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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Quarterly Period Ended September 30, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _________ to _________
COMMISSION FILE NUMBER: 0-23723
-------------
AMBIENT CORPORATION
(Exact name of small business issuer as specified in its charter)
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<S> <C>
DELAWARE 98-0166007
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
270 MADISON AVENUE, NEW YORK, NEW YORK 10016
(Address of principal executive offices, including zip code)
(888) 861-0205
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No___
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes___ No___
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity as
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of the latest practicable date:
At November 2, 1998, Ambient Corporation had outstanding 3,104,333
shares of common stock, par value $.001 per share.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (Check one)
Yes___ No X
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
3
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AMBIENT CORPORATION AND SUBSIDIARY
(a Development Stage Company)
CONSOLIDATED BALANCE SHEET
In U.S. dollars
(Unaudited)
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<CAPTION>
December 31, 1997 September 30, 1998
----------------- ------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ -- $ --
Restricted cash 30,000 130,000
Note receivable -- 835,000
Other receivables and prepaids 39,922 138,445
---------------------------------------
Total current assets 69,922 1,103,445
PROPERTY AND EQUIPMENT
Cost 248,421 355,191
Less accumulated depreciation (51,478) (89,801)
---------------------------------------
196,943 265,390
DEBT ISSUANCE COSTS 231,936 --
DEPOSITS FOR SEVERANCE PAY 7,725 --
---------------------------------------
Total assets $ 506,526 $ 1,368,835
=======================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term bank credit $ -- $ 166,468
Notes payable -- 470,000
Accounts payable 246,762 261,515
Other current liabilities 239,955 4,252
---------------------------------------
Total current liabilities 486,717 902,235
LONG-TERM LIABILITIES
Accrued severance pay 27,725 49,942
Loans payable 1,627,005 61,269
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common stock, $0.001 par value; authorized 20,000,000
shares; issued and outstanding 2,984,333 and 2,419 3,104
3,104,333 shares, respectively
Additional paid in capital 730,582 4,937,559
Deferred compensation (241,112) (468,277)
Deficit accumulated during the development stage (2,126,810) (4,116,996)
---------------------------------------
Total stockholders' equity (deficiency) (1,634,921) 355,390
---------------------------------------
Total liabilities and stockholders' equity $ 506,526 $ 1,368,835
=======================================
</TABLE>
See accompanying notes to financial statements.
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AMBIENT CORPORATION AND SUBSIDIARY
(a Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS
In U.S. dollars
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
from
Three months ended Nine months ended Inception
September 30, September 30, to
1997 1998 1997 1998 September 30, 1998
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Research & development expenses $ 164,153 $ 337,409 $ 245,820 $ 800,507 $ 1,455,578
Less - Chief Scientist of Israel participation -- -- -- -- 95,976
---------------------------------------------------------------------------------
164,153 337,409 245,820 800,507 1,359,602
Selling, general and administrative expenses 166,979 207,831 488,103 764,309 1,811,427
---------------------------------------------------------------------------------
Operating loss (331,132) (545,241) (733,923) (1,564,817) (3,171,030)
Other expenses -- -- -- 21,389 21,389
Financing expenses, net 50,400 120,696 73,359 403,981 924,578
---------------------------------------------------------------------------------
Net loss $ (381,532) $ (665,936) $ (807,282) $(1,990,186) $(4,116,996)
=================================================================================
Basic and fully diluted loss per share $ (0.16) $ (0.22) $ (0.35) $ (0.66)
--------------------------------------------------------------
Weighted average number of shares outstanding 2,331,087 2,997,666 2,331,087 2,997,666
==============================================================
</TABLE>
See accompanying notes to financial statements.
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AMBIENT CORPORATION AND SUBSIDIARY
(a Development Stage Company)
CONSOLIDATED STATEMENT STOCKHOLDERS' EQUITY (DEFICIENCY)
In U.S. dollars
(Unaudited)
<TABLE>
<CAPTION>
Number Common Additional Deferred Deficit Total
of shares Stock paid in compensation accumulated
capital during the
development
stage
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<S> <C> <C> <C> <C> <C> <C>
Stock issued to founders 2,028,833 $ 2,029 $ -- $ -- $ -- $ 2,029
Stock issued to employees for services 200,333 200 -- -- -- 200
Net loss -- -- -- -- (693,995) (693,995)
--------------------------------------------------------------------------
Balance as of December 31, 1996 2,229,166 2,229 -- -- (693,995) (691,766)
Stock issued to employees for services 104,167 104 386,668 (386,668) -- 104
Stock issued pursuant to private placement 80,000 80 319,920 -- -- 320,000
Stock issued to advisor for services 6,000 6 23,994 -- -- 24,000
Amortization of deferred compensation -- -- -- 145,556 -- 145,556
Net loss -- -- -- -- (1,432,815) (1,432,815)
--------------------------------------------------------------------------
Balance as of December 31, 1997 2,419,333 2,419 730,582 (241,112) (2,126,810) (1,634,921)
Stock issued pursuant to consulting agreement 105,000 105 654,895 (655,000) -- --
Public offering February 1998 525,000 525 3,432,502 -- -- 3,433,027
Stock issued pursuant to debt financing agreement 20,000 20 99,980 -- -- 100,000
Additional stock pursuant to founders agreement 35,000 35 -- -- -- 35
Warrants issued pursuant to private placement -- -- 18,000 -- -- 18,000
Options granted pursuant to consulting agreement -- -- 1,600 (1,600) -- --
Amortization of deferred compensation -- -- -- 429,435 -- 429,435
Net loss -- -- -- -- (1,990,186) (1,990,186)
--------------------------------------------------------------------------
Balance as of September 30, 1998 3,104,333 $ 3,104 $4,937,559 $ (468,277) $ (4,116,996) $ 355,390
==========================================================================
</TABLE>
See accompanying notes to financial statements.
