order of Various  Sublists.  The  Company is  awaiting  the PTO's
response regarding an additional five patent  applications,  which were filed at
approximately the same time as the two issued patents. During the quarter ending
September 30, 2004, the Company filed an additional patent application  bringing
the total number of applications pending to six.

Operating Expenses

     Operating  expenses for the three and nine-month  periods ending  September
30, 2004 and 2003 break out as follows:


<TABLE>
<CAPTION>


                                            Operating Expenses - Three Months ended September 30,
                                                    2004                                  2003
                                                    ----                                  ----
                                                                % Change vs.
                                    $ in 000's    % of Total     Prior Period      $ in 000's     % of Total
                                    ----------                   ------------      ----------
        <S>                               <C>          <C>             <C>              <C>            <C>
      Sales and marketing            $    478         35%             206%             $ 156            17%
      Research and development            561         41%              24%               451            48%
      General and administrative          317         24%             (3)%               326            35%
                                  ----------------------------------------------------------------------------
         Total operating expenses  $ (1,356)       100%              45%             $ (933)         100%
                                  ============================================================================

</TABLE>



                                       12

<PAGE>


<TABLE>
<CAPTION>


                                              Operating Expenses - Nine Months ended September 30,
                                                     2004                                    2003
                                                     ----                                    ----
                                                                 % Change vs.
                                     $ in 000's   % of Total      Prior Period      $ in 000's     % of Total
        <S>                               <C>          <C>             <C>              <C>            <C>
      Sales and marketing              $   934         26%             95%              $ 479          18%
      Research and development           1,595         44%             27%              1,254          47%
      General and administrative         1,078         30%             15%                938          35%
                                   ----------------------------------------------------------------------------
           Total operating expenses  $ (3,607)        100%             35%            $ (2,671)       100%
                                   ============================================================================

</TABLE>


Sales and Marketing Expenses

     Sales and marketing  expenses  consist  primarily of employee  salaries and
benefits,  consultant  fees,  travel,  marketing  programs (trade shows,  public
relations,  lead  generation  programs) and marketing and sales  literature  and
presentations. As shown in the tables above, there was a significant increase in
sales and marketing expenses over the prior periods resulting  primarily from an
increase in  marketing  programs,  an increase  in sales and  marketing  related
travel and the addition of personnel.

     The Company expects that, if sufficiently  funded,  its marketing and sales
expenses will continue to increase moderately to substantially as more marketing
and sales programs are implemented.

Research and Development Expenses

     Research and development  expenses consist  primarily of employee  salaries
and benefits,  fees to consultants,  depreciation on equipment and software, and
allocation  of corporate  overhead.  As shown in the tables  above,  there was a
moderate  increase in research and  development  expenses over the prior periods
resulting   primarily  from  the  addition  of  personnel  and  an  increase  in
depreciation  expense  related  to new  equipment  purchased  for the  Company's
development lab.

     The  Company  expects  that,  if  sufficiently  funded,  its  research  and
development  expenses will increase  moderately as additional staff is recruited
to customize its product for potential customers.

General and Administrative Expenses

     General and  administrative  expenses  consist  primarily  of salaries  and
benefits,  consultant fees, legal and investor  relation fees,  recruiting fees,
facility rental and insurance.  As shown in the tables above,  there was a small
to  moderate  increase  in general and  administrative  expenses  over the prior
periods  resulting  primarily  from an increase in legal and investor  relations
fees  related to capital  raising  activity in the first  quarter of 2004 and an
increase  in  recruiting  expense  related  to the  hiring of  personnel  in the
research and development and general and administrative functions.

     The  Company  expects  that,  if  sufficiently   funded,  its  general  and
administrative expenses will increase moderately as the Company expands.

     The majority of the  Company's  operating  expenses and costs over the next
twelve months are expected to be for, and related to,  marketing and selling the
ANTs Data Server, continuing technical development, and supporting customers.

Off-Balance Sheet Arrangements

     During  2003,  the  Company  entered  into an  operating  lease for certain
computer  equipment  used in the Company's  development  lab. The total original
lease obligation was $9,155 and is payable in monthly  installments of $254 over
a three-year  period.  The outstanding  lease  obligation is not reported on the
balance  sheet,  as title to the  equipment  remains  with the lessor  until the
Company pays the total  obligation  and a buyout fee. As of September  30, 2004,
the total outstanding  obligation was $5,841.  Should the Company default in its
lease obligation,  the lessor could choose to repossess the computer  equipment.
Should the lessor do so, it would not have a  material  effect on the  Company's
ability to maintain normal business operations.

