**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**


_____________________




**FORM
      10-Q**


**(Mark
      One)**





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





**For
      the quarterly period ended: March 31, 2006**





**OR**





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





**For
      the transition period from _________________ to
      ________________**





**Commission
      file number: 000-16299**


________________




**ANTS
      SOFTWARE INC.**


**(Exact
      name of registrant as specified in its charter)**





**Delaware**
            **13-3054685****(State
                or other jurisdiction of**
            **(IRS
                Employer Identification Number)****Incorporation
                or Organization)****700
                Airport Blvd. Suite 300, Burlingame, CA**
            **94010****(Address
                of principal executive offices)**
            **(Zip
                Code)**





**(650)
      931-0500**


**(Registrant’s
      Telephone Number, including area code)**





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





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





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





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




45,294,022
      shares of common stock as of March 31, 2006







**TABLE
      OF CONTENTS**







PART
                    I. Financial InformationItem
                    1.
                Condensed
                    Financial Statements
                    (Unaudited)
                3-12Condensed
                    Balance Sheets as of March 31, 2006 and
                    December 31, 2005Condensed
                    Statements of Operations for the Three Months
                    ended March 31, 2006 and 2005Condensed
                    Statements of Cash Flows for the Three Months
                    ended March 31, 2006 and 2005Notes
                    to Condensed Financial StatementsItem
                    2.
                Management’sDiscussion
                    and Analysis of Financial Condition and Results of Operations
                13-20Item
                    3.
                Quantitative
                    and Qualitative Disclosures About Market
                    Risk
                20Item
                    4.
                Controls
                    and Procedures
                20PART
                    II. Other InformationItem
                    1.
                Legal
                    Proceedings
                20Item
                    1A.
                Risk
                    Factors
                20-22Item
                    2.
                Unregistered
                    Sales of Equity Securities and Use of
                    Proceeds
                22Item
                    3.
                Defaults
                    Upon Senior Securities
                23Item
                    4.
                Submission
                    of Matters to a Vote of Security
                    Holders
                23Item
                    5.
                OtherInformation
                23Item
                    6.
                Exhibits
                    and Reports on Form 8-K
                23Signatures
                24




2


**PART
      I. FINANCIAL INFORMATION**





**ITEM
      1. FINANCIAL STATEMENTS**




**ANTS
      SOFTWARE INC.**


**CONDENSED
      BALANCE SHEETS**


**(Unaudited** **)**




March
                31,
            
            
            December
                31,ASSETS
            
            
            2006
            
            
            2005Current
                assets:Cash
                and cash equivalents
            
            $
            3,483,840
            
            $
            6,381,932Accounts
                    receivable, net of allowance for doubtful accounts of $49,738
                    and $16,000
                  in
                    2006 and 2005, respectively
            
            
            97,890
            
            
            45,228Prepaid
                insurance and other expenses
            
            
            131,509
            
            
            73,560Total
                current assets
            
            
            3,713,239
            
            
            6,500,720Restricted
                cash
            
            
            105,399
            
            
            105,399Prepaid
                expense from warrant issued to customer, net
            
            
            158,603
            
            
            173,021Property
                and equipment, net
            
            
            674,809
            
            
            622,515Other
                assets
            
            
            34,702
            
            
            34,702Total
                assets
            
            $
            4,686,752
            
            $
            7,436,357LIABILITIES
                AND STOCKHOLDERS' EQUITYCurrent
                liabilities:Accounts
                payable and other accrued expenses
            
            $
            210,002
            
            $
            548,178Accrued
                bonuses and commissions payable
            
            
            35,000
            
            
            218,750Accrued
                vacation payable
            
            
            172,240
            
            
            149,573Deferred
                revenues
            
            
            84,114
            
            
            58,603Total
                current liabilities
            
            
            501,356
            
            
            975,104Long-term
                liabilities:Accrued
                rent
            
            
            54,872
            
            
            48,667Total
                liabilities
            
            
            556,228
            
            
            1,023,771Commitment
                and contingencies
            
            
            -
            
            
            -Stockholders’
                equity:Preferred
                  stock, $0.0001 par value; 50,000,000 shares authorized,
                no
                  shares issued and outstanding,
                  respectively
            
            
            -
            
            
            -Common
                stock, $0.0001 par value; 100,000,000 shares authorized;
              45,294,022
                and 44,862,058 shares issued and outstanding, respectively
            
            
            4,530
            
            
            4,487Common
                stock subscribed, not
                issued
            
            
            11,000
            
            
            243,608Additional
                paid-in capital
            
            
            50,391,806
            
            
            49,690,324Accumulated
                deficit
            
            
            (46,276,812
            )
            
            (43,525,833
            )Total
                stockholders’ equity
            
            
            4,130,524
            
            
            6,412,586Total
                liabilities and stockholders' equity
            
            $
            4,686,752
            
            $
            7,436,357




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


3








**ANTS
      SOFTWARE INC.**


**CONDENSED
      STATEMENTS OF OPERATIONS**


**(Unaudited)**




For
                the Three Months ended March 31,2006
            
            
            2005Revenues:Licenses
            
            $
            42,000
            
            $
            86,100Maintenance
            
            
            26,389
            
            
            667Total
                revenues
            
            
            68,389
            
            
            86,767Expenses:Sales
                and marketing
            
            
            1,072,024
            
            
            575,359Research
                and development
            
            
            1,230,255
            
            
            787,089General
                and administrative
            
            
            526,331
            
            
            525,603Total
                expenses
            
            
            2,828,610
            
            
            1,888,051Loss
                from operations
            
            
            (2,760,221
            )
            
            (1,801,284
            )Other
                income (expense):Interest
                income
            
            
            9,712
            
            
            2,528Gain
                on legal settlement
            
            
            1,000
            
            
            1,500Interest
                expense
            
            
            (1,470
            )
            
            (915
            )Other
                income, net
            
            
            9,242
            
            
            3,113Net
                loss
            
            $
            (2,750,979
            )
            $
            (1,798,171
            )Basic
                and diluted net loss per common share
            
            $
            (0.06
            )
            $
            (0.05
            )Shares
                                        used in computing basic and diluted
                                      net
                                        loss per
                                        share
            
            
            45,180,279
            
            
            37,176,396




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


4




**ANTS
      SOFTWARE INC.**


**CONDENSED
      STATEMENTS OF CASH FLOWS**


**(Unaudited)**




For
                the Three Months ended March 31,2006
            
            
            2005Cash
                flows from operating activities:Net
                loss
            
            $
            (2,750,979
            )
            $
            (1,798,171
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation
            
            
            71,979
            
            
            64,943Amortization
                of accrued rent, net of cash payments
            
            
            1,825
            
            
            -Amortization
                of warrant issued to customer for potential support
                services
            
            
            14,418
            
            
            -Bad
                debt expense
            
            
            33,738
            
            
            -Compensation
                expense recognized on options granted to non-employees
            
            
            3,851
            
            
            4,672Compensation
                  expense recognized on restricted shares of common stock
                granted
                  to a non-employee and subscribed as of March 31, 2006
            
            
            11,000
            
            
            -Compensation
                expense recognized on vesting of employee stock options
            
            
            88,188
            
            
            -Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (86,400
            )
            
            (114,100
            )Prepaid
                insurance and expenses
            
            
            (57,949
            )
            
            61,075Accounts
                payable and other accrued expenses
            
            
            (333,796
            )
            
            (115,574
            )Accrued
                bonuses and commissions payable
            
            
            (183,750
            )
            
