UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to _______________
Commission file number: 0000796655
________________
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)
801 Mahler Rd, Suite G, Burlingame, CA 94010
(Address of principal executive offices) (Zip Code)
(650) 692-0240
(Registrant's Telephone Number, including area code)
________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange
Act of 1934 duringthe preceding 12 months (or for such shorter period
that the registrant was required to file reports),and (2) has been subject
to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
Common stock, as of the latest practicable date:
15,234,888 shares of common stock as of June 30, 2001
Transitional Small Business Disclosure Format: Yes [ ] No [X]
TABLE OF CONTENTS
PART I. Financial Information
Item 1. Financial Statements .. 3-7
Item 2. Management's Plan of Operation .. 8-9
PART II. Other Information
Item 1. Legal Proceedings .. 9
Item 2. Changes in Securities .. 10
Item 3. Defaults Upon Senior Securities .. 10
Item 4. Submission of Matters to a Vote of Security Holders .. 10
Item 5. Other Matters .. 10
Item 6. Exhibits and Reports on Form 8-K .. 10
Risk Factors .. 11-13
Signatures .. 14
2.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ANTs software inc.
BALANCE SHEETS
June 30, 2001 December 31, 2000
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,761,225 $ 2,609,084
Interest and other receivables 24,769 4,860
Prepaid expenses 360,550 102,947
Total current assets 2,146,544 2,716,891
PROPERTY AND EQUIPMENT:
Computers and software 605,838 565,110
Office furniture and fixtures 26,372 26,372
Less accumulated depreciation (127,404) (65,278)
Property and equipment, net 504,806 526,204
OTHER ASSETS 3,700 3,700
Total assets $ 2,655,050 $ 3,246,795
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 147,313 $ 231,053
Accrued legal fees 40,073 258,742
Notes payable 220,733 29,980
Other liabilities 125,000 -
Total current liabilities 533,119 519,775
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.0001 par value;
100,000,000 authorized;
15,234,888 and 13,082,038 shares issued
and outstanding respectively 1,523 13,082
Common stock subscribed 400,000 1,815,000
Treasury Stock (121,078) (121,078)
Notes receivable from officers for
stock purchases (180,000) (180,000)
Additional paid-in capital 22,304,716 18,804,974
Accumulated deficit (20,404,308) (17,604,958)
Total stockholders' equity 2,121,931 2,727,020
Total liabilities and
stockholders' equity $ 2,655,050 $ 3,246,795
The accompanying notes are an integral part of these financial statements.
3.
ANTs software inc.
STATEMENTS OF OPERATIONS
Three months Six months
ended June 30, ended June 30,
2001 2000 2001 2000
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
REVENUES $ - $ - $ - $ -
OPERATING EXPENSES:
General and administrative
expenses 937,410 1,059,754 2,210,483 1,710,110
Research and development
expenses 277,297 206,728 621,638 321,814
Loss from operations (1,214,707) (1,266,482) (2,832,121) (2,031,924)
OTHER INCOME:
Interest income, net 12,713 75,932 36,457 126,445
Other income 5,655 - 4,171 -
Other income, net 18,368 75,932 40,628 126,445
LOSS BEFORE INCOME TAXES (1,196,339) (1,190,550) (2,791,493) (1,905,479)
INCOME TAXES 3,859 - 7,859 -
NET LOSS $(1,200,198)$(1,190,550) $(2,799,352)$(1,905,479)
BASIC AND DILUTED LOSS PER
COMMON SHARE $ (0.08)$ (0.09) $ (0.19)$ (0.15)
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 14,907,221 12,581,264 14,398,759 12,560,965
The accompanying notes are an integral part of these financial statements.
4.
ANTs software inc.
