AMBIENT CORP /NY, 424B4, 1998-02-13

AMBIENT CORP /NY
424B4, 1998-02-13
SEMICONDUCTORS & RELATED DEVICES

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RULE 424(b)(4)
File No. 333-40045
PROSPECTUS

[LOGO]

525,000 SHARES OF COMMON STOCK

All of the 525,000 shares (the 'Shares') of Common Stock, par value $.001
per share (the 'Common Stock'), offered hereby (the 'Offering'), are being sold
by Ambient Corporation, a development stage company organized in Delaware (the
'Company'), through Roan Capital Partners L.P., the representative (the
'Representative') of the underwriters listed on page 46 (the 'Underwriters').

Prior to this offering (the 'Offering'), there has been no public market
for the Common Stock. There can be no assurance that any such market will
develop or, if developed, be sustained. It is currently estimated that the
initial public offering price per share will be $8.00. The offering price of the
Shares has been determined in negotiations between the Company and the
Representative on an arbitrary basis and bears no relationship to the assets,
earnings or any other recognized criteria of value. The offering price should in
no event be regarded as an indication of any future market price of the Shares.
See 'Underwriting' for a discussion of the factors considered in determining the
public offering price of the Common Stock. After the Offering, the Company's
current directors, executive officers and principal stockholders will
beneficially own approximately 20% of the outstanding shares of Common Stock of
the Company. See 'Description of Securities.'

The Company has been advised that the Common Stock will be quoted on the
OTC Electronic Bulletin Board under the symbol 'ABTG.' The OTC Bulletin Board
System is an unorganized, inter-dealer, over-the-counter market which provides
significantly less liquidity than The Nasdaq Stock Market, and quotes for stocks
included on the OTC Bulletin Board are not listed in the financial sections of
newspapers as are those for The Nasdaq Stock Market, as well as other securities
exchanges. In the event the Shares are not included on the OTC Bulletin Board,
quotes for the Shares may be included in the 'pink sheets' for the
over-the-counter market. An OTC Electronic Bulletin Board quote does not imply
that a liquid and active market will develop or be sustained for the securities
upon completion of the Offering. See 'Risk Factors.'
------------------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK AND SUBSTANTIAL DILUTION. SEE 'RISK FACTORS' BEGINNING ON PAGE 7.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share............................................. $8.00 $.80 $7.20
Total(3).............................................. $4,200,000 $420,000 $3,780,000
</TABLE>

(1) Does not include: (i) a 3% nonaccountable expense allowance payable to the
Representative at the closing of the Offering; (ii) warrants (the
'Underwriters' Warrants') to purchase up to 52,500 shares of Common Stock;
and (iii) a two-year financial advisory agreement with the Representative
for an aggregate of $100,000, payable at the closing of the Offering. In
addition, the Company has agreed to indemnify the Underwriters against
certain liabilities under the Securities Act of 1933, as amended (the
'Securities Act'). See 'Underwriting.'

(2) Before deducting certain expenses estimated at $571,000 payable by the
Company in connection with the Offering, including a nonaccountable expense
allowance to the Representative in the amount of $126,000 ($144,900 if the
Underwriters' over-allotment option is exercised in full) and a two-year
financial advisory agreement with the Representative for an aggregate of
$100,000.

(3) The Company has granted the Underwriters an option (the 'Over-allotment
Option'), exercisable within 45 days from the date of this Prospectus, to
purchase in the aggregate up to an additional 78,750 shares of Common Stock
on the same terms as the Shares, solely to cover over-allotments, if any. If
the Over-allotment Option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$4,830,000, $483,000 and $4,347,000, respectively. See 'Underwriting.'
------------------------
The Common Stock being offered through the Underwriters is being sold by
the Company on a 'firm commitment' basis, when, as and if delivered to and
accepted by the Underwriters and subject to approval of certain legal matters by
counsel to the Underwriters and certain other conditions. The Representative
reserves the right to withdraw, cancel or modify the Offering and to reject any
order in whole or in part. It is expected that delivery of the certificates
representing the securities offered hereby will be made against payment therefor
at the offices of the Representative in New York City on or about February 23,
1998.

ROAN CAPITAL PARTNERS L.P.
------------------------
THE DATE OF THIS PROSPECTUS IS FEBRUARY 12, 1998

<PAGE>

<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SHARES, INCLUDING
OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS AND THE IMPOSITION
OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE 'UNDERWRITING.'

------------------------
SPECIAL STANDARDS FOR SECURITIES SOLD IN CALIFORNIA

EACH CALIFORNIA INVESTOR MUST HAVE AN ANNUAL GROSS INCOME OF AT LEAST
$65,000 AND A NET WORTH, EXCLUSIVE OF HOME, FURNISHINGS AND AUTOMOBILES, OF AT
LEAST $250,000 OR IN THE ALTERNATIVE, A NET WORTH, EXCLUSIVE OF HOME,
FURNISHINGS AND AUTOMOBILES, OF AT LEAST $500,000. IN ADDITION, AN INVESTOR'S
TOTAL PURCHASE MAY NOT EXCEED 10% OF SUCH INVESTOR'S NET WORTH. THE EXEMPTION
FOR SECONDARY TRADING AVAILABLE UNDER CORPORATION CODE 25104(H) WILL BE
WITHHELD, BUT THERE MAY BE OTHER EXEMPTIONS TO COVER PRIVATE SALES BY THE BONA
FIDE OWNER FOR HIS OWN ACCOUNT WITHOUT ADVERTISING AND WITHOUT BEING EFFECTED BY
OR THROUGH A BROKER DEALER IN A PUBLIC OFFERING. THE COMPANY DID NOT HAVE TO
DEMONSTRATE COMPLIANCE WITH SOME OR ALL OF THE MERIT REGULATIONS OF THE
DEPARTMENT OF CORPORATIONS.

------------------------
The Company is not currently a reporting Company. Following the Offering,
the Company will be subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the 'Exchange Act'), and in accordance
therewith, will file reports, proxy and information statements and other
information with the Securities and Exchange Commission (the 'Commission'). The
Company intends to furnish to its stockholders annual reports containing audited
financial statements and such other periodic reports as the Company may
determine to be appropriate or as may be required by law.

------------------------
Ambient'tm' is a trademark of the Company. Certain other trademarks of
other companies are used in this Prospectus.

<PAGE>

<PAGE>
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by reference to the more
detailed information and financial statements and notes thereto, appearing
elsewhere in this Prospectus. Each prospective investor is urged to read this
Prospectus in its entirety. As used herein, the term 'Company' includes the
operations of the Company and its subsidiary, Ambient, Ltd. ('Ambient Israel'),
unless the context otherwise requires.

All references to 'dollars', 'U.S. dollars' or '$' in this Prospectus are
to United States dollars, and all references to 'Shekels' or 'NIS' are to New
Israeli Shekels. The exchange rate of NIS into dollars as of February 3, 1998
was NIS 3.587 to $1.00, or NIS 1 to $0.28.

This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such differences include, but are not limited to, those discussed in 'Risk
Factors.'

THE COMPANY

Ambient Corporation ('Ambient' or the 'Company'), a development stage
company, was founded in June 1996 to design and develop advanced smart card
interface technology. A smart card is a credit card-sized, plastic card equipped
with an integrated circuit ('IC') that contains a memory and, in its more
evolved form, a microprocessor, or a 'mini-computer,' that stores and transfers
information in electronic form. Smart cards are used in a variety of
applications including (i) access to restricted areas (replacing keys and
identification cards), (ii) public transportation fare collection (replacing
tokens and tickets), (iii) point of sale purchases (replacing cash or credit
cards at cafeterias, newsstands and related point of sale locations where speed
of purchase is important), (iv) vending machines, (v) public telephones, (vi)
industrial applications such as quality control, warehousing, inventory control,
distribution and warranty, and (vii) health care (replacing patients' paper
files in hospitals and HMOs). Ambient Israel has two patent applications pending
in Israel, a corresponding application for one of which was filed in the United
States, and one patent application pending in the United States, for which a
corresponding application was filed under the Patent Cooperation Treaty ('PCT').
The applications cover various aspects of its smart card interface design and
terminal architecture. Ambient has not generated any revenues. In December 1997,
the Company commenced the installation of two smart card readers at a public
school in Israel where the Company plans to implement its first pilot project in
February 1998 to demonstrate Ambient's technology.

The Company is developing contactless interface technology for
multi-purpose smart cards that will be capable of storing and transferring large
amounts of data in a secure environment at costs similar to typical
contact-based systems. Existing smart cards depend largely on 'contact'
technology, requiring the card to be inserted into a terminal where a receptor
clamps down on the card making precise contact with an exposed metal plate on
the card's surface creating a metal-to-metal electrical connection. The Company
believes that due to the disadvantages inherent in requiring contact for the
transfer of information in many applications, such as slow transaction time and
high terminal and card maintenance costs, the industry has produced
'contactless' smart card technology, where information is transferred
electronically without the need for metal-to-metal contact. Contactless smart
cards currently on the market utilize inductive coupling (commonly known as
'radio frequency' radiation) to transfer information. This technology creates
several disadvantages, such as the potential security hazard of data
interception by scanners, the lack of ease of use, since the card often must be
carefully positioned over a terminal antenna at a certain angle, power
limitations and environmental emissions. The Company's technology is not based
on 'radio frequency' radiation operating at a distance; rather, it relies on
capacitive close coupling. Capacitive close coupling allows for a
closed-circuit, high energy, rapid data rate connection between the card and the
terminal within a relatively short range. Ambient's technology enables the
transmission of both data and energy over the same capacitive pads (one pad is
located in each of the card and the terminal) at high rates of speed and
accuracy. The Company believes that its technology will provide the following
advantages over existing contact-based and contactless smart card

<PAGE>

<PAGE>
systems: high security, quicker transaction time, low terminal maintenance due
to the absence of moving parts, long card life due to rugged construction and
low wear-and-tear, significantly higher levels of power, and significant memory
capability allowing for multi-purpose applications.

The Company's dual goal is to become a licensor of smart card technology
and a vendor of smart card systems. The Company's business strategy is: (i) to
implement pilot projects that exhibit the benefits of the Ambient systems; (ii)
to form strategic alliances with system integrators, as well as individual IC,
smart card and terminal manufacturers who in turn can incorporate Ambient
contactless interface technology into the overall design of their smart card
products; and (iii) to integrate its own smart card systems that utilize
Ambient's contactless interface technology that it can market directly to
end-users.

The Company is currently preparing to commence in February 1998 its first
smart card pilot project at a public school in the city of Ashdod, Israel (the
'Ashdod Project'). In December 1997, the Company installed readers in two
classrooms at the public school. The project is expected to be implemented in
two stages. In the first stage, readers will be installed in two classrooms and
Ambient smart cards will be distributed to students in those classes. These
cards are being designed to track classroom attendance. If the first stage of
the trial proves successful, as to which there can be no assurance, the school
may elect to expand the Ashdod Project to encompass a larger portion of the
school.

Ambient Corporation, a Delaware company, was organized in June 1996. In
August 1996, Ambient Corporation purchased substantially all of the liabilities
and the assets, properties, business and goodwill 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.
All of the Company's activities to date, which have primarily consisted of
research and development, have been performed by Ambient Israel in Jerusalem,
Israel. Ambient Israel's corporate headquarters and executive offices are
located at Jerusalem Technological Park, Building One, Malha, Jerusalem, Israel
and its telephone number is 011-972-649-0611. Ambient Corporation's offices are
located at 270 Madison Avenue, 11th Fl., New York, New York 10016 and its
telephone number is (888) 861-0205.

THE OFFERING

<TABLE>
<S> <C>
Securities offered by the Company............ 525,000 shares of Common Stock. See 'Description of Securities.'
Common Stock outstanding prior to the
Offering................................... 2,459,333(1)
Common Stock to be outstanding after the
Offering................................... 2,984,333(1)
Use of Proceeds.............................. The Company intends to apply the net proceeds from the Offering
for the repayment of indebtedness, research and product
development, marketing, the purchase of capital equipment,
renting additional facilities and working capital and general
corporate purposes. See 'Use of Proceeds.'
Risk Factors and Dilution.................... Prospective investors should carefully consider the matters set
forth under the captions 'Risk Factors' and 'Dilution.' An
investment in the securities offered hereby involves a high
degree of risk and immediate and substantial dilution.
</TABLE>

<PAGE>

<TABLE>
<S> <C>
OTC Electronic Bulletin Board Symbol(2)...... ABTG
</TABLE>

- ------------

(1) Does not include: (i) 250,000 shares of Common Stock reserved for issuance
upon exercise of stock options which may be granted under the Company's
Incentive & Non-Qualified Stock Option Plan (the '1998 Plan'); (ii) 52,500
shares of Common Stock issuable upon exercise of the Underwriters' Warrants;
and (iii) 78,750 shares of Common Stock issuable upon exercise of the
Over-allotment Option. See 'Management' and 'Underwriting.' Includes (i)
20,000 shares of Common Stock issued in October 1997 as part of the
Company's 1997 Private Placement; and (ii) 40,000 shares of Common Stock
issued in November 1997 to a consultant to the Company. See 'Description of
Securities -- Prior Financing and -- Recent Financing.'

(2) The Company has been advised that the Common Stock will be quoted on the OTC
Electronic Bulletin Board. An OTC Electronic Bulletin Board quotation does
not imply that a liquid and active market will develop or be sustained for
the Shares upon completion of the Offering. See 'Risk Factors -- OTC
Electronic Bulletin Board; Absence of Public Market; Determination of
Offering Price.'

<PAGE>

<PAGE>
SUMMARY FINANCIAL INFORMATION

The summary financial information set forth below is derived from the
Consolidated Financial Statements included elsewhere in this Prospectus and
should be read in conjunction with such Consolidated Financial Statements and
the Notes thereto.

<TABLE>
<CAPTION>
YEAR NINE MONTHS NINE MONTHS
ENDED ENDED ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1996 SEPTEMBER 30, 1997
----------------- ------------------ ------------------
(UNAUDITED)
<S> <C> <C> <C>
Statement of Operations Data:
Research and development expenses............... $(244,466) $ (165,819) $ (245,820)
Less participation by the Chief Scientist of the
State of Israel............................... 95,976 25,229 --
----------------- ------------------ ------------------
(148,490) (140,590) (245,820)
Operating, general and administrative
expenses...................................... 434,735 368,327 488,103
----------------- ------------------ ------------------
Operating loss.................................. (583,225) (508,917) (733,923)
Financing expenses, net......................... 110,770 47,949 109,359
----------------- ------------------ ------------------
Net loss........................................ $(693,995) $ (556,866) $ (843,282)
----------------- ------------------ ------------------
----------------- ------------------ ------------------
Loss per share.................................. $(0.32) $(0.27) $(0.36)
Weighted average number of shares of Common
Stock outstanding............................. 2,156,548 2,029,389 2,358,959
----------------- ------------------ ------------------
----------------- ------------------ ------------------
Other Financial Data:
Capital expenditures............................ $(193,590) $ (28,701)
Cash used in operating activities............... (575,536) (450,043)
Cash used in investing activities............... (223,590) (28,701)
Cash provided by financing activities........... 903,448 473,344
</TABLE>

<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997
-----------------------------
ACTUAL AS ADJUSTED(1)
----------- --------------
(UNAUDITED)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.................................................... $ 98,922 $1,900,522
Total assets................................................................. 578,832 2,380,432
----------- --------------
Short-term loans and current portion of long-term loans...................... 34,913 34,913
Long-term debt............................................................... 1,502,041 111,641
----------- --------------
----------- --------------
Stockholders' equity (deficiency)(2)......................................... $(1,189,833) $2,099,167
----------- --------------
----------- --------------
</TABLE>

- ------------

(1) As adjusted to give effect to (a) the receipt by the Company of the
estimated net proceeds from the sale of the Shares offered hereby, after
deducting underwriting discounts and commissions, the non-accountable
expense allowance, the financial consulting fees payable to the
Representative, and the estimated expenses of the Offering payable by the
Company, and (b) the receipt by the Company of proceeds in the principal
amount of $1,638,000 from certain financings and the application of an
aggregate of $1,650,000 of the net proceeds of the Offering to repay the
same as follows: (i) the principal on the notes issued in the Debt Financing
(as defined herein) ($968,000); (ii) the principal and estimated accrued
interest on the notes issued in September and October in the 1997 Private
Placement (as defined herein) ($404,600); and (iii) the principal and
estimated accrued interest on two loans in the amounts of $122,400 and
$155,000, respectively. See 'Use of Proceeds,' 'Plan of Operation' and
'Description of Securities -- Prior Financing and -- Recent Financing.'

(2) Actual column does not include 20,000 shares of Common Stock issued in
October 1997 as part of the Company's 1997 Private Placement. As adjusted
column includes: (i) 20,000 shares of Common Stock issued in October 1997 as
part of the Company's 1997 Private Placement, for which there was no charge
to earnings; and (ii) 40,000 shares of Common Stock issued in November 1997
to a consultant to the Company, for which $200,000 was charged to earnings.
See 'Description of Securities -- Prior Financing and -- Recent Financing.'

<PAGE>

<PAGE>
RISK FACTORS

The securities offered hereby are speculative and involve a high degree of
risk and should not be purchased by persons who cannot afford the loss of their
entire investment. Prospective investors should carefully consider the following
risk factors, as well as all other information set forth elsewhere in this
Prospectus.

Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
projected in the forward-looking statements discussed herein. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed in this section, as well as in the sections entitled 'Plan of
Operation' and 'Business.'

DEVELOPMENT STAGE COMPANY; HISTORY OF OPERATING LOSSES; ACCUMULATED DEFICIT;
WORKING CAPITAL DEFICIENCY; NO REVENUES TO DATE; UNCERTAINTY OF FUTURE
PROFITABILITY

The Company is a development stage company and has an accumulated deficit
as of September 30, 1997 of $1,537,277. As a development stage company, the
Company has a limited operating history upon which investors may rely to
evaluate the Company's prospects. The Company's prospects must be considered in
light of the problems, expenses, delays and complications associated with a new
business. At September 30, 1997, the Company had a working capital deficit of
$92,705. Losses have resulted principally from costs incurred in the research
and development of the Company's technology, as well as general and
administrative costs. The Company has not realized any operating revenue to
date. The Company expects to continue to incur operating losses for the
foreseeable future until such time, if ever, as the Company is able to achieve
sufficient levels of revenues from operations. There can be no assurance that
the Company will ever generate significant revenues or achieve profitability.
See 'Plan of Operation.'

EXPLANATORY PARAGRAPH IN INDEPENDENT AUDITORS' REPORT

The Company's independent auditors have included an explanatory paragraph
in their report on the Company's financial statement stating that certain
factors raise substantial doubt about the Company's ability to continue as a
going concern. The Company's continuation as a going-concern is dependent upon
its ability to obtain additional financing, including from this Offering, and to
generate sufficient cash flow to meet its obligations on a timely basis. As a
result of the start-up nature of the Company's business, additional operating
losses can be expected in the foreseeable future. There can be no assurance that
the Company can be operated profitably in the future. See 'Plan of Operation'
and Consolidated Financial Statements.

NEED FOR SUBSTANTIAL ADDITIONAL FUNDS; UNCERTAINTY OF ADDITIONAL FINANCING

The Company's cash requirements may vary materially from those now planned
depending on numerous factors, including the status of the Company's marketing
efforts, the Company's business development activities, the results of future
research and development and competition. The Company believes that the net
proceeds of this Offering, together with its projected cash flow from
operations, if any, will be sufficient to fund its working and other capital
requirements for a period of approximately 12 to 18 months from the date of this
Prospectus. Thereafter, or sooner if conditions make it necessary, the Company
will need to raise additional funds to finance its capital requirements through
public or private financings. Such financing potentially includes equity
financing, which may be dilutive to stockholders, or additional debt financing,
which would likely restrict the Company's ability to make acquisitions, borrow
from other sources and pay dividends to stockholders in certain cases. The
Company does not currently have any commitments for any additional financing.
There can be no assurance that additional funds will be available on terms
attractive to the Company or at all. If adequate funds are not available, the
Company may be required to curtail research and development activities or
otherwise materially reduce its current and proposed operations. See 'Use of
Proceeds' and 'Plan of Operation.'

<PAGE>

<PAGE>
SUBSTANTIAL PORTION OF PROCEEDS TO SATISFY INDEBTEDNESS

Approximately 51% ($1,650,000) of the net proceeds of the Offering will be
used to repay indebtedness and, as such, the Company will have limited funds to
develop and expand its business. See 'Use of Proceeds.'

ROYALTY PAYMENTS

In July 1997, the Company terminated the employment of Alexander Rozin as
chief scientist of Ambient Israel. Pursuant to the terms of a certain purchase
agreement between GTI and Mr. Rozin dated December 5, 1995 and assumed by the
Company in connection with its purchase of GTI's assets, Mr. Rozin is entitled
to receive 15% of the net profits (as defined in the agreement) from all sales
of products and technology by Ambient Israel for an indefinite period of time.
In addition, Mr. Rozin is entitled to receive, until December 2015, royalties of
20% of GTI's net profits (as defined in the agreement) from sales or licenses of
products predominantly utilizing an electronic data communication system as
described in a certain 1994 patent application which has been abandoned by the
Company; if the Company sells or licenses products wherein such electronic data
communications technology is not the predominant technology, Mr. Rozin is
entitled to receive royalties at a reduced rate to be agreed upon. In addition,
the agreement provides that Mr. Rozin shall be paid royalties of 20% of
consideration from any sale or assignment of such technology (excluding sales
and assignments to affiliate companies) for an indefinite period of time. The
Company has not to date utilized this electronic data communication technology
in the development of Ambient systems and does not presently intend to do so.
See 'Business -- Proprietary Information' and ' -- Legal Proceedings.'

MINORITY STOCKHOLDER HOLDINGS IN AMBIENT ISRAEL

The Company owns 95% of the issued and outstanding capital stock of its
subsidiary Ambient Israel. The remaining 5% of Ambient Israel's issued and
outstanding capital stock is held by Mr. Rozin. Mr. Rozin has been granted
anti-dilution protection with respect to his holdings in Ambient Israel.
Accordingly, any funds transferred from the Company to Ambient Israel as a
contribution to capital will not result in dilution to Mr. Rozin. Such
anti-dilution protection could make future financing for Ambient Israel more
difficult to obtain, if at all.