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AMBIENT CORPORATION AND SUBSIDIARY
(a Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
In U.S. dollars
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
from
Inception
Nine months ended Sept 30, to
1997 1998 Sept 30, 1998
-------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss $ (807,282) $(1,990,186) (4,116,996)
Adjustments to reconcile net loss to
net cash used in operating activities -
Depreciation and amortization 132,916 49,856 587,461
Amortization of deferred compensation -- 429,435 429,435
Amortization of financing costs -- 234,936 234,936
Stock issued for financing costs -- 100,035 100,035
Severance pay, net 6,001 29,942 49,942
Write off of leasehold improvements -- 21,507 21,507
Accrued interest on long-term loan and notes 75,000 -- 210,016
Changes in operating assets and liabilities
Accounts receivable -- -- (13,160)
Other receivables and prepaid expenses 11,228 (98,523) (98,523)
Accounts payable 38,862 14,752 32,267
Other current liabilities 93,232 (235,703) (184,303)
------------------------------------------------------
Net cash used in operating activities (450,043) (1,443,949) (2,747,383)
Cash flows from investing activities
Restricted cash -- (100,000) (130,000)
Note receivable -- (835,000) (835,000)
Purchase of equipment (28,701) (139,810) (387,210)
------------------------------------------------------
Net cash used in investing activities (28,701) (1,074,810) (1,352,210)
Cash flows from financing activities
Issuance of share capital 2,279 -- 2,229
Issuance of long-term notes 300,000 -- 400,000
Receipt of loans from shareholders, net 35,000 -- 919,600
Receipt of long-term loan 120,000 -- 120,000
Increase in bank overdraft -- -- 87,948
Receipt of loan from bank -- -- 37,110
Receipt of short-term loans -- 467,000 480,947
Warrants issued pursuant to private placement -- 18,000 18,000
Increase in short-term credits 25,781 166,468 166,468
Proceeds (repayments) of long-term loans (9,716) (1,565,736) (1,565,736)
Public offering of common stock -- 3,433,027 3,433,027
------------------------------------------------------
Net cash provided by financing activities 473,344 2,518,759 4,099,593
Net increase (decrease) in cash (5,400) -- (0)
Cash, beginning of period 104,322 -- --
------------------------------------------------------
Cash, end of period $ 98,922 $ -- $ (0)
======================================================
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for interest $ 198,764 $ 205,945
</TABLE>
See accompanying notes to financial statements.
<PAGE>
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AMBIENT CORPORATION AND SUBSIDIARY
(a development stage company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - GENERAL
The accompanying condensed interim financial statements have been
prepared in accordance with generally accepted accounting principles
relating to interim financial information. Accordingly, they do not
include all of the information and notes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the three month and nine month periods ended
September 30, 1998, are not necessarily indicative of the results that
may be expected for the year ended December 31, 1998.
Note 2 - INITIAL PUBLIC OFFERING
In February 1998 the Company completed an initial public offering of
525,000 shares of common stock for gross proceeds of $4,200,000 before
issuance expenses of approximately $943,000 (including amounts that were
expensed in 1997).
Note 3 - PLANNED MERGER
On May 20, 1998, the Company entered into a letter of intent with
Ordacard Hi-Tech Industries (1995) Ltd. ("Ordacard"), an Israeli
manufacturer of plastic ID and bank cards, relating to the proposed
merger of Ordacard to be consummated on December 31, 1998.
The letter of intent provides for a $1,000,000 loan to Ordacard, $350,000
of which was loaned upon the execution of the letter of intent and
$485,000 loaned in the quarter ended September 30, 1998. The loan is
evidenced by promissory notes secured by
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Ordacard's assets and subordinated to existing bank loans. The notes bear
interest at an annual rate of 6%.
The letter further provides that, as a condition of the merger, the
Company is to conduct a public offering or private placement of equity
securities by December 31, 1998 with minimum net proceeds of $7.5
million.
If the merger is not consummated by December 31, 1998, the Company will
be entitled to demand full payment of the notes, including interest, or
to convert the balance into 50,000 shares of Ordacard stock. The Company
is currently negotiating for an extension of time to obtain the equity
financing.
Consummation of the merger is subject to approval by the courts in Israel
and in the U.S. as well as other statutory bodies in those countries and
completion of due diligence satisfactory to the Company.
Note 4 - GOING CONCERN
The Company incurred a net loss in 1996 and 1997 and during the nine
months ended September 30, 1998 and anticipates that it will continue to
incur losses for some time. The Company's continued existence is
dependent on obtaining additional financing from its shareholders and
outside sources for product development and commercialization. These
matters raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans in this regard include raising
additional capital through equity financing. The financial statements do
not include any adjustments that might be necessary should the Company be
unable to continue as a going concern.
Note 5 - NOTES PAYABLE
In August and September 1998, the Company realized gross proceeds of
$500,000 from a private offering of 10 Units, each Unit consisting of
$50,000 principal amount of 10% Promissory Notes and Warrants to purchase
10,000 shares of Common Stock. For financial reporting purposes, the
Company recorded a note discount totaling $18,000, to reflect the value
of the Warrants issued. The discount will be amortized on a straight-line
basis over the term of the respective notes. The notes bear interest at
the rate of 10% per annum and become due and payable together with
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accrued interest one year following the consummation by the Company of
any public or private equity or debt financing exceeding $1,500,000. The
Warrants are exercisable for a four-year period at the lower of an
exercise price equal to the public offering price of a subsequent
offering, or $8 per share.
Note 6 - CONSULTING AGREEMENTS
The Company retained the services of several consultants under one-year
consulting agreements. The agreements provide for the issuance of 105,000
shares of Common Stock and options for 80,000 shares exercisable at $6
per share. The Company recorded charges to deferred compensation expense
of $656,600 as a result of these issuances and is amortizing these
amounts over the term of the agreements.
