SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
|X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarterly Period Ended June 30, 1999
OR
|_| Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _________ to _________
Commission File Number: 0-23723
Ambient Corporation
(Exact name of small business issuer as specified in its charter)
Delaware 98-0166007
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
270 Madison Avenue, New York, New York 10016
(Address of principal executive offices, including zip code)
(888) 861-0205
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes |X| No |_|
At August 18, 1999, Ambient Corporation had outstanding 3,126,833 shares
of common stock, par value $.001 per share.
Transitional Small Business Disclosure Format (Check one) Yes |X| No |_|
<PAGE>
Index
PART I -- FINANCIAL INFORMATION
Item 1 -- Financial Statements*
Consolidated Balance Sheet at December 31, 1998 and June 30, 1999
Consolidated Statement of Operations for the Six and Three Months Ended
June 30, 1999 and 1998
Consolidated Statement of Stockholders' Equity (Deficiency) at June 30,
1999
Consolidated Statement of Cash Flows for the Six Months Ended June 30,
1999 and 1998
Notes to Consolidated Statements
Item 2--Plan of Operations
PART II--OTHER INFORMATION
Item 1-- Legal Proceedings
Item 2-- Changes in Securities
Item 3-- Defaults upon Senior Securities
Item 4-- Submission of Matters to a vote of Security Holders
Item 5-- Other Information
Item 6-- Exhibits and Reports on Form 8-K
Signatures
*The Balance Sheet at December 31, 1998 has been taken from audited
financial statements at that date. All other financial statements are unaudited.
<PAGE>
AMBIENT CORPORATION AND SUBSIDIARY
( a Development Stage Company)
CONSOLIDATED BALANCE SHEET
In U.S. dollars
(Unaudited)
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
-----------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 7,642 $ 16,138
Restricted cash 131,259 131,259
Note receivable 350,000 350,000
Other receivables and prepaids 203,305 334,983
--------------------------------
Total current assets 692,206 832,380
PROPERTY AND EQUIPMENT
Cost 328,320 328,320
Less accumulated depreciation (120,795) (92,057)
--------------------------------
207,525 236,263
DEPOSITS FOR SEVERANCE PAY 9,187 6,587
--------------------------------
Total assets $ 908,918 $ 1,075,230
================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term credit $ 185,543 $ 144,006
Note payable 594,900 585,900
Accounts payable 488,071 337,105
Other current liabilities 74,182 175,264
--------------------------------
Total current liabilities 1,342,697 1,242,275
LONG-TERM LIABILITIES
Accrued severance pay 61,343 37,613
Long-term bank credit 28,386 37,886
--------------------------------
Total long-term liabilities 89,729 75,499
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common stock, $0.001 par value; authorized 20,000,000
shares; issued and outstanding 3,126,833 and 3,127 3,074
3,074,333 shares, respectively
Additional paid in capital 5,171,710 4,941,189
Deferred compensation (49,433) (239,683)
Deficit accumulated during the development stage (5,648,911) (4,947,124)
--------------------------------
Total stockholders' equity (deficiency) (523,507) (242,544)
--------------------------------
Total liabilities and stockholders' equity $ 908,918 $ 1,075,230
================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
AMBIENT CORPORATION AND SUBSIDIARY
( a Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS
In U.S. dollars
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
from
Inception
For the three months ended For the six months ended to
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998 June 30, 1999
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Research & development expenses $ 123,665 $ 236,377 $ 227,900 $ 463,098 $ 1,609,450
Less - Chief Scientist of Israel participation 138,000 -- 148,387 -- 474,815
-----------------------------------------------------------------------------
(14,335) 236,377 79,513 463,098 1,134,635
Selling, General and administrative expenses 184,475 276,459 295,744 556,478 3,247,135
-----------------------------------------------------------------------------
Operating loss (170,140) (512,836) (375,257) (1,019,576) (4,381,770)
Other expenses -- 21,507 -- 21,507 3,587
Financing expenses, net 126,517 41,184 326,530 283,285 1,263,554
-----------------------------------------------------------------------------
Net loss $ (296,657) $ (575,527) $ (701,787) $(1,324,368) $(5,648,911)
