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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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: July 31, 2000
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
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ANTS SOFTWARE.COM
(Exact name of registrant as specified in its charter)
Nevada 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)
500 Airport Blvd, Suite 100, Burlingame, CA 94010
(Former name, former address and former fiscal year,
if changed since last report)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate the number of shares outstanding of each of the issuer's classes
of Common stock, as of the latest practicable date:
12,756,197 shares of common stock as of 7/31/00
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TABLE OF CONTENTS
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PART I. Financial Information
Item 1. Financial Statements................................
Item 2. Management's Plan of operation......................
PART II. Other Information
Item 1. Legal Proceedings...................................
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Matters ......................................
Signatures
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ANTs software.com
(A NEVADA CORPORATION)
PART 1. FINANCIAL INFORMATION
The financial statements set forth herein have been prepared by ANTs
software.com (the "Company") without audit. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles may have been condensed or
omitted. The Company believes that the information contained herein is accurate.
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ITEM 1. FINANCIAL STATEMENTS
ANTs software.com
BALANCE SHEET
July 31, 2000
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash & cash equivalents $ 2,037,658
Interest receivable 25,734
Pre-paid insurance 248,364
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Total current assets 2,311,756
PROPERTY AND EQUIPMENT:
Computers and software 277,281
Office furniture and fixtures 24,459
Leasehold improvements 54,297
Less accumulated depreciation (17,354)
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Property and equipment, net 338,683
OTHER ASSETS - Security deposits 211,798
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TOTAL ASSETS $ 2,862,237
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 252,550
Accrued vacation 69,422
Payable to employees 723
Notes payable 176,470
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Total current liabilities 499,165
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value; 20,000,000
authorized; 12,756,197 shares issued and
outstanding 12,756
Common stock subscribed, 70,000 shares 119,500
Notes receivable from officers for stock
purchases (337,500)
Additional paid-in capital 13,049,452
Accumulated deficit (10,481,136)
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Total stockholders' equity 2,363,072
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,862,237
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See accompanying notes to financial statements.
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ANTs software.com
STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended
July 31,
2000 1999
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General and administrative expenses $1,196,624 $109,881
Research and development expenses 193,137 0
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LOSS FROM OPERATIONS (1,389,761) (109,881)
OTHER INCOME:
Interest income 50,920 0
Interest expense (5,368) 0
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Other income, net 45,552 0
LOSS BEFORE INCOME TAXES (1,344,209) (109,881)
INCOME TAXES 800 0
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NET LOSS ($1,345,009) ($109,881)
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BASIC LOSS PER COMMON SHARE ($0.11) ($0.01)
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WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 12,689,030 10,767,165
See accompanying notes to financial statements.
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ANTs software.com
STATEMENTS OF CASH FLOWS
(Unaudited)
For the three months ended
July 31,
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($1,345,009) ($109,881)
Adjustments to reconcile net loss
to net cash used by operating activities:
Depreciation 11,808 0
Changes in operating assets and liabilities:
Interest receivable (3,469) 0
Pre-paid rent 60,651 0
Accounts payable (31,679) 0
Accrued expenses (124,041) (10,000)
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Net cash used by operating activities (1,431,739) (119,881)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (239,313) 0
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of shares 150,000 362,400
Notes payable & other payable (84,556) 0
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Net cash provided by financing activities 65,444 362,400
NET (DECREASE) INCREASE IN CASH (1,605,608) 242,519
CASH, BEGINNING OF PERIOD 3,643,266 16,050
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CASH, END OF PERIOD $2,037,658 $258,569
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $5,368 $0
Income taxes $800 $0
See accompanying notes to financial statements.
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ANTs software.com
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business - ANTs software.com (the "Company"), a Nevada
corporation, was incorporated on September 24, 1996. The Company is the
successor to CHoPP Computer Corp., a Delaware corporation. In February
1999, the Company changed its name from CHoPP Computer Corp. to ANTs
software.com.
Going Concern - The Company has incurred significant losses since
inception and expects to continue to incur such losses until its software
successfully achieves commercial viability.
The accompanying financial statements were prepared assuming the Company
will continue to operate on a going-concern basis and do not include any
adjustments to the recorded amounts of assets or to the recorded amounts
or classification of liabilities which would be required if the Company
were unable to realize its assets and satisfy its liabilities and
obligations in the normal course of business.
Cash and Cash Equivalents - The Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents.
Property and Equipment - Property and equipment are stated at cost with
depreciation provided over the estimated useful life of 5 years using the
straight-line method.
Research and Development - Company-sponsored research and development
costs related to both present and future products are expensed currently
as a separate line item in the accompanying statements of operations.
Pervasiveness of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Income Taxes - The Company accounts for its income taxes under the
provisions of Statement of Financial Accounting Standards ("SFAS") 109
("SFAS 109"). The method of accounting for income taxes under SFAS 109 is
the asset and liability method. This method requires the recognition of
deferred tax assets and liabilities for the expected future tax
consequences of temporary differences is accounting for tax and financial
reporting bases of other assets and liabilities. The provision for income
taxes in the accompanying financial statements represents the California
corporate minimum franchise tax.
