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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended: January 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
ANTS SOFTWARE.COM
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(exact name of registrant as specified in its charter)
Nevada 13-3054685
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(State or other jurisdiction of (IRS Employer Identification Number)
Incorporation or Organization)
500 Airport Boulevard, Suite 100, Burlingame, CA 94010
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(Address of principal executive offices) (Zip Code)
(650) 579-6625
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(Registrant's Telephone Number, including area code)
37 SANTA TERESITA WAY, SANTA BARBARA, CA 93105
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(Former name, former address and former
fiscal year, if changed since last report)
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:
12,540,678 shares of common stock as of 1/31/00
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ANTS SOFTWARE.COM
(A NEVADA CORPORATION)
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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ANTs Software.Com
(FKA CHOPP COMPUTER CORPORATION)
BALANCE SHEET
January 31, 2000
<TABLE>
<S> <C>
ASSETS
Current Assets
Cash & Cash Equivalents $ 4,650,152
------------
Total current assets 4,650,152
Property and Equipment
Computers & Software 66,199
Office furniture and fixtures 2,711
Less accumulated depreciation (3,269)
------------
Total property and equipment 65,641
Other Assets
Security deposits 206,748
Patents 52,553
Less valuation allowance (52,553)
------------
Total other assets 206,748
Total Assets $ 4,922,541
============
Liabilities And Stockholder's Equity
Current Liabilities
Accounts Payable $ 720,031
Accounts Payable to officers,
Directors and stockholders 205,332
Accrued Expenses 78,333
------------
Total current liabilities 1,003,696
Stockholders' equity
Common stock, $.001 par value; 20,000,000
authorized; 12,540,678 shares issued and
outstanding; 1,650,000 shares reserved for
future issuance 12,541
Additional paid-in capital 12,813,834
Loans to Directors & Officers (337,500)
Accumulated Deficit (8,570,030)
------------
Total stockholders' equity (deficit) 3,918,845
Total Liabilities and Stockholders' Equity $ 4,922,541
============
</TABLE>
See accompanying notes to financial statements.
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ANTs Software.Com
(FKA CHOPP COMPUTER CORPORATION)
STATEMENT OF OPERATION
January 31, 2000
<TABLE>
<CAPTION>
Prior Year Ending Three months ended Nine months ended
April 30, 1999 January 31, 2000 January 31, 2000
----------------- ------------------ -----------------
<S> <C> <C> <C>
Revenues $ 0 $ 0 $ 0
Expenses:
General and Administrative 610,691 207,176 449,286
Professional services 0 408,398 408,398
Tax Expenses 0 800 800
Rent 0 59,591 59,591
Depreciation Expense 0 558 558
Valuation Allowance 0 0 0
Loss from operations (610,691) (676,524) (918,634)
Interest Income 0 13,189 13,189
----------- ------------ ------------
Loss before income taxes (610,691) (663,335) (905,445)
Income taxes 0 0 0
----------- ------------ ------------
Net Loss (610,691) (663,335) (905,445)
=========== ============ ============
Basic loss per common share $ (0.06) $ (0.05) $ (0.08)
----------- ------------ ------------
Weighted average common shares
outstanding 9,985,451 12,160,006 11,266,698
Dilutive loss per common share N/A $ (0.05) $ (0.07)
----------- ------------ ------------
Diluted average shares outstanding N/A 14,183,960 13,290,652
</TABLE>
Note: Comparative figures not available for previous year.
See accompanying notes to financial statements.
