<PAGE>
<PAGE>
As filed with the Securities and Exchange Commission on January 23, 1998
Registration No. 333-40045
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
Amendment No. 1
to
FORM SB-2
Registration Statement
Under the
Securities Act of 1933
AMBIENT CORPORATION
(Name of Small Business Issuer in Its Charter)
<TABLE>
<S> <C> <C>
Delaware 3674 98-0166007
- ----------------------------------- ----------------------------- --------------------
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number) Identification No.)
Organization)
</TABLE>
270 Madison Avenue, 11th Fl.
New York, New York 10016
(888) 861-0205
(Address and Telephone Number of Principal Executive Offices
and Principal Place of Business)
Jacob Davidson
Chairman of the Board and
Chief Executive officer
Ambient Corporation
270 Madison Avenue, 11th Fl.
New York, New York 10016
(888) 861-0205
(Name, Address and Telephone Number of Agent For Service)
Copies to:
------------------
<TABLE>
<S> <C> <C>
Samuel F. Ottensoser, Esq. Barry Schuman, Adv. Stuart Neuhauser, Esq.
Baer Marks & Upham LLP Ephraim Abramson & Company Bernstein & Wasserman, LLP
805 Third Avenue 16B King George Street 950 Third Avenue
New York, New York 10022 Jerusalem, Israel 94229 New York, New York 10022
Tel.: (212) 702-5700 Tel: 972-2-624-5881 Tel: (212) 826-0730
Fax: (212) 702-5941 Fax: 972-2-625-9264 Fax: (212) 371-4730
</TABLE>
------------------
Approximate Date of Commencement of Proposed
Sale to the Public: As soon as practicable after
the Registration Statement becomes effective.
<PAGE>
<PAGE>
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
* * * * *
- --------------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
====================================================================================================================================
Proposed Proposed
Maximum Maximum Amount of
Amount to be Offering Price Aggregate Registration
Registered Per Share(1) Offering Price Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001
par value per share 603,750(2) $8.00 $4,830,000.00 $1,463.64
- ------------------------------------------------------------------------------------------------------------------------------------
Underwriter's
Warrants(3) 52,500 $.001 $52.50 $0.02
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001
par value per share 52,500(4) $13.20 $693,000 $210.00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL $5,523,052.50 $1,673.66(5)
====================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 promulgated under the Securities Act of 1933, as
amended.
(2) Includes 78,750 shares of common stock issuable upon exercise in full of an
option granted to the Underwriter to cover over-allotments, if any.
(3) Underwriter's Warrants to be issued to the Underwriter consisting of
warrants to purchase 52,500 shares of common stock.
(4) Shares issuable upon exercise of the Underwriter's Warrant.
(5) An additional $57.27 has been wired to the Commission to cover the increase
in the registration fee.
-ii-
<PAGE>
<PAGE>
-------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
-iii-
<PAGE>
<PAGE>
SUBJECT TO COMPLETION, PRELIMINARY PROSPECTUS DATED JANUARY 23, 1998
PROSPECTUS
AMBIENT CORPORATION
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 "Underwriter").
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
Underwriter 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 anticipates that, upon completion of the Offering, the
Common Stock will be quoted on the OTC Electronic Bulletin Board under the
symbol "AMBT." 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 __.
----------------
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>
====================================================================================================================================
Price Underwriting Discounts
to Public and Commissions (1) Proceeds to 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
Underwriter at the closing of the Offering; (ii) warrants (the
"Underwriter's Warrants") to purchase up to 52,500 shares of Common Stock;
and (iii) a two-year financial advisory agreement with the Underwriter for
an aggregate of $100,000, payable at the closing of the Offering. In
addition, the Company has agreed to indemnify the Underwriter against
certain liabilities under the Securities Act of 1933, as amended (the
"Securities Act"). See "Underwriting."
<PAGE>
<PAGE>
(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 Underwriter in the amount of $126,000 ($144,900 if the
Underwriter's over-allotment option is exercised in full) and a two-year
financial advisory agreement with the Underwriter for an aggregate of
$100,000.
(3) The Company has granted the Underwriter 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 Underwriter is being sold
by the Company on a "firm commitment" basis subject to prior sale, when, as and
if delivered to and accepted by the Underwriter and subject to approval of
certain legal matters by counsel to the Underwriter and certain other
conditions. The Underwriter 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 Underwriter in New York City
on or about_________, 1998.
----------------
ROAN CAPITAL PARTNERS L.P.
The date of this Prospectus is __________, 1998
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<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."
----------------
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.
-3-
<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.
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 four patent applications
pending in the United States and Israel covering 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
-4-
<PAGE>
<PAGE>
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, 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.
-5-
<PAGE>
<PAGE>
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.
Proposed OTC Electronic Bulletin
Board Symbol(2)........................................................... AMBT
</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 Underwriter's
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 anticipates that after the completion of the Offering, 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."
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<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 SEPTEMBER ENDED SEPTEMBER
DECEMBER 31, 1996 30, 1996 30, 1997
----------------- ---------------- ---------------
(unaudited) (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
<CAPTION>
AT SEPTEMBER 30, 1997
----------------------------------------
ACTUAL AS ADJUSTED(1)
--------------- ---------------
(unaudited)
BALANCE SHEET DATA:
Cash and cash equivalents .............................................. $ 98,922 $ 1,900,522
Total assets ........................................................... 338,832 2,140,432
=========== ===========
Short-term loans and current portion
of long-term loans ................................................ 34,913 34,913
Long-term debt ......................................................... 1,262,041 111,641
=========== ===========
Stockholders' equity (deficiency)(2) ................................... (1,189,833) 1,859,167
=========== ===========
</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
Underwriter, 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
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<PAGE>
<PAGE>
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."
-8-
<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
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<PAGE>
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."
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, 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
patent application; if the Company sells or licenses products wherein the
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. The agreement also
entitles Mr. Rozin 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. 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 dilute Mr. Rozin. Such anti-dilution protection
could make future financing for the Company more difficult to obtain, if at
all.
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<PAGE>
<PAGE>
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.
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
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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 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."
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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."
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
approximately 70% 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
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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 and Israel
(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 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."
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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) does 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."
RISKS ASSOCIATED WITH PROPOSED EXPANSION
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. 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 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
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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."
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."
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. It is anticipated 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.
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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 Underwriter 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 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."
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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 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
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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.
UNDERWRITER'S LIMITED UNDERWRITING EXPERIENCE
The Underwriter has been actively engaged in the securities brokerage
and investment banking business since 1994. However, the Underwriter has engaged
in only limited underwriting activities, and this Offering is only the second
public offering in which the Underwriter has acted as the sole or managing
underwriter. The Underwriter has limited experience acting as a member of a
syndicate in underwritten offerings. There can be no assurance that the
Underwriter's limited experience as an
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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
Underwriter'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 Underwriter's 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, 2,229,166 will be eligible for resale under Rule
144 commencing 90 days following the completion of this Offering, 20,000 shares
will be eligible for resale under Rule 144 commencing March 1998, 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
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<PAGE>
<PAGE>
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 have agreed with the Company not to sell their Shares
for a period of 18 months from the date of this Prospectus without the express
written consent of the Underwriter. 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."
UNDERWRITER'S WARRANTS
The Company will sell to the Underwriter and/or its designees, for
nominal consideration, the Underwriter's Warrants to purchase an aggregate of up
to 52,500 shares of Common Stock. The Underwriter's 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 Underwriter's 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
Underwriter's Warrants remain unexercised, the terms under which the Company
could obtain additional capital elsewhere may be adversely affected. Moreover,
the holders of the Underwriter's 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 Underwriter's Warrants. Additionally, if the holders of
the Underwriter's Warrants were to effect a distribution of the Underwriter's
Warrants or the underlying shares of Common Stock, the Underwriter, 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 Underwriter was 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
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<PAGE>
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.
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<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 13 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
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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 Underwriter exercises 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, 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, money-market funds
or non-United States short-term investments.
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<PAGE>
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."
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<PAGE>
DILUTION
At September 30, 1997, the negative net tangible book value of the
Company was $(1,189,833) or $(0.48) per share of Common Stock based on 2,459,333
shares of Common Stock issued and outstanding. 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 $1.07 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:
Offering price .................................................... $8.00
Net tangible book value before the Offering ........... $(0.48)
Increase attributable to new investors ................. $ 1.07
Pro forma as adjusted net tangible book value after the Offering .. $0.59
Dilution to new investors ......................................... $7.41
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
Amount Percentage Amount Percentage Per 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>
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<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
Underwriter 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
------------------------------------------
(unaudited)
Actual As Adjusted
------------ -------------
<S> <C> <C>
Short-term loans and current portion of
long term loans .......................................................... $ 34,913 $ 34,913
Long-term debt ............................................................. 1,262,041 111,641
----------- -----------
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 ............................................... 650,596 4,139,017
Deferred compensation .................................................... (305,557) (305,557)
Accumulated deficit ...................................................... (1,537,277) (1,977,277)
----------- -----------
Total stockholders' equity (deficit) ............................... (1,189,833) 1,859,167
----------- -----------
Total capitalization ........................................ $ 72,208 $ 1,970,808
=========== ===========
</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."
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(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
Underwriter's Warrants; and (iii) 78,750 shares of Common Stock issuable
upon exercise of the Over-allotment Option. See "Management" and
"Underwriting."
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
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United States and Cartes 97 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 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
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<PAGE>
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 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
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<PAGE>
<PAGE>
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.
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<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 four patent applications
pending in the United States and Israel covering 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 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
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<PAGE>
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 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 in excess of 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
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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 approximately 70% 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.
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
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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 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.
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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 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.
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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 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.
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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."
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
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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
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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 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
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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.
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
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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 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
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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 four patent
applications pending. Two of the patent applications were filed in Israel in
1994 and 1996 and two of the patent applications were filed in the United States
in 1996 and 1997. Under a certain agreement, the former Chief Scientist of
Ambient Israel, Alexander 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
the 1994 patent application; if the Company sells or licenses products wherein
the 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 technology in the development of Ambient
systems and does not presently intend to do so. The agreement also entitles Mr.
Rozin to receive 15% of the net profits (as defined in a certain purchase
agreement) from sales of products and technology by Ambient Israel for an
indefinite period of time. 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."
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,
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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
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<PAGE>
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
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 ("NIS"), price and exchange rate instability could have a
material adverse effect on the Company. As of January 19, 1998, the reported
interbank exchange rate was NIS 3.5992 to $1.00.
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
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<PAGE>
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
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
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<PAGE>
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.
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<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 and executive officers
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 1998 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
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<PAGE>
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 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 Underwriter may designate a director to the
Board during the three (3) year period commencing on the Effective Date. The
Underwriter 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
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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 $100,000 during
such period.
SUMMARY COMPENSATION TABLE
Annual Compensation
<TABLE>
<CAPTION>
====================================================================================================================================
Annual Compensation Long-Term Compensation
- ------------------------------------------------------------------------------------------------------------------------------------
Awards Payouts
-------------------------------------------------
Securities
Other Under-
Annual Restricted lying All Other
Compen- Stock Options/ LTIP Compen-
Name and Salary Bonus sation Award(s) SARs Pay-outs sation
Principal Position (1) ($) ($) ($) ($) (#) ($) ($)
(a) Year (b) (c) (d) (e) (f) (g) (h) (i)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jacob Davidson
Chairman of the Board, President and
Chief Executive Officer 1996 $40,000(2) -- (1) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
1997 $61,085(3) -- (1) -- -- -- --
====================================================================================================================================
</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
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<PAGE>
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 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 $__________ 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 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.
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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, subject to
stockholder approval, 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.
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<PAGE>
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.
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, 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
patent application; 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 this technology in the development of Ambient systems and does not
presently intend to do so. The agreement also entitles Mr. Rozin 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. 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.
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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
Shares Owned
------------------------------------------
Amount and
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 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.
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<PAGE>
(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.
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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 through October 1997. These fees
have been accruing since January 1997, except for an aggregate of $5,000 which
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, provided that the Company remains obligated for the accrued consulting
fees to date.
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."
The Company rents from Pioneer, on a month-to-month basis, a small
office in New York City for $800 per month. 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."
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
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<PAGE>
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."
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 Underwriter.
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
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<PAGE>
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 its capital stock for a period of 24 months from the date
hereof without the prior written consent of the Underwriter.
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
Underwriter. 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"
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<PAGE>
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 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, 2,229,166 will be eligible for sale under Rule 144 commencing 90
days after the consummation of the Offering, 20,000 shares will be eligible for
resale under Rule 144 commencing March 1998, 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
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<PAGE>
shareholders have agreed not to sell their shares for a period of 18 months from
the date of this Prospectus without the express written consent of the
Underwriter. 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.
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<PAGE>
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement
between the Company and the Underwriter (the "Underwriting Agreement"), the
Underwriter has agreed to purchase from the Company and the Company has agreed
to sell to the Underwriter, 525,000 Shares offered hereby on a "firm commitment"
basis, if any are purchased.
The Shares offered hereby are being offered by the Underwriter
subject to prior sale, when, as and if delivered to and accepted by the
Underwriter and subject to certain other conditions. The Underwriter reserves
the right to withdraw, cancel or modify the Offering and to reject any order in
whole or in part.
The Underwriter has advised the Company that it proposes 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 $_______ per Share of which not in excess
of $_______ 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 Underwriter.
The Company has granted an option to the Underwriter, 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 Underwriter 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 Underwriter 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 Underwriter, or to its
designees, for an aggregate purchase price of $52.50, warrants (the
"Underwriter's Warrant") to purchase up to an aggregate of 52,500 Shares of
Common Stock. The Underwriter's Warrant shall be exercisable during a four (4)
year period commencing one (1) year from the Effective Date. The Underwriter's
Warrant may not be assigned, transferred, sold or hypothecated by the
Underwriter until twelve (12) months after the Effective Date, except to
officers of the Underwriter or to officers and partners of the selling group
members in this Offering. The Underwriter's Warrant grants to the holders
thereof certain piggyback and demand registration rights for a period of five
years from the Effective Date. The Underwriter's Warrant is exercisable at 165%
of the initial public offering price of the Shares. The exercise of the
Underwriter's Warrant and the number of shares of Common Stock covered thereby
are subject to adjustment in certain events to prevent dilution.
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<PAGE>
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. In addition, the officers, directors and
shareholders of the Company have agreed not to sell, assign or transfer any of
the Shares held by them without the Underwriter's prior written consent for a
period of 18 months from the Effective Date.
The Underwriter 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
Underwriter 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 Underwriter may designate a director to the Board during the
three (3) year period commencing on the Effective Date. The Underwriter has not
identified any director designees and does not intend to exercise this right in
the immediate future.
The Underwriter has informed the Company that no sales will be made
to any account over which the Underwriter exercises discretionary authority.
The foregoing is a summary of certain provisions of the Underwriting
Agreement and the Underwriter's Warrant 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 Underwriter 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 Underwriter. 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 anticipates that, upon completion of the Offering, the
Common Stock will be quoted on the OTC Bulletin Board under the symbol "AMBT,"
but there can be no assurance that an active trading market will develop, or if
developed, be sustained. The Underwriter intends to make a market in all of the
publicly-traded securities of the Company. See "Risk Factors--Inexperienced
Underwriter."
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<PAGE>
The Underwriter has been actively engaged in the securities brokerage
and investment banking business since 1994. However, the Underwriter has engaged
in only limited underwriting activities, and this Offering is only the second
public offering in which the Underwriter has acted as the sole or managing
underwriter. The Underwriter has limited experience acting as a member of a
syndicate in underwritten offerings. There can be no assurance that the
Underwriter'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 -- Underwriter'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 Underwriter by Bernstein &
Wasserman, LLP, New York, New York.
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
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<PAGE>
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.
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<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 in July 1996(1)....................... 2,028,833 $ 2,029 $ -- $ 2,029
Issuance of common stock in September 1996(2).................. 5,000 5 -- 5
Issuance of common stock in October 1996(3).................... 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>
- ------------
(1) A group of private investors and Company officers.
(2) A Company employee.
(3) A group of private investors and Company employees.
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 September 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., 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 Gen
Technologies, Inc., since 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>
YEARS
------------
<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
F-8
<PAGE>
<PAGE>
AMBIENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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).
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 January 1, 1997 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.
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
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
-------------
<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
-------------
Total assets........................................................................ $ 338,832
-------------
-------------
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)................................................................. 60,000
Severance pay............................................................................ 19,939
-------------
Total long-term liabilities......................................................... 1,281,980
-------------
Total liabilities................................................................... 1,528,665
-------------
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...................................... $ 338,832
-------------
-------------
</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
(UNAUDITED)
<TABLE>
<CAPTION>
CUMULATIVE
FOR THE NINE MONTHS FOR THE NINE MONTHS FROM
ENDED ENDED INCEPTION UNTIL
SEPTEMBER 30 SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997
------------------- --------------- ---------------
<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(1)............................ 20,000 20 50,000 -- -- 50,020
Issuance of common stock in August
1997(2)............................ 84,167 84 -- -- -- 84
Issuance of common stock in September
1997(3)............................ 60,000 60 546,002 -- -- 546,062
Issuance of common stock in September
1997(4)............................ 6,000 6 54,600 -- -- 54,606
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>
- ------------
(1) Issuance to a Company officer.
(2) Issuance to a Company officer.
(3) Issuance to a group of private investors.
(4) Issuance to a consultant.
The accompanying notes are an integral part of the financial statements.