Note 7 - RESTRICTED CASH
The Company has short-term lines of credit from banks in Israel for which
the Company agreed to maintain compensating balances of $130,000, which
are restricted for a period of up to one year.
Note 8 - STOCK ISSUANCES
In July 1998 the Company issued 55,000 shares of unregistered Common
Stock in consideration of certain debt financing and founders
agreements.
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Item 2 - Plan of Operation
The Company was organized in June 1996 and is a development stage
company. In August 1996, Ambient Corporation purchased substantially all of the
assets, properties, business and goodwill and assumed the liabilities of Gen
Technologies, Inc., a Delaware company organized in September 1995 ("GTI"),
including the capital stock of GTI's subsidiary, GenTec, Ltd., a corporation
organized under the laws of the State of Israel in November 1995. In November
1996, the Company changed the name of its subsidiary from GenTec, Ltd. to
Ambient, Ltd. ("Ambient Israel"). The Company owns 95% of Ambient Israel's
outstanding capital stock. Since inception, the Company's activities have been
principally limited to organizational and initial capitalization activities,
designing and developing smart card technology and recruitment of executive
personnel. As a development stage company, the Company has a limited operating
history upon which an evaluation of the Company's prospects can be made. The
Company's prospects must therefore be evaluated in light of the problems,
expenses, delays and complications associated with a new business.
The Company has not generated any revenues from its smart card
technology since its inception. For the fiscal years ended December 31, 1996 and
1997, and the nine months ended September 30, 1998, the Company has incurred net
losses aggregating $4,116,996, reflecting principally research and development
expenses and general and administrative expenses. The Company expects to incur
significant up-front expenditures in connection with the planned expansion of
its operations, including the implementation of marketing and sales efforts and
the commercialization of the Company's technology, and operating losses are
expected to continue for the foreseeable future. There can be no assurance that
the Company can be operated profitably in the future. The Company's continuation
as a going-concern is dependent upon, among other things, its ability to obtain
additional financing when and as needed, and to generate sufficient cash flow to
meet its obligations on a timely basis. The Company may also explore other
business options including strategic joint ventures and business combinations,
including investments in other companies, or mergers.
In February 1998, the Company completed an initial public offering of
525,000 shares of Common Stock (the "IPO"). The Company received net proceeds
from the IPO of approximately $3,250,000. The Company is dependent upon the
proceeds of the IPO to implement its anticipated business plans.
On May 20, 1998, the Company entered into a letter of intent with Ordacard
Hi-Tech Industries (1995) Ltd.("Ordacard"), an Israeli manufacturer of plastic
ID and bank cards relating to the proposed merger of Ordacard with and into the
Company or a wholly-owned subsidiary of the Company to be formed under the laws
of Israel. In connection therewith, the Company agreed to loan to Ordacard the
principal amount of $1,000,000, of which
4
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$350,000 was loaned upon execution of the letter of intent and $485,000 was
loaned in the quarter ended September 30, 1998.
Consummation of the merger is subject to approval by the courts in Israel
and in the U.S., as well as other statutory bodies in those countries and
completion of due diligence satisfactory to the Company.
As of September 30, 1998, the Company has expended $1,455,578 on its
research and development activities (including $95,976 received from the Office
of Chief Scientist of the Israeli Ministry of Industry and Trade ("OCS").
Ambient Israel has two patent applications pending in Israel which were filed in
1996, for one of which a corresponding application was filed in the United
States in 1997. The United States Patent and Trademark Office ("PTO") has
allowed one patent application, which was filed in the United States in 1996,
for which a corresponding application was filed under the international Patent
Cooperation Treaty in 1997. The Company expects that the patent application that
has been allowed by the PTO will be issued within the next several months.
During the next 12 months, the Company's research and development plans include,
although there can be no assurance, filing one or more additional patent
applications in the United States and Israel, developing a reader based on
certain chip technology, implementing pilot production of smart cards and
demonstrating compatibility for the use of Ambient technology in large memory
data storage media such as cameras, telephones and computers. The Company may
need to raise additional funding to carry out all or a portion of its research
and development plans. The Company does not have any commitments for any future
financings and there can be no assurance such financing will be available, or if
available, that it can be obtained on terms favorable to the Company, or that
such financing will not be dilutive to stockholders. The Company anticipates
that its first Ambient product will be completed and ready for introduction into
the market by the fourth quarter of 1998. Product introduction will depend on
several factors, including the availability of funding, research and development
and marketing efforts, and there can be no assurance that the Company will be
successful in introducing a product by the end of 1998.
The Company's marketing activity to date has consisted primarily of
formulating a marketing strategy. The Company's strategy focuses initially on
approaching and establishing relationships with large and mid-sized system
integrators already operating in the smart card market, such as Ordacard, as
well as those integrators involved in ancillary markets such as health care,
access control, and transport ticketing. The Company also intends to target
potential volume customers. In an effort to promote recognition of the Ambient
name within the industry, the Company plans to exhibit its technology at
selected industry trade shows, and design and distribute marketing materials.
The Company also plans to implement and publicize pilot projects to demonstrate
the benefits of using the Company's technology.
5
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Depending on several factors, including the success of the Company's
marketing efforts, market acceptance of the Ambient technology, competition and
the Company's progress in its research and development efforts and developing
relationships with systems integrators, the Company believes it will begin to
generate sales and revenues during the fourth quarter of 1998. There can be no
assurances, however, that the Company will generate significant revenues by this
date, or at all.
