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                                  UNITED STATES

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

                                   FORM 10-QSB

(Mark One)

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

                  For the quarterly period ended: June 30, 2004

                                       OR

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

      For the transition period from _________________ to ________________

                        Commission file number: 000-16299
                                ________________


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


                  Delaware                               13-3054685
      (State or other jurisdiction of                   (IRS Employer
       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:

              32,792,397 shares of common stock as of June 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  .................................10-13
Item 3.  Controls and Procedures  ........................................13-14

                          PART II. Other Information

Item 1. Legal Proceedings  ..................................................14
Item 2. Changes in Securities ...............................................14
Item 3. Defaults Upon Senior Securities......................................15
Item 4. Submission of Matters to a Vote of Security Holders..................15
Item 5. Other Information....................................................15
Item 6. Exhibits and Reports on Form 8-K..................................15-16
Risk Factors..............................................................16-19
Signatures...................................................................19








                                       2
<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS


                               ANTS SOFTWARE INC.
                            CONDENSED BALANCE SHEETS

                                                        June 30,      Dec. 31,
                                                          2004          2003
                        ASSETS                        (Unaudited)    (Audited)
                                                      ------------  ------------
Current assets:
  Cash                                                $ 2,669,235   $   541,725
  Prepaid insurance                                        64,125        46,229
  Prepaid expenses                                         16,745           800
                                                      ------------  ------------
        Total current assets                            2,750,105       588,754
                                                      ------------  ------------
Computers and software                                    901,099       774,441
Office furniture and fixtures                              29,386        29,386
Leasehold improvements                                     16,675         9,000
  Less accumulated depreciation                          (578,095)     (489,326)
                                                      ------------  ------------
        Property and equipment, net                       369,065       323,501
                                                      ------------  ------------
Other assets - security deposits                            9,100         9,100
                                                      ------------  ------------
        Total assets                                  $ 3,128,270   $   921,355
                                                      ============  ============

         LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                    $    96,563   $    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        75,000
                                                      ------------  ------------
        Total current liabilities                         173,663       811,947
                                                      ------------  ------------
Long-term liabilities:
  Capital lease payable                                     5,882         7,919
  Convertible promissory note, net of unamortized
   beneficial interest and debt discount of $189,585
   and $83,196 in 2004 and 2003, respectively             130,415       236,804
                                                      ------------  ------------
        Total liabilities                                 309,960     1,056,670
                                                      ------------  ------------
Commitment and contingencies

Stockholders' equity/(deficit):
  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; 32,792,397 and 26,381,004 shares issued
   and outstanding, respectively                            3,279         2,638
  Notes receivable from officer for stock purchases             -       (45,000)
  Additional paid-in capital                           34,677,275    29,668,322
  Accumulated deficit                                 (31,862,244)  (29,761,275)
                                                      ------------  ------------
        Total stockholders' equity/(deficit)            2,818,310      (135,315)
                                                      ------------  ------------
Total liabilities and stockholders' equity            $ 3,128,270   $   921,355
                                                      ============  ============

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


                                       3
<PAGE>

<TABLE>
<CAPTION>

                                     ANTS SOFTWARE INC.
                             CONDENSED STATEMENTS OF OPERATIONS

                                           Three Months ended June 30,          Six Months ended June 30,
                                              2004              2003              2004              2003
                                          (Unaudited)       (Unaudited)       (Unaudited)       (Unaudited)
                                       ----------------  ----------------  ----------------  ----------------
<S>                                    <C>               <C>               <C>               <C>
Cost of goods sold                     $             -   $             -   $             -   $             -
General and administrative expenses            409,511           310,498           755,918           611,879
Sales and marketing                            312,287           193,879           457,557           322,519
Research and development expenses              577,501           437,765         1,037,452           803,204
                                       ----------------  ----------------  ----------------  ----------------
        Loss from operations                (1,299,299)         (942,142)       (2,250,927)       (1,737,602)
                                       ----------------  ----------------  ----------------  ----------------