                                       13

<PAGE>

Critical Accounting Policies

     Use  of  Estimates  -  The  preparation  of  the  financial  statements  in
accordance with accounting principles generally accepted in the United States of
America  requires  management  to make  estimates  and  assumptions  that affect
reported amounts of assets, liabilities, revenues and expenses and disclosure of
contingent  assets and  liabilities.  The Company  evaluates  such estimates and
assumptions on an ongoing basis and bases its estimates on historical experience
and on various other  assumptions  that are believed to be reasonable  under the
circumstances,  the results of which form the basis for making  judgments  about
the carrying values of assets and liabilities that are not readily apparent from
other sources.  Actual results may differ from these estimates and probably will
differ from these estimates under different assumptions or conditions.

    The Company believes the following represents its critical accounting
    policies:

          o    Stock-based compensation

          o    Income taxes

     Stock-based  Compensation  - The  Company  uses the fair value  recognition
provisions of Financial  Accounting Standard No. 123, Accounting for Stock-Based
Compensation,  to value  stock  options  granted to  employees  and  independent
consultants.  The values are derived  from a model,  which  requires  historical
assumptions and management judgment.  Stock-based  compensation for employees is
disclosed in the pro-forma net loss statement in note 1 of the Company's  annual
financial statements.  Stock-based  compensation for independent  consultants is
expensed in the statement of operations.

     Income Taxes - The carrying value of the Company's  deferred tax assets are
dependent  upon the  Company's  ability to generate  sufficient  future  taxable
income in certain tax jurisdictions.  Until such time as the Company establishes
a taxable  income in such  jurisdictions,  the total  amount of the deferred tax
assets shall be offset with a valuation allowance.

Capital and Liquidity Resources

     If  sufficiently  funded,  the  Company  intends to  increase  expenditures
moderately to  substantially  over the next twelve months as it actively markets
and sells the ANTs  Data  Server  and hires  additional  sales,  marketing,  and
technical  personnel.  The  Company's  cash balance as of September 30, 2004 was
approximately  $1.5  million,  which it  believes  will be  adequate to fund its
activities  through  2004 at its  expected  rate of  spending.  There  can be no
assurance that the Company's  continued product  development and  infrastructure
development  will not  require a much higher  rate of  spending.  The Company is
involved in discussions from time to time with prospective investors in order to
raise  capital to support its  continued  operations,  although  there can be no
assurance  that it will be able to  obtain  investment  proceeds  on  acceptable
terms, or at all.

ITEM 3. CONTROLS AND PROCEDURES

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

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


                                       14


<PAGE>


                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     The Company is not a party to any material pending legal proceeding and, to
the best of its  knowledge,  no such action by or against the Company,  has been
threatened.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES

     From January 1, 2004 through March 31, 2004, the Company sold to accredited
investors,  through  a  private  offering,  5,703,159  D  Units  at a  price  of
seventy-five  cents ($0.75) per D Unit,  with each D Unit  consisting of (i) one
(1) share of common stock of the  Company,  and (ii) a warrant to purchase up to
one (1) share of common stock of the Company at a per share price of two dollars
($2.00),  exercisable until March 31, 2006. The gross proceeds from the offering
were $4,277,379.  In connection with this offering,  the Company issued 33,666 D
Units to finders and paid $269,100 in cash  commissions.  The Company  issued an
aggregate  of  367,240 D Units to the  placement  agent in  connection  with the
private  offering  of D Units that  commenced  in the first  quarter of 2003 and
closed at the end of the first  quarter of 2004.  The  proceeds  of the  private
offering  are being  used for  sales,  marketing  and  general  working  capital
purposes.  The sales of these securities were made in reliance upon Rule 506 and
Section 4(2) of the Securities Act of 1933.

     On May 31, 2004,  the Company sold to one  accredited  investor,  through a
private offering, 400,000 E units at a price of one dollar and twenty-five cents
($1.25) per E unit,  with each E Unit  consisting of (i) one (1) share of common
stock of the  Company,  and (ii) a warrant  to  purchase  up to one (1) share of
common  stock of the Company at a per share price of two dollars and fifty cents
($2.50),  exercisable until May 31, 2007. In connection with this offering,  the
Company  paid  $65,000  in cash  commissions  and  issued  36,363 E Units to the
placement  agent.  The gross  proceeds  from the  offering  were  $500,000.  The
proceeds  are being  used for  sales,  marketing  and  general  working  capital
purposes.  The sale of these  securities  was made in reliance upon Rule 506 and
Section 4(2) of the Securities Act of 1933.