The Company currently has 13 full-time employees and several part-time
employees. The Company's product development is carried out at Ambient Israel's
facilities in Israel. In May 1998, the Company purchased from the Jerusalem
College of Technology (the "College") certain equipment used for the manufacture
of smart cards for a purchase price of $40,000, which is payable in quarterly
installments over three years. The Company paid the first installment of
approximately $5,000 in May 1998. In connection with such purchase, the Company
agreed to hire three full-time employees from the College, assumed certain
liabilities in the aggregate amount of approximately $15,000, entered into a
sublease agreement with the College with respect to the facilities housing the
purchased equipment and assumed certain other contractual obligations. The
Company anticipates that revenues from these operations will offset all or a
portion of the expenses associated with purchasing and operating such equipment.
Since inception, the Company has relied on certain debt financings,
government funding from the OCS, bank financing, loans from third parties,
stockholder loans, private placements and the IPO for its capital requirements.
The Company used $1,828,261 of the net proceeds from the IPO to satisfy the
principal and accrued interest due on certain third party loans (excluding the
stockholder loans), debt financing and private placements.
On March 25, 1998 the Israeli Investment Center granted "Approved
Enterprise" status to Ambient Israel, pursuant to The Law for the Encouragement
of Capital Investments, 1959 (the "Investment Law") with respect to its planned
investment in certain fixed assets for establishing a smart card production
facility. The Investment Law provides that certain capital investments may, upon
application to the Israeli Investment Center, be designated as an "Approved
Enterprise". Ambient Israel participates under the "Alternative Benefits
Program" under the Investment Law. Accordingly, taxable profits attributable to
the approved enterprise will be exempt from tax for a period of 10 years,
commencing in the first year in which the Approved Enterprise first generates
taxable income. However, such benefits period will terminate upon the earlier of
(i) 12 years from the commencement of production or (ii) 14 years from the date
of approval of the Approved Enterprise. Under the Alternative Benefits Program,
dividend distributions from Ambient Israel during the benefits period will be
subject to reduced withholding tax of 15%, but will render Ambient Israel liable
for corporate tax (generally 25%, subject to reduction depending upon the
percentage of foreign investment in Ambient Israel) on the amount distributed
and the corporate tax thereon.
6
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The benefits available as an Approved Enterprise are conditioned upon the
fulfillment of certain conditions stipulated in the Investment Law, and the
regulations thereunder, and the criteria set forth in the certificate of
approval. In the event any of these conditions are not fulfilled, in whole or in
part, the benefits could be canceled and the Company could be required to refund
the amount of the canceled benefits, plus interest and inflation adjustments.
There can be no assurances that the Company will be able to continue to comply
with such requirements in the future.
Certain statements made in this Quarterly Report on Form 10-QSB including
statements contained in the preceding Plan of Operation are "forward-looking
statements" (within the meaning of the Private Securities Litigation Reform Act
of 1995) regarding the plans and objectives of management for future operations
and projections of revenues, earnings and capital expenditures. Such statements
involve known and unknown risks, uncertainties and other factors that may cause
actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. The forward-looking statements
included herein are based on current expectations that involve numerous risks
and uncertainties. The Company's plans, objectives and expectations are based,
in part, on assumptions involving the growth of the Company's business.
Assumptions relating to the foregoing involve judgments with respect to, among
other things, future economic, competitive and market conditions and future
business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company. Although the
Company believes that its assumptions underlying the forward-looking statements
are reasonable, any of the assumptions could prove inaccurate and, therefore,
there can be no assurance that the forward-looking statements included in this
Report will prove to be accurate. In light of the significant uncertainties
inherent in the forward-looking statements included herein, the inclusion of
such information should not be regarded as a representation by the Company or
any other person that the objectives, plans or expectations of the Company will
be achieved.
Year 2000 Issues
Certain organizations anticipate that they will experience organizational
difficulties at the beginning of the year 2000 as a result of computer programs
being written using two digits rather than four digits to define the applicable
year. The Company's plan for the Year 2000 calls for compliance verification
with vendors, testing software in the Company's products for Year 2000 problems
and communication with significant suppliers to ascertain their readiness for
the Year 2000 problem
7
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Company's Registration Statement on Form SB-2, file no. 333-40045, was
declared effective by the Securities and Exchange Commission on February
12, 1998. The initial public offering of the Company's Common Stock
covered by such Registration Statement commenced on February 13, 1998.
Roan Capital Partners, L.P. acted as the managing underwriter (the
"Representative") for the offering. A total of 656,250 shares of Common
Stock were registered, including 78,750 shares issuable upon exercise of
the Representative's 45-day over-allotment option and 52,500 shares
issuable upon exercise of warrants issued to the Representative (the
"Representative's Warrants"). The Representative's Warrants to purchase
52,500 shares of Common Stock issued to the Representative were also
registered. The aggregate offering price of the registered Common Stock
(including the over-allotment option), the Representative's Warrants and
the shares issuable upon exercise of Representative's Warrants, was
$5,523,052.50. Of this amount, $4,200,000 representing 525,000 shares of
Common Stock have been sold (and the Representative's Warrants were sold
for $52.50). The Representative's Warrants have not yet been exercised and
consequently the offering has not yet terminated.
The amount of expenses incurred for the Company's account in connection
with the issuance and distribution of the securities registered are as
follows:
<TABLE>
<S> <C>
Underwriting discounts and commissions: $ 420,000
Finder's fees: 0
Expenses paid to or for the underwriters: 126,000
Other expenses: 397,710
---------
Total expenses: $ 943,710
</TABLE>
8
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All such expenses were paid directly or indirectly to others.
The net offering proceeds to the Company after deducting the above
expenses were $3,256,290.