Other income (expense):
  Income earned from expired
   contract                                          -                 -           310,943                 -
  Interest income                                7,063               794             9,146             2,478
  Gain on legal settlement                       1,500             1,000             3,500            17,000
  Write-off of officer's note
   receivable for stock purchases                    -                 -           (45,000)                -
  Interest expense                             (41,087)                -          (128,631)                -
                                       ----------------  ----------------  ----------------  ----------------
        Other income, net                      (32,524)            1,794           149,958            19,478
                                       ----------------  ----------------  ----------------  ----------------
        Net loss                       $    (1,331,823)  $      (940,348)  $    (2,100,969)  $    (1,718,124)
                                       ================  ================  ================  ================

Basic and diluted net loss per
 common share                          $         (0.04)  $         (0.04)  $         (0.07)  $         (0.07)
                                       ================  ================  ================  ================
Shares used in computing basic and
 diluted net loss per share                 32,311,854        24,192,811        30,274,355        23,787,125
                                       ================  ================  ================  ================

    The accompanying notes are an integral part of these condensed financial
                                   statements.
</TABLE>


                                       4
<PAGE>

                               ANTS SOFTWARE INC.
                       CONDENSED STATEMENTS OF CASH FLOWS

                                                       Six Months Ended June 30,
                                                          2004          2003
                                                      (Unaudited)   (Unaudited)
                                                      ------------  ------------
Cash flows from operating activities:
  Net loss                                            $(2,100,969)  $(1,718,124)
  Adjustments to reconcile net loss to net cash used
   in operating activities:
     Depreciation                                          88,769        77,294
     Amortization of debt discount and beneficial
      interest                                            127,238             -
     Compensation expense recognized on options
      granted to non-employees                             29,498        69,054
     Write-off of note receivable to officer for stock
      purchases                                            45,000             -
  Changes in operating assets and liabilities:
     Prepaid insurance and expenses                       (33,841)      (76,310)
     Accounts payable                                      13,374        97,808
     Deferred salaries                                   (340,505)       66,376
     Deferred revenue                                    (310,943)            -
                                                      ------------  ------------
        Net cash used in operating activities          (2,482,379)   (1,483,902)
                                                      ------------  ------------

Cash flows used in investing activities:
  Purchase of property and equipment, net                (134,333)      (48,236)
                                                      ------------  ------------

Cash flows from financing activities:
  Proceeds from private placements net of commissions   4,443,279       941,905
  Proceeds from exercise of options                       303,190        13,565
  Proceeds from exercise of warrants                            -        75,000
  Payments on capital lease obligations                    (2,247)            -
                                                      ------------  ------------
        Net cash provided by financing activities       4,744,222     1,030,470
                                                      ------------  ------------
Net increase (decrease) in cash                         2,127,510      (501,668)
                                                      ------------  ------------
Cash at beginning of period                               541,725       946,957
                                                      ------------  ------------
Cash at end of period                                 $ 2,669,235   $   445,289
                                                      ============  ============

Supplemental disclosures of cash flow information:
  Cash paid during the period for:
     Interest                                         $     1,146   $         -
     Taxes                                                      -             -

    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
fairly present the financial position,  results of operations, and cash flows on
a consistent basis.  Operating results for the three and six month periods ended
June 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 2004.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

     The following  table presents the calculation of basic and diluted net loss
per share:
<TABLE>
<CAPTION>
                                                  Three Months Ended June 30,           Six Months Ended June 30,
                                               -----------------------------------------------------------------------
                                                     2004              2003              2004              2003
                                               -----------------------------------------------------------------------
<S>                                            <C>               <C>               <C>               <C>
Net loss                                       $   (1,331,823)   $     (940,348)   $   (2,100,969)   $   (1,718,124)

Weighted average shares of common stock
outstanding - basic and dilutive                   32,311,854        24,192,811        30,274,355        23,787,125
                                               -----------------------------------------------------------------------
Basic and diluted net loss per share           $        (0.04)   $        (0.04)   $        (0.07)   $        (0.07)

</TABLE>

     As of June 30,  2004 and 2003,  outstanding  options and  warrants  for the
purchase of up to 13,474,330 shares of common stock at prices ranging from $0.52
to $11.63 per share, and 8,529,279 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 June 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 June 30,            Six Months ended June 30,
                                            ----------------------------------    ----------------------------------
                                                  2004              2003                2004              2003
                                            ----------------------------------    ----------------------------------
<S>                                         <C>               <C>                 <C>               <C>