<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, 1996.......... -- $ -- $ -- $ -- $ -- $ --
Issuance of common stock in July
1996(1).............................. 2,028,833 2,029 -- -- 2,029
Issuance of common stock in September
1996(2) ........................... 5,000 5 -- -- -- 5
Net loss............................... -- -- -- -- (556,866) (556,866)
--------- ------- ---------- ------------ ----------- ---------
Balance as of September 30, 1996....... 2,033,833 $ 2,034 -- -- $(556,866) $(554,832)
--------- ------- ---------- ------------ ----------- ---------
--------- ------- ---------- ------------ ----------- ---------
</TABLE>
- ------------
(1) A group of private investors and Company officers.
(2) Issuance to a Company employee.
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
(UNAUDITED)
<TABLE>
<CAPTION>
CUMULATIVE
FROM
FOR THE NINE FOR THE NINE INCEPTION
MONTHS ENDED MONTHS ENDED UNTIL
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997
------------- ------------ -------------
<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).
The notes are presented net of a discount of $240,000 attributed to the
shares issued, based on a value of $4.00 per share.
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>
======================================= ==================================
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......................................................
SUMMARY FINANCIAL INFORMATION...........................................
RISK FACTORS............................................................
USE OF PROCEEDS.........................................................
DIVIDEND POLICY.........................................................
DILUTION .............................................................
CAPITALIZATION..........................................................
PLAN OF OPERATION.......................................................
BUSINESS .............................................................
MANAGEMENT .............................................................
PRINCIPAL STOCKHOLDERS..................................................
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS...........................................................
DESCRIPTION OF SECURITIES...............................................
SHARES ELIGIBLE FOR FUTURE SALE.........................................
UNDERWRITING............................................................
LEGAL MATTERS...........................................................
EXPERTS .............................................................
AVAILABLE INFORMATION...................................................
INDEX TO FINANCIAL STATEMENTS........................................... F-1
</TABLE>
------------------------
UNTIL , 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
AMBIENT CORPORATION
-----------
PROSPECTUS
-----------
ROAN CAPITAL PARTNERS L.P.
, 1998
======================================= ==================================
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Under Section 145 of the Delaware General Corporation Law, the Issuer
has broad powers to indemnify its directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act"). The Issuer's Bylaws provide that
the Issuer will indemnify its directors, executive officers, other officers,
employees and agents to the fullest extent permitted by Delaware law.
The Issuer's Certificate of Incorporation provides for the
elimination of liability for monetary damages for breach of the directors'
fiduciary duty of care to the Issuer and its stockholders. These provisions do
not eliminate the directors' duty of care and, in appropriate circumstances,
equitable remedies such as injunctive or other forms of non-monetary relief will
remain available under Delaware law. In addition, each director will continue to
be subject to liability for breach of the director's duty of loyalty to the
Issuer, for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for any transaction from
which the director derived an improper personal benefit, and for payment of
dividends or approval of stock repurchases or redemptions that are unlawful
under Delaware law. The provision does not affect a director's responsibilities
under any other laws, such as the federal securities laws or state or federal
environmental laws.
Item 25. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
broker commissions, payable by the Issuer in connection with the issuance and
distribution of the securities being registered hereunder. All of the amounts
shown are estimates (except for the SEC registration fees).
<TABLE>
<S> <C>
SEC filing fee...................................... $1,673.66
NASD fee............................................ 920.00
Transfer agent's fee................................ 3,000.00
Printing and engraving expenses..................... 40,000.00
Legal fees and expenses............................. 175,000.00
Blue sky filing fees and expenses................... 30,000.00
(including counsel fees)
Accounting fees and expenses........................ 90,000.00
Miscellaneous expenses.............................. 4,406.34
-----------
Total..................................... $345,000.00
===========
</TABLE>
II-1
<PAGE>
<PAGE>
Item 26. Recent Sale of Unregistered Securities
1. (a) In August 1996, Ambient purchased substantially all of the
liabilities and the assets, properties, business and goodwill of Gen
Technologies, Inc ("GTI"), an affiliate of the Company. Prior to such
acquisition, in December 1995, GTI issued to Ephod Management, 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 the 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 to the following members of the investment fund:
<TABLE>
<S> <C>
75,000
Arnold Ackerman
Marcell Remery 10,000
Chip Adams 10,000
Nickolas Alleva Pension Plan 10,000
Marvin Barish 5,000
Cecilia Bennett 12,500
Elliot L. Brody 10,000
Grafton Cooper 5,000
Michael Cooper 10,000
Richard Denton 15,000
Stuart Elfland 10,000
Evelyn Fisher 10,000
Steven Gelbstein 10,000
Myron Glodenberg 2,500
Myron Glodenberg Profit Sharing 2,500
Yaakov Goldfeder 10,000
Joy Jacobs 12,500
Moshe Klapper 20,000
Peter Grabler 2,500
Dr. Edward Gross 2,500
Jack Hirschfield 2,500
Rahmin Kodsi 5,000
Michael Kubin 5,000
Richard Larry 17,500
Lewis Levine 2,500
Sheldon Margules 20,000
Solomon Mayer (DB Plan) 55,000
Larry Morris 10,000
</TABLE>
II-2
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Neve Yerushalayim 80,000
Rubin Morris 10,000
Wayne Saker 10,000
Saker Family Trust 30,000
Jeffrey Schondoff, Custodian for Renee Dean 25,000
Jeffrey Schondoff, Custodian for Zachary Dean 25,000
Walter Scott 37,500
John J. Senn 10,000
Yitzchok Stefansky 20,000
Sidney Teichman 20,000
Jerome Toder 12,500
Ulrich Wissman 7,500
--------
Total 650,000
========
</TABLE>
(b) In connection with this transaction, Ephod Management received
a consulting fee of $66,064 and a commission in the amount of $96,800.
(c) The shares of Ambient Corporation were issued to replace the
GTI stock after the acquisition described above in subsection (a) for no further
consideration.
(d) The Company believes that the shares of Common Stock were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended.
2. (a) 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 7% promissory note in the principal amount of $30,000 and 6,000
shares of Common Stock, at a purchase price of $30,000 per Unit, to the
following purchasers, all of whom have represented to the Company that they are
accredited investors:
<TABLE>
<S> <C>
Tom McCann IRA 6,000
Brock C. Akers 9,000
Ralph Mandarino 6,000
PJ Realty Trust, Ellen Gopin-Marcus Trustee 6,000
Philip Kenneth Wood 6,000
Edward J. Rodriguez 6,000
Lawrence and Karen Dalessandri 12,000
CLFS Equities LLP 6,000
Diane Zam 6,000
Donald Greenberg TTEF 6,000
Marc M. Feder 6,000
Robert Friedman 5,000
------
Total 80,000
======
</TABLE>
(b) The Company paid commissions (10%) and a non-accountable
expense allowance (3%) in the aggregate amount of approximately $52,000 to Roan
Capital Partners L.P.
II-3
<PAGE>
<PAGE>
(c) The gross proceeds from the 1997 Private Placement was
$400,000 (ascribing no value to the shares).
(d) The Company believes that the Units, notes and shares were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Sections 4(2) and 4(6) of the Securities
Act of 1933, as amended, and Rule 505 of Regulation D promulgated thereunder.
3. (a) In August 1996, the Company issued to Jacob Davidson,
president, chief executive officer and a director of the Company, 233,049 shares
of Common Stock.
(b) There were no underwriters with respect to this issuance.
(c) The shares were issued in consideration of services performed.
(d) The Company believes that the shares of Common Stock were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended.
4. (a) In August 1996, the Company issued to Elie Wurtman, secretary
and a director of the Company, 235,646 shares of Common Stock, which are held of
record by Pioneer Management Corporation, of which Mr. Wurtman is a principal.
(b) There were no underwriters with respect to this issuance.
(c) The shares were issued in consideration of services performed.
(d) The Company believes that the shares of Common Stock were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended.
5. (a) In August 1996 the Company issued to Noam Bordin, a former
employee of the Company, 50,000 shares of Common Stock.
(b) There were no underwriters with respect to this issuance.
(c) The shares were issued in consideration of services performed.
(d) The Company believes that the shares of Common Stock were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended.
6. (a) In August 1997, the Company issued to Yehuda Cern, an officer
of the Company, 84,167 shares of Common Stock.
(b) There were no underwriters with respect to this issuance.
(c) The shares were issued in consideration of services performed.
II-4
<PAGE>
<PAGE>
(d) The Company believes that the shares of Common Stock were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended.
7. (a) In October 1996, the Company issued to Adam Slater, an
employee of the Company, 25,000 shares of Common Stock.
(b) There were no underwriters with respect to this issuance.
(c) The shares were issued in consideration of services performed.
(d) The Company believes that the shares of Common Stock were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended.
8. (a) In March 1997, the Company issued to Aryeh Weinberg, chief
financial officer of the Company, 20,000 shares of Common Stock.
(b) There were no underwriters with respect to this issuance.
(c) The shares were issued in consideration of services performed.
(d) The Company believes that the shares of Common Stock were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended.
9. (a) In September 1996, the Company issued to Jodie Clements, an
employee of the Company, 5,000 shares of Common Stock.
(b) There were no underwriters with respect to this issuance.
(c) The shares were issued in consideration of services performed.
(d) The Company believes that the shares of Common Stock were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended.
10. (a) In October 1996, the Company issued to Edward Cohen, an
advisor of the Company, 50,000 shares of Common Stock.
(b) There were no underwriters with respect to this issuance.
(c) The shares were issued in consideration of services performed.
(d) The Company believes that the shares of Common Stock were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended.
II-5
<PAGE>
<PAGE>
11. (a) In October 1996, the Company issued to Tekol, Ltd., a
consultant to the Company, 42,083 shares of Common Stock.
(b) There were no underwriters with respect to this issuance.
(c) The shares were issued in consideration of services
performed.
(d) The Company believes that the shares of Common Stock were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended.
12. (a) In October 1996, the Company issued to George Kaplun, a key
employee of the Company, 26,933 shares of Common Stock.
(b) There were no underwriters with respect to this issuance.
(c) The shares were issued in consideration of services
performed.
(d) The Company believes that the shares of Common Stock were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended.
13. (a) In October 1996, the Company issued to Leo Yevilevich, a
former employee of the Company, 25,250 shares of Common Stock.
(b) There were no underwriters with respect to this issuance.
(c) The shares were issued in consideration of services
performed.
(d) The Company believes that the shares of Common Stock were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended.
14. (a) In October 1996, the Company issued to Leo Shleimovich, an
employee of the Company, 23,567 shares of Common Stock.
(b) There were no underwriters with respect to this issuance.
(c) The shares were issued in consideration of services
performed.
(d) The Company believes that the shares of Common Stock were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended.
15. (a) In August 1996, the Company issued to Vincent Park Holdings
59,000 shares of Common Stock.
(b) There were no underwriters with respect to this issuance.
II-6
<PAGE>
<PAGE>
(c) The shares were issued to Vincent Park as a founder of the
Company.
(d) The Company believes that the shares of Common Stock were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended.
16. (a) In August 1996, the Company issued to Machtec Limited 114,481
shares of Common Stock.
(b) There were no underwriters with respect to this issuance.
(c) The shares were issued to Machtec as a founder of the
Company.
(d) The Company believes that the shares of Common Stock were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended.
17. (a) In August 1996, the Company issued to Dalimore Consulting
Limited 105,219 shares of Common Stock.
(b) There were no underwriters with respect to this issuance.
(c) The shares were issued to Dalimore as a founder of the
Company.
(d) The Company believes that the shares of Common Stock were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended.
18. (a) In August 1996, the Company issued to Jarvis Development
Limited 108,785 shares of Common Stock.
(b) There were no underwriters with respect to this issuance.
(c) The shares were issued to Jarvis as a founder of the Company.
(d) The Company believes that the shares of Common Stock were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended.
19. (a) In August 1996, the Company issued to Coco Sand Trust 114,320
shares of Common Stock.
(b) There were no underwriters with respect to this issuance.
(c) The shares were issued to the Trust as a founder of the
Company.
II-7
<PAGE>
<PAGE>
(d) The Company believes that the shares of Common Stock were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended.
20. (a) In August 1996, the Company issued to International Investors
Group 66,000 shares of Common Stock.
(b) There were no underwriters with respect to this issuance.
(c) The shares were issued to the Group as a founder of the
Company.
(d) The Company believes that the shares of Common Stock were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended.
21. (a) In August 1996, the Company issued to The Galaxy Trust
107,333 shares of Common Stock.
(b) There were no underwriters with respect to this issuance.
(c) The shares were issued to the Trust as a founder of the
Company.
(d) The Company believes that the shares of Common Stock were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended.
22. (a) In October 1996, the Company issued to Yehudis Mayer, an
employee of the Company, 2,500 shares of Common Stock.
(b) There were no underwriters with respect to this issuance.
(c) The shares were issued in consideration of services
performed.
(d) The Company believes that the shares of Common Stock were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended.
23. (a) In August 1996, the Company issued to Meadow Blue Holdings,
Ltd. 100,000 shares of Common Stock.
(b) There were no underwriters with respect to this issuance.
(c) The shares were issued to Meadow as a founder of the Company.
(d) The Company believes that the shares of Common Stock were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended.
II-8
<PAGE>
<PAGE>
24. (a) In August 1996, the Company issued to Levitan, Ltd. 85,000
shares of Common Stock.
(b) There were no underwriters with respect to this issuance.
(c) The shares were issued to Levitan as a founder of the
Company.
(d) The Company believes that the shares of Common Stock were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended.
25. (a) In October 1997, the Company issued to Camden Management
Holdings, an advisor to the Company, 6,000 shares of Common Stock.
(b) There were no underwriters with respect to this issuance.
(c) The shares were issued in consideration of services
performed.
(d) The Company believes that the shares of Common Stock were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended.
26. (a) In November 1997, the Company issued to Malki Neuberg, a
consultant to the Company, 40,000 shares of Common Stock.
(b) There were no underwriters with respect to this issuance.
(c) The shares were issued in consideration of services
performed.
(d) The Company believes that the shares of Common Stock were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended.
Item 27. Exhibits
<TABLE>
<S> <C>
**1.1 Form of Underwriting Agreement
**1.2 Form of Underwriter's Warrant Agreement
**1.3 Form of Selected Dealer Agreement
**1.4 Form of Financial Consulting Agreement
**3.1 Certificate of Incorporation of the Company, as amended.
**3.2 By-Laws of the Company, as amended.
**3.3 Memorandum of Association of Ambient Israel.
**3.4 Articles of Association of Ambient Israel.
4.1 Specimen Stock Certificate
5.1 Securities Opinion of Baer Marks & Upham LLP.
10.1 Form of the Company's 1998 Stock Option Plan.
10.2 Form of Employment Agreement between the Company and Jacob Davidson.
</TABLE>
II-9
<PAGE>
<PAGE>
<TABLE>
<S> <C>
10.3 Employment Agreement between Ambient Israel and Dr. Yehuda Cern (re-filed to
replace previously filed Exhibit 10.3).
**10.4 Employment Agreement between Ambient Israel and Dr. George Kaplun.
10.5 Summary (in English) of principal terms of lease between Ambient Israel and
Jerusalem Technological Park.
10.6 Agreement dated August 1, 1996, between GenTechnologies, Inc. and Ambient
Corporation.
10.7 Agreement between GenTechnologies, Inc. and Alexander Rozin dated December 5,
1995.
10.8 Consulting Agreement with Tekol, Ltd.
10.9 Form of Cooperation Agreement dated January 1, 1998, between Delta Three Inc.
and Ambient Israel.
**21.1 Subsidiaries of the Company.
23.1 The consent of Baer Marks & Upham LLP (included in Exhibit 5.1).
23.2 The consent of Ephraim Abramson & Company is included in Part II of this
Registration Statement.
23.3 The consent of Luboshitz, Kasierer & Co., Member Firm of Andersen Worldwide,
independent public accountants, is included in Part II of this Registration Statement.
**24.1 Powers of Attorney.
</TABLE>
- ----------------------
** Previous filed
Item 28. Undertakings
The Company hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Act");
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement;
(iii) Include any additional or changed material information on
the plan of distribution.
(2) For determining liability under the Act, to treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) To file a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.
II-10
<PAGE>
<PAGE>
(4) To provide to the Underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as required by the Underwriters to permit prompt delivery to each
purchaser.
(5) Insofar as indemnification for liabilities arising under the Act
may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the small
business issuer of expenses incurred or paid by a Director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such Director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(6) For determining any liability under the Act, to treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the small business issuer under Rule 424(b)(1), or (4) or
497(h) under the Act as part of this registration statement as of the time the
Commission declared it effective.
(7) For determining any liability under the Act, to treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
II-11
<PAGE>
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the State of Israel, on the 22nd day of January, 1998.
AMBIENT CORPORATION
By: /s/ Jacob Davidson
--------------------------
Jacob Davidson
Chairman of the Board, President and
Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following persons in the
capacities and on the dates stated:
<TABLE>
<CAPTION>
Signature Title Date
---------- ----- ----
<S> <C> <C>
/s/ Jacob Davidson
------------------------------------- Chairman of the Board, President January 22, 1998
Jacob Davidson and Chief Executive Officer
(Principal Executive Officer)
/s/ * January 22, 1998
------------------------------------- Director and Secretary
Elie Wurtman
/s/ * Chief Financial Officer (Principal January 22, 1998
------------------------------------- Financial Officer and Principal
Aryeh Weinberg Accounting Officer)
* /s/ Jacob Davidson
-------------------------------------
By Jacob Davidson,
as attorney in fact
</TABLE>
II-12
<PAGE>
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
As independent public accountants, we hereby consent to the use of
our report (and to all references to our firm) included in or made a part of
this Amendment No. 1 to the Registration Statement of Ambient Corporation on
Form SB-2.
