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 March 31, 2000
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)
22 Beit Hadofus Jerusalem 95483 Israel
(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 |_|
As of May 31, 2000, Ambient Corporation had outstanding 9,714,083 shares
of common stock, par value $.001 per share.
Transitional Small Business Disclosure Format (Check one) Yes |X| No |_|
,
<PAGE>
Index
PART I -- CONDENSED FINANCIAL INFORMATION
Item 1 -- Financial Statements*
Consolidated Balance Sheet as of December 31, 1999 and March 31, 2000
Consolidated Statement of Operations for the Three Months Ended March 31,
2000 and 1999, and cumulative from inception to March 31, 2000
Consolidated Statement of Cash Flows for the Three Months Ended March 31,
2000 and 1999, and cumulative from inception to March 31, 2000
Notes to the Condensed Consolidated Financial Statements
Item 2--Plan of Operations
PART II--OTHER INFORMATION
Item 1-- Legal Proceedings
Item 2-- Changes in Securities and Use of Proceeds
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 Financial Statements as of December 31, 1999 derives from audited
financial statements at that date. All other financial statements are unaudited.
<PAGE>
AMBIENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2000
<PAGE>
AMBIENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
INDEX TO UNAUDITED CONDENSED INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
Page
INDEPENDENT ACOUNTANTS' REVIEW REPORT 1-2
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS:
Balance Sheet 3
Statement of Operations 4
Statement of Changes in Shareholders' Deficiency 5
Statement of Cash Flows 6
Notes to the Condensed Interim Consolidated Financial Statements 7-10
3
<PAGE>
INDEPENDENT ACCOUNTANT'S REVIEW REPORT
To the Board of Directors of
Ambient Corporation
We have reviewed the accompanying condensed interim consolidated balance sheet
of Ambient Corporation (a development stage company) and subsidiaries
(collectively, "the Company") as of March 31, 2000, and the related condensed
consolidated statements of operations, changes in shareholders' deficiency and
cash flows for the three-month period then ended. These financial statements are
the responsibility of the company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
We have not audited or reviewed the comparative amounts for the three-month
period ended March 31, 1999. Accordingly, we do not express an opinion or any
other form of assurance thereon.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements as of March 31, 2000
for them to be in conformity with accounting principles generally accepted in
the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company incurred a net loss in the
three-month period ended March 31, 2000 of approximately $2.9 million (and
approximately $8.9 million since inception) and anticipates that it will
continue to incur losses for some time. In addition, the Company had a working
capital deficit of approximately $0.3 million and a shareholders' deficiency of
approximately $0.6 million as of March 31, 2000. Although the Company raised net
proceeds of approximately $3.4 million from an initial public offering in
February 1998 and raised debt financing, through convertible debentures in the
amount of $1 million (before expenses) in February 2000, and an additional
$500,000 (before expenses) in April 2000, it has substantially utilized all
of such proceeds. The Company's continued existence as a going concern is
dependent on obtaining additional financing for product development and
commercialization. The Company continues to seek out other potential sources of
equity capital, but there can be no assurance that it will be able to do so in
the foreseeable future. The Company's Management estimates that the existing
funds will enable the Company to operate through August, 2000. These matters
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
4
<PAGE>
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated statements of
financial position of the Company as of December 31, 1999, and the related
consolidated statements of operations, shareholders' deficiency, and cash flows
(not presented herein) for the year then ended and in our report dated April 13,
2000, we expressed an unqualified opinion on those consolidated financial
statements, with an emphasis paragraph describing the substantial doubt
regarding the Company's continued existence as a going concern. In our opinion,
the information set forth in the accompanying condensed interim consolidated
financial statements as of December 31, 1999, is fairly stated, in all material
respects, in relation to the consolidated financial statements from which they
have been derived.
Brightman Almagor & Co.