STATEMENTS OF CASH FLOWS
Six months ended June 30,
2001 2000
CASH FLOWS FROM OPERATING
ACTIVITIES: (Unaudited) (Unaudited)
Net Loss $ (2,799,352) $ (1,905,479)
Adjustments to reconcile net loss
to net cash used by operating Activities:
Depreciation 62,864 5,546
Lawsuit settlement 137,235 -
Compensation expense recognized on
exercise of options 46,800 -
Gain on sale of fixed assets 2,985 -
Changes in operating assets and liabilities:
Prepaid expenses (257,603) (277,447)
Accounts payable & Accrued expenses 41,260 43,082
Other receivables (19,909) (22,265)
Notes payable 190,753 205,131
Accrued legal fees (59,443) (250,775)
Security deposits - (12,365)
Net cash used in operating
activities (2,654,410) (2,214,572)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net (44,451) (281,562)
Net cash used in investing activities (44,451) (293,927)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from private placements 1,730,000 -
Proceeds from exercise of warrants 121,000 150,000
Net cash provided by financing
activities 1,851,000 150,000
NET DECREASE IN CASH (847,859) (2,264,628)
CASH, BEGINNING OF PERIOD 2,609,084 4,882,212
CASH, END OF PERIOD $ 1,761,225 2,536,078
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes $ (7,859) $ -
Interest $ (3,851) $ -
NON-CASH FINANCING ACTIVITY:
On February 23, 2001, the Company issued 400,000 shares of stock as settlement
of a lawsuit claim. See Note 5.
The accompanying notes are an integral part of these financial statements.
5.
ANTs software inc.
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements are presented in accordance with
the requirements for Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly,
they do not include all the disclosures normally required by generally accepted
accounting principles. Reference should be made to the ANTs software inc. (the
"Company") Form 10-KSB for the eight months ended December 31, 2000, for
additional disclosures including a summary of the Company's accounting policies,
which have not significantly changed.
The information furnished reflects all adjustments (all of which were of a
normal recurring nature) which, in the opinion of management, are necessary
to fairly present the financial position, results of operations, and cash
flows on a consistent basis. Operating results for the three months and six
months ended June 30,2001, are not necessarily indicative of the results that
may be expected in the future.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Reclassification - To more clearly reflect the operation of the business, we
have reclassified as research and development expenses certain historical
expenses originally classified as general and administrative. Beginning
January 1, 2000, the subtotals for general and administrative and research
and development expenses have changed. Note that while the subtotals have
changed, total expenses have not.
Basic Net Loss Per Share - Basic net loss per share is calculated using the
weighted-average number of common shares outstanding during the period.
Diluted net loss per share is computed using the weighted-average number of
common and dilutive common equivalent shares outstanding during the period.
The following table presents the calculation of basic and diluted net loss
per share:
Three Months Ended June 30, Six Months Ended June 30,
2001 2000 2001 2000
Net loss $(1,200,198) $(1,190,550) $(2,799,352) $(1,905,479)
Weighted average shares
of common stock outstanding
basic and dilutive 14,907,221 12,581,264 14,398,759 12,560,965
Basic and diluted net
loss per share $ (0.08) $ (0.09) $ (0.19) $ (0.15)
As of June 30, 2001 outstanding options and warrants for the purchase of
6,537,724 shares of common stock at prices ranging from $0.25 to $11.63
were anti-dilutive, and therefore, not included in the computation of diluted
loss per share.
3. EQUITY TRANSACTIONS
In the three month period ended June 30, 2001, warrants to purchase
a total of 7,000 shares were exercised for $21,000, and we completed the sale,
through a private offering, of 782,500 units, 200,000 of which were subscribed
but not yet issued as of June 30, 2001, at a price of $2 per unit, each unit
consisting of (i) One (1) share of Common Stock of the Company, and (ii) a
warrant to purchase up to One (1) share of Common Stock of the Company at a
per share price of Four Dollars ($4.00), exercisable until December 31, 2001.
The Company reclassified $121,078 of Treasury Stock to Additional Paid-In
Capital. Additionally, a former employee exercised an option to purchase
12,000 shares and the Company realized a compensation expense of $46,800.