=============================================================================
Basic and fully diluted loss per share $ (0.10) $ (0.20) $ (0.23) $ (0.46)
------------------------------------------------------------
Weighted average number of shares outstanding 3,104,333 2,896,833 3,104,333 2,896,833
============================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
AMBIENT CORPORATION AND SUBSIDIARY
( a Development Stage Company)
CONSOLIDATED STATEMENT STOCKHOLDERS' EQUITY (DEFICIENCY)
In U.S. dollars
(Unaudited)
<TABLE>
<CAPTION>
Number Common Additional Deferred Deficit Total
of shares Stock paid in compensation accumulated
capital during the
development
stage
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Stock issued July 1996 to founders
for nominal consideration 2,028,833 $ 2,029 $ -- $ -- $ -- $ 2,029
Stock issued September & October
1996 to employees for services 200,333 200 -- -- -- 200
Net loss -- -- -- -- (693,995) (693,995)
-----------------------------------------------------------------------------------
Balance as of December 31, 1996 2,229,166 2,229 -- -- (693,995) (691,766)
Stock issued March & August 1997
to employees for services 104,167 104 386,668 (386,668) -- 104
Stock issued September & October
1997 pursuant to private placement 80,000 80 319,920 -- -- 320,000
Stock issued September 1997 to
advisor for services 6,000 6 23,994 -- -- 24,000
Amortization of deferred compensation -- -- -- 145,556 -- 145,556
Net loss -- -- -- -- (1,432,815) (1,432,815)
-----------------------------------------------------------------------------------
Balance as of December 31, 1997 2,419,333 2,419 730,582 (241,112) (2,126,810) (1,634,921)
Stock issued January & August 1998
pursuant to consulting agreement 75,000 75 654,925 (655,000) -- --
Public offering February 1998 525,000 525 3,432,502 -- -- 3,433,027
Stock issued January 1998 pursuant
to debt financing agreement 20,000 20 99,980 -- -- 100,000
Additional stock issued January 1998
pursuant to founders agreement 35,000 35 -- -- -- 35
Warrants issued September 1998 pursuant
to private placement -- -- 21,600 -- -- 21,600
Options granted August 1998 pursuant
to consulting agreement -- -- 1,600 (1,600) -- --
Amortization of deferred compensation -- -- -- 658,029 -- 658,029
Net loss -- -- -- -- (2,820,314) (2,820,314)
-----------------------------------------------------------------------------------
Balance as of December 31, 1998 3,074,333 3,074 4,941,189 (239,683) (4,947,124) (242,544)
Stock issued February 1999 pursuant
to consulting agreement 37,500 38 69,963 -- -- 70,000
Options granted May 1999 pursuant to
employee stock option plan -- -- 138,125 -- -- 138,125
Warrants issued April 1999 pursuant
to consulting agreement -- -- 10,260 -- -- 10,260
Stock issued April 1999 pursuant to
consulting agreement 15,000 15 12,173 -- -- 12,188
Amortization of deferred compensation -- -- -- 190,250 -- 190,250
Net loss -- -- -- -- (701,787) (701,787)
-----------------------------------------------------------------------------------
Balance as of June 30, 1999 3,126,833 $ 3,127 $ 5,171,710 $ (49,433) $(5,648,911) $ (523,508)
===================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
AMBIENT CORPORATION AND SUBSIDIARY
( a Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
In U.S. dollars
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
from
Inception
For the six months ended to
June 30, 1999 June 30, 1998 June 30, 1999
-------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss $ (701,787) $(1,324,368) (5,648,911)
Adjustments to reconcile net loss to
net cash used in operating activities -
Depreciation and amortization 227,988 390,835 1,715,602
Financing and consulting expenses paid via
issuance of common stock 92,449 -- 192,449
Options granted pursuant to employee stock
option plan 138,125 138,125
Increase in net liability for severance pay 21,130 17,896 52,156
Write-down of loan receivable -- -- 485,000
Write off of leasehold improvements -- 21,507 20,453
Accrued interest on long-term loan and
notes payable -- -- 210,016
Changes in operating assets and liabilities
Other receivables and prepaid expenses 131,678 (214,123) (176,543)
Accounts payable 150,966 (33,043) 258,824
Other current liabilities (101,082) (239,315) (114,373)
-------------------------------------------------------
Net cash used in operating activities (40,533) (1,380,611) (2,867,202)
Cash flows from investing activities
Restricted cash -- (100,000) (131,259)
Note receivable -- (350,000) (835,000)
Purchase of equipment -- (116,034) (359,717)
-------------------------------------------------------
