Ambient 424B3 Prospectus supplement

File Pursuant to Rule 424(b)(3)

Registration No. 333-159645

PROSPECTUS

AMBIENT CORPORATION

37,368,831shares of Common Stock

This Prospectus relates to the resale by the selling stockholders of up to 37,368,831 shares of our common stock, par value $0.001 (the "Common Stock") issuable upon exercise of currently exercisable warrants.

We will not receive any of the proceeds from the sale of the shares by the selling stockholders.

The selling stockholders may sell the shares from time to time at the prevailing market price or in negotiated transactions. Each of the selling stockholders may be deemed to be an "underwriter," as such term is defined in the Securities Act of 1933, as amended (the "Act").

Our Common Stock is quoted on the OTC Bulletin Board under the trading symbol "ABTG". The last reported sales price per share of our Common Stock as quoted by the OTC Bulletin Board on April 21, 2011 was $0.072.

AS YOU REVIEW THIS PROSPECTUS, YOU SHOULD CAREFULLY CONSIDER THE MATTERS DESCRIBED IN THE SECTION OF THIS PROSPECTUS TITLED "RISK FACTORS" BEGINNING ON PAGE 3.

NEITHER THE SECURITIES EXCHANGE AND COMMISSION (THE "SEC") NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED ON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Prospectus is April 27, 2011

PRINCIPAL EXECUTIVE OFFICE:

Ambient Corporation

7 Wells Avenue

Newton, Massachusetts 02459

(617) 332-0004

AMBIENT CORPORATION

TABLE OF CONTENT

PROSPECTUS SUMMARY			1
RISK FACTORS			3
USE OF PROCEEDS			7
AGREEMENTS WITH THE SELLING STOCKHOLDERS			7
DIVIDEND POLICY			8
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS			9
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION			9
DESCRIPTION OF BUSINESS			10
DESCRIPTION OF PROPERTY			24
LEGAL PROCEEDINGS			24
MANAGEMENT			24
EXECUTIVE COMPENSATION			26
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS			28
BENEFICIAL OWNERSHIP OF MANAGEMENT, DIRECTORS AND CERTAIN BENEFICIAL HOLDERS			29
SELLING STOCKHOLDERS			31
PLAN OF DISTRIBUTION			31
DESCRIPTION OF CAPITAL STOCK			33
DISCLOSURE OF SEC POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES			33
LEGAL MATTERS			33
EXPERTS			34
WHERE YOU CAN FIND MORE INFORMATION			34
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS			F-1

We have not authorized anyone to provide you with information different from that contained or incorporated by reference in this Prospectus. The selling stockholders are offering to sell, and seeking offers to buy, shares of our Common Stock only in jurisdictions where offers and sales are permitted. The information contained in this Prospectus is accurate only as of the date of this Prospectus, regardless of the time of delivery of this Prospectus or of any sale of Common Stock.

PROSPECTUS SUMMARY

THIS IS ONLY A SUMMARY AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT MAY BE IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS, ESPECIALLY THE SECTION TITLED "RISK FACTORS" AND OUR FINANCIAL STATEMENTS AND THE RELATED NOTES INCLUDED IN THIS PROSPECTUS, BEFORE DECIDING TO INVEST IN SHARES OF OUR COMMON STOCK.

AMBIENT CORPORATION

Ambient Corporation (“Ambient” the “Company” “we or “us”) is a pioneering integrator of smart grid communications platforms, creating high-speed Internet Protocols (IP) based data communications networks for the medium and low-voltage distribution grid. The Ambient smart grid platform, known as Ambient Smart Grid®, facilitates a two-way, real-time communications network designed to modernize the power grid infrastructure, making it more receptive to wide-scale adoption of renewable energy sources and supportive of new energy efficiency technologies and programs. The Ambient Smart Grid® platform facilitates a utility’s ability to implement smart grid applications such as Advanced Metering Infrastructures (AMI), Demand Side Management (DSM), Distribution Monitoring and Automation, direct load control and more. When combined, these applications offer economic, operational and environmental benefits for utilities, and ultimately the utility customers.