As of June 30, 1998, the amount of net offering proceeds to the Company
has been used for the following purposes:
<TABLE>
<S> <C>
Marketing............................................. $104,118
Additional Facilities................................. 0
Research and Product Development...................... 519,201
Repayment of indebtedness............................. 1,828,261
Capital Equipment..................................... 11,080
Working Capital and General Corporate................. 396,340
Convertible Note Receivable from Ordacard............. 350,000
Total........................................... $3,209,000
</TABLE>
All such payments were made directly or indirectly to others.
The use of proceeds contained herein does not represent a material change
in the use of proceeds described in the prospectus, except that repayment
of indebtedness increased by $178,261 from the estimated $1,650,000 in the
prospectus to $1,828,261 due to adjustments in the calculations of
interest on the indebtedness through the date of payment and the repayment
of accrued interest on certain indebtedness in the principal amount of
$968,000. In addition, the Company reserved the right in the prospectus to
use all or a portion of the net proceeds allocated for working capital to
acquire other companies. The Company used $350,000 to fund a loan to
Ordacard in connection with the proposed merger of Ordacard with and into
the Company (or a subsidiary thereof).
On August 1, 1998, the Company entered into a consulting agreement (the
"Consulting Agreement") with Mission Bay Consulting, Inc., a Delaware
corporation ("Mission Bay"), pursuant to which Mission Bay agreed to
provide the Company with certain consulting services. In connection
therewith, and as compensation therefor, the Company agreed to issue to
Randolph Beimel, a principal of Mission Bay: (i) an aggregate of 65,000
shares of Common Stock to be issued in varying amounts upon certain future
dates; and (ii) options to purchase an aggregate of 80,000 shares of
Common Stock under the Company's 1998 Stock Option Plan at an exercise
price of $6.00 per share, all of which options are fully vested. As of
9
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September 30, 1998, pursuant to the terms of the Consulting Agreement, the
Company had issued 20,000 unregistered shares of Common Stock to Mr.
Beimel. The issuance of such shares of Common Stock was exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act") by virtue of Section 4(2) thereof. Such shares were subsequently
registered pursuant to the Company's Registration Statement on Form S-8,
registration number 333-65893, which was declared effective by the
Securities and Exchange Commission on October 20, 1998.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
10.1 Consulting Agreement between the Company and Mission Bay
Consulting, Inc. dated as of August 1, 1998.
27.1 Financial Data Schedule
</TABLE>
10
<PAGE>
<PAGE>
(b) Reports on Form 8-K
On August 13, 1998, the Company filed a Current Report on Form 8-K to report the
change of independent accountants to the firm Brightman, Bar-levav, Friedman &
Co. the Israeli affiliate of Deloitte Touche Tohmatsu.
11
<PAGE>
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act the registrant
caused this report to be signed by the undersigned thereunto duly authorized.
Date: November 11, 1998
AMBIENT CORPORATION
-----------------------------------------------
(Registrant)
/s/ Jacob Davidson
-----------------------------------------------
President, Chairman and Chief Executive Officer
/s/ Aryeh Weinberg
-----------------------------------------------
Chief Financial Officer
12
<PAGE>
<PAGE>
EXHIBIT INDEX
10.1 Consulting Agreement between the Company and Mission Bay
Consulting, Inc. dated as of August 1, 1998.
27.1 Financial Data Schedule
<PAGE>
<PAGE>
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement"), executed as of the 1st day of
August 1998, is hereby made between AMBIENT CORPORATION, a Delaware corporation
having offices at 270 Madison Avenue, New York, New York, 10016 (hereinafter
"ABTG"), and MISSION BAY CONSULTING, INC., a Rhode Island corporation having an
office address at 387 Atwells Avenue, Providence, Rhode Island 02909
(hereinafter "Consultant").
WITNESSETH:
WHEREAS, ABTG desires to obtain certain financial consulting services, and
Consultant is willing to provide such services in accordance with the terms
and conditions set forth below,
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
herein contained, the parties hereto agree to establish such client/consultant
relationship in accordance with the following terms and conditions set forth
below:
1. SCOPE OF SERVICES PROVIDED
1.1 Consultant is to provide certain financial public relations services to
ABTG in accordance with the terms and conditions hereof (the "Services"), which
shall include, but not necessarily be limited to, the following:
(i) supervising and managing a financial public relations firm selected
by the mutual agreement of ABTG and the Consultant, to increase the visibility
and corporate profile of ABTG to the financial community and the public at
large;
(ii) assisting brokers, financial professionals, investors and other
interested persons in obtaining current information about ABTG's operations,
business and prospects;
(iii) responding to inquiries from the financial community and security
holders of ABTG regarding ABTG's operations, business and prospects;
(iv) assisting to the extent requested by ABTG in the preparation of
annual and interim financial reports and press releases regarding ABTG;
(v) assisting in securing third-party preparation of research reports
regarding ABTG; and
(vi) such other services as ABTG's Board of Directors may request
consistent with the above described services.
<PAGE>
<PAGE>
1.2 The Consultant shall be obligated to render the services upon the
request of ABTG, in good faith, but shall not be obligated to expend any
specified amount of time in so doing. Consultant may work according to its own
methods and keep its own hours; ABTG shall not control the manner in which
Consultant works while performing under this Agreement. Notwithstanding the
foregoing, inasmuch as the Board of Directors of ABTG has retained the
Consultant to provide significant services and has a duty to the stockholders of
ABTG to supervise the operations of ABTG; Consultant accordingly agrees to
report to and be promptly responsive to redirection, questions, concerns, or
comments raised by the Board regarding the Services.
1.3 Consultant shall be responsible for the payment of all fees and
expenses of the firm retained pursuant to Section 1.1 hereof, and any persons
Consultant procures to assist it in performance of the Services. Any such
assistants shall be compensated by Consultant and are deemed employees solely of
Consultant. Consultant agrees to be solely responsible for any actions of its
assistant, agents or other employees. Consultant agrees to comply with all
applicable Federal, state and local laws, regulations and ordinances.