DEVELOPING MARKET; UNCERTAINTY OF MARKET ACCEPTANCE OF AMBIENT TECHNOLOGY AND
PRODUCTS

The smart card market is developing and rapidly evolving and is
characterized by an increasing number of market entrants who have developed or
are developing a wide variety of products. As is typical in a developing and
rapidly evolving industry, demand and market acceptance for new products are
subject to a high level of uncertainty. There can be no assurance that the smart
card technology, systems and products designed by the Company will become widely
accepted. Because the market for the Company's smart cards is developing and
evolving, it is also difficult to predict with any assurance the future growth
rate, if any, and size of the market. If a substantial market fails to develop,
develops more slowly than expected or becomes saturated with competitors, or if
the Company's smart card technology, systems and products do not achieve market
acceptance, the Company's business, operating results and financial condition
will be materially adversely affected.

The Company's technology and products are intended to be marketed and sold,
to a large extent, to IC, smart card and terminal manufacturers for inclusion in
the smart card products and equipment marketed and sold by them. As with other
new products designed to enhance or replace existing products or change product
designs, these potential partners may be reluctant to integrate the Company's
smart card technology and products into their systems unless the technology and
products are proven to be both reliable and available at a competitive price.
Even assuming product acceptance, the Company's potential partners may be
required to redesign their systems to effectively use the Company's smart card
technology and products. The time and costs necessary for such redesign could
delay or prevent market acceptance of the Company's smart card products. A lack
of, or delay in, market acceptance of the Company's smart card systems could
adversely affect the Company's operations.

<PAGE>

<PAGE>
The Company is ultimately dependent upon the acceptance of Ambient
technology and products by issuing institutions and end-users. Many issuing
institutions, such as public transportation systems and banks, may be unwilling
to incur the costs and utilize other resources necessary to either switch from
their existing smart card systems to Ambient systems or to install any smart
card systems in the first instance. Moreover, the end-users of such systems,
such as public transportation riders and bank customers, may be resistant to
such changes. While the Company believes that its technology can significantly
improve transactions for these and many other applications, there can be no
assurance that issuing institutions and/or end-users will elect to switch to or
utilize the Company's proposed technology and products, or, if they do, that
such products will be accepted by the market at large. There can be no assurance
that the Company will be able to market its technology and proposed products
successfully or that any of its technology or products will be accepted in the
marketplace. See 'Business -- The Ambient System,' ' -- Proposed Ambient Smart
Cards' and ' -- Sales and Marketing.'

NEW PRODUCTS AND RAPID TECHNOLOGICAL CHANGE

The market for the Company's proposed products is characterized by rapidly
changing technology, evolving industry standards and frequent new product
introductions. The Company's success will depend in part on its ability to
enhance its planned technologies and products and to introduce new products and
technologies to meet changing customer requirements and evolving industry
standards. The Company is currently devoting, and intends to continue to devote,
significant resources toward the development of smart card systems that will
accommodate its close coupling contactless cards and technology as well as
existing remote coupling, or radio frequency, contactless smart cards. There can
be no assurance that the Company will successfully complete the development of
these technologies and related products in a timely fashion or that the
Company's current or future products, if any, will satisfy the needs of the
smart card market. There can also be no assurance that smart card products and
technologies developed by others will not adversely affect the Company's
competitive position or render its products or technologies non-competitive or
obsolete. See ' -- Competition,' 'Use Of Proceeds' and 'Business -- Research and
Development.'

COMPETITION

The smart card industry is extremely competitive. Competitive factors in
the industry include transaction speed, the extent and flexibility of smart card
memory, reliability, transaction accuracy, security and cost. The Company's
primary competitors are expected to include companies with substantially greater
financial, technological, marketing, personnel and research and development
resources than those of the Company. Anticipated competitors include such
multinational firms as Gemplus Ltd., Schlumberger Ltd., and Group Bull Ltd.,
which primarily offer contact cards, and Philips GmbH, Sony Corporation, Inc.,
Kapsch Communications Ltd., Matsushita Electronics Corporation and Micron
Communications, GmbH, which offer primarily contactless smart cards. There can
be no assurance that the Company will be able to compete successfully in this
market. Further, there can be no assurance that existing and new companies will
not enter the smart card market in the future, especially those in related
fields, such as computer software. Although the Company believes that its
products will be distinguishable from those of its competitors on the basis of
their technological features and functionality at an attractive
price/performance ratio, there can be no assurance that the Company will be able
to penetrate any of its anticipated competitors' portions of the market. Many of
the Company's anticipated competitors have existing relationships with smart
card equipment manufacturers and other system integrators which may impede the
Company's ability to market its technology to those potential customers and
build market share. There can be no assurance the Company will be able to
compete successfully against currently anticipated or future competitors or that
competitive pressures will not materially adversely affect its business,
operating results and financial condition. See 'Business -- Competition.'

DEPENDENCE ON KEY PERSONNEL

The success of the Company will be largely dependent upon the personal
efforts of Dr. Yehuda Cern, Dr. George Kaplun and Jacob Davidson. The loss of
the services of any of such persons could

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have a material adverse effect on the Company's business and prospects. Although
the Company has entered into employment agreements with each of the
aforementioned individuals, there can be no assurance that the Company will be
able to retain their services. The Company does not maintain and is not
contemplating obtaining key-man life insurance policies on any of its employees,
except the Company intends to obtain a policy in the amount of $1,000,000 on the
life of Jacob Davidson. The Company is also dependent to a substantial degree on
its other technical and research staff. The success of the Company will be
dependent upon its ability to hire and retain additional qualified technical,
research, management, marketing, and financial personnel. The Company will
compete with other companies with greater financial and other resources for such
other personnel. There can be no assurance that the Company will be able to
retain its present personnel or acquire additional qualified personnel as and
when needed. See 'Management.'

CHIEF EXECUTIVE OFFICER NOT FULL TIME; POTENTIAL CONFLICTS OF INTEREST

Mr. Davidson, Chairman of the Board, Chief Executive Officer and President
of the Company, is also in management positions with other companies and
currently devotes, and after the Offering expects to continue to devote,
approximately 75% of his time to the business of the Company. There can be no
assurance that Mr. Davidson's devotion of less than his full time will not have
an adverse effect on the business of the Company. In addition, Mr. Davidson may
experience conflicts of interest with respect to allocation of business time
among the Company and any other companies in which he holds management
positions. See 'Certain Relationships and Related Transactions' and
'Management.'

RISKS ASSOCIATED WITH PROPOSED EXPANSION; UNSPECIFIED ACQUISITIONS

The Company intends to use a significant portion of the net proceeds of
this Offering to expand its operations through the expansion of its research and
development activities, the establishment of sales and marketing efforts, and,
potentially, through acquisitions, although no companies have yet been
identified by the Company as possible acquisitions. The Company believes that
the net proceeds of the Offering will be sufficient to enable the Company to
carry out its business plan, including plans for expansion, for approximately 12
to 18 months, although there can be no assurance it will be able to do so.

The Company may seek to expand its operations through acquisitions. In such
event, the Company may use a portion of the net proceeds from the Offering
currently allocated for working capital to acquire all or a portion of existing
companies in businesses which the Company believes are compatible with its
business, which may include, competitors of the Company. The Company will have
broad discretion in allocating such funds without any action or approval of the
Company's stockholders. Thus, stockholders will not have the opportunity to
review the financial status of or vote on any potential acquisition. Any
decision to make an acquisition will be based upon a variety of factors,
including, among others, the purchase price and other financial terms of the
transaction, the business prospects and the extent to which any acquisition
would enhance the Company's prospects. To the extent that the Company may,
depending upon the opportunities available to it, finance an acquisition with a
combination of cash and equity securities, any such issuance of equity
securities could result in dilution to the interests of the Company's
stockholders. Additionally, to the extent that the Company, or the acquisition
or merger candidate itself, issues debt securities in connection with an
acquisition, the Company may be subject to risks associated with incurring
indebtedness, including the risks of interest rate fluctuations and
insufficiency of cash flow to pay principal and interest. The Company is not
currently engaged in identifying any potential acquisition and has no plans,
agreements, understandings or arrangements for any acquisitions. There can be no
assurance that the Company will successfully consummate any acquisition or
successfully integrate into its business any acquired business or portion
thereof. See ' -- Substantial Portion of Proceeds to Satisfy Indebtedness; Broad
Discretion in Application of Proceeds' and 'Use of Proceeds.'

The anticipated growth in activities, including expenditures, will require
expansion of the Company's management and financial controls, and could place a
significant strain on the Company's administrative, operational and financial
resources. None of the Company's current officers have had

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experience in managing a public company or a company with expenditures as large
as the anticipated expenditures of the Company. While the Company intends to
hire additional personnel, as appropriate, there can be no assurance that the
Company will be successful in hiring qualified personnel to implement its growth
strategy or that it will be able to rapidly and efficiently integrate any new
personnel with its existing work force. In addition to hiring support to
accommodate its planned expansion, the Company will likely be required to
install or enhance any existing information and other administrative systems.
There can be no assurance that the Company's administrative, operational and
financial resources and systems will be adequate to maintain and efficiently
monitor and support any future growth. See 'Use of Proceeds,' 'Business' and
'Management.'

LIMITED MARKETING CAPABILITY

The Company has limited marketing capabilities and resources. Achieving
market penetration will require significant efforts and expenditures by the
Company to create awareness of and demand for the Company's technology and
products. The Company's ability to penetrate the market and build its customer
base will be substantially dependent on its marketing efforts, including its
ability to establish an effective internal sales organization and establish
strategic marketing arrangements with IC, smart card and terminal manufacturers.
The Company currently has no plan, agreement, understanding or arrangement with
any such company, and no assurance can be given that any will be entered into.
In addition, although the Company recently hired a marketing and sales director
and plans to hire two to three additional full-time marketing and sales
personnel after the Offering, the Company does not have a marketing team
currently in place. The failure by the Company to successfully develop its
marketing capabilities, both internally and through third-party alliances, would
have a material adverse effect on the Company's business, operating results and
financial condition. Further, there can be no assurance that, if developed, such
marketing capabilities will lead to sales of the Company's technologies and
products. See 'Use of Proceeds,' 'Plan of Operations' and 'Business -- Sales and
Marketing.'

DEPENDENCE ON MANUFACTURERS AND SUPPLIERS

The Company currently purchases, and intends to continue to purchase, ICs
for its smart card systems from several manufacturers, including Motorola
Corporation, SGS Thompson, Ltd. and National Semiconductor Inc., and purchases
other components used in assembly of its smart card systems from other key
suppliers. The Company does not intend to manufacture any of the equipment to be
used in its smart card systems, except smart card terminals in limited numbers.
The Company's reliance upon outside manufacturers and suppliers is expected to
continue and involves several risks, including limited control over the
availability of components, delivery schedules, pricing and product quality. The
Company may experience, delays, expenses and lost sales should it be required to
locate and qualify alternative manufacturers and suppliers. See
'Business -- Suppliers; Manufacturing and Assembly.'

In addition, ICs with microprocessors and electrically erasable
programmable read only memory ('EEPROM') are produced by a relatively small
number of chip makers. The five principal chip manufacturers comprise a majority
of the market. Similarly, five smart card manufacturers comprise approximately
90% of the card manufacturing market. Should the Company for any reason be
precluded from obtaining chips and cards, respectively, from these
manufacturers, the Company may experience difficulty in locating alternative
sources of supply or, even if alternatives are located, the Company may
experience substantial delays because such sources may be unable to produce the
quantities that may be required in a timely manner, and the Company may be
required to pay higher costs for its components. See 'Business -- Suppliers;
Manufacturing and Assembly.'

UNCERTAIN ABILITY TO PROTECT PATENT-PENDING TECHNOLOGY

The Company's ability to compete effectively depends on its success in
protecting its proprietary technology, both in the United States and abroad.
Ambient Israel has patent applications pending in the United States, Israel and
under the PCT (the 'Patent Rights'). No assurance can be given that any patents
will be issued from the United States or Israeli patent offices for the Patent
Rights, that the Company will receive any patents in the future based on its
continued development of its technology, or

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that the Company's patent protection within and/or outside of the United States
and Israel will be sufficient to deter others, legally or otherwise, from
developing or marketing competitive products utilizing the Ambient technologies.

The Company believes that the protection afforded by the Patent Rights will
be material to its future revenues and earnings. There can be no assurance that
the Patent Rights will be found to be valid or that the Patent Rights will be
enforceable to prevent others from developing and marketing competitive products
or methods. A successful challenge to the validity of the Patent Rights would
have a material adverse effect on the Company, and could jeopardize its ability
to engage in its contemplated business activities. An infringement action on
behalf of the Company may require the diversion of substantial funds from the
Company's operations and may require management to expend efforts that might
otherwise be devoted to the Company's operations. Furthermore, there can be no
assurance that the Company will be successful in enforcing the Patent Rights.

There can be no assurance that patent infringement claims in the United
States, Israel or in other countries will not be asserted against the Company by
a competitor or others, or if asserted, that the Company will be successful in
defending against such claims. In the event one of the Company's proposed
products is adjudged to infringe patents of others with the likely consequence
of a damage award, the Company may be enjoined from using and selling such
product or be required to obtain a royalty-bearing license, if available on
acceptable terms. Alternatively, in the event a license is not offered, the
Company might be required, if possible, to redesign those aspects of the product
held to infringe so as to avoid infringement liability. Any redesign efforts
undertaken by the Company might be expensive, could delay the introduction or
the re-introduction of the Company's products into certain markets, or may be so
significant as to be impractical. There can be no assurance that the Company
would be able to redesign an infringing product, or aspect thereof, so as to
avoid infringement liability. See 'Business -- Proprietary Information' and
'Risk Factors -- Competition.'

UNCERTAIN PROTECTION OF PROPRIETARY TECHNOLOGY AND INFORMATION

The Company will also rely on trade secrets, know-how and continuing
technological advancement to achieve and thereafter maintain a competitive
position. Although the Company has entered into confidentiality and invention
assignment agreements with its technical employees, consultants and advisors, no
assurance can be given that such agreements will be honored or that the Company
will be able to effectively protect its rights to its unpatented trade secrets
and know-how. Moreover, no assurance can be given that others will not
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to the Company's trade secrets and know-how.
See 'Business -- Proprietary Information' and 'Management.'

TRADEMARK REGISTRATION

The Company intends to promote the Ambient trademark in connection with its
proposed marketing activities. The Company has a pending application on file
with the Patent and Trademark Office to register Ambient as a trademark in the
United States. There can be no assurance that prior registrations and/or uses of
such mark (or a confusingly similar mark) do not exist, in which case the
Company might thereby be precluded from registering and/or using the Ambient
mark in the United States. See 'Business -- Proprietary Information.'

BROAD DISCRETION IN APPLICATION OF PROCEEDS

While the Company presently intends to use the net proceeds of this
Offering as set forth herein, management will have broad discretion in the
application of the net proceeds allocated to working capital and general
corporate purposes. Due to the number and variability of factors that will be
analyzed before the Company determines how to use such net proceeds, the Company
will have broad discretion in allocating a significant portion of the net
proceeds from the Offering without any action or approval of the Company's
stockholders. Accordingly, investors will not have the opportunity to evaluate
the economic, financial and other relevant information which will be considered
by the Company in determining the application of such net proceeds. See 'Use of
Proceeds.'

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IMMEDIATE SUBSTANTIAL DILUTION

The Company's present stockholders acquired their shares of the Company's
Common Stock at costs substantially below the anticipated offering price of the
Shares to be sold in the Offering. Therefore, investors purchasing Common Stock
in this Offering will incur an immediate and substantial dilution in net
tangible book value per share of $7.41 (92.6%). Accordingly, investors will bear
a disproportionate part of the financial risk associated with the Company's
business while effective control will remain with existing stockholders. See
'Dilution.'

LACK OF INDEPENDENT DIRECTORS, BOARD COMMITTEES

The Company's Board of Directors consists of two people, one of whom is
also the Chief Executive Officer and President and a principal stockholder and
one of whom is also the secretary and a principal stockholder. The Board does
not currently contain any independent directors and there are no audit or
compensation committees currently in place. Accordingly, the two 'inside'
directors will be in a position to control the actions and decisions of the
Board without the benefit of input from independent directors. The Company may
in the future nominate independent directors although there can be no assurance
as to when or if suitable persons can be located. See 'Management.'

OTC ELECTRONIC BULLETIN BOARD; ABSENCE OF PUBLIC MARKET; DETERMINATION OF
OFFERING PRICE

The Company's Common Stock will be traded in the over-the-counter market.
The Company has been advised that the Shares will be quoted on the OTC
Electronic Bulletin Board (the 'OTC Bulletin Board'). The OTC Bulletin Board,
which is sponsored and operated by the National Association of Securities
Dealers, Inc., is an unorganized, inter-dealer automated quotation system for
equity securities not included for listing on The Nasdaq SmallCap Market or
Nasdaq National Market. The OTC Bulletin Board provides significantly less
liquidity than The Nasdaq SmallCap Market or Nasdaq National Market, and quotes
for stocks included on the OTC Bulletin Board are not listed in the financial
sections of newspapers as are those for The Nasdaq SmallCap Market and Nasdaq
National Market.

Therefore, prices for securities traded solely on the OTC Bulletin Board
may be difficult to obtain and purchasers of the Shares may be unable to resell
the Shares at or near their original offering price or at any price. In the
event the Shares are not included on the OTC Bulletin Board, quotes for the
securities may be included in the 'pink sheets' for the over-the-counter market.
See ' -- Penny Stock Regulation' and 'Underwriting.' Prior to this Offering,
there has been no public trading market for the Common Stock and there can be no
assurance that an active public market for the Common Stock will develop or, if
developed, continue following the Offering. Until such time, if ever, that an
active trading market develops, investors will, in all likelihood, be unable to
readily liquidate their investment in the Company's securities following this
Offering. In addition, there does not exist, nor has there ever existed, a
public trading market in Israel for the securities of Ambient Israel.

The initial public offering price of the Common Stock has been determined
by negotiations between the Representative and the Company and does not
necessarily bear any relationship to the Company's assets, book value, revenues
or other established criteria of value, and should not be considered indicative
of the price at which the Common Stock will trade after completion of the
Offering. There can be no assurance that the market price of the Common Stock
will not decline below the initial public offering price. See 'Underwriting.'

RISKS ASSOCIATED WITH ANTICIPATED INTERNATIONAL SALES

The Company intends to initially market its products in Europe, North
America, Israel and certain Asian countries. If it successfully markets its
products internationally, the Company will be subject to the risks inherent in
international business activities, including unexpected changes in regulatory
requirements and the burdens of complying with a wide variety of laws and
regulations, import restrictions, tariffs and other trade barriers, as well as
adverse changes to the applicable currency exchange rates. For example, any
appreciation of the value of the currency in which the Company bills future
international customers relative to the local currency of such customers may
place the Company

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at a competitive disadvantage by effectively making its services more expensive
compared to those of local competitors. There can be no assurance that currency
fluctuations will not have a material adverse effect on the Company's business,
results of operations and financial condition. Moreover, the imposition of
exchange or price controls or other restrictions on the conversion of foreign
currencies could materially adversely affect the Company's business.

RISKS ASSOCIATED WITH OPERATIONS IN ISRAEL

The Company's research and development facilities and Ambient Israel's
principal offices are located in the State of Israel and are directly affected
by the economic, military and political conditions in that country, and any
major hostilities involving Israel or the interruption or curtailment of trade
between Israel and its present trading partners could have a material adverse
effect on the Company's operations. In addition, despite progress towards peace
between Israel, its Arab neighbors and the Palestinians, there remain a number
of countries that restrict business with Israel or Israeli companies. There can
be no assurance that restrictive laws or policies directed toward Israel or
Israeli businesses will not have a material adverse effect on the Company's
business. For information with respect to certain factors concerning the State
of Israel, including risks related to the political and economic situation, see
'Business -- Conditions in Israel.'

RESTRICTIONS OF ISRAELI GOVERNMENT FUNDING FOR RESEARCH AND DEVELOPMENT

Ambient Israel has received from the Office of the Chief Scientist of the
Israeli Ministry of Industry and Trade (the 'OCS') certain research and
development grants in the amount of $95,976. The Company recently filed a
request for an additional research grant which was rejected by the OCS. The
Company intends to appeal the OCS decision but there can be no assurance that
any such appeal will be successful. Among the conditions to its participation in
the funding program of the OCS, technologies developed using such funds may not
be transferred out of Israel and products developed as a result of research and
development funded by the OCS may not be manufactured outside of Israel without
the consent of the OCS. Ambient Israel and the Company are also obligated to pay
a specified level of royalties on sales of products developed using such grants.
Moreover, OCS grant programs as are currently in effect require the Company to
comply with various conditions in order for Ambient Israel to continue to be
eligible for participation. There can be no assurance that the Company will
continue to meet such conditions in the future. The Company anticipates that for
so long as such grants continue to be available, Ambient Israel will likely seek
from time to time to utilize such grants. No assurance can be given, however,
that the Company's participation will so continue or that the programs, or their
current conditions of participation and eligibility, will be maintained in their
current form or at all. Termination or a substantial reduction in such programs,
or the Company's inability to continue to receive OCS funding, could have a
material adverse effect on the Company's business, financial condition or
results of operations. See 'Business -- Research and Development.'

SERVICE OF PROCESS AND ENFORCEMENT OF JUDGMENTS

Service of process upon Ambient Israel and directors and officers of the
Company, all of whom reside outside the United States, may be difficult to
obtain within the United States. Furthermore, since substantially all of the
Company's and such persons' assets are located outside the United States, any
judgment obtained in the United States against the Company or such persons may
not be collectible within the United States.

The Company has been informed by its Israeli legal counsel that, in such
counsel's opinion, there is doubt as to the enforceability of civil liabilities
under the Securities Act and the Exchange Act, in original actions instituted in
Israel. However, subject to certain limitations, Israeli courts may enforce
United States final executory judgments for liquidated amounts in civil matters,
obtained after a trial before a court of competent jurisdiction (according to
the rules of private international law currently prevailing in Israel) which
enforce similar Israeli judgments, provided that (i) due service of process has
been effected, (ii) such judgments or the enforcement thereof are not contrary
to the law, public policy, security or sovereignty of the State of Israel, (iii)
such judgments were not obtained by fraud and do not conflict with any other
valid judgment in the same matter between the same parties and (iv) an action
between the same parties in the same matter is not pending in any Israeli court
at the time the lawsuit is

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instituted in the foreign court. Ambient Israel has appointed Baer Marks & Upham
LLP as agent to receive service of process in any action against it in any
federal or state court in the State of New York arising out of this Offering.