Ambient has been focused, since 2000, on the collaborative development of communication solutions that meet the needs of utilities to ultimately deploy what is now referred to as the smart grid. From inception, Ambient’s platform, which includes Nodes, management systems, current transformers and a suite of applications, has been designed to function as an open standards-based system intended to support a variety of applications and services simultaneously. Over the years, Ambient has developed and delivered three generations of smart grid communications Nodes that with thousands of our units deployed in the field are already beginning to transform today’s century-old power delivery system into an advanced energy network that provides timely energy usage information and remote grid monitoring, automation and control. With each successive generation, Ambient has continued to support and integrate additional applications, while driving lower the manufacturing costs and price to our customers making our products even more attractive. In December of 2010, Ambient delivered to our marquee customer units of our fourth generation communications Node which are being beta tested in the field.

Throughout the past five years, Ambient has been a key supplier to Duke Energy’s grid efficiency programs, and the leading supplier of the smart grid communications Nodes for their smart grid deployments. During 2008, Ambient received purchase orders from Duke Energy to purchase its X2000 and X-3000 communications Nodes and to license our AmbientNMS®, to enable the building out of an intelligent grid/intelligent-metering platform, which generated approximately $14.8 million in revenues throughout 2008 and 2009.

In September 2009, we entered into a long-term agreement, running through 2015 to supply Ambient’s X-3100 Node and to license our management software – AmbientNMS® for deployment throughout the utility’s electric power distribution grid. Since the execution of the agreement, we have generated, through December 31, 2010, approximately $21.1 million in revenues from the sale of our product.

With Ambient Smart Grid®, our goal remains to be a leading designer, developer and systems integrator of smart grid communications platforms, incorporating a wide array of communications protocols and smart grid applications such as advanced metering solutions to complement our communications platform and our internally developed energy sensing capabilities. We view a flexible smart grid communications platform to be a key factor for utilities to efficiently integrate the increasing portfolios of smart grid technologies and applications into and on the electrical grid.

Ambient continues to seek new opportunities for commercial deployments and to bring new and existing networks to full commercialization. Throughout 2011, Ambient’s principal target customers will continue to be electric utilities that seek to both increase efficiencies in the delivery of energy and enable consumers to better understand and manage their energy consumption. Ambient seeks to continue to extend existing relationships, and develop new relationships to collaborate on efforts to drive the development of new functionality for both utility and consumer applications that further enhance the value of the Ambient Smart Grid® platform.

In February 2011, our majority stockholder approved a reverse split of our common stock, in the range of 1-for 30 to 1-for 100, which our Board of Directors may implement in its discretion (if at all) before December 31, 2011, without any further stockholder approval. Our Board approved and recommended the reverse stock split primarily in order to increase Ambient’s prospects of successfully listing its common stock on the NASDAQ Capital Market. In connection therewith and in an effort to strengthen our balance sheet position in any such listing effort, as discussed below in further detail in December 2010 our majority stockholder applied the $5 million then remaining in the escrow account for our benefit to the purchase of Ambient’s securities.

Since inception, we have funded operations primarily through the sale of our securities and most recently from the revenue generated from purchase orders received from our marquee customer. To date, we have funded operations primarily through the sale of our securities. In connection with the continued development, marketing, and deployment of our products, technology, and services, we anticipate that we will continue to augment our revenue generation capabilities with such raises in the future. We recognized revenues of $20,358,040 and $2,193,338 for the years ended December 31, 2010 and 2009, respectively, representing sales of equipment, software and services to Duke Energy. We incurred net losses of $3,186,229 and $14,246,284 for the years ended December 31, 2010 and 2009, respectively.

CORPORATE INFORMATION

Our principal offices are located 7 Wells Avenue, Newton, Massachusetts 02459, and our telephone number is (617) 332-0004. We maintain a website at www.ambientcorp.com. Information contained on our website is not part of this Prospectus.