/s/ Luboshitz, Kasierer & Co.
-----------------------------------------
Luboshitz, Kasierer & Co.,
Member Firm of Andersen Worldwide
Tel-Aviv, Israel
January 22, 1998
II-13
<PAGE>
<PAGE>
CONSENT OF COUNSEL
We hereby consent to the reference to our firm under the caption
"Legal Matters" in the Prospectus contained in the Registration Statement of
Ambient Corporation on Form SB-2.
/s/ Ephraim Abramson
----------------------------------
Ephraim Abramson & Company
Jerusalem, Israel
January 22, 1998
II-14
STATEMENT OF DIFFERENCES
------------------------
The trademark symbol shall be expressed as............................ 'tm'
The copyright symbol shall be expressed as............................ 'c'
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
-------- ----------- -----
<S> <C> <C>
**1.1 Form of Underwriting Agreement
**1.2 Form of Underwriter's Warrant Agreement
**1.3 Form of Selected Dealer Agreement
**1.4 Form of Financial Consulting Agreement
**3.1 Certificate of Incorporation of the Company, as amended.
**3.2 By-Laws of the Company, as amended.
**3.3 Memorandum of Association of Ambient Israel.
**3.4 Articles of Association of Ambient Israel.
4.1 Specimen Stock Certificate
5.1 Securities Opinion of Baer Marks & Upham LLP.
10.1 Form of the Company's 1998 Stock Option Plan.
10.2 Form of Employment Agreement between the Company and Jacob Davidson.
10.3 Employment Agreement between Ambient Israel and Dr. Yehuda Cern (re-filed to
replace previously filed Exhibit 10.3).
**10.4 Employment Agreement between Ambient Israel and Dr. George Kaplun.
10.5 Summary (in English) of principal terms of lease between Ambient Israel and
Jerusalem Technological Park.
10.6 Agreement dated August 1, 1996, between GenTechnologies, Inc. and Ambient
Corporation.
10.7 Agreement between GenTechnologies, Inc. and Alexander Rozin dated December 5,
1995.
10.8 Consulting Agreement with Tekol, Ltd.
10.9 Form of Cooperation Agreement dated January 1, 1998, between Delta Three Inc.
and Ambient Israel.
**21.1 Subsidiaries of the Company.
23.1 The consent of Baer Marks & Upham LLP (included in Exhibit 5.1).
23.2 The consent of Ephraim Abramson & Company is included in Part II of this
Registration Statement.
23.3 The consent of Luboshitz, Kasierer & Co., Member Firm of Andersen Worldwide,
independent public accountants, is included in Part II of this Registration Statement.
**24.1 Powers of Attorney.
</TABLE>
- ----------
** Previously filed.
II-15
<PAGE>
<PAGE>
H-54620--AMERICAN BANK NOTE COMPANY--S9-6822 FRONT--THIRD PROOF JANUARY 15, 1998
NUMBER SHARES
AM AMBIENT CORPORATION
INCORPORATED UNDER THE LAWS SEE REVERSE FOR
OF THE STATE OF DELAWARE CERTAIN DEFINITIONS
CUSIP 02318N 10 2
This Certifies that
is the owner of
fully paid and non-assessable shares of Common Stock,
par value $.001 per share, of
AMBIENT CORPORATION
transferable on the books of the Corporation by the holder hereof
in person or by duly authorized attorney upon surrender of this
L certificate properly endorsed.
This certificate is not valid unless countersigned by the Transfer Agent
and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
[signature] AMBIENT CORPORATION [signature]
CHAIRMAN OF THE BOARD, PRESIDENT CORPORATE
AND CHIEF EXECUTIVE OFFICER SEAL DIRECTOR AND SECRETARY
1996
DELAWARE
COUNTERSIGNED AND REGISTERED:
AMERICAN SECURITIES TRANSFER & TRUST, INC.
P.O. Box 1596
Denver, Colorado 80201
TRANSFER AGENT AND REGISTRAR,
BY
AUTHORIZED OFFICER
'c' SECURITY-COLUMBIAN UNITED STATES BANKNOTE CORPORATION 1960
<PAGE>
<PAGE>
H-54620--AMERICAN BANK NOTE COMPANY--S9-6822 BACK--FIRST PROOF JANUARY 8, 1998
The Corporation will furnish without charge to each stockholder who so
requests a statement of the designations, powers preferences and relative
participating, optional or other special rights of each class of stock or series
thereof of the Corporation and the qualifications, limitations or restrictions
of such preferences and/or rights. Such request may be made to the Corporation
or the Transfer Agent.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN - as tenants in common UNIF GIFT MIN ACT-...........Custodian............
COM - as tenants by the entireties (Cust) (Minor)
TEN ENT - as joint tenants with right under Uniform Gifts to Minors
JT TEN of survivorship and not as tenants Act..........................
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
--------------------------------------
________________________________________________________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated _______________________________
___________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
_______________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP
IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE>
<PAGE>
5700
January 23, 1998
Ambient Corporation
Jerusalem Technological Park Building One
Malha, Jerusalem, Israel
Re: Registration Statement on Form SB-2
----------------------------------------
Gentlemen:
We have acted as counsel to Ambient Corporation, a Delaware
corporation (the "Company"), in connection with (a) the proposed public offering
by the Company of up to 603,750 shares of Common Stock, $.001 par value (the
"Common Stock"), including up to 78,750 shares of Common Stock solely to cover
over-allotments; and (b) the issuance by the Company to Roan Capital Partners
L.P. (the "Underwriter") of warrants (the "Underwriter's Warrants") to purchase
up to 52,500 shares of Common Stock, pursuant to a registration statement on
Form SB-2 (the "Registration Statement"), as amended, originally filed by the
Company with the Securities and Exchange Commission on November 12, 1997,
pursuant to the Securities Act of 1933, as amended.
The shares of Common Stock issuable pursuant to the above proposed
public offering are hereinafter referred to as the "Offered Shares." The shares
of Common Stock issuable upon exercise of the Underwriter's Warrants are
hereinafter referred to as the "Underwriter's Warrant Shares." The Offered
Shares, the Underwriter's Warrants and the Underwriter's Warrant Shares are
hereinafter referred to as the "Securities."
In connection with the foregoing, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of the
Certificate of Incorporation of the Company, as amended, the By-laws of the
Company, as amended, the form of Underwriting Agreement, and the form of
Underwriter's Warrant filed as exhibits to the Registration Statement, your
records of corporate proceedings, and such other documents as we have deemed
necessary or appropriate as a basis for the opinions set forth below. In such
examination, we have assumed the genuineness of all signatures, the authenticity
of all documents submitted to us as originals, the accuracy and completeness
of all
<PAGE>
<PAGE>
Ambient Corporation
January 23, 1998
Page 2
documents submitted to us as copies and the authenticity of the originals
of such latter documents. As to any facts material to such opinions which we
did not independently establish or verify, we have relied upon statements or
representations of officers and other representatives of the Company, public
officials or others.
Based upon the foregoing, we are of the opinion that upon the
effective date of the Registration Statement the issuance of the Securities will
have been duly authorized by the Board of Directors of the Company, and the
Offered Shares and the Underwriter's Warrant Shares when issued and paid for, as
contemplated by the Registration Statement and as provided for in the
Underwriter's Warrants will be validly issued, fully paid and non-assessable and
the Underwriter's Warrants when issued as contemplated by the Registration
Statement, will be legally issued and binding obligations of the Company.
We hereby consent to the reference to our name in the Registration
Statement under the caption "Legal Matters" and further consent to the inclusion
of this opinion as Exhibit 5.1 to the Registration Statement. In giving such
consent, we do not thereby concede that we are in the category of persons whose
consent is required under Section 7 of the Securities Act, or the rules and
regulations thereunder, or that we are "experts" within the meaning of the
Securities Act or such rules and regulations.
Very truly yours,
/s/ BAER MARKS & UPHAM LLP
--------------------------
BAER MARKS & UPHAM LLP
SFO;JWD
<PAGE>
<PAGE>
EXHIBIT 10.1
AMBIENT CORPORATION
1998 STOCK OPTION PLAN
1. PURPOSE
The purpose of this plan (the "Plan") is to secure for AMBIENT
CORPORATION (the "Company") and its stockholders the benefits arising from
capital stock ownership by employees, officers, directors, consultants and other
service providers of the Company or an Affiliate (as that term is defined in the
Plan) who are expected to contribute to the Company's future growth and success.
The Plan is also designed to attract and retain other persons who will provide
services to the Company. Those provisions of the Plan which make express
reference to Section 422 of the Internal Revenue Code of 1986, as amended or
replaced from time to time (the "Code"), shall apply only to Incentive Stock
Options (as that term is defined in the Plan).
2. TYPE OF OPTIONS AND ADMINISTRATION
(a) Types of Options. Options granted pursuant to the Plan shall
be authorized by action of the Board of Directors (the "Board") of the Company
(or the committee appointed by the Board in accordance with Section 2(b) below)
and may be either incentive stock options ("Incentive Stock Options") intended
to meet the requirements of Section 422 of the Code or non-statutory options
which are not intended to meet the requirements of Section 422 of the Code
("Non-Qualified Options").
(b) Administration. The Plan will be administered by the Board or
by a committee consisting of two or more directors each of whom shall be a
"non-employee director," within the meaning of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor rule ("Rule 16b-3"), and an "outside director," within the meaning of
Treasury Regulation Section 1.162-27(e)(3) promulgated under Section 162(m) of
the Code, (the "Committee") appointed by the Board, in each case whose
construction and interpretation of the terms and provisions of the Plan shall be
final, conclusive and binding upon the optionee and all other persons interested
or claiming interests under the Plan. If the Board determines to create a
Committee to administer the Plan, the delegation of powers to the Committee
shall be consistent with applicable laws or regulations (including, without
limitation, applicable state law and Rule 16b-3). The Board or the Committee may
in its sole discretion grant options to purchase shares of the Company's Common
Stock, $0.001 par value per share ("Common Stock"), and issue shares upon
exercise of such options as provided in the Plan. The Board or the Committee
shall have authority, subject to the express provisions of the Plan, to construe
the respective option agreements and
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the Plan; to prescribe, amend and rescind rules and regulations relating to the
Plan; to determine the terms and provisions of the respective option agreements,
which need not be identical; and to make all other determinations in the
judgment of the Board or the Committee necessary or desirable for the
administration of the Plan. The Board or the Committee may correct any defect or
supply any omission or reconcile any inconsistency in the Plan or in any option
agreement in the manner and to the extent it shall deem expedient to carry the
Plan into effect and it shall be the sole and final judge of such expediency. No
director or person acting pursuant to authority delegated by the Board shall be
liable for any action or determination under the Plan made in good faith.
3. ELIGIBILITY
Options may be granted to persons who are, at the time of grant,
employees, officers, directors, consultants or other service providers of the
Company or any parent or subsidiary of the Company as defined in Sections 424(e)
and 424(f) of the Code ("Affiliate"), provided that Incentive Stock Options may
only be granted to individuals who are employees (within the meaning of Section
3401(c) of the Code) of the Company or any Affiliate. Options may also be
granted to other persons, provided that such options shall be Non-Qualified
Options. A person who has been granted an option may, if he or she is otherwise
eligible, be granted additional options if the Board or the Committee shall so
determine. Notwithstanding anything in the Plan to the contrary, no employee of
the Company or an Affiliate shall be granted options with respect to more than
150,000 shares of Common Stock during any calendar year.
4. STOCK SUBJECT TO PLAN
The stock subject to options granted under the Plan shall be
shares of authorized but unissued or reacquired Common Stock. Subject to
adjustment as provided in Section 15 below, the maximum number of shares of
Common Stock of the Company which may be issued and sold under the Plan is
250,000. If an option granted under the Plan shall expire, terminate or is
cancelled for any reason without having been exercised in full, the unpurchased
shares subject to such option shall again be available for subsequent option
grants under the Plan.
5. FORMS OF OPTION AGREEMENTS
As a condition to the grant of an option under the Plan, each
recipient of an option shall execute an option agreement in such form not
inconsistent with the Plan and as may be approved by the Board or the Committee.
The terms of such option agreements may differ among recipients.
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6. PURCHASE PRICE
(a) General. The purchase price per share of Common Stock
issuable upon the exercise of an option shall be determined by the Board or the
Committee at the time of grant of such option, provided, however, that such
exercise price shall not be less than 100% of the Fair Market Value (as
hereinafter defined) of such Common Stock at the time of grant of such option,
or less than 110% of such Fair Market Value in the case of an option granted to
a "10% Shareholder" (as defined in Section 11(b)). "Fair Market Value" of a
share of Common Stock of the Company as of a specified date for purposes of the
Plan shall mean the closing price of a share of the Common Stock on the
principal securities exchange (including but not limited to the Nasdaq Stock
Market or the Nasdaq National Market) on which such shares are traded on the day
immediately preceding the date as of which Fair Market Value is being
determined, or on the next preceding date on which such shares are traded if no
shares were traded on such immediately preceding day, or if the shares are not
traded on a securities exchange, Fair Market Value shall be deemed to be the
average of the high bid and low asked prices of the shares in the
over-the-counter market on the day immediately preceding the date as of which
Fair Market Value is being determined or on the next preceding date on which
such high bid and low asked prices were recorded. If the shares are not publicly
traded, Fair Market Value of a share of Common Stock (including, in the case of
any repurchase of shares, any distributions with respect thereto which would be
repurchased with the shares) shall be determined in good faith by the Board. In
no case shall Fair Market Value be determined with regard to restrictions other
than restrictions which, by their terms, will never lapse.
(b) Payment of Purchase Price. Options granted under the Plan may
provide for the payment of the exercise price by delivery of cash or a check to
the order of the Company in an amount equal to the exercise price of such
options, or by any other means which the Board determines are consistent with
the purpose of the Plan and with applicable laws and regulations (including,
without limitation, the provisions of Rule 16b-3).
7. EXERCISE OPTION PERIOD
Subject to earlier termination as provided in the Plan, each
option and all rights thereunder shall expire on such date as determined by the
Board or the Committee and set forth in the applicable option agreement,
provided that such date shall not be later than ten (10) years after the date on
which the option is granted.
8. EXERCISE OF OPTIONS
Each option granted under the Plan shall be exercisable either in
full or in installments at such time or times and during such period as shall be
set forth in the option agreement evidencing such option, subject to the
provisions of the Plan. Subject to the requirements in the immediately preceding
sentence, if an option is not at the time of grant immediately exercisable, the
Board or the Committee may (i) in the agreement evidencing such option, provide
for the acceleration of the exercise date or dates of the subject option upon
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the occurrence of specified events and/or (ii) at any time prior to the complete
termination of an option, accelerate the exercise date or dates of such option.
9. NONTRANSFERABILITY OF OPTIONS
No option granted under this Plan shall be assignable or
otherwise transferable by the optionee, except by will or by the laws of descent
and distribution. An option may be exercised during the lifetime of the optionee
only by the optionee.
10. EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP
(a) Except as provided in Section 11(d) with respect to Incentive
Stock Options and except as may otherwise be determined by the Board or the
Committee at the date of grant of an option, and subject to the provisions of
the Plan, an optionee may exercise an option at any time within three (3) months
following the termination of the optionee's employment or other relationship
with the Company and its Affiliates or within one (1) year if such termination
was due to the death or disability (within the meaning of Section 22(e)(3) of
the Code or any successor provisions thereto) of the optionee (to the extent
such option is otherwise exercisable at the time of such termination) but in no
event later than the expiration date of the option.
(b) Notwithstanding the foregoing and except as may otherwise be
determined by the Board or the Committee, if the termination of the optionee's
employment or other relationship with the Company and/or its Affiliate is for
cause, the option shall expire immediately upon such termination. The Board or
the Committee shall have the power to determine, in its sole discretion, what
constitutes a termination for cause, whether an optionee has been terminated for
cause, and the date upon which such termination for cause occurs. Any such
determinations shall be final and conclusive and binding upon the optionee and
all other persons interested or claiming interests under the Plan.
11. INCENTIVE STOCK OPTIONS
Options granted under the Plan which are intended to be Incentive
Stock Options shall be subject to the following additional terms and conditions:
(a) Express Designation. All Incentive Stock Options granted
under the Plan shall, at the time of grant, be specifically designated as such
in the option agreement covering such Incentive Stock Options.
(b) 10% Shareholder. If any employee to whom an Incentive Stock
Option is to be granted under the Plan is, at the time of the grant of such
option, the owner of stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company (after taking into account the
attribution of stock ownership rules of Section 424(d)
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of the Code), then the following special provisions shall be applicable to the
Incentive Stock Option granted to such individual:
(i) the purchase price per share of the Common Stock subject
to such Incentive Stock Option shall not be less than 110% of the Fair
Market Value of one share of Common Stock at the time of grant; and
(ii) the option exercise period shall not exceed five (5)
years from the date of grant.
(c) Dollar Limitation. For so long as the Code shall so provide,
options granted to any employee under the Plan (and any other incentive stock
option plans of the Company) which are intended to constitute Incentive Stock
Options shall not constitute Incentive Stock Options to the extent that such
options, in the aggregate, become exercisable for the first time in any one
calendar year for shares of Common Stock with an aggregate Fair Market Value, as
of the respective date or dates of grant, of more than $100,000.