Net cash used in investing activities -- (566,034) (1,325,976)
Cash flows from financing activities
Issuance of share capital -- 200,000 2,264
Issuance of long-term notes -- 1,000,000
Receipt of loans from shareholders, net -- 919,600
Increase in bank overdraft -- 98,995
Receipt of loans from bank -- -- 120,007
Decrease in short-term credits 41,537 33,600 41,537
Repayments of long-term loans (9,500) (1,568,356) (1,414,610)
Public offering of common stock -- 3,433,027 3,433,027
-------------------------------------------------------
Net cash provided by financing activities 32,037 2,098,271 4,200,820
Net increase (decrease) in cash (8,496) 151,626 7,642
Cash, beginning of period 16,138 -- --
-------------------------------------------------------
Cash, end of period $ 7,642 $ 151,626 $ 7,642
=======================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
AMBIENT CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - GENERAL
The accompanying condensed interim financial statements have been prepared
in accordance with generally accepted accounting principles relating to
interim financial information. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the six
month period ended June 30, 1999, are not necessarily indicative of the
results that may be expected for the year ended December 31, 1999.
Note 2 - GOING CONCERN
The Company incurred a net loss in 1996, 1997 and 1998 and during the six
months ended June 30, 1999 and anticipates that it will continue to incur
losses for some time. The Company's continued existence is dependent on
obtaining additional financing from its shareholders and outside sources
for product development and commercialization. These matters raise
substantial doubt about the Company's ability to continue as a going
concern.
Management's plans to continue operations in the normal course of business
include the following: (i) continuing to seek out potential sources of
equity capital; (ii) seek further grants from the Office of the Chief
Scientist; (iii) expanding sales efforts by entering into new agreements
with distributors in a number of countries; (iv) negotiating with a number
of companies to install pilot projects; and (v) diversification through
establishment of a new subsidiaries in the fields of internet technology
and software development. In management's estimation, the above measures,
if substantially realized, should enable the Company to continue operating
through at least June 30, 2000, although there can be no assurance of
this.
In order to reduce its fixed costs until the above measures are partially
or fully realized, in March 1999, the Company terminated the employment of
approximately one-half of its employees. The Company has also undertaken
other cost-cutting measures, such as reducing its lease space. In
addition, due to the Company's adverse liquidity position, the Company did
not pay salaries to its remaining employees for the months of April
through July 1999. The Company has not recorded any possible interest or
penalties relating to the late payment of these salaries.
The above matters raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments that might be necessary should the Company be unable to
continue as a going concern.
<PAGE>
Note 3 - CONSULTING AGREEMENTS
During the period the Company retained the services of legal and financial
consultants. The agreements provide for the issuance of 52,500 shares of
Common Stock and warrants to purchase 18,000 shares of Common Stock. The
Company recorded consulting expense of $22,448 and prepaid consulting of
$70,000 as a result of these issuances and is amortizing the prepaid
amount over the term of the agreement.
Note 4 - RESTRICTED CASH
The Company has short-term lines of credit from banks in Israel for which
the Company agreed to maintain compensating balances of $130,000, which
are restricted for a period of up to one year.
Note 5 - NOTE RECEIVABLE
The Company loaned money to Ordacard Hi-tec Industries, Ltd. as part of an
anticipated merger. The merger was not consummated due to the fact that a
number of material conditions to the merger were not fulfilled. In
addition, the Company was notified that the Israeli courts were unable to
approve a merger between an Israeli corporation and a foreign corporation.
A dispute currently exists between the Company and Ordacard as to the
nature and substance of the $835,000 amounts provided by the Company to
Ordacard. The Company maintains, that such amount is a loan; whereas,
Ordacard maintains that such amount represents an equity investment in
Ordacard's shares.