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ANTs Software. Com
(FKA CHOPP COMPUTER CORPORATION)
STATEMENT OF CASH FLOW
January 31, 2000
<TABLE>
<CAPTION>
Year Ended Three months ended Nine months ended
April 30, 1999 January 31, 2000 January 31, 2000
----------------- ------------------ -----------------
<S> <C> <C> <C>
Operating activities:
Continuing operations
Loss from operations $(610,691) $ (663,335) $ (905,445)
Adjustments to reconcile
net loss to net cash
utilized by operating
activities:
Depreciation 0 558 558
Changes in assets and liabilities:
Security Deposits 0 (206,748) (206,748)
Computers & Software 0 (66,199) (66,199)
Accounts Payable 367,141 76,203 76,203
Accrued Expenses 5,000 78,333 68,333
Subscriptions Receivable and other 45,483 0 0
--------- ----------- -----------
Net cash utilized by
Operating activities: (193,067) (781,188) (1,033,298)
Investing activities:
Financing activities:
Issuance of shares 194,000 5,055,000 5,667,400
--------- ----------- -----------
Net cash provided by
Financing activities: 194,000 5,055,000 5,667,400
Net increase in cash 933 4,273,812 4,634,102
Cash at beginning of period 15,117 376,340 16,050
--------- ----------- -----------
Cash at end of period 16,050 4,650,152 4,650,152
Supplemental disclosures:
Cash paid during the period for:
Interest 0 0 0
Income taxes 0 0 0
Non-cash financing transactions:
Common stock for debt 34,750 0 0
--------- ----------- -----------
</TABLE>
Note: Comparative figures not available for previous year.
See accompanying notes to financial statements.
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NOTES TO FINANCIAL STATEMENTS
NOTE 1 - Significant Accounting Policies
NATURE OF OPERATIONS
The Company is engaged in the development of a proprietary, patented
software technology that is intended to significantly improve the speed at which
computers can process commutative transactions. The Company's operations
currently consist of start-up activities, including research and development of
its asynchronous non-preemptive tasking software technology (the "ANTs
technology"), personnel recruiting and capital raising. The Company intends 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 e-commerce. The Company is in the process of developing its
technology as it prepares to implement its new business strategy in fiscal year
2001, and has not realized any revenues to date.
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements are
presented in accordance with the requirements for Form 10-QSB, Article 10 of
Regulation S-X and 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.Com (the "Company") Form 10-SB 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 ended January 31,
2000, are not necessarily indicative of the results that may be expected for the
Fiscal year ended April 30, 2000.
COMPARATIVE NUMBERS FOR PRIOR PERIODS
The company's new management is currently engaged in a review of its
previous period financial and corporate records. The company was unable to
prepare comparative financial statements for prior periods on a timely basis.
The company intends to amend the financial statements set forth herein to
include prior periods, as soon as practicable.
PROPERTY AND EQUIPMENT AND DEPRECIATION
Property and equipment is recorded at cost and is depreciated over the estimated
lives of approximately two to three years using the straight-line method.
PATENTS AND VALUATION ALLOWANCE
Patents are recorded at cost. Due to uncertainty as to recovery, a
valuation allowance for the full carrying amount of the patents is recorded.
CASH AND CASH EQUIVALENTS
The Company's money market account and a short-term commercial paper are
included as cash equivalents.
INCOME TAXES
The Company records its income tax provision in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes". (See Note 2).
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FAIR VALUE OF FINANCIAL INSTRUMENTS
Pursuant to SFAS No. 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 January 31, 2000. The Company
considers the carrying value of such amounts in the financial statements to
approximate their expected realization and interest rates, which approximate
current market rates.
COMPREHENSIVE INCOME (LOSS)
In fiscal 1999, the Company adopted SFAS No. 130, Reporting
Comprehensive Income. This statement establishes standards for the reporting of
comprehensive income and its components in a financial statement that is
displayed with the same prominence as other financial statements. The adoption
of SFAS No. 130 required no additional disclosure for the Company and did not
have any effect on the Company's financial position, as there was no difference
between comprehensive loss and the net loss as reported.
SEGMENT DISCLOSURES
In fiscal 1999, the Company adopted SFAS No. 131, Disclosures About
Segments of an Enterprise and Related Information. This statement establishes
standards for the way companies report information regarding operating segments
in annual financial statements. The adoption of SFAS No. 131 required no
additional disclosure for the Company as the Company operated in one principal
business segment.
RECLASSIFICATIONS
Certain items in prior year financial statements have been reclassified
to conform to the current year's presentation.
PRIOR PERIOD ADJUSTMENTS
Legal expenses of $271,450, related to previous periods and have not
been accrued properly, were added to Accumulated Deficits.