(d) Termination of Employment, Death or Disability. No Incentive
Stock Option may be exercised unless, at the time of such exercise, the optionee
is, and has been continuously since the date of grant of his or her option,
employed by the Company or an Affiliate, except that:
(i) an Incentive Stock Option may be exercised within the
period of three (3) months after the date the optionee ceases to be an
employee of the Company or an Affiliate (or within such lesser period as
may be specified in the applicable option agreement), to the extent it
is otherwise exercisable at the time of such cessation,
(ii) if the optionee dies while in the employ of the Company
or an Affiliate, or within three (3) months after the optionee ceases to
be such an employee, the Incentive Stock Option may be exercised by the
person to whom it is transferred by will or the laws of descent and
distribution within the period of one (1) year after the date of death
(or within such lesser period as may be specified in the applicable
option agreement), to the extent it is otherwise exercisable at the time
of the optionee's death, and
(iii) if the optionee becomes disabled (within the meaning of
Section 22(e)(3) of the Code or any successor provisions thereto) while
in the employ of the Company or an Affiliate, the Incentive Stock Option
may be exercised within the period of one (1) year after the date the
optionee ceases to be such an employee because of such disability (or
within such lesser period as may be specified in the applicable option
agreement), to the extent it is otherwise exercisable at the time of
such cessation.
For all purposes of the Plan and any option granted hereunder, "employment"
shall be defined in accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any successor regulations). Notwithstanding the
foregoing provisions, no Incentive Stock Option may be exercised after its
expiration date.
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12. ADDITIONAL PROVISIONS
(a) Additional Option Provisions. The Board or the Committee may,
in its sole discretion, include additional provisions in option agreements
covering options granted under the Plan, including without limitation,
restrictions on transfer, repurchase rights, rights of first refusal,
commitments to pay cash bonuses or to make, arrange for or guaranty loans or to
transfer other property to optionees upon exercise of options, or such other
provisions as shall be determined by the Board or the Committee, provided that
such additional provisions shall not be inconsistent with the requirements of
applicable law and such additional provisions shall not cause any Incentive
Stock Option granted under the Plan to fail to qualify as an Incentive Stock
Option within the meaning of Section 422 of the Code.
(b) Acceleration, Extension, Etc. The Board or the Committee may,
in its sole discretion (i) accelerate the date or dates on which all or any
particular option or options granted under the Plan may be exercised, or (ii)
extend the dates during which all, or any particular, option or options granted
under the Plan may be exercised, provided, however, that no such acceleration or
extension shall be permitted if it would (i) cause any Incentive Stock Option
granted under the Plan to fail to qualify as an Incentive Stock Option within
the meaning of Section 422 of the Code, or (ii) cause the Plan or any option
granted under the Plan to fail to comply with Rule 16b-3 (if applicable to the
Plan or such option).
13. GENERAL RESTRICTIONS
(a) Investment Representations. The Board or the Committee may
require any person to whom an option is granted, as a condition of exercising
such option or award, to give written assurances in substance and form
satisfactory to the Board or the Committee to the effect that such person is
acquiring the Common Stock subject to the option or award for his or her own
account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Board or the
Committee deems necessary or appropriate in order to comply with applicable
federal and state securities laws, or with covenants or representations made by
the Company in connection with any public offering of its Common Stock,
including any "lock-up" or other restriction on transferability.
(b) Compliance With Securities Law. Each option shall be subject
to the requirement that if, at any time, counsel to the Company shall determine
that the listing, registration or qualification of the shares subject to such
option or award upon any securities exchange or automated quotation system or
under any state or federal law, or the consent or approval of any governmental
or regulatory body, or that the disclosure of non-public information or the
satisfaction of any other condition, is necessary as a condition of, or in
connection with the issuance or purchase of shares thereunder, except to the
extent expressly permitted by the Board, such option or award may not be
exercised, in whole or in part, unless such listing, registration,
qualification, consent or approval or satisfaction of such condition shall have
been effected or obtained on conditions acceptable to the Board or the
Committee. Nothing herein shall be deemed to require the Company to apply for or
to obtain such listing, registration, qualification, consent or approval, or to
satisfy such condition.
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In addition, Common Stock issued upon the exercise of options may bear such
legends as the Company may deem advisable to reflect restrictions which may be
imposed by law, including, without limitation, the Securities Act of 1933, as
amended, any state "blue sky" or other applicable federal or state securities
law.
14. RIGHTS AS A STOCKHOLDER
The holder of an option shall have no rights as a stockholder
with respect to any shares covered by the option (including, without limitation,
any right to vote or to receive dividends or non-cash distributions with respect
to such shares) until the effective date of exercise of such option and then
only to the extent of the shares of Common Stock so purchased. No adjustment
shall be made for dividends or other rights for which the record date is prior
to the date of exercise.
15. ADJUSTMENT PROVISIONS FOR RECAPITALIZATIONS,
REORGANIZATIONS AND RELATED TRANSACTIONS
(a) Recapitalizations and Related Transactions. If, through or as
a result of any recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction (i) the outstanding shares of
Common Stock are increased, decreased or exchanged for a different number or
kind of shares or other securities of the Company, or (ii) additional shares or
new or different shares or other non-cash assets are distributed with respect to
such shares of Common Stock or other securities, an appropriate and
proportionate adjustment shall be made in (x) the maximum number and kind of
shares reserved for issuance under or otherwise referred to in the Plan, (y) the
number and kind of shares or other securities subject to any then-outstanding
options under the Plan, and (z) the price for each share subject to any
then-outstanding options under the Plan, without changing the aggregate purchase
price as to which such options remain exercisable. Notwithstanding the
foregoing, no adjustment shall be made pursuant to this Section 15 if such
adjustment (A) would cause any Incentive Stock Option granted under the Plan to
fail to qualify as an Incentive Stock Option within the meaning of Section 422
of the Code, (B) would cause the Plan or any option granted under the Plan to
fail to comply with Rule 16b-3 (if applicable to the Plan or such option), or
(C) would be considered as the adoption of a new plan requiring stockholder
approval.
(b) Board Authority to Make Adjustments. Any adjustments under
this Section 15 will be made by the Board or the Committee, whose determination
as to what adjustments, if any, will be made and the extent thereof will be
final, binding and conclusive. No fractional shares will be issued under the
Plan on account of any such adjustments.
16. NO EMPLOYMENT RIGHTS
Nothing contained in the Plan or in any option agreement shall
confer upon any optionee any right with respect to the continuation of his or
her employment or other
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relationship with the Company or an Affiliate or interfere in any way with the
right of the Company or an Affiliate at any time to terminate such employment or
relationship or to increase or decrease the compensation of the optionee.
17. AMENDMENT, MODIFICATION OR TERMINATION OF THE PLAN
(a) The Board may at any time modify, amend or terminate the
Plan, provided that to the extent required by applicable law, any such
modification, amendment or termination shall be subject to the approval of the
stockholders of the Company.
(b) The modification, amendment or termination of the Plan shall
not, without the consent of an optionee, affect his or her rights under an
option previously granted to him or her. With the consent of the optionee
affected, the Board or the Committee may amend or modify outstanding option
agreements in a manner not inconsistent with the Plan. Notwithstanding the
foregoing, the Board shall have the right (but not the obligation), without the
consent of the optionee affected, to amend or modify (i) the terms and
provisions of the Plan and of any outstanding Incentive Stock Option agreements
to the extent necessary to qualify any or all such options for such favorable
federal income tax treatment (including deferral of taxation upon exercise) as
may be afforded incentive stock options under Section 422 of the Code, (ii) the
terms and provisions of the Plan and the option agreements entered into in
connection with any outstanding options to the extent necessary to ensure the
qualification of the Plan and such options under Rule 16b-3 (if applicable to
the Plan and such options), and (iii) the terms and provisions of the Plan and
the option agreements entered into in connection with any outstanding options to
the extent that the Board determines necessary to preserve the deduction of
compensation paid to certain optionees who are "covered employees," within the
meaning of Treasury Regulation Section 1.162-27(c)(2), as a result of the grant
or exercise of options under the Plan.
18. WITHHOLDING
(a) The Company shall have the right to deduct and withhold from
payments or distributions of any kind otherwise due to the optionee any federal,
state or local taxes of any kind required by law to be so deducted and withheld
with respect to any shares issued upon exercise of options under the Plan.
Subject to the prior approval of the Company, which may be withheld by the
Company in its sole discretion, the optionee may elect to satisfy such
obligations, in whole or in part by (i) causing the Company to withhold shares
of Common Stock otherwise issuable pursuant to the exercise of an option, (ii)
delivering to the Company shares of Common Stock already owned by the optionee,
or (iii) delivering to the Company cash or a check to the order of the Company
in an amount equal to the amount required to be so deducted and withheld. The
shares delivered in accordance with method (ii) above or withheld in accordance
with method (i) above shall have a Fair Market Value equal to such withholding
obligation as of the date that the amount of tax to be withheld is to be
determined. An optionee who has made (with the Company's approval) an election
pursuant to method (i) or (ii) of this Section 18(a) may only satisfy his or her
withholding obligation
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with shares of Common Stock which are not subject to any repurchase, forfeiture,
unfulfilled vesting or other similar requirements.
(b) The acceptance of shares of Common Stock upon exercise of an
Incentive Stock Option shall constitute an agreement by the optionee (i) to
notify the Company if any or all of such shares are disposed of by the optionee
within two (2) years from the date the option was granted or within one (1) year
from the date the shares were issued to the optionee pursuant to the exercise of
the option, and (ii) if required by law, to remit to the Company, at the time of
and in the case of any such disposition, an amount sufficient to satisfy the
Company's federal, state and local withholding tax obligations with respect to
such disposition, whether or not, as to both (i) and (ii), the optionee is in
the employ of the Company or an Affiliate at the time of such disposition.
19. CANCELLATION AND NEW GRANT OF OPTIONS, ETC.
The Board or the Committee shall have the authority to effect, at
any time and from time to time, with the consent of the affected optionee(s) the
(i) cancellation of any or all outstanding options under the Plan and the grant
in substitution therefor of new options under the Plan (or any successor stock
option plan of the Company) covering the same or different numbers of shares of
Common Stock and having an option exercise price per share which may be lower or
higher than the exercise price per share of the cancelled options, or (ii)
amendment of the terms of the option agreements entered into in connection with
any and all outstanding options under the Plan to provide an option exercise
price per share which is higher or lower than the then-current exercise price
per share of such outstanding options.
20. EFFECTIVE DATE AND DURATION OF THE PLAN
(a) Effective Date. The Plan shall become effective when adopted
by the Board, but no Incentive Stock Option granted under the Plan shall become
exercisable unless and until the Plan shall have been approved by the Company's
stockholders. If such stockholder approval is not obtained within twelve (12)
months after the date of the Board's adoption of the Plan, no options previously
granted under the Plan shall be deemed to be Incentive Stock Options and no
Incentive Stock Options shall be granted thereafter. Amendments to the Plan
shall become effective as of the latest of (i) the date of adoption by the
Board, (ii) the date set forth in the amendments or (iii) in the case of any
amendment requiring stockholder approval (as set forth in Section 17), the date
such amendment is approved by the Company's stockholders. Notwithstanding the
foregoing, no Incentive Stock Option granted on or after the effective date of
such amendment shall become exercisable unless and until such amendment shall
have been approved by the Company's stockholders. If such stockholder approval
is not obtained within twelve (12) months of the Board's adoption of such
amendment, no options granted on or after the effective date of such amendment
shall be deemed Incentive Stock Options and no Incentive Stock Options shall be
granted thereafter. Subject to above limitations, options may be granted under
the Plan at any time after the effective date of the Plan and before the date
fixed for termination of the Plan.
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(b) Termination. Unless sooner terminated by the Board, the Plan
shall terminate upon the close of business on the day next preceding the tenth
anniversary of the date of its adoption by the Board. After termination of the
Plan, no further options may be granted under the Plan; provided, however, that
such termination will not affect any options granted prior to termination of the
Plan.
21. GOVERNING LAW
The provisions of this Plan shall be governed and construed in
accordance with the laws of the State of New York without regard to the
principles thereof relating to the conflicts of laws.
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EMPLOYMENT AGREEMENT
AGREEMENT, dated as of January __, 1998 between AMBIENT
CORPORATION, ("Ambient") a Delaware corporation with offices at Jerusalem
Technological Park Building One, Malha, Jerusalem, Israel (the "Company"), and
JACOB DAVIDSON, an individual residing at ___________ ("Executive"):
W I T N E S S E T H
WHEREAS, the Company desires to employ Executive upon the
terms and conditions of this Employment Agreement;
WHEREAS, Executive desires to be employed by the Company upon
the terms and conditions of this Employment Agreement;
NOW, THEREFORE, in consideration of the mutual provisions,
representations and warranties set forth below, and for other good and valuable
consideration, it is hereby agreed as follows:
1. Employment. Subject to the terms and conditions of this
Agreement the Company employs Executive and Executive hereby accepts such
employment.
2. Term. Executive shall be employed under this Agreement for
a period of two years commencing on the date hereof (such period, and any
extension thereof pursuant to this Section 2, is referred to herein as the
"Term"), unless sooner terminated as hereinafter set forth. Subject to the
provisions of Section 8, after the expiration of such initial period, this
Agreement shall automatically be renewed for successive one-year periods, on all
the remaining terms and conditions set forth herein, unless either party elects
not to renew this Agreement by giving written notice to the other at least 90
days before a scheduled expiration date.
3. Position and Duties. Executive shall serve as the Chairman
of the Board of Directors, President and Chief Executive Officer of the Company
and its subsidiary, Ambient Israel (all references hereinafter to the "Company"
shall include Ambient Israel unless the context clearly requires otherwise). In
such capacity Executive shall perform the service and duties required of
Executive and shall perform such other services and duties, consistent with such
position as from time to time may be prescribed by the Board of Directors of the
Company (the "Board"). During the Term, Executive shall perform and discharge
well and faithfully all duties that may be assigned to him by the Company from
time to time in accordance with this Agreement to the reasonable satisfaction of
the Company, and Executive shall devote his best talents, efforts and abilities
to the
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performance of his duties hereunder. Executive shall devote at least 75% of his
business time to the Company and, without the express prior written consent of
the Board, Executive shall have no employment or related outside business
activities whatsoever other than those activities previously disclosed to the
Board as of the date of this Agreement.
4. Compensation. (a) Executive shall be paid a base salary of
$__________ per year during the Term (the "Base Salary"), as convertible into
new Israeli shekels pursuant to the applicable exchange rate on the date of
payment. The Company shall pay the Base Salary to Executive in equal
semi-monthly installments. The Base Salary shall be reviewed periodically by the
Board and shall be subject to such increases as the Board, in its sole
discretion, from time to time may determine.
(b) In addition to the Base Salary, the
Executive shall be entitled to such bonus or bonuses as the Board in its
discretion may determine to award to Executive from time to time. The amount
of any bonus shall be prorated for a fraction of the year.
(c) All payments required to be made by the
Company to Executive under this Agreement shall be subject to withholding
taxes, social security and other payroll deductions in accordance with the
Company's policies applicable to employees of the Company, the provisions of
applicable benefit plans and applicable law.
5. Benefit Plans. During the term of this Agreement, Executive
shall be eligible to participate, subject to meeting any eligibility
requirements, in the Company's benefit plans and programs in effect from time to
time and made available by the Company to its senior employees (as the same may
be supplemented, amended or replaced, the "Benefit Plans"). The Company shall
have the right, from time to time, in its discretion, to the extent permitted by
applicable law, to supplement, amend, replace or terminate any or all of the
benefit plans and programs then in effect, reduce the benefits provided
thereunder, or increase the amount of Executive's contribution required
thereunder. Any benefits to which Executive may be entitled under the foregoing
plans shall be provided to him in accordance with the respective terms thereof.
6. Vacations; Holidays; and Sick Days. (a) Executive shall be
entitled to ___________ days paid vacation during each year of the term of this
Agreement. Such days must be taken at times mutually convenient to the Company
and Executive and are subject to the reasonable advance approval of the Company.
All requests for such days shall be made by Executive in accordance with the
Company's policies in effect from time to time. Unused vacation days may not be
carried over to succeeding years of employment.
(b) Executive shall also be entitled, with pay,
to those holidays regularly celebrated in Israel and for which the Israeli
office of the Company shall be closed.
(c) Executive shall be entitled to ______ (__)
days paid time due to Executive's illness in each year of the Executive's
employment. All requests for sick days
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shall be made by Executive in accordance with the Company's policies in effect
from time to time.
7. Expenses. During the term of this Agreement, the
Company shall pay or reimburse Executive promptly for all reasonable business
expenses actually incurred or paid by Executive in the performance of his
services hereunder in accordance with the Company's policy for reimbursements.
8. Termination. The employment of Executive may be
terminated prior to the expiration of the Term in the manner described in this
Section 8.
(a) Certain Definitions. For purposes of this
Agreement, the following terms shall have the following meanings:
(i) An "Affiliate" of any Person means
any other Person directly or indirectly through one or more intermediary
Persons, controlling, controlled by or under common control with such Person.
For purposes of this definition, "control" shall mean the power to direct the
management and policies of such Person, directly or indirectly, by or through
stock ownership, agency or otherwise, or pursuant to or in connection with an
agreement, arrangement or understanding (written or oral) with one or more other
Persons by or through stock ownership, agency or otherwise; and the terms
"controlling" and "controlled" shall have meanings correlative to the foregoing.
(ii) "Cause" means the occurrence of any
of the following events:
a. Executive neglects to
perform any of his material duties hereunder, breaches any of the other material
terms of this Agreement, or fails or refuses to comply with reasonable
directives given to him from time to time by the Board of the Company and fails
to cure such breach within the time period given to him by the Board, if any, to
cure such breach;
b. Executive is convicted of
a crime involving moral turpitude whether or not committed in the course of
performing services for the Company;
c. Executive is determined,
by the Board in its reasonable determination, to be dependent on the use of
drugs and alcohol;
d. Executive commits an act of
fraud, embezzlement, dishonesty, misappropriation, disloyalty or breach of
fiduciary duty against the Company or any Affiliate in the reasonable
determination of the Board;
e. Executive is convicted of
any felony under applicable law or has entered a plea of guilty or nolo
contendere with respect thereto or Executive is convicted of another crime which
in the reasonable determination of the Board
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adversely affects Executive's performance of his duties and responsibilities
under this Agreement or adversely affects the reputation of the Company or any
of its Affiliates; or
f. Executive shall breach his
obligations under Sections 9 and 11 hereunder.