The Company intends to vigorously defend its rights to collect the
$835,000 amounts advanced. Nevertheless, in light of significant financial
difficulties currently existing at Ordacard, the Company has written-down
the receivable to its estimated realizable value of $350,000.
Note 5 - STOCK AWARD
In May 1999 the Company awarded options exercisable into 170,000 shares of
Common Stock to the Chief Executive Officer and the Chief Financial
Officer under the Ambient Corporation 1998 Stock Option Plan. The options
were granted for past services.
<PAGE>
Item 2. Plan of Operation
The following discussion and expositions should be read in conjunction
with the Financial Statements and realted Notes contained elsewhere in this Form
10-QSB.
The Company was organized in June 1996 and is a development stage company.
In August 1996, Ambient Corporation purchased substantially all of the assets,
properties, business and goodwill and assumed the liabilities of Gen
Technologies, Inc., a Delaware company organized in September 1995 ("GTI"),
including the capital stock of GTI's subsidiary, GenTec, Ltd., a corporation
organized under the laws of the State of Israel in November 1995. In November
1996, the Company changed the name of its subsidiary from GenTec, Ltd. to
Ambient, Ltd. ("Ambient Israel"). The Company owns 95% of Ambient Israel's
outstanding capital stock. Since inception , the Company's activities have been
principally limited to organizational and initial capitalization activities,
designing and developing smart card technology and recruitment of executive
personnel. As a development stage company, the Company has a limited operating
history upon which an evaluation of the Company's prospects can be made. The
Company's prospects must therefore be evaluated in light of the problems,
expenses, delays and complications associated with a new business.
The Company has not generated any revenues from its smart card technology
since its inception. For the fiscal years ended December 31, 1996, 1997, and
1998, and the six months ended June 30, 1999, the Company has incurred net
losses aggregating $5,648,911, reflecting principally research and development
expenses and general and administrative expenses. The Company expects to incur
significant up-front expenditures in connection with the planned expansion of
its operations, including the implementation of marketing and sales efforts and
the commercialization of the Company's technology, and operating losses are
expected to continue for the foreseeable future. There can be no assurance that
the Company can be operated profitably in the future. The Company's continuation
as a going-concern is dependent upon, among other things, its ability to obtain
additional financing when and as needed, and to generate sufficient cash flow to
meet its obligations on a timely basis. The Company may also explore other
business options including strategic joint ventures and business combinations,
including investments in other companies, or mergers.
In February 1998, the Company completed an initial public offering of
525,000 shares of Common Stock (the "IPO"). The Company received net proceeds
from the IPO of approximately $3,433,027. The Company is dependent upon
obtaining additional financing to implement its anticipated business plans.
As of June 30, 1999, the Company has expended $1,609,450 on its research
and development activities (including $474,815 received from the Office of Chief
Scientist of the Israeli Ministry of Industry and Trade ("OCS"). Ambient Israel
has two patent applications pending in Israel which were filed in 1996, for one
of which a corresponding application was filed in the United States in 1997. The
United States Patent and Trademark Office ("PTO") has allowed one patent
application, which was filed in the United States in 1996, for which a
corresponding application was filed under the international Patent Cooperation
Treaty in 1997. During the next 12 months, the Company's research and
development plans include, although there can be no assurance, filing one or
more additional patent applications in the United States and Israel, developing
a reader based on certain chip technology, implementing pilot production of
smart cards and demonstrating compatibility for the use of Ambient technology in
large memory data storage media such as cameras, telephones and computers. The
Company may need to raise additional funding to carry out all or a portion of
its research and development plans. The Company does not have any commitments
for any future financings and there can be no assurance such financing will be
available, or if available, that it can be obtained on terms favorable to the
Company, or that such financing will not be dilutive to stockholders. The
Company anticipates that its first Ambient product will be completed and ready
for introduction into the market by the third quarter of 1999. Product
introduction will depend on several factors, including the availability of
funding, research and development and marketing efforts, and there can be no
assurance that the Company will be successful in introducing a product by the
end of 1999.