Foreign judgments enforced by Israeli courts generally will be payable in
Israeli currency, and a special permit of the Israeli Controller of Foreign
Currency of the Bank of Israel will be required to convert the Israeli currency
into United States dollars and to transfer such dollars out of Israel. The usual
practice in an action to recover an amount in a non-Israeli currency is for the
Israeli court to render judgment for the equivalent amount in Israeli currency
at the rate of exchange in force on the date thereof. Under existing Israeli
law, a foreign judgment payable in foreign currency may be paid in Israeli
currency at the rate of exchange on the date of payment, but the judgment debtor
also may make payment in foreign currency if the Israeli exchange control
regulations then in effect permit such foreign currency payment. Pending
collection, the amount of the judgment of an Israeli court stated in Israeli
currency ordinarily will be linked to the Israeli Consumer Price Index ('CPI')
plus interest at the annual rate (set by Israeli regulations) prevailing at such
time. Judgment creditors must bear the risk that they will be unable to convert
their award into foreign currency that can be transferred out of Israel and the
risk of unfavorable exchange rates.

PENNY STOCK REGULATION

Broker-dealer practices in connection with transactions in 'penny stocks'
are regulated by certain penny stock rules adopted by the Securities and
Exchange Commission. Penny stocks generally are equity securities with a price
of less than $5.00 (other than securities registered on certain national
securities exchanges or quoted on the Nasdaq system, provided that current
prices and volume information with respect to transactions in such securities
are provided by the exchange or system). The Company's Shares will not be listed
on any exchange or quoted on a Nasdaq system. Accordingly, after the Offering,
if broker-dealers make a market in the Shares, then the penny stock rules could
affect the sale of Ambient Shares if the price per share falls below $5.00. The
penny stock rules require a broker-dealer, prior to a purchase or sale of a
penny stock not otherwise exempt from the rules, to deliver to the customer a
standardized risk disclosure document that provides information about penny
stocks and the risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction,
and monthly account statements showing the market value of each penny stock held
in the customer's account. In addition, the penny stock rules generally require
that prior to a transaction in a penny stock the broker-dealer make a special
written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to the
penny stock rules. If the Company's Shares become subject to the penny stock
rules, investors in the Offering may find it more difficult to sell their
securities.

POSSIBLE VOLATILITY OF SECURITIES PRICES

If a public trading market develops, trading volume and prices for the
Common Stock could be subject to wide fluctuations in response to quarterly
variations in operations, financial results, announcements with respect to sales
and earnings, technological innovations, new product developments, the sale or
attempted sale of a large amount of securities in the public market, and other
events or factors which cannot be foreseen or predicted by the Company. In
addition, various factors affecting the smart card or computer industry
generally may have a significant impact on the market price of the Common Stock,
as well as price and volume volatility affecting small and emerging growth
companies, in general, and not necessarily related to the operating performance
of such companies.

REPRESENTATIVE'S LIMITED UNDERWRITING EXPERIENCE

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underwriter of public offerings will not adversely affect the proposed public
offering of the Shares or the subsequent development of a trading market for the
Company's securities. Therefore, purchasers of the securities offered hereby may
suffer a lack of liquidity in their investment or a material diminution of the
value of their investment. See 'Underwriting.'

NO DIVIDENDS

To date, the Company has not paid any cash dividends. After the
consummation of the Offering, the Company does not intend, for the foreseeable
future, to declare or pay any dividends and intends to retain earnings, if any,
for the future operation and expansion of the Company's business. The
declaration and payment of any cash dividends in the future will be determined
by the Board of Directors of the Company in light of conditions and
circumstances then existing, including the Company's financial condition and
requirements. See 'Dividends.'

PREFERRED STOCK

The Company's Amended and Restated Certificate of Incorporation authorizes
the issuance of 5,000,000 shares of Preferred Stock, $.001 par value per share,
in one or more series, with each series to have such designations, rights and
preferences as may be determined from time to time by the Board of Directors.
Accordingly, the Board of Directors is empowered, without stockholder approval,
to issue Preferred Stock with dividend, liquidation, conversion, voting or other
rights which could adversely affect the voting power or other rights of the
holders of the Common Stock. In addition, the Preferred Stock could be utilized,
under certain circumstances, as a method of discouraging, delaying or preventing
a change in control of the Company. Although the Company does not have any
current intentions to issue any shares of Preferred Stock, there can be no
assurance that the Company will not do so in the future. The Company has agreed
not to issue any shares of Preferred Stock without the Representative's consent
for a period of 24 months.

SHARES ELIGIBLE FOR FUTURE SALE

Future sales of shares of Common Stock by existing stockholders pursuant to
Rule 144 ('Rule 144') promulgated under the Securities Act, or otherwise, could
have an adverse effect on the price of the shares of Common Stock. Upon
completion of this Offering, the Company will have 2,984,333 shares of Common
Stock outstanding. In addition, the Company has reserved for issuance 250,000
shares upon exercise of options to be granted under the 1998 Plan, 52,500 shares
upon exercise of the Underwriters' Warrants, and 78,750 shares upon exercise of
the Over-allotment Option.

The 525,000 shares of Common Stock offered hereby will be freely
transferable without restriction or further registration under the Securities
Act except for any shares purchased by an 'affiliate' of the Company within the
meaning of Rule 144. The remaining 2,459,333 outstanding shares of Common Stock
are 'restricted securities,' as that term is defined in Rule 144, and may only
be sold pursuant to a registration statement under the Securities Act or an
applicable exemption from registration thereunder, including exemptions provided
by Rule 144. Of such shares, 2,249,166 will be eligible for resale under Rule
144 commencing 90 days following the completion of this Offering, 84,167 shares
will be eligible for resale under Rule 144 commencing August 1998, 66,000 shares
will be eligible for resale under Rule 144 commencing September 1998, 20,000
shares will be eligible for resale under Rule 144 commencing October 1998 and
40,000 shares will be eligible for resale under Rule 144 commencing November
1998. However, all of the Company's officers, directors and shareholders holding
2,183,333 shares have agreed with the Company not to sell, assign or transfer
their Shares for a period of 18 months from the date of this Prospectus without
the express written consent of the Representative. Holders of 107,500 shares and
holders of 97,500 shares have agreed not to sell, assign or transfer their
shares for a period of six months and 12 months, respectively, from the date of
this Prospectus without the express written consent of the Representative. No
prediction can be made as to the effect that future sales of Common Stock, or
the availability of shares of Common Stock for future sales, will have on the
market price of the Common Stock prevailing from time to time. Sales of
substantial amounts of Common Stock, or the perception that such sales could
occur, could adversely affect prevailing market prices for the Common Stock and
could impair the Company's ability to raise capital through the future sale of
its equity securities. See 'Principal Stockholders' and 'Shares Eligible for
Future Sale.'

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UNDERWRITERS' WARRANTS

The Company will sell to the Underwriters and/or their designees, for
nominal consideration, the Underwriters' Warrants to purchase an aggregate of up
to 52,500 shares of Common Stock. The Underwriters' Warrants are exercisable for
a four-year period commencing one year from the date of this Prospectus, at an
exercise price per share equal to 165% of the initial public offering price of
the Common Stock. For the life of the Underwriters' Warrants, the holders are
given, at nominal cost, the opportunity to profit from a rise in the market
price of the Common Stock without assuming the risk of ownership, with a
resulting dilution in the interest of other security holders. As long as the
Underwriters' Warrants remain unexercised, the terms under which the Company
could obtain additional capital elsewhere may be adversely affected. Moreover,
the holders of the Underwriters' Warrants may be expected to exercise them at a
time when the Company would, in all likelihood, be able to obtain any needed
capital through a new offering of its securities on terms more favorable than
those provided by the Underwriters' Warrants. Additionally, if the holders of
the Underwriters' Warrants were to effect a distribution of the Underwriters'
Warrants or the underlying shares of Common Stock, the Underwriters, prior to
and during such distribution, may be unable to make a market in the Company's
Shares and may be required to comply with other limitations on trading set forth
in Regulation M under the Exchange Act. Such rules restrict the solicitation of
purchasers of a security by a distribution participant (or its affiliated
purchasers) that is the subject of the distribution and also limit market making
activities by a distribution participant (or its affiliated purchasers) until
the completion of the distribution. If the Underwriters were required to cease
making a market in the Shares during the restricted period, the market and
market price for such Shares may be adversely affected and holders of the Shares
may be unable to sell them. See 'Underwriting.'

ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW

Certain provisions of Delaware law may discourage third party attempts to
acquire control of the Company. In particular, Section 203 of the Delaware
General Corporation Law generally prohibits a publicly held Delaware corporation
from engaging in a 'business combination' with an 'interested stockholder' for a
period of three years after the date of the transaction in which such person
became an interested stockholder, unless certain restrictive requirements are
met. The Company has not opted to include any provisions in its Certificate of
Incorporation or By-laws electing not to be governed by Section 203 of the
Delaware General Corporation Law. The provisions of Section 203 of the Delaware
General Corporation Law may have a depressive effect on the market price of the
Common Stock because they could impede any merger, consolidating takeover or
other business combination involving the Company or discourage a potential
acquiror from making a tender offer or otherwise attempting to obtain control of
the Company. See 'Description of Securities.'

FORWARD LOOKING STATEMENTS

Certain statements contained in this Prospectus, including, without
limitation, statements containing the words 'believes,' 'anticipates,'
'intends,' 'expects,' 'plans' and words of similar import, constitute
'forward-looking statements.' Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company or the industry to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: prospects for the smart card industry; market
acceptance of the Ambient technology and products; the Company's success in
penetrating the market; competition; changes in the Company's business strategy
or development plans; the loss of key personnel; patent protection; the
availability of capital; general economic and business conditions; and other
factors referenced in this Prospectus, including, without limitation, under the
captions 'Prospectus Summary,' 'Risk Factors,' 'Plan of Operations' and
'Business.' Given these uncertainties, prospective investors are cautioned not
to place undue reliance on such forward-looking statements. The Company
disclaims any obligation to update any such factors or to publicly announce the
results of any revisions to any of the forward-looking statements contained
herein to reflect future events or developments.

<PAGE>

<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of the Shares offered hereby
(after deducting underwriting discounts and commissions and other expenses of
the Offering), are estimated to be approximately $3,209,000 ($3,758,000 if the
Over-allotment Option is exercised in full). The Company expects to use the net
proceeds in approximately the manner set forth in the following table:

<TABLE>
<CAPTION>
APPROXIMATE
APPROXIMATE PERCENTAGE OF
APPLICATION OF PROCEEDS DOLLAR AMOUNT NET PROCEEDS
- ------------------------------------------------------------------------ ------------- -------------

<S> <C> <C>
Marketing(1)............................................................ $ 350,000 10.91%
Additional Facilities(2)................................................ 20,000 .62
Research and Product Development(3)..................................... 594,000 18.51
Repayment of Indebtedness(4)............................................ 1,650,000 51.14
Capital Equipment(5).................................................... 100,000 3.12
Working Capital and General Corporate Purposes.......................... 495,000 15.43
------------- -------------
Total.............................................................. $ 3,209,000 100.00%
------------- -------------
------------- -------------
</TABLE>

- ------------

(1) Represents (i) salaries for the Company's recently appointed sales and
marketing director and the up to three additional full-time sales and
marketing personnel the Company intends to hire, and (ii) expenses
associated with the Company's anticipated participation in trade show
exhibitions.

(2) Represents estimated costs associated with leasing and operating a
manufacturing facility for the Company's planned small scale production of
Ambient smart card reader/writer terminals.

(3) Represents (i) salaries for 11 existing research and development personnel
and up to seven additional research and development personnel; and (ii)
costs associated with retaining subcontractors to assist in the design and
development of the proposed Ambient Application Specific Integrated Circuit
('ASIC').

(4) Includes: (i) $968,000 for the repayment of principal on the promissory note
issued in December 1995 as part of the Debt Financing (as defined herein),
which note bears interest at 10% per annum; (ii) $122,400 for repayment of
principal and accrued interest (8% per annum) on a certain loan to the
Company from a third party during the second quarter of 1997 which is due
upon the consummation of this Offering; (iii) $404,600 for repayment of
principal and estimated interest (7% per annum) on notes issued in September
and October 1997 in connection with the Company's 1997 Private Placement (as
defined herein); and (iv) $155,000 for repayment of principal and estimated
accrued interest (22% per annum) on a loan from a third party in January
1998. The proceeds from the loans received in 1997 and 1998 were primarily
used for research and development and to fund the Company's working capital.
See 'Plan of Operation' and 'Description of Securities -- Prior Financing
and -- Recent Financing.'

(5) Represents costs associated with leasing or buying additional computers and
the additional machinery required to commence the Company's planned
small-scale production operations.

------------------------
If the Underwriters exercise the Over-allotment Option in full, the Company
will realize additional net proceeds of approximately $549,000, which will be
added to the Company's working capital.

The Company anticipates, based on currently proposed plans and assumptions
relating to its operations, that the net proceeds of this Offering, together
with its projected cash flow from operations, if any, will be sufficient to
satisfy the Company's contemplated cash requirements for approximately 12 to 18
months following the closing date of this Offering. In the event that the
Company's plans change or its assumptions change or prove to be inaccurate or if
the net proceeds of this Offering or the Company's projected cash flow prove to
be insufficient to fund operations (due to unanticipated expenses, manufacturing
problems, marketing difficulties or otherwise), the Company may find it
necessary or advisable to reallocate some of the proceeds within the
above-described categories, or to use portions of the net proceeds for other
purposes or may be required to seek additional financing or curtail its
operations. The Company has no current arrangements with respect to, or sources
of,

<PAGE>

<PAGE>
additional financing and it is not anticipated that existing stockholders will
provide any portion of the Company's future financing requirements. There can be
no assurance that any such additional financing will be available to the Company
on commercially reasonable terms, or at all. Any inability to obtain additional
financing when needed would have a material adverse effect on the Company,
requiring it to curtail or possibly cease operations. See 'Risk Factors -- Need
for Substantial Additional Funds; Uncertainty of Additional Financing' and 'Plan
of Operation.'

The Company may use all or a portion of the $495,000, or 15.43% of the net
proceeds from the Offering allocated to working capital, to acquire all or a
portion of existing companies in businesses which the Company believes are
compatible with its business including, but not limited to, competitors of the
Company. Any decision to make an acquisition will be based upon a variety of
factors, including, among others, the purchase price and other financial terms
of the transaction, the business prospects and competitive position of and the
nature of any formulations, designs or products and the extent to which any
acquisition would enhance the Company's prospects. The Company is not currently
engaged in identifying any potential acquisition and has no plans, agreements,
understandings or arrangements for any acquisitions. There can be no assurance
that the Company will be able to successfully consummate any acquisition or, if
it does, that it will successfully integrate into its business any acquired
product or business. See 'Risk Factors -- Risks Associated with Proposed
Expansion.'

Pending utilization of the net proceeds of the Offering, the Company may
make temporary investments, in among other things, bank certificates of deposit,
short-term interest-bearing investments equivalent to commercial paper, prime
commercial paper, United States government obligations and money-market funds.

DIVIDEND POLICY

To date, the Company has not paid any cash dividends on its Common Stock.
The payment of future cash dividends, if any, is within the discretion of the
Board of Directors and will depend upon the Company's earnings, if any, capital
requirements and financial condition and other relevant factors. The Board does
not intend to declare any cash or other dividends in the foreseeable future,
rather it intends to retain future earnings, if any, to provide for the
operation and expansion of the Company's business. See 'Plan of Operation.'

<PAGE>

<PAGE>
DILUTION

At September 30, 1997, the negative net tangible book value of the Company
was $(1,429,833) or $(0.58) per share of Common Stock based on 2,459,333 shares
of Common Stock issued and outstanding (includes 20,000 shares of Common Stock
issued in October 1997 as part of the Company's 1997 Private Placement and
40,000 shares of Common Stock issued in November 1997 to a consultant. See
'Capitalization'). After giving effect to the sale of 525,000 shares of Common
Stock offered by the Company hereby (less broker commissions and estimated
expenses of the Offering and the application of the estimated net proceeds
therefrom), the pro forma as adjusted net tangible book value of the Company at
September 30, 1997 would have been $1,762,167, or $0.59 per share, based on
2,984,333 shares, representing an immediate increase in net tangible book value
of $1.17 per share to existing stockholders and an immediate dilution of $7.41
per share (92.6%) to the purchasers of Common Stock in the Offering.

The difference between the public offering price per share of Common Stock
and the net tangible book value per share of Common Stock after the Offering
constitutes the dilution per share of Common Stock to investors in the Offering.
Net tangible book value per share of Common Stock on any given date is
determined by dividing the net tangible book value of the Company (total
tangible assets less total liabilities) on such date by the number of
outstanding shares of Common Stock.

The following table illustrates the dilution to the purchasers of Common
Stock in the Offering on a per-share basis:

<TABLE>
<S> <C> <C>
Offering price........................................................................ $8.00
Net tangible book value before the Offering...................................... $(0.58)
Increase attributable to new investors........................................... $ 1.17
Pro forma as adjusted net tangible book value after the Offering...................... $0.59
Dilution to new investors............................................................. $7.41
</TABLE>

The following table summarizes as of the date of this Prospectus, the total
consideration paid and the average price per share of Common Stock paid by
existing stockholders and by purchasers of Common Stock in the Offering:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------------- ------------------------ PRICE PER
AMOUNT PERCENTAGE AMOUNT PERCENTAGE SHARE
--------- ---------- ---------- ---------- ---------

<S> <C> <C> <C> <C> <C>
Existing stockholders................... 2,459,333 82.4% $ 933,001 18.2% $0.38
New investors........................... 525,000 17.6 4,200,000 81.8 $8.00
--------- ---------- ---------- ----------
Total.............................. 2,984,333 100.0% $5,133,001 100.0%
--------- ---------- ---------- ----------
--------- ---------- ---------- ----------
</TABLE>

<PAGE>

<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company as of
September 30, 1997, and as adjusted to reflect the issuance and sale of the
Shares offered hereby and the application of the estimated $3,209,000 of net
proceeds therefrom, after deducting underwriting discounts and commissions, the
non-accountable expense allowance, the financial consulting fees payable to the
Representative and the estimated expenses of the Offering payable by the
Company, and the application of $1,650,000 of such proceeds to repay certain
indebtedness. This table should be read in conjunction with the consolidated
financial statements and the related notes thereto included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
--------------------------
ACTUAL AS ADJUSTED
----------- -----------
(UNAUDITED)

<S> <C> <C>
Short-term loans and current portion of long-term loans......... $ 34,913 $ 34,913
Long-term debt.................................................. 1,502,041 111,641
----------- -----------
Stockholders' equity (deficit):
Common stock, $0.001 par value; 20,000,000 shares
authorized; 2,459,333(1) shares issued and outstanding;
2,984,333(2) shares issued and outstanding as adjusted... 2,399 2,984
Additional paid-in capital................................. 650,602 4,139,017
Deferred compensation...................................... (305,557) (305,557)
Accumulated deficit........................................ (1,537,277) (1,737,277)
----------- -----------
Total stockholders' equity (deficit).................. (1,189,833) 2,099,167
----------- -----------
Total capitalization............................. $ 312,208 $ 2,210,808
----------- -----------
----------- -----------
</TABLE>

- ------------

(1) Includes: 20,000 shares of Common Stock issued in October 1997 as part of
Company's 1997 Private Placement, for which there was no charge to earnings;
and (ii) 40,000 shares of Common Stock issued in November 1997 to a
consultant to the Company, for which there was $200,000 charged to earnings.
See 'Description of Securities -- Prior Financing and -- Recent Financing.'

(2) Does not include: (i) 250,000 shares of Common Stock reserved for issuance
upon exercise of stock options which may be granted under the 1998 Plan;
(ii) 52,500 shares of Common Stock issuable upon exercise of the
Underwriters' Warrants; and (iii) 78,750 shares of Common Stock issuable
upon exercise of the Over-allotment Option. See 'Management' and
'Underwriting.'

<PAGE>

<PAGE>
PLAN OF OPERATION

The Company is a development stage company. Since GTI's inception in
September 1995, 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 relevant 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. See 'Business.'

The Company has not generated any revenues from operations. For the fiscal
year ended December 31, 1996 and the nine months ended September 30, 1997, the
Company has incurred net losses aggregating approximately $1,537,277, reflecting
principally research and development expenses and general and administrative
expenses. The Company expects to incur significant up-front expenditures in
connection with the 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 independent auditors included an explanatory paragraph
in their report dated May 8, 1997 relating to the Company's financial statements
for the year ended December 31, 1996, indicating that there is substantial doubt
regarding the Company's ability to continue as a going concern. The Company's
continuation as a going-concern is dependent upon its ability to obtain
additional financing, including from this Offering, and to generate sufficient
cash flow to meet its obligations on a timely basis. See 'Risk
Factors -- Development Stage Company; History of Operating Losses; Accumulated
Deficit; Working Capital Deficiency; No Revenues To Date; Uncertainty of Future
Profitability,' ' -- Explanatory Paragraph in Independent Auditors' Report' and
the Consolidated Financial Statements.

The Company anticipates that its first Ambient product will be completed
and ready for introduction into the market during the second quarter of 1998.
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 developing relationships with systems integrators, the
Company believes it will begin to generate sales and revenues by the fourth
quarter of 1998. There can be no assurance, however, that the Company will
generate significant revenues by this date, or at all.