Notwithstanding the foregoing, ABTG agrees to provide Consultant with support
and cooperation in connection with the performance of the Services.
1.4 ABTG recognizes and confirms that, in advising ABTG and in fulfilling
its responsibilities under this agreement, the Consultant will use and rely on
data, material and other information furnished to the Consultant by ABTG. ABTG
acknowledges and agrees that in performing the Services under this Agreement,
the Consultant may rely upon data, material and other information supplied by
ABTG without independently verifying the accuracy, completeness or veracity of
the same. Accordingly, ABTG expressly agrees that all data, material and other
information furnished to the Consultant by ABTG shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
2. PAYMENT FOR SERVICES
2.1 As full compensation for the performance of the Services ABTG shall:
(i) issue to Consultant a nonqualified stock option (the "Option") under
ABTG's January 1998 Stock Option Plan to purchase an aggregate of 80,000 shares
of ABTG common stock (the "Common Stock"). The Option shall have such vesting
and other terms, conditions and provisions as shall be determined by ABTG, and
shall be in the form of Exhibit A hereto;
(ii) issue to Consultant an aggregate of 65,000 shares of Common Stock
(the "Compensation Shares"), which shares shall be issued to Consultant in the
manner set forth below (each such issuance, a "Tranche"):
-2-
<PAGE>
<PAGE>
20,000 Compensation Shares to be issued August 1, 1998;
15,000 Compensation Shares to be issued November 1, 1998;
15,000 Compensation Shares to be issued February 1, 1999; and
15,000 Compensation Shares to be issued May 1, 1999.
(iii) reimbursement of Consultant's pre-approved accountable expenses
incurred in rendering the Services (following submission of satisfactory
documentation).
2.2 No fringe benefits or employee benefits shall be paid or given to
Consultant. Consultant shall be solely responsible for the payment of any and
all Federal, state, and local income taxes, Social Security taxes and
unemployment taxes that may be generated hereunder. ABTG shall not withhold any
such items and bears no responsibility for any such payments. The Consultant
shall perform the Services hereunder as an independent contractor and not as an
employee of ABTG or an affiliate thereof. It is expressly understood and agreed
to by the parties hereto that the Consultant shall not have authority to act
for, represent or bind ABTG or any affiliate thereof in any manner.
2.3 ABTG shall use its best efforts to: (i) include each Tranche of
Compensation Shares issued to Consultant in a registration statement of ABTG on
Form S-8 or other qualifying or successor form to be filed with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933 (the
"1933 Act"); and (ii) have such registration statement declared effective by the
Commission, so that each Tranche of Compensation Shares shall be registered
under the 1933 Act on or prior to the date such Tranche of Compensation Shares
is issued.
3. TERM AND TERMINATION
3.1 Consultant shall commence providing the services contemplated hereunder
as of the date hereof and shall continue providing such services until the
earlier of (i) July 31, 1999; or (ii) such time as this Agreement is earlier
terminated pursuant to the provisions of Section 3.2 hereof.
3.2 Either party hereto shall have the option to terminate this Agreement
at any time without cause upon thirty (30) days prior notice to the other party.
The right to terminate this Agreement as provided for in this Section 3.2 shall
be in addition to and not in lieu of any right either party hereto may have
against the other for breach of this Agreement. In the event of such
termination, any portion of the Option which was unexercised at the date of
notification of termination shall be forfeited.
3.3 (a) Notwithstanding Article 2 hereof, if Consultant is terminated for
"cause" (as defined in Section 3.3(e)), Consultant shall forfeit all
Compensation Shares issued to Consultant through the date of termination, and
Consultant shall immediately surrender to ABTG the certificate(s) evidencing all
Compensation Shares issued pursuant to all Tranches under this Agreement. In the
event this Agreement is terminated pursuant to
-3-
<PAGE>
<PAGE>
this Section 3.3(a), ABTG shall cease to have any obligation to Consultant
hereunder, including, but not limited to, the issuance of any Tranche of
Compensation Shares.
(b) Notwithstanding Article 2 hereof, if Consultant terminates this
Agreement for any reason, or for no reason, then Consultant shall forfeit
one-half of all Compensation Shares issued to Consultant through the date of
termination. Consultant shall then immediately surrender to ABTG the
certificate(s) evidencing the Compensation Shares to be surrendered, and ABTG
shall retire and cancel such shares. In the event this Agreement is terminated
pursuant to this Section 3.3(b), ABTG shall cease to have any obligation to
Consultant hereunder, including, but not limited to, the issuance of any Tranche
of Compensation Shares.
(c) Notwithstanding Article 2 hereof, if Consultant is terminated
without "cause", Consultant shall be entitled to ownership of all Compensation
Shares to be issued pursuant to the terms of this Agreement.
(d) In the event all or any part of the Compensation Shares to be
forfeited and surrendered to ABTG by Consultant upon a termination of this
Agreement pursuant to this Article 3 have been sold by the Consultant, then the
Consultant shall return to ABTG the economic value of the Compensation Shares
sold and required to be surrendered. The economic value of such shares shall be
equal to the price at which such shares were sold by the Consultant, and shall
immediately be remitted to ABTG in cash at the time of surrender.
(e) For purposes of this Agreement, the term "cause" shall mean fraud,
willful neglect or wrongful acts, repeated negligence or the failure to perform
to customary consulting standards, conviction of, or a plea of guilty or nolo
contendre to, a felony or misdemeanor which is a crime, or a violation of
Section 6 hereof.
4. CONSULTANT TO PROVIDE NON-EXCLUSIVE SERVICES
Either Consultant, or Randolph Beimel, Consultant's principal stockholder,
may provide services similar to the Services to any other clients while this
Agreement is in effect without the prior express written consent of ABTG's Board
of Directors.