The Company's marketing activity to date has consisted primarily of
formulating a marketing strategy. The Company's strategy focuses initially on
approaching and establishing relationships with large and mid-sized system
integrators already operating in the smart card market, as well as those
integrators involved in ancillary markets such as health care, access control,
and transport ticketing. The Company also intends to target potential volume
customers. In an effort to promote recognition of the Ambient name within the
industry, the Company plans to exhibit its technology at selected industry trade
shows, and design and distribute marketing materials. The Company also plans to
implement and publicize pilot projects to demonstrate the benefits of using the
Company's technology.
Depending on several factors, including the success of the Company's
marketing efforts, market acceptance of the Ambient technology, competition and
the Company's progress in its research and development efforts and developing
<PAGE>
relationships with systems integrators, the Company believes it will begin to
generate sales and revenues during the fourth quarter of 1999. There can be no
assurances, however, that the Company will generate significant revenues by this
date, or at all.
The Company currently has 4 full-time employees and several part time
employees. The Company's product development is carried out at Ambient Israel's
facilities in Israel
Since inception, the Company has relied on certain debt financings,
government funding from the OCS, bank financing, loans from third parties,
stockholder loans, private placements and the IPO for its capital requirements.
The Company used $1,828,261 of the net proceeds from the IPO to satisfy the
principal and accrued interest due on certain third party loans (excluding the
stockholder loans), debt financing and private placements.
On March 25, 1998 the Israeli Investment Center granted "Approved
Enterprise" status to Ambient Israel, pursuant to The Law for the Encouragement
of Capital Investments, 1959 (the "Investment Law") with respect to its planned
investment in certain fixed assets for establishing a smart card production
facility. The Investment Law provides that certain capital investments may, upon
application to the Israeli Investment Center, be designated as an "Approved
Enterprise". Ambient Israel participates under the "Alternative Benefits
Program" under the Investment Law. Accordingly, taxable profits attributable to
the approved enterprise will be exempt from tax for a period of 10 years,
commencing in the first year in which the Approved Enterprise first generates
taxable income. However, such benefits period will terminate upon the earlier of
(i)12 years from the commencement of production or (ii)14 years from the date of
approval of the Approved Enterprise. Under the Alternative Benefits Program,
dividend distributions from Ambient Israel during the benefits period will be
subject to reduced withholding tax of 15%, but will render Ambient Israel liable
for corporate tax (generally 25%, subject to reduction depending upon the
percentage of foreign investment in Ambient Israel) on the amount distributed
and the corporate tax thereon.
The benefits available as an Approved Enterprise are conditioned upon the
fulfillment of certain conditions stipulated in the Investment Law, and the
regulations thereunder, and the criteria set forth in the certificate of
approval. In the event any of these conditions are not fulfilled, in whole or in
part, the benefits could be canceled and the Company could be required to refund
the amount of the canceled benefits, plus interest and inflation adjustments.
There can be no assurances that the Company will be able to continue to comply
with such requirements in the future. As of December 31, 1998 the Company has
not realized any benefit as an Approved Enterprise due to the net loss.
Certain statements made in this Annual Report on Form 10 KSB including
statements contained in the preceding Plan of Operation are "forward looking
statements" (within the meaning of the Private Securities Litigation Reform Act
of 1995) regarding the plans and objectives of management for future operations
and projections of revenues, earnings and capital expenditures. Such statements
involve known and unknown risks, uncertainties and other factors that may cause
actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. The forward-looking statements
included herein are based on current expectations that involve numerous risks
and uncertainties. The Company's plans, objectives and expectations are based,
in part, on assumptions involving the growth of the Company's business.
Assumptions relating to the foregoing involve judgments with respect to, among
other things, future economic, competitive and market conditions and future
business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company. Although the
Company believes that its assumptions underlying the forward-looking statements
are reasonable, any of the assumptions could prove inaccurate and, therefore,
there can be no assurance that the forward-looking statements included in this
Report will prove to be accurate. In light of the significant uncertainties
inherent in the forward-looking statements included herein, the inclusion of
such information should not be regarded as a representation by the Company or
any other person that the objectives, plans or expectations of the Company will
be achieved.