Certified Public Accountants (Israel)
A member of Deloitte Touche Tohmatsu
Tel Aviv, Israel
June 4, 2000
5
<PAGE>
AMBIENT CORPORATION
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
(in U.S. dollars, except share data)
<TABLE>
<CAPTION>
As of As of
March 31, December 31,
--------- ------------
2 0 0 0 1 9 9 9
------- -------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents 118,942 8,071
Restricted cash 87,567 84,820
Receivables and prepaid expenses 74,967 34,821
----------- -----------
Total current assets 281,476 127,712
----------- -----------
LONG TERM INVESTMENTS 304,622 170,000
----------- -----------
PROPERTY AND EQUIPMENT
Cost 266,448 264,928
Less - accumulated depreciation (141,888) (129,630)
----------- -----------
Property and equipment, net 124,560 135,298
----------- -----------
Total assets 710,658 433,010
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Short-term credit 67,730 140,903
Accounts payable 172,729 212,967
Other current liabilities 384,851 406,713
----------- -----------
Total current liabilities 625,310 760,583
----------- -----------
LONG-TERM LIABILITIES
Long-term bank credit 8,409 9,958
Notes payable -- 685,000
Convertible debentures 708,330 --
Liability for severance pay -- 15,334
----------- -----------
Total long-term liabilities 716,739 710,292
----------- -----------
Total liabilities 1,342,049 1,470,875
----------- -----------
CONTINGENT LIABILITIES AND COMMITMENTS
SHAREHOLDERS' DEFICIENCY
Common stock $0.001 par value; authorized - 20,000,000 shares;
issued and outstanding - 9,381,833 and 3,130,833 shares,
respectively 9,382 3,131
Additional paid-in capital 19,965,460 5,041,595
Deferred stock - based compensation (11,658,915) (4,063)
Deficit accumulated during the development stage (8,947,318) (6,078,528)
----------- -----------
Total shareholders' deficiency (631,391) (1,037,865)
----------- -----------
Total liabilities and shareholders' deficiency 710,658 433,010
=========== ===========
</TABLE>
The accompanying notes constitute an integral part of the condensed consolidated
financial statements.
6
<PAGE>
AMBIENT CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS
(in U.S. dollars, except share data)
<TABLE>
<CAPTION>
Cumulative from
Three-month period Year ended inception to
Ended March 31, December 31, March 31,
--------------- ------------ ---------
2 0 0 0 1 9 9 9 1 9 9 9 2 0 0 0
------- ------- ------- -------
Note (Unaudited) (Unaudited)
---- ----------- -----------
<S> <C> <C> <C> <C> <C>
Research and development expenses 69,030 104,235 340,287 1,790,867
Less - participation by the Office of the
Chief Scientist of the State of Israel -- 10,387 231,767 558,195
---------- ---------- ---------- ----------
69,030 93,848 108,520 1,232,672
Operating, general and administrative
expenses 2 1,140,340 111,269 684,234 4,775,965
Other expenses 3 1,512,500 -- -- 1,512,500
---------- ---------- ---------- ----------
2,652,840 111,269 684,234 6,288,465
Operating loss (2,721,870) (205,117) (792,754) (7,521,137)
Financing expenses, net (149,602) (200,013) (332,546) (1,419,172)
Other income (expenses), net 18,060 -- (6,104) 8,369
Company's share in net losses of affiliates (15,378) -- -- (15,378)
---------- ---------- ---------- ----------
Net loss (2,868,790) (405,130) (1,131,404) (8,947,318)
========== ========== ========== ==========
Basic and diluted loss per share (0.49) (0.13) (0.36)
========== ========== ==========
Weighted average number of shares
Outstanding 5,892,386 3,074,333 3,121,479
========== ========== ==========
</TABLE>
The accompanying notes constitute an integral part of the condensed consolidated
financial statements.
