-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SawhikYfFQm8Aq/oEILZwIU/3L72HVFRlYrWRz26NKNu605qQhp2M6xft/mV4Uzz H2NxD9HVYWwWC/S38MREvA== 0001005477-99-003896.txt : 19990823 0001005477-99-003896.hdr.sgml : 19990823 ACCESSION NUMBER: 0001005477-99-003896 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990820 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMBIENT CORP /NY CENTRAL INDEX KEY: 0001047919 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 980166007 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-23723 FILM NUMBER: 99696657 BUSINESS ADDRESS: STREET 1: 270 MAIDOSN AVENUE STREET 2: BUILDING ONE CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 8888610205 MAIL ADDRESS: STREET 1: 270 MADISON AVENUE STREET 2: BUILDING ONE CITY: NEW YORK STATE: NY ZIP: 10016 10QSB 1 FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB |X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended June 30, 1999 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: 0-23723 Ambient Corporation (Exact name of small business issuer as specified in its charter) Delaware 98-0166007 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 270 Madison Avenue, New York, New York 10016 (Address of principal executive offices, including zip code) (888) 861-0205 (Issuer's telephone number, including area code) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 |_| At August 18, 1999, Ambient Corporation had outstanding 3,126,833 shares of common stock, par value $.001 per share. Transitional Small Business Disclosure Format (Check one) Yes |X| No |_| Index PART I -- FINANCIAL INFORMATION Item 1 -- Financial Statements* Consolidated Balance Sheet at December 31, 1998 and June 30, 1999 Consolidated Statement of Operations for the Six and Three Months Ended June 30, 1999 and 1998 Consolidated Statement of Stockholders' Equity (Deficiency) at June 30, 1999 Consolidated Statement of Cash Flows for the Six Months Ended June 30, 1999 and 1998 Notes to Consolidated Statements Item 2--Plan of Operations PART II--OTHER INFORMATION Item 1-- Legal Proceedings Item 2-- Changes in Securities Item 3-- Defaults upon Senior Securities Item 4-- Submission of Matters to a vote of Security Holders Item 5-- Other Information Item 6-- Exhibits and Reports on Form 8-K Signatures *The Balance Sheet at December 31, 1998 has been taken from audited financial statements at that date. All other financial statements are unaudited. AMBIENT CORPORATION AND SUBSIDIARY ( a Development Stage Company) CONSOLIDATED BALANCE SHEET In U.S. dollars (Unaudited)
June 30, 1999 December 31, 1998 ----------------------------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 7,642 $ 16,138 Restricted cash 131,259 131,259 Note receivable 350,000 350,000 Other receivables and prepaids 203,305 334,983 -------------------------------- Total current assets 692,206 832,380 PROPERTY AND EQUIPMENT Cost 328,320 328,320 Less accumulated depreciation (120,795) (92,057) -------------------------------- 207,525 236,263 DEPOSITS FOR SEVERANCE PAY 9,187 6,587 -------------------------------- Total assets $ 908,918 $ 1,075,230 ================================ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term credit $ 185,543 $ 144,006 Note payable 594,900 585,900 Accounts payable 488,071 337,105 Other current liabilities 74,182 175,264 -------------------------------- Total current liabilities 1,342,697 1,242,275 LONG-TERM LIABILITIES Accrued severance pay 61,343 37,613 Long-term bank credit 28,386 37,886 -------------------------------- Total long-term liabilities 89,729 75,499 STOCKHOLDERS' EQUITY (DEFICIENCY) Common stock, $0.001 par value; authorized 20,000,000 shares; issued and outstanding 3,126,833 and 3,127 3,074 3,074,333 shares, respectively Additional paid in capital 5,171,710 4,941,189 Deferred compensation (49,433) (239,683) Deficit accumulated during the development stage (5,648,911) (4,947,124) -------------------------------- Total stockholders' equity (deficiency) (523,507) (242,544) -------------------------------- Total liabilities and stockholders' equity $ 908,918 $ 1,075,230 ================================
See accompanying notes to financial statements. AMBIENT CORPORATION AND SUBSIDIARY ( a Development Stage Company) CONSOLIDATED STATEMENT OF OPERATIONS In U.S. dollars (Unaudited)