Ambient plans to diversify through a new subsidiary established to develop
internet service over power lines utilizing Ambient's contactless connector
technology. The new product will be electronic equipment utilizing patented
technologies for transmitting data over power lines. This equipment will offer
consumers an alternative Internet connection with the advantages of quicker data
rates at lower costs. The Company will provide the devices for the electric
utility company to cost-effectively upgrade their existing equipment and will
provide the special modem for the connection to the customer's home.
The planned merger of Ambient and Ordacard Hi-Tec Industries was not
consummated due to the fact that a number of material conditions to the merger
were not fulfilled
Year 2000 Issues
Background Many currently installed computer systems and software products are
unable to distinguish between twentieth century dates and twenty-first century
dates because these systems may have been developed using two digits rather than
four to determine the applicable year. For example, computer systems that have
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This error could result in system failures or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices or engage
in similar normal business activities. As a result, many companies' software and
computer systems may need to be upgraded or replaced to comply with such "Year
2000" requirements.
State of Readiness
Our business is dependent on the operation of numerous systems that could
potentially be affected by Year 2000 related problems. Those systems include,
among others: software systems that we use internally in the management of our
business; hardware and software products that we have developed; the internal
systems of our customers and suppliers; and non-information technology systems
and services that we use in the management of our business, such as telephone
systems and building systems. Based on an analysis of the systems potentially
affected by conducting business in the twenty-first century, we are applying a
phased approach to making such systems, and accordingly our operations, Year
2000 ready. Beyond awareness or the issues and scope of systems involved, the
phases of activities in progress include: an assessment of specific underlying
computer systems, programs and/or hardware; rededication or replacement of Year
2000 non-compliant technology; validation and testing of technologically Year
2000 ready solutions; and implementation of the Year 2000 ready systems. The
table below provides the status and timing of these phased activities:
<PAGE>
Affected Systems Status-
- ---------------- -------
Products that we Assessment completed; conducting
license or sell ongoing validation and testing
(see details below)
Hardware and software Assessment completed;
systems that we use certain components
replaced; conducting
validation and testing
Internal systems of our Assessment not yet completed
customers and suppliers
Non-information technology No assessment made
systems and certain services
that we use in the management
of our business, internal and
external, such as telephone
systems and building systems
Product Status
Our product is not date or time sensitive. We have tested and verified our
product as Year 2000 ready. Year 2000 readiness does not include the performance
or functionality of third party products, including hardware or software with
which our product interfaces.
Costs to Address Year 2000 Readiness
We have expensed as incurred all costs directly related to Year 2000 readiness,
even in cases where non-compliant information technology systems have been
replaced. To date, these costs have been insignificant. The replacement cost of
non-information technology systems would have been incurred, regardless of the
Year 2000 issue. We do not believe that future expenditures to upgrade internal
systems and applications will have a material adverse effect on our business,
financial condition and results of operations. In addition, while the potential
costs of redeployment of personnel and any delays in implementing other projects
is not known, the costs are anticipated to be immaterial.
Risks of Year 2000 Issues
We believe that our product is Year 2000 ready; however, success of our Year
2000 readiness efforts may depend on the success of our customers in dealing
with their Year 2000 issues. Customer difficulties with Year 2000 issues could
interfere with the use of Our product, which
<PAGE>
might require us to devote additional resources to resolve the underlying
problems. If the problem is found to lie in Our product, our business, financial
condition and results of operations could be materially adversely affected.
Furthermore, the purchasing patterns of these customers or potential customers
may be affected by Year 2000 issues as companies expend significant resources to
become Year 2000 ready. The costs of becoming Year 2000 ready for current or
potential customers may result in reduced funds available to purchase and
implement our products. In addition, we rely on various entities that are common
to many businesses, such as public utilities. If these entities were to
experience Year 2000 failures, our ability to conduct business would be
disrupted. Although we believe that our Year 2000 readiness efforts are designed
to appropriately identify and address those Year 2000 issues that are within our
control, there can be no assurance that our efforts will be fully effective or
that the Year 2000 issues will not have a material adverse effect on our
business, financial condition or results of operations. The novelty and
complexity of the issues presented and our dependence on the preparedness of
third parties are among the factors that could cause our efforts to be less than
fully effective. Moreover, Year 2000 issues present many risks that are beyond
our control, such as the potential effects of Year 2000 issues on the economy in
general and on our business partners and customers in particular.