In December 2000 the Company re-incorporated from Nevada to Delaware and
changed itsname from ANTs software.com to ANTs software inc. As part of
the re-incorporation theCompany's common stock par value was changed from
$0.001 to $0.0001 and the authorized common stock was increased from
20,000,000 to 100,000,000 shares.
6.
4. WARRANTS AND STOCK OPTIONS
As of June 30, 2001, the Company had outstanding warrants to purchase
4,493,269 shares of common stock and options to purchase 2,044,455 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.
As of June 30, 2001, outstanding warrants include warrants immediately
exercisable into1,644,334 restricted shares of common stock. All other
shares of common stock covered by warrants and stock options were registered
on a Form S-8 filed on September 27, 2000 and a Form S-8 filed on June 4, 2001.
5. LEGAL SETTLEMENT
The Company entered into a Settlement Agreement effective as of February
23, 2001 with the law firm Hughes Hubbard & Reed LLP ("HHR") pursuant to
which the Company agreed to issue 400,000 shares of common stock, for which
the Company recognized an expense of $137,195. In addition, the settlement
satisfied accrued legal expenses of $159,267, which had been recorded in prior
periods. HHR had filed suit against the Company in the California Superior
Court claiming that the Company breached a June 1988 contract by failing to
deliver certificates representing shares earned as a premium for legal work
performed between 1993 and 1996.
7.
ITEM 2. MANAGEMENT'S PLAN OF OPERATION
Certain statements contained in this Form 10-QSB constitute forward-looking
statementswithin the meaning of Section 27A of the Securities Act of 1933,
as amended and Section21E of the Securities Exchange Act of 1934, as amended.
Such forward-looking statements herein are based on current expectations that
involve a number of risks and uncertainties. Such forward-looking statements
are based on assumptions that the Company will have adequate financial resources
to fund the development and operation of its business, and there will be no
material adverse change in the Company's operations or business. The foregoing
assumptions are based on judgments with respect to, among other things,
information availableto the Company, future economic, competitive and market
conditions and future business decisions. All are difficult or impossible to
predict accurately and many of which are beyond the Company's control.
Accordingly, although the Company believes that the assumptions underlying
the forward-looking statements are reasonable, any such assumption could prove
to be inaccurate and therefore there can be no assurance that the results
contemplated in the forward-looking statements will be realized. There are a
number of risks presented by the Company's business and operations which could
cause the Company's financial performance to vary markedly from prior results
or results contemplated by the forward-looking statements. Such risks include
failure of the ANTs technology to work properly, failure to develop commercially
viable products or services from the ANTs technology, delays or failure in
fundraising efforts, delays in or lack of market acceptance, failures to recruit
adequate personnel, and problems with protection of intellectual property, among
others. Management decisions, including budgeting, are subjective in many
respects and periodic revisions must be made to reflect actual conditions
and business developments, the impact of which may cause the Company to alter
its capital investment and other expenditures, which may also adversely affect
the Company's results of operations. In light of significant uncertainties
inherent in forward-looking information included in this quarterly Report on
Form 10-QSB, the inclusion of such information should not be regarded as a
representation by the Company that the Company's objectives or plans will be
achieved.
Overview
We are engaged in the development and marketing of a proprietary software
technology that is intended to significantly improve the speed at which
computers can access data. Our operations currently consist of research
and development of our proprietary software technology ("ANTs technology"),
marketing our technology to potential customers and partners, personnel
recruiting, and capital raising. We have not realized any revenues to date.