Cumulative from Inception For the three months ended For the six months ended to June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998 June 30, 1999 ----------------------------------------------------------------------------- Research & development expenses $ 123,665 $ 236,377 $ 227,900 $ 463,098 $ 1,609,450 Less - Chief Scientist of Israel participation 138,000 -- 148,387 -- 474,815 ----------------------------------------------------------------------------- (14,335) 236,377 79,513 463,098 1,134,635 Selling, General and administrative expenses 184,475 276,459 295,744 556,478 3,247,135 ----------------------------------------------------------------------------- Operating loss (170,140) (512,836) (375,257) (1,019,576) (4,381,770) Other expenses -- 21,507 -- 21,507 3,587 Financing expenses, net 126,517 41,184 326,530 283,285 1,263,554 ----------------------------------------------------------------------------- Net loss $ (296,657) $ (575,527) $ (701,787) $(1,324,368) $(5,648,911) ============================================================================= Basic and fully diluted loss per share $ (0.10) $ (0.20) $ (0.23) $ (0.46) ------------------------------------------------------------ Weighted average number of shares outstanding 3,104,333 2,896,833 3,104,333 2,896,833 ============================================================
See accompanying notes to financial statements. AMBIENT CORPORATION AND SUBSIDIARY ( a Development Stage Company) CONSOLIDATED STATEMENT STOCKHOLDERS' EQUITY (DEFICIENCY) In U.S. dollars (Unaudited)
Number Common Additional Deferred Deficit Total of shares Stock paid in compensation accumulated capital during the development stage ----------------------------------------------------------------------------------- Stock issued July 1996 to founders for nominal consideration 2,028,833 $ 2,029 $ -- $ -- $ -- $ 2,029 Stock issued September & October 1996 to employees for services 200,333 200 -- -- -- 200 Net loss -- -- -- -- (693,995) (693,995) ----------------------------------------------------------------------------------- Balance as of December 31, 1996 2,229,166 2,229 -- -- (693,995) (691,766) Stock issued March & August 1997 to employees for services 104,167 104 386,668 (386,668) -- 104 Stock issued September & October 1997 pursuant to private placement 80,000 80 319,920 -- -- 320,000 Stock issued September 1997 to advisor for services 6,000 6 23,994 -- -- 24,000 Amortization of deferred compensation -- -- -- 145,556 -- 145,556 Net loss -- -- -- -- (1,432,815) (1,432,815) ----------------------------------------------------------------------------------- Balance as of December 31, 1997 2,419,333 2,419 730,582 (241,112) (2,126,810) (1,634,921) Stock issued January & August 1998 pursuant to consulting agreement 75,000 75 654,925 (655,000) -- -- Public offering February 1998 525,000 525 3,432,502 -- -- 3,433,027 Stock issued January 1998 pursuant to debt financing agreement 20,000 20 99,980 -- -- 100,000 Additional stock issued January 1998 pursuant to founders agreement 35,000 35 -- -- -- 35 Warrants issued September 1998 pursuant to private placement -- -- 21,600 -- -- 21,600 Options granted August 1998 pursuant to consulting agreement -- -- 1,600 (1,600) -- -- Amortization of deferred compensation -- -- -- 658,029 -- 658,029 Net loss -- -- -- -- (2,820,314) (2,820,314) ----------------------------------------------------------------------------------- Balance as of December 31, 1998 3,074,333 3,074 4,941,189 (239,683) (4,947,124) (242,544) Stock issued February 1999 pursuant to consulting agreement 37,500 38 69,963 -- -- 70,000 Options granted May 1999 pursuant to employee stock option plan -- -- 138,125 -- -- 138,125 Warrants issued April 1999 pursuant to consulting agreement -- -- 10,260 -- -- 10,260 Stock issued April 1999 pursuant to consulting agreement 15,000 15 12,173 -- -- 12,188 Amortization of deferred compensation -- -- -- 190,250 -- 190,250 Net loss -- -- -- -- (701,787) (701,787) ----------------------------------------------------------------------------------- Balance as of June 30, 1999 3,126,833 $ 3,127 $ 5,171,710 $ (49,433) $(5,648,911) $ (523,508) ===================================================================================
See accompanying notes to financial statements. AMBIENT CORPORATION AND SUBSIDIARY ( a Development Stage Company) CONSOLIDATED STATEMENT OF CASH FLOWS In U.S. dollars (Unaudited)
Cumulative from Inception For the six months ended to June 30, 1999 June 30, 1998 June 30, 1999 ------------------------------------------------------- Cash flows from operating activities Net loss $ (701,787) $(1,324,368) (5,648,911) Adjustments to reconcile net loss to net cash used in operating activities - Depreciation and amortization 227,988 390,835 1,715,602 Financing and consulting expenses paid via issuance of common stock 92,449 -- 192,449 Options granted pursuant to employee stock option plan 138,125 138,125 Increase in net liability for severance pay 21,130 17,896 52,156 Write-down of loan receivable -- -- 485,000 Write off of leasehold improvements -- 21,507 20,453 Accrued interest on long-term loan and notes payable -- -- 210,016 Changes in operating assets and liabilities Other receivables and prepaid expenses 131,678 (214,123) (176,543) Accounts payable 150,966 (33,043) 258,824 Other current liabilities (101,082) (239,315) (114,373) ------------------------------------------------------- Net cash used in operating activities (40,533) (1,380,611) (2,867,202) Cash flows from investing activities Restricted cash -- (100,000) (131,259) Note receivable -- (350,000) (835,000) Purchase of equipment -- (116,034) (359,717) ------------------------------------------------------- Net cash used in investing activities -- (566,034) (1,325,976) Cash flows from financing activities Issuance of share capital -- 200,000 2,264 Issuance of long-term notes -- 1,000,000 Receipt of loans from shareholders, net -- 919,600 Increase in bank overdraft -- 98,995 Receipt of loans from bank -- -- 120,007 Decrease in short-term credits 41,537 33,600 41,537 Repayments of long-term loans (9,500) (1,568,356) (1,414,610) Public offering of common stock -- 3,433,027 3,433,027 ------------------------------------------------------- Net cash provided by financing activities 32,037 2,098,271 4,200,820 Net increase (decrease) in cash (8,496) 151,626 7,642 Cash, beginning of period 16,138 -- -- ------------------------------------------------------- Cash, end of period $ 7,642 $ 151,626 $ 7,642 =======================================================
See accompanying notes to financial statements. AMBIENT CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 1 - GENERAL The accompanying condensed interim financial statements have been prepared in accordance with generally accepted accounting principles relating to interim financial information. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six month period ended June 30, 1999, are not necessarily indicative of the results that may be expected for the year ended December 31, 1999. Note 2 - GOING CONCERN The Company incurred a net loss in 1996, 1997 and 1998 and during the six months ended June 30, 1999 and anticipates that it will continue to incur losses for some time. The Company's continued existence is dependent on obtaining additional financing from its shareholders and outside sources for product development and commercialization. These matters raise substantial doubt about the Company's ability to continue as a going concern. Management's plans to continue operations in the normal course of business include the following: (i) continuing to seek out potential sources of equity capital; (ii) seek further grants from the Office of the Chief Scientist; (iii) expanding sales efforts by entering into new agreements with distributors in a number of countries; (iv) negotiating with a number of companies to install pilot projects; and (v) diversification through establishment of a new subsidiaries in the fields of internet technology and software development. In management's estimation, the above measures, if substantially realized, should enable the Company to continue operating through at least June 30, 2000, although there can be no assurance of this. In order to reduce its fixed costs until the above measures are partially or fully realized, in March 1999, the Company terminated the employment of approximately one-half of its employees. The Company has also undertaken other cost-cutting measures, such as reducing its lease space. In addition, due to the Company's adverse liquidity position, the Company did not pay salaries to its remaining employees for the months of April through July 1999. The Company has not recorded any possible interest or penalties relating to the late payment of these salaries. The above matters raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. Note 3 - CONSULTING AGREEMENTS During the period the Company retained the services of legal and financial consultants. The agreements provide for the issuance of 52,500 shares of Common Stock and warrants to purchase 18,000 shares of Common Stock. The Company recorded consulting expense of $22,448 and prepaid consulting of $70,000 as a result of these issuances and is amortizing the prepaid amount over the term of the agreement. Note 4 - RESTRICTED CASH The Company has short-term lines of credit from banks in Israel for which the Company agreed to maintain compensating balances of $130,000, which are restricted for a period of up to one year. Note 5 - NOTE RECEIVABLE The Company loaned money to Ordacard Hi-tec Industries, Ltd. as part of an anticipated merger. The merger was not consummated due to the fact that a number of material conditions to the merger were not fulfilled. In addition, the Company was notified that the Israeli courts were unable to approve a merger between an Israeli corporation and a foreign corporation. A dispute currently exists between the Company and Ordacard as to the nature and substance of the $835,000 amounts provided by the Company to Ordacard. The Company maintains, that such amount is a loan; whereas, Ordacard maintains that such amount represents an equity investment in Ordacard's shares. The Company intends to vigorously defend its rights to collect the $835,000 amounts advanced. Nevertheless, in light of significant financial difficulties currently existing at Ordacard, the Company has written-down the receivable to its estimated realizable value of $350,000. Note 5 - STOCK AWARD In May 1999 the Company awarded options exercisable into 170,000 shares of Common Stock to the Chief Executive Officer and the