The Company's marketing activity to date has consisted of formulating a
marketing strategy. The Company's strategy focuses initially on approaching and
establishing relationships with large and mid-sized system integrators already
established 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. The Company
recently hired a marketing and sales director and plans to hire two to three
additional full-time marketing and sales personnel after the Offering. 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, such
as Card Tech/Secure Tech in the United States and Cartes 98 in France, and
design and distribute marketing materials. The Company also plans to implement
and publicize pilot projects to demonstrate the benefits of the Ambient system.
In connection with the Ashdod Project, the Company has installed two readers at
a public school in Ashdod, where the Company plans to commence its first pilot
project in February 1998 to demonstrate Ambient's technology. The Company is
incurring substantially all of the costs associated with the Ashdod Project. As
of the date of this Prospectus, the Company incurred approximately $12,000 in
connection with the Ashdod Project and the Company expects to incur additional
minimal expenses in connection with the installation, design and operation of
this system during the first stage of the Ashdod Project, plus such additional
amounts that may be necessary should the school elect to expand the Ashdod
Project. The Company has not entered into any arrangements to design any
additional pilot projects. See 'Use of Proceeds' and 'Business.'

The Company is dependent upon the proceeds of this Offering to implement
its business plans. The Company anticipates that the proceeds of the Offering
will be sufficient to satisfy the Company's contemplated cash requirements for
the next 12 to 18 months following the consummation of the Offering, based upon
the Company's present plans and certain assumptions relating to general economic

<PAGE>

<PAGE>
and industry conditions, market factors, and the Company's future revenues and
expenditures. If any of these factors change or the Company's assumptions change
or prove to be incorrect, the Company will be required to raise additional funds
during the next 12 to 18 months. The Company intends, in any event, to seek
additional financing following the completion of this Offering. The Company has
no present intention, agreement, understanding or commitment with respect to any
such financing. Any inability to obtain additional financing when needed would
have a material adverse effect on the Company, requiring it to curtail or
possibly cease operations. See 'Risk Factors -- Need For Substantial Additional
Funds; Uncertainty of Additional Financing.'

The Company has a $30,000 line of credit with The First International Bank
of Israel for which the Company has agreed to maintain a restricted compensating
balance of $30,000. As of September 30, 1997, the amount of credit utilized was
not material. The Company does not currently have any alternative sources of
credit or capital financing.

On January 5, 1998, the Company received a loan from Mylock Holdings Inc.
('Mylock') in the principal amount of $150,000, bearing interest at 22% per
annum. The principal and accrued interest on the loan are due and payable upon
the earlier of the consummation of this Offering and July 5, 1998. As
collateral, the Company granted to Mylock a security interest, subject to
existing liens, in substantially all of its assets. The Company intends to use
approximately $155,000 of the net proceeds from this Offering to repay the
principal and accrued interest. See 'Use of Proceeds.'

As of September 30, 1997, the Company had a working capital deficit of
$92,705. Since inception, the Company has relied, for its capital requirements,
on the Debt Financing (as defined herein), government funding from the OCS, bank
loans, a loan from a third party during the second quarter of 1997 in the
principal amount of $120,000 which bears interest at 8% per annum, stockholder
loans in the aggregate principal amount of $25,781 (of which $12,042 was repaid
during the fourth quarter of 1997), the 1997 Private Placement and a third party
loan from Mylock in the principal amount of $150,000, bearing interest at 22%
per annum. See 'Risk Factors -- Restrictions of Israeli Government Funding for
Research and Development,' 'Business -- Research and Development,' 'Use of
Proceeds,' 'Description of Securities -- Prior Financing and -- Recent
Financing' and 'Certain Relationships and Related Transactions.'

The Company's product development is carried out at Ambient Israel's
facilities in Israel. During the next 12 months, the Company plans to utilize
approximately $100,000 of the net proceeds hereof for capital expenditures to
purchase additional equipment for the planned small scale production of Ambient
smart card terminals.

The Company requires the net proceeds of this Offering to continue its
product development efforts and to commence initial marketing of its smart card
technology. To date, the Company has expended approximately $490,286 on its
research and development activities, and plans to spend approximately $594,000
of the net proceeds of the Offering to continue such activities. In addition,
over the next 12 months, the Company plans to spend approximately $350,000 of
the Offering proceeds on marketing related activities. See 'Use of Proceeds' and
'Business -- Research and Development' and ' -- Sales and Marketing.'

The Company currently has 17 full-time employees, and depending on its
level of business activity, expects to hire up to 10 additional employees in the
next 12 months, including marketing and sales, research and development,
customer support, and administrative personnel. The Company has allocated
approximately $500,000 of the net proceeds of this Offering for the recruitment
and related payroll expenses for approximately 10 additional employees over the
next 12-month period. See 'Risk Factors -- Proposed Expansion' and 'Use of
Proceeds.'

On August 10, 1997, the Company applied to the Israeli Investment Center
pursuant to The Law for the Encouragement of Capital Investments, 1959 (the
'Investment Law') to have certain of its facilities and/or assets designated as
an 'Approved Enterprise.' The Investment Law provides that certain capital
investments may, upon application to the Israeli Investment Center, be
designated as an Approved Enterprise. Each certificate of approval for an
Approved Enterprise relates to a specific investment program in the Approved
Enterprise, delineated both by the financial scope of the investment and by the
physical characteristics of the facility or asset. Should the Company's
application

<PAGE>

<PAGE>
be granted, the Company will be eligible for certain tax benefits, including a
tax exemption for a period of years on undistributed income and reduced tax
rates for any additional period of time and reduced dividend withholding rates.
Such benefits, if granted, would relate only to taxable income attributable to
the specific investment program covered by the certificate of approval granted
by the Israeli Investment Center. To be eligible for such benefits, the Company
must continue to meet conditions which may be set forth in the certificate of
approval. If the Company were to fail to meet such conditions, it could be
required to refund tax benefits already received. There can be no assurance as
to the terms and conditions upon which the Company's application may be granted,
if at all. Furthermore, even if the Company receives such approval, there can be
no assurance that the Company will continue to meet all necessary conditions in
the future.

YEAR 2000 COMPLIANCE

Many currently installed computer systems and software products are coded
to accept only two-digit entries. By the year 2000, these systems and products
must be modified to accept four-digit entries or otherwise distinguish 21st
century dates from 20th century dates. As a result, computer systems and/or
software may need to be upgraded to comply with such 'year 2000' requirements.
The Company's technical personnel have taken the year 2000 issue into
consideration in designing its software for future use in Ambient products to
minimize the risk of material disruption in its systems. In addition, the
Company believes that its own computer system is in compliance, and does not
currently anticipate any material disruption in its operations. However, the
Company does not have any information concerning the compliance status of its
future suppliers and customers. In the event that any of the Company's
significant suppliers or customers do not successfully achieve year 2000
compliance, the Company's business, financial condition or results of operations
could be adversely effected.

<PAGE>

<PAGE>
BUSINESS

Ambient Corporation, a development stage company, was founded in June 1996
to design and develop advanced smart card interface technology. A smart card is
a credit card-sized, plastic card equipped with an IC that contains a memory
and, in its more evolved form, a microprocessor, or a 'mini-computer,' that
stores and transfers information in electronic form. Smart cards are used in a
variety of applications including (i) access to restricted areas (replacing keys
and identification cards), (ii) public transportation fare collection (replacing
tokens and tickets), (iii) point of sale purchases (replacing cash or credit
cards at cafeterias, newsstands and related point of sale locations where speed
of purchase is important), (iv) vending machines, (v) public telephones, (vi)
industrial applications such as quality control, warehousing, inventory control,
distribution and warranty, and (vii) health care (replacing patients' paper
files in hospitals and HMOs). Ambient Israel has two patent applications pending
in Israel, a corresponding application for one of which was filed in the United
States, and one patent application pending in the United States, for which a
corresponding application was filed under the PCT. The applications cover
various aspects of Ambient's smart card interface design and terminal
architecture. Ambient has not generated any revenues. In December 1997, the
Company commenced the installation of two smart card readers at a public school
in Israel where the Company plans to implement its first pilot project in
February 1998 to demonstrate Ambient's technology.

The Company is developing a contactless interface technology for
multi-purpose smart cards that will be capable of storing and transferring large
amounts of data in a secure environment at costs similar to typical
contact-based systems. Existing smart cards depend largely on 'contact'
technology, requiring the card to be inserted into a terminal where a receptor
clamps down on the card making precise contact with an exposed metal plate on
the card's surface creating a metal-to-metal electrical connection. The Company
believes that due to the disadvantages inherent in requiring contact for the
transfer of information in many applications, such as slow transaction time and
high terminal and card maintenance costs, the industry has produced
'contactless' smart card technology, where information is transferred
electronically without the need for metal-to-metal contact. Contactless smart
cards currently on the market utilize inductive coupling (commonly known as
'radio frequency' radiation) to transfer information. This technology creates
several disadvantages, such as the potential security hazard of data
interception by scanners, the lack of ease of use, since the card often must be
carefully positioned over a terminal antenna at a certain angle, power
limitations and environmental emissions. The Company's technology is not based
on 'radio frequency' radiation operating at a distance; rather, it relies on
capacitive close coupling. Capacitive close coupling allows for a
closed-circuit, high energy, rapid data rate connection between the card and the
terminal within a relatively short range. Ambient technology enables the
transmission of both data and energy over the same capacitive pads (one pad is
located in each of the card and the terminal) at high rates of speed and
accuracy. The Company believes that its technology will provide the following
advantages over existing contact-based and contactless smart card systems: high
security, quicker transaction time and low terminal maintenance due to the
absence of moving parts, long card life due to rugged construction and low
wear-and-tear, significantly higher levels of power and significant memory
capability allowing for multi-purpose applications.

The Company's dual goal is to become a licensor of smart card technology
and a vendor of smart card systems. The Company's business strategy is: (i) to
implement pilot projects that exhibit the benefits of the Ambient systems; (ii)
to form strategic alliances with systems integrators, as well as individual IC,
smart card and terminal manufacturers who in turn can incorporate Ambient
contactless interface technology into the overall design of their smart card
products; and (iii) to integrate its own smart card systems that utilize
Ambient's contactless interface technology that it can market directly to
end-users.

INDUSTRY BACKGROUND

There are two basic types of smart cards, memory cards and microprocessor
cards, each of which can interface between the smart card and a terminal on a
contact or contactless basis. Memory cards are typically used to store and
retrieve information only and do not have the capability of performing complex
processing of information. Microprocessor cards are truly 'smart' cards in that
they contain a central processing unit within a chip which can perform a number
of functions, including complex

<PAGE>

<PAGE>
arithmetic operations required for security. Current smart card technology is
based largely on contact cards and, to a lesser extent, contactless cards that
utilize radio frequencies to transfer data. The Company is developing what it
believes to be next generation, close coupling contactless interface technology
for microprocessor cards.

The Company estimates that approximately 90% of all smart cards sold in
1995 were memory cards with contact interfaces used as disposable phone cards.
Contact technology requires the card to be inserted into a terminal where a
receptor clamps down on the card making precise contact with an exposed metal
plate on the card's surface. Contact cards present several inherent
disadvantages including long transaction times, relatively short card life due
to corrosion of exposed metal and damage to the metal from physical abuse, such
as being sat upon or housed in an over-stuffed wallet. There is also the
potential for expensive terminal maintenance due to moving clamps and other
parts. While contact smart cards have found broad use in high volume, cost
sensitive applications such as public telephones, these cards are, in general,
cumbersome and not user-friendly and systems using contact smart cards are
expensive to maintain, less reliable and are too slow for many applications such
as transportation. In the early 1990s, several companies developed various
'contactless' smart cards, where information is transferred electronically
without the need for metal-to-metal contact. Contactless smart cards currently
on the market utilize radio frequencies to transfer information, creating the
potential security hazard of data interception. Other disadvantages include the
lack of ease of use, since the card often must be carefully positioned over a
terminal antenna at a certain angle, power limitations and environmental
emissions. In response to these limitations, the Company is developing its close
coupling, contactless interface technology for smart cards that will be capable
of storing and transferring large amounts of data in a secure environment at
costs similar to typical contact-based systems. The Company believes that its
technology will provide the following advantages over existing smart card
systems: high security, significant memory capability, long card life due to
rugged construction and low wear-and-tear, significantly higher levels of power,
quicker transaction time and low terminal maintenance due to the absence of
moving parts. See ' -- Proprietary Information.'

There are several levels of smart cards utilized for different
applications. The 'dumb' smart card is simply a memory card with some hard wired
logic, and can only be loaded with information one time. The next level is a
memory card with a simple controller upon which information can be recorded and
erased many times. This memory is usually in the form of EEPROM, which can be
written on and erased many times, or the more advanced flash memory products
being developed by companies such as Sandisk Israel Ltd., Intel Corporation ,
M-Systems Ltd., and others. The heart of the truly smart card is a
microprocessor with EEPROM memory that is contained within the IC. Such a smart
card acts as a mini-computer, without a monitor or keyboard. This type of IC is
produced by a relatively small number of chip makers. The five principal chip
manufacturers comprise a majority of the market. See 'Risk Factors -- Dependence
on Manufacturers and Suppliers.' The Company intends to engage subcontractors to
produce initially an ASIC of its contactless interface technology which will be
integrated in a multi-chip solution with various microprocessor and memory
modules. The next stage of the company's development will be to create a product
line of one-chip solutions, combining on one piece of silicon the analog
interface of Ambient, along with various levels of memory and microprocessors.

BUSINESS STRATEGY

Initially, the Company plans to target its marketing efforts on 'niche'
markets that require the storage and transfer of large quantities of
information, as well as security protocols and have a preference for contactless
solutions, but cannot, for various reasons, use radio frequency cards. The
Company has identified the health care, vending systems and high security access
control markets for initial entry. The Company intends to target users of
existing contact-based smart cards that it believes could benefit from switching
to Ambient's contactless system. Using its technology, the Company recently
developed a 'transparent interface' with the ability to provide a contactless
interface for substantially all existing contact-based smart card chips. This
technology is designed to allow the existing contact-based smart card industry
to convert to contactless smart cards while maintaining the existing card
software, readers and system host computers, as well as the existing security
software.

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In order to gain access to its targeted markets, the Company intends to
enter into strategic relationships with system integrators, as well as
individual IC, terminal and card manufacturers, that could integrate the Ambient
contactless close coupling interface technology with their product for joint
marketing and distribution of smart card systems that use Ambient technology.

To create a market presence, the Company intends to implement pilot
projects that exhibit to the public the benefits of the Ambient systems. In
addition to the Ashdod Project, the Company intends to enter into discussions
with other municipalities and governmental authorities in Israel and elsewhere
in an effort to implement additional pilot projects. There can be no assurance
that the Company will commence any additional pilot projects. In addition to
demonstrating its technology, the Company believes that pilot projects will
serve to provide it with valuable feedback on its technology, enabling the
Company to fine-tune its systems prior to commercial marketing and application.
See 'Plan of Operation' and ' -- Pilot Projects: Ashdod.'

THE AMBIENT SYSTEM

Ambient's principal product is a smart card interface for transmitting
energy and data between the terminal and the smart card. The energy and data
transmission is galvanically contactless utilizing capacitive technology.
Capacitive transfer technology is the result of placing plates of conductive
material both on the card, which are covered in plastic, and in the terminal
that act as a virtual capacitor when coming in relatively close range of each
other. The Company believes that the Ambient technology will provide a reliable
close coupling solution for contactless cards, combining the best attributes of
both traditional contact cards and radio frequency contactless cards. The
Ambient technology is designed to enable the construction of a rugged, high
energy, high memory, true multi-application smart card.

Smart cards utilizing the Ambient technology are being designed to have
robust functionality without the security handicaps of radio frequency cards and
the mechanical liabilities of contact cards. The Ambient system is being
designed to be easily integrated with existing technology and easily adapted to
any of the current IC smart cards. Moreover, Ambient's platform is designed to
handle the energy requirements of future generations of smart card
microprocessors and memory chips.

The Ambient smart card system consists of smart cards and terminals that
can be configured utilizing three different transaction methods:

Insertion. this method, much like traditional contact cards and ATM
terminals, allows Ambient's smart cards to be inserted into a terminal,
while maintaining the advantage of significantly lower terminal maintenance
due to the absence of electrical contact and moving parts within the
terminal.

Flat Reading. this design allows the card to simply be placed on a
reader/writer terminal.

Swiping. this method contains a swiping terminal allowing the Ambient
smart card to be swiped in substantially the same manner as the standard
magnetic credit card reader, except that the Ambient card can be swiped
through the terminal in any manner at any speed, still creating a
capacitive connection. This transaction method significantly reduces the
error rate to almost zero, since end-users will simply swipe the cards
through the terminals. This method will also allow Ambient to enter the
market without substantial consumer education since the swiping mechanism
is already commonly used for various day-to-day transactions.

The Company believes that the following features of the Ambient system
provide it with significant advantages over existing smart cards:

Security. As a result of the low amounts of energy capable of being
transmitted through the radio waves, existing radio frequency contactless
cards have limited memory capacity and lack internal microcomputers. As a
consequence, many of these cards are not capable of offering high level
security protocols. The transmission of sensitive financial and personal
information via radio frequency is therefore subject to security leaks
since the transmitted information can be intercepted or forged by a simple
scanner. Ambient's capacitive information transfer method contains
substantial physical security prohibiting data from being 'leaked' or
'listened to,' which is critical

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for certain applications, such as health care and electronic commerce. This
security is built into the hardware technology itself, as the connection
between the card and terminal is a closed circuit, and attempts to listen
in to the dialogue will cause the connection to be broken immediately.

Memory capabilities. Ambient's capacitive power transfer method allows
for significant memory expansion possibilities. Existing radio frequency
cards supply up to several kilobytes of EEPROM memory; Ambient technology
can supply up to 20 megabytes of on board EEPROM memory. Ambient is
currently developing flash memory products of up to two megabytes that can
fit into an ISO 7816 smart card. Memory capacity is a critical element in
enabling smart cards to store large amounts of various data and be utilized
as a multi-application tool.

Rugged Construction. Existing microprocessor cards utilize standard
'8-pin' contact technology, meaning that with every transaction, an
electrical connection must be made between the card and the terminal. This
requirement for a metal-to-metal connection is the basis for the
substantial disadvantages in the standard contact smart card technology.
Industry estimates view the life span of a standard contact card at
approximately 5,000 to 10,000 insertions, not including damage from regular
wear and tear, corrosion from contact with moisture and physical damage
from being sat on, played with or otherwise physically abused. Ambient
cards will not contain any exposed parts as the whole card will be encased
in plastic, thereby substantially reducing exposure to the wear and tear of
everyday life. The Ambient smart card's rugged construction guarantees a
longer card life, which lowers overall costs. This feature is especially
significant considering the introduction of multi-application cards, which,
it is anticipated, will be used with higher frequencies and therefore
exposed to significantly more damage-inducing elements.

Low terminal maintenance. Unlike standard contact terminals, Ambient's
reader/writer terminals will not contain any moving parts or exposed
electrical connections, which, it is expected, will result in lower
maintenance costs, virtually trouble and vandalism free terminals, as well
as the system's ability to withstand exposure from the environmental
elements. The ability to leave the smart card terminal exposed to the
elements is especially critical for vending, access control, public
telephones and other outdoor applications.

Faster throughput. The Company anticipates that Ambient's terminals
will be available in a variety of configurations including swiping and flat
reading. These configurations reduce transaction times, allowing each
terminal to be used by a larger number of people per hour. Contact systems
require longer transaction time since the card has to be inserted into the
terminal and direct contact achieved. The time factor is critical for many
applications that require quick transaction time, such as public
transportation and toll roads.

Environmental considerations. Little or no harmful radiation is
emitted into the environment during transactions using the Ambient system.
Radio frequency systems depend on spread spectrums that emanate from the
terminals at all times, which means that radio waves are being continuously
emitted from the device. This emission can lead to harmful radiation
effects to the environment, as well as interference with surrounding
devices that are sensitive to radio frequency waves.

PROPOSED AMBIENT SMART CARDS

The Company intends to produce and market, along with strategic partners,
three types of contactless smart cards: the Standard Card, the Secure Card and
the Mega Card. As currently planned, each card will have two capacitive plates
embedded on both sides to act as receivers and transmitters of energy and data
between the card and reader/writer terminal, which terminal will be equipped
with similar plates. These plates will be completely covered and sealed in
plastic, resulting in a card without any exposed metal or galvanic electrical
contact points. This configuration enables the card to be utilized in a
high-speed swiping mechanism, as well as flat reading and insertion. The cards
will be hermetically sealed with durable plastic lamination.

The Ambient Standard Card. The Ambient Standard Card will target all
existing smart card applications with a special emphasis on access control,
mass transit and vending applications. Mass transit and access control
system managers are frequently required to choose between the slower

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throughput of traditional contact cards, or the lower security and
unreliability of radio frequency contactless cards. The Ambient smart card
is designed to offer quick throughput, high reliability and security. The
Ambient contactless interface operates with swiping technology which has
been proven by credit card and metro users to be a reliable and rapid means
of executing a transaction. The standard card will contain limited memory
and processing power and will emphasize low cost and ease of use.

The Ambient Secure Card. The Ambient Secure Card will incorporate all
the features of the Ambient Standard Card with additional security provided
by an on board crypto controller responsible for the encryption of data.
The combination of an on board central processing unit ('CPU'), which
allows for high-level security programs to be run directly on the card, a
crypto controller and the absence of radiation and data leakage produces
what the Company believes will be the most secure contactless smart card
available. This card will be targeted for high security applications such
as access to sensitive installations, electronic banking, high value
monetary transactions and confidential data storage.

The Ambient Mega Card. The Ambient Mega Card will combine the security
of the Ambient Secure Card with memory capacity of at least 0.5 megabytes
of flash memory. This combination will offer currently unavailable options
for secure data storage applications. The Mega Card will be targeted for
applications such as the health care industry. A holder will be able to
carry around in a wallet all of his medical insurance information combined
with his full medical history, including, depending on the card's memory
capacity, x-rays, lab results, allergies, medicine sensitivities, previous
illnesses and operations, E.K.G. results and any other vital information.
The card's significant memory capacity (dependent upon memory chip size)
will provide adequate storage for each application, from transportation, to
electronic commerce, to health care, achieving a true multi-purpose card.

The Ambient card will conform to the mechanical criteria laid out in ISO
7816-1 and ISO 10536, which are international standards regarding physical
dimensions and flexibility of the card itself. The system will not comply with
sections of ISO 7816 relevant to contact technology, such as positioning and
dimensions of the contact itself, as they are not relevant to the Ambient card.
There can be no assurance that the Company will be successful in developing any
of the smart cards described herein.