NOTE 2 - Income taxes
Tax provision of $800 for California minimum Franchise taxes has been
provided in quarter ended January 31, 2000. At January 31, 2000, the company did
not have any significant tax net operating loss carryforwards (tax benefits
resulting from losses for tax purposes have been fully reserved due to the
uncertainty of realizing the benefits). At January 31, 2000, the company did not
have any significant deferred tax liabilities or deferred tax assets.
NOTE 3 - Earnings Per Share
On December 31, 1997, the Company adopted Financial Accounting Statement
No. 128 issued by the Financial Accounting Standards Board. Under Statement 128,
the Company was required to change the method previously used to compute
earnings per share and to restate all prior periods. Under the new requirements
for calculating basic earnings per share, the dilutive effect of stock options
are excluded. The impact of Statement 128 on the calculation of earnings per
share is as follows:
<TABLE>
<CAPTION>
3 Months Ended 9 months Ended
January 31, 2000 January 31, 2000
---------------- ----------------
<S> <C> <C>
Average Shares Outstanding 12,160,006 11,266,698
Net Loss $ (663,335) $ (905,445)
Basic Loss Per Share $ (0.05) $ (0.08)
</TABLE>
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<TABLE>
<CAPTION>
3 Months Ended 9 months Ended
January 31, 2000 January 31, 2000
---------------- ----------------
<S> <C> <C>
DILUTED:
Average Shares Outstanding 12,160,006 11,266,698
Net Effect of Dilutive
Stock options and warrants
based on the treasury stock
method using average market price 2,023,954 2,023,954
Total Shares 14,183,960 13,290,652
Net Loss $ (663,335) $ (905,445)
Diluted Loss Per Share $ (0.05) $ (0.07)
Average Market Price of Common Stock $ 22.63 $ 9.27
Ending Market Price of Common Stock $ 33 $ 33
</TABLE>
The following securities were excluded from the calculation of diluted
earnings per share at January 31, 2000 because they are considered anti-dilutive
under FAS 128:
Warrants issued to company officers and employees to purchase up to
1,650,000 shares of common stock at various prices between $0.25 and $1.00 per
share.
NOTE 4- LAW FIRM PAYABLE
As of January 31, 2000 the Company had outstanding payables totaling
$685,484 with the law firm of Hughes Hubbard & Reed, LLP which has been
representing the Company in connection with various litigation matters since
1988. Of this amount, $244,820 relates to legal services rendered between
October, 1996 and November, 1999, $342,538 relates to legal services rendered
between January, 1993 and September, 1996 and $98,126 relates to current amounts
due in connection with the Lauffs case (See "Legal Proceedings"). The
obligations to Hughes Hubbard & Reed are ostensibly secured by all right, title
and interest of the Company in (i) certain claims of the Company against several
defendants in connection with the San Francisco Superior Court Case No. 862163
ChoPP Computer Corp. v. Laurins et al., (ii) all rights, interest, title and
claims that the Company has to distributions from the PMITA bankruptcy pending
in United States Bankruptcy court for the District of Maryland (Case Nos.
86-4-2698PM and 91-4-4457PM, (iii) U.S. Patents Nos. 4,484,262, 4,707,781 and
5,438,680, and (iv) an agreement with St. Clair Intellectual Property
Consultants, Inc. and others dated October 24, 1996.
Hughes, Hubbard & Reed has claimed that the Company is obligated to
satisfy the $342,538 of fees by issuance of approximately 390,000 shares of
Common Stock. There can be no assurance that complying with Hughes, Hubbard &
Reed's demands would not have a material effect on the Company's financial
statements. If the Company were to issue such shares to Hughes, Hubbard & Reed,
it would be required to charge to earnings the excess of the fair market value
of such shares on the date of issuance over the recorded payable of $342,538.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS AND PLAN OF OPERATION
Overview
The Company is engaged in the development of a proprietary, patented
software technology that is intended to significantly improve the speed at which
computers can process commutative transactions. The Company's operations
currently consist of start-up activities, including research and development of
its asynchronous non-pre-emptive tasking software technology ("ANTs
technology"), personnel recruiting and capital raising. The Company intends 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 e-commerce. The Company is in the process of developing its
technology as it prepares to implement its new business strategy in fiscal year
2001, and has not realized any revenues to date.