Net loss, as reported                       $   (1,331,823)   $     (940,348)     $   (2,100,969)   $   (1,718,124)
Less: Stock-based employee compensation
 expense determined under the fair-value
 based method                                     (218,523)         (329,535)           (680,183)         (654,391)
                                            ----------------  ----------------    ----------------  ----------------

Net loss, pro forma                         $   (1,550,346)   $   (1,269,883)     $   (2,781,152)   $   (2,372,515)
                                            ================  ================    ================  ================
Basic and diluted net loss per share:


   As reported                              $        (0.04)   $        (0.04)     $        (0.07)   $        (0.07)
                                            ================  ================    ================  ================
   Pro forma
                                            $        (0.05)   $        (0.05)     $        (0.09)   $        (0.10)
                                            ================  ================    ================  ================
</TABLE>

     Employee  options for the  purchase of up to 335,000 and 610,000  shares of
common stock were granted during the three-month periods ended June 30, 2004 and
2003, respectively.  The weighted average fair value of employee options granted
during the  three-month  periods ended June 30, 2004 and June 30, 2003 was $1.64
and $0.95 per share,  respectively.  Employee  options for the purchase of up to
740,000 and 970,000  shares of common  stock were granted  during the  six-month
periods ended June 30, 2004 and 2003,  respectively.  The weighted  average fair
value of employee  options  granted during the six-month  periods ended June 30,
2004 and 2003 was $1.12 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 June 30,  2004 and 2003,
respectively.


                        Three Months ended June 30,   Six Months ended June 30,
                        ---------------------------  ---------------------------
                             2004         2003            2004         2003
                        ---------------------------  ---------------------------

Interest rate                 3.22%        2.53%           3.19%        2.69%
Dividend yield                0.00%        0.00%           0.00%        0.00%
Expected volatility         126.00%      134.01%         124.46%      135.98%
Expected life in years        5.00         5.00            5.00         5.00


     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  [to be
consistent]  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. In connection with this offering, the
Company paid $269,100 in cash commissions, issued 33,666 D Units to finders, and
will issue 239,697 D Units to the placement  agent.  The gross proceeds from the
offering were  $4,277,379.  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 will issue 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.

     During the six months ended June 30, 2004,  274,502  shares of common stock
of the Company  were  purchased  through the  exercise of stock  options.  Total
proceeds to the Company were $303,190.

     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.

4.   WARRANTS AND STOCK OPTIONS

     As of June 30, 2004, the Company had outstanding warrants to purchase up to
9,621,125  shares of common stock and options to purchase up to 3,853,205 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.


                                                          Stock
                                           Warrants      Options        Total
                                           --------      -------        -----

Outstanding at December 31, 2003          3,484,300     3,841,162     7,325,462

Granted                                   6,136,825       740,000     6,876,825

Retired/forfeited                                 -      (453,455)     (453,455)

Expired                                           -             -             -

Exercised through cash consideration              -      (274,502)     (274,502)
                                        ------------  ------------  ------------
Outstanding at June 30, 2004              9,621,125     3,853,205    13,474,330
                                        ------------  ------------  ------------

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 June 30, 2004,  the
Company  received $3,500 as its portion of the settlement,  which was recognized
as a gain from legal settlement.


                                       8
<PAGE>

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.

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 six month period ended June 30, 2004,
beneficial  interest  discount  amounting to $122,500,  and imputed  interest of
$4,738  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.  The Company will  therefore  issue 400,000  shares of Common
Stock and a warrant to  purchase  up to 400,000  shares of Common  Stock to each
noteholder.


                                       9
<PAGE>

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.

     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.


                                       10
<PAGE>

Marketing
---------

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

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

     o    Sell  to  Independent  Software  Vendors  ("ISV's")  and  directly  to
          end-users in targeted markets.