PILOT PROJECTS: ASHDOD

The Company is currently preparing to implement the Ashdod Project, its
first smart card pilot project, in February 1998, at a public school in the city
of Ashdod, Israel. In December 1997, the Company installed readers in two
classrooms at the public school. The project is expected to be implemented in
two stages. In the first stage, readers will be installed in two classrooms and
Ambient smart cards will be distributed to students in those classes. These
cards are being designed to track classroom attendance. If the first stage of
the trial proves successful, of which there can be no assurance, the school may
elect to expand the Ashdod Project to encompass a larger portion of the school,
and incorporate additional features such as using the cards for payment at the
school's cafeteria, passes for transportation and access to school buildings. As
of the date of this Prospectus, the Company incurred expenses of approximately
$12,000 in connection with the Ashdod Project and the Company expects to incur
additional minimal expenses in connection with the installation, design and
operation of this system during the first stage of the Ashdod Project, plus such
additional amounts that may be necessary should the school elect to expand the
Ashdod Project. A formal agreement between the Ashdod municipality and the
Company has not yet been formally executed.

The Company intends to engage in discussions with other municipalities and
governmental authorities in Israel and elsewhere to promote the implementation
of additional pilot projects. There can be no assurance that the Company will be
successful in these discussions or that any additional pilot projects will be
commenced. See 'Plan of Operation.'

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RESEARCH AND DEVELOPMENT

The Company's research and development activities are conducted primarily
in Israel through its subsidiary, Ambient Israel. The Company currently has 11
full-time employees engaged in research and development.

The Company's research and development operations are conducted through
three main departments:

Electrical engineering. The electrical engineering department is led
by Dr. George Kaplun and is responsible for designing and developing
Ambient's interface technology.

Mechanical Engineering. Ambient's mechanical engineers have created
prototypes of the Ambient cards and terminals, and are laying the
groundwork for full volume production of the Ambient system.

Software development. At present, Ambient's software programmers are
devoted to creating the basic communication drivers that allow
communication through the Ambient interface between the card and the
terminal. In addition this department is responsible for creating
development tools that will allow future partners to integrate existing
applications with the Ambient protocols.

The Company has made limited use of outside subcontractors from time to
time, and is in the process of selecting outside developers to assist in the
design and production of the proposed Ambient ASIC. The Company intends to use a
portion of the proceeds of this Offering to hire experienced subcontractors to
serve as project managers for chip design and production. See 'Use of Proceeds.'

The Company believes that there are several advantages to centering its
development efforts in Israel, including the potential for substantial
government assistance from one or more of Israel's numerous incentive programs,
the availability of skilled labor and significant potential tax relief. The OCS
has granted Ambient Israel $95,976 for research and development as of September
30, 1997. The Ambient Israel grant from OCS is for up to 60% of certain research
and development expenses for the development of products intended for export.
Under the Law for the Encouragement of Industrial Research and Development, 1984
(the 'Research Law'), research and development programs approved by a research
committee in the OCS are eligible for grants or loans upon meeting certain
criteria against payment of royalties from all revenues derived from the product
developed in accordance with the program. Regulations promulgated under the
Research Law generally provide for the payment of royalties ranging from 3% to
5% of all revenues derived from the products developed as a result of the
research project so funded, or based on technology funded by the OCS, until 100%
of the dollar-linked participation is repaid. An amendment to the royalty
regulations provides that royalty payments are payable as follows: 3% of
revenues during the first three years, 4% during the following three years and
5% in the seventh year and thereafter. The repaid royalties may not exceed the
principal dollar value of the total grant received. The Research Law requires
that the manufacture of any product developed as a result of research and
development funded by the OCS be forever performed in Israel, even after all
required royalty payments are made, unless special approval has been granted. It
also provides that know-how from the research and development that is used to
produce the product may not be transferred without the approval of the OCS. The
Company believes that these restrictions and obligations will not have a
material adverse effect on the operations of the Company . Further, such
restrictions do not apply to exports from Israel of products developed with such
technologies. From time to time the government of Israel has revised its
policies regarding the availability of grants and participations and there can
be no assurance that the government's support of research and development will
continue. See 'Risk Factors -- Restrictions on Israeli Government Funding For
Research and Development.'

For the Company's fiscal year ended December 31, 1996 and the nine months
ended September 30, 1997, the Company's aggregate expenditures for research and
development before amounts received from OCS, were $490,286. Ambient Israel
filed a request with the OCS for an additional research grant. The OCI denied
this request and the Company intends to appeal such decision. There can be no
assurance that the Company will be successful in such appeal.

Following the completion of the Offering, the Company plans to expand its
research and development activities, including hiring up to seven additional
employees for its research and

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development operations. Ambient has allocated $594,000 of the net proceeds of
this Offering for research and development activities. See 'Use of Proceeds.'

SALES AND MARKETING; DISTRIBUTION

The Company intends to center its marketing and sales operations in
Jerusalem, and focus on those geographic areas where smart card acceptance is
already at a high level, such as Europe, Asia, and the Middle East. The Company
intends to focus initial marketing efforts on building recognition of the
Ambient system. Towards that end, the Company intends to engage, at the
Company's cost, in pilot projects in Israel and other locations to demonstrate
its technology and participate in trade show exhibitions. The Company intends to
enter the commercial market by bidding on smart card system projects. The
Company also intends to market itself to systems integrators active in smart
card projects, as well as individual IC, smart card and terminal manufacturers.

The Company recently hired a sales and marketing director and has one other
sales and marketing employee. Upon completion of the Offering, the Company
intends to hire up to three additional full-time sales and marketing associates.
The Company intends to devote $200,000 of the net proceeds of this Offering to
pay the salaries of existing and additional sales and marketing personnel and to
participate in trade shows to exhibit Ambient technology. See 'Use of Proceeds.'

The Company plans to focus sales efforts initially on the following
industries:

Access control. The access control market consists of systems
integrators who, by contract, provide security control systems for large
buildings and other enclosures. Within the access control market, there is
a wide spectrum of potential users, ranging from those entities requiring
only limited security levels to those who require high security. Ambient
intends to cover this spectrum by offering simple memory cards to the low
end of the market and secure cards to the high end of the market. Secure
cards will require large amounts of memory to handle biometric security and
sophisticated microprocessors for encryption.

Hotel services. Hotel service is an example of a niche market that the
Company believes can benefit from a multi-application card that can serve
as a room key, a stored value card for phones, vending machines and pay TV,
an access control card for entry into hotel buildings and other potential
applications.

Amusement parks. Ambient management believes there is a large volume
potential in stored value/access control cards for the amusement park
industry. This industry is currently largely dependent on paper and coin
money. Management believes that large amusement and theme parks have
already begun and will continue to incorporate smart cards as 'passports'
to the parks, capable of payment, allowing access into and out of the park
for one-day or multi-day passes, and allowing parents to grant freedom to
their children by purchasing cards for their use with cash limits loaded
directly onto the smart card.

Health care. There are two separate markets within health care for
smart cards, state and private health management organizations ('HMOs'),
and individual hospitals. Within each of these markets, the patient paper
trail is costly, time consuming, and can even lead to life threatening
delays when an emergency situation arises and the patient's basic medical
data is needed immediately. The Company intends to offer this industry
Ambient system solutions, wherein, for example, an HMO context, each member
could be issued an Ambient Standard Card containing all basic information
such as blood type, allergies, and other most recent vital statistics, and
in a hospital context, each admitted patient's paper records could be
replaced by an Ambient Mega Card, containing all patient care notes, test
results, recent EKGs and the like.

The Company also intends to focus sales and marketing efforts on the
transportation industry as well as, campus cards and multi-application cards
suitable for city services and government benefit programs. There can be no
assurance that the Company will be successful in these efforts. The Company's
failure to successfully market its products in one or more of these industries
could have a material adverse effect on the business, financial condition or
results of operations of the Company.

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SUPPLIERS; MANUFACTURING AND ASSEMBLY

A smart card system consists essentially of the plastic card, within which
is embedded one or more silicon ICs, and the corresponding terminal. The Company
currently purchases ICs for its smart card systems in development from Motorola
Corporation Inc., National Semiconductor, Inc. and other manufacturers, and
purchases other components used in the assembly of its smart card systems, such
as the cards and the terminal components, from other key suppliers. While the
Company does not intend to produce ICs or cards itself (it intends to rely on
subcontractors for such manufacture), it does plan, depending on the
availability of funds, either from revenues or additional financing, of which
there can be no assurance, to establish one or more factories in Jerusalem and
other locations to produce Ambient sub-assemblies and, to a limited extent,
smart card terminals. It is currently anticipated that Ambient's subassembly
will include the IC, which will incorporate ROM, RAM and EEPROM or flash
memories, plus Ambient's proprietary capacitative data and energy
transmitter/receiver. At the proposed factories, the chip will be connected to
the capacitive plates to form self-contained micro modules. As completed, these
subassemblies will be sold to smart card manufacturers for incorporation into
their cards. In the event that the Company builds up large card volume, of which
there can be no assurance, Ambient plans to complete the card package itself.
See 'Risk Factors -- Dependence on Manufacturers and Suppliers' and 'Use of
Proceeds.'

COMPETITION AND RAPIDLY CHANGING TECHNOLOGY

The market for smart card products is developing, intensely competitive,
quickly evolving and subject to rapid technological change. Competitors may
develop superior technology and products or products of similar quality for sale
at lower prices. Moreover, there can be no assurance that the Company's smart
card technology will not be rendered obsolete by changing technology or new
industry standards. The Company expects competition to persist and increase in
the future. The Company's currently anticipated and potential competitors are
primarily subsidiaries of multinational companies with established contact card
and contactless smart card businesses who have longer operating histories,
greater name recognition, larger customer bases and significantly greater
financial, technical and marketing resources than the Company. This intense
level of competition could materially adversely affect the Company's business,
operating results and financial condition. See 'Risk Factors -- Competition' and
' -- New Products and Rapid Technological Change.'

Competitive factors in the industry include transaction speed, the extent
and flexibility of smart card memory, security, reliability, transaction
accuracy and cost. There can be no assurance that the Company will be able to
compete successfully against currently anticipated or future competitors or that
competitive pressures will not materially adversely affect its business,
operating results and financial condition. Many of the Company's anticipated
competitors have the financial resources necessary to enable them to withstand
substantial price and product competition, which are expected to increase, and
to implement extensive advertising and promotional programs, both generally and
in response to efforts by other competitors to enter into existing markets or
introduce new products. The industry is also characterized by frequent
introductions of new products. The Company's ability to compete successfully
will be largely dependent on its ability to anticipate and respond to various
competitive factors affecting the smart card industry, including new products
which may be introduced, changes in customer preferences, demographic trends,
pricing strategies by competitors and consolidation in the industry where
smaller companies with leading edge technologies may be acquired by larger
multinational companies. See 'Risk Factors -- Competition.'

Radio frequency contactless cards and standard contact cards, represent the
Company's primary competition. The Company believes that it will be able to
compete favorably with contact cards because the Company's contactless smart
cards (i) will operate at higher speeds, (ii) will not require the time and
effort involved in inserting the smart card into a terminal, (iii) will use
reliable electronics without moving parts, exposed contact points or magnetic
stripes that can be erased by a magnetic field, and (iv) are lower in cost over
the product life. The Company believes it will be able to compete favorably with
current radio frequency contactless smart cards because Ambient contactless
cards (i) will provide for the secure transfer of information that cannot be
achieved when data is transferred over radio frequencies which are not powerful
enough to sustain high level security protocols and can be

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intercepted with scanners, (ii) will provide significant memory expansion
capabilities, enabling the Company to offer a true multi-purpose card, while
radio frequency cards, by their nature, can only supply a limited EEPROM memory,
and (iii) will be environmentally sound since, unlike radio frequency smart
cards, radiation is not emitted during a transaction or between transactions.

The Company believes that its main competitors over the next one to three
years will be primarily companies developing and marketing contactless
smartcards that depend on radio frequency radiation, such as Mikron GmbH, On
Track Innovations, Ltd., Motorola, and others. In addition, the Company expects
to compete with those contact card vendors who have vested interests in
continuing to produce and sell contact card systems by virtue of the fact that
these entities have invested large sums of money in contact card production
machinery. See 'Risk Factors -- Competition' and ' -- New Products and Rapid
Technological Change.'

PROPRIETARY INFORMATION

The Company relies on patents, trade secrets, trademarks, and proprietary
information and non-disclosure agreements to establish and protect its
proprietary rights in its technologies and planned products. Despite these
precautions, it may be possible for unauthorized third parties to utilize the
Company's technology or to obtain and use information that the Company regards
as proprietary. The laws of some foreign countries do not protect the Company's
proprietary rights in its processes and products to the same extent as the laws
of the United States.

The Company is seeking patent protection in the United States and Israel
relating to various aspects of the electrical design of the card and the
terminal. As of the date of this Prospectus, Ambient Israel has two patent
applications pending in Israel which were filed in 1996 and for one of which a
corresponding application was filed in the United States in 1997, and one patent
application pending in the United States which was filed in 1996, for which a
corresponding application was filed under the PCT in 1997.

Under a certain agreement, the former chief scientist of Ambient Israel,
Alexander Rozin, is entitled to receive 15% of the net profits (as defined in
such agreement) from sales of products and technology by Ambient Israel for an
indefinite period of time. In addition, Mr. Rozin is entitled to receive, until
December 2015, royalties of 20% of the Company's net profits from sales or
licenses of products predominantly utilizing an electronic data communication
system as described in a certain 1994 patent application which application has
been abandoned by the Company; if the Company sells or licenses products wherein
such electronic data-communication technology is not the predominant technology,
Mr. Rozin is entitled to receive royalties at a reduced rate to be agreed upon.
In addition, the agreement provides that Mr. Rozin shall be paid royalties of
20% of consideration from any sale or assignment of such technology (excluding
sales and assignments to affiliate companies) for an indefinite period of time.
The Company has not to date utilized the technology described in the abandoned
patent application in the development of Ambient systems and does not presently
intend to do so. See 'Risk Factors -- Royalty Payments' and ' -- Uncertain
Ability to Protect Patent-Pending Technology,' ' -- Legal Proceedings' and
'Management.'

In addition, the Company has a pending application on file with the Patent
and Trademark Office to register Ambient as a trademark in the United States.

The Company's competitive position is dependent upon protecting its trade
secrets. The Company has developed and is continuing to develop a substantial
database of information concerning its research and development and has taken
security measures to protect its data. However, trade secrets are difficult to
protect. In an effort to protect its trade secrets, the Company has a policy of
requiring its employees, consultants, and advisors to execute non-disclosure
agreements. These agreements provide that all confidential information developed
or made known to an individual during the course of his relationship with the
Company must be kept confidential, except in specified circumstances. There can
be no assurance, however, that these agreements will provide meaningful
protection for the Company's trade secrets, know-how or other proprietary
information in the event of unauthorized use or disclosure of confidential
information. See 'Risk Factors -- Uncertain Protection of Proprietary Technology
and Information.'

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The Company may be required to take legal action in order to defend against
or assert claims of patent or trademark infringement, to enforce patents or
licenses issued to the Company, to protect trade secrets or know-how owned by
the Company, or to determine the scope and validity of the proprietary rights of
others, and could result in substantial costs to and diversion of effort by, and
may have a material adverse impact on, the Company's financial condition or
results of operations. There can be no assurance that any legal action by the
Company will be successful. In addition, while the Company believes that its
planned products and technology do not infringe any valid patents of others,
there can be no assurance that third parties will not commence legal action
against the Company to enforce their alleged patent rights.

CONDITIONS IN ISRAEL

The following information is intended to advise prospective investors of
certain conditions in Israel that could affect the Company.

POLITICAL CONDITIONS

Since the establishment of the State of Israel in 1948, a state of
hostility existed, varying as to degree and intensity, among Israel and various
Arab countries. A peace agreement was signed between Israel and Egypt in 1979
and limited relations have been established. A peace treaty with the Hashemite
Kingdom of Jordan was signed in 1994, ending the state of war along Israel's
longest border.

Since December 1987, civil unrest has existed in the territories which came
under Israel's control in 1967. In September 1993, Israel and the Palestine
Liberation Organization ('PLO') signed a Declaration of Principles outlining
interim Palestinian self-government arrangements. In May 1994, Israel and the
PLO signed an agreement in Cairo in which the principles of the September 1993
declaration were implemented. In accordance with this agreement, Israel has
transferred the civil administration of the Gaza Strip and Jericho to the
Palestinian Self-Rule Authority and the Israeli army has withdrawn from these
areas. In September 1995, Israel and the PLO signed an interim agreement to
further implement the principles of the September 1993 declaration. The interim
agreement provides for the gradual redeployment of Israel military forces in the
West Bank and the transfer of certain powers and governmental responsibilities
to a Palestinian elected council.

Despite reported progress towards peace between Israel, Arab states and the
Palestinians, no prediction can be made as to whether a full resolution of these
problems will ever be achieved, or as to the nature and timing of any such
resolution. The permanent status arrangements between Israel and the
Palestinians have yet to be determined, and peace treaties with Syria, Lebanon
and other Arab states have yet to be concluded.

Generally, all adult male citizens and permanent residents of Israel under
the age of 51 are, unless exempt, obligated to perform up to 44 days of military
reserve duty annually. Additionally, all such residents are subject to being
called to active duty at any time under emergency circumstances. Many of the
male employees of the Company are currently obligated to perform annual reserve
duty. While the Company has operated effectively under these requirements in the
past, no assessment can be made as to the full impact of such requirements on
the Company in the future, particularly if emergency circumstances occur.

Certain countries and companies continue to participate in a boycott of
Israeli companies and others doing business in Israel or with Israeli companies.
The Company does not believe that any such boycott has had a material adverse
impact on the Company's current operations, but there can be no assurance that
restrictive laws, policies or practices towards Israel or Israeli businesses
will not have an adverse impact on the Company's business in the future.

ECONOMIC CONDITIONS

Israel's economy has been subject to numerous de-stabilizing factors,
including a period of rampant inflation in the early to mid 1980s, low foreign
exchange reserves, fluctuations in world commodity prices, military conflicts
and civil unrest. For these and associated reasons, the Israeli Government has

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intervened in sectors of the Israeli economy, utilizing among other means,
fiscal and monetary policies, import duties, foreign currency restrictions and
control of wages, prices and exchange rates, and has frequently reversed or
modified its policies in all these areas. There can be no assurance that the
Israeli government will be successful in any attempts to keep prices and
exchange rates stable. To the extent that a significant portion of the Company's
business is conducted in Israel and any future revenues are collected in New
Israeli Shekels, price and exchange rate instability could have a material
adverse effect on the Company. The exchange rate of NIS into dollars as of
February 3, 1998 was NIS 3.587 to $1.00, or NIS 1 to $0.28.

Since the institution of the Israeli Economic Program in 1985, the rate of
inflation, while continuing, has been significantly reduced, and the rate of
devaluation has been substantially diminished. During the calendar years 1991
through 1996, the annual rates of inflation were approximately 18.0%, 9.4%,
11.2%, 14.4%, 8.1% and 10.8%, respectively. During the calendar years 1991
through 1996, Israel effected devaluations of the NIS in relation to the U.S.
dollar of approximately 11.5%, 21.1%, 8.0%, 1.1%, 3.9% and 3.7%, respectively.

TRADE AGREEMENTS

Israel is a member of a number of international organizations, including
the United Nations, the International Bank for Reconstruction and Development,
the International Monetary Fund and the International Finance Corporation.
Israel is a longstanding signatory of the General Agreement on Tariffs and Trade
and is an original Member of the World Trade Organization ('WTO'), which
provides for the liberalization of international trade in goods and services.
Within the WTO, Israel is eligible for certain preferential treatment as a
developing country, and in certain instances may be eligible for trade
preferences under the Generalized System of Preferences.

Israel has concluded free trade area ('FTA') agreements with its major
trading partners, and is currently the only nation with such agreements with
both the United States and the European Community ('EC'). The Israel-U.S. FTA
agreement of 1985 has eliminated all tariff and certain non-tariff barriers to
bilateral trade in most products. Israel has had an FTA agreement with the EC
and its member states since 1975. In 1995 this became an Association agreement
with the EC and its member states. In general, this agreement provides for the
elimination of tariff and most non-tariff barriers to bilateral trade in
industrial products and for the liberalization of trade in agricultural
products. In addition, Israel has free trade agreements with the European Free
Trade Association (EFTA), whose members include Switzerland, Norway, Iceland and
Liechtenstein, and with Canada and the Czech and Slovak Republics, and is in the
process of negotiating such agreements with other countries.

ASSISTANCE FROM THE UNITED STATES

The State of Israel receives significant economic and military assistance
from the United States, amounting to an annual average of approximately $3
billion over the last few years. In addition, in 1992, the United States
approved the issuance of up to $10 billion of loan guarantees during U.S. fiscal
years 1993 to 1998 to help Israel absorb a large influx of new immigrants
primarily from the former Soviet Union. Under the loan guarantee program, Israel
may issue up to $2 billion in principal amount of guaranteed loans each year,
subject to reduction in certain circumstances. If the grants for economic and
military assistance or the U.S. loan guarantees are eliminated or significantly
reduced, the Israeli economy in general, and the Company in particular, could be
materially adversely affected.

PROPERTIES

Ambient Israel currently leases approximately 2,691 square feet for its
executive offices and research and development facilities at the Jerusalem
Technology Park in Jerusalem, Israel, at a monthly rental fee of approximately
NIS 13,229, excluding VAT (approximately $3,780 as of January 19, 1998), linked
to the Israeli CPI, plus maintenance fees, pursuant to a five-year lease. The
lease expires March 31, 2001 and the Company has an option to extend such lease
for an additional 59 months. Pursuant to certain provisions of the lease, since
Ambient Israel did not receive from the Israeli government 'approved enterprise'
status by December 31, 1997, the Company is subject to additional

<PAGE>

<PAGE>
retroactive payments for the period from April 1996 through such date, as well
as an increase in the rental fee on a going forward basis. The amount of the
retroactive payments and increase in the rental fee would be approximately NIS
1,561 per month, subject to Israeli CPI linkage differentials, from December
1995, plus interest from January 1998 . Ambient Israel has applied for 'approved
enterprise' status but there can be no assurance that it will be granted. See
'Plan of Operation.'