General and Administrative
During the third quarter the Company's general and administrative
expenses increased to $207,176. This increase is the result of the Company's
recruiting efforts to add technical, marketing and administrative staff. The
Company expects that its general and administrative expenses will continue to
increase as additional staff is 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.
Such individuals are necessary for the development of the Company.
Professional Services
During the third quarter expenses for professional services increased to
$408,398. 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 recruiting services, 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, recruiting and financial services as the Company
continues to build its corporate infrastructure.
The Company is engaged in a review of its historical legal and
accounting records. In the process of reconciling its outstanding liabilities,
it was discovered that $271,450 of legal fees incurred from 1995 to 1998 had not
been recognized by prior management. This amount has been added to accumulated
deficits since it is related to previously closed periods. There can be no
assurance that further adjustments will not be made as the Company's review of
its legal and accounting records proceeds.
Facilities
The Company incurred facilities expenses of approximately $60,000 during
the third 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. The
Company expects to take possession of these facilities during the first quarter
of its fiscal year, 2001. The Company believes that these facilities will be
adequate to accommodate the Company's growth plans through at least fiscal year
2001. These facilities represent an obligation of approximately $598,299 per
year.
CAPITAL AND LIQUIDITY RESOURCES
The Company anticipates significantly increasing its expenditures over
the coming months as it continues to develop and productize its technology. The
Company does not expect to realize any revenues through calendar year 2000. The
Company finished the third quarter with a cash balance of
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approximately $4.6 million, which would be adequate to fund the Company's
activities through the calendar year at its current rate of spending. There can
be no assurance that the Company's continued product development and
infrastructure development will not require a much higher rate of spending than
currently. The Company plans to seek investment from institutional investors to
support accelerated product development, although there can be no assurance that
the Company will be able to obtain such capital or accelerate its development
spending.
During the third quarter the Company raised approximately $5.0 million
from private placements of restricted common stock to accredited investors. Such
sales were made at substantial discounts to the market value of the Company's
traded shares due to the lack of liquidity of the unregistered shares that were
sold and the risk inherent in the Company's activities. The share price of the
Company's stock was extremely volatile during the third quarter. The Company
believes that this volatility could make raising substantial capital more
difficult than it otherwise would be.
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 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, 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.
LEGAL PROCEEDINGS
The Company was a defendant in, and was awarded summary judgment in
February, 2000 in connection with, a case entitled Lauffs v. Mosaic, et al. The
plaintiffs have filed an appeal. The Company believes the appeal to be without
merit, but there can be no assurance that the appellate court will not reverse
the lower court's ruling. Additionally, the Company has filed an action for
malicious prosecution against the plaintiffs in that case. The Company is not a
party to any other litigation.
RECENT SALES OF SECURITIES
During November and December, 1999 the Company raised approximately
$5,055,000 through the sale of an aggregate of 883,510 shares of its Common
Stock in several private placements to twelve investors at prices ranging from
$4.00 to $20.00.
The shares were sold in transactions exempt under Section 4(2) of the
Securities Act 1933, as amended, (the "Act") and Rule 506 of Regulation D
promulgated thereunder. The purchasers in each of these transactions represented
that they were purchasing for their own accounts and not with a view
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toward distribution; and that they were purchasing restricted securities without
any public solicitation by the Company.
As of January 31, 2000, the Company had outstanding warrants to purchase
an aggregate of 1,650,000 shares of its Common Stock, exercisable at prices
ranging from $0.25 to $1.00 per share, and exercisable for periods ranging from
November 4, 2000 to September 23, 2004.
Lawrence Coopet, a former employee of the Company, was granted a Warrant
to purchase 10,000 shares of the Company's common stock at a per share exercise
price of $0.50 per share on December 30, 1999, which he exercised on December
31, 1999 for an aggregate $5,000.
On or about December 3, 1999, the Company and John C. Wilczak, the
former President and Chief Executive Officer of the Company entered into an
agreement pursuant to which Mr. Wilczak was granted a registered, fully vested
five (5) year stock option to purchase up to Eighty Thousand (80,000) shares of
the common stock of the Company at a price of Fifty Cents ($0.50) per share.