RISK FACTORS

Investing in shares of our Common Stock involves significant risk. You should consider the information under the caption "RISK FACTORS" beginning on page 7 of this Prospectus in deciding whether to purchase the Common Stock offered under this Prospectus.

THE OFFERING

Securities offered by the selling stockholders		37,368,831 shares of Common Stock. (1)
Shares outstanding before the Offering		1,649,301,354 (2)
Use of Proceeds		We will not receive any proceeds from the sale of the Common Stock by the selling stockholders

(1)	Refers to shares issuable upon exercise of warrants issued to Kuhns Brothers (“Kuhns”), an investment firm and a registered broker dealer, or its designees, in connection with certain financings that we consummated between July 2007 and November 2008 and is comprised of the following: to (i) 750,000 shares of Common Stock issuable upon exercise of warrants issued in January 2007 in connection with the retainer of Kuhns as investment advisor to us and (ii) 36,618,831 shares of Common Stock issuable upon exercise of warrants issued as compensation for placement agent services rendered in connection with the above referenced financings. For a description of the agreement between us and the holders of the Warrants and the Other Warrants, see "DESCRIPTION OF THE AGREEMENTS WITH SELLING STOCKHOLDERS".

(2)	As of April 21, 2011. Does not include (i) up to an aggregate of 107,146,500 shares of Common Stock issuable upon exercise of options granted under our 2000 Equity Incentive Stock Option Plan and our 2002 Non-Employee Director Stock Option Plan, (ii) any of the shares described in footnote (1) above and (iii) 122,225,000 shares of Common Stock issuable upon exercise of other outstanding options and warrants.

RISK FACTORS

INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED BELOW BEFORE YOU PURCHASE ANY OF OUR COMMON STOCK. IF ANY OF THESE RISKS OR UNCERTAINTIES ACTUALLY OCCURS, OUR BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS COULD BE MATERIALLY ADVERSELY AFFECTED, AND YOU COULD LOSE ALL OR PART OF YOUR INVESTMENT.

RISKS CONCERNING OUR BUSINESS

WE CURRENTLY DEPEND ON ONE KEY CUSTOMER FOR ALL OUR REVENUE, AND THE LOSS OF, OR A SIGNIFICANT SHORTFALL IN ORDERS FROM, THIS KEY CUSTOMER COULD SIGNIFICANTLY REDUCE OUR REVENUE.

For the years ended December 31, 2010 and 2009, 100% of our revenue was from Duke Energy. Our inability to generate additional anticipated revenue from our key customer, or a significant shortfall in sales will likely significantly reduce our revenue and adversely affect our business. Our operating results in the foreseeable future continue to depend on our ability to further our deployments with our existing customer.

Our immediate business opportunities continue to be largely dependent on the success of our deployments, and the future decisions of Duke Energy relating to smart grid system architecture, and the Ambient fourth generation Node. We are focusing much of our time, attention and resources on the rollout of the equipment and software delivered to Duke Energy. The success of our endeavors with respect to the deployment is subject to several risks. We depend on third parties to deliver and support reliable components to manufacture and assemble our end products, as well as our engineering team to continue to advance our software products.

If we are unable to effectively manage, maintain and grow our relationship with Duke Energy, our business could be materially and adversely affected in its ability to continue operations as currently conducted.

Additionally, management is unable at this time to assess the effects, if any, that the proposed merger between Duke and Progress Energy, which merger was announced in January 2011 and is subject to shareholder and regulatory approval, will have on the continuation and/or expansion of our deployment by the new combined company following the merger, No assurance can be provided that the post merger entity will continue with or expand the current deployments at Duke Energy.

WE UTILIZE ONE SUPPLIER TO MANUFACTURE OUR NODES

In both 2010 and 2009, we utilized one contract manufacturer to produce our Nodes. Should our relationship with the manufacturer deteriorate or terminate or should this supplier lose some or all of its access to the products or components that comprise all or part of the Nodes that we purchase from it performance would be adversely affected. Under such circumstances, we would be required to seek alternative sources of supply for these products, and there can be no assurance that we would be able to obtain such products from alternative sources on the same terms. A failure to obtain such products on as favorable terms would have an adverse effect on our revenue and/or gross margin.