Ambient Israel intends to move to new facilities within the Jerusalem
Technology Park during the first quarter of 1998. The new facilities are
anticipated to be approximately 3,228 square feet at a monthly rent of
approximately $7,800 (including rent, utilities, computer network, security and
cleaning service), linked to Israeli CPI, pursuant to a sublease from Delta
Three Inc. for an initial term of two years. The Company is seeking to sublease
to a third party its current office space for the remaining lease term in an
effort to recoup expenses for certain leasehold improvements made by the
Company. If the Company fails to locate a sub-tenant, the Company will be
relieved of its obligations under the current lease without penalty or payment.
See 'Certain Relationships and Related Transactions.'

EMPLOYEES

The Company presently has 17 full-time employees, of whom 11 are employed
in research and development, two in sales and marketing, two in administration,
and two in management, plus the Company's secretary, which is not a full-time
position.

LEGAL PROCEEDINGS

On November 12, 1997, the former chief scientist of the Company, Alexander
Rozin, filed suit against Ambient Israel in the Regional Labor Court for the
Jerusalem Region asserting a claim for severance and vacation pay and certain
other benefits aggregating approximately NIS 70,000 (approximately $19,500), not
including interest, penalties and attorneys' fees. The Company and Mr. Rozin
have entered into a court approved settlement pursuant to which the Company has
agreed to pay Mr. Rozin approximately NIS 70,000, subject to Israeli CPI linkage
differentials, over a two month period commencing January 1, 1998. In addition,
while not sought in such claim, Mr. Rozin stated in documents filed with the
labor court that he believed certain officers of Ambient Israel agreed to issue
to him an additional 15% of the shares of Ambient Israel in exchange for Mr.
Rozin's waiver of certain royalty rights from the Company and Ambient Israel. It
is unclear whether Mr. Rozin plans to assert this claim in a separate litigation
in an Israeli court of proper jurisdiction. Management believes that these
allegations are without merit and intends, should it become necessary, to
vigorously defend against these claims. See 'Risk Factors -- Royalty Payments'
and 'Business -- Proprietary Information.'

The Company is not a party to any other material litigation that would have
a material adverse effect on the Company or its business.

<PAGE>

<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The names, ages and positions of the directors, executive officers and key
employees of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------- --- -------------------------------------------------------

<S> <C> <C>
Jacob Davidson.......................... 28 Chairman of the Board, President, and Chief Executive
Officer
Dr. Yehuda Cern......................... 54 Chief Technical Officer
Aryeh Weinberg.......................... 40 Chief Financial Officer
Elie Wurtman............................ 28 Director and Secretary
Dr. George Kaplun....................... 56 Senior Electrical Engineer
</TABLE>

The business experience, principal occupations and employment, as well as
the periods of service, of each of the directors, executive officers and key
employees of the Company during at least the last five years are set forth
below.

Jacob Davidson is a co-founder of Ambient Corporation and has been Chairman
of the Board, President and Chief Executive Officer of Ambient Corporation and
Ambient Israel since the Company's inception in June 1996. From 1991 to 1996,
Mr. Davidson managed several high-tech start-up companies in Israel, as a
venture capitalist and as a management consultant. In May 1995, Mr. Davidson
co-founded Pioneer Management Corporation ('Pioneer') and has served as an
officer and director thereof since such date. In May 1996, Mr. Davidson became a
director of Delta Three Inc., an Internet communications company ('Delta
Three'). From 1988 through 1991, Mr. Davidson was employed by the law firm of
Wolf Haldenstein Adler Freeman & Herz in the securities litigation division. Mr.
Davidson received a J.D. from Georgetown University Law Center in May 1994 and
received both a B.A. and a B.S. from the City College of New York.

Dr. Yehuda Cern has been Chief Technical Officer of Ambient Israel since
August 1997. Dr. Cern worked at AirOptics, Inc., an infrared communications
company located in Lancaster, Pennsylvania and a subsidiary of JOLT, Ltd. in
Jerusalem, as Chief Operating Officer and Senior Vice President from 1996 to
1997 and as Chief Technical Officer from 1993 to 1996. From 1991 to 1993, Dr.
Cern served as R&D Manager and then Chief Operating Officer of News Datacom
Research Ltd., a subsidiary of News Corp. located in Israel. Dr. Cern received a
B.S. degree and an M.Sc. degree in electrical engineering from Wayne State
University in Detroit and a Ph.D. in medical electronics from the Weizmann
Institute in Israel.

Aryeh Weinberg has been Chief Financial Officer of Ambient Corporation and
Ambient Israel since January 1997. Since February 1997, Mr. Weinberg has served
as Chief Financial Officer of Delta Three. From 1980 to 1996, Mr. Weinberg, a
certified public accountant, worked at Schiller Holinsky & Garolyn P.A., a
public accounting firm in the United States, becoming the audit and accounting
partner there in 1991. Mr. Weinberg earned a Bachelor's degree in business
administration from Towson State University in Baltimore, Maryland.

Elie Wurtman is a co-founder of Ambient Corporation and has been Secretary
and a Director of Ambient Corporation and Ambient Israel since the Company's
inception in June 1996. From April 1995 to December 1996, Mr. Wurtman served as
the Director of Marketing for TTR Technologies Ltd., an Israel-based software
security company and wholly-owned subsidiary of the publicly owned TTR Inc. Mr.
Wurtman has served as chief executive officer and a director of Delta Three
since May 1, 1996. In May 1995, Mr. Wurtman co-founded Pioneer and has served as
an officer and a director thereof since such date. Since 1994, Mr. Wurtman has
been a managing director of a small equities trading fund in Israel and has been
retained as a consultant in financial consulting and strategic marketing
planning by several technology companies in Israel. Mr. Wurtman served as a
commander in the Israel Defense Forces, including two years as the Commander of
the Allenby Bridge tourist border crossing between Israel and Jordan. Mr.
Wurtman sits on the central committee of Yisrael B'ALIYA, a new Israeli

<PAGE>

<PAGE>
political party, and often serves as a political advisor. Mr. Wurtman holds a
B.A. in political science from Columbia University and a B.A. in Talmud from the
Jewish Theological Seminary.

Dr. George Kaplun has been Senior Electrical Engineer of Ambient Israel
since the Company's inception in June 1996. Dr. Kaplun is a veteran electrical
engineer, with many years of experience in both the academic and development
sectors. His experience includes: designing an IR System for telecommunications
at OPLINK Communication Ltd., in Jerusalem; developing an automatic projection
interface program at RADA Ltd., in Beit Shean; and 15 years as a Docent and
Senior Lecturer, Chief Engineer and Team Manager in the computer science
division for hardware development at the Polytechnic Institute in the former
Soviet Union. Dr. Kaplun has received numerous patents in various electrical
engineering fields and holds a Ph.D. in electronics, as well as a masters of
science degree in electronic engineering from the Tel Aviv University.

Mr. Davidson currently devotes and after the Offering expects to continue
to devote approximately 75% of his time to the business of the Company. Mr.
Weinberg currently devotes approximately 75% and after the Offering expects to
devote 100% of his time to the business of the Company. As a director and the
Secretary, Mr. Wurtman does not currently and after the Offering is not expected
to devote a substantial amount of time to the daily business operations of the
Company. See 'Risk Factors -- Chief Executive Officer Not Full Time; Potential
Conflicts of Interest.'

All directors hold office until the next annual meeting of stockholders and
the election and qualification of their successors. Directors currently do not
receive cash compensation for serving on the Board of Directors. Officers are
elected annually by the Board of Directors and serve at the discretion of the
Board. The Representative may designate a director to the Board during the three
(3) year period commencing on the Effective Date. The Representative has not
identified any director designees and does not intend to exercise this right in
the immediate future.

SPECIAL ADVISOR

The Company consults from time to time with Yuli Kosharovsky, Special
Advisor to the Company, and makes arrangements from time to time with other
smart card design experts to work with the Company's management and the Special
Advisor. The Special Advisor assists management in identifying promising
technology and reviews with management the progress of specific design projects.
Mr. Kosharovsky does not receive a fee for such services, but the Company
reimburses Mr. Kosharovsky for reasonable out-of-pocket expenses incurred in
connection with his assistance to the Company.

Mr. Kosharovsky has been Special Advisor to the Company since June 1996.
Mr. Kosharovsky serves as a private consultant between Russian immigrant
scientists and American business enterprises seeking scientific expertise. Mr.
Kosharovsky holds a masters degree in radio-electronics engineering from the
Ural Polytechnic Institute in Russia and completed post graduate studies in
telemetrical electronics at the Sverdlovsk Scientific Research Institute of
Labor and Professional Diseases in Russia. Mr. Kosharovsky is Chairman of the
Board of Tekol, Ltd., a private consulting firm in Israel. Tekol, Ltd. owns
42,083 shares of Common Stock and has provided certain consulting services to
the Company. See 'Certain Relationships and Related Transactions.'

EXECUTIVE COMPENSATION

The following table sets forth all compensation awarded to, earned by, or
paid for all services rendered to the Company during the Company's fiscal years
ended December 31, 1996 and 1997 by the Company's Chief Executive Officer. No
other executive officers received compensation in excess of $100,000 during such
period.

<PAGE>

<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------------
AWARDS
ANNUAL COMPENSATION --------------------------
------------------------------------------------------------ SECURITIES PAYOUTS
NAME AND OTHER RESTRICTED UNDERLYING --------------
PRINCIPAL POSITION(1) ANNUAL STOCK OPTIONS/ LTIP
(A) YEAR(B) SALARY($)(C) BONUS($)(D) COMPENSATION($)(E) AWARD(S)($)(F) SARS(#)(G) PAY-OUTS($)(H)
- ------------------------ ------- ------------ ----------- ------------------ -------------- ---------- --------------

<S> <C> <C> <C> <C> <C> <C> <C>
Jacob Davidson ......... 1996 $ 40,000(2) -- (1) -- -- --
Chairman of the Board, 1997 $ 61,085(3) -- (1) -- -- --
President and Chief
Executive Officer

<CAPTION>
NAME AND
PRINCIPAL POSITION(1) ALL OTHER
(A) COMPENSATION($)(I)
- ------------------------ ------------------
<S> <C>
Jacob Davidson ......... --
Chairman of the Board, --
President and Chief
Executive Officer
</TABLE>

- ------------

(1) The above compensation figures do not include the cost to the Company of the
use of automobiles leased by the Company, the cost to the Company of
benefits, including premiums for life and health insurance and any other
personal benefits provided by the Company to such persons in connection with
the Company's business.

(2) Consists of $40,000 paid to Mr. Davidson pursuant to a consulting agreement
with Ambient. See 'Employment Agreements' for a description of the
compensation arrangement between the Company and Mr. Davidson. See 'Certain
Relationships and Related Transactions.'

(3) Consists of (i) $50,000 paid to Mr. Davidson pursuant to a consulting
agreement with Ambient; and (ii) $11,085 in salary payments from Ambient
Israel as converted from NIS into United States dollars based on the average
rate of exchange in effect during the period in 1997 that such salary was
earned (approximately NIS 3.5 for every $1.00). See 'Employment Agreements'
for a description of the compensation arrangement between the Company and
Mr. Davidson. See 'Certain Relationships and Related Transactions.'

------------------------

The Company did not grant any options or warrants during 1996 or 1997 to
any of its executive officers. The Company does not have any long-term incentive
plans for compensating its executive officers.

EMPLOYMENT AGREEMENTS

On May 1, 1996, Messrs. Wurtman and Davidson entered into a management
consulting agreement with GTI, which Ambient assumed in August 1996 in
connection with the acquisition of substantially all of GTI's assets. Pursuant
to such agreement, each of Messrs. Wurtman and Davidson earned $90,000 through
October 1997, of which an aggregate of $5,000 has been paid. Effective as of
November 1, 1997, such consulting agreements were terminated by the mutual
consent of Messrs. Davidson and Wurtman and the Company. See 'Certain
Relationships and Related Transactions.'

As of the date of this Prospectus, the Company entered into a two-year
employment agreement with Jacob Davidson as President and Chief Executive
Officer of Ambient Corporation and Ambient Israel, with automatic one-year
renewal periods, unless otherwise terminated in accordance with the terms of the
agreement. The agreement provides for an annual salary of $60,000 and requires
Mr. Davidson to devote at least 75% of his business time to the affairs of the
Company. The agreement may be terminated by the Company for cause, as defined
therein. Upon Mr. Davidson's termination for any reason, other than death,
disability, for cause or as a result of his voluntary resignation, he is
entitled to receive an amount equal to his annual base salary during the year of
termination. The agreement also prohibits Mr. Davidson from disclosing
confidential information and restricts Mr. Davidson during the term of his
employment and for a period of two years after termination, from engaging in a
business in competition with the Company's business and from soliciting
employees of the Company.

As of August 1, 1997, Ambient Israel entered into an employment agreement
with Dr. Yehuda Cern as Chief Technical Officer, which agreement may be
terminated upon six weeks notice after six months of employment and three months
notice after 18 months of employment. The agreement provides for a monthly
salary of NIS 30,000 (subject to adjustment by mandated cost of living increases
in Israel), of which the payment of NIS 10,000 per month is deferred until the
earlier of (i) Ambient

<PAGE>

<PAGE>
Israel's or Ambient's receipt of capital investments of at least $2,000,000 or
(ii) December 1, 1997. Pursuant to the agreement, the Company issued to Dr. Cern
84,167 shares of Common Stock of Ambient, which shares Dr. Cern has agreed to
return to the Company if Dr. Cern terminates his employment prior to August 1,
1998. The agreement also provides that Dr. Cern shall not, for a period of two
years after termination of his employment agreement, accept employment at a
competitor of the Company. In addition, pursuant to an addendum to the
employment agreement, Dr. Cern assigned to Ambient Israel all proprietary
information developed by him or with his help during his employment.

On January 1, 1996, Ambient Israel entered into a one-year employment
agreement with George Kaplun as Senior Electrical Engineer, with automatic
one-year renewal periods, unless otherwise terminated in accordance with the
terms of the Agreement. The agreement provides for a monthly salary of NIS
7,000. The agreement also provides that Dr. Kaplun shall not, for a period of
one year after termination of his employment agreement, accept employment with a
direct competitor of the Company. In addition, under the agreement, Dr. Kaplun
assigned to Ambient Israel all proprietary information developed by him or with
his help during his employment.

1998 STOCK OPTION PLAN

In January 1998, the Board of Directors adopted, and in February 1998 the
stockholders approved, the Company's Incentive & Non-Qualified Stock Option Plan
(the '1998 Plan'). The 1998 Plan provides for the grant to qualified employees
(including officers and directors) of the Company of options to purchase shares
of Common Stock. A total of 250,000 shares of Common Stock have been reserved
for issuance upon exercise of stock options granted under the 1998 Plan. The
1998 Plan is administered by the Board of Directors or a committee of the Board
of Directors (the 'Compensation Committee') whose members are not entitled to
receive options under the Plan (excluding options granted exclusively for
directors fees). The Compensation Committee has complete discretion to select
the optionee and to establish the terms and conditions of each option, subject
to the provisions of the Plan. Options granted under the Plan may or may not be
'incentive stock options' as defined in Section 422 of the Internal Revenue Code
('Incentive Options') depending upon the terms established by the Compensation
Committee at the time of grant, but the exercise price of options granted may
not be less than 100% of the fair market value of the Common Stock as of the
date of grant (110% of the fair market value if the grant is an Incentive Option
to an employee who owns more than 10% of the outstanding Common Stock). Options
may not be exercised more than 10 years after the grant (five years if the grant
is an Incentive Option to any employee who owns more than 10% of the outstanding
Common Stock). Options granted under the Plan are not transferable and may be
exercised only by the respective grantees during their lifetimes or by their
heirs, executors or administrators in the event of death. Under the 1998 Plan,
shares subject to canceled or terminated options are reserved for subsequently
granted options. The number of options outstanding and the exercise price
thereof are subject to adjustment in the case of certain transactions such as
mergers, recapitalizations, stock splits or stock dividends. As of the date of
this Prospectus, the Company has not granted any options under the 1998 Plan.

INDEMNIFICATION

Pursuant to the Company's Amended and Restated Certificate of Incorporation
and By-laws, officers and directors of the Company shall be indemnified by the
Company to the fullest extent allowed under Delaware law for claims brought
against them in their capacities as officers or directors. Indemnification is
not allowed if the officer or director does not act in good faith and in a
manner reasonably believed to be in the best interests of the Company, or if the
officer or director had no reasonable cause to believe his conduct was lawful.
Accordingly, indemnification may occur for liabilities arising under the
Securities Act. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted for directors, officers and controlling persons
of the Company pursuant to the foregoing provisions or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.

<PAGE>

<PAGE>
AGREEMENT WITH FORMER OFFICER OF AMBIENT ISRAEL

In July 1997, the Company terminated the employment of Alexander Rozin as
chief scientist of Ambient Israel. Pursuant to a certain purchase agreement
between GTI and Mr. Rozin dated December 5, 1995 and assumed by the Company in
connection with its purchase of GTI's assets, Mr. Rozin is entitled to receive,
15% of the net profits (as defined in the agreement) from sales of products and
technology by Ambient Israel for an indefinite period of time. In addition, Mr.
Rozin is entitled to receive, until December 2015, royalties of 20% of the
Company's net profits (as defined in the agreement) from sales or licenses of
products predominantly utilizing an electronic data communication system as
described in a certain 1994 patent application which has been abandoned by the
Company; if the Company sells or licenses products wherein the predominant
technology is not the technology, Mr. Rozin is entitled to receive royalties at
a reduced rate to be agreed upon. In addition, the agreement provides that Mr.
Rozin shall be paid royalties of 20% of consideration from any sale or
assignment of such technology (excluding sales or assignments to affiliate
companies) for an indefinite period of time. The Company has not to date
utilized the technology described in the abandoned patent application in the
development of Ambient systems and does not presently intend to do so. Mr. Rozin
owns five percent of the outstanding capital stock of Ambient Israel. See 'Risk
Factors -- Royalty Payments,' ' -- Proprietary Information' and ' -- Legal
Proceedings.'

On November 12, 1997, Mr. Rozin filed suit against Ambient Israel in the
Regional Labor Court for the Jerusalem Region asserting a claim for severance
and vacation pay and certain other benefits aggregating approximately NIS
70,000, not including interest, penalties and attorneys' fees. The Company and
Mr. Rozin have entered into a court approved settlement pursuant to which the
Company has agreed to pay Mr. Rozin approximately NIS 70,000 (approximately
$19,500), subject to Israeli CPI linkage differentials, over a two month period
commencing January 1, 1998. In addition, while not sought in such claim, Mr.
Rozin stated in documents filed with the labor court that he believed certain
officers of Ambient Israel agreed to issue to him an additional 15% of the
shares of Ambient Israel in exchange for Mr. Rozin's waiver of certain royalty
rights from the Company and Ambient Israel. It is unclear whether Mr. Rozin
plans to assert this claim in a separate litigation in an Israeli court of
proper jurisdiction. Management believes that these allegations are without
merit and intends, should it become necessary, to vigorously defend against
these claims.

PRINCIPAL STOCKHOLDERS

The following table sets forth, as of the date of this Prospectus and as
adjusted to reflect the sale of 525,000 shares of Common Stock offered by the
Company hereby, certain information, with respect to the beneficial ownership of
Common Stock by (i) each person known by the Company to be the owner of more
than 5% of the outstanding Common Stock, (ii) each director, (iii) each
executive officer named in the Summary Compensation Table and (iv) all directors
and executive officers as a group:

<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
AMOUNT AND SHARES OWNED
NATURE OF --------------------------
NAME AND ADDRESS BENEFICIAL BEFORE AFTER
OF BENEFICIAL OWNER(1) OWNERSHIP(2) OFFERING(3) OFFERING(4)
- ------------------------------------------------------------------------- ------------ ----------- -----------

<S> <C> <C> <C>
Jacob Davidson(5)........................................................ 233,049 9.5% 7.8%
Dr. Yehuda Cern.......................................................... 84,167 3.4% 2.8%
Aryeh Weinberg........................................................... 20,000 0.8% 0.7%
Elie Wurtman(6).......................................................... 235,646 9.6% 7.9%
Dr. George Kaplun........................................................ 26,933 1.1% 0.9%
Directors and executive officers as a group (5 persons).................. 599,795 24.4% 20.1%
</TABLE>

- ------------

(1) Except as otherwise indicated, the address of each beneficial owner is c/o
Ambient Israel, Jerusalem Technological Park, Building One, Malha,
Jerusalem, Israel.

(2) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them. A

(footnotes continued on next page)

<PAGE>

<PAGE>
(footnotes continued from previous page)
person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date hereof upon the
exercise of warrants or options. Each beneficial owner's percentage
ownership is determined by assuming that options or warrants that are held
by such person (but not those held by any other person) and which are
exercisable within 60 days from the date hereof have been exercised.

(3) Based on 2,459,333 shares outstanding.

(4) Based on 2,984,333 shares outstanding.

(5) Does not include 235,646 shares of Common Stock owned of record by Pioneer
Management Corporation ('Pioneer'), of which Mr. Jacobson is a principal, of
which shares Mr. Davidson disclaims beneficial ownership.

(6) Includes 235,646 shares of Common Stock owned of record by Pioneer. Mr.
Davidson and Mr. Wurtman each own 50% of the outstanding equity and are
directors and officers of Pioneer. Pursuant to an agreement between Mr.
Davidson and Mr. Wurtman, Mr. Wurtman has sole voting and investment control
over the 235,646 shares of Common Stock owned of record by Pioneer and may,
therefore, be deemed to be the beneficial owner of such 235,646 shares of
Common Stock.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On May 1, 1996, Messrs. Wurtman and Davidson entered into a management
consulting agreement with GTI, which Ambient assumed in August 1996 in
connection with the acquisition of substantially all of GTI's assets and
liabilities. Pursuant to such agreement, each of Jacob Davidson, chairman of the
board, president and chief executive officer, and Elie Wurtman, a director and
secretary, earned $5,000 per month, or $90,000 each from May 1, 1996 through
October 1997. These fees were accruing from January 1997 until November 1, 1997,
when such consulting agreements were terminated by the mutual consent of Messrs.
Davidson and Wurtman and the Company, except for an aggregate of $5,000 which
has been paid. The Company remains obligated for the accrued consulting fees
during such period aggregating $95,000.