     On or about August 15, 2003, the Company sold to two accredited  investors,
through a private  offering,  one  convertible  promissory  note  each,  without
interest, in principal face amount of $160,000 per note, each maturing on August
15, 2005, and each convertible at the option of the holder into shares of Common
Stock of the Company at a conversion  price of $0.75 per share.  The Company had
agreed to grant the holder of each note,  upon conversion of the note, a warrant
to purchase 213,333 share of Common Stock of the Company at a per share price of
$2.00,  exercisable  until March 31, 2006.  The stated  conversion  price of the
notes was $0.75 per share, however, the Company had agreed to set the conversion
price at $0.40 per share in the event an  anticipated  $5 million  financing did
not  close  shortly  after the note  financing,  and,  since  the  intent of the
agreement was for the conversion  price to include one share of common stock and
a warrant to purchase  another share of common stock, the Company further agreed
to increase the number of shares of Common Stock  underlying  each warrant to be
granted upon  conversion  of the notes from  213,333 to 400,000.  The $5 million
financing  did not  close,  accordingly,  the  Company  entered  into  Amendment
Agreements with each convertible promissory  noteholder,  setting the conversion
price at $0.40 per share and  increasing  the  number of shares of Common  Stock
underlying  each warrant to be granted upon conversion of each note from 213,333
to 400,000.  The proceeds of the private  offering were used for general working
capital purposes.  The sales of these securities were made in reliance upon Rule
506 and Section 4(2) of the  Securities  Act of 1933. On or about July 14, 2004,
the holders of the two  convertible  promissory  notes  elected to convert  such
notes.  Pursuant to the terms of the notes,  the company issued each  noteholder
400,000 shares of Common Stock of the Company and a warrant to purchase  400,000
shares of Common  Stock of the Company at a per share  exercise  price of $2.00,
exercisable until March 31, 2006.

     In August 2004, a former officer purchased 60,000 E Units. The E Units were
issued in lieu of a $75,000 cash payment due on August 4, 2004 on a note payable
to the former  officer.  The sale of these  securities was made in reliance upon
Rule 506 and Section 4(2) of the Securities Act of 1933.


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         No changes during the period covered by this report.


                                       15

<PAGE>

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

         No matter was submitted to a vote of security holders during the
         period covered by this report.

ITEM 5.  OTHER INFORMATION

ITEM 6.  EXHIBITS

         3.1   Amended and Restated Certificate of Incorporation of the Company,
               as listed in Exhibit 3.1 to the Company's  10-QSB filed on August
               14, 2003, is hereby incorporated by reference.
         3.2   Amended and Restated Bylaws of the Company,  as listed in Exhibit
               3.2 to the Company's  10-KSB filed on March 22, 2001,  are hereby
               incorporated by reference.
         10.1  Letter Agreement  between the Company and Boyd Pearce,  as listed
               in Exhibit  10.1 to the  Company's  Form 8-K filed on October 20,
               2004, is hereby incorporated by reference.
         10.2  Salary Agreement  between the Company and Francis K. Ruotolo,  as
               listed  in  Exhibit  10.1 to the  Company's  Form  8-K  filed  on
               November 1, 2004, is hereby incorporated by reference.
         10.3  Salary Agreement  between the Company and Boyd Pearce,  as listed
               in Exhibit  10.2 to the  Company's  Form 8-K filed on November 1,
               2004, is hereby incorporated by reference.
         10.4  Salary  Agreement  between the Company  and Kenneth  Ruotolo,  as
               listed  in  Exhibit  10.3 to the  Company's  Form  8-K  filed  on
               November 1, 2004, is hereby incorporated by reference.
         10.5  Salary  Agreement  between  the Company and  Clifford  Hersh,  as
               listed  in  Exhibit  10.4 to the  Company's  Form  8-K  filed  on
               November 1, 2004, is hereby incorporated by reference.
         10.6  Salary Agreement between the Company and Jeffrey R. Spirn,  Ph.D,
               as  listed in  Exhibit  10.5 to the  Company's  Form 8-K filed on
               November 1, 2004, is hereby incorporated by reference.
         10.7  Salary  Agreement  between  the Company  and Girish  Mundada,  as
               listed  in  Exhibit  10.1 to the  Company's  Form  8-K  filed  on
               November 2, 2004, is hereby incorporated by reference
         14.   Code of Ethics,  as listed in Exhibit 14 to the Company's  10-KSB
               filed on March 30, 2004, is hereby incorporated by reference.
         31.1  Certification  of the Chief  Executive  Officer  required by Rule
               13a-14(a) of the Securities  Exchange Act of 1934, as amended, as
               adopted  pursuant  to Section  302 of the  Sarbanes-Oxley  Act of
               2002.
         31.2  Certification  of the Chief  Financial  Officer  required by Rule
               13a-14(a) of the Securities  Exchange Act of 1934, as amended, as
               adopted  pursuant  to Section  302 of the  Sarbanes-Oxley  Act of
               2002.
         32.1  Certification  of the  Chief  Executive  Officer  pursuant  to 18
               U.S.C.  Section  1350 as adopted  pursuant  to Section 906 of the
               Sarbanes-Oxley Act of 2002.
         32.2  Certification  of the  Chief  Financial  Officer  pursuant  to 18
               U.S.C.  Section  1350 as adopted  pursuant  to Section 906 of the
               Sarbanes-Oxley Act of 2002.