Chief Financial Officer under the Ambient Corporation 1998 Stock Option Plan. The options were granted for past services. Item 2. Plan of Operation The following discussion and expositions should be read in conjunction with the Financial Statements and realted Notes contained elsewhere in this Form 10-QSB. The Company was organized in June 1996 and is a development stage company. In August 1996, Ambient Corporation purchased substantially all of the assets, properties, business and goodwill and assumed the liabilities of Gen Technologies, Inc., a Delaware company organized in September 1995 ("GTI"), including the capital stock of GTI's subsidiary, GenTec, Ltd., a corporation organized under the laws of the State of Israel in November 1995. In November 1996, the Company changed the name of its subsidiary from GenTec, Ltd. to Ambient, Ltd. ("Ambient Israel"). The Company owns 95% of Ambient Israel's outstanding capital stock. Since inception , the Company's activities have been principally limited to organizational and initial capitalization activities, designing and developing smart card technology and recruitment of executive personnel. As a development stage company, the Company has a limited operating history upon which an evaluation of the Company's prospects can be made. The Company's prospects must therefore be evaluated in light of the problems, expenses, delays and complications associated with a new business. The Company has not generated any revenues from its smart card technology since its inception. For the fiscal years ended December 31, 1996, 1997, and 1998, and the six months ended June 30, 1999, the Company has incurred net losses aggregating $5,648,911, reflecting principally research and development expenses and general and administrative expenses. The Company expects to incur significant up-front expenditures in connection with the planned expansion of its operations, including the implementation of marketing and sales efforts and the commercialization of the Company's technology, and operating losses are expected to continue for the foreseeable future. There can be no assurance that the Company can be operated profitably in the future. The Company's continuation as a going-concern is dependent upon, among other things, its ability to obtain additional financing when and as needed, and to generate sufficient cash flow to meet its obligations on a timely basis. The Company may also explore other business options including strategic joint ventures and business combinations, including investments in other companies, or mergers. In February 1998, the Company completed an initial public offering of 525,000 shares of Common Stock (the "IPO"). The Company received net proceeds from the IPO of approximately $3,433,027. The Company is dependent upon obtaining additional financing to implement its anticipated business plans. As of June 30, 1999, the Company has expended $1,609,450 on its research and development activities (including $474,815 received from the Office of Chief Scientist of the Israeli Ministry of Industry and Trade ("OCS"). Ambient Israel has two patent applications pending in Israel which were filed in 1996, for one of which a corresponding application was filed in the United States in 1997. The United States Patent and Trademark Office ("PTO") has allowed one patent application, which was filed in the United States in 1996, for which a corresponding application was filed under the international Patent Cooperation Treaty in 1997. During the next 12 months, the Company's research and development plans include, although there can be no assurance, filing one or more additional patent applications in the United States and Israel, developing a reader based on certain chip technology, implementing pilot production of smart cards and demonstrating compatibility for the use of Ambient technology in large memory data storage media such as cameras, telephones and computers. The Company may need to raise additional funding to carry out all or a portion of its research and development plans. The Company does not have any commitments for any future financings and there can be no assurance such financing will be available, or if available, that it can be obtained on terms favorable to the Company, or that such financing will not be dilutive to stockholders. The Company anticipates that its first Ambient product will be completed and ready for introduction into the market by the third quarter of 1999. Product introduction will depend on several factors, including the availability of funding, research and development and marketing efforts, and there can be no assurance that the Company will be successful in introducing a product by the end of 1999. The Company's marketing activity to date has consisted primarily of formulating a marketing strategy. The Company's strategy focuses initially on approaching and establishing relationships with large and mid-sized system integrators already operating in the smart card