SLOWER ECONOMIC GROWTH RATES IN THE US MAY MATERIALLY ADVERSELY IMPACT OUR OPERATING RESULTS.

The US and other economies are recovering from a global financial crisis and recession which began in 2008. Growth has resumed, but has been modest and at an unsteady rate. There are likely to be significant long-term effects resulting from the financial crisis and recession, including a future global economic growth rate that is slower than what was experienced in the years leading up to the crisis, and more volatility may occur before a sustainable, yet lower, growth rate is achieved.

In addition, the OECD has encouraged countries with large federal budget deficits, such as the US, to initiate deficit reduction measures. Such measures, if they are undertaken too rapidly, could further undermine economic recovery and slow growth by reducing demand.

A lower future economic growth rate could result in reductions in sales of our products and services, slower adoption of new technologies and increase price competition. Any of these events would likely harm our business, results of operations and financial condition or cash flows from operations and our profitability.

IF WE ARE UNABLE TO OBTAIN ADDITIONAL FUNDS WHEN NEEDED, WE MAY NOT BE ABLE TO EXPAND EXISTING COMMERCIAL DEPLOYMENTS.

Management believes that our currently available cash resources, as well as anticipated revenue from firm purchase orders will allow us to meet our operating requirements through fiscal 2011. However, it is conceivable that we may raise additional funds to expand existing commercial deployments, support strategic acquisitions and/ orjoint venture opportunities, and/or to satisfy any additional significant purchase order that it may receive. If and or when additional capital is required there are no assurances that we will be successful in obtaining additional required capital on reasonable terms and conditions.

OTHERS MAY CHALLENGE OUR INTELLECTUAL PROPERTY RIGHTS WHICH MAY NEGATIVELY IMPACT OUR COMPETITIVE POSITION

Although we rely on a combination of patents, copyrights, trade secrets, nondisclosure and other contractual provisions and technical measures to protect our intellectual property rights, it is possible that our rights relating to Ambient’s Smart Grid® solution may be challenged and invalidated or circumvented. Further, effective intellectual property protection may be unavailable or limited. Despite efforts to protect our proprietary rights, unauthorized parties may attempt to copy, reverse engineer, or otherwise use aspects of processes and devices that we may regard as proprietary. Policing unauthorized use of proprietary information is difficult, and there can be no assurance that the steps we have taken will prevent misappropriation of our technologies. In the event that our intellectual property protection is insufficient to protect our intellectual property rights, we could face increased competition in the market for technologies, which could have a material adverse effect on our business, financial condition and results of operations.

OTHER COMPANIES MAY DEVELOP AND SELL COMPETING PRODUCTS WHICH MAY REDUCE THE SALES OF OUR PRODUCTS OR RENDER OUR PRODUCTS OBSOLETE.

The smart grid communications marketplace is rapidly evolving and therefore has rapidly changing technological, regulatory and consumer requirements. We will need to continue to maintain and improve our competitive position to keep pace with the evolving needs of our customers, and continue to develop and introduce new products, features and services in a timely and efficient manner.

Some of our potential competitors have longer operating histories, greater name recognition and substantially greater financial, technical, sales, marketing and other resources than our Company. These potential competitors may, among other things, undertake more extensive marketing campaigns, adopt more aggressive pricing policies, obtain more favorable pricing from suppliers and manufacturers and exert more influence on the sales channel than we do. As a result, we may not be able to compete successfully with these potential competitors, and these potential competitors may develop or market technologies and products that are more widely accepted than those we are developing or that would render our products obsolete or noncompetitive.

WE HAVE A HISTORY OF LOSSES AND WE MAY EXPERIENCE LOSSES IN THE FUTURE

We are a company engaged in the design, development and marketing of our smart grid communication technology and solutions. We have incurred losses of $3,186,229 and $14,246,284 for the years ended December 31, 2010 and 2009, respectively.