7
<PAGE>
AMBIENT CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIENCY
(in U.S. dollars, except share data)
<TABLE>
<CAPTION>
Deficit
accumulated
Additional Deferred stock during the
Number Share paid-in - based development
of shares capital capital Compensation stage Total
--------- ------- ------- ------------ ----- -----
Three-month period ended
March 31, 2000
-------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1999 3,130,833 3,131 5,041,595 (4,063) (6,078,528) (1,037,865)
Waiver of liability due to related
party - January 2000 -- -- 75,328 -- -- 75,328
Stock issued in respect of
conversion of debt - February 2000 3,490,000 3,490 688,343 -- -- 691,833
Stock issued pursuant to consulting
agreement - February 2000 700,000 700 2,099,300 (2,100,000) -- --
Stock issued pursuant to consulting
agreement - February 2000 180,000 180 539,820 (540,000) -- --
Stock issued pursuant to consulting
agreement - February 2000 70,000 70 192,430 (192,500) -- --
Stock issued pursuant to consulting
agreement - February 2000 25,000 25 68,725 (68,750) -- --
Warrants issued pursuant to
consulting agreement - February 2000 -- -- 1,500,000 (1,500,000) -- --
Warrants issued to convertible
debentures' holders - February 2000 -- -- 161,376 -- -- 161,376
Stock issued pursuant to consulting
agreement - February 2000 589,750 590 1,768,660 (1,769,250) -- --
Stock issued pursuant to consulting
agreement - February 2000 300,000 300 1,246,560 (1,246,860) -- --
Stock issued pursuant to consulting
agreement - March 2000 250,000 250 1,499,750 (1,500,000) -- --
Stock issued pursuant to consulting
agreement - March 2000 100,000 100 587,400 (587,500) -- --
Stock issued pursuant to consulting
agreement - March 2000 346,250 346 2,033,873 (2,034,219) -- --
Stock issued pursuant to consulting
agreement - March 2000 200,000 200 1,149,800 (1,150,000) -- --
Stock to be issued pursuant to
settlement agreement -- -- 1,312,500 -- -- 1,312,500
Amortization of deferred stock -
based compensation -- -- -- 1,034,227 -- 1,034,227
Net loss -- -- -- -- (2,868,790) (2,868,790)
----------- ----------- ----------- ----------- ----------- -----------
Balance - March 31, 2000 9,381,833 9,382 19,965,460 (11,658,915) (8,947,318) (631,391)
=========== =========== =========== =========== =========== ===========
Year ended December 31, 1999
Balance - December 31, 1998 3,074,333 3,074 4,941,189 (239,683) (4,947,124) (242,544)
Stock issued pursuant to consulting
agreement - January 1999 4,000 4 7,996 (8,000) -- --
Stock issued pursuant to consulting
agreement - February 1999 15,000 15 -- -- -- 15
Stock issued pursuant to consulting
agreement - February 1999 22,500 23 69,977 (70,000) -- --
Stock issued pursuant to consulting
agreement - April 1999 15,000 15 12,173 (12,188) -- --
Warrants issued pursuant to
consulting agreement - April 1999 -- -- 10,260 -- -- 10,260
Amortization of deferred stock -
based compensation -- -- -- 325,808 -- 325,808
Net loss -- -- -- -- (1,131,404) (1,131,404)
----------- ----------- ----------- ----------- ----------- -----------
Balance - December 31, 1999 3,130,833 3,131 5,041,595 (4,063) (6,078,528) (1,037,865)
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes constitute an integral part of the condensed consolidated
financial statements.
8
<PAGE>
AMBIENT CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in U.S. dollars)
<TABLE>
<CAPTION>
Cumulative from
Three-month period inception to
CASH FLOWS - OPERATING ACTIVITIES ended March 31, March 31,
--------------- ---------
2 0 0 0 1 9 9 9 2 0 0 0
------- ------- -------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Net loss (2,868,790) (405,130) (8,947,318)
Adjustments to reconcile net loss to net cash used in
operating activities -
Items not involving cash flows:
Depreciation and amortization 31,297 133,019 1,590,161
Loss on sale of fixed assets -- -- 13,817
Financing consulting and other expenses paid via the
issuance of common stock and warrants 2,346,727 70,001 2,782,810
Increase (decrease) in net liability for severance pay (15,334) 16,570 (199)
Accrued interest on loans and notes payable -- -- 210,016
Loss in affiliated company 15,378 -- 15,378
Write-down of long term investment -- -- 665,000
Write-off of leasehold improvements -- -- 20,453
Changes in operating assets and liabilities:
Decrease (increase) in receivables and prepaid
expenses (40,146) 231,828 (48,006)
Increase (decrease) in accounts payable (40,238) 114,250 (56,518)
Increase (decrease) in other current liabilities 53,466 (115,807) 356,624
---------- ---------- ----------
Net cash provided by (used in) operating activities (517,640) 44,731 (3,397,782)
---------- ---------- ----------
CASH FLOWS - INVESTING ACTIVITIES
Loan provided to another company -- (835,000)
Investment in affiliated company (150,000) -- (150,000)
Additions to property and equipment (1,520) -- (373,339)
Proceeds from disposal of fixed assets -- -- 42,100
Increase in restricted cash (2,747) -- (87,567)
---------- ---------- ----------
Net cash used in investing activities (154,267) -- (1,403,806)