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

Raising Capital
---------------

     During February and March 2004, the Company raised approximately $4 million
(net of placement  agent fees and  commissions)  in financing  through a private
offering of Company  securities.  In May 2004,  an  additional  $435,000  (gross
proceeds of $500,000 less  placement  agent fees and  commissions of $65,000) in
financing  was raised  through a private  offering of Company  securities to one
accredited  investor.  To  carry  out  its  plan  of  operations,   the  Company
anticipates  that, over the next twelve months, it will require an additional $2
million.  The  Company  intends  to pursue a number of  avenues  to raise  these
additional  operating  funds:  1) in the past the Company has been successful in
raising funds through private  placements of its stock and  anticipates  that it
will  continue  to raise funds  through  private  placements,  2) as the Company
develops  close  relationships  with large  partners,  it will pursue  strategic
investments from those partners,  and 3) the Company expects to begin generating
revenue in 2004 and, if  successful,  this should be a source of some  operating
funds.  The Company is pursuing all three  avenues,  but believes  that securing
additional capital will be difficult.

Personnel
---------

     The  Company   currently  has  22  full-time   employees  and  3  full-time
consultants.   The  Company  views  the  recruitment  of  additional   qualified
marketing,   sales,  and  technical   personnel  as  essential  to  the  further
development  and  commercialization  of  its  proprietary  technologies.  If the
Company is sufficiently funded and it is successful in its recruitment  efforts,
the Company  expects that its personnel and other  operating costs will increase
moderately  over current  levels.  During 2003, to conserve  cash, all employees
agreed to reduce their salary to 85% of their then-current salary ("New Salary")
and the employees further agreed to defer part of their New Salary. In addition,
as of January 16, 2004, Francis K. Ruotolo agreed to reduce his salary to 50% of
his  starting  salary  (such new salary shall be referred to herein as "Salary")
and defer part of his Salary.  In  connection  with these  deferrals the Company
agreed to accrue  the  difference  between  the New  Salary  or the  Salary,  as
applicable, and the employees' actual pay, until the Company received sufficient
funding.  During  February and March 2004, the Company raised  approximately  $4
million (net of placement  agent fees and  commissions).  On March 1, 2004,  the
salary  accruals and  deferrals  were  discontinued.  As of June 30,  2004,  all
accrued  salaries  had been  fully  repaid.  The  total  amount  paid in  salary
deferrals during the six months ended June 30, 2004 was $478,655.

     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.

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.  Subsequent to June 30,
2004, the Company filed an additional patent application.


                                       11
<PAGE>

Sales and Marketing Expenses
----------------------------

     Sales and  marketing  expenses  consist  primarily  of  employee  salaries,
benefits,  consultant  fees,  travel,  marketing  programs (trade shows,  public
relations,  lead  generation  programs) and marketing and sales  literature  and
presentations.  Marketing  and sales  expenses  increased  from $193,879 for the
quarter  ended June 30, 2003 to $312,287 for the quarter ended June 30, 2004, an
increase of $118,408 or 61%. This increase results from the Company shifting its
focus from research and  development to sales and  marketing.  For the six-month
periods ended June 30, 2004 and 2003, marketing and sales expenses were $457,557
and  $322,519,  respectively,  an increase of $135,038 or 42%.  The changes from
2003 to 2004  resulted from  increased  expenditures  on events and  promotions,
sales-related travel and marketing communications in 2004.

     Marketing  and sales  expenses  for the six months  ended June 30, 2004 and
2003 break out as follows: salaries,  benefits and consultant costs (60% and 85%
of the  total,  respectively),  travel  (12%  and 3%,  respectively),  marketing
programs  (17%  and  6%,   respectively)   and  other   expenses  (11%  and  6%,
respectively).  The Company  expects that its marketing and sales  expenses will
continue  to  increase  moderately  to  substantially  as  additional  staff  is
recruited and as marketing and sales programs are implemented.

Research and Development Expenses
---------------------------------

     Research and development  expenses consist primarily of employee  salaries,
benefits,  consultant fees,  equipment and software  purchases and depreciation.
Research and development  expenses increased from $437,765 for the quarter ended
June 30, 2003 to $577,501 for the quarter  ended June 30,  2004,  an increase of
$139,736 or 32%. For the six months ended June 30, 2004 and 2003, these expenses
were $1,037,452 and $803,204,  respectively, an increase in 2004 of $234,248, or
29%.  The changes  from 2003 to 2004  resulted  largely  from an increase in: 1)
salaries and benefits related to the hiring of additional  engineering personnel
and  consulting  fees,  which  together  represented  80%  of the  increase;  2)
allocated  overhead  expenses which  represented  10% of the increase;  3) other
operating  expenses  such  as  computer  supplies  which  represented  4% of the
increase and 4)  depreciation  expense for new  equipment  purchased  during the
six-month period ended June 30, 2004 which represented 6% of the increase.