(iii) "Person" means any individual,
corporation, partnership, association, joint-stock company, trust,
unincorporated organization, joint venture, entity, court or government (or
political subdivision or agency thereof).
(b) Termination by the Company for Cause.
The Company shall have the right to terminate the employment of Executive for
Cause by written notice to Executive specifying the particulars of the conduct
of Executive forming the basis for such termination.
(c) Termination upon Death. The employment of
Executive hereunder shall terminate immediately upon his death.
(d) The Company's Options upon Disability.
If Executive becomes physically or mentally disabled during the Term so that he
is unable to perform the services required of him pursuant to this Agreement for
a period of six successive months, or an aggregate of six months in any
twelve-month period (the "Disability Period"), the Company shall have the
option, in its discretion, by giving written notice thereof, either to (i)
terminate Executive's employment hereunder; or (ii) continue the employment of
Executive hereunder upon all the terms and conditions set forth herein except
that for the balance of the Term the Executive shall receive a Base Salary equal
to 50% of the Base Salary then in effect. Regardless of which option the Company
exercises or shall be deemed to have exercised, during the Disability Period,
Executive shall continue to receive his full compensation and other benefits
provided herein net of any payments received under any disability policy or
program of which Executive is a beneficiary or recipient.
(e) Termination Date. Any notice of termination
given pursuant to the provisions of this Agreement shall specify therein the
effective date of such termination (the "Termination Date").
(f) Obligation on Termination. The Company's
sole obligations on termination of Executive's employment shall be as follows:
(i) Upon termination of Executive's
employment for any reason, the Company shall pay to Executive: (a) all accrued
and unpaid amounts earned, and all expenses properly incurred, at the time of
termination, which payment shall be made in such manner and at such time as
otherwise payable hereunder and shall be subject to the other terms and
conditions of this Agreement; and (b) all amounts otherwise required to be paid
under applicable law governing the employment relationship.
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(ii) Upon termination of Executive's
employment by the Company for any reason other than death, disability pursuant
to Section 8(d), Cause or voluntary resignation, the Company shall pay Executive
an additional amount equal to the Base Salary in effect during the Term year
that his employment is terminated; provided, however, that in the event the
aggregate amount of all payments to be received by Executive on account of
salary, stock options or other compensation would constitute an "excess
parachute payment" under the Internal Revenue Code and applicable regulations as
then in effect, then such amounts shall be reduced accordingly so as to not
constitute an "excess parachute payment" (collectively, the "Severance
Payment").
(iii) Upon the termination of Executive's
employment with the Company other than for death, Cause, voluntary resignation
or disability (which shall be governed by Section 8(d)), to the extent permitted
by applicable law, the Company shall continue to provide Executive, at his cost,
with medical and hospitalization insurance coverage for a period of not longer
than one year.
9. Trade Secrets; Confidentiality. Executive recognizes and
acknowledges that, in connection with his employment with the Company, he will
have access to valuable trade secrets, confidential information and other
proprietary information of the Company and their respective Affiliates
(collectively, "Confidential Information"), including, but not limited to,
software codes, operating and technical methods, technology, customer lists,
business methods and processes and marketing, pricing, promotional and financial
information, and that these are special and unique assets of the Company and/or
for their respective Affiliate's businesses that are made available to Executive
only in connection with the furtherance of his employment with the Company.
Executive agrees that he shall not at any time disclose any of such Confidential
Information to any Person, directly or indirectly, or use same for any reason or
purpose whatsoever, except: (i) in connection with the performance of his duties
under this Agreement; or (ii) with the express prior written consent of the
Company; or (iii) as required by law with prior written notice to the Company.
The provisions of this Section 9 shall survive the termination of this
Agreement.
10. Return of Property. In the event of the termination of
Executive's employment with the Company, regardless of the reason for such
termination, Executive shall immediately: (i) return to the Company all
documents, material, information and other property of the Company or any
Affiliate (including, but not limited to, keys, records, notes, data, memoranda,
models and equipment) whether or not such property constitutes Confidential
Information and (ii) purge or destroy any computerized, duplicated, copied or
other records, extracts or summaries of any such information. The provisions of
this Section 10 shall survive the termination of this Agreement.
11. Restrictive Covenants; Equitable Relief. (a) During the
Term and for a period of two years immediately following the termination of
Executive's employment for any reason, Executive agrees that he will not engage
in or have any financial interest in any business enterprise in competition with
the Company. For purposes of this Section 11(a):
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(i) A business enterprise in competition
with the Company shall mean any enterprise which engages in any business similar
to that conducted by the Company or Ambient Israel or any of future direct or
indirect subsidiary of the Company during the 12 months preceding the date of
Executive's termination of employment which enterprise operates anywhere within
a radius of [___] miles of any office maintained by the Company, Ambient Israel
or any direct or indirect future subsidiary of the Company as of the date of
termination of employment; and
(ii) Executive shall be deemed to be
engaged in or to have a financial interest in such business enterprise if he is
an employee, officer, director, trustee, agent, consultant or partner of any
Person which is engaged in such business or if he owns, directly or indirectly,
stock, partnership, member interests or other securities of such Person or any
securities convertible into or exchangeable for any of the foregoing or
otherwise has any equity or beneficial interest in such Person; provided,
however, that the ownership of 1% or less of the outstanding shares of a class
of security, which is regularly traded on a national securities exchange or
quoted in an automated inter-dealer quotation system, shall not be deemed to be
engaging or having a financial interest in the business of such Person.
(b) During the Term and for a period of two
years immediately following the termination of Executive's employment, Executive
agrees that he will not directly or indirectly hire or solicit any employee of
the Company or any Affiliate or who was an employee of the Company or any
Affiliate at any time within the three-month period immediately prior thereto or
encourage an employee or agent of the Company to terminate such employment or
agency relationship.
(c) Executive acknowledges and agrees that the
restrictive covenants set forth in Sections 9, 10 and 11 (the "Restrictive
Covenants") are reasonable and valid in geographical and temporal scope and in
all other respects. If any court of competent jurisdiction determines that any
of the Restrictive Covenants, or any part thereof, is invalid or unenforceable,
the remainder of the Restrictive Covenants shall not thereby be affected and
shall be given full force and effect, without regard to the invalid or
unenforceable parts. If any court of competent jurisdiction determines that any
of the Restrictive Covenants, or any part thereof, is invalid or unenforceable
for any reason, such court shall have the power to modify such Restrictive
Covenant, or any part thereof, and, in its modified form, such Restrictive
Covenant shall then be valid and enforceable. Executive acknowledges that any
breach by him of Sections 9, 10 or 11 hereof will cause the Company irreparable
harm for which there is no adequate remedy at law. As a result, the parties
acknowledge and agree that in the event of a breach by Executive of any of the
covenants contained in Sections 9, 10 or 11 hereof, the Company shall be
entitled to the issuance of a temporary restraining order, a preliminary
injunction, a permanent injunction restraining Executive from breaching or
continuing to breach any of said covenants and/or any other equitable remedy or
relief. Nothing herein contained shall be construed as prohibiting the Company
from pursuing any other remedies that may be available to it, whether at law or
in equity, for such breach including the recovering of damages. The provisions
of this Section 11 shall survive the termination of this Agreement.
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12. Severability. Should any provision of this Agreement be
held, by a court of competent jurisdiction, to be invalid or unenforceable, such
invalidity or unenforceability shall not render the entire Agreement invalid or
unenforceable, and this Agreement and each individual provision hereof shall be
enforceable and valid to the fullest extent permitted by law.
13. Successors and Assigns. This Agreement and the benefits
hereunder are personal to the Company and are not assignable or transferable by
Executive. The services or any specified portion thereof to be performed by
Executive hereunder may be assigned by the Company to any of its Affiliates.
Subject to the foregoing, this Agreement shall be binding upon and inure to the
benefit of the Company and it successors and assigns and Executive and his heirs
and legal representatives.
14. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York, without
regard to the conflicts of the laws and rules thereof.
15. Notices. (a) Any notice or other communication
required or permitted hereunder shall be in writing and shall be delivered
personally by hand or by recognized overnight courier, telecopied or mailed as
follows:
(i) If to the Company, to:
Ambient Israel
Jerusalem Technological Park Building One
Malha, Jerusalem, Israel
Telecopier: 011-972-2-649-0612
Attn: Chief Financial Officer
with a copy to:
Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
Telecopier: (212) 702-5941
Attn: Samuel F. Ottensoser, Esq.
(ii) If to Executive, to:
---------------
----------------
----------------
Telecopier: ________________
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(b) Each such notice or other communication
shall be effective (i) if given by telecopier, when such telecopy is transmitted
to the telecopier number specified in Section 15(a) (with confirmation of
transmission) (ii) if mailed by registered or certified mail, postage prepaid,
three (3) business days after deposit in the mails or (iii) if given by any
other means, when delivered at the address specified in Section 15(a). Any party
by notice given in accordance with this Section 15 to the other party may
designate another address (or telecopier number) or person for receipt of
notices hereunder. Notices by a party may be given by counsel to such party.
16. Complete Understanding. This Agreement supersedes any
prior contracts, understandings, discussions and agreements relating to
employment between Executive and the Company and constitutes the complete
understanding between the parties with respect to the subject matter hereof. No
statement, representation, warranty or covenant has been made by either party
with respect to the subject matter hereof except as expressly set forth herein.
17. Modification; Waiver. This Agreement may be amended or
waived if, and only if, such amendment or waiver is in writing and signed, in
the case of any amendment, by the Company and Executive or, in the case of a
waiver, by the party against whom the waiver is to be effective. Any such waiver
shall be effective only to the extent specifically set forth in such writing. No
failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.
18. Representations. Executive represents and warrants to the
Company that he has full power to enter into this Agreement and to perform his
obligations hereunder and that the execution and delivery of this Agreement and
the fulfillment of the terms hereof (i) do not constitute a default under or
conflict with any agreement or other instrument or arrangement whether written
or oral to which he is a party or by which he is bound and (ii) do not require
the consent of any Person.
19. Headings. The headings in this Agreement are for
convenience of reference only and shall not control or affect the meaning or
construction of this Agreement.
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20. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party hereto shall have received counterparts
hereof signed by the other party hereto.
IN WITNESS WHEREOF, the Company has caused this Employment
Agreement to be duly executed in its corporate name by one of its officers duly
authorized to enter into and execute this Agreement, and Executive has manually
signed his name hereto, all as of the day and year first above written.
AMBIENT CORPORATION
By:
---------------------------------
Name: Aryeh Weinberg
Title: Chief Financial Officer
---------------------------------
JACOB DAVIDSON
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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
Whereas Ambient Ltd. of the Jerusalem Technological Park, Bldg. One, Malha,
Jerusalem (hereinafter the "Company") wishes to employ Dr. Yehuda Cern of 23
Rimon St., POB 1054, Efrat. (hereinafter "Employee") in a full time position as
Chief Technical Officer; and
Whereas Company has examined the Employee's qualifications and finds him
qualified for the position offered, and
Whereas said Employee is available and willing to accept such employment.
It is agreed
RESPONSIBILITIES AND CHAIN OF COMMAND
1. The Employee will be responsible for product development, transfer from
prototype to production, quality assurance, intellectual property
protection and all other matters relating to the creation and production
of the Company's technical products.
2. The Employee will manage the technical staff, with authority to hire and
fire technical staff, however all hiring shall be within budget approved
by Board of Directors.
3. The Employee will have the authority to use Company resources and
initiate purchase orders for equipment and components, consistent with a
budget and schedule to be created, after said budgets and schedules are
approved periodically by the CEO.
4. The Employee will report directly to the CEO, initially Jacob Davidson.
TERMS OF EMPLOYMENT
1. Employment shall commence on August 1, 1997, and continue until
terminated. Employment shall be terminated by written notice from one
party to the other, after the Notice Period. Such Notice Period shall
initially be two weeks, increasing to six weeks after the first six
months of employment, and increasing to three months after the first 18
months of employment.
2. In consideration of the Company's limited initial resources, the
Employee compensation shall commence at NIS 30,000 per month, with NIS
10,000 of that deferred, as detailed below, resulting in initial gross
paid salary of NIS 20,000. Considering the extremely fast process of
initiating employment, the Company understands that the Employee has
affairs in Israel and the US which require his attention and cause him
to miss work
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days. The Employee will either make up this time by the end of the third
month of his employment or have these days deducted from his vacation
days.
3. The Company is wholly owned by its parent firm, Ambient Corporation of
Delaware (hereinafter the "Parent Company"). Starting with the month
during which the Company or the Parent Company receives a capital
investment of at least $2,000,000 but no later than four months after
the start of employment, the Employee's gross salary shall be increased
to NIS 30,000 per month.
In addition, without time limitation, the deferred salary shall be paid
to the Employee after the Company or the Parent Company receives
investment of at least $2,000,000.
4. In consideration of the Company's limited initial resources, the
Employee will use his own transportation initially (a 1983 car), and
Company agrees to cover all fuel, oil, license and insurance costs (the
latter proportional to the time car is so used), and up to NIS 2,000 of
repairs. Such payments will be against receipts and be taxable as per
applicable law.
Starting with the month during which the Company receives capital
investment of at least $2,000,000, the Company shall lease a car for the
Employee's use, provide security windows, and cover all its operating
and related expenses. Company shall deduct applicable imputed income tax
from Employee's salary.
To clarify, this car is not considered a personal privilege for the
Employee, but rather is considered needed by him to carry out his
duties, for as long as the CEO deems necessary. The Employee and his
immediate family may also make personal use of the car. If not
specifically needed by the Company during the Employee's absence abroad
for Company trips, his family may use the car during this period.
Company shall provide additional computer and communications equipment
for the Employee's use, as it sees fit.
Employee shall use his home phone and fax lines, and his personal fax
machine as required for business, with the Employer covering his
telephone bills, excluding personal calls abroad, deducting tax as
required by law.
5. For the purposes of this Agreement, gross salary shall include
nationally mandated Cost of Living increments, as these are applied to
similar companies in the Israeli economy, from time to time. Company
shall contribute 8.33% of the Employee's gross salary to Employee's
existing Executive Insurance Policy for Severance Pay, and shall release
its ownership rights to the Policy back to the Employee upon termination
of employment, regardless of which party initiated the termination,
unless the Employee has committed criminal acts related to his
employment, or committed a gross violation of this Agreement and not
corrected
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this violation within 15 days of written request to do so by Employer.
Gross violations shall be considered acts which substantially damage or
place at risk the value of the Company or Parent Company.
Upon termination, sums in the Severance Account in excess of that due as
per the Severance Pay Law of 1963-5723 shall be refunded back to the
Company. If there is a shortfall in the Severance Account relative to
the legally mandated amount, it shall be paid by the Company.
Company and Employee shall each contribute 5% of the gross salary to the
Executive Insurance Policy pension fund, with Company deducting
Employee's portion and transferring it to the insurance company in a
timely manner.
Company shall provide disability insurance for the Employee.
Company shall provide the Employee access to the Education Fund by
allowing Employee to make such contributions out of his gross salary.
In consideration of his general seniority in similar firms, the Employee
is entitled to 22 working days vacation per year, in addition to
nationally recognized religious and national holidays, and optional
days, as per the Company's policy. The Employee may accumulate up to two
years' worth of unused vacation days, after which the Company shall
redeem the excess, at the end of each calendar year.
The Employee is entitled to 30 Sick Days per year, and may accumulate up
to 90 Sick Days. Should the disability insurance cover all or part of
the Employee's salary for certain Sick Days, the Company is exempt from
paying the covered portion. Unused Sick Days cannot be cashed in.
The Company shall pay Vacation Allowance as mandated by law.
Should Company request Employee to travel, Company shall cover direct
costs, and a per diem shall be paid to cover all other expenses, as per
Israeli tax-exempt levels.
6. Company's parent firm, Ambient Corporation of Delaware (hereinafter the
"Parent Company"), shall grant stock to the Employee in the amount of
3.8% of the current number of outstanding shares. Stock shall be
returned to Company if employee terminates before one year.
7. Employee shall devote his best efforts, time, energy, talents and
experience to increase the value of the Company. Employee will accept no
other compensated work without the express written consent of the
Company. Employee may devote an average of between 10-15% of his time
off site at seminars, libraries or surfing the Net to stay up to date on
Company-related technology and market.
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8. The Employee agrees to be transferred to other companies owned by the
Parent Company, so long as there is no diminution of position or
compensation, continuity of rights is guaranteed, and the location is
within Jerusalem or considered equally accessible by the Employee.
9. Employee will treat Company proprietary information with
confidentiality, not make use of Company confidential information, nor
do anything which might substantially damage its reputation nor accept
employment at competing firms for a period of two years after
termination of employment.
10. No other agreements exist between Company and Employee prior to this
Agreement, neither verbal nor written. Employer-employee relations are
terminated at the end of the Notice Period. Notification is considered
received three business days after sent by registered mail. Jurisdiction
for this Agreement is the Labor Court of Jerusalem.