---------- ---------- ----------
CASH FLOWS - FINANCING ACTIVITIES
Proceeds from issuance of share capital -- -- 2,264
Proceeds from issuance of notes payable -- -- 1,000,000
Proceeds from issuance of convertible debentures 857,500 -- 857,500
Repayment of notes payable -- -- (400,000)
Proceeds of loans from shareholders, net -- -- 919,600
Repayment of loans from shareholders -- -- (968,000)
Proceeds from long-term bank credit -- -- 95,969
Repayment of long-term bank credit (1,549) (3,579) (79,594)
Increase (decrease) in short term bank credit (73,173) (53,190) 35,726
Public offering of common stock -- -- 3,433,027
Repayment of short-term bank loan (250,000) -- (250,000)
Proceeds from short-term bank loan 250,000 -- 274,038
---------- ---------- ----------
Net cash provided by (used in) financing
activities 782,778 (56,769) 4,290,530
---------- ---------- ----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 110,871 (12,038) 118,942
CASH AND CASH EQUIVALENTS - BEGINNING
OF PERIOD 8,071 16,138 --
---------- ---------- ----------
CASH AND CASH EQUIVALENTS - END OF
PERIOD 118,942 4,100 118,942
========== ========== ==========
</TABLE>
The accompanying notes constitute an integral part of the condensed consolidated
financial statements.
Non-cash transactions for the period ended March 31, 2000:
A. Issuance of shares in respect of conversion of note payable in the
amount of $700,000 (see note 3A).
B. Waiver of liability due to related party in the amount of $75,328.
9
<PAGE>
AMBIENT CORPORATION
(A Development Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(in U.S. dollars)
NOTE 1 - BASIS OF PRESENTATION AND GENERAL
A. The unaudited condensed interim consolidated financial statements as of
March 31, 2000 and for the three-month period then ended ("interim
financial statements") of Ambient Corporation and subsidiaries.
(collectively "the Company") and subsidiaries should be read in
conjunction with the audited financial statements of the Company as of
December 31, 1999 and for the year then ended, including the notes
thereto. The results of operations for the interim periods are not
necessarily indicative of the results to be expected on a full-year basis.
B. The interim financial statements have been prepared in accordance with
accounting principles generally accepted in the United States.
The accounting principles applied in the preparation of these interim
financial statements are consistent with those principles applied in the
preparation of the most recent annual audited financial statements.
C. Description of business
Ambient Corporation ("Ambient"), a development stage company, was founded
in June 1996 to design and develop advanced smart card interface
technology. The Company has ceased its research and design efforts in the
smart card interface technology area.
In August 1996, Ambient purchased substantially all of the assets and
assumed substantially all of the liabilities of Gen Technologies, Inc., a
smart card research and development company, at their approximate book
value, including the capital stock of its subsidiary, Gen Tec Ltd. (which
subsequently changed its name to Ambient Ltd.). The results of operations
of Gen Technologies, Inc. prior to the acquisition were not material.
Ambient and its subsidiary are collectively referred to herein as "the
Company."
The Company has recently commenced the design and development of products
and services in the field of electronics commerce, internet and telephony
activities.
The Company's activities are currently centered in two distinct areas; the
completion of the design and development of a unique technology designed
to facilitate the provision of rapid power line telecommunication (PLT)
services to ordinary business and personal consumers and the
establishment, initially in Israel, of nationwide screen phone network
that design to enable internet access for consumers who do not have access
to, or unable, or unwilling to use, personal computers.
The Company has not generated any revenues since inception.
10
<PAGE>
AMBIENT CORPORATION
(A Development Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(in U.S. dollars)
NOTE 1 - BASIS OF PRESENTATION AND GENERAL (contd.)
D. Going concern assumption
The Company incurred a net loss in the three-month period ended March 31,
2000 of approximately $2.9 million (and approximately $8.9 million since
inception) and anticipates that it will continue to incur losses for some
time. In addition, the Company had a working capital deficit of
approximately $344,000 and a shareholders' deficiency of approximately
$0.6 million as of March 31, 2000. Although the Company raised net
proceeds of approximately $3.4 million from an initial public offering in
February 1998, it has substantially utilized all of such proceeds,
primarily for product development. The Company's Management estimates that
the existing funds will enable the Company to operate through August 2000.
The Company's continued existence is dependent on obtaining additional
financing for product development and commercialization.