Fair Value of Financial Instruments - Pursuant to SFAS 107, "Disclosures
About Fair Value of Financial Instruments," the Company is required to
estimate the fair value of all financial instruments included on its
balance sheet at July 31, 2000. The Company considers the carrying value
of such amounts in the financial statements to approximate their current
fair values.
Reclassifications - Certain items in the prior year's financial statements
have been reclassified to conform to the current year's presentation.
Basic Income (Loss) Per Share - The Company adopted the provisions of SFAS
128, "Earnings Per Share" ("EPS") that established standards for the
computation, presentation and disclosure of earnings per share, replacing
the presentation of Primary EPS with a presentation of Basic EPS. It also
requires dual presentation of Basic EPS and Diluted EPS on the face of the
statement of operations for
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ANTs software.com
NOTES TO FINANCIAL STATEMENTS
entities with complex capital structures. Basic EPS is based on the
weighted average number of common shares outstanding during the period,
which totalled 12,689,030 and 10,767,165 for 2000 and 1999, respectively.
The Company did not present Diluted EPS, since the result was
anti-dilutive in 2000 and immaterial in 1999.
Operating Segment Information - The Company operates in one industry
segment, computer software. Substantially all of the Company's assets and
employees are located at the Company's headquarters in Burlingame,
California.
New Accounting Pronouncements - SFAS 130, "Reporting Comprehensive
Income," establishes standards for reporting and displaying comprehensive
income and its components in financial statements. The Company adopted the
provisions of SFAS 130 in 1998, but has had no elements of comprehensive
income since inception.
SFAS 131, "Disclosures About Segments of an Enterprise and Related
Information," establishes a new model for segment reporting, called the
"management approach" and requires certain disclosures for each segment.
The management approach is based on the way the chief operating
decision-maker organizes segments within a company for making operating
decisions and assessing performance. The Company adopted the provisions of
SFAS 131 in 1998, but currently operates in only one industry segment.
2. INCOME TAXES
The Company has net operating loss carryforwards totaling approximately
$3.4 million for Federal income tax purposes available to offset future
taxable income through 2020.
Deferred tax assets consist substantially of the net operating loss
carryforward. The Company has made a 100% valuation allowance against the
deferred tax assets. The valuation allowance increased approximately $1.3
million in the three months ended July 31, 2000 representing the tax
effect of the Company's net taxable loss for that quarter. In assessing
the realizability of deferred tax assets, management considers whether it
is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of sufficient future taxable
income prior to the expiration of the net operating loss carryforward.
Management considered the scheduled reversal of deferred tax liabilities,
projected future taxable income and tax planning strategies in making this
assessment.
The Company has not filed Federal income tax returns since 1994 and has
not filed state income tax returns since inception.
3. WARRANTS
As of July 31, 2000, the Company had warrants for 3,194,000 common shares
outstanding. These securities give the holder the right to purchase shares
of the Company's restricted common stock in accordance with the terms of
the instrument. Warrants to purchase 1,984,000 shares are exercisable at
July 31, 2000.
Outstanding at April 30, 2000 3,164,000
Granted 230,000
Exercised or retired (200,000)
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Outstanding at July 31, 2000 3,194,000
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ANTs software.com
NOTES TO FINANCIAL STATEMENTS
4. OPERATING LEASES
The Company leases office space under a noncancellable operating lease
agreement. The agreement requires monthly payments of $49,858 that began
in May 2000. The agreement expires in April 2005. The agreement provides
for annual cost of living increases.
The Company leases additional office space on a month-to-month basis for a
monthly payment of $3,600. Rental expense related to operating leases
totalled approximately $150,000 in the three months ended July 31, 2000.
Future minimum lease payments under the noncancellable operating lease as
of July 31, 2000 are as follows:
2001 $598,299
2002 598,299
2003 598,299
2004 598,299
2005 448,299
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TOTAL $2,841,495
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5. LEGAL MATTERS
A law firm has filed a lawsuit against the Company in California Superior
Court based on a contract allegedly entered into between the firm and the
Company in June 1988. The firm claims that the terms of the alleged
contract entitle it to a 20% bonus premium of legal fees billed to the
Company between 1993 and 1996 and that such bonus is payable in Company
stock. The firm demands issuance of 436,864 shares of Company stock to the
firm and approximately $220,000 in satisfaction of the Company's alleged
obligation. The Company believes the firm's claim is without merit. The
Company has made a full provision in the financial statements for the
legal fees sought by the firm, but the Company has made no provision for
the shares of common stock sought by the firm. If the Company is found
ultimately liable in this matter, it would be obligated to record a charge
to earnings of approximately $7.5 million.
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ITEM 2. MANAGEMENT'S PLAN OF OPERATION
Overview
We are engaged in the development of a proprietary, software technology
that is intended to significantly improve the speed at which computers can
process commutative transactions. Our operations currently consist of start-up
activities, including research and development of our asynchronous
non-pre-emptive tasking software technology ("ANTs technology"), personnel
recruiting and capital raising. We intend to use the ANTs technology as the
basis for providing outsourcing services to enhance performance of ERP and other
software applications used by large enterprises and in e-commerce. We are in the
process of developing our technology and have not realized any revenues to date.