     Research  and  development  expenses for the six months ended June 30, 2004
and 2003 break out as follows:  salaries,  benefits and consulting fees (82% and
82% of the total,  respectively),  equipment,  software and depreciation (9% and
8%, respectively),  and other expenses (9% and 10%,  respectively).  The Company
expects that 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,
benefits, consulting fees, legal, investor relations and audit fees, facilities,
and insurance.  General and administrative  expenses increased from $310,498 for
the quarter ended June 30, 2003 to $409,511 for the quarter ended June 30, 2004,
an increase of $99,013, or 32%. For the six months ended June 30, 2004 and 2003,
these expenses were $755,918 and $611,879,  respectively, an increase in 2004 of
$144,039,  or 24%.  The changes  from 2003 to 2004  resulted  primarily  from an
increase in the first  quarter of 2004 in legal and investor  relations  fees of
$108,142 related to the Company's  financing  activities and its annual meeting,
proxy  and  voting  process  and from an  increase  in  salaries,  benefits  and
consulting  fees of  $53,751,  of  which  $29,498  is  non-employee  stock-based
compensation  expense  related to the  extension of the period  during which Mr.
Gary Ebersole, the Company's former President and Chief Operating Officer, could
exercise his stock options.

     Components of general and  administrative  expense for the six months ended
June 30, 2004 and 2003 break out as follows:  salaries,  benefits and consulting
fees (44% and 46% of the total, respectively),  legal and investor relation fees
(28% and 17%, respectively), audit fees (6% and 7%, respectively), insurance (9%
and 14%,  respectively),  and other  expenses such as  facilities,  supplies and
travel (13% and 16%,  respectively).  The Company  expects  that its general and
administrative expenses will increase moderately as the Company expands.


                                       12
<PAGE>

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 June 30,  2004,  the
outstanding  obligation  was  $6,604.  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.

Critical Accounting Policies
----------------------------

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

     The Company  believes the  following  represents  its  critical  accounting
policies:

     o    Stock-based compensation

     o    Income taxes

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

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

Capital and Liquidity Resources
-------------------------------

     The Company intends to increase  expenditures  moderately to  substantially
over the next  twelve  months  as it  actively  markets  and sells the ANTs Data
Server and hires  additional  sales,  marketing,  and technical  personnel.  The
Company's cash balance as of June 30, 2004 was approximately $2.7 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.


                                       13
<PAGE>

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


                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

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

ITEM 2. CHANGES IN SECURITIES

     From January 1, 2004 through March 31, 2004, the Company sold to accredited
investors,  through  a  private  offering,  5,703,159  D  Units  at a  price  of
seventy-five  cents ($0.75) per D Unit,  with each D Unit  consisting of (i) one
(1) share of common stock of the  Company,  and (ii) a warrant to purchase up to
one (1) share of common stock of the Company at a per share price of two dollars
($2.00), exercisable until March 31, 2006. In connection with this offering, the
Company paid $269,100 in cash commissions, issued 33,666 D Units to finders, and
will issue 239,697 D Units to the placement  agent.  The gross proceeds from the
offering were  $4,277,379.  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 or about February 17, 2004,  the Company sold to an accredited  investor
66 shares of common stock at a price of $.75 per share. The accredited  investor
paid for the shares by assigning all rights in certain shares of common stock of
the Company, which had been escheated.

     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 will issue 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 note holders  elected to convert their  convertible  promissory  notes.  The
Company will  therefore  issue  400,000  shares of Common Stock and a warrant to
purchase up to 400,000 shares of Common Stock to each noteholder.


                                       14
<PAGE>

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

     No changes during the period covered by this report.