RISK FACTORS

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

     A failure to obtain  additional  financing  could  prevent the Company from
executing its business plan. A failure to raise additional funding could prevent
the Company from  continuing its business  after 2004.  The Company  anticipates
that current cash  resources  will be  sufficient  to fund its  operations  only
through 2004 at its expected rate of spending. The Company believes that, due to
an uncertain  investment  climate,  securing  additional sources of financing to
enable it to complete the development and  commercialization  of its proprietary
technologies  is  uncertain  and there is no  assurance of its ability to secure
such financing. A failure to obtain additional funding could prevent the Company
from making expenditures that are needed to pay current obligations, allow it to
hire  additional  personnel,  continue  development of the technology or attract
customers who are  concerned  about its ability to continue  operations.  If the
Company  raises  additional  funds by selling  equity  securities,  the relative
equity ownership of its existing investors could be diluted or the new investors
could obtain terms more favorable than previous investors. If the Company raises
additional funds through debt financing,  it could incur  significant  borrowing
costs.

                                       16

<PAGE>

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

     If the  Company  is  unable  to  protect  its  intellectual  property,  its
competitive  position would be adversely affected.  The Company relies on patent
protection,  as well as trademark and copyright law, trade secret protection and
confidentiality  agreements  with  its  employees  and  others  to  protect  its
intellectual  property.  Despite the Company's  precautions,  unauthorized third
parties may copy its products and services or reverse engineer or obtain and use
information  that it  regards  as  proprietary.  The  Company  has filed  patent
applications  with the United States Patent and Trademark  Office and intends to
file more. Two patent  applications have been granted and issued;  however,  the
Company does not know if the remaining  applications  will be granted or whether
it will be successful in prosecuting any future patents.  In addition,  the laws
of some foreign countries do not protect  proprietary  rights to the same extent
as do the laws of the United  States.  The  Company's  means of  protecting  its
proprietary  rights  may not be  adequate  and third  parties  may  infringe  or
misappropriate  its  patents,  copyrights,  trademarks  and similar  proprietary
rights.  If  the  Company  fails  to  protect  its  intellectual   property  and
proprietary rights, its business,  financial condition and results of operations
would  suffer.  The  Company  believes  that  it  does  not  infringe  upon  the
proprietary  rights of any third party, and no third party has asserted a patent
infringement claim against it. It is possible,  however, that such a claim might
be asserted  successfully  against the Company in the future. The Company may be
forced to  suspend  its  operations  to pay  significant  amounts  to defend its
rights,  and a  substantial  amount of the  attention of its  management  may be
diverted from its ongoing  business,  which can materially affect its ability to
attain and maintain profitability.

     The Company  focuses on the research  and  development  of its  proprietary
technologies and the marketing of its first product. The Company's present focus
is on the research  and  development  of its  proprietary  technologies  and the
marketing of its first product. The Company believes that these technologies are
the basis for highly marketable  commercial products.  However,  there can be no
assurance of this and it is possible that the Company's proprietary technologies
and products will have no commercial benefit or potential. In addition, from the
Company's  inception  to  the  present,  it has  not  recognized  any  operating
revenues.

     The Company faces possible  competition from large  companies.  The Company
operates in a highly  competitive  industry.  Although the Company believes that
its  technology  is unique,  can be  protected,  and,  if  adopted,  will confer
benefits that will be otherwise  unavailable for some significant time, it faces
very large competitors with greater  resources who may adopt various  strategies
to block or slow its market  penetration,  thereby  straining  its more  limited
resources.  They  may also  seek to  hinder  the  Company's  operations  through
attempts to recruit key staff with exceptionally attractive terms of employment,
including signing bonuses,  or by offer of highly competitive terms to potential
or newly acquired customers.