<TABLE>
<S> <C> <C>
/s/ Jacob Davidson Jacob Davidson September 22, 1997
- ------------------------------------ ------------------------- ------------------
For Ambient Ltd. (Israel) Name Date
/s/ Jacob Davidson Jacob Davidson September 22, 1997
- ------------------------------------ ------------------------- ------------------
For Ambient Corporation (USA) Name Date
/s/ Yehuda Cern September 22, 1997
- ------------------------------------ ------------------
Dr. Yehuda Cern, Employee Date
</TABLE>
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Addendum to Employment Agreement between Ambient Ltd. and Dr. Yehuda Cern
Development Rights
The Employee agrees and declares that all proprietary information including but
not limited to trade secrets, know-how, patents and other rights, technology and
know-how developed by or with the contribution of Employee's efforts during his
employment with the Company shall be the sole property of the Company.
6 January, 1998
/s/ Yehuda Cern
_____________________________
Dr. Yehuda Cern
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EXHIBIT 10.5
EPHRAIM ABRAMSON & CO.
Advocates
APPENDIX B
SUMMARY OF COMPANY LEASE FOR
PREMISES AT JERUSALEM TECHNOLOGICAL PARK,
BUILDING 1, MALCHA, JERUSALEM, ISRAEL.
PARTIES: G.T.Y. Jerusalem Technological Park Ltd.
LESSEE: Gentec Ltd.
DATE OF CONTRACT: January 15, 1996
LEASE PREMISES: 250 meters squared (gross) located on the first floor of
Building I of the Jerusalem Technological Park.
LEASE TERM: Commences April 1, 1996 and ends on March 31, 2001.
EXTENSION OPTION: Lessee has the option to extend the term of the lease for a
period of an additional 59 months.
USE OF PROPERTY: Premises are to be used for research and development in the
field of computers and electronics.
ADDITIONAL PAYMENT: Lessee shall bear and pay all taxes, fees and levies both
municipal and governmental, which are due in respect of the premises, and for
all water, gas and electric fees.
GUARANTEES: Lessee to provide bank guarantee in the amount of six months rent to
lessor which guarantee shall be in effect for the entire period of lease. In
addition, Lessee shall provide to Lessor on behalf the maintenance company a
bank guarantee in the amount of one month rent which guarantee shall be in
effect for the entire period of the lease. All guarantees are linked to the
Israeli Consumer Price Index.
RENT: Base rent per month is 8,586 NIS ($11 per square meter (gross)). However,
in the event the Company does not receive Approved Enterprise status within the
first year of the Lease, the monthly rent will be 10,147 NIS ($13 per square
meter (gross)) retroactive from the commencement of the Lease. Additional rent
per month in the amount of 3,122 NIS ($4 per square meter (gross)) as
consideration for the construction and build-out of the Premises. The basic rent
and the additional rent are linked to the Israeli Consumer Price Index. Israeli
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EPHRAIM ABRAMSON & CO.
Advocates
VAT must be added to each payment. Therefor, the aggregate monthly rent is
currently approximately 13,229 NIS (excluding VAT). All rent is paid quarterly
in advance. In addition, Lessee must prepay the final quarter's rent
(approximately 25,124 NIS) upon execution of the Lease.
Lessee must provide Lessor upon execution of the Lease post dated checks in the
amount of all payments due under the Lease.
APPENDIX 5 TO THE LEASE IS A MAINTENANCE AGREEMENT THE PRINCIPLE TERMS OF WHICH
ARE AS FOLLOWS.
PARTIES: G.T.Y. Jerusalem Technological Park Ltd. (the "Company")
Gentec Ltd. (the "Tenant')
SERVICES: The Company, or another party on its behalf, shall provide all
necessary maintenance services with respect to the building.
MAINTENANCE FEE: Tenant must pay its relative portion of the maintenance
expenses, plus a 15% markup. The maintenance fee is to be paid quarterly,
Israeli VAT must be added to each payment. Notwithstanding the above, for the
first 24 months, the Tenant must pay a maintenance fee of $2 per square meter.
The maintenance fee is payable in NIS, determined at the representative rate of
exchange as announced by the Bank of Israel.
-2-
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EXHIBIT 10.6
BILL OF SALE, ASSIGNMENT OF
ASSETS, PROPERTIES, BUSINESS AND
GOODWILL, FROM GEN TECHNOLOGIES, INC.
TO AMBIENT CORPORATION AND
ASSUMPTION OF LIABILITIES OF
GEN TECHNOLOGIES, INC. BY
AMBIENT CORPORATION
--------------------------------------
THIS BILL OF SALE, ASSIGNMENT OF ASSETS, PROPERTIES, BUSINESS AND
GOODWILL, AND ASSUMPTION OF LIABILITIES made, executed and delivered as of the 1
day of August, 1996, by GEN TECHNOLOGIES, INC., a Delaware corporation (herein
called "Grantor"), to AMBIENT CORPORATION, a Delaware corporation (herein called
"Grantee").
W I T N E S S E T H:
WHEREAS, Grantor desires to transfer and assign to Grantee, and Grantee
desires to be the transferee and assignee of, substantially all of the
properties, assets, rights, goodwill and business of Grantor, subject to all of
the liabilities, commitments and obligations of Grantor;
WHEREAS, the parties now desire to carry out the foregoing intent and
purpose by Grantor's execution and delivery to Grantee of this instrument
evidencing the vesting in Grantee of all of the properties, assets, rights,
goodwill and business of Grantor hereinafter described, subject to all of the
liabilities, commitments and obligations hereinafter described, in addition to
such other instruments as Grantee shall have otherwise received or may hereafter
request;
Section 1. NOW, THEREFORE, in consideration of the premises and of other
valuable consideration to Grantor in hand paid by Grantee, at or before the
execution and
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delivery hereof, the receipt and sufficiency of which by Grantor is hereby
acknowledged, Grantor has conveyed, granted, sold, transferred, assigned and
delivered, and by this Instrument does convey, grant, sell, transfer, assign and
deliver unto Grantee, all the assets, properties, rights and business of Grantor
of every kind and description, wherever located, tangible or intangible,
personal or mixed, including Grantor's goodwill and the right to use all
trademarks and trade names, except for such rights, privileges, properties and
assets of Grantor specified in Section 3 below. Subject to Section 3 below, the
assets so conveyed, granted, sold, transferred, assigned and delivered hereby,
are, without limiting the generality of the foregoing, more particularly
described as follows:
(a) All inventories of raw materials, work-in-process and
finished goods, and all machinery, equipment, furniture, fixtures, spare
parts, tools and samples, owned by Grantor or which relate to or are
used in the Grantor's business, or which are sold or used by Grantor in
its business, and all warranties relating thereto;
(b) All patents, patent applications, trade names, service marks,
service mark applications, trademarks, trademark applications,
copyrights, copyright applications, inventions, trade secrets, logos,
slogans, proprietary processes and formulae and all other proprietary,
technical and other information and intellectual property rights,
whether patentable or unpatentable;
(c) All records and files of Grantor which relate to or are or
were used in Grantor's Business, including, but not limited to,
production records, purchasing and sales records, designs and drawings,
accounting records, plant
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records, customers' histories, sales aids and computer records, files
and programs used in Grantor's business;
(d) All computer software and hardware owned by Grantor and used
in Grantor's business;
(e) Grantor's accounts receivable, contract rights, rights to
payment, claims; cash and cash equivalents including without limitation
petty cash, cash-in-bank, certificates of deposit and money market
accounts; prepaid expenses; and Grantor's common stock and all other
interests in Gentach, Ltd, its subsidiary;
(f) All rights and benefits of Grantor under all open sales
orders and commitments, and all other contracts, agreements and
obligations to which Grantor is a party which relate to Grantor's
business;
(g) All rights of the Grantor in and to warranties and similar
items with respect to the foregoing assets and all claims relating
thereto; and
(h) All stationery, purchase orders, forms, invoices, labels,
shipping material, catalogs, brochures, art work, photographs and
advertising material of Grantor which relate to or are used in Grantor's
business.
TO HAVE AND TO HOLD all of the foregoing assets, properties, business
and goodwill unto Grantee, its successors and assigns to its and their own use
forever (such assets, privileges, properties, business and goodwill being
hereinafter collectively called the "Business").
Section 2. Grantor hereby constitutes and appoints Grantee, its
successors and assigns, Grantor's true and lawful attorney and attorneys, with
full power of substitution, in Grantor's name and stead, but on behalf and for
the benefit of Grantee, its successors and assigns, to
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demand and receive any and all of the Business, and to give receipts and
releases for and in respect of the same, and any part thereof, and from time to
time to institute and prosecute in Grantor's name, or otherwise, for the benefit
of Grantee, its successors and assigns, any and all proceedings at law, in
equity or otherwise, which Grantee, its successors or assigns, may deem proper
for the collection and enforcement of any claim or right of any kind hereby
sold, conveyed, transferred and assigned, or intended so to be, and to do all
acts and things in relation to the Business which Grantee, its successors or
assigns shall deem desirable, Grantor hereby declaring that the foregoing powers
are coupled with an interest and are and shall be irrevocable by Grantor or by
its dissolution or in any manner or for any reason whatsoever.
Section 3. Notwithstanding any of the provisions of the foregoing,
Grantor shall not by this instrument convey, transfer, assign, grant, sell or
deliver but shall retain for itself (i) the corporate seal, Certificate of
Incorporation, minute book, stock books and stock ledgers of Grantor and (ii)
Grantor's original financial records and books of account (provided that Grantor
shall supply copies of all such to Grantee.)
Section 4. Grantee hereby assumes and agrees to perform, discharge or
pay all of Grantor's obligations and liabilities under all open sales and
commitments, and all other contracts, agreements and obligations of Grantor, and
all accounts payable and other liabilities and debts of Grantor, in all cases
upon the terms and conditions set forth therein.
Grantee expressly assumes Grantors liabilities and obligations to the
holders of promissory notes of Grantor described in Exhibit 1 attached hereto
and to issue shares of its common stock upon the proper exercise of the warrants
held by the holders of warrants to
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acquire common stock of Grantor described in Exhibit 1 attached hereto, all upon
the terms and conditions set forth in the notes and warrants issued to such
holders by Grantor.
IN WITNESS WHEREOF, Grantor and Grantee have caused this Bill of Sale,
Assignment of Assets, Properties, Business and Goodwill and Assumption of
Liabilities to be signed by its duly authorized officers on the 1 day of August,
1996.
GEN TECHNOLOGIES, INC.
By: /s/ Elie C. Wurtman
______________________________________
Elie C. Wurtman, President
AMBIENT CORPORATION
By: /s/ Jacob A. Davidson
______________________________________
Jacob A. Davidson, Chairman
of the Board
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EXHIBIT I
BILL OF SALE,
FROM GEN TECHNOLOGIES, INC.
TO AMBIENT CORPORATION
Ambient Corporation assumes Gen Technologies, Inc. obligation to the
holders of a promissory note as follows:
$968,000 promissory note owing to Ephod Management Group
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EXHIBIT 10.7
AGREEMENT
PURCHASE AGREEMENT AND ASSIGNMENT made this 5th day of December 1995 by and
between Gen Technologies Inc., a Delaware company (hereafter the " Purchaser")
and Alexander Rozin, an Israeli citizen, I.D. _________ (hereafter the "Seller")
W I T N E S S E T H:
WHEREAS, Seller is the sole owner of the Purchased Property (as defined
below); and
WHEREAS, the Purchaser desires to purchase, and the Seller desires to
sell and assign to the Purchaser, subject to the terms and conditions contained
herein, all of Seller's right, title and interest in and to Purchased Property
(as defined below); and
WHEREAS, the Purchaser and the Seller desire to set forth their
agreement relating to the sale and assignment to the Purchaser of all the
Seller's rights, title and interest to the Purchased Property.
NOW THEREFORE, in consideration of the terms and conditions hereafter
set forth, the Parties hereto mutually agree as follows:
1. Definitions & Interpretation
1.1 Definitions. As used herein, the following terms shall,
unless the context otherwise requires, have the following meanings ascribed to
them.
"Closing Date" shall mean December 11, 1995 or any subsequent date
mutually agreed to by the parties.
"Electronic Data Communication System" or "System" shall mean that
system described in the Patent Application defined below) on the date hereof.
"Patent Application" shall mean the application for patent made by the
Seller to the Israeli Patent Office for the Electronic Data Communication System
and bearing Patent Office Number 108912 dated 09.08.94.
"Documentation" shall mean all manuals and technical information
describing any aspect of the Electronic Data Communication System or designed to
facilitate the use or modification or enhancement of such system.
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"Permits" shall mean all licenses, permits, authorizations, and other
approvals from any Israeli or foreign governmental, public, or self-regulatory
body or authority, or from any private party, pertaining to the System and the
Documentation.
"Intangible Property" shall mean shall mean all trade names and other
identifying names, all trademarks, service marks and other identifying names and
marks associated with the System, whether registered or unregistered, and all
applications, relating to the foregoing, all patents, copyright, copyright
registrations and patent applications therefor, together with all divisions,
renewals and continuations of any of the foregoing, and all know-how, unpatented
inventions, trade secrets and other intangible, intellectual property embodied
in or pertaining to the System and the Documentation.
"Technology" shall mean all things authored, discovered, developed,
made, perfected, improved, designed, engineered, acquired, produced, conceived
or first reduced to practice by the Seller or any of his employees or agents
that are embodied in, derived from or relate to the System, in any stage of
development, including without limitation, modifications, enhancements, designs,
concepts, techniques, methods, ideas, flow charts, coding sheets, programmer's
notes and all other information relating to the System whether or not such
information is subject to protection under any applicable intellectual property
law.
"Purchased Property" shall mean collectively, the System, Documentation,
Intangible Property, Patent application, Technology and Permits including,
without limitation, name and goodwill associated with the foregoing.
"Unit" shall mean a product or component wherein the System is the
predominant technology being used.
1.2 Interpretation. The recitals set forth above are incorporated
into the body of this Agreement and constitute an inseparable part thereof
2. Sale, Assignment and Purchase of Right, Title and Interests in
the Purchased Property
2.1 Subject to the terms and conditions set forth herein, and on
reliance on the representations and warranties of the Purchaser, on the Closing
Date the Seller shall sell, assign, grant, convey and deliver all of the
Seller's right, title and interests in and to the Purchased Property (hereafter
the "Sale and Assignment").
2.2 The Sale and Assignment shall be effected on the Closing Date
by assignments and such other instruments of transfer and conveyance as shall be
deemed necessary or desirable to counsel for the Purchaser including without
limitation, the Trust Declaration attached hereto as schedule A ("Trust
Declaration") and an assignment of
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ownership of the Patent Application to Chai Peres, Adv. (hereafter the
"Trustee"). Such assignment to Trustee shall be registered forthwith by the
Purchaser in the office of the Commissioner of Patents, Designs and Trade Marks.
2.3 The Trustee shall transfer to the Purchaser the Patent
Application upon the occurrence of the following terms ("the Release
conditions"):
(i) the transfer or deposit of no less then
$105,000.000 in the aggregate into the Israeli Company's bank account as
provided for in section 11 below, which in no event shall be later than 150 days
of the Closing Date; and
(ii) at all times prior to the event specified in (i)
above, the Purchaser shall have paid the Gross Salary specified in the
Employment Agreement in accordance therewith.
In the event the Release Conditions are not satisfied then the
Trustee shall transfer forthwith, without consideration, the Patent Application
to the Seller.
2.4 The Seller and Purchaser shall act in accordance with the
terms and conditions set out in the Trust Declaration which forms an integral
part hereof
2.5 The Seller shall, at any time and from time to time after the
closing Date, upon the request of the Purchaser, execute, acknowledge and
deliver, and will cause to be done, executed, acknowledged and delivered all
such further acts, applications, deeds, assignments, transfers, conveyances and
assurances as may be reasonably required for the better assigning, transferring,
granting, conveying and confirming to the Purchaser, or to its successors and
assigns, the right, title and interests in any or all of the Purchased Property.
Prior to the fulfillment of the Release Conditions all such further
documentation will be assigned to the Trustee.
3. Consideration
3.1 The consideration for the Sale and Assignment shall be as
follows:
On or prior to closing the Purchaser shall cause to be
established a private company under the laws of Israel (hereafter the "Israeli
Company") of which the Seller shall own 5% of the ordinary shares which shall be
transferred into the name of the Seller without further consideration. The
Purchaser will cause the Israeli Company to enter into an employment agreement
with the Seller as set out in Schedule B attached hereto ("Employment
Agreement").
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4. Closing
The closing of the Sale and Assignment shall be at a mutually agreeable
place at 11:00 AM on the Closing Date.
5. Representations and Warranties of the Seller
The Seller represents and warrants to the Purchaser as of the
Closing Date as follows:
5.1 Conflicting Agreements; No Liens. Neither the execution nor
the delivery of this Agreement nor the fulfillment nor the compliance with the
terms and conditions hereof will constitute a breach of the terms, conditions or
provisions of, or constitute a default under or result in a violation of any
agreement, contract, instrument, order, judgment or decree to which the Seller
is a party or by which it is bound, or result in a violation by the Seller of
any existing law or statute or regulation or result in the creation or
imposition of any lien, charge, restriction, security interest or encumbrance of
any nature whatsoever on the Purchased property.
5.2 Consents. Other then with respect to assignment of the Patent
Application no consent or other approval of any governmental entity or other
person is necessary in connection with the execution of this Agreement or the
consummation by the Seller of the Sale and Assignment or any other transaction
contemplated herein.
5.3 Title to Purchased Property. Seller owns all the right, title
and interests in and to all the purchased property free and clear of all liens,
charges, encumbrances or title defects of any nature whatsoever, including,
without limitation, patent or intellectual rights or other proprietary fights
infringement.
5.4 Litigation. There are no actions, suits, proceedings or
investigations pending, or, to the knowledge of the Seller, threatened against
or involving Seller affecting the Purchased property.