Plan of Operation
Our operations over the next six months will primarily consist of
continued research and development of our proprietary software technologies
and development of our marketing program. Research and development will be
focused initially upon developing a prototype system utilizing and
demonstrating the capabilities of our technology. We anticipate this prototype
system to be completed during the third quarter of calendar 2001. Thereafter,
research and development will be directed towards developing initial customer
applications utilizing our technology. General commercial applications
utilizing our technology are expected to be available by the end of calendar
2001. There is no assurance that our plans will be realized.
The majority of our operating expenses and costs over the next three
to six months are expected to be for and in connection with existing and
additional personnel. We currently have eighteen employees and two consultants,
and we are recruiting additional personnel. We view the recruitment of
additional qualified technical personnel as essential to the further
development and commercialization of our proprietary technology. Should we
be successful in our recruitment efforts, we expect that personnel and other
operating costs will increase.
To more clearly reflect the operation of the business, we have reclassified
as research and development expenses, certain historical expenses originally
classified as general and administrative. Beginning January 1, 2000, the
Statements of Operations subtotals for general and administrative and research
and development expenses have changed. Note that while the subtotals have
changed, total expenses have not.
8.
We believe that additional sources of financing can be secured to enable
us to complete the development and commercialization of our proprietary
technologies, although there is no assurance of our ability to do so.
General and Administrative
General and administrative expenses decreased from $1,059,754 during the
three months ended June 30, 2000 to $937,410 during the three months ended
June 30, 2001. General and administrative expenses increased from $1,710,110
during the six months ended June 30, 2000 to $2,210,483 during the six months
ended June 30, 2001. Components of general and administrative expense for
the 2nd quarter of 2001 include: salaries and benefits (27%), insurance (18%),
legal (18%), other professional services (16%) and other (21%). We expect
overall general and administrative expenses to increase moderately over the
next three to six months.
Research and Development
Research and development expenses increased from $206,728 during the three
months ended June 30, 2000 to $277,297 during the three months ended
June 30, 2001. Research and development expenses increased from $321,814
during the six months ended June 30, 2000 to $621,638 during the six months
ended June 30, 2001. These expenses are related to the research, testing
and product development of our proprietary software. We expect that our
research and development expenses will continue to increase as additional
staff is recruited. We intend to continue to focus significant resources
on recruiting additional personnel for engineering, and technical development
roles. There can be no assurances that we will be able to recruit the
appropriate personnel necessary for the development of our products.
Capital and Liquidity Resources
We anticipate increasing expenditures over the coming months as we continue
to develop our technology. We do not expect to realize any revenues through
calendar year 2001. Our cash balance as of June 30, 2001 was $1,761,225, which
we believe will be adequate to fund our activities through October 2001 at our
current rate of spending. There can be no assurance that our continued product
development and infrastructure development will not require a much higher rate
of spending. There can also be no assurance that we will be able to obtain
additional capital on acceptable terms. During the second quarter of 2001,
we entered into a $331,000 financing arrangement to provide for an annual
insurance policy with interest and principal payments on the note due quarterly
at a 4% interest rate.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We were a defendant in a case entitled Hubert P. Lauffs v. Mosaic
Multisoft Corporation, in which the plaintiff asserted a cause of action
against us for breach of fiduciary duty. The plaintiff purported to base
his cause of action on allegations that we and others caused the shareholders
of Mosaic Multisoft Corporation ("Mosaic") to elect outside directors to its
board of directors who subsequently voted to remove Mosaic's president from
office, thus interfering with Mosaic's ability to raise capital and causing
Mosaic to be unable to repay its debt to the plaintiff. In March 2000, we won
this case on summary judgment. In April 2000, the plaintiff filed an appeal
of the summary judgment ruling. We believe the appeal to be without merit,
but there can be no assurance that the appellate court will not reverse the
lower court's ruling and require a trial. We have filed an action for
malicious prosecution against the lawyer and the plaintiff in this case.
Since May 4, 2000, the malicious prosecution action has been stayed pending
resolution of the appeal. With respect to the appeal, the plaintiff filed
an opening brief on December 19, 2000, we filed a responsive brief on
April 4, 2001, and the plaintiff filed his reply brief on May 25,2001.
The court of appeals has scheduled oral arguments for September 11, 2001.
9.