            199,167Accrued
                vacation
            
            
            22,667
            
            
            22,236Deferred
                revenue
            
            
            25,511
            
            
            27,333Net
                cash used in operating activities
            
            
            (3,139,697
            )
            
            (1,648,419
            )Cash
                flows used in investing activities:Purchases
                of office furniture, fixtures and equipment
            
            
            (124,273
            )
            
            (198,287
            )Net
                cash used in investing activities
            
            
            (124,273
            )
            
            (198,287
            )Cash
                flows from financing activities:Proceeds
                from private placements, net of commissions
            
            
            184,000
            
            
            842,650Common
                stock subscribed
            
            
            -
            
            
            1,049,000Proceeds
                from exercise of options
            
            
            111,005
            
            
            25,416Proceeds
                from exercise of warrants, net of commissions
            
            
            70,873
            
            
            1,842,846Payments
                on capital lease obligations
            
            
            -
            
            
            (1,155
            )Net
                cash provided by financing activities
            
            
            365,878
            
            
            3,758,757Net
                increase (decrease) in cash and cash equivalents
            
            
            (2,898,092
            )
            
            1,912,051Cash
                and cash equivalents at beginning of period
            
            
            6,381,932
            
            
            1,448,724Cash
                and cash equivalents at end of period
            
            $
            3,483,840
            
            $
            3,360,775Non-cash
                investing and financing activities:Common
                stock issued for subscribed shares
            
            $
            243,608
            
            $
            30,000




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




5




**ANTS
      SOFTWARE INC.**


**NOTES
      TO CONDENSED FINANCIAL STATEMENTS**


**(Unaudited)**





**1.**  **BASIS
      OF PRESENTATION**





The
      accompanying unaudited condensed financial statements are presented in
      accordance with the requirements for Form 10-Q. Accordingly, they do not include
      all the disclosures normally required by generally accepted accounting
      principles. The December 31, 2005 balance sheet was derived from audited
      financial statements, but does not include all disclosures required by
      accounting principles generally accepted in the United States of America.
      Reference should be made to the ANTs software inc. (the “Company”) Form 10-KSB
      for the twelve months ended December 31, 2005, 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 months ended March 31, 2006 and 2005 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 anticipates that cash
      on hand will be sufficient to fund operations and investments in capital
      equipment through March 2007 at its current levels of revenue and
      expenditures.





**2.**  **BASIC
      AND DILUTED NET LOSS PER SHARE**





Basic
      net
      loss per share is calculated in accordance with Statement of Financial
      Accounting Standards No. 128, "*Earnings Per Shar*e" 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:





Three
                Months ended March 31,2006
            
            
            2005Net
                loss
            
            $
            (2,750,979
            )
            $
            (1,798,171
            )Weighted
                      average shares of common
                      stock
                    outstanding
                      - basic and dilutive
            
            
            45,180,279
            
            
            37,176,396Basic
                and diluted net loss per share
            
            $
            (0.06
            )
            $
            (0.05
            )





As
      of
      March 31, 2006 and 2005, outstanding options and warrants for the purchase
      of up
      to 21,461,566 shares of common stock at prices ranging from $0.52 to $7.25
      per
      share, and 15,367,888 shares of common stock at prices ranging from $0.52 to
      $10.50 per share, respectively, were anti-dilutive, and therefore, not included
      in the computation of diluted loss per share.


6


**3.**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**





**** **Stock-Based
      Compensation**




We
      have a
      stock-based compensation program (the ANTs software inc. 2000 Stock Option
      Plan
      or the “Plan”) which is intended to attract, retain and provide incentives for
      talented employees, officers and directors, and to align stockholder and
      employee interests. We consider stock-based compensation critical to our
      operation and productivity; essentially all of our employees and directors
      participate. Under the Plan, the Company may grant incentive stock options
      and
      non-qualified stock options to employees, directors or consultants, at not
      less
      than the fair market value on the date of grant for incentive stock options,
      and
      85% of fair market value for non-qualified options. Options are granted at
      the
      discretion of the Board of Directors.





Options
      granted under the Plan are generally vested within three years after the date
      of
      grant, and expire 10 years after issuance. Stock option vesting is generally
      time-based. The options vest 1/6th beginning six months after the
      employee’s date of hire, then 1/36th each month thereafter such that
      the option is fully vested three years from date of hire. As of March 31, 2006,
      the Company had a total of 1,612,777
      shares of common stock in the stock option reserve available for future grant
      awards.




On
      January
      1, 2006, we adopted the provisions of Statement of Financial Accounting
      Standards (“SFAS”) 123(R), *“Share-Based
      Payment”* (the
      “Statement or “SFAS 123(R)”), requiring us to recognize expense related to the
      fair value of our stock-based compensation awards. We elected to use the
      modified prospective transition method as permitted by SFAS 123(R) and therefore
      have not restated our financial results for prior periods. Under this transition
      method, stock-based compensation expense for the three months ended March 31,
      2006 includes compensation expense for all stock-based compensation awards
      granted prior to, but not fully vested, as of January 1, 2006, based on the
      grant date fair value estimated in accordance with the original provisions
      of
      SFAS 123, *“Accounting
      for Stock Compensation”* (“SFAS
      123”). Stock-based compensation expense for all stock-based compensation awards
      granted subsequent to January 1, 2006 is based on the grant date fair value
      estimated in accordance with the provisions of SFAS 123(R). We recognize
      compensation expense for stock option awards on a straight-line basis over
      the
      requisite service period of the award, which is three years. Grants to new
      employees and directors do not vest for the first six months of
      service.




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




The
      following table sets forth the total stock-based compensation expense for the
      quarter ended March 31, 2006, resulting from both the vesting of unvested
      options for certain grants issued prior to January 1, 2006, and from options
      awarded during the three months ended March 31, 2006.





Three
                Months Ended
              March
                31, 2006Sales
                and marketing
            
            $
            24,439Research
                and development
            
            
            59,803General
                and administrative
            
            
            7,797Stock-based
                compensation before income taxes
            
            
            92,039Income
                tax benefit
            
            
            -Total
                stock-based compensation expense after income taxes
            
            $
            92,039




7


The
      total
      stock-based compensation expense of $92,039 comprised $88,188 attributable
      to
      the vesting of employee stock options, and $3,851 charged to R&D
      professional fees attributable to vesting of options issued to non-employee
      R&D contractors. During the quarter ended March 31, 2005, the Company
      recognized R&D professional fees of $4,672 related to the vesting of
      non-employee stock options.




Net
      cash
      proceeds from the exercise of stock options were $111,005 for the three months
      ended March 31, 2006. No income tax benefit was realized from stock option
      exercises during the three months ended March 31, 2006, due to the Company’s net
      loss from operations for the period. In accordance with SFAS 123(R), we present
      excess tax benefits from the exercise of stock options, if any, as financing
      cash flows rather than operating cash flows.