In February 2000, the Company issued $1,000,000, 10% convertible
debentures to private investors and an additional $500,000 in April 2000.
The debentures mature on February 28, 2002. (See Note 3B and D).
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) seeking out strategic partnerships; (iii) negotiating
with a number of companies to install pilot projects; and (iv)
diversification through establishment of new subsidiaries in the fields of
internet technology and communications. In management's estimation, the
above measures, if substantially realized, should enable the Company to
continue operating through at least March 31, 2001, although there can be
no assurance of this.
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.
E. Reclassification
Certain prior period amounts have been reclassified to conform with
current period presentation.
11
<PAGE>
AMBIENT CORPORATION
(A Development Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(in U.S. dollars)
NOTE 2 - OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES
Including $946,000 in stock-based compensation (three month period
ended March 31, 1999 $318,000, year ended December 31, 1999 -
$180,000).
NOTE 3 - SIGNIFICANT EVENTS
A. During the period the Company issued 3,490,000 shares in
consideration of an outstanding note payable in an approximate
amount (principal plus accrued interest) of $700,000. The share
price at the date of issuance was $3.
B. In February 2000, the Company issued $1,000,000 10% convertible
debentures to private investors. Net proceeds of the issuance
amounted to $875,500. The debentures were issued pursuant to the
terms of an agreement which further provides that, subject to
certain conditions, the investors will purchase an additional
$1,000,000 of debentures no later than five days after the effective
date of a registration statement covering the common stock into
which the debentures may be converted. In April 2000, the debenture
holders pre-funded $500,000 of this commitment and, in consequence
thereof, the Company issued an additional $500,000 of its 10%
convertible debentures.
In April 2000, the debenture holders pre-funded $500,000 of such
amount, in consequence of which the Company issued an additional
$500,000 of the 10% convertible dentures.
The debentures are convertible into shares of the Company's common
stock at a conversion rate of $0.40 per share, subject to
adjustments under certain conditions. The debentures are exercisable
only to the extent that after exercise, the beneficial ownership of
the debenture holder in the Company's outstanding shares of common
stock does not exceed 9.99%. The debentures mature in February 2002.
In connection with the issuance of the 10% convertible debentures,
the Company issued to debenture holders warrants to purchase, in the
aggregate, 937,500 of the Company's common shares at an exercise
price per share of $1 per share. The warrants are exercisable only
to the extent that after exercise, the beneficial ownership of the
debenture holder in the Company's outstanding shares of common stock
does not exceed 9.99%. The warrants expire in February 2003.
Under its agreements with the debenture holders, the Company is
obligated to pay late fees as liquidated damages to the debenture
holders because it has not filed a registration statement in respect
of the resale of shares issuable upon the conversion of the
debentures and the shares issuable upon exercise of the warrants
issued in conjunction with the debentures. However, these amounts
are not payable in the event that such registration statement is
declared effective by June 16, 2000. If the Company is obligated to
pay these liquidated damages, the amount that it must pay to the
debenture holders will be equal to (A) 2% of the principal amount of
all the debentures for the period from April 2, 2000 through the 30
day thereafter, and (B) 3% of the principal amount thereof for each
subsequent 30 day period as well as an additional (X) 2% of the
principal amount of the debenture for the period May 17, 2000
through the 30th day thereafter and (Y) 3% of the principal amount
thereof for each subsequent 30 day period.
12
<PAGE>
AMBIENT CORPORATION
(A Development Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(in U.S. dollars)
NOTE 3 - SIGNIFICANT EVENTS (contd.)
C. In February 2000, the Company entered into a one year agreement with
a consultant ("consultant") for the provision of financial and
investment services to the Company. In consideration for such
services, the Company issued the consultant warrants to purchase
1,500,000 shares of the Company's common stock for $0.01 per share,
only to the extent that after exercise, the beneficial ownership of
the consultant in the Company's outstanding shares of common stock
does not exceed 4.99% of the Company's outstanding common shares.
Such warrants are exercisable until February 2002. The compensation
expense for the period ended March 31, 2000 with respect to this
agreement amounted to $88,356.
D. In connection with a planned offering of the Company's stock held by
certain stockholders, the Company took upon itself a number of
undertakings.