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

     The Company held its 2004 Annual  Meeting of  shareholders  on May 6, 2004.
One Class 1 director,  Thomas Holt, was nominated and re-elected to serve on the
board until the annual  meeting  following  the close of the 2006  fiscal  year.
Papken  Der  Torossian  chose  not to serve as Class 1  director  following  the
expiration  of his term and  therefore  was not up for  re-election  at the 2004
Annual Meeting. Class 2 director Homer G. Dunn will serve on the board until the
annual  meeting  following the close of the 2004 fiscal year.  Class 3 directors
Francis K.  Ruotolo  and John R.  Gaulding  will  continue to serve on the board
until the annual meeting following the close of the 2005 fiscal year.

     Shareholders  ratified the  selection of Burr,  Pilger & Mayer,  LLP as the
Company's independent accountant for the calendar year ending December 31, 2004.

     The Company's shareholders voted upon the matters as follows:

------------------------ ---------------- --------------- ----------------------
 DESCRIPTION OF MATTER      VOTES FOR      VOTES AGAINST   WITHHELD/ABSTENTIONS
------------------------ ---------------- --------------- ----------------------
Election of Class 1
 Director:
------------------------ ---------------- --------------- ----------------------
     Thomas Holt            20,110,153           -                 48,616
------------------------ ---------------- --------------- ----------------------

------------------------ ---------------- --------------- ----------------------
Ratification of Auditor     20,001,668         53,496             103,605
------------------------ ---------------- --------------- ----------------------


ITEM 5.  OTHER INFORMATION

     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. As
of June 30, 2004, Mr. Ebersole had exercised all his vested stock options.

     The Company and Francis K. Ruotolo,  its Chief Executive  Officer,  entered
into a Deferred  Salary  Agreement  and an Amendment  Agreement to such Deferred
Salary  Agreement,  on or about March 31,  2004 and June 30, 2004  respectively,
pursuant  to which Mr.  Ruotolo  acknowledged  and agreed that as of January 16,
2004 his salary was set at Two Hundred  Thousand  dollars  ($200,000) per annum,
subject to the Company's withholding obligations.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)  Exhibits

              3.1    Amended and Restated  Certificate  of  Incorporation of the
                     Company,  as listed in Exhibit 3.1 to the Company's  10-QSB
                     filed  on  August  14,  2003,  is  hereby  incorporated  by
                     reference.

              3.2    Amended and  Restated  Bylaws of the  Company, as listed in
                     Exhibit 3.2  to  the  Company's  10-KSB  filed on March 22,
                     2001, are hereby incorporated by reference.

              10.1   2000 Stock Option Plan of the Company, as amended, attached
                     as  Exhibit  4 to the  Company's  Form S-8 filed on May 23,
                     2003, is hereby incorporated by reference.

              10.2   Agreement and Plan of Merger dated December 8, 2000 between
                     ANTs  software  inc. and ANTs  software.com,  as  listed in
                     Exhibit  10.2 to the Company's  10-KSB  filed on March  22,
                     2001, is hereby incorporated by reference.

              10.3   Settlement  Agreement and Full  Release of All Claims dated
                     January 11,  2001,  between the  Company and  Frederick  D.
                     Pettit,  as listed in Exhibit 10.3 to the Company's  10-KSB
                     filed  on  March  22,  2001,  is  hereby   incorporated  by
                     reference.


                                       15
<PAGE>

              10.4   Separation  Agreement dated  January 8, 2001,  between  the
                     Company  and  Francis K. Ruotolo, as listed in Exhibit 10.4
                     to the Company's 10-KSB  filed on March 22, 2001, is hereby
                     incorporated by reference.

              10.5   Form of Indemnification  Agreement signed with officers and
                     directors of the  Company, as listed in Exhibit 10.5 to the
                     Company's  10-KSB  filed  on  March  22,  2001,  is  hereby
                     incorporated by reference.

              10.6   Registration   Agreement  between  the  Company  and  Karen
                     Buechler and Eric Scott Buechler dated  September 15, 2000,
                     as listed in Exhibit 10.6 to the  Company's 10-KSB filed on
                     March 22, 2001, is hereby incorporated by reference.

              10.7   Registration  Agreement  between  the  Company  and  Arcade
                     Investment Limited  dated  September 7, 2000,  as listed in
                     Exhibit  10.7 to the Company's  10-KSB  filed on March  22,
                     2001, is hereby incorporated by reference.