Prior
      to
      the adoption of SFAS 123(R), we applied SFAS 123, amended by SFAS 148,
“ *Accounting
      for Stock-Based Compensation — Transition and Disclosure* ”
(“SFAS
      148”), which allowed companies to apply the existing accounting rules under
      Accounting Principles Board No. 25, “ *Accounting
      for Stock Issued to Employees* ,”
(APB
      25) and related Interpretations. In general, as the exercise price of options
      granted under these plans was equal to the market price of the underlying common
      stock on the grant date, no stock-based employee compensation cost was
      recognized in our statements of operations for periods prior to the adoption
      of
      SFAS 123(R). As required by SFAS 148 prior to the adoption of SFAS 123(R),
      we
      disclosed reported net loss which included stock-based compensation expense
      of
      $0, calculated in accordance with APB 25, and then pro forma net loss as if
      the
      fair-value-based compensation expense calculated in accordance with SFAS 123
      had
      been recorded in the financial statements. The following table illustrates
      the
      effect on net loss after tax, and net loss per common share, as if we had
      applied the fair value recognition provisions of SFAS 123 to employee
      stock-based compensation during the three months ended March 31, 2005:





Three
                  Months
                Ended
              March
                31, 2005Net
                loss as reported
            
            $
            (1,798,171
            )Less:
                    total stock-based compensation expense for employees
                  determined
                    under the SFAS 123 fair-value method, net
                    of
                  tax
                    benefit of $0
            
            
            (271,821
            )Net
                loss, pro forma
            
            $
            (2,069,992
            )Basic
                and diluted net loss per share:As
                reported
            
            $
            (0.05
            )Pro
                forma
            
            $
            (0.06
            )





The
      fair
      value of employee and non-employee stock-based awards was estimated using the
      Black-Scholes valuation model with the following weighted-average assumptions
      for the three months ended March 31, 2006 and 2005:





Employee
                      Stock Options
                    Three
                      Months ended March 31,
            Non-employee
                    Stock Options
                Three
                  Months ended March 31,2006
            
            
            2005
            
            
            2006
            
            
            2005Expected
                Life in Years
            
            
            3.00
            
            
            5.00
            
            
            4.00
            
            
            5.00Volatility
            
            
            91.00
            %
            
            107.00
            %
            
            91.00
            %
            
            107.00
            %Interest
                Rate
            
            
            4.57
            %
            
            3.30
            %
            
            4.55
            %
            
            3.30
            %Yield
                Rate
            
            
            0.00
            %
            
            0.00
            %
            
            0.00
            %
            
            0.00
            %




Our
      computation of expected volatility for the three months ended March 31, 2006
      is
      based on a combination of historical and market-based implied volatility. Our
      computation of expected life is based on historical exercise patterns. The
      interest rate for periods within the contractual life of the award is based
      on
      the U.S. Treasury yield curve in effect at the time of grant.




8


Prior
      to
      the adoption of SFAS 123(R), on December 29, 2005, the Company’s Board of
      Directors approved the acceleration of vesting for all unvested employee stock
      options granted under the ANTs software inc. 2000 Stock Option Plan (the
“Plan”), as amended, excluding those stock options held by non-employee
      directors whose options had an exercise price less than $2.10, and certain
      employees who did not consent to such acceleration. The closing sale price
      of
      ANTs’ common stock on December 29, 2005 was $2.10. This was the price used to
      determine which options were “in” or “out of the money”. The Company accelerated
      a total of 2,621,004 options, of which 687,866 were in the money, and 1,933,138
      were out of the money. The vesting of the stock options was accelerated to
      December 29, 2005 so that the Company would not incur approximately $4.7 million
      in compensation expense in the 2006-2008 fiscal years that otherwise would
      have
      been recorded under SFAS 123(R).




Stock
      option activity (including both employee and non-employee grants) for the three
      months ended March 31, 2006, is as follows:





Shares
                Available
              For
                Grant
            
            
            Outstanding
              Stock
                Options
            
            
            Weighted
                  Average
                Exercise
              Price
            
            
            Aggregate
                Intrinsic
              ValueOutstanding
                at January 1, 2006
            
            
            1,818,940
            
            
            8,060,801
            
            $
            2.17
            
            
            N/AGranted
            
            
            (260,000
            )
            
            260,000
            
            $
            2.26
            
            
            N/AExercised
                through cash consideration
            
            
            -
            
            
            (93,902
            )
            $
            1.18
            
            $
            106,402Retired
                or forfeited
            
            
            53,837
            
            
            (53,837
            )
            $
            1.30
            
            
            N/AOutstanding
                at March 31, 2006
            
            
            1,612,777
            
            
            8,173,062
            
            $
            2.19
            
            $
            2,370,188Exercisable
                at March 31, 2006
            
            
            
            
            
            7,632,570
            
            $
            2.18
            
            $
            2,289,771




The
      aggregate intrinsic value of total stock options outstanding and exercisable,
      and of total stock options exercised during the three months ended March 31,
      2006 in the table above, represents the total pretax intrinsic value (i.e.,
      the
      difference between the Company’s closing stock price on March 31, 2006 and the
      exercise price, times the number of shares) that would have been received by
      the
      option holders had all option holders exercised their options on March 31,
      2006.
      This amount will change as the fair market value of the Company’s stock changes.
      The closing market price of the stock on March 31, 2006 was $2.48.





As
      of
      March 31, 2006, there was approximately $1 million of total unrecognized
      compensation cost, adjusted for forfeitures, related to non-vested stock-based
      payments granted to Company employees and contractors, which is expected to
      be
      recognized over a weighted-average period of approximately 3 years. Total
      unrecognized compensation cost will be adjusted for future changes in estimated
      forfeitures.




**Recent
      Accounting Pronouncements** **




In
      May
      2005, the FASB issued SFAS 154, “ *Accounting
      Changes and Error Corrections”.* SFAS
      No.
      154 establishes new standards on accounting for changes in accounting
      principles. Pursuant to the new rules, all such changes must be accounted for
      by
      retrospective application to the financial statements of prior periods unless
      it
      is impracticable to do so. SFAS No. 154 supersedes Accounting Principles
      Bulletin (APB) Opinion 2, “ *Accounting
      for Changes”* and
      SFAS
      No. 3 “ *Reporting
      Accounting Changes in Interim Financial Statements”,* though
      it
      carries forward the guidance of those pronouncements with respect to accounting
      for changes in estimates, changes in the reporting entity, and error
      corrections. This statement is effective for accounting changes and error
      corrections made in years beginning after December 15, 2005, with early adoption
      permitted for changes and corrections made in years beginning after May 2005.
      The Company does not expect adoption of SFAS No. 154 to have a material impact
      on the Company's financial statements.




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




9





**4.**  **PREPAID
      EXPENSE FROM WARRANT ISSUED TO CUSTOMER, NET**




Prepaid
      expense from warrant issued to customer, net, consists of the original charge
      of
      $173,021 related to the issuance of a warrant to a customer in 2005 to purchase
      100,000 shares of the Company’s Common Stock, in exchange for a guarantee by
      that customer to provide maintenance and support services for the ANTs Data
      Server to the Company’s customers should the Company be unable to provide such
      services. The fair value of the warrant was calculated using the Black-Scholes
      valuation model. The warrant has an exercise price of $3.50 per share and may
      be
      exercised until July 2008. The prepaid expense is being amortized into the
      statements of operations on a straight-line basis, over 36 months, commencing
      January 2006. Amortized expense for the first quarter of 2006 was $14,418,
      leaving a net balance in the prepaid asset account of $158,603.




The
      prepaid expense is being evaluated periodically for signs of impairment, and
      will be written down to its impaired value as necessary, in accordance with
      the
      guidance in Statement of Financial Accounting Standards No. 144, *“Accounting
      for the Impairment or Disposal of Long-Lived Assets”* .





**5.** **EQUITY
      TRANSACTIONS**





A
      comprehensive summary of transactions occurring in stockholders’ equity for the
      three months ending March 31, 2006 and 2005 is presented in the table
      below.