The Company has agreed to bear all costs, expenses and fees of
registration of the shares of common stock offered by the selling
stockholders for resale other than the legal fees and expenses of
counsel or other advisors to the selling stockholders. Any brokerage
commissions, discounts, concessions or other fees, if any, payable
to broker-dealers in connection with any sale of the shares of
common stock will be borne by the selling stockholders selling those
shares or by the purchasers of such shares.
In addition the Company has agreed to indemnify each debenture
holder against certain liabilities, including liabilities arising
under the Securities Act.
The Company has agreed to indemnify certain selling stockholders, or
their transferees, or assignees against certain liabilities,
including liabilities under the Securities Act of 1933, or to
contribute to payments to which such selling stockholders, or their
respective pledges, donees, transferees or other successors in
interest, may be required to make in respect thereof.
NOTE 4 - OTHER EXPENSES
Certain parties contended that the Company guaranteed, in a prior
year, the repayment of an outstanding third-party loan obligation,
which contention the Company denies. In settlement of the dispute,
the Company, on April 14, 2000, entered into a settlement agreement
with such parties pursuant to which it undertook to pay to said
claimants, in the aggregate, $200,000 and issued to them an
aggregate of 250,000 shares of the Company's common stock.
Accordingly, the Company has recorded to its operating expenses for
the three month period ended March 31, 2000, an expense in the
amount of $1,512,500, representing the market value of the shares
that were issued and the cash payment which it undertook to pay.
Item 2. Plan of Operation
13
<PAGE>
The following discussion and expositions should be read in conjunction
with the Financial Statements and realted Notes contained elsewhere in this Form
10-QSB.
We are engaged in the design and development of products and services in
the fields of electronic commerce, Internet access and advanced telephony
applications. All of our design and development activities are conducted within
the State of Israel.
Our activities are currently centered in two distinct areas: (i) the
completion of the design and development of a unique technology designed to
facilitate the provision of rapid power line telecommunication services to
ordinary business and personal consumers and (ii) the establishment, initially
in Israel, of a nationwide screen phone network that is designed to enable
e-commerce and Internet browsing for consumers who do not have access to, or are
unable or unwilling to use, personal computers.
Since our founding in June 1996, we have been engaged primarily in the
design and development of smart card based technologies and products. Owing to a
fundamental reassessment of general market developments in the field of smart
card based technologies, we elected to leverage our experience and expertise
acquired in the area of smart card based technologies to the design, development
and commercialization of our proprietary technologies in the field of
power-line- telecommunications (PLT) and screen phones. We have, in latter part
of 1999, ceased all research and design efforts in the smart card area.
We have established a subsidiary, PLT Solutions, Inc., in which we hold a
90.1% interest, to promote a unique technology designed to facilitate the use of
existing electricity power lines and grids in the United States and Japan for
Internet, telephone and data transfer to ordinary business and personal users.
Existing electrical power grids are not currently in use for high speed data
transmission due to certain power utility infrastructure limitations. We have
designed and developed proprietary technology that overcome these infrastructure
limitations. We believe that our technology will be especially attractive to
Internet providers/integrators. Our wholly-owned Israeli subsidiary, Insulated
Connections Corporation Ltd., undertakes all our research and development
activities for PLT.
We also have a 40% interest in a newly established Israeli company,
Kliks.com Ltd. ("Kliks"), which is engaged in designing and attempting to
establish a nationwide Screen Phone network in Israel. The remaining 60%
interest in Kliks is held by our Vice-President, Mr. Bernie Wolff. The network
will enable Internet access for a wide segment of the population which is less
familiar with the use of personal computers (PC's), or belongs to the large
segment of populace which does not have a PC.We are engaged in the design and
development of products and services in the fields of electronic commerce,
internet and telephony activities.
As a development stage company, we have a limited operating history upon
which an evaluation of our prospects can be made. Our prospects must therefore
be evaluated in light of the problems, expenses, delays and complications
associated with a new business.
To date, we have incurred net losses aggregating $8,947,318, reflecting
principally general and administrative expenses and research and development
expenses. We expect to incur significant up-front expenditures in connection
with the new focus of our operations, and operating losses are expected to
continue for the foreseeable future. There can be no assurance that we can be
operated profitably in the future. Our continuation as a going-concern is
dependent upon, among other things, our ability to obtain additional financing
when and as needed, and to generate sufficient cash flow to meet its obligations
on a timely basis. We may also explore other business options including
strategic joint ventures and business combinations, including investments in
other companies, or mergers.