     The Company depends on its key personnel and may have difficulty attracting
and  retaining  the  skilled  staff it needs to execute  its growth  plans.  The
Company's  success  will be dependent  largely upon the personal  efforts of its
Chairman  and Chief  Executive  Officer,  Francis K.  Ruotolo,  as well as other
senior  managers.  The loss of key staff could have a material adverse effect on
the Company's  business and  prospects.  To execute its plans,  the Company will
need to hire  additional  staff and retain current  employees.  Competition  for
highly skilled employees with technical,  management,  marketing, sales, product
development and other  specialized  training is intense.  The Company may not be
successful in attracting or retaining  such qualified  personnel.  Specifically,
the  Company  may  experience  increased  costs in order to  attract  and retain
skilled  employees.  If the  Company  is unable to hire,  train and  manage  new
skilled and experienced  employees as needed,  it would be unable to support its
planned growth and future operations.

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


                                       17



<PAGE>

     In the event that the Company  experiences growth, the Company will need to
manage such growth well.  The Company may experience  substantial  growth in the
size of its  staff  and the  scope of its  operations,  resulting  in  increased
responsibilities for management. To manage this possible growth effectively, the
Company  will  need to  continue  to  improve  its  operational,  financial  and
management information systems and to hire, train, motivate and manage a growing
number of staff.  Due to a  competitive  employment  environment  for  qualified
technical,  marketing  and sales  personnel,  the Company  expects to experience
difficulty  in  filling  its  needs  for  qualified  personnel.  There can be no
assurance  that the Company  will be able to  effectively  achieve or manage any
future growth,  and its failure to do so could delay product  development cycles
and  market  penetration  or  otherwise  have a material  adverse  effect on its
financial condition and results of operations.

     The Company could face information and product  liability risks and may not
have adequate  insurance.  The Company's product may be used to manage data from
critical business applications. The Company may become the subject of litigation
alleging  that its product was  ineffective  or  disruptive  in its treatment of
data, or in the  compilation,  processing or manipulation  of critical  business
information. Thus, the Company may become the target of lawsuits from injured or
disgruntled  businesses  or other users.  The Company does not  presently  carry
product or information liability or errors and omissions insurance, and although
it intends to acquire such insurance prior to commencing substantial sales, such
insurance may not be available in an acceptable or affordable form. In the event
that the Company is required to defend more than a few such  actions,  or in the
event that it was found liable in connection  with such an action,  its business
and operations would be severely and materially adversely affected.

     The Company is dependent on new demand for its products and  services.  The
success  of the  Company's  business  depends  upon  demand  for  and use of its
technology,  products  and  services  in general  and the demand for  additional
computing  power,  cost  effectiveness  and speed in  particular.  The Company's
product is new and the Company may encounter  substantial market resistance.  In
the event sufficient demand does not develop, the Company's business and results
of operations would be materially adversely affected.  The Company believes that
there appears to be increased demand for computing power, cost effectiveness and
speed,  but if  general  economic  conditions  decline  or  hardware  and memory
advances make such power, cost  effectiveness and speed more readily  available,
then  adoption,  use and sales of the  Company's  products  and  services may be
materially adversely affected.

     Market acceptance of the Company's products and services is not guaranteed.
The Company is at an early stage of  development  and its  earnings  will depend
upon market  acceptance and  utilization of its intended  products and services.
Due to economic  conditions  potential  customers have  significantly  tightened
budgets for evaluating new products and technologies  and the evaluation  cycles
are much  longer than in the recent  past.  There can be no  assurance  that the
Company's product and technology development efforts will result in new products
and services, or that they will be successfully introduced.

     Future profitability is not guaranteed.  The Company has not recognized any
operating  revenues to date. There is no assurance that the Company's plans will
be realized,  that it will be able to generate  revenues or that it will achieve
profitability in the future.

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

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


                                       18

<PAGE>



     The Company has  indemnified  its officers and  directors.  The Company has
indemnified its Officers and Directors  against possible  monetary  liability to
the maximum extent permitted under Delaware law.

     Limitation  on ability for control  through  proxy  contest.  The Company's
Bylaws  provide for a Board of  Directors to be elected in three  classes.  This
classified  Board may make it more  difficult  for a potential  acquirer to gain
control of the Company by using a proxy  contest,  since the acquirer would only
be able to elect one or two directors out of four directors at each shareholders
meeting held for that purpose.

                                   SIGNATURES


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


                                        ANTs software inc.


Date:   November 12, 2004              By: /s/ Francis K. Ruotolo
                                           --------------------------------
                                           Francis K. Ruotolo, Chairman and
                                           Chief Executive Officer





Date:   November 12, 2004              By: /s/ Kenneth Ruotolo
                                           --------------------------------
                                           Kenneth Ruotolo
                                           Chief Financial Officer and Secretary




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