Changes
                in Stockholders' EquityFor
                the Three Months ended March 31,2006
            
            2005Total
                stockholders' equity, beginning of period
            
            $
            6,412,586
            
            $
            1,529,181Cash
                transactions:Proceeds
                from private placements:Sales
                of "F" Units at $1.00 per unit
            
            
            -
            
            
            933,000Cash
                commissions on sales of "F" units
            
            
            -
            
            
            (90,350
            )Sales
                of "H" units at $1.60 per unit
            
            
            204,000
            
            
            -Cash
                commissions on sales of "H" units
            
            
            (20,000
            )
            
            -Net
                proceeds from private placements
            
            
            184,000
            
            
            842,650Proceeds
                from warrant exercises:Warrants
                with discounted exercise price of $1.50 and $1.40per
                share, respectively
            
            
            109,998
            
            
            2,996,396Cash
                commissions on exercise of warrants
            
            
            (39,125
            )
            
            (104,550
            )Net
                proceeds from warrant exercises
            
            
            70,873
            
            
            2,891,846Funds
                received from exercise of stock options
            
            
            111,005
            
            
            25,416Total
                cash transactions
            
            
            365,878
            
            
            3,759,912Non-cash
                transactions:Employee
                compensation expense - vesting of stock options
            
            
            88,188
            
            
            -Commissions
                paid by issuing 63,181 "F" units to placement agent
            
            
            -
            
            
            -Non-employee
                compensation expense:Restricted
                stock issued to vendor
            
            
            11,000
            
            
            -Stock
                  options issued to and exercised by executive recruiter in payment for
                  search for new president
            
            
            -
            
            
            3,526Vesting
                of stock options issued to contractors
            
            
            3,851
            
            
            1,146Total
                non-employee compensation expense
            
            
            14,851
            
            
            4,672Total
                non-cash transactions
            
            
            103,039
            
            
            4,672Net
                loss and comprehensive net loss for the year
            
            
            (2,750,979
            )
            
            (1,798,171
            )Total
                stockholders' equity, end of period
            
            $
            4,130,524
            
            $
            3,495,594




10


During
      the
      three months ended March 31, 2006, the Company sold to accredited investors,
      through a private offering, 127,500 H Units at a price of one dollar and sixty
      cents ($1.60) per H Unit, with each H Unit consisting of (i) one (1) share
      of
      common stock of the Company, and (ii) a warrant to purchase up to one (1) share
      of common stock of the Company at a per share exercise price of three dollars
      and twenty-five cents ($3.25), exercisable until April 14, 2008. The Company
      received $204,000 in gross proceeds from the offering. No commissions were
      incurred for these sales. The sales of these securities were made in reliance
      upon Rule 506 and Section 4(2) of the Securities Act of 1933.





During
      the
      three months ended March 31, 2006 ,
      one
      investor exercised 73,332 warrants with an original exercise price of $2.00
      at a
      discounted price of $1.50, resulting in gross proceeds to the Company of
      $109,998. The
      sales
      of these securities were made in reliance upon Rule 506 and Section 4(2) of
      the
      Securities Act of 1933.




During
      the
      three months ended March 31, 2006, the Company paid cash commissions totaling
      $20,000 in connection with the H Unit offering that occurred during the fourth
      quarter of 2005. As well, the Company paid $39,125 in cash commissions in
      connection with the warrant exercises that occurred during the fourth quarter
      of
      2005.





During
      the
      three months ended March 31, 2006, a total of 93,902 shares of common stock
      of
      the Company were purchased through the exercise of stock options, resulting
      in
      cash proceeds to the Company of ** $111,005.





For
      the
      fiscal period ending March 31, 2006, the Company recognized $88,188 in
      compensation expense related to vesting of employee stock options, and $3,851
      in
      professional fees related to the vesting of non-employee stock
      options.





From
      January 2, 2005 through January 12, 2005, the Company sold to accredited
      investors, through a private offering, 933,000 F Units at a price of one dollar
      ($1.00) per F Unit, with each F 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 exercise price of two dollars
      ($2.00), exercisable until November 12, 2007. The gross proceeds from the
      offering were $933,000. The Company issued 963,000 shares related to the F
      Unit
      offering in January 2005, including 30,000 shares that had been recorded as
      common stock subscribed as of December 31, 2004. The Company paid cash
      commissions totaling approximately $90,350 and issued 63,181 F Units to the
      placement agent in January 2005 in connection with this private offering. The
      sales of these securities were made in reliance upon Rule 506 and Section 4(2)
      of the Securities Act of 1933.





From
      February 1, 2005 through March 31, 2005, the Company offered all shareholders
      who owned warrants with an exercise price of $2.00 the right to exercise their
      warrants at a discounted price of $1.40 per share. A total of 2,140,283 warrants
      was exercised, resulting in gross proceeds to the Company of $2,996,396. The
      Company paid cash commissions of $109,800 in connection with these warrant
      exercises in March and April of 2005. The
      sales
      of these securities were made in reliance upon Rule 506 and Section 4(2) of
      the
      Securities Act of 1933.




On
      February 25, 2005, a prior
      consultant exercised an option for 12,886 shares, generating cash proceeds to
      the Company of $24,999. The option was previously granted in lieu of cash
      compensation. Non-employee stock compensation expense of $3,526 related to
      the
      exercise was recognized during the three months ended March 31,
      2005.





For
      the
      fiscal period ending March 31, 2005, the Company recognized $1,146 in
      professional fee expense related to the vesting of non-employee stock options
      during this period.





During
      the
      three months ended March 31, 2005, a total of 28,300 shares of common stock
      of
      the Company were purchased through the exercise of stock options, resulting
      in
      cash proceeds to the Company of ** $25,416.




**6.**  **WARRANTS
      AND STOCK OPTIONS**





As
      of
      March 31, 2006, the Company had outstanding warrants to purchase up to
      13,288,504 shares of common stock, and options to purchase up to 8,173,062
      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.




11




Stock
              Options
            
            Warrants
            
            TotalBalance,
                December 31, 2005
            
            
            8,060,801
            
            
            13,121,580
            
            
            21,182,381Granted
            
            
            260,000
            
            
            240,256
            
            
            500,256Exercised
            
            
            93,902
            
            
            73,332
            
            
            167,234Retired/forfeited
            
            
            53,837
            
            
            -
            
            
            53,837Balance,
                March 31, 2006
            
            
            8,173,062
            
            
            13,288,504
            
            
            21,461,566





As
      of
      March 31, 2006, 1,612,777 options were available in the option reserve for
      future grants.





**7.
      DEFERRED REVENUES**





As
      of
      March 31, 2006 deferred revenues of $84,114 consisted of both payments from
      customers in advance for one-year software maintenance under perpetual licenses,
      and for the license and maintenance fees for three-year arrangements for which
      the license and maintenance support fees were not individually identified and
      priced. The deferred revenues are being amortized ratably into the statements
      of
      operations over the applicable periods. During the quarter ended March 31,
      2005,
      the Company recognized $26,389 in deferred revenue in the Statement of
      Operations.





**8.** **COMMITMENTS AND CONTINGENCIES**





On
      April
      27, 2005, the Company entered into a lease with Bayside Plaza, a partnership,
      for approximately 15,600 square feet of general commercial offices located
      at
      700 Airport Boulevard, Suite 300, Burlingame, California (the “Premises”). The
      Company moved its principal offices to these Premises on May 2, 2005. The
      Premises are used for the purposes of general office use and for software
      development. The lease has an initial term of three years, subject to the
      Company's right to extend the term of the lease for a total of six additional
      years. The base rent under this lease is $16,060 per month for the first year,
      $17,520 per month for the second year and $20,440 per month for the third year.
      The Company received abated rent for the period from May 1, 2005 to July 30,
      2005. In the event that the Lease is not extended, the total obligations of
      the
      Company related to the lease amount to $600,060.