As of March 31, 2000, we have expended $1,232,672 on our research and
development activities (net of $558,195 received from the Office of Chief
Scientist of the Israeli Ministry of Industry and Trade).
In February 2000, we issued $1,000,000 (before expenses and fees) of our
10% Convertible Debentures to private investors. The Debentures were issued
pursuant to the terms of an agreement which further provides that, subject to
certain conditions, the investors will purchase an additional $1,000,000 of
Debentures no later than five days after the effective date of a registration
statement covering the Common Stock into which the Debentures may be converted.
In April 2000, the investors pre-funded $500,000 of this obligation. The
Debentures mature on February 28, 2002. The Debentures are convertible into
shares of the Company's Common Stock at a conversion rate of $0.40 per share,
subject to adjustment under certain conditions.
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In connection with the issuance of the 10% Convertible Debentures, we
issued to Debenture holders warrants to purchase, in the aggregate, 625,000 of
our Common Shares at an exercise price per share of $1. In connection with the
pre-funding of $500,000 from the additional $1,000,000, we issued warrants to
purchase, in the aggregate, an additional 312,5000 shares of our common stock at
an exercise price per share of $1. The warrants expire in February 2003. For
penalties and late fees that may be payable by the Company see note 3 to the
financial statements.
We issued to an independent consultant warrants, exercisable through
February 2002, to purchase up to 1.5 million shares of our common stock, at an
exercise price per share of $0.01. As a result of the issuance of these
warrants, we recognized a significant non-cash financing costs, and recorded
approximately $1.5 million as deferred financing costs and charged approximately
$88,000 to operations.
In February 2000 we converted outstanding debts of approximately $700,000
in principal and accrued interest into 3,490,000 shares of our common stock. The
share price at the date of issuance was $3.
We anticipate that cash on hand, as well as the $500,000 (before fees and
commissions) due to be invested upon purchase of the additional Convertible
Debentures, will allow us to maintain operations through August 31, 2000.
Thereafter, we will need additional financing to maintain operations. We are
currently reviewing possible private sales of equity or debt with equity
features. We have no commitments for any such financing and there can be no
assurance that we will obtain additional capital when needed or that any such
additional capital will not have a dilutive effect on current stockholders.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities and Use of Proceeds
Sale of Unregistered Securities
Set forth below is certain information concerning sales by the Company of
unregistered securities during the first quarter of 2000. The issuances by the
Company of the securities sold in the transactions referenced below were not
registered under the Securities Act of 1933, pursuant to the exemption
contemplated by Section 4(2) thereof for transactions not involving a public
offering.
1. On February 16, 2000, we issued to private investors $1,000,000 of our 10%
Convertible Debentures. The Debentures were issued pursuant to the terms of an
agreement which further provides that, subject to certain conditions, the
investors will purchase an additional $1,000,000 of Debentures no later than
five days after the effective date of a registration statement covering the
Common Stock into which the Debentures may be converted. The Debentures mature
on February 28, 2002. The Debentures are convertible into shares of the
Company's Common Stock at a conversion rate $0.40 per share, subject to
adjustment under certain conditions.
2. In February, 2000, we issued to a consultant warrants to purchase up to
1,500,000 shares of our common stock at an exercise price per share of $0.01.
3. On February 13, 2000, we issued 3,490,000 shares in conversion of an
outstanding loan owed by us in an approximate amount (principal plus accrued
interest) of $700,000.
4. On February 15, 2000, we issued to a consultant 180,000 shares.
5. On February 16, 2000, we issued to a consultant 70,000 shares.
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6. On February 17, 2000, we issued to a consultant 25,000 shares.
7. On February 19, 2000, we issued to a consultant 589,750 shares.
8. On February 14, and as amended on March 19, we issued to a consultant 700,000
shares.
9. On March 29, we issued to a consultant 200,000 shares.
10. On March 20, 2000, we issued to a consultant 250,000 shares.
11. On March 27, we issued to two consultants, respectively, 346,250 and 100,000
shares.
12. On February 25, we issued to a consultant 300,000 shares.
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) Reports on Form 8-K for the three months ended March 31, 2000
None
(b) Exhibit
27.1 Financial Data Schedule
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: June 5, 2000 AMBIENT CORPORATION
/s/ Aryeh Weinberg
------------------
Chief Executive Officer,
Chief Financial Officer
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