On or about August 14, 2001, we have entered into a tentative
agreement with the staff of the Pacific Regional Office of the Securities
and Exchange Commission (the SEC) that would close an SEC inquiry under
way since early last year. The tentative agreement must be approved by the
SEC Commissioners in Washington, D.C. before it is final. Under the terms of
the tentative agreement, the SEC will allege in a civil injunctive action
that we violated the periodic reporting requirements of the federal
securities laws. We will simultaneously settle the case, without admitting
or denying the SEC's allegations, by consenting to an injunction prohibiting
us from future violations of the periodic reporting requirements of the federal
securities laws. The agreement does not require us to pay a monetary fine.
The information is hereby incorporated by reference from the Form
10-QSB filed on May 15, 2001. There have been no other material
developments in the period covered by this report.
ITEM 2. CHANGES IN SECURITIES
From May 1, 2001 through June 30, 2001, we sold to accredited investors,
through a private offering, 782,500 units, at a price of $2.00 per unit
(the "Units"), of which 200,000 have not yet been issued as of
June 30, 2001, for a value of $400,000, with each Unit consisting of (i)
One (1) share of Common Stock of the Company, and (ii) a warrant to
purchase up to One (1) share of Common Stock of the Company at a per
share price of Four Dollars ($4.00), exercisable until December 31, 2001.
In connection with this offering, we paid a commission of $57,000 to
Berry-Shino Securities, Inc., and a commission of $5,000 to Spencer
Edwards, Inc. for services rendered as placement agents. The gross
proceeds of the offering were $1,565,000. The proceeds will be used
for general working capital purposes. The sales of these securities
were made in reliance upon Rule 506 and Section 4(2) of the Securities
Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No changes during the period covered by this report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual Shareholder Meeting of the Company was held on
April 24, 2001. Proxies for the meeting were solicited pursuant to
Regulation 14A under the Exchange Act.On the proposal to elect 2 Class
1 Directors of the Company, 10,145,524 shares of the Company's voting
securities voted on the matter, of which 10,044,948 shares were voted
for Mr. Richard J. Lee and 10,046,998 shares were voted for Mr. Thomas
Holt. The Class 2 and Class 3 directors and the Class 2 and Class 3
director positions were not up for re-election at the Shareholder Meeting.
Clive G. Whittenbury, Ph.D. and Homer G. Dunn are Class 2 directors and
their term will expire at the annual meeting following the close of the
2001 fiscal year. Francis K. Ruotolo, Papken S. Der Torossian and
John R. Gaulding are Class 3 directors and their term will expire at
the annual meeting following the close of the 2002 fiscal year.
On the proposal to amend the Company's 2000 Stock Option Plan by
increasing the shares reserved under the plan by an additional
1,950,000 shares of Common Stock, 23,770 shares of the Company's voting
securities were abstaining, 5,048,749 shares voted for the proposal,
464,869 shares voted against the proposal and there were 4,608,136
broker non-votes. On the proposal to ratify the selection of Burr,
Pilger & Mayer, LLP, as independent public accountants for the Company
for the fiscal year ending December 31,2001, 36,559 shares of the
Company's voting securities were abstaining, 10,032,977 shares voted
for the proposal and 75,988 shares voted against the proposal.
ITEM 5. OTHER MATTERS
Appointment of Officer
Mr. Kenneth Ruotolo was appointed Executive Vice President of
Finance and Operations by the Board of Directors at a meeting held on
June 22, 2001.
Compensation Committee
A Compensation Committee consisting of Richard J. Lee,
Homer G. Dunn and John R. Gaulding was formed by the Board of Directors
of the Company at a meeting held on June 22, 2001.
10.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Amended and Restated Certificate of Incorporation of the Company
as listed in Exhibit 3.1 to the Company's 10-KSB filed on March 22, 2001,
is hereby incorporated by reference.