In August 1996, the Company purchased from GTI substantially all of the
liabilities and assets, properties, business and goodwill of GTI, including the
capital stock of GTI's subsidiary, GenTec Ltd., a corporation organized under
the laws of the State of Israel, for an aggregate purchase price of $1.00. The
negative book value of GTI and Gentec Ltd. at the time of the acquisition was
$(83,674). After the acquisition, the Company changed the name of its subsidiary
from GenTec, Ltd to Ambient, Ltd. Mr. Davidson is chief executive officer and a
principal stockholder of GTI. GTI has not conducted any substantial business
operations since its sale to the Company of substantially all of its assets in
August 1996.

In November 1996, the Company entered into a six-month consulting agreement
with Tekol, Ltd. ('Tekol'). Pursuant to this consulting agreement, Tekol managed
the Company's research and development operations and oversaw the Company's
government funding applications in return for $1,000 per month. Tekol also
received 42,083 shares of Common Stock and a $6,000 fee for meeting certain
designated funding targets set forth in the agreement. All of the outstanding
capital stock of Tekol is owned by the Special Advisor to the Company. See
'Management.'

As of October 1, 1997, the Company has rented from Wolf Haldenstein Adler
Freeman & Herz, on a month-to-month basis, a small office in New York City for
$700 per month. Mr. Davidson's father-in-law is a partner at Wolf Haldenstein
Adler Freeman & Herz. Prior thereto, the Company subleased such space from
Pioneer, the rent for which has been forgiven by Pioneer. Mr. Wurtman and Mr.
Davidson own all of the outstanding equity and are directors and officers of
Pioneer. See 'Principal Stockholders.'

In September 1997, Mr. Davidson and Mr. Wurtman loaned the Company an
aggregate of $25,781, at no interest, of which $12,042 has been repaid through
October 1997. The Company used the proceeds from such loans for general working
capital purposes. See 'Use of Proceeds.'

<PAGE>

<PAGE>
Since January 1997, Ambient Israel has shared office space and resources,
including personnel and equipment, with Delta Three pursuant to an arrangement
whereby Ambient Israel has paid all of the rent, office expenses and salaries of
the shared employees. Pursuant to an agreement, in December 1997, Delta Three
reimbursed the Company for such costs for the 11 months ended November 30, 1997,
in the aggregate amount of approximately NIS 90,000. Mr. Wurtman is chief
executive officer and a director and Mr. Davidson is a director of Delta Three,
and each is, directly or indirectly, a minority stockholder of Delta Three. The
Company intends to invoice Delta Three for the month of December 1997. As of
January 1, 1998, Ambient Israel and Delta Three entered into a cooperation
agreement (the 'Cooperation Agreement') pursuant to which the entities have
agreed to share the expenses of resources, rent and shared employees based on
their proportionate uses. On or about March 1, 1998, Ambient Israel intends to
move to new offices. Under the Cooperation Agreement, it is intended that such
new office space will be leased by Delta Three, which will sublease a portion of
such space to Ambient Israel for an initial term of two years at the prevailing
monthly rental rate of $7,800 (including rent, utilities, computer network,
security and cleaning service), linked to Israeli CPI. The Cooperation Agreement
also provides for the Company to reimburse Delta Three for 30% of phone and fax
expense and 50% of the cost of accounting services plus $50 per month through
June 1998 and for Delta Three to reimburse the Company for 25% of its costs of
rent and other office services through February 28, 1998. The Cooperation
Agreement has a term of one year and is automatically renewable for additional
one year periods, provided that the amounts of reimbursements and the services
to be provided thereunder are subject to negotiation by the parties, in general,
every six months or at otherwise specified dates provided therein. See
'Business -- Property.'

In August 1997, the Company issued to Yehuda Cern, the Company's Chief
Technical Officer, 84,167 shares of Common Stock in consideration of Dr. Cern's
services to the Company.

For a description of certain employment agreements, see 'Management.'

All future transactions between the Company and its affiliates will be on
terms no less favorable to the Company than the Company could obtain from
non-affiliated third parties.

DESCRIPTION OF SECURITIES

COMMON STOCK

The Company is authorized to issue 20,000,000 shares of Common Stock, $.001
par value per share, of which 2,459,333 shares are currently outstanding.
Holders of shares of Common Stock are entitled to one vote for each share held
of record on all matters to be voted on by stockholders. There are no
preemptive, subscription, conversion or redemption rights pertaining to the
shares of Common Stock. Holders of shares of Common Stock are entitled to
receive dividends when, as and if declared by the Board of Directors from funds
legally available therefor and to share ratably in the assets of the Company
available upon liquidation, dissolution or winding up. The holders of shares of
Common Stock do not have cumulative voting rights for the election of directors
and, accordingly, the holders of more than 50% of the shares of Common Stock are
able to elect all directors. All of the outstanding shares of Common Stock are,
and the Common Stock offered hereby, upon issuance and when paid for, will be
duly authorized, validly issued, fully paid and non-assessable. The Company has
agreed not to issue any shares of its capital stock for a period of 24 months
from the date hereof without the prior written consent of the Representative.

PREFERRED STOCK

The Amended and Restated Certificate of Incorporation authorizes the
issuance of 5,000,000 shares of Preferred Stock, $.001 par value per share, in
one or more series, with each series to have such designations, rights and
preferences as may be determined from time to time by the Board of Directors.
Accordingly, the Board of Directors is empowered, without stockholder approval,
to issue Preferred Stock with dividend, liquidation, conversion, voting or other
rights which could adversely affect the voting power or other rights of the
holders of the Common Stock. In addition, the Preferred Stock could be utilized,
under certain circumstances, as a method of discouraging, delaying or preventing
a change in control of the Company. Although the Company does not have any
current intentions to issue

<PAGE>

<PAGE>
any shares of Preferred Stock, there can be no assurance that the Company will
not do so in the future. The Company has agreed not to issue any shares of its
capital stock for a period of 24 months from the date hereof without the prior
written consent of the Representative.

PRIOR FINANCING

In August 1996, Ambient purchased from GTI substantially all of the
liabilities and assets, properties, business and goodwill of GTI for an
aggregate purchase price of $1.00. Prior to such acquisition, in December 1995,
GTI issued to an investment fund a promissory note in the aggregate principal
amount of $968,000, bearing interest at 10% per annum, and 650,000 shares of
common stock of GTI (the 'Debt Financing'). As part of Ambient's acquisition of
GTI, Ambient assumed the promissory note issued in the Debt Financing. In
addition, the 650,000 shares of common stock of GTI were cancelled and Ambient
issued, in their place, 650,000 shares of Common Stock of Ambient. In connection
with the Debt Financing, Ephod Management received a consulting fee of $66,064
and a commission in the amount of $96,800. The Company used the net proceeds
from the Debt Financing that it received in connection with the acquisition of
GTI for research and development activities, employee salaries and other
operating expenses. The principal and accrued interest on the promissory note is
due and payable in December 1998. The Company intends to use $968,000 of the net
proceeds of this Offering to pay the principal on the notes issued in the Debt
Financing. See 'Risk Factors -- Shares Eligible For Future Sale,' 'Use of
Proceeds,' and 'Certain Relationships and Related Transactions.'

RECENT FINANCING

In September and October 1997, the Company sold in a private offering (the
'1997 Private Placement') 13.3 units ('Units'), each Unit consisting of a
promissory note in the principal amount of $30,000 bearing interest at 7% per
annum and 6,000 shares of Common Stock, at a purchase price of $30,000 per Unit.
The principal and accrued interest on such notes are due the earlier of March
1999, with respect to $300,000 of the notes, and April 1999, with respect to
$100,000 of the notes, or the Company's consummation of an initial public
offering. The gross proceeds from the 1997 Private Placement amounted to
$400,000. The Company paid commissions (10%) and a non-accountable expense
allowance (3%) in the aggregate amount of approximately $52,000 to the
Representative. The Company intends to use approximately $404,600 of the net
proceeds of this Offering to pay the principal and estimated accrued interest on
the notes. See 'Risk Factors -- Shares Eligible For Future Sale' and 'Use of
Proceeds.'

LIMITATIONS UPON TRANSACTIONS WITH 'INTERESTED STOCKHOLDERS'

Section 203 of the Delaware General Corporation Law prohibits a publicly
held Delaware corporation from engaging in a 'business combination' with an
'interested stockholder' for a period of three years after the date of the
transaction in which the person became an interested stockholder unless (i)
prior to the date of the business combination, the transaction is approved by
the board of directors of the corporation, (ii) upon consummation of the
transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owns at least 85% of the outstanding
voting stock, or (iii) on or after such date the business combination is
approved by the board of directors and by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder. A 'business combination' includes mergers, asset sales and other
transactions resulting in a financial benefit to the stockholder. An 'interested
stockholder' is a person who, together with affiliates and associates, owns (or
within three years, did own), 15% or more of the corporation's voting stock. The
restrictions of Section 203 do not apply, among other things, if a corporation,
by action of its stockholders, adopts an amendment to its certificate of
incorporation or by-laws expressly electing not to be governed by Section 203,
provided that, in addition to any other vote required by law, such amendment to
the certificate of incorporation or by-laws must be approved by the affirmative
vote of a majority of the shares entitled to vote. Moreover, an amendment so
adopted is not effective until twelve months after its adoption and does not
apply to any business combination between the corporation and any person who
became an interested stockholder of such corporation on or prior to such
adoption. The Company's Certificate of Incorporation and By-laws do not
currently contain any

<PAGE>

<PAGE>
provisions electing not to be governed by Section 203 of the Delaware General
Corporation Law. The provisions of Section 203 of the Delaware General
Corporation Law may have a depressive effect on the market price of the Common
Stock because they could impede any merger, consolidating takeover or other
business combination involving the Company or discourage a potential acquiror or
from making a tender offer or otherwise attempting to obtain control of the
Company.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company, 40 Wall Street, New York, New York.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have 2,984,333 shares of
Common Stock outstanding. Of the Common Stock to be issued and outstanding after
the Offering, the 525,000 shares of Common Stock sold in the Offering will be
freely tradeable without restriction or further registration under the
Securities Act, except for any shares purchased by an 'affiliate' of the Company
within the meaning of Rule 144 under the Securities Act ('Rule 144'). The
remaining 2,459,333 outstanding shares of Common Stock are 'restricted
securities,' as that term is defined under Rule 144, and may not be sold in the
absence of registration under the Securities Act unless an exemption from
registration is available, including the exemption provided by Rule 144. Of such
shares, 2,249,166 will be eligible for sale under Rule 144 commencing 90 days
after the consummation of the Offering, 84,167 shares will be eligible for
resale under Rule 144 commencing August 1998, 66,000 shares will be eligible for
resale under Rule 144 commencing September 1998, 20,000 shares will be eligible
for resale under Rule 144 commencing October 1998 and 40,000 shares will be
eligible for resale under Rule 144 commencing November 1998. However, all of the
Company's officers, directors and shareholders holding 2,183,333 shares have
agreed not to sell, assign or transfer their shares for a period of 18 months
from the date of this Prospectus without the express written consent of the
Representative. Holders of 107,500 shares and holders of 97,500 shares have
agreed not to sell, assign or transfer their shares for a period of six and 12
months, respectively, from the date of this Prospectus without the express
written consent of the Representative. No prediction can be made as to the
effect that future sales of Common Stock, or the availability of shares of
Common Stock for future sales, will have on the market price of the Common Stock
prevailing from time to time. Sales of substantial amounts of Common Stock, or
the perception that such sales could occur, could adversely affect prevailing
market prices for the Common Stock and could impair the Company's ability to
raise capital through the future sale of its equity securities. See 'Risk
Factors -- Shares Eligible for Future Sale' and 'Principal Stockholders.'

In general, under Rule 144, as currently in effect, a person, including an
'affiliate' of the Company as defined under the Securities Act, (or persons
whose shares are aggregated), who for at least one year has beneficially owned
restricted securities acquired directly or indirectly from the Company or an
affiliate of the Company in a private transaction, is entitled to sell, within
any three-month period, a number of shares that does not exceed the greater of
1% of the total number of outstanding shares of the same class or the average
weekly trading volume during the four calendar weeks preceding the day notice is
given to the Securities and Exchange Commission with respect to such sale. A
person (or persons whose shares are aggregated) who is not an affiliate and has
not been an affiliate of the Company at any time during the three months
immediately preceding the sale and who has beneficially owned shares of Common
Stock for at least two years is entitled to sell such shares pursuant to
subparagraph (k) of Rule 144 without regard to the volume limitations described
above.

Prior to this Offering, there has been no public trading market for the
Common Stock, and there can be no assurance that a regular trading market will
develop after the Offering, or that if developed, that it will be sustained. In
addition, no prediction can be made as to the effect, if any, that any market
sales of Common Stock or the availability of such shares for sale will have on
the market prices prevailing from time to time. Nevertheless, the possibility
that substantial amounts of shares of Common Stock may be sold in the public
market may adversely affect prevailing market prices for the Common Stock and
could impair the Company's ability to raise capital through the sale of its
equity securities.

<PAGE>

<PAGE>
UNDERWRITING

The Underwriters named below, for whom Roan Capital Partners L.P. is acting
as Representative, have severally agreed, subject to the terms and conditions of
an underwriting agreement (the 'Underwriting Agreement'), to purchase on a 'firm
commitment' basis the respective number of shares of Common Stock set forth
opposite their names below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------------------------------------------------------------------------------- ---------

<S> <C>
Roan Capital Partners L.P. ........................................................ 425,000
First Metropolitan Securities, Inc................................................. 100,000
---------
Total.................................................................... 525,000
---------
---------
</TABLE>

The Shares offered hereby are being offered by the Underwriters, when, as
and if delivered to and accepted by the Underwriters and subject to certain
other conditions. The Representative reserves the right to withdraw, cancel or
modify the Offering and to reject any order in whole or in part.

The Representative has advised the Company that the Underwriters propose to
offer the Shares to the public at the initial public offering price as set forth
on the cover page of this Prospectus and that it may allow to certain dealers
who are NASD members concessions not to exceed $.40 per Share of which not in
excess of $.40 per Share may be reallowed to other dealers who are members of
the NASD. After the Offering, the public offering price, concession and
reallowance may be changed by the Representative.

The Company has granted an option to the Underwriters, exercisable during
the forty-five (45) day period from the date of this Prospectus, to purchase up
to a maximum of 78,750 additional Shares of Common Stock at the initial public
offering price, less the underwriting discount, to cover over-allotments, if
any.

The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriters against certain liabilities in connection with
the Registration Statement, including liabilities arising under the Securities
Act. Insofar as indemnification for liabilities arising under the Securities Act
may be provided to officers, directors or persons controlling the Company, the
Company has been informed that in the opinion of the Commission, such
indemnification is against public policy and is therefore unenforceable.

The Company has agreed to pay to the Representative a non-accountable
expense allowance equal to three percent (3%) of the gross proceeds derived from
the sale of the Shares offered hereby, including any Shares purchased pursuant
to the Over-allotment Option.

The Company has agreed to sell to the Underwriters, or to their designees,
for an aggregate purchase price of $52.50, warrants (the 'Underwriters'
Warrants') to purchase up to an aggregate of 52,500 Shares of Common Stock. The
Underwriters' Warrants shall be exercisable during a four (4) year period
commencing one (1) year from the Effective Date. The Underwriters' Warrants may
not be assigned, transferred, sold or hypothecated by the Underwriters until
twelve (12) months after the Effective Date, except to officers of the
Underwriters or to officers and partners of the selling group members in this
Offering. The Underwriters' Warrants grant to the holders thereof certain
piggyback and demand registration rights for a period of five years from the
Effective Date. The Underwriters' Warrants are exercisable at 165% of the
initial public offering price of the Shares. The exercise of the Underwriters'
Warrants and the number of shares of Common Stock covered thereby are subject to
adjustment in certain events to prevent dilution.

Pursuant to the Underwriting Agreement, the Company has agreed not to issue
shares of its capital stock or options, warrants or other securities convertible
into shares of its capital stock (other than shares issuable upon exercise of
options to be granted under the 1998 Plan) for a period of 24 months from the
date of this Prospectus without the prior written consent of the Representative.
In addition, the Company's officers, directors and shareholders holding
2,183,333 shares have agreed not to sell, assign or transfer any of the Shares
held by them without the Representative's prior written consent for a period of
18 months from the date of this Prospectus. Holders of 107,500 shares and
holders of 97,500

<PAGE>

<PAGE>
shares have agreed not to sell, assign or transfer their shares for a period of
six and 12 months, respectively, from the date of this Prospectus without the
express written consent of the Representative.

The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934, as amended. Over-allotment involves
syndicate sales in excess of the offering size, which creates a syndicate short
position. Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a specific maximum.
Syndicate covering transactions involve purchases of the Company's securities in
the open market after the distribution has been completed in order to cover
syndicate short positions. Penalty bids permit the Underwriters to reclaim a
selling concession from a syndicate member when the securities originally sold
by such syndicate member are purchased in a syndicate covering transaction to
cover syndicate short positions. Such stabilizing transactions, syndicate
covering transactions and penalty bids may cause the price of the securities to
be higher than they would otherwise be in the absence of such transactions.

The Representative may designate a director to the Board during the three
(3) year period commencing on the Effective Date. The Representative has not
identified any director designees and does not intend to exercise this right in
the immediate future.

The Underwriters have informed the Company that no sales will be made to
any account over which the Underwriters exercise discretionary authority.

The foregoing is a summary of certain provisions of the Underwriting
Agreement and the Underwriters' Warrants which have been filed as exhibits
hereto.

As part of the Underwriting Agreement, the Company will enter into a
two-year financial consulting agreement with the Representative commencing as of
the Effective Date for an aggregate fee of $100,000, payable in full upon the
consummation of the Offering.

Prior to the Offering, there has been no public market for the Shares. The
initial public offering price of the Shares has been determined by negotiations
between the Company and the Representative. Among the factors considered in the
negotiations were areas of activity in which the Company is engaged, the present
state of the Company's business, the Company's financial condition, the
Company's prospects, an assessment of management, and the general condition of
the securities market at the time of this Offering. The public offering price of
the Shares does not necessarily bear any relationship to the assets, earnings,
book value or any other criteria of value applicable to the Company.

The Company has been advised that the Common Stock will be quoted on the
OTC Bulletin Board under the symbol 'ABTG,' but there can be no assurance that
an active trading market will develop, or if developed, be sustained. The
Underwriters intend to make a market in all of the publicly-traded securities of
the Company. See 'Risk Factors -- Representative's Limited Underwriting
Experience.'

The Representative has been actively engaged in the securities brokerage
and investment banking business since 1994. However, the Representative has
engaged in only limited underwriting activities, and this Offering is only the
second public offering in which the Representative has acted as the sole or
managing underwriter. The Representative has limited experience acting as a
member of a syndicate in underwritten offerings. There can be no assurance that
the Representative's limited experience as an underwriter of public offerings
will not adversely affect the proposed public offering of the Shares or the
subsequent development of a trading market for the Company's securities.
Therefore, purchasers of the securities offered hereby may suffer a lack of
liquidity in their investment or a material diminution of the value of their
investment. See 'Risk Factors -- Representative's Limited Underwriting
Experience.'

LEGAL MATTERS

The legality of the securities offered by this Prospectus will be passed
upon for the Company by Baer Marks & Upham LLP, New York, New York. In addition,
certain other matters in connection with this Offering with respect to Israeli
law will be passed upon for the Company by Ephraim Abramson & Company. Certain
legal matters will be passed upon for the Representative by Bernstein &
Wasserman, LLP, New York, New York.

<PAGE>

<PAGE>
EXPERTS

The audited consolidated financial statements of Ambient Corporation for
the fiscal year ended December 31, 1996 included in this Prospectus and
elsewhere in the Registration Statement have been audited by Luboshitz, Kasierer
& Co., Member Firm of Andersen Worldwide, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to said report which includes an explanatory fourth paragraph
with respect to the Company's ability to continue as a going concern.

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
'Commission') a Registration Statement on Form SB-2 including all amendments
thereto (the 'Registration Statement') under the Securities Act with respect to
the Securities offered by this Prospectus. This Prospectus does not contain all
of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulation of the Commission.
For further information with respect to the Company and the Offering, reference
is made to the Registration Statement, including the exhibits filed therewith.
The Registration Statement may be inspected and copies may be obtained from the
Public Reference Section at the Commission's principal office, located at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the regional offices of the Commission located at the Chicago Regional Office,
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60611, and the Northeast Regional Office, Seven World Trade Center,
Suite 1300, New York, New York 10048, upon payment of the fees prescribed by the
Commission. The Registration Statement has been filed electronically with the
Commission. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission, at http://www.sec.gov. Statements contained
in this Prospectus as to the contents of any contract or other document are not
necessarily complete and where the contract or other document has been filed as
an exhibit to the Registration Statement, each such statement is qualified in
all respects by such reference to the applicable document filed with the
Commission.

<PAGE>

<PAGE>
AMBIENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)

CONTENTS

<TABLE>
<CAPTION>
PAGE
--------

<S> <C>
Report of Independent Public Accountants............................................................... F-2
Consolidated Financial Statements
Consolidated Balance Sheet........................................................................ F-3
Consolidated Statement of Operations.............................................................. F-4
Consolidated Statement of Changes in Shareholders' Deficiency..................................... F-5
Consolidated Statement of Cash Flows.............................................................. F-6
Notes to the Consolidated Financial Statements.................................................... F-7 - F-9
</TABLE>

F-1

<PAGE>

<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of
AMBIENT CORPORATION

We have audited the accompanying consolidated balance sheet of Ambient
Corporation (a development stage company) and subsidiary as of December 31,
1996, and the related consolidated statement of operations, changes in
shareholders' deficiency and cash flows for the year ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.

We conducted our audit in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Ambient Corporation and subsidiary as of December 31, 1996, and the results of
their operations and their cash flows for the year ended December 31, 1996, in
conformity with accounting principles generally accepted in the United States.