              10.8   Amended Agreement between the Company and Arcade Investment
                     dated October  6, 2000,  as listed in  Exhibit  10.8 to the
                     Company's  10-KSB  filed  on  March  22,  2001,  is  hereby
                     incorporated by reference.

              10.9   Form of Registration Agreement between the Company and each
                     of  Discount  Bank  and  Trust   Company,   Lemanik   Sicav
                     Convertible Bond, and Pershing Keen Nominees,  as listed in
                     Exhibit 10.9 to the  Company's  10-KSB  filed on March  22,
                     2001, is hereby incorporated by reference.

              10.10  Employment Agreement  dated  March 24,  2003,  between  the
                     Company and Gary Ebersole, as listed in Exhibit 10.10 to
                     the  Company's  10-QSB  filed  on  May 8, 2003,  is  hereby
                     incorporated by reference.

              10.11  Separation and Settlement Agreement and Full Release of All
                     Claims dated January 14, 2004, between the Company and Gary
                     Ebersole, as listed in Exhibit 10.11 to the Company's
                     10-KSB  filed  on March 30, 2004, is hereby incorporated by
                     reference.

              10.12  Deferred  Salary  Agreement  dated  March 31, 2004  between
                     the Company and Francis K. Ruotolo.

              10.13  Amendment Agreement dated June 30, 2004 between the Company
                     and Francis K. Ruotolo.

              14.    Code of Ethics,  as listed in  Exhibit  14 to the Company's
                     10-KSB filed on March 30, 2004,  is hereby incorporated  by
                     reference.

              31.1   Certification of the Chief  Executive  Officer  required by
                     Rule  13a-14(a) of the Securities  Exchange Act of 1934, as
                     amended,  as  adopted   pursuant  to  Section  302  of  the
                     Sarbanes-Oxley Act of 2002.

              31.2   Certification of the Chief  Financial  Officer  required by
                     Rule  13a-14(a) of the Securities  Exchange Act of 1934, as
                     amended,  as  adopted   pursuant  to  Section  302  of  the
                     Sarbanes-Oxley Act of 2002.

              32.1   Certification of the Chief Executive Officer pursuant to 18
                     U.S.C. Section  1350 as adopted  pursuant to Section 906 of
                     the Sarbanes-Oxley Act of 2002.

              32.2   Certification of the Chief Financial Officer pursuant to 18
                     U.S.C. Section  1350 as adopted  pursuant to Section 906 of
                     the Sarbanes-Oxley Act of 2002.

         (b)  Reports on Form 8-K

     During the period  covered by this report,  the Company filed the following
reports on Form 8-K: (i) on April 14, 2004,  the Company  clarified  the date on
which its annual  shareholder  meeting was being held,  and (ii) on May 6, 2004,
the Company  announced that: (a) the ANTs Data Server ("ADS") had been ported to
11 platforms,  (b) the Company was porting ADS to the 64-bit Linux platform, (c)
internal  testing  demonstrated  that ADS running on the Linux  platform had the
same high performance as ADS running on the Windows and Solaris  platforms,  (d)
the Company would be  exhibiting  for a second year at the  Securities  Industry
Association  Technology  Management  Conference,  and that  (e) the  independent
analyst David Rogers, of Standard Investment Chartered, Inc. (Member NASD SIPC),
had initiated coverage of the Company.

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.


                                       16
<PAGE>

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

     If the  Company  is  unable  to  protect  its  intellectual  property,  its
competitive  position would be adversely affected.  The Company relies on patent
protection,  as well as trademark and copyright law, trade secret protection and
confidentiality  agreements  with  its  employees  and  others  to  protect  its
intellectual  property.  Despite the Company's  precautions,  unauthorized third
parties may copy its products and services or reverse engineer or obtain and use
information  that it  regards  as  proprietary.  The  Company  has filed  patent
applications and intends to file more. 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.


                                       17
<PAGE>

     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.

     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.

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

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


                                       18
<PAGE>

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

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

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

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

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


                                   SIGNATURES

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


                                                 ANTs software inc.


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





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




                                       19