market, as well as those integrators involved in ancillary markets such as health care, access control, and transport ticketing. The Company also intends to target potential volume customers. In an effort to promote recognition of the Ambient name within the industry, the Company plans to exhibit its technology at selected industry trade shows, and design and distribute marketing materials. The Company also plans to implement and publicize pilot projects to demonstrate the benefits of using the Company's technology. Depending on several factors, including the success of the Company's marketing efforts, market acceptance of the Ambient technology, competition and the Company's progress in its research and development efforts and developing relationships with systems integrators, the Company believes it will begin to generate sales and revenues during the fourth quarter of 1999. There can be no assurances, however, that the Company will generate significant revenues by this date, or at all. The Company currently has 4 full-time employees and several part time employees. The Company's product development is carried out at Ambient Israel's facilities in Israel Since inception, the Company has relied on certain debt financings, government funding from the OCS, bank financing, loans from third parties, stockholder loans, private placements and the IPO for its capital requirements. The Company used $1,828,261 of the net proceeds from the IPO to satisfy the principal and accrued interest due on certain third party loans (excluding the stockholder loans), debt financing and private placements. On March 25, 1998 the Israeli Investment Center granted "Approved Enterprise" status to Ambient Israel, pursuant to The Law for the Encouragement of Capital Investments, 1959 (the "Investment Law") with respect to its planned investment in certain fixed assets for establishing a smart card production facility. The Investment Law provides that certain capital investments may, upon application to the Israeli Investment Center, be designated as an "Approved Enterprise". Ambient Israel participates under the "Alternative Benefits Program" under the Investment Law. Accordingly, taxable profits attributable to the approved enterprise will be exempt from tax for a period of 10 years, commencing in the first year in which the Approved Enterprise first generates taxable income. However, such benefits period will terminate upon the earlier of (i)12 years from the commencement of production or (ii)14 years from the date of approval of the Approved Enterprise. Under the Alternative Benefits Program, dividend distributions from Ambient Israel during the benefits period will be subject to reduced withholding tax of 15%, but will render Ambient Israel liable for corporate tax (generally 25%, subject to reduction depending upon the percentage of foreign investment in Ambient Israel) on the amount distributed and the corporate tax thereon. The benefits available as an Approved Enterprise are conditioned upon the fulfillment of certain conditions stipulated in the Investment Law, and the regulations thereunder, and the criteria set forth in the certificate of approval. In the event any of these conditions are not fulfilled, in whole or in part, the benefits could be canceled and the Company could be required to refund the amount of the canceled benefits, plus interest and inflation adjustments. There can be no assurances that the Company will be able to continue to comply with such requirements in the future. As of December 31, 1998 the Company has not realized any benefit as an Approved Enterprise due to the net loss. Certain statements made in this Annual Report on Form 10 KSB including statements contained in the preceding Plan of Operation are "forward looking statements" (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations and projections of revenues, earnings and capital expenditures. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company's plans, objectives and expectations are based, in part, on assumptions involving the growth of the Company's business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes that its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives, plans or expectations of the Company will be achieved. Ambient plans to diversify through a new subsidiary established to develop internet service over power lines utilizing Ambient's contactless connector technology. The new product will be electronic equipment utilizing patented technologies for transmitting data over power lines. This equipment will offer consumers an alternative Internet connection with the advantages of quicker data rates at lower costs. The Company will provide the devices for the electric utility company to cost-effectively upgrade their existing equipment and will provide the special modem for the connection to the customer's home. The planned merger of Ambient and Ordacard Hi-Tec Industries was not consummated due to the fact that a number of material