The
      Company is recognizing rent expense for this lease in accordance with Financial
      Technical Bulletin 85-3 (“FTB 85-3”), *“Accounting
      for Operating Leases with Scheduled Rent Increases”.* The base
      rent, the effects of the scheduled rent increases, and the effects of the rent
      abatement are being recognized on a straight-line basis over the lease term.
      This results in monthly rental expense of $16,668. During the quarter ended
      March 31, 2006, the Company recognized a total of $50,004 in rental expense
      for
      this lease.





As
      part of a
      License Agreement (“Agreement”) dated August 1, 2005 with a certain customer,
      the Company has agreed to issue a warrant to purchase 50,000 shares of
      restricted stock of the Company to the customer thirty (30) days after the
      Software Acceptance Date, subject to approval from the Company’s board of
      directors, compliance with applicable securities laws and regulations and
      Licensee representing that it is an accredited investor. The warrant has an
      exercise price of $3.50 per share and shall be exercisable for a period of
      three
      years from the Effective Date of the warrant. If the warrant is not granted
      within thirty (30) days after the Software Acceptance Date without fault of
      Licensee, then Licensee will have the right to terminate the Agreement on notice
      to the Company, and the Company will immediately refund to Licensee all monies
      theretofore paid to the Company under this Agreement. To date, the customer
      has
      not fully accepted the software, thus the warrant has not been
      issued.





**9.
      SUBSEQUENT EVENTS**





On
      May 2,
      2006, the Company completed a private offering of restricted stock, and raised
      approximately $9 million. Net proceeds from the offering were approximately
      $8.3
      million after deducting placement agent fees of approximately $700 thousand.
      The
      Company anticipates that this new capital, combined with its $3.5 million cash
      balance at March 31, 2006, will be sufficient to fund operations and investments
      in capital equipment through March 2007 at its current levels of revenue and
      expenditures.




12





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





The
      following information should be read in conjunction with the financial
      statements and notes thereto in Part 1 Item 1, Financial Statements for this
      Quarterly Report on Form 10-Q and with Item 6, Management’s Plan of Operations,
      in the Company’s Annual Report on Form 10-KSB for the year ended December 31,
      2005.





*Certain
      statements contained in this Form 10-Q constitute forward-looking statements
      within the meaning of Section 27A of the Securities Act of 1933, as amended
      and
      Section 21E of the Securities Exchange Act of 1934, as amended. Such
      forward-looking statements herein are based on current expectations that involve
      a number of risks and uncertainties. Such forward-looking statements are based
      on assumptions that the Company will have adequate financial resources to fund
      the development and operation of its business, that there will be no material
      adverse change in the Company’s operations or business, that the Company will
      meet success in marketing and selling its products, and that the Company will
      be
      able to continue to attract and retain skilled employees necessary for its
      business, among other things. 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 of these assumptions are difficult or impossible to predict
      accurately and many 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
      or
      products to work as anticipated, 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, failure to recruit adequate personnel,
      and problems with protection of intellectual property, among others.* *The
      words “believe,” “estimate,” “expect,” “intend,” “anticipate” “should”, “could”,
“may”, “plan” and similar expressions and variations thereof identify some of
      these forward-looking statements.* *Management
      decisions, including budgeting, are subjective in many respects and periodic
      revisions must be made to reflect actual conditions and business developments,
      the impact of which may cause 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-Q, 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
      relational database management system (“RDBMS”) that is intended to
      significantly lower database infrastructure costs and significantly improve
      application performance. The Company anticipates that over the next twelve
      months its focus will be on sales, marketing, supporting customers, and
      continued research and development.





**Technology
      Development**





The
      ANTs
      Data Server is based on technologies that provide an advantage over other RDBMS’s:
      Universal Compatibility and the ANTs Concurrency Engine.





**Universal
      Compatibility**





Applications
      written to work with one RDBMS are typically incompatible with other RDBMSs
      due
      to proprietary extensions developed and popularized by other RDBMS vendors.
      This
      has the effect of locking in customers to one RDBMS vendor because it will
      generally be cost-prohibitive and time-consuming to port an application which
      currently works with one RDBMS to work with another RDBMS. ANTs has developed
      technology that allows the ANTs Data Server to natively process these
      proprietary extensions from almost all popular RDBMS vendors. This technology,
      which is tightly integrated into the ANTs Data Server, allows customers to
      port
      applications to the ANTs Data Server more easily and at less cost. ANTs believes
      that this universal compatibility technology is not present in any other RDBMS
      product.





**The
      ANTs Concurrency Engine (ACE)**





Applications
      which require access to rapidly changing, shared data often suffer from poor
      performance and scalability because of database locking. The ANTs
      Concurrency Engine (ACE), which comprises
      a highly efficient data-processing engine coupled with lock-free data
      structures, eliminates virtually all data locking. ACE is
      architected into the core of the ANTs Data
      Server and
      enables performance improvements of  two
      to
      fifteen times over other RDBMS’s. The
      Company has applied for eight patents on the concepts which underlie ACE, four
      of which have been granted by the Patent and Trademark Office.




13


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 to determine what features are and will be most in demand. The Company
      intends to mobilize its engineering resources around developing those features.





**Marketing**





The
      benefits of the Company’s Universal Compatibility and ANTs Concurrency Engine
      technologies apply to a wide variety of potential customers and partners.
      Accordingly, the Company’s go-to-market strategy includes:





·
            Focus
                on large enterprise customers who can realize significant savings
                by
                migrating applications away from expensive RDBMS’s and to the ANTs Data
                Server.


·
            Focus
                on industry segments where high-performance applications demand a
                high-performance database.


·
            Sell
                the ANTs Data Server through three sales
                channels;


o
            Direct
                sales to end-users.


o
            Through
                independent software vendors who will incorporate the ANTs Data Server
                with their own product which they will sell to their
                customers.


o
            Through
                value added resellers and system integrators - companies which generally
                have deep expertise in certain vertical markets and who integrate
                the best
                products to develop complete solutions for their customers.





**Results
      of Operations**





The
      results of operations for the three months ending March 31, 2006 and 2005 are
      summarized below.




Summary
                of Statements of Operations(in
                000's)Three
                Months ending March 31,2006
            
            
            2005
            
            
            %
                ChangeRevenues
            
            $
            68
            
            $
            87
            
            
            -22
            %Operating
                expenses
            
            
            (2,828
            )
            
            1,888
            
            
            50
            %Loss
                from operations
            
            
            (2,760
            )
            
            (1,801
            )
            
            53
            %Other
                income (expense), net
            
            
            9
            
            
            3
            
            
            200
            %Net
                loss
            
            $
            (2,751
            )
            $
            (1,798
            )
            
            53
            %Net
                  loss per share - basic and diluted
            
            $
            (0.06
            )
            $
            (0.05
            )
            
            21
            %Shares
                  used in computing basic and diluted net loss per share (in
                  000's)
            
            45,180
            
            
            37,176
            
            
            22
            %





**Revenues**





During
      the
      first three months of 2006, the Company invoiced an aggregate of $93,900,
      comprising $53,900 related to the license of the ANTs Data Server and related
      one-year maintenance and support agreements, and $40,000 related to renewals
      of
      annual maintenance contracts. Of the total invoiced amount, the Company
      recognized license fee revenue of $42,000 in the statements of operations during
      the three months ended March 31, 2006, and deferred revenue of $51,900 related
      to one-year support and maintenance contracts on the balance sheet. The Company
      recognized $26,389 of the deferred revenue in the statement of operations for
      the three months ended March 31, 2006, leaving a total of $84,114 in deferred
      revenue on the balance sheet as of March 31, 2006. The deferred revenue is
      being
      amortized ratably over the twelve-month period from the contract
      dates.