5. REPRESENTATIONS AND WARRANTIES
5.1 ABTG represents and warrants to the Consultant as follows:
(i) ORGANIZATION AND STANDING OF ABTG. ABTG is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware and has all requisite power and authority to enter into this Agreement.
(ii) AUTHORIZATION. ABTG has all requisite power and authority
-4-
<PAGE>
<PAGE>
to execute, deliver and perform this Agreement and to carry out and consummate
the transactions contemplated hereby. The execution, delivery and performance of
this Agreement by ABTG has been duly authorized by all requisite corporate
action and this Agreement has been duly executed and delivered by ABTG and
constitutes the legal, valid and binding obligation by ABTG, enforceable against
ABTG in accordance with its terms, subject as to enforcement of remedies to
applicable bankruptcy, insolvency, reorganization or similar laws affecting
generally the enforcement of creditors' rights and the relief of debtors.
(iii) REPORTING COMPANY STATUS. ABTG has a reporting obligation pursuant
to Section 12(g) or 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and ABTG is current in the filing of all periodic reports
under the Exchange Act.
5.2 The Consultant represents and warrants to ABTG as follows:
(i) ORGANIZATION AND STANDING OF CONSULTANT. Consultant is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Rhode Island and has all requisite power and authority to enter into
this Agreement.
(ii) AUTHORIZATION. The Consultant has all requisite power and authority
to execute, deliver and perform this Agreement and to carry out and consummate
the transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Consultant has been duly authorized by all requisite
corporate action and this Agreement has been duly executed and delivered by the
Consultant and constitutes the legal, valid and binding obligation by the
Consultant, enforceable against the Consultant in accordance with its terms,
subject as to enforcement of remedies to applicable bankruptcy, insolvency,
reorganization or similar laws affecting generally the enforcement of creditors'
rights and the relief of debtors.
(iii) NONCONTRAVENTION. The execution, delivery and performance of this
Agreement by the Consultant will not violate any provision of any law, any rule
or regulation of any governmental authority, or any judgment, decree or order of
any court binding on the Consultant, and will not conflict with or result in any
breach of any of the unwaived terms, conditions or provisions or constitute a
default under, or result in the creation of any lien, security interest, charge
or encumbrance upon any of the Consultant's properties or assets, or any
material indenture, mortgage, lease, agreement or other instrument to which the
Consultant is a party.
(iv) NON-DISTRIBUTION. The Consultant represents and warrants to ABTG
that the Option and the Consideration Shares are being acquired by the
Consultant for its own account for investment, not as a nominee or agent, and
without a view to resale or other distribution within the meaning of the 1933
Act and the rules and regulations thereunder, and the Consultant will not
distribute them in violation of the 1933 Act.
-5-
<PAGE>
<PAGE>
6. DISCLOSURE OF INFORMATION
Upon completion of Consultant's work hereunder, all of its documents,
records, notebooks, and other work product containing confidential information
and all copies thereof, will be left with ABTG. Consultant agrees not to
disclose to anyone any confidential information obtained while providing the
Services hereunder, unless Consultant obtains the prior written approval of
ABTG's Board of Directors. Notwithstanding anything herein to the contrary,
regardless of the circumstances under which this Agreement is terminated there
shall be no restrictions on the engagements accepted by Consultant after the
term of this Agreement. Consultant acknowledges and agrees that, because of the
unique and extraordinary nature of the Services, any breach or threatened breach
of any of the provisions of Section 7 hereof will cause irreparable injury and
incalculable harm to ABTG, and ABTG shall, accordingly, be entitled to
injunctive and other equitable relief for such breach or threatened breach and
that resort by ABTG to such injunctive or other equitable relief shall not be
deemed to waive or limit in any respect any right or remedy which ABTG may have
with respect to such breach or threatened breach. ABTG and Consultant agree that
any such action for injunctive or equitable relief shall be heard in a state or
federal court situate in Rhode Island and each of the parties hereto hereby
agree to accept service of process by registered mail and to otherwise consent
to the jurisdiction of such courts.
7. INDEMNIFICATION
7.1 ABTG hereby agrees to indemnify and hold Consultant harmless to the
maximum extent permitted by applicable law and the by-laws of ABTG, against all
losses, claims, liens, damages, liabilities, costs, charges, and expenses,
including, without limitation, the costs of investigating, preparing or
defending any action, suit, claim or proceeding or threatened action, suit,
claim or proceeding, whether civil, criminal, or administrative, including,
without limitation, attorney's fees, incurred or sustained by Consultant in
connection with (i) any misrepresentation of ABTG herein or breach of any
covenant of ABTG; and (ii)any such action, suit, claim or other proceeding, to
which Consultant is, or may be made, a party by reason of its being a party to
and performing under this Agreement; provided however, that any action, suit,
claim or proceeding shall not be a result of Consultant's negligence or willful
misconduct.
7.2 Consultant hereby agrees to indemnify and hold ABTG, its officers,
employees, directors, shareholders, and agents (collectively "ABTG Indemnitees")
harmless to the maximum extent permitted by applicable law and the by-laws of
the Consultant, against all losses, claims, liens, damages, liabilities, costs,
charges, and expenses, including, without limitation, the costs of
investigating, preparing or defending any action, suit, claim or proceeding or
threatened action, suit, claim or proceeding, whether civil, criminal, or
administrative, including, without limitation, attorney's fees, incurred or
sustained by any ABTG Indemnitee in connection with (i) any misrepresentation of
-6-
<PAGE>
<PAGE>
Consultant herein or breach of any covenant of Consultant; and (ii) any such
action, suit, claim or other proceeding, to which ABTG is, or may be made, a
party by reason of Consultant's gross negligence or willful misconduct in the
performance of the Services under this Agreement.