conditions to the merger were not fulfilled Year 2000 Issues Background Many currently installed computer systems and software products are unable to distinguish between twentieth century dates and twenty-first century dates because these systems may have been developed using two digits rather than four to determine the applicable year. For example, computer systems that have date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This error could result in system failures or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices or engage in similar normal business activities. As a result, many companies' software and computer systems may need to be upgraded or replaced to comply with such "Year 2000" requirements. State of Readiness Our business is dependent on the operation of numerous systems that could potentially be affected by Year 2000 related problems. Those systems include, among others: software systems that we use internally in the management of our business; hardware and software products that we have developed; the internal systems of our customers and suppliers; and non-information technology systems and services that we use in the management of our business, such as telephone systems and building systems. Based on an analysis of the systems potentially affected by conducting business in the twenty-first century, we are applying a phased approach to making such systems, and accordingly our operations, Year 2000 ready. Beyond awareness or the issues and scope of systems involved, the phases of activities in progress include: an assessment of specific underlying computer systems, programs and/or hardware; rededication or replacement of Year 2000 non-compliant technology; validation and testing of technologically Year 2000 ready solutions; and implementation of the Year 2000 ready systems. The table below provides the status and timing of these phased activities: Affected Systems Status- - ---------------- ------- Products that we Assessment completed; conducting license or sell ongoing validation and testing (see details below) Hardware and software Assessment completed; systems that we use certain components replaced; conducting validation and testing Internal systems of our Assessment not yet completed customers and suppliers Non-information technology No assessment made systems and certain services that we use in the management of our business, internal and external, such as telephone systems and building systems Product Status Our product is not date or time sensitive. We have tested and verified our product as Year 2000 ready. Year 2000 readiness does not include the performance or functionality of third party products, including hardware or software with which our product interfaces. Costs to Address Year 2000 Readiness We have expensed as incurred all costs directly related to Year 2000 readiness, even in cases where non-compliant information technology systems have been replaced. To date, these costs have been insignificant. The replacement cost of non-information technology systems would have been incurred, regardless of the Year 2000 issue. We do not believe that future expenditures to upgrade internal systems and applications will have a material adverse effect on our business, financial condition and results of operations. In addition, while the potential costs of redeployment of personnel and any delays in implementing other projects is not known, the costs are anticipated to be immaterial. Risks of Year 2000 Issues We believe that our product is Year 2000 ready; however, success of our Year 2000 readiness efforts may depend on the success of our customers in dealing with their Year 2000 issues. Customer difficulties with Year 2000 issues could interfere with the use of Our product, which might require us to devote additional resources to resolve the underlying problems. If the problem is found to lie in Our product, our business, financial condition and results of operations could be materially adversely affected. Furthermore, the purchasing patterns of these customers or potential customers may be affected by Year 2000 issues as companies expend significant resources to become Year 2000 ready. The costs of becoming Year 2000 ready for current or potential customers may result in reduced funds available to purchase and implement our products. In addition, we rely on various entities that are common to many businesses, such as public utilities. If these entities were to experience Year 2000 failures, our ability to conduct business would be disrupted. Although we believe that our Year 2000 readiness efforts are designed to appropriately identify and address those Year 2000 issues that are within our control, there can be no assurance that our efforts will be fully effective or that the Year 2000 issues will not have a material adverse effect on our business, financial condition or results of operations. The novelty and complexity of the issues presented and our dependence on the preparedness of