As discussed in Note 1 to the consolidated finical statements, the Company
is in the development stage and its continued existence is dependent on
obtaining additional financing for product development and commercialization.
The Company incurred a net loss in 1996 and anticipates that it will continue to
incur losses for some time. These matters raise substantial doubt about the
Company's ability to continue as a going concern. The accompanying financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and classification of
liabilities that might be necessary should the Company be unable to continue as
a going concern.

LUBOSHITZ, KASIERER & CO.
Member Firm of Andersen Worldwide

Tel-Aviv, May 8, 1997

F-2

<PAGE>

<PAGE>
AMBIENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
DECEMBER 31,
NOTE 1996
---- ------------

<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.............................................................. $ 104,322
Restricted cash........................................................................ (3) 30,000
Receivables and prepaid expenses....................................................... 36,232
Due from shareholders.................................................................. 2,229
------------
Total current assets.............................................................. 172,783
------------
Property and Equipment...................................................................... (4)
Cost................................................................................... 193,590
Less -- accumulated depreciation....................................................... 19,166
------------
174,424
------------
Deposits for Severance Pay.................................................................. (7) 8,927
------------
Total assets................................................................. $ 356,134
------------
------------

LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current Liabilities:
Current maturities of long-term bank loan.............................................. $ 12,565
Accounts payable....................................................................... 20,324
Other current liabilities.............................................................. (5) 59,354
------------
Total current liabilities......................................................... 92,243
------------
Long-Term Liabilities:
Loans from shareholders................................................................ (6) 936,041
Loan from bank......................................................................... 6,283
Accrued severance pay.................................................................. (7) 13,333
------------
Total long-term liabilities....................................................... 955,657
------------
Total liabilities................................................................. 1,047,900
------------
Shareholders' Deficiency:
Common stock of $0.001 par value; authorized 20,000,000 shares; issued and outstanding
2,229,166 shares...................................................................... (9) 2,229
Deficit accumulated during the development stage....................................... (693,995)
------------
Total shareholders' deficiency.................................................... (691,766)
------------
Total liabilities and shareholders' deficiency............................... $ 356,134
------------
------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-3

<PAGE>

<PAGE>
AMBIENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1996
------------------

<S> <C>
Research and development expenses............................................................ $ 244,466
Less -- participation by the Chief Scientist of the State of Israel (Note 10)................ 95,976
------------------
148,490
------------------
Operating, general and administrative expenses............................................... 434,735
------------------
Operating loss.......................................................................... 583,225
Financing expenses, net...................................................................... 110,770
------------------
Net loss................................................................................ $ (693,995)
------------------
------------------
Net loss per share........................................................................... $(0.32)
------------------
------------------

Weighted average number of shares outstanding................................................ 2,156,548
------------------
------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-4

<PAGE>

<PAGE>
AMBIENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIENCY

<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
DURING THE
NUMBER SHARE DEVELOPMENT
OF SHARES CAPITAL STAGE TOTAL
--------- ------- ----------- ---------

<S> <C> <C> <C> <C>
Issuance of common stock on formation.......................... 2,028,833 $ 2,029 $ -- $ 2,029
Issuance of common stock in September 1996..................... 5,000 5 -- 5
Issuance of common stock in October 1996....................... 195,333 195 -- 195
Net loss for the year ended December 31, 1996.................. -- -- (693,995) (693,995)
--------- ------- ----------- ---------
Balance as of December 31, 1996................................ 2,229,166 $ 2,229 $(693,995) $(691,766)
--------- ------- ----------- ---------
--------- ------- ----------- ---------
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-5

<PAGE>

<PAGE>
AMBIENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1996
------------------

<S> <C>
Cash flows from operating activities
Net loss................................................................................ $ (693,995)
Adjustments to reconcile net loss to net cash used in operating activities.............. --
Items not involving cash flows:
Depreciation.................................................................. 19,166
Accrued interest on loans from shareholders................................... 51,441
Severance pay, net............................................................ 4,406
Changes in operating assets and liabilities:
Increase in receivables and prepaid expenses.................................. (36,232)
Increase in accounts payable.................................................. 20,324
Increase in other current liabilities......................................... 59,354
------------------
Net cash used in operating activities.................................... (575,536)
------------------
Cash flows from investing activities
Purchase of property and equipment...................................................... (193,590)
Restricted cash......................................................................... (30,000)
------------------
Net cash used in investing activities.................................... (223,590)
------------------
Cash flows from financing activities
Receipt of loans from shareholders, net................................................. 884,600
Receipt of loan from bank............................................................... 18,848
------------------
Net cash provided by financing activities................................ 903,448
------------------
Net increase in cash and cash equivalents.................................................... 104,322
Cash and cash equivalents beginning of period................................................ --
------------------
Cash and cash equivalents end of period...................................................... $ 104,322
------------------
------------------
Interest paid................................................................................ $ 1,428
------------------
------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-6

<PAGE>

<PAGE>
AMBIENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- GENERAL

A. Ambient Corporation (the 'Company'), a development stage company, was
founded in June 1996 to design and develop advanced smart card interface
technology. A smart card is a credit card-sized plastic card equipped with an
integrated circuit that can store and transfer information in electronic form.
The Company has not generated revenues. In December 1997, the Company commenced
the installation of smart card terminals at a public school in Israel where the
Company plans to launch its first pilot project to demonstrate its technology.

In August 1996, the Company purchased substantially all of the assets and
liabilities of Gen Technologies, Inc. ('GTI'), a smart card research and
development company, at their approximate book value, including the capital
stock of GenTec Ltd., the subsidiary. The financial statements include the
activities of GTI, since January 1996. GTI was incorporated in September 1995
but did not commence operations until January 1996. In November 1996, the
Company changed the name of its subsidiary to Ambient Ltd.

The Company incurred a net loss in 1996 and anticipates that it will
continue to incur losses for some time. The Company's continued existence is
dependent on obtaining additional financing for product development and
commercialization from its shareholders and outside sources. These 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. The Company intends
to raise additional capital through a private placement and an initial public
offering in 1997. In addition, the Company is applying to receive additional
funding for its research and development from the chief scientist of the
government of Israel.

B. The accompanying consolidated financial statements have been prepared in
U.S. dollars, as the currency of the primary's economic environment in which the
operations of the Company and its subsidiary are conducted is the U.S. dollar.

Transactions and balances originally denominated in U.S. dollars are
presented at their original amounts. Transactions and balances in other
currencies are remeasured into U.S. dollars in accordance with the principles
identical to those set forth in Statement No. 52 of the Financial Accounting
Standards Board of the United States ('FASB'), as follows:

Monetary items -- at the current exchange rate at balance sheet date.

Nonmonetary items -- at historical exchange rates.

Income and expenditure items -- at exchange rates current as of date
of recognition of those items (excluding depreciation and other items
deriving from nonmonetary items).

C. The preparation of consolidated 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 expenses during the reporting period.
Actual results could differ from those estimates.

NOTE 2 -- ACCOUNTING POLICIES

The consolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United States. The significant
accounting policies followed in the preparation of the financial statements are:

A. CASH AND CASH EQUIVALENTS

All highly liquid investments with an original maturity of three months or
less are considered cash equivalents.

F-7

<PAGE>

<PAGE>
AMBIENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

B. PROPERTY AND EQUIPMENT

These assets are presented at cost. Depreciation is calculated by the
straight-line method over the estimated useful lives of the assets, ranging as
follows:

<TABLE>
<CAPTION>
YEAR
---

<S> <C>
Furniture and office equipment................................................. 14 mainly)
Machinery and equipment........................................................ 7
Motor vehicles................................................................. 7
Leasehold improvements......................................................... 5
Computers...................................................................... 4
</TABLE>

C. LOSS PER SHARE

Loss per share is computed based on the weighted average number of ordinary
shares outstanding during the period. Retroactive recognition has been given in
the calculation of loss per share, using the treasury stock method, to shares
granted in the twelve-month period preceding the Company's initial public
offering for consideration below the initial public offering price per Ordinary
share, although the effect is antidilutive.

NOTE 3 -- RESTRICTED CASH

The Company has a $30,000 line of credit from a bank in Israel for which
the Company agreed to maintain a compensating balance of $30,000 which is
restricted for a period of up to one year. As of December 31, 1996 the amount of
credit utilized was not material.

NOTE 4 -- PROPERTY AND EQUIPMENT

<TABLE>
<S> <C>
Computers............................................................... $ 45,306
Machinery and equipment................................................. 45,500
Furniture and office equipment.......................................... 37,255
Leasehold improvements.................................................. 32,930
Motor vehicle(*)........................................................ 32,599
--------
193,590
Less -- accumulated depreciation........................................ 19,166
--------
Net book value.......................................................... $174,424
--------
--------
</TABLE>

- ------------

* Motor vehicle is pledged as collateral for a bank loan.

NOTE 5 -- OTHER CURRENT LIABILITIES

<TABLE>
<S> <C>
Accrued salaries and related expenses.................................... $23,354
Accrued expenses and others.............................................. 36,000
-------
$59,354
-------
-------
</TABLE>

NOTE 6 -- LOANS FROM SHAREHOLDERS

Loans received from shareholders bear interest of 10% per annum and mature
on December 1, 1998. The loan balance includes accrued interest amounting to
$51,441. Upon receipt of the loan, the Company was charged a commission of
$96,800, which is amortized over the expected loan repayment period (unamortized
balance at December 31, 1996 -- $48,400).

F-8

<PAGE>

<PAGE>
AMBIENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 7 -- SEVERANCE PAY

The Company's liability for severance pay to its employees is principally
covered by monthly deposits with a severance pay fund. The balance of the
Company's liability for severance pay, in excess of the amounts funded, is
reflected in the accrual for severance pay.

NOTE 8 -- COMMITMENTS AND CONTINGENCIES

A. In connection with its research and development, the Company received
participation payments from the Office of the Chief Scientist of the Government
of Israel in the total amount of $95,976 in 1996. In return for the
participation, the Company is committed to pay royalties at a rate of 3% - 5% of
sales of the developed product, up to 100% of the amount of grants received.

B. The Company is committed to pay a shareholder of the subsidiary
royalties, in connection with technology transferred by him to the Company, at
rates of 15% - 20% of net sales less the cost of components as defined in an
agreement with the shareholder.

C. Ambient Israel currently leases office space in Jerusalem. Pursuant to
certain provisions of the lease, if Ambient Israel does not receive from the
Israeli government 'Approved Enterprise' status, the Company will be subject to
additional retroactive payments for the period from April 1, 1996 through the
date of such rejection, as well as an increase in the rental fee. The amount is
expected to be immaterial.

NOTE 9 -- SHARE CAPITAL

Authorized share capital -- 20,000,000 shares of common stock, $0.001 par
value per share, and 5,000,000 shares of preferred stock, $0.001 par value per
share. Issued and outstanding -- 2,229,166 shares of common stock, $0.001 par
value per share. The outstanding shares include 158,250 shares issued to
employees of the Company.

NOTE 10 -- TAXES ON INCOME

Carryforward losses for tax purposes approximate reported losses. Due to
the uncertainty of realizing the benefit of the loss carryforwards, a valuation
allowance for the related deferred tax assets has been recorded.

The Company's subsidiary in Israel is subject to the Income Tax Law
(Inflationary Adjustments), 1985, measuring income on the basis of changes in
the Israeli Consumer Price Index.

NOTE 11 -- TRANSACTIONS WITH RELATED PARTIES

Transactions with related parties for the period ended December 31, 1996,
are as follows:

<TABLE>
<S> <C>
Consulting fees......................................................... $164,863
Rent.................................................................... $ 9,600
</TABLE>

F-9

<PAGE>

<PAGE>
AMBIENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)

CONTENTS

<TABLE>
<CAPTION>
PAGE
----

<S> <C>
Condensed Interim Consolidated Financial Statements (unaudited)
Consolidated Balance Sheet............................................................................ F-11
Consolidated Statements of Operations................................................................. F-12
Consolidated Statements of Changes in Shareholders' Deficiency........................................ F-13
Consolidated Statements of Cash Flows................................................................. F-14
Notes to the Interim Consolidated Financial Statements................................................ F-15
</TABLE>

F-10

<PAGE>

<PAGE>
AMBIENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
-------------
(UNAUDITED)

<S> <C>
ASSETS
Current assets
Cash and cash equivalents..................................................................... $ 98,922
Restricted cash............................................................................... 30,000
Receivables and prepaid expenses.............................................................. 25,058
-------------
Total current assets..................................................................... 153,980
-------------
Property and equipment
Cost.......................................................................................... 222,291
Less -- accumulated depreciation.............................................................. 46,971
-------------
175,320
-------------
Deposits for severance pay......................................................................... 9,532
Debt issuance costs................................................................................ 240,000
-------------
Total assets............................................................................. $ 578,832
-------------
-------------

LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities
Current maturities of long-term bank loan..................................................... $ 9,132
Accounts payable.............................................................................. 59,186
Short-term loans from related parties......................................................... 25,781
Other current liabilities..................................................................... 152,586
-------------
Total current liabilities................................................................ 246,685
-------------
Long-term liabilities
Loans from shareholders....................................................................... 1,079,641
Long-term loan (Note 2)....................................................................... 122,400
Long-term notes (Note 3)...................................................................... 300,000
Severance pay................................................................................. 19,939
-------------
Total long-term liabilities.............................................................. 1,521,980
-------------
Total liabilities........................................................................ 1,768,665
-------------
Shareholders' deficiency
Common stock of $0.001 par value -- authorized 20,000,000 shares; issued and outstanding
2,399,333 shares............................................................................. 2,399
Additional paid in capital.................................................................... 650,602
Deferred compensation......................................................................... (305,557)
Deficit accumulated during the development stage.............................................. (1,537,277)
-------------
Total shareholders' deficiency........................................................... (1,189,833)
-------------
Total liabilities and shareholders' deficiency........................................... $ 578,832
-------------
-------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-11

<PAGE>

<PAGE>
AMBIENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED CUMULATIVE FROM
SEPTEMBER 30, INCEPTION UNTIL
--------------------------- SEPTEMBER 30,
1997 1996 1997
----------- --------- ---------------
(UNAUDITED) (UNAUDITED)

<S> <C> <C> <C>
Research and development expenses........................ $ 245,820 $ 165,819 $ 490,286
Less -- Participation by the Chief Scientist of the State
of Israel.............................................. -- 25,229 95,976
----------- --------- ---------------
245,820 140,590 394,310
----------- --------- ---------------
Operating, general and administrative expenses........... 488,103 368,327 922,838
----------- --------- ---------------
Operating loss...................................... (733,923) (508,917) (1,317,148)
----------- --------- ---------------
Financing expenses, net.................................. 109,359 47,949 220,129
----------- --------- ---------------
Net loss............................................ $(843,282) $(556,866) $(1,537,277)
----------- --------- ---------------
----------- --------- ---------------
Net loss per share....................................... $(0.36) $(0.27)
----------- ---------
----------- ---------
Weighted average number of shares outstanding............ 2,358,959 2,029,389
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-12

<PAGE>

<PAGE>
AMBIENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIENCY
(UNAUDITED)

<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
ADDITIONAL DURING THE
NUMBER OF SHARE PAID IN DEFERRED DEVELOPMENT
SHARES CAPITAL CAPITAL COMPENSATION STAGE TOTAL
--------- ------- ---------- ------------ ----------- -----------

<S> <C> <C> <C> <C> <C> <C>
Balance as of January 1, 1997.... 2,229,166 $ 2,229 $ -- $ -- $ (693,995) $ (691,766)
Issuance of common stock in March
1997........................... 20,000 20 50,000 -- -- 50,020
Issuance of common stock in
August 1997.................... 84,167 84 336,668 -- -- 336,752
Issuance of common stock in
September 1997................. 60,000 60 239,940 -- -- 240,000
Issuance of common stock in
September 1997................. 6,000 6 23,994 -- -- 24,000
Deferred compensation............ -- -- -- (386,668) -- (386,668)
Amortization of deferred
compensation................... -- -- -- 81,111 -- 81,111
Net loss......................... -- -- -- -- (843,282) (843,282)
--------- ------- ---------- ------------ ----------- -----------
Balance as of September 30,
1997........................... 2,399,333 $ 2,399 $650,602 $ (305,557) $(1,537,277) $(1,189,833)
--------- ------- ---------- ------------ ----------- -----------
--------- ------- ---------- ------------ ----------- -----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-13

<PAGE>

<PAGE>
AMBIENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
CUMULATIVE
FROM
FOR THE NINE MONTHS ENDED INCEPTION
SEPTEMBER 30, UNTIL
------------------------------ SEPTEMBER 30,
1997 1996 1997
------------- ------------- -------------
(UNAUDITED) (UNAUDITED)

<S> <C> <C> <C>
Cash flows from operating activities:
Net loss...................................................... $(843,282) $(556,866) $(1,537,277)
Adjustments to reconcile net loss to net cash used in
operating activities
Items not involving cash flows:
Depreciation and amortization....................... 168,916 13,691 188,082
Severance pay, net.................................. 6,001 10,000 10,407
Accrued interest on loans from shareholders......... 72,600 31,500 124,041
Accrued interest on long-term loan.................. 2,400 -- 2,400
Changes in operating assets and liabilities:
Decrease (increase) in receivables and prepaid
expenses.......................................... 11,228 (152,206) (25,004)
Increase in accounts payable........................ 38,862 28,767 59,186
Increase in other current liabilities............... 93,232 91,556 152,586
------------- ------------- -------------
Net cash used in operating activities.......... (450,043) (533,558) (1,025,579)
------------- ------------- -------------
Cash flows from investing activities:
Purchase of property and equipment............................ (28,701) (179,827) (222,291)
Restricted cash............................................... -- -- (30,000)
------------- ------------- -------------
Net cash used in investing activities.......... (28,701) (179,827) (252,291)
------------- ------------- -------------
Cash flows from financing activities:
Issuance of share capital..................................... 2,279 -- 2,279
Issuance of long-term notes................................... 300,000 -- 300,000
Receipt of loans from shareholders, net....................... 35,000 860,400 919,600
Receipt of long-term loan..................................... 120,000 -- 120,000
Receipt (repayment) of loan from bank......................... (9,716) 21,825 9,132
Receipt of short-term loans................................... 25,781 -- 25,781
------------- ------------- -------------
Net cash provided by financing activities...... 473,344 882,225 1,376,792
------------- ------------- -------------
Increase (decrease) in cash and cash equivalents................... (5,400) 168,840 98,922
Cash and cash equivalents, beginning of period..................... 104,322 -- --
------------- ------------- -------------
Cash and cash equivalents, end of period........................... $ 98,922 $ 168,840 $ 98,922
------------- ------------- -------------
------------- ------------- -------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-14

<PAGE>

<PAGE>
AMBIENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 -- GENERAL

The accompanying condensed interim financial statements have been prepared
in accordance with generally accepted accounting principles relating to the
provision of 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 nine month
period ended September 30, 1997, are not necessarily indicative of the results
that may be expected for the year ending December 31, 1997. For further
information, refer to the financial statements and notes for the period ended
December 31, 1996.

NOTE 2 -- LONG-TERM LOAN

The loan was received in June 1997. The loan bears interest of 8% per annum
and is repayable from the proceeds of the Company's initial public offering. The
balance as of September 30, 1997, includes accrued interest of $2,400.

NOTE 3 -- LONG-TERM NOTES

The Company issued in September 1997 long-term notes amounting to $300,000
and 60,000 common shares in a private placement. The notes bear interest at 7%
per annum and are repayable at the earliest of March 1999 or at the Company's
initial public offering (see Note 4).

NOTE 4 -- COMMON STOCK

The Company issued 60,000 shares at par value, as part of the private
placement in 1997 (see Note 3). In addition, the Company issued 6,000 shares at
par value to a general consultant of the Company. The Company recorded debt
issuance costs and consulting expense in respect of the above issuances.

In addition the Company issued to certain employees 104,167 shares with a
vesting period of one year. The Company recorded deferred compensation in
respect of these shares which will be amortized over the vesting period.
Unamortized balance as of September 30, 1997 is $305,557.

Subsequent to balance sheet date, the Company issued long-term notes
amounting to $100,000 and 20,000 shares as part of the private placement in 1997
(see Note 3).

NOTE 5 -- INCOME TAXES

Ambient Israel Ltd., a subsidiary of the Company, has applied for 'Approved
Enterprise' status under the Laws for the Encouragement of Capital Investments,
1959. The Company has chosen to receive its benefits through the 'Alternative
Benefits' program. The benefits under this program include a tax exemption on
income deriving from the 'Approved Enterprise' for a period of two years and a
reduced tax rate for a period of up to eight years commencing with the date on
which taxable income is first earned. The Company has yet to receive the
'Approved Enterprise' status.

F-15

<PAGE>

<PAGE>
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<PAGE>

<PAGE>
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<PAGE>

<PAGE>
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<PAGE>

<PAGE>
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<PAGE>

<PAGE>
_____________________________ _____________________________

NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS, OR AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY, BY ANY PERSON IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES, IMPLY THAT THE INFORMATION IN THIS PROSPECTUS IS CORRECT AS OF BY
ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.

------------------------
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----

<S> <C>
Prospectus Summary........................................................................................................... 3
Summary Financial Information................................................................................................ 6
Risk Factors................................................................................................................. 7
Use of Proceeds.............................................................................................................. 18
Dividend Policy.............................................................................................................. 19
Dilution..................................................................................................................... 20
Capitalization............................................................................................................... 21
Plan of Operation............................................................................................................ 22
Business..................................................................................................................... 25
Management................................................................................................................... 37
Principal Stockholders....................................................................................................... 41
Certain Relationships and Related Transactions............................................................................... 42
Description of Securities.................................................................................................... 43
Shares Eligible for Future Sale.............................................................................................. 45
Underwriting................................................................................................................. 46
Legal Matters................................................................................................................ 47
Experts...................................................................................................................... 48
Available Information........................................................................................................ 48
Index to Financial Statements................................................................................................ F-1
</TABLE>

------------------------
UNTIL MAY 13, 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

525,000 SHARES OF
COMMON STOCK
[LOGO]

-------------------------
PROSPECTUS
-------------------------

ROAN CAPITAL
PARTNERS L.P.

FEBRUARY 12, 1998

_____________________________ _____________________________

STATEMENT OF DIFFERENCE

The trademark symbol shall be expressed as...........'tm'