5.5 Patents, Trademarks and Copyrights; Infringement. Other then
that relating to the patent application the Seller does not own any patents,
trademarks, patents rights, or copy fights, nor has the Seller applied for any
patent, trademark or copyright registrations, in respect of the System or any of
the purchased property. The Seller has not received any notice of claim of
infringement of any patent, invention, rights, trademarks, trade names or
copyrights of others with reference to the processes, methods, formulae or
procedures used by the Seller in the design, development, marketing or sale of
the System or any of the Purchased Property.
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5.6 Patent Application. The Patent Application is subsisting and
nothing has been done nor has any event occurred whereby the same may be
declared void or invalidated (but the Seller does not warrant that the
application will be granted).
5.7 Untrue Statements or Material Omissions. No representation or
warranty by the Seller, and no statement contained in any other instrument or to
be furnished to the Purchaser pursuant hereto, or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact, or omits or will omit to state any material fact which is
necessary in order to make the statements contained therein not misleading.
6. Representations and Warranties of the Purchaser
The Purchaser represents and warrants to the Seller as of the Closing
Date as follows:
6.1 Organization. The Purchaser is a company dully organized,
validly existing and in good standing under the laws of the State of Delaware.
6.2 Authority. Purchaser has full corporate authority to execute
and perform in accordance with this Agreement, and this Agreement constitutes a
valid and binding obligation of the Purchaser and is enforceable in accordance
with its terms.
6.3 Conflicting Agreements; No Liens. Nether the execution nor
the delivery of this agreement not the fulfillment nor the compliance with its
terms and conditions hereof will constitute a breach by the Purchaser of its
articles or memorandum of association or result in a breach.
7. Non-Competition
From the Closing Date and for a two (2) year period thereafter Seller
will not, directly or indirectly, for his own account or as an employee,
officer, director, partner, joint venturer, shareholder, investor, consultant or
otherwise (except as an investor in a corporation whose stock is publicly traded
and in whitch Employee holds less than 5% of the outstanding shares) interest
himself in or engage in any business enterprise anywhere in the world, that
directly competes with the System and applications being developed by the
Israeli Company, as now existing or after any modifications or enhancements
during the term of the Seller's employment with the Israeli Company.
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8. Secrecy and Nondisclosure
The Seller undertakes that he shall treat as secret and confidential all
of the Technology and Intangible Property and other information which are not of
public knowledge or record pertaining to the Purchased Property ( the
"Proprietary Information") and Seller shall not disclose, use, publish, or in
any other manner reveal, directly or indirectly, any such Proprietary
Information. For purposes hereof 'public knowledge' shall not include
information filed with the Patent Office in Israel.
9. Conditions Precedent of Purchaser
The obligations of the Purchaser under this Agreement are subject to the
conditions that on or prior to Closing Date the following conditions shall have
been satisfied in full, it being understood and agreed that if any of the
foregoing conditions shall not have been fulfilled by the Closing Date, the
Purchaser may terminate without penalty or liability this Agreement by written
notice to the Seller:
9.1 Accuracy of Representations and Warranties on Closing Date.
The representations, warranties, covenants and undertakings of the Seller
contained in this Agreement or in any certificate or document delivered pursuant
to the provisions hereof or in connection with the transactions contemplated
hereby shall be true on and as of the Closing Date as though such
representations, warranties, covenants and undertakings were made at and as of
such date, except as otherwise contemplated herein.
9.2 Seller's Compliance with Agreement. The Seller shall have
performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by it prior to or at the closing of
this Agreement.
9.3 Injunction. On the Closing Date, there shall be no effective
injunction, writ, preliminary restraining order or any order of any nature
issued by a court of competent jurisdiction directing that the transactions
provided for herein or any of them not be consummated as herein provided.
9.4 Approval of Proceedings. All actions, proceedings,
instruments and documents required to carry out this Agreement, or incidental
thereto, and all other related legal matters shall have been approved by Aboudi
& Brounstein, counsel for the Purchaser and Morris Rubin, counsel for the
Seller.
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10. Conditions Precedent of the Seller
The obligations of the Seller under this Agreement are subject to the
conditions that on or prior to the Closing Date the following conditions shall
have been satisfied in full, it being understood and agreed that if any of the
foregoing conditions shall not have been fulfilled by the Closing Date, the
Seller may terminate this Agreement by notice to the Purchaser:
10.1 Accuracy of Representations and Warranties on Closing Date.
The representations and warranties of the Purchaser contained in this Agreement
or in any certificate or document delivered pursuant to the provisions hereof or
in connection with the transactions contemplated hereby shall be true on and as
of the Closing Date as though such representations and warranties were made at
and as of such date, except as otherwise contemplated herein.
10.2 Purchaser's Compliance with Agreement. The Purchaser shall
have performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by it prior to or at the closing of
this Agreement.
10.3 Injunction. On the Closing Date, there shall be no effective
injunction, writ, preliminary restraining order or any order of any nature
issued by a court of competent jurisdiction directing that the transactions
provided for herein or any of them not be consummated as herein provided.
10.4 Guarantee. On Closing Date the Purchaser shall deliver to
the Seller the following executed guarantees
`Each of (Israeli Co.) and Gen Technologies Inc. hereby
undertake to guarantee the others obligations to Rozin Alexander
as specified in the agreement between Rozin Alexander and Gen
Technologies Inc. dated the 5th day of December, 1995 relating
to the sale of the Purchased Property described therein and the
obligations contained in the Employment Agreement attached
thereto. Notwithstanding anything to the contrary in the
Guarantee Law, the Seller will be entitled to join the guarantor
as a corespondent in any legal actions by Seller against the
principal.'
11. R&D
11.1 The Purchaser undertakes to provide or obtain funding for
further research and development (which will be used for payment of all Israeli
Company expenses including salaries, office expenses, professional fees and R &
D costs) of the System at least
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$105,000 US for the first six month period from the Closing Date. Such funding
shall be advanced to the Israeli Company by the Purchaser from time to time as
needed as determined by the Purchaser. On or before the Closing Date at least
$50,000.00 US shall have been transferred or deposited into the Israeli
Company's bank account in Israel ("Initial Deposit"). The $105,000.00 mentioned
in this section shall not be used for purposes other then in the ordinary course
of business of the Israeli Company without the consent of the Seller.
11.2 The Initial Deposit will be designated for, inter alia, the
employment of a second electrical engineer to be employed by Israeli Company as
soon as operations begin and the employment of a third electrical engineer after
two months of operation of the Israeli Company. The gross salary for each of the
two mentioned employees shall not exceed 7000NIS and 6500NIS respectively per
month.
11.3 Within twelve months of operations of the Israeli Company,
the Israeli Company shall issue, upon consultation with the Seller and without
payment of consideration, 5% of the ordinary shares of the Israeli Company to
its employees.
11.4 A further $25,000 will be deposited in the Israeli Company
account within 60 days of Closing Date and a further $45,000 will be deposited
in the Israeli Company account within 150 days of the closing Date.
11.5 The Purchaser acknowledges that the Israeli Company will
require premises of 20 square meters during the first six months of operations
and an additional 20 square meters thereafter.
11.6 Subject to Israeli Company's receipt of a proper R & D
budget plan for the second six months of operations the Purchaser undertakes to
provide $120,000 for R & D during the second six months of the Israeli Company's
operations.
12. Royalties
12.1 For a period of twenty years from the Closing Date the
Seller shall be paid a royalty of 20% of Purchaser's Net Profits from all sales
or licenses of Units. Royalties shall be paid at the end of each three month
period commencing upon the commercial distribution of Units. Accompanying each
payment of Royalties, the Purchaser shall provide a statement of sales to the
Seller but shall only be obligated to provide such statement if Royalties are
owing for the pervious three month period. `Purchaser Net Profits' shall mean
consideration received by Purchaser respecting use of Units, less customary
credits, discounts, returns, sales or value added taxes (but before income taxes
unless such taxes are required by law to be deducted or withheld in which case
Seller will be provided with proper tax authority's receipt) and less the cost
to Purchaser of components contained in each Unit.
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12.2 If the Company sells or licenses a product or component
wherein the System is not the predominant technology then the royalty payments
paid to the Seller shall be reduced by an amount to be agreed upon by the
Parties.
12.3 The Seller shall be paid 20% of consideration from any
subsequent sale or assignment of the Purchased Property excluding any sale or
assignment to and between affiliate companies of the Purchaser, and in such an
event will be provided with a lawyers certificate setting out consideration paid
to assignor.
12.4 The Seller shall be paid 15% of all Israel Net Profits from
all sales of products (including technology) sold by the Israeli Company.
`Israel Net Profits' shall mean consideration received by Israel Company
respecting products less customary credits, discounts, returns, sales or value
added taxes (but before income taxes unless such taxes are required by law to be
deducted or withheld in which case Seller will be provided with proper tax
authority's receipt) and where product is assembled or manufactured by the
Israeli Company, less the cost to the Israeli Company of the components
contained in each product.
12.5 During the Term of this Agreement, Purchaser grants to
Seller the following audit rights to the extent necessary to verify that
Purchaser is complying with its payment obligation under this Agreement (the
"Auditing Rights"). The Auditing Rights may be exercised once per year, by
giving Purchaser thirty (30) days written notice. Such audit will be conducted
by an independent auditor to be agreed upon by the parties who shall have signed
an appropriate non-disclosure agreement with Purchaser.
12.6 The exercise of the Auditing Rights shall be done at
Seller's expense, unless the audit reveals that there is a discrepancy of more
than 4% between the amount which Seller actually received and amount which
Seller should have received, in which case the Purchaser shall bear the cost of
such audit. In any event if the exercise of the Auditing Rights reveals money
owing to the Seller, such money will be paid forthwith.
12.7 In addition to the above Auditing Rights the Seller shall
have the right to appoint an agent to verify that payment obligations to Seller
hereunder are being fulfilled. This right may be exercised once per year, by
giving the Purchaser thirty (30) days notice. The Seller shall bear the cost of
exercising this right.
13. Miscellaneous
13.1 Entire Agreement. This Agreement constitutes the entire
understanding and agreement between the parties, and supersedes any and all
prior discussions and agreements and correspondence, and may not be amended or
modified in any respect except by a subsequent writing executed by both parties.
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13.2 Successors & Assigns. Purchaser is entitled to assign to any
person or persons, firm or company the benefit of this Agreement and all or any
of the rights hereby sold and assigned to it and to sub-license the exercise
thereof and in any such event all the representations, warranties and covenants
on the part of the Seller herein contained shall to the extent of such
assignment or grant thereupon inure for the benefit of such assignee or grantee.
To the extent applicable all assignees of the Purchaser or Israeli Company or
subsequent assignees of assignees shall be obligated to perform and fulfill the
terms of sections 3, 11, 12.1, 12.2, 12.3 and 12.4 hereof and shall undertake
the same in writing. Upon any such assignment Seller will be provided with a
lawyer's certified copy of undertakings of assignee to perform and fulfill such
above mentioned sections. The Purchaser shall be responsible to Seller if an
assignee fails to carry out its obligations under the above mentioned sections
and the Seller is not in breach of any of his obligations hereunder.
The Seller shall not be entitled to assign or transfer his
obligations hereunder without the written consent of the Purchaser but all
rights and obligations hereunder shall continue to be binding upon and to
subsist and inure to the benefit of his respective successors and assigns. The
Seller shall be informed of any assignment hereunder within thirty days thereof.
13.3 Governing Law & Jurisdiction.
13.3.1 This Agreement shall be governed by and construed
in accordance with the laws of the State of Israel. All disputes, differences or
questions arising out of or relating to this Agreement, or pertaining to its
validity, interpretation, breach or violation or execution of any judgment shall
be decided exclusively by the appropriate court sitting in Tel Aviv-Jaffa.
13.3.2 Notwithstanding the above so long as Employment
Agreement is in force all disputes, controversies, differences or questions
arising out of or relating to technical matters and at all times relating to
section 13 will be finally and solely determined and settled by an arbitrator in
Israel, mutually agreed upon or appointed by the Parties.
In the absence of agreement between the Parties either shall have
the right to apply to the acting Chairman of the Institute of Architects &
Engineers in Israel to appoint an arbitrator to act in accordance with the
provisions set out in this sub-section.
13.4 Counterparts & Execution. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement may
be executed and delivered by fax and such delivery shall be valid and binding as
if signed in person.
13.5 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing this Agreement.
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13.6 Notices. All notices or other communications required or
desired to be sent to either Party shall be in writing and shall be sent by hand
or by Registered mail, postage prepaid, return receipt requested, or sent by
telegram or facsimile to the address set forth below or to such other address as
the recipient may designate by notice in accordance with the provisions of this
Section.
Purchaser: 19/8 Ramban St., Jerusalem 92422 fax-638833
Seller: P.0. Box 11043 Jerusalem 91110
Any such notice shall have been deemed to have been delivered if served by hand
when delivered, if by Registered Mail 48 hours after posting if within the same
country or 14 days if posted from another country, and by telex or facsimile
transmission when dispatched and receipt confirmed by receiving Party.
13.7 Amendments & Waivers. Any term of this Agreement may be
amended and the observance of any term may be waived only with the written
consent of the party to be charged.
13.8 Nature & Survival of the Representations. All statements
contained in any certificate or other instrument delivered by or on behalf of a
party pursuant to this Agreement or in connection with the transactions
contemplated hereby shall be deemed representations and warranties by such
party. All representations and warranties and agreements made by the parties
hereto in this Agreement or pursuant hereto shall survive the Closing Date
hereunder.
13.9 Acknowledgment Regarding Legal Representation. Each of the
parties hereto acknowledges and confirms that it has had a full and complete
opportunity to obtain independent legal advice in connection with the
advisability of entering into this Agreement.
13.10 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provisions shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provisions were so excluded and shall be enforceable in
accordance with its terms.
13.11 Fundamental Breach. The breach of any of the following
sections will be considered a fundamental breach of this Agreement: 2, 3, 5, 6,
7, 8, 11, 12.
13.12 Trustee Fees. All expenses and fees of Trustee arising out
of this Agreement, but excluding any arising from the indemnity clause contained
in the Trust Declaration, shall be paid by Purchaser.
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IN WITNESS WHEREOF, the undersigned have set forth their signature as of
the date first written above.
Gen Technologies, Inc.
/s/ Elie Wurtman /s/ Alexander Rozin
__________________________________ ___________________________________
By: Rozin Alexander
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EXHIBIT 10.8
CONSULTING AGREEMENT
CONSULTING AGREEMENT made and entered into this 26th day of
November, 1996 by and among Ambient Corporation, an Israeli company with offices
at the Jerusalem Technological Park, Jerusalem (hereafter "Ambient" or the
"Company") and Tekol Ltd., an Israeli company with offices at 396 Hazayit, Beit
Aryeh, D.N. Modiin 71947 (hereafter the "Consultant").
W I T N E S S E T H:
WHEREAS, the Company is in the business of marketing and
developing smart card and various computer technologies;
WHEREAS, the Company desires to engage the services of Consultant
as a consultant for financial, technical and managerial affairs; and
WHEREAS, Consultant represents that it has the requisite
financial, technical and managerial skills to render the consulting services set
forth herein:
NOW, THEREFORE, in consideration of the mutual promises,
covenants and undertakings of the parties, it is hereby agreed:
1. Engagement. The Company hereby engages Consultant and the
Consultant agrees to provide financial, technical and managerial consulting
services to the Company as determined from time to time by the Board of
Directors of the Company on the terms and conditions set forth herein.
2. Duties
2.1 Consultant agrees to provide advice and services to
the Company regarding the Company's financial and technical operations of its
research and development activities as determined from time to time by the
Company's Board of Directors. Consultant shall devote no less than eight hours
per week to the consulting services hereunder.
2.2 Consultant shall report regularly to the President of
the Company with respect to Consultant's activities hereunder.
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2.3 Without detracting from the obligations of section 2.1
supra.
Managerial duties shall include:
i) overseeing administration of Company's
research and development project;
ii) reporting in writing to the President of the
Company, on the first of every month, detailing the technological progress of
the Company's research and development activities.
Financial duties shall include:
i) overseeing the Company's applications
("Applications") for government grants and loans;
ii) submitting and representing the Company's
applications to the following bodies for funding.
Office of the Chief Scientist
Ministry of Industry and Trade to obtain Approved
Enterprise status
3. Compensation
3.1 For services rendered hereunder, Consultant shall
be entitled as a consulting fee to $1,000 per month, payable in installments at
the end of each monthly period.
3.2 The Consultant shall be entitled as a finders fee
at $6,000 USD
3.3 The Company shall reimburse Consultant for all
actual costs and expenses incurred by Consultant in rendering the consulting
services.
3.4 Payment of consulting fees and reimbursable costs
and expenses shall be made only against delivery by Consultant to the Company of
requisite tax receipts or other appropriate documentation thereof
3.5 Translations to Israeli currency shall be
calculated on the basis of the representative rate of exchange published by a
daily newspaper in Israel on the date of payment.
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3.6 If as a result of any of the Applications the
Company receives funding subject to the usual conditions, from a combination of
any Applications which Consultant prepared and filed, within any 12 month period
in the aggregate amount of at least:
i) $100,000, then the Consultant shall be paid
$6,000.
3.7 Consultant (or entities consultant shall name)
shall be issued 5% of the common shares of the company's parent corporation,
Ambient Corporation, a Delaware corporation. The Consultant shall be obligated
to obtain any governmental approvals necessary for issuing it such shares.
Shares to be distributed to Consultant (or entities Consultant shall name) upon
the signing of this Agreement.