Our ability to generate and sustain significant additional revenues or achieve profitability will depend upon the factors discussed elsewhere in this "Risk Factors" section. There are no assurances that we will sustain profitability, or that operating losses will not resume in the future.

RISKS CONCERNING OUR CAPITAL STRUCTURE

VICIS CAPITAL MASTER FUND OWNS A MAJORITY OF AMBIENT’S ISSUED AND OUTSTANDING COMMON STOCK AND WILL THUS BE ABLE TO CONTROL THE OUTCOME OF ALL ISSUES SUBMITTED TO OUR STOCKHOLDERS.

Vicis holds, as of April 21, 2011, approximately 84.2% of our issued and outstanding common stock. As a result, Vicis is able to control the outcome of all issues submitted to our stockholders, including the election of all of our directors and the approval of any other action requiring the approval of our stockholders, including any amendments to our certificate of incorporation, a sale of all or substantially all of our assets or a merger or a private transaction. A principal of Vicis also is a member of our board of directors.

THE EFFECTS OF A POTENTIAL REVERSE STOCK SPLIT OF OUR COMMON STOCK ARE UNKNOWN.

In February 2011, our majority stockholder approved a reverse split of Ambient’s stock, in the range of 1-for 30 to 1-for 100, which the Board of Directors may implement in its discretion (if at all) before December 31, 2011, without any further stockholder approval.

The Board approved and recommended the reverse stock split primarily in order to increase Ambient’s prospects of successfully listing its common stock on the Nasdaq Capital Market. If the Board determines to effect a reverse stock split, we cannot assure you that it will be successful in achieving a listing on The Nasdaq Capital Market (or any other exchange). Stockholders should also note that if our Board elects to implement a reverse stock split, there is no assurance that prices for shares of the Common Stock after the reverse split will increase proportionally to the exchange ratio of the reverse stock split (or at all). We cannot guarantee to stockholders that the price of our shares will reach or sustain any price level in the future, and it is possible the proposed reverse stock split will have no lasting impact on our share price.

FUTURE SALES OF COMMON STOCK OR OTHER DILUTIVE EVENTS MAY ADVERSELY AFFECT PREVAILING MARKET PRICES FOR OUR COMMON STOCK.

As of April 21, 2011, we were authorized to issue up to 2,000,000,000 shares of common stock, of which 1,649,301,354 shares were outstanding as of such date. As of April 21, 2011, an additional 290,956,931 shares of common stock were reserved for the exercise of outstanding options and warrants to purchase common stock and the reservations of shares in the various stock option plans. Many of the above options and warrants contain provisions that require the issuance of increased numbers of shares of common stock in the event of stock splits, redemptions, mergers and other transactions. The occurrence of any such event or the exercise of any of these options or warrants would dilute the interest in our company represented by each share of common stock and may adversely affect the prevailing market price of our common stock.

Additionally, our board of directors has the authority, without further action or vote of our stockholders, to issue authorized shares of our common stock that are not reserved for issuance. In addition, in order to raise the amount of capital that we may need at the current market price of our common stock, we may need to issue a significant number of shares of common stock or securities that are convertible into or exercisable for a significant number of shares of our common stock.

Any of these issuances will dilute the percentage ownership interests of our current stockholders, which will have the effect of reducing their influence on matters on which our stockholders vote, and might dilute the book value and market value of our common stock. Our stockholders may incur additional dilution upon the exercise of currently outstanding or subsequently granted options or warrants to purchase shares of our common stock.

OUR STOCK PRICE MAY BE VOLATILE.

The market price of our common stock will likely fluctuate significantly in response to the following factors, some of which are beyond our control:

●

Announcements by us of commencement of, changes to, or cancellation of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;

●

Changes in financial estimates of our revenues and operating results by securities analysts or investors;

	●	Variations in our quarterly operating results due to a