3.2 Amended and Restated Bylaws of the Company, as listed in Exhibit
3.2 to the Company's 10-KSB filed on March 22, 2001, are hereby incorporated
by reference.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter
for which this report is filed.
RISK FACTORS
In addition to other information in this 10-QSB, the following risk
factors should be carefully considered in evaluating our business since we
operate in a highly changing and complex business environment that involves
numerous risks, some of which are beyond our control. The following discussion
highlights a few of these risk factors, any one of which may have a significant
adverse impact on our business, operating results and financial condition.
As a result of the risk factors set forth below and elsewhere in this 10-QSB,
and the risks discussed in our other Securities and Exchange Commission filings,
actual results could differ materially from those projected in any
forward-looking statements.
If we are unable to protect our intellectual property, our competitive
position would be adversely affected. We rely on patent protection, as well as
trademark and copyright law, trade secret protection and confidentiality
agreements with our employees and others to protect our intellectual property.
Despite our precautions, unauthorized third parties may copy our products and
services or reverse engineer or obtain and use information that we regard as
proprietary. We have also filed patent applications and intend to file more.
We do not know if any of our intended future patents will be issued or whether
we will be successful in prosecuting any additional patents. In addition, the
laws of some foreign countries do not protect proprietary rights to the same
extent as do the laws of the United States. Our means of protecting our
proprietary rights may not be adequate and third parties may infringe or
misappropriate our patents, copyrights, trademarks and similar proprietary
rights. If we fail to protect our intellectual property and proprietary
rights, our business, financial condition and results of operations would
suffer. We believe that we do not infringe upon the proprietary rights of
any third party, and no third party has asserted a patent infringement claim
against us. It is possible, however, that such a claim might be asserted
successfully against us in the future. We may be forced to suspend our
operations to pay significant amounts to defend our rights, and a substantial
amount of the attention of our management may be diverted from our ongoing
business, which can materially affect our ability to attain and maintain
profitability.
We face possible competition from large companies. The industry that
we are in is highly competitive. Although we believe that our technology is
unique, can be protected, and, if adopted, will confer benefits that will be
otherwise unavailable for some significant time, we face very large competitors
with greater resources who may adopt various strategies to block or slow our
market penetration, thereby straining our more limited resources. They may
also seek to hinder our operations through attempts to recruit key staff
with exceptionally attractive terms of employment, including signing bonuses,
or by offer of highly competitive terms to potential or newly acquired
customers.
We depend on our key personnel and may have difficulty attracting and
retaining the skilled staff we need to execute our growth plans. Our success
will be dependent largely upon the personal efforts of our Chairman and Chief
Executive Officer, Francis K. Ruotolo, as well as other senior managers. The
loss of key staff could have a material adverse effect on our business and
prospects. To execute our plans, we will need to hire and retain substantially
more staff. We plan to increase our technical personnel in the near term. We
are recruiting personnel to meet this objective. Competition for highly
skilled employees with technical, management, marketing, sales, product
development and other specialized training is intense. We may not be
successful in attracting or retaining such qualified personnel.
Specifically, we may experience increased costs in order to attract and
retain skilled employees. If we are unable to hire, train and manage new
skilled and experienced employees as needed, we would be unable to support
our planned growth and future operations.
11.