14




During
      the
      first three months of 2005, the Company invoiced an aggregate of $114,100.
      Of
      the total amount invoiced, the Company recognized license fee revenue of $86,100
      in the statements of operations during the three months ended March 31, 2005,
      and deferred revenue of $28,000 related to one-year support and maintenance
      contracts on the balance sheet. The Company recognized $667 of the deferred
      revenue in the statement of operations for the three months ended March 31,
      2005.





**Overview
      of Operating Expenses**





During
      the
      first quarter of 2005, the Company made its first sales, and largely completed
      its transition to focusing the majority of its efforts on marketing the product,
      with on-going support from Research and Development in refining and increasing
      the functionality of the ANTs Data Server (“ADS”) in response to requests from
      current and potential customers. During the three months ending March 31, 2006,
      the Company’s sales and marketing activities expanded dramatically, both as
      compared to the same period in 2005, and as compared to the growth in Research
      and Development and General and Administrative activities over the same period.





From
      2005
      to 2006, Sales and Marketing expense increased from 31% to 38% of total
      operating expenses, while over the same time period Research and Development
      operating expense increased from 42% of the total to 43%. General and
      Administrative expense declined from 27% of the total to 19%. All areas of
      the
      Company expanded in 2006 as the company added personnel and relocated its
      offices (in May 2005) to accommodate growth. In total, average full-time
      equivalent (“FTE”) staff grew from 25 in 2005 to 42 in 2006, an increase of 17
      or 68%.





In
      accordance with Financial Accounting Standards Board Statement No. 123 (R) *“Share-Based
      Payment”* (“Statement”) *”* ,
      as of
      January 1, 2006, the Company began recognizing employee stock-based compensation
      expense related to employee stock option vesting in the statement of operations.
      The Statement and its application to the Company’s financial statements is
      discussed in greater detail in “Critical Accounting Policies and Estimates”
below. The total employee stock-based compensation expense recognized in the
      three months ended March 31, 2006 was $88 thousand, and total non-employee
      stock-based compensation recognized was $4 thousand, for total stock-based
      compensation expense of $92 thousand, which was recognized in the first quarter
      of 2006. The details by Company functional area (departments) are discussed
      below.





Operating
      expenses by department for the three months ending March 31, 2006 and 2005
      were
      as follows:





Operating
                Expenses - Three Months ended March 31,2006
            
            
            2005$
                in 000's
            
            
            %
                of Total
            
            
            %
                Change
              vs.
              Prior
                Period
            
            
            
            $
                      in 000's
            
            
            %
                of TotalSales
                and marketing
            
            $
            1,072
            
            
            38
            %
            
            86
            %
            
            $
            575
            
            
            30
            %Research
                and development
            
            
            1,230
            
            
            43
            %
            
            56
            %
            
            
            787
            
            
            42
            %General
                and administrative
            
            
            526
            
            
            19
            %
            
            0
            %
            
            
            526
            
            
            28
            %Total
                operating expenses
            
            $
            (2,828
            )
            
            100
            %
            
            50
            %
            
            $
            (1,888
            )
            
            100
            %





**Sales
      and Marketing Expenses**





Sales
      and
      Marketing (“S&M”) expenses consist primarily of employee salaries and
      benefits, consultants’ fees, travel, marketing programs (trade shows, public
      relations, lead generation programs), marketing and sales literature and
      presentations, and allocation of corporate overhead.




15




S&M
      expense increased to $1.07 million in 2006 from $575 thousand in 2005, an
      increase of $497 thousand, or 86%, due primarily to the following:





-
      An
      increase in total compensation expense (including bonuses and commissions)
      from
      $234 thousand in 2005 to $484 thousand in 2006, an increase of $250 thousand,
      or
      107%. Sales staff averaged 14 over the 2006 period compared to 6 in the 2005
      period, an increase in employees of 8, or 133%. Sales bonuses and commissions
      in
      2006 were $47 thousand, as compared to $54 thousand in 2005. Also, in 2006,
      the
      Company recognized $24 thousand in S&M-related share-based compensation
      expense related to the vesting of employee options, as compared to $0 in
      2005.


-
      A
      decrease in professional fees of $83 thousand, or 41% (from $203 thousand in
      2005 to $120 thousand in 2006), as the Company relied less on outside
      contractors, and more on in-house employees;


-
      An
      increase in direct sales and marketing expense (public relations, advertising,
      events and promotions, etc.) from $33 thousand in 2005 to $233 thousand in
      2006,
      an increase of $200 thousand, or 606%, resulting from greatly increased
      marketing efforts and programs in the first quarter of 2006 as compared to
      the
      first quarter of 2005;


-
      An
      increase in marketing-related travel and entertainment from $36 thousand in
      2005
      to $100 thousand in 2006, an increase of $64 thousand, or 178%, related to
      greatly increased sales activities in 2006.


-
      An
      increase in allocated corporate overhead from $69 thousand in 2005 to $130
      thousand in 2006; an increase of $61 thousand, or 88%, due to the increase
      in
      average S&M FTE over the same period.





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





**Research
      and Development Expenses**





Research
      and development (“R&D”) expenses consist primarily of employee salaries and
      benefits, fees to consultants, depreciation on equipment and software, and
      allocation of corporate overhead.




R&D
      expense increased to $1.23 million in 2006 from $787 thousand in 2005, an
      increase of $443 thousand, or 56%, due primarily to the following:





-
      An
      increase in total compensation expense from $583 thousand in 2005 to $823
      thousand in 2006, an increase of $240 thousand, or 41%, as additional engineers
      were hired to further refine the product in accordance with actual and potential
      customer demands. The number of average R&D personnel increased from 14 in
      2005 to 22 in 2006, an increase of 8 engineers, or 57%. Also, in 2006, the
      Company recognized $56 thousand in share-based compensation expense related
      to
      the vesting of R&D employee stock options, as compared to $0 in
      2005;


-
      An
      increase in expenses related to engineering consultants from $89 thousand in
      2005 to $204 thousand in 2006; an increase of $115 thousand, or 129%. The
      consultants were used for quality assurance testing, and proof of conversion
      projects;


- An
      increase in allocated corporate overhead from $37
      thousand in 2005 to $120 thousand in 2006, an increase of $83 thousand, or
      224%,
      primarily due to the increase in average R&D FTE personnel over the same
      period.





The
      Company expects that, if sufficiently funded, its R&D expenses will increase
      moderately over the next twelve months as additional staff is recruited, and
      additional hardware is purchased, to support sales and marketing
      needs.