third parties are among the factors that could cause our efforts to be less than fully effective. Moreover, Year 2000 issues present many risks that are beyond our control, such as the potential effects of Year 2000 issues on the economy in general and on our business partners and customers in particular. Contingency Plans We have conducted an assessment of certain of our Year 2000 exposure areas in order to determine what steps beyond those identified by our internal review were advisable and no additional work was recommended. We do not presently have a contingency plan for handling Year 2000 issues that are not detected and corrected prior to their occurrence. Any failure by us to address any unforeseen Year 2000 issue could adversely affect our business, financial condition and results of operations. Any such occurrence could adversely affect our business. PART II - OTHER INFORMATION Item 1. Legal Proceedings. None. Item 2. Changes in Securities and Use of Proceeds The Company's Registration Statement on Form SB-2, file no. 333-40045, was declared effective by the Securities and Exchange Commission on February 12, 1998. The initial public offering of the Company's Common Stock covered by such Registration Statement commenced on February 13, 1998. Roan Capital Partners, L.P. acted as the managing underwriter (the "Representative") for the offering. A total of 656,250 shares of Common Stock were registered, including 78,750 shares issuable upon exercise of the Representative's 45-day over-allotment option and 52,500 shares issuable upon exercise of warrants issued to the Representative (the "Representative's Warrants"). The Representative's Warrants to purchase 52,500 shares of Common Stock issued to the Representative were also registered. The aggregate offering price of the registered Common Stock (including the over-allotment option), the Representative's Warrants and the shares issuable upon exercise of Representative's Warrants, was $5,523,052.50. Of this amount, $4,200,000 representing 525,000 shares of Common Stock have been sold (and the Representative's Warrants were sold for $52.50). The Representative's Warrants have not yet been exercised and consequently the offering has not yet terminated. The amount of expenses incurred for the Company's account in connection with the issuance and distribution of the securities registered are as follows: Underwriting discounts and commissions: $ 420,000 Finder's fees: Expenses paid to or for the underwriters: 126,000 Other expenses: 397,710 --------- Total expenses: $ 943,710 All such expenses were paid directly or indirectly to others. The net offering proceeds to the Company after deducting the above expenses were $3,256,290. As of June 30, 1998, the amount of net offering proceeds to the Company has been used for the following purposes: Marketing ................................................... $ 104,118 Additional Facilities Research and Product Development ............................ 519,201 Repayment of indebtedness ................................... 1,828,261 Capital Equipment ........................................... 11,080 Working Capital and General Corporate ....................... 396,340 Convertible Note Receivable from Ordacard ................... 350,000 ---------- Total ................................................. $3,209,000 All such payments were made directly or indirectly to others. The use of proceeds contained herein does not represent a material change in the use of proceeds described in the prospectus, except that repayment of indebtedness increased by $178,261 from the estimated $1,650,000 in the prospectus to $1,828,261 due to adjustments in the calculations of interest on the indebtedness through the date of payment and the repayment of accrued interest on certain indebtedness in the principal amount of $968,000. In addition, the Company reserved the right in the prospectus to use all or a portion of the net proceeds allocated for working capital to acquire other companies. The Company used $350,000 to fund a loan to Ordacard in connection with the proposed merger of Ordacard with and into the Company (or a subsidiary thereof). Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Securities Holders. None. Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit Number Description ------ ----------- 27.1 Financial Data Schedule (b) Reports on Form 8-K None SIGNATURES In accordance with the requirements of the Exchange Act the registrant caused this report to be signed by the undersigned thereunto duly authorized. Date: August 20, 1999 AMBIENT CORPORATION (Registrant) /s/ Aryeh Weinberg ------------------------------------- Chief Financial Officer EX-27 2 FDS --
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1999 JUN-30-1999 138,901 0 553,305 0 0 692,206 328,320 (120,795) 908,918 1,342,697 0 0 0 3,127 (526,634) 908,918 0 0 0 0 1,324,368 0 0 (1,324,368) 0 (1,324,368) 0 0 0 (1,324,368) (0.46) (0.46)
-----END PRIVACY-ENHANCED MESSAGE-----