We face rapid technological change. The market for our products
and services is characterized by rapidly changing technologies, extensive
research and the introduction of new products and services. We believe that
our future success will depend in part upon our ability to continue to
enhance our existingproducts and to develop, manufacture and market new
products and services. As a result, we expect to continue to make a
significant investment in engineering, research and development. There
can be no assurance that we will be able to develop and introduce new
products and services or enhance our initial intendednproducts and services
in a timely manner to satisfy customer needs, achieve market acceptance or
address technological changesin our target markets. Failure to develop
products and services and introduce themsuccessfully and in a timely manner
could adversely affect our competitive position,financial condition and results
of operations.We will need to manage growth well. We may experience substantial
growth in the size of our staff and the scope of our operations, resulting in
increased responsibilities for management. To manage thispossible growth
effectively, we will need to continue to improve our operational, financial
and management information systems and to hire, train, motivate and manage
a growing number of staff. We expect to experience difficulty in filling
our needs for qualified engineers and other personnel. There can be no
assurance that we will be able to effectively achieve or manage any future
growth, and our failure to do so could delay product development cycles and
market penetration or otherwise have a material adverse effect on our financial
condition and results of operations. We could face information and product
liability risks and may not have adequate insurance. Because we intend to
provide middleware solutions to critical business and Internet applications,
we may become the subject of litigation alleging that our products were
ineffective or disruptive in their treatment of data, or in the compilation,
processing or manipulation of critical business information. Thus, we
may become the targets of lawsuits from injured or disgruntled businesses
or other users. We do not presently carry product or information liability
or errors and omissions insurance, and although we intend to acquire such
insurance prior to commencing substantial sales, such insurance may not be
available in an acceptable or affordable form. In the event that we are
required to defend more than a few such actions, or in the event that we
were found liable in connection with such an action, our business and
operations would be severely and materially adversely affected.
We are dependent on new demand for our products and services.
The success of our business depends upon demand for and use of our
technology, products and services in general and the demand for additional
computing power, cost effectiveness and speed in particular. Our technology
introduces a new kind of middleware, so we may encounter substantial
market resistance. In the event sufficient demand does not develop,
our business and results of operations would be materially adversely
affected. We believe that there appears to be increased demand for
computing power, cost effectiveness and speed, but if general economic
conditions decline or hardware and memory advances make such power, cost
effectiveness and speed more readily available, then adoption, use and
sales of our products and services may be materially adversely affected.
We will need to continue our product development efforts. We believe
that our market will be characterized by increasing technical sophistication.
We also believe that our eventual success will depend on our ability to
continue to provide increased and specialized technical expertise. There
is no assurance that we will not fall technologically behind competitors
with greater resources. Although we believe that we enjoy a significant
lead in our product development and introduction, and are hopeful that
our patents provide some protection, we will likely need significant
additional capital in order to continue to enjoy such a technological
lead over competitors with more resources.
A failure to obtain additional financing could prevent us from
executing our business plan. We anticipate that current cash resources
will be sufficient to fund our operations through October 2001. We believe
that additional sources of financing can be secured to enable us to
complete the development and commercialization of our proprietary
technologies, although there is no assurance of our ability to do so.
A failure to obtain additional funding could prevent us from making
expenditures that are needed to allow us to hire additional personnel
and continue development of the technology. If we raise additional funds
by selling equity securities, the relative equity ownership of our existing
investors could be diluted or the new investors could obtain terms more
favorable than previous investors. If we raise additional funds through
debt financing, we could incur significant borrowing costs.
12.
Market acceptance of our products and services is not guaranteed.
We are at an early stage of development and our earnings will depend upon
broad market acceptance and utilization of our intended products and services.
There can be no assurance that our product and technology development
efforts will result in new products and services, or that they will be
successfully introduced.
Future profitability is not guaranteed. We have not recognized any
operating revenues to date. We expect to begin recognizing revenues from the
sale of products and services in calendar 2002. There is no assurance
that our plans will be realized, that we will be able to generate revenues in
2002 or that we will achieve profitability in the future.
Limited market for our common stock. Our common stock is not listed
on any exchange and trades in the over-the-counter (the "OTC") market. As
such, the market for our common stock is limited and is not regulated by the
authorities of any exchange. Further, the price of our common stock and
its volume in the OTC market may be subject to wide fluctuations.
13.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, there
unto duly authorized.
ANTs software inc.
Date: August 14, 2001 By: /s/ Francis K. Ruotolo
Francis K. Ruotolo, Chairman,
Chief Executive Officer and President
Date: August 14, 2001 By: /s/ Michael W. O'Connor
Michael W. O'Connor,
Interim Chief Financial Officer
14.