**General
      and Administrative Expenses**




General
      and administrative (“G&A”) expense stayed level from the first quarter of
      2005, as compared to the first quarter of 2006 at $526 thousand in both
      quarters, due primarily to the following:





-
      Total
      compensation expense increased from $275 thousand in 2005 to $319 thousand
      in
      2006, an increase of $44 thousand, or 16%, due to the addition of a staff
      accountant in 2006. Average G&A FTE personnel was 6 in 2006 as compared to 5
      in 2005. This represents an increase of 1 person, or 20%. Also, in 2006, the
      Company recognized $8 thousand in G&A-related share-based compensation
      expense related to the vesting of employee stock options, as compared to $0
      in
      2005;


-
      Medical
      insurance premiums increased from $48 thousand in 2005 to $77 thousand in 2006,
      an increase of $29 thousand, or 60%. The increase is attributable to the
      increase in total average FTE personnel of 17, or 68%, from the first quarter
      of
      2005 to the same period in 2006;




16
 
  -
        Bad debt
        expense of $34 thousand in 2006 as compared to $0 in 2005;
 -
        Total
        facilities costs increased from $34 thousand in 2005 to $104 thousand in
        2006,
        an increase of $70 thousand, or 206%. The increase is attributable to moving
        the
        corporate offices in May 2005 (which increased the Company’s monthly rent
        expense from $6 thousand to approximately $16.7 thousand), and increased
        utilities expense in 2006 related to the expansion of the computer
        lab;


-
      Amortization of prepaid warrant expense of $14.4 thousand in 2006 as compared
      to
      $0 in 2005;


-
      General
      administrative expense (supplies, stationery, postage, corporate insurance,
      etc.) increased from $57 thousand in 2005 to $79 thousand in 2006, an increase
      of $22 thousand, or 39%, as total company average FTE personnel increased from
      25 to 42 over the same period;


-
      Professional fees related to accounting, investor relations and legal decreased
      from $216 thousand in 2005 to $142 thousand in 2006, a decrease of $74 thousand,
      or 34%. Accounting fees declined primarily due to the Controller transferring
      from outside consultant status to employee status, effective April 2005.
      Investor relations and legal expenses declined as there were fewer
      capital-raising activities in 2006 as compared to 2005;


-
      The
      increases in G&A expenses have been partially reduced by the allocation of
      corporate overhead out to the S&M and R&D areas. The allocation
      increased from $106 thousand in 2005 to $249 thousand in 2006, an increase
      of
      $143 thousand, or 135%. The increase in overhead allocated to other areas has
      increased in 2006 as average FTE personnel has increased in both S&M and
      R&D, while remaining relatively level in G&A during the
      period.





The
      Company expects that, if sufficiently funded, its general and administrative
      expenses will increase moderately as the Company expands. In 2006, the Company
      is required to implement the processes and procedures necessary to effect
      compliance with Section 404 of the Sarbanes-Oxley Act of 2002. In addition
      to
      consulting expenses, the Company will incur increased audit fees, as the outside
      auditors will be required to issue an opinion on the effectiveness of the
      Company’s internal controls over the financial reporting process during 2006.
      Although the Company’s total cost of compliance in 2006 is presently unknown,
      preliminary investigation indicates that the cost could be in the $400 - $600
      thousand range.





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.





**Other
      Income (Expense), Net**





During
      the
      three months ended March 31, 2006 and 2005, Other Income (Expense), Net was
      $9.2
      thousand and $3 thousand, respectively. In both periods, the income consisted
      primarily of interest income earned on bank deposits, net of interest expense
      paid on credit card facilities. Interest income in 2006 was $9.7 thousand,
      which
      was $6.2 thousand, or 207%, higher than the $2.5 thousand earned in 2005, due
      to
      the increase in average cash balances in 2006 as compared to 2005. The average
      monthly cash balance during the first quarter of 2006 was $5 million, as
      compared to $2.5 million during the 2005 period; an increase of $2.5 million,
      or
      100%. The increase in cash balances is due to capital that was raised between
      April 1, 2005 and March 31, 2006. Interest expense rose from $915 in 2005 to
      $1.47 thousand in 2006, an increase of $555, or 61%.





**Liquidity
      and Capital Resources**





For
      the
      last five years, the Company has reported negative cash flow from operations.
      During the period 2000-2004, the Company was focused primarily on research
      and
      development with first sales occurring in the first quarter of 2005. Throughout
      the last five years, the Company has been supported by cash flows from financing
      activities, primarily in the form of equity, rather than debt. At present,
      ANTs
      has no long-term debt.





The
      Company has offered several private placements each year. The offerings
      typically consist of Units, which give the investor shares of restricted common
      stock at a discount to the then-current market price, and a warrant to purchase
      the same number of restricted shares of common stock at a fixed price set at
      a
      premium to the then-current market price. The warrants typically have a life
      of
      three years. The Company’s investing activities have been focused almost
      entirely on the acquisition of computer equipment, and expansion of electrical
      and air-conditioning capacity in its development and testing laboratory. The
      expenditures have been significantly less than the funds provided by financing
      activities; the remainder of the capital raised has been used to support
      operations.




17


To
      date,
      revenue from sales has been minimal. During fiscal 2005, revenue totaled $466
      thousand. In the first quarter of 2006, revenue was $68 thousand. These revenues
      are significantly less than the Company’s need for funds.





During
      fiscal 2005, the Company used $7.6 million in operations, and $725 thousand
      in
      investing activities. The Company raised approximately $13.2 million in equity
      capital, and had a cash balance of $6.4 million at December 31, 2005. At that
      time, the cash on hand was sufficient to fund operations for approximately
      six
      months in 2006, assuming that no further cash came in.





During
      the
      first quarter of 2006, operations used approximately $3.1 million in cash,
      and
      investing activities consumed another $124 thousand. Since revenues during
      the
      period were $68 thousand, the Company relied on cash flows from financing
      activities, which provided $366 thousand, and cash on hand, to fund operations
      and purchases of computer equipment. Cash on hand decreased from $6.4 million
      on
      December 31, 2005 to $3.5 million at March 31, 2006.





On
      May 2,
      2006, the Company completed a private offering of restricted stock, and raised
      approximately $9 million. Net proceeds from the offering were approximately
      $8.3
      million after deducting placement agent fees of approximately $700 thousand.
      The
      Company anticipates that this new capital, combined with its $3.5 million cash
      balance at March 31, 2006, will be sufficient to fund operations and investments
      in capital equipment through March 2007 at its current levels of revenue and
      expenditures.





The
      Company has three potential funding sources: 1) Raising funds through private
      placements of its stock and warrants; 2) as the Company develops close
      relationships with large partners, it will pursue strategic investments from
      those partners; and 3) the Company has begun generating revenue and expects
      to
      continue generating revenue during the next twelve months and, if successful,
      this should be a source of some operating funds. There can be no assurance
      that
      any or all of these sources will provide sufficient funds to support the
      Company’s operations beyond March 2007. The Company intends to continue its
      acquisition of computer-related equipment to expand and update its computer
      laboratory; however, the Company presently has no commitments to acquire assets
      that would have a material impact on the balance sheet or statement of cash
      flows. The Company plans to fund all acquisitions with cash provided by
      operations and/or cash received from financing activities.





During
      the
      three most recent fiscal years, inflation and changing prices have had little
      or
      no effect on the Company’s operations or financial position.





**Off-Balance
      Sheet Arrangements**





As
      of
      March 31, 2006, the Company had certain off-balance sheet arrangements as
      described below.





On
      April
      27, 2005, the Company entered into a lease with Bayside Plaza, a partnership,
      for approximately 15,600 square feet of general commercial offices located
      at
      700 Airport Boulevard, Suite 300, Burlingame, California (the "Premises").
      The
      Company moved its principal offices to these Premises on May 2, 2005.The
      Premises are used for the purposes of general office use including, without
      limitation, hosting server operations and for software development. The lease
      has an initial term of three years, subject to the Company's right to extend
      the
      term of the lease for a total of six additional years. The base rent under
      this
      lease is $16,060 per month for the first year, $17,520 per month for the second
      year and $20,440 per month for the third year. The Company received abated
      rent
      for the period from May 1, 2005 to July 30, 2005. In the event that the Lease
      is
      not extended, the total obligations of the Company there under amount to
      $600,060.