Contingency Plans
We have conducted an assessment of certain of our Year 2000 exposure areas in
order to determine what steps beyond those identified by our internal review
were advisable and no additional work was recommended. We do not presently have
a contingency plan for handling Year 2000 issues that are not detected and
corrected prior to their occurrence. Any failure by us to address any unforeseen
Year 2000 issue could adversely affect our business, financial condition and
results of operations. Any such occurrence could adversely affect our business.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities and Use of Proceeds
The Company's Registration Statement on Form SB-2, file no. 333-40045, was
declared effective by the Securities and Exchange Commission on February
12, 1998. The initial public offering of the Company's Common Stock
covered by such Registration Statement commenced on February 13, 1998.
Roan Capital Partners, L.P. acted as the managing underwriter (the
"Representative") for the offering. A total of 656,250 shares of Common
Stock were registered, including 78,750 shares issuable upon exercise of
the Representative's 45-day over-allotment option and 52,500 shares
issuable upon exercise of warrants issued to the Representative (the
"Representative's Warrants"). The Representative's Warrants to purchase
52,500 shares of Common Stock issued to the Representative were also
registered. The aggregate offering price of the registered Common Stock
(including the over-allotment option), the Representative's Warrants and
the shares issuable upon exercise of Representative's Warrants, was
$5,523,052.50. Of this amount, $4,200,000 representing 525,000 shares of
Common Stock have been sold (and the Representative's Warrants were sold
for $52.50). The Representative's Warrants have not yet been exercised and
consequently the offering has not yet terminated.
The amount of expenses incurred for the Company's account in connection
with the issuance and distribution of the securities registered are as
follows:
Underwriting discounts and commissions: $ 420,000
Finder's fees:
Expenses paid to or for the underwriters: 126,000
Other expenses: 397,710
---------
Total expenses: $ 943,710
<PAGE>
All such expenses were paid directly or indirectly to others.
The net offering proceeds to the Company after deducting the above expenses were
$3,256,290.
As of June 30, 1998, the amount of net offering proceeds to the Company has been
used for the following purposes:
Marketing ................................................... $ 104,118
Additional Facilities
Research and Product Development ............................ 519,201
Repayment of indebtedness ................................... 1,828,261
Capital Equipment ........................................... 11,080
Working Capital and General Corporate ....................... 396,340
Convertible Note Receivable from Ordacard ................... 350,000
----------
Total ................................................. $3,209,000
All such payments were made directly or indirectly to others.
The use of proceeds contained herein does not represent a material change
in the use of proceeds described in the prospectus, except that repayment of
indebtedness increased by $178,261 from the estimated $1,650,000 in the
prospectus to $1,828,261 due to adjustments in the calculations of interest on
the indebtedness through the date of payment and the repayment of accrued
interest on certain indebtedness in the principal amount of $968,000. In
addition, the Company reserved the right in the prospectus to use all or a
portion of the net proceeds allocated for working capital to acquire other
companies. The Company used $350,000 to fund a loan to Ordacard in connection
with the proposed merger of Ordacard with and into the Company (or a subsidiary
thereof).
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Securities Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit
Number Description
------ -----------
27.1 Financial Data Schedule
(b) Reports on Form 8-K
<PAGE>
None
SIGNATURES
In accordance with the requirements of the Exchange Act the registrant
caused this report to be signed by the undersigned thereunto duly authorized.
Date: August 20, 1999
AMBIENT CORPORATION
(Registrant)
/s/ Aryeh Weinberg
-------------------------------------
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 138,901
<SECURITIES> 0
<RECEIVABLES> 553,305
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 692,206
<PP&E> 328,320
<DEPRECIATION> (120,795)
<TOTAL-ASSETS> 908,918
<CURRENT-LIABILITIES> 1,342,697
<BONDS> 0
0
0
<COMMON> 3,127
<OTHER-SE> (526,634)
<TOTAL-LIABILITY-AND-EQUITY> 908,918
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,324,368
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,324,368)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,324,368)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,324,368)
<EPS-BASIC> (0.46)
<EPS-DILUTED> (0.46)
</TABLE>