OTHER MATTERS
On January 7, 2000 the Securities and Exchange Commission ("SEC") issued
an order that a private investigation be made to determine whether any persons
or entities had made false or misleading statements regarding the value of ANTs
stock in postings made on Internet investor bulletin boards. The Company and its
affiliates have cooperated with the SEC, intend to continue to fully cooperate
with the SEC, and have produced all available documents requested by the SEC.
REPORTS ON FORM 8-K
On or about January 31, 2000 the Company filed a current report on Form
8-k concerning the following:
RESIGNATION OF THE COMPANY'S FORMER ACCOUNTANT
On January 3, 2000, Jaak Olesk, CPA informed the Registrant's former
Chairman that he resigned as the independent accountant of the Registrant.
The report of Jaak Olesk, CPA on the financial statements as of and for
the year ending April 30, 1999 did not contain any adverse opinion or disclaimer
of opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principles. However, the auditor's report dated July 2, 1999, for the
year ended April 30, 1999, included an explanatory paragraph expressing
substantial doubt about the Registrant's ability to continue as a going concern.
In connection with its audits for the two most recent fiscal years and
through April 30, 1999, there have been no disagreements with Jaak Olesk, CPA on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of Jaak Olesk, CPA would have caused him to make reference
thereto in their reports on the financial statements for such years; provided,
however, that Jaak Olesk, CPA indicated his objection to the filing by the
Registrant of registration statements on Form 10-SB and S-8 without obtaining
his prior written consent, as required. The referenced registration statement on
Form S-8 was withdrawn by the Registrant. Jaak Olesk, CPA has agreed to
cooperate with the Registrant in filing appropriate amendments to the
Registrant's registration statement on Form 10-SB and a new registration
statement on Form S-8 to correct such deficiencies.
During the two most recent fiscal years and through April 30, 1999,
there have been no reportable events of the type described in Regulation S-B
Item 304(a)(1)(iv)(B).
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Jaak Olesk, CPA's resignation was not recommended by the Audit Committee
or Board of Directors of the Registrant.
The Registrant requested that Jaak Olesk, CPA furnish it with a letter
addressed to the Securities and Exchange Commission stating whether or not it
agrees with the above statements. A copy of such letter, dated January 27, 2000
was filed as Exhibit 16 to the Form 8-K.
RETENTION BY THE COMPANY OF NEW ACCOUNTANTS
The Registrant engaged Farber & Hass LLP as its new independent
accountants as of January 19, 2000. During the two most recent fiscal years and
through January 19, 2000, the Registrant has not consulted with Farber & Hass
LLP regarding either: (i) the application of accounting principles to a specific
completed or contemplated transaction, or the type of audit opinion that might
be rendered on the Registrant's financial statements and either written or oral
advice was provided to the Registrant by Farber & Hass LLP that the Registrant
considered was an important factor in reaching a decision as to the accounting,
auditing or financial reporting issue; or (ii) any matter that was the subject
of a disagreement or event of the type described in Item 304(a)(1)(iv) of
Regulation S-B and the related instructions to Item 304 of Regulation S-B.
RESIGNATION AND APPOINTMENT OF DIRECTORS
On January 5, 2000, Donald R. Hutton resigned as Chief Executive
Officer, Chairman of the Board and a Director of the Registrant. Donald R.
Hutton's resignation as Chairman of the Board and a Director of the Registrant
reported in Item 5 of the Current Report was not due to any disagreement with
the Registrant.
Effective January 5, 2000, Frederick D. Pettit was appointed as the new
Chairman of the Board and Robert Mountain was appointed as a director of the
Company.
On January 26, 2000, Peter C. Patton, Ph.D., resigned as a director of
the Company.
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: March 13, 2000 by: /s/ FREDERICK D. PETTIT
---------------------------------
Frederick D. Pettit, Chairman and
Chief Executive Officer
Date: March 13, 2000 by: /s/ JOHN CRARY
-----------------------------------
John Crary, Secretary and Treasurer
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