8. MISCELLANEOUS
8.1 NOTICES. All notices, requests, consents and other communications
required or permitted to be given hereunder, shall be in writing and shall be
deemed to have been duly given if delivered personally or sent by prepaid
telegram, or mailed first-class, postage prepaid, by registered or certified
mail (notices sent by telegram or mailed shall be deemed to have been given on
the date sent), to the parties at their respective address hereinabove set forth
or to such other address as either party shall designate by notice in writing to
the other in accordance herewith.
8.2 GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the local laws of the State of Rhode Island
applicable to agreements made and to be performed entirely in Rhode Island. This
Agreement shall be governed in all respects and for all purposes by the laws of
the State of Rhode Island and the Courts of the State of Rhode Island shall have
exclusive jurisdiction to enforce any order or award obtained in arbitration. If
any provision of this Agreement shall be declared void or against public policy,
such provision shall be deemed severed from this Agreement and the remaining
provisions shall remain in full force and effect and unmodified.
8.3 ARBITRATION. Except with respect to any proceeding brought under
Section 7 hereof, any controversy, claim, or dispute between the parties,
directly or indirectly, concerning this Agreement or the breach hereof, or the
subject matter hereof, including questions concerning the scope and
applicability of this arbitration clause, shall be finally settled by
arbitration in Kent County, Rhode Island pursuant to the rules then applying of
the American Arbitration Association. The arbitrators shall consist of one
representative selected by ABTG, one representative selected by the Consultant,
and one representative selected by the first two arbitrators. The parties agree
to expedite the arbitration proceeding in every way, so that the arbitration
proceeding shall be commenced within thirty (30) days after the request
therefore is made, and shall continue thereafter, without interruption, and that
the decision of the arbitrators shall be handed down within thirty (30) days
after the hearings if the arbitration proceedings are closed. The arbitrators
shall have the right and authority to assess the cost of the arbitration
proceedings and to determine how their decision or determination as to each
issue or matter in dispute may be implemented or enforced. The decision in
writing of any two of the arbitrators shall be binding and conclusive on all of
the parties to this Agreement. Should either ABTG or the Consultant fail to
appoint an arbitrator as required by this Section 8.3 within thirty (30) days
after receiving written notice from the other party to do so, the arbitrator
appointed by the other party shall act for all of the parties and its decision
in writing shall be binding and conclusive on all of the parties to this
Agreement. Any decision or award of the arbitrators
-7-
<PAGE>
<PAGE>
shall be final and conclusive on the parties to this Agreement; judgment upon
such decision or award may be entered in any competent Federal or state court
located in the United States of America; and the application may be made to such
court for confirmation of such decision or award for any order of enforcement
and for any other legal remedies that may be necessary to effectuate such
decision or award.
8.4 ENTIRE AGREEMENT. This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter hereof, and
supersedes all prior agreements, arrangements and understandings, written or
oral, relating to the subject matter hereof. No representation, promise or
inducement has been made by any party that is not embodied in this Agreement,
and no party shall be bound by or liable for any alleged representation, promise
or inducement not so set forth.
8.5 ASSIGNABILITY. This Agreement, and the various parties' rights and
obligations hereunder may not be assigned. Notwithstanding the foregoing, any
party hereto which is a corporation may assign its rights, together with its
obligations, hereunder in connection with any sale, transfer or other
disposition of all or substantially all of its business or assets; and in such
even the rights and obligations of such corporation hereunder shall be binding
on its successors or assigns, whether by merger, consolidation or acquisition of
all or substantially all of the business or assets. This Agreement shall be
binding upon the parties hereto and their respective executors, administrators,
legal representatives, successors and assigns.
8.6 AMENDMENT. This Agreement may be amended, modified, superseded,
canceled, renewed or extended and the terms or covenants hereof may be waived,
only by a written instrument executed by all of the parties hereto who are
thereby affected, or in the case of a waiver, by the party waiving compliance.
No superseding instrument, amendment, modification, cancellation, renewal or
extension hereof shall require the consent or approval of any person other than
the parties hereto. The failure of either party at any time or times to require
performance of any provision hereof shall in no matter affect the right at a
later time to enforce the same. No waiver by either party of the breach of
contract or otherwise, in any one or more instances, shall be deemed to be, or
construed as, a further or continuing waiver of any such breach, or a waiver of
the breach of any other term or covenant contained in this Agreement.
8.7 INSURANCE. Consultant must produce and provide ABTG with evidence of
personal hospitalization insurance and business insurance.
8.8 SURVIVAL. The rights and obligations under Paragraphs 2, 5, 6, and 7
shall survive and continue after any expiration or termination of this Agreement
and shall bind the parties and their legal representatives, successors, heirs
and assigns.
-8-
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands and seals as of
the date first written above.
AMBIENT CORPORATION
By:
--------------------------------
Jacob Davidson
CEO
[Seal]
MISSION BAY CONSULTING, INC.
By:
--------------------------------
Randolph Beimel
President
[Seal]
-9-
<PAGE>
<PAGE>
EXHIBIT A
Number of Options: 80,000 options
Vesting Period: Fully vested as of August 1, 1998
Exercise Price: $6.00 per share
-10-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<PERIOD-END> SEP-30-1998
<FISCAL-YEAR-END> DEC-31-1997
<CASH> 130,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,103,445
<PP&E> 355,191
<DEPRECIATION> (89,801)
<TOTAL-ASSETS> 1,368,835
<CURRENT-LIABILITIES> 902,235
<BONDS> 0
0
0
<COMMON> 3,104
<OTHER-SE> 352,286
<TOTAL-LIABILITY-AND-EQUITY> 1,368,835
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,990,186
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,990,186)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,990,186)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,990,186)
<EPS-PRIMARY> (0.68)
<EPS-DILUTED> (0.68)
</TABLE>