The
      Company is recognizing rent expense for this lease in accordance with Financial
      Technical Bulletin 85-3 (“FTB 85-3”), *“Accounting
      for Operating Leases with Scheduled Rent Increases”.* The base
      rent, the effects of the scheduled rent increases, and the effects of the rent
      abatement are being recognized on a straight-line basis over the lease term.
      This results in monthly rental expense of $16,668. During the three months
      ended
      March 31, 200, the Company recognized a total of $50,004 in rental expense
      for
      this lease.




18




The
      table
      below presents the Company’s total long-term contractual obligations as of March
      31, 2006, for both on and off-balance sheet categories.




Payments
                Due by PeriodContractual
                Obligations
            
            
            Total
            
            
            Less
                  than
              1
                Year
            
            
            1-3
              Years
            
            
            3-5
              Years
            
            
            More
                than
              5
                YearsOperating
                lease obligations
            
            $
            471,580
            
            $
            208,780
            
            $
            262,800
            
            
            -
            
            
            -





**Critical
      Accounting Policies and Estimates**





*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:




·
            Revenue
                recognition


·
            Stock-based
                compensation


·
            Income
                taxes





*Revenue
      Recognition -* We
      recognize revenue in accordance ** with
      the
      provisions of Statement of Position (“SOP”) 97-2 *,
      “Software Revenue Recognition”,* and SOP
      98-9, *“Modification
      of SOP 97-2, Software Revenue Recognition, With Respect to Certain
      Transactions”.* Revenue
      consists primarily of revenue earned under agreements for software licenses,
      maintenance and support (otherwise known as post-contract customer support
      or
“PCS”) and professional services.





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





·
            Persuasive
                evidence of an arrangement exists.


·
            Delivery
                has occurred and there are no future deliverables except post-contract
                customer support (“PCS”).


·
            The
                fee is fixed and determinable. If we cannot conclude that a fee is
                fixed
                and determinable, then assuming all other criteria have been met,
                revenue
                is recognized as payments become due in accordance with paragraph
                29 of
                SOP 97-2.


·
            Collection
                is probable.





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




19


*Stock-Based
      Compensation -* On
      January
      1, 2006, we adopted the provisions of Statement of Financial Accounting
      Standards (“SFAS”) 123(R), *“Share-Based
      Payment”* (the
      “Statement or “SFAS 123(R)”), requiring us to recognize expense related to the
      fair value of our stock-based compensation awards. We elected to use the
      modified prospective transition method as permitted by SFAS 123(R) and therefore
      have not restated our financial results for prior periods. Under this transition
      method, stock-based compensation expense for the three months ended March 31,
      2006 includes compensation expense for all stock-based compensation awards
      granted prior to, but not fully vested, as of January 1, 2006, based on the
      grant date fair value estimated in accordance with the original provisions
      of
      SFAS 123, *“Accounting
      for Stock Compensation”* (“SFAS
      123”). Stock-based compensation expense for all stock-based compensation awards
      granted subsequent to January 1, 2006 is based on the grant date fair value
      estimated in accordance with the provisions of SFAS 123(R). We recognize
      compensation expense for stock option awards on a straight-line basis over
      the
      requisite service period of the award, which is three years. Grants to new
      employees and directors have an initial six month cliff for
      vesting.




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




*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
      completely offset with a valuation allowance.





**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**





None.





**ITEM
      4. 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.







**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 against the Company has been threatened, nor
      does the Company anticipate any such action.





**ITEM
      1A. RISK FACTORS**





***Market
      acceptance of the Company’s products and services is not
      guaranteed*** **.** The
      Company is at an early stage of development and its revenue will depend upon
      market acceptance and utilization of its intended products and services. The
      Company’s product is under constant development and is still maturing. Due to
      economic conditions some 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.





20


***The
      Company competes with
      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. The Company
      is
      aware of efforts by competitors to introduce doubt about the Company’s financial
      stability as it competes to win business. Large competitors 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 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 eight patent applications with the United
      States Patent and Trademark Office and
      intends to file more. Four patents have been granted; 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 an 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, all
      of
      which would materially adversely affect its business.





***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 substantial operating revenues.





**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
      Chief Executive Officer, Boyd Pearce, its President Joseph Kozak, and its
      Chairman, 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.





21


***If
      the Company continues at or exceeds its current rate of 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 carries product and information liability
      or errors and omissions insurance, but in the event that the Company is required
      to defend more than a few such actions, or in the event that it is found liable
      in connection with such an action, its business and operations may be severely
      and materially adversely affected.





***Future
      profitability is not guaranteed.*** **** The
      Company has not recognized any substantial 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 two or three directors at each shareholders
      meeting held for that purpose.




**ITEM
      2.****UNREGISTERED
      SALES OF EQUITY SECURITIES**





During
      the
      three months ended March 31, 2006, the Company sold to accredited investors,
      through a private offering, 127,500 “H” Units at a price of one dollar and sixty
      cents ($1.60) per H Unit (for aggregate consideration of $204,000), with each
      H
      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 exercise price of three dollars and twenty-five cents ($3.25), exercisable
      until April 14, 2008. The sales of these securities were made in reliance upon
      Rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933.





22


During
      the
      three months ended March 31, 2006 ,
      one
      investor exercised 73,332 warrants with an original exercise price of $2.00
      per
      share at a discounted price of $1.50 per share, resulting in gross proceeds
      to
      the Company of $109,998. The
      sales
      of these securities were made in reliance upon Rule 506 of Regulation D and
      Section 4(2) of the Securities Act of 1933.




The
      proceeds from these sales of unregistered securities will be used for sales,
      product development, marketing and general working capital
      purposes.




**ITEM
      3. DEFAULTS UPON SENIOR
      SECURITIES**





None





**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**




None





**ITEM
      6. EXHIBITS****AND
      REPORTS ON FORM 8-K.**





(a) Exhibits




3.1
            Amended
                and Restated Certificate of Incorporation of the Company, filed as
                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, filed as Exhibit 3.2 to the Company’s
                10-KSB filed on March 22, 2001, are hereby incorporated by
                reference.


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


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


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


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





(b)
      Reports on Form 8-K





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





1)
      On
      January 3, 2006, the Company announced that it was adopting the requirements
      of
      Statement of Financial Standards No. 123(R), *“Share-Based
      Payment”,* to
      account for expense arising from vesting of employee stock options effective
      January 1, 2006; and that furthermore, on January 3, 2006, the Company had
      issued a press release announcing that effective December 29, 2005, its Board
      of
      Directors approved the acceleration of vesting for all unvested stock options
      granted under the ANTs software inc. 2000 Stock Option Plan, as amended, subject
      to certain exclusions; 2) On January 9, 2006 the Company announced information
      regarding funds raised during the fiscal quarter ended December 31, 2005; 3)
      On
      February 10, 2006, the Company published, as required by Regulation FD, a
      summary of a shareholder teleconference call held on February 9, 2006; 4) On
      February 14, 2006, the Company announced the resignation of Director Richard
      LaBarbera from the Company’s Board of Directors effective February 13, 2006; and
      5) On March 13, 2006, the Company announced that it had unilaterally extended
      the exercise termination date for outstanding warrants to purchase an aggregate
      of approximately 6.8 million shares of common stock from March 31, 2006 to
      June
      30, 2006.




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**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:
              May 15, 2006
            By:
            /s/ Boyd PearceBoyd
              Pearce, Chief Executive Officer and DirectorDate:
              May 15, 2006
            By:
            /s/ Kenneth RuotoloKenneth
              Ruotolo, Chief Financial Officer and
              Secretary










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