Plan of Operation
Our operations over the next six to nine months will primarily consist of
continued research and development of our proprietary software technologies.
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 2000. Thereafter, research and development will be directed towards
developing certain initial customer applications utilizing our technology.
General commercial applications utilizing our technology are expected to be
available in the second half of calendar 2001. We also expect to begin
recognizing revenues from the sales of our products at that time.
The majority of our operating expenses and costs over the next six to nine
months are expected to be for and in connection with existing and additional
personnel. We currently have fifteen fulltime employees and are actively
recruiting additional personnel domestically and overseas. We view the
recruitment of additional qualified technical personnel as essential to the
further development and commercialization of our proprietary technologies.
Should we be successful in our recruitment efforts, we expect that our personnel
and other operating costs will increase significantly over current levels.
We anticipate that current cash resources and committed additional funding
will be sufficient to fund our operations through the end of calendar 2000. We
intend to fund our operations for the first half of 2001 by issuing additional
debt and/or equity securities. We are currently in active discussions for the
sale of up to $5 million of securities. We expect to close this financing by the
end of the third quarter of calendar 2000. We expect to secure additional
financing in late calendar 2000 and/or the first half of calendar 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.
General and Administrative
General and administrative expenses increased from $109,881 during the
three months ended July 31, 1999 to $1,196,624 for the three months ended July
31, 2000. The Company incurred salaries expenses of approximately $475,236.
These expenses are related to approximately 10 administrative and corporate
management employees. The Company expects that its general and administrative
expenses will continue to increase as additional staff are recruited. The
Company intends to continue to focus significant resources on recruiting
additional personnel for engineering, technical development, marketing and
administrative roles. There can be no assurances that the Company will be able
to recruit the appropriate personnel necessary for the development of the
Company.
Professional service expenses increased from near $0 during the three
months ended July 31, 1999 to $222,642 for the three months ended July 31, 2000.
These were principally legal expenses associated with general corporate matters,
review of the Company's legal records, patents and trademarks, and current
litigation (See "Legal Proceedings"). Professional service expenses were also
incurred for retention of certified public accountants and web site development.
The Company expects to continue to incur significant professional fee expense
with providers of outside legal, accounting, technical and financial services as
the Company continues to execute its operation plans.
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We incurred facilities expenses of approximately $199,917 during the first
quarter. Most of these expenses were related to the Company's lease for five
years of approximately 15,341 square feet in San Mateo, California. We
believe that these facilities will be adequate to accommodate our
growth plans through at least fiscal year 2001. These facilities represent an
obligation of approximately $598,299 per year.
Research and Development
We incurred research and development expenses of approximately $193,137
during the first quarter. These expenses are directly related to the development
of the Company's proprietary products and consisted primarily of software
engineers' salaries.
Capital and Liquidity Resources
We anticipate significantly increasing our expenditures over the coming
months as we continue to develop and productize our technology. We do not expect
to realize any revenues through calendar year 2000. Our cash balance as of July
31, 2000 was approximately $2 million, which we believe is adequate to fund our
activities through the calendar year 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 than currently. We
are currently seeking investment from additional investors to support continued
operations, although there can be no assurance that we will be able to obtain
such investment.
Forward-Looking Statements
The forward-looking statements herein are based on current expectations
that involve a number of risks and uncertainties. Such forward-looking
statements are based on assumptions that the Company will have adequate
financial resources to fund the development and operation of its business, and
there will be no material adverse change in the Company's operations or
business. The foregoing assumptions are based on judgments with respect to,
among other things, information available to the Company, future economic,
competitive and market conditions and future business decisions. All are
difficult or impossible to predict accurately and many 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, the failure to develop commercially
viable products or services from the ANTs technology, 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 10QSB, the inclusion of
such information should not be regarded as a representation by the Company or
any person that the Company's objectives or plans will be achieved.
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PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
The information is hereby incorporated by reference from our 10-KSB filing
for the fiscal year ended April 30, 2000. There have been no material
developments.
ITEM 4. Submission of Matters to a Vote of Security Holders
The information is hereby incorporated by reference from our Proxy
Statement on Form DEFR14A filed on September 6, 2000.
ITEM 5. Other Matters
Resignation and Appointment of Directors
On September 7, 2000, the Company announced that John Williams would be
resigning from the Board of Directors to become a full-time employee of the
Company. No replacement for Mr. Williams on the Board of Directors has been
elected at this time.
On August 28, 2000, the Company announced that Richard Lee joined the
Company's Board of Directors.
On August 3, 2000, the Company announced that Dean Witter III joined the
Company's Board of Directors and will chair the Audit Committee.
Robert Mountain's resignation as a member of the Board of Directors was
accepted by the Board of Directors on August 10, 2000.
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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.com
Date: September 13, 2000 By: /s/ FREDERICK D. PETTIT
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Frederick D. Pettit
Chairman and Chief Executive Officer
Date: September 13, 2000 By: /s/ Miles Mochizuki
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Miles Mochizuki
Acting Chief Financial Officer
and Secretary
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