4. Term & Termination
4.1 This Agreement shall commence on the date on which
it shall have been duly executed by both of the parties hereto and continue for
a period six months hereafter.
4.2 This Agreement shall terminate without any further
action on the part of either party upon the occurrence of any of the following
(hereafter, each being a "Termination Event"):
i) the failure of Consultant for whatever reason to
submit any of the applications in accordance with section 2 hereof.
ii) the commencement of an IPO by Ambient Corporation
or any affiliates thereof.
iii) the failure of the Consultant to fulfill his
obligations as set forth in section 2 of this Agreement.
iv) for justifiable cause (as hereinafter defined) as
determined by the Board of Directors of the Company.
4.2.1 The term "justifiable cause" shall mean
i) a serious breach of trust including but not limited to theft, embezzlement,
self-dealing, prohibited disclosure to unauthorized persons or entities of a
confidential or proprietary information of or relating to the Company and
engaging by Consultant in any prohibited business competitive to the business of
the Company and its subsidiaries or affiliated entities; or ii) any willful
failure to perform competently any of the Consultant's functions or duties
hereunder or other cause justifying termination or dismissal under applicable
law.
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4.3 Either party shall be entitled to terminate this
Agreement upon breach of a material term thereof from the other party, upon
receipt by the breaching party of written notice thereof from the other party,
upon receipt by the breaching party of written notice from the other party,
specifying in reasonable detail the basis of the breach within 15 days of notice
from the other, then the Agreement shall continue in full force and effect.
4.4 Either party may terminate this Agreement
forthwith, by notice, if the other is declared insolvent or bankrupt, or makes
an assignment for the benefit of creditors, or shall have a receiver or trustee
appointed for its business or property or is dissolved or liquidated or
otherwise ceases business, and such declaration or execution, or appointment is
not canceled within forty five (45) days.
4.5 Upon the occurrence of Termination Event, or upon
either party's termination of the Agreement in accordance with subparagraphs
4.2, 4.3 and 4.4 above, Consultant shall retain its shares in Ambient
Corporation.
4.6 Upon the termination, cancellation or expiration of
this Agreement, neither party shall be responsible or liable to the other for
consequential or incidental damages of any kind, provide, that, consultant shall
subsequently be paid any sums which would have been paid to Consultant under
section 3.5 as if this Agreement remained in force for an additional one year
period.
5. Non-competition
5.1 Consultant agrees and undertakes that for so long
as this Agreement is in effect and for a one (1) year period following
termination or expiration of this Agreement with the Company for whatever
reason, directly or indirectly as owner, partner, joint venture, stockholder,
employee, broker, agent, principal, trustee, corporate officer, director,
licenser, Consultant in any capacity whatsoever shall not engage in, become
financially interested in, be employed by or have any connections with, any
business or venture that is engaged in any activities or venture that is engaged
in any activities involving either (i) products similar or related to actual
products then designed or produced by the Company or any of its subsidiaries or
affiliates; or (ii) information, processes, technology or equipment that is
similar or related to information, processes, technology or equipment in which
the Company or any the subsidiaries or affiliates then has a proprietary
interest in any geographic area where, during the time of engagement, such
business of the Company or any of its' subsidiaries or any of its affiliates
being or had been conducted; provided, however, that Consultant may own any
securities of any corporation which is engaged in any business and is publicly
owned and traded but in an amount not to exceed at any one time five percent of
any class of stock or securities of such company, so long as it has no active
role in the publicly owned or traded company as director, employee, consultant
or otherwise.
5.2 If any one or more terms contained in this
paragraph 5 shall for any reason be held to be excessively broad with regard to
time, geographic scope or activity,
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the term shall be construed in a manner to enable it to be enforced to the
extent compatible with applicable law.
6. Proprietary Information
6.1 Consultant acknowledges and agrees that the Company
possesses and will continue to possess information and technology that has been
created, discovered or developed, or has otherwise become known to the Company
in the field of Smart Card technology, including without limitation,
information, and technology which has been assigned or otherwise conveyed to the
Company, which information or technology has commercial value in the business in
which the Company is engaged. Such information, whether documentary, oral or
computer generated, shall be deemed to be and is referred to as "proprietary
information", which by way of illustration but not limitation, shall include
trade secrets, processes, formulae, data and know-how, improvements, inventions,
techniques, products (actual or planned), marketing plan forecasts and customer
lists.
6.2 Proprietary information deemed to include any and
all proprietary information disclosed by or on behalf of the Company,
irrespective of from what source, excluding information that (i) shall have
become a part of the public knowledge not as a result of the breach of this
Agreement by Consultant; (ii) shall have been received by Consultant from a
third party having no obligation to the Company; (iii) reflects general skills
and experience gained during Consultant's engagement by the Company; or (iv)
reflects data and information generally known within the industries or trades in
which the Company competes.
6.3 Consultant agrees that all proprietary information,
patents and other rights in connection therewith shall be the sole property of
the Company and its' assignees at all times, both during the engagement by the
Company and after its' termination. Consultant shall keep in confidence and
trust all proprietary information or anything relating to it without the written
consent of the Company except as may be necessary in the ordinary course of
performing Consultant's duties as Consultant to the Company.
6.4 Consultant's undertakings under this section shall
remain in full force and effect for two (2) years following the termination of
this Agreement or any renewal thereof.
7. Warranty. Consultant represents and warrants that on date
hereof it is free to be engaged by the Company upon the terms contained in this
Agreement and that there are no agreements or arrangements restricting full
performance of Consultant's duties hereunder. The Company represents and
warrants that it is free to engage the Consultant upon the terms contained in
this Agreement and there are no agreements or arrangements restricting full
performance of the Company's duties hereunder. Ambient Corporation represents
and warrants that it is free to enter into this Agreement and that there are no
agreements restricting full performance of Ambient's duties hereunder.
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8. Forced Transfer of Shares. In the event of Ambient
Corporation, or a wholly owned subsidiary thereof, shall undertake an initial
public offering of its equity shares to the public on a recognized stock
exchange (the "IPO"), then, prior to the consummation of the IPO, the shares of
Ambient Corporation held by Consultant shall be exchanged for the market value
equivalent of shares of the entity for which the IPO is undertaken whereupon
this Agreement shall automatically terminate, and Consultant shall take all
actions and sign any instrument reasonably requested to by Ambient Corporation,
Inc. in order to effect such the IPO share exchange.
9. Force Majeure
9.1 No liability shall result to any Party due to delay
in performance caused by circumstances beyond the reasonable control of the
party affected, including, but not limited to acts of God, flood, war,
terrorism, embargo, accident, and governmental laws, or request, or any ruling
of a court or tribunal;
9.2 Each party affected by an event of force majeure
shall (a) promptly notify the other party hereto of the expected duration
thereof, and its anticipated effect on the Party effected in terms of the
performance required hereunder; and (b) make reasonable efforts to remedy any
such event of force majeure. Performance that is delayed by any event of force
majeure shall be extended for such time as the event shall continue.
10. General Provisions
10.1 This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof, and shall not be
amended, modified or varied by any oral agreement or representation or otherwise
other than by a written instrument executed by both parties or their duly
authorized representative.
10.2 No failure, delay or forbearance by a party in
exercising any power or right hereunder shall in any way restrict or diminish
such party's rights and powers under this Agreement, or operate as a waiver of
any breach or non-performance by either party of any of the terms or conditions
hereof.
10.3 If any term or provision of this Agreement shall be
declared invalid, illegal or unenforceable, then such term or provision shall be
enforceable to the extent that a court shall deem it reasonable to enforce such
term or provision and if such term or provision shall be unenforceable, such
term or provision shall be severed and all remaining terms and provisions shall
be unaffected and shall continue in full force and effect.
10.4 The terms and conditions of this Agreement
supersede those of all previous agreements and arrangements, either written or
oral between the Company and Consultant relating to the subject thereof.
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10.5 Consultant acknowledges and agrees that he is an
independent contractor, is not the agent of the Company and has not authority in
such capacity to bind or commit the Company by or to any contract or otherwise.
Consultant is not, expressly or by implication, an employee of the Company for
any purpose whatsoever.
10.6 This Agreement is Personal to Consultant, and
Consultant shall not assign or delegate its rights or duties to a third party,
whether by contract, will or operation of law, without the Company's prior
written consent.
10.7 Each notice and/or demand given by one party
pursuant to this Agreement shall be given in writing and shall be sent by
registered mail to the other party at its designated address and such notice
and/or demand shall be deemed given at the expiration of seven (7) days from the
date of mailing by registered mail or immediately if delivered by hand. Delivery
by facsimile and other electronic communication shall be sufficient and be
deemed to have occurred upon electronic confirmation of the receipt.
10.8 This Agreement shall be interpreted, construed and
governed in accordance with the law of the State of New York.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
AMBIENT CORPORATION
By: /s/ Jacob Davidson
_______________________________________
Jacob Davidson
TEKOL LTD.
By: /s/ Yuli Kasharovsky
_______________________________________
Yuli Kosharovsky
November 26, 1996
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Exhibit 10.9
COOPERATION AGREEMENT
THIS COOPERATION AGREEMENT is entered into as of the 1 day of January,
1998, among and between Delta Three Inc., a private company limited by shares
organized under the laws of the State of Delaware US ("Delta"). And Ambient
Israel, a private company limited by shares organized under the laws of the
State of Israel ("Ambient"), ("Delta" and together with, "Ambient", the
"Parties").
WHEREAS, the Parties desire to achieve cost savings through the
elimination of duplicative expenses and the effective exploitation of resources
through mutual cooperation; and
WHEREAS, to achieve such goals the Parties desire to pool certain
resources and efforts and to coordinate certain of their activities and
functions, on the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual covenants, representations
and agreements set forth herein and the mutual benefits to be derived therefrom,
the Parties hereby agree as follows:
1. Mutual Cooperation. Each Party shall provide to the other Party the
goods, services, use of employees, advice, consultation and other forms of
cooperation and assistance (collectively, the "Cooperation Services") as set
forth on Appendix 1 attached hereto. The Parties shall review Appendix 1
semiannually during January and June of each year during the term of this
Agreement (or on such other date as set forth in the Appendix) and may amend
such Appendix upon terms and conditions to be mutually agreed upon by the
Parties to reflect the scope and nature of Cooperation Services to be provided
during the following six month period (or such other duration as provided in the
Appendix).
2. Fees. Each Party receiving Cooperation Services from the other Party
shall pay to such other party a fee for such services determined as set forth on
Appendix 1, as in effect from time to time. Such fees shall be determined on a
monthly basis and shall be paid by the 15th day of the following month. Promptly
after the close of each month, each Party shall issue to the other Party a bill
for Cooperation Services rendered. Such fees shall be paid in the currency
specified for such services on Appendix 1. All fees pursuant to this Agreement
shall be established to provide for the reimbursement of expenses incurred plus
a reasonable mark up for overhead and administrative costs. Payments paid
directly or indirectly by the receiving party on behalf of the providing company
will be offset from the fees that should be paid by the receiving company. VAT
shall be added to all payments to the extent required under applicable law.
3. Employees. Any officer or employee of a Party who shall, pursuant to
this Agreement, provide a portion of his time or services to any other Party
shall not be deemed, for any purpose, to be an officer or employee of such other
Party.
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However, any such officer or employee shall be bound to keep all confidential
information of such other Party in strict confidence during the period of this
Agreement and for a period of 5 years thereafter.
4. Term. The term of this Agreement shall be for a period of one (1)
year from the date hereof, except with respect to the provision of certain
services for which the term shall be such longer period as set forth on
Appendix 1, and shall be automatically extended for successive renewal terms
of one (1) year each unless terminated pursuant to Section 5.
5. Termination. Any Party may terminate its participation in this
Agreement upon 60 days prior written notice to the other Party. Upon termination
of this Agreement all of the rights and obligations of the Parties hereunder in
respect of the terminating Party shall cease; provided, however, that the
termination of this Agreement shall not relieve a Party from its liability to
pay any fees which have accrued as of the date of termination.
6. Records. Each Party shall keep, maintain and preserve, in its
principal place of business, for at least six (6) months following termination
or expiration of the term of this Agreement including any renewal periods
thereof, true and accurate books and records of accounting. Such books, records
and accounts shall be available for inspection or audit during regular business
hours, upon reasonable prior notice by a Party.
7. LIMITATION OF LIABILITY. NO PARTY SHALL BE LIABLE FOR ANY INDIRECT,
INCIDENTAL, RELIANCE, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING, AMONG OTHER
THINGS, LOST PROFITS OR REVENUE) SUSTAINED OR INCURRED IN CONNECTION WITH OR
ARISING OUT OF THIS AGREEMENT. THE LIMITATION OF LIABILITY SET FORTH HEREIN
SHALL APPLY REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT, WARRANTY,
STRICT LIABILITY, TORT (INCLUDING, WITHOUT LIMITATION, NEGLIGENCE OF ANY KIND)
OR OTHERWISE; AND REGARDLESS OF WHETHER A PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES AND WHETHER SUCH DAMAGES WERE FORESEEABLE.
8. Confidentiality. The Parties agree, both during the term of this
Agreement and after the expiration or termination of this Agreement, to hold
each other's Confidential Information in strict confidence and not to use each
other's Confidential Information for an Purposes other than the implementation
of this Agreement.
9. Relationship of the Parties. The Parties understand and agree that
each Party is and shall be an independent supplier or contractor. Nothing in
this Agreement shall be construed so as to create a partnership or joint
venture, and no Party hereto shall be liable for the debts or obligations of
another party. In no event shall any Party be authorized to make any
representation or commitment on behalf of any other Party without such other
Party's prior written approval.
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10. Entire Agreement. This Agreement constitutes the entire agreement
between the Parties hereto and supersedes any and all other agreements,
understandings, negotiations, or discussions, either written or oral, expressed
or implied, between the Parties hereto. The terms and conditions set forth
herein may only be modified or amended in writing and must be signed by a duly
authorized representative of each of the Parties.
11. Assignment. No Party shall be entitled to assign, sell or transfer
any of its rights or obligations under this Agreement without the prior written
consent of the other Parties.
12. Governing Law: Forum. THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS, INCLUDING AS TO VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF
THE STATE OF ISRAEL WITHOUT REGARD TO THE CONFLICT OF LAW RULES OF SUCH STATE.
ALL CLAIMS WITH RESPECT TO THIS AGREEMENT SHALL BE HEARD AND DETERMINED
EXCLUSIVELY BY THE COMPETENT COURTS OF ISRAEL AND EACH OF THE PARTIES
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURT SOLELY IN
RESPECT OF THE INTERPRETATION AND ENFORCEMENT OF THE PROVISIONS OF THIS
AGREEMENT.
13. Notice. All notices, consents and approvals required hereunder shall
be in writing sent by registered or certified mail, postage prepaid, or by
cable, telex or facsimile and addressed as set forth on Appendix 2 attached
hereto. Notices will be deemed received by the receiving Party within fifteen
(15) days of mailing, if mailed, when actually delivered by hand, if so
delivered, and on the first Business Day (at the receiving end) following
transmission, if transmitted by cable, telex or facsimile. The Parties agree
that transmission by electronic mail (E-mail) shall be deemed valid provision of
notice, consent or approval for purposes of the Agreement.
14. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed and original and all of which shall
together constitute one and the same instrument.
15. Waiver. No term or condition contained herein will be deemed waived
and no breach excused, unless such waiver or consent is in writing and signed by
the party to be charged. Any consent or waiver, whether express or implied, will
not constitute a waiver or consent to any different or subsequent breach.
16. Survival. The provisions of Sections 7, and 12 shall survive
expiration or termination of this Agreement.
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IN WITNESS WHEREOF the Parties have duly executed this Agreement as of
the date first above written.
Delta Three Inc. Ambient Israel.
By: By:
---------------------------- ----------------------------
Title: Title:
------------------------- -------------------------
Date: Date:
-------------------------- --------------------------
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Appendix 1
1. Services to be provided:
<TABLE>
<CAPTION>
============================================================================================================
<S> <C> <C> <C> <C> <C>
Party Party Currency
Providing Receiving Type of Special Terms of
Service Service Service and Conditions Fee Payment
- ------------------------------------------------------------------------------------------------------------
Delta Ambient Office space (300 Including Rent $26 per Square US$
square meter) utilities Net work, meter per month
starting March 1, security and
1998 cleaning
- ------------------------------------------------------------------------------------------------------------
Delta Ambient Phones and fax According to the 30% of the NIS
phone bills the price office phone bill
includes rent of the or by extension
PBX (if possible)
- ------------------------------------------------------------------------------------------------------------
Delta Ambient Accounting Until having a $50 + 50% of NIS
separate Controller Delta's
for Delta and Ambient Controller cost
(per month)
- ------------------------------------------------------------------------------------------------------------
Ambient Delta Office services Includes all expenses 25% of NIS
(rent, utilities, etc.) Ambient's office
to be in effect up to costs
2/28/98
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
============================================================================================================
</TABLE>
This Appendix shall be in effect from January 1998 through June 1998, except for
the provision of office space and related services by Delta to Ambient which
shall be in effect from March 1, 1998 until February 28, 2000. If Delta or
Ambient have any expenses not specified in this Appendix and part of it is
related to the other party the fee to be paid shall be agreed in Detail by both
parties on case to case bases.
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Appendix 2
Delta Address:
Delta Three Inc.
430 Park Avenue
NY, NY
USA
Tel: 212-588-3760
E-mail:[email protected]
Ambient Address:
Ambient Israel
Jerusalem Technology Park
P.O.B. 48265, Jerusalem
96951, Israel
Tel: (972) 2-649-0666
Fax: (972) 2-649-0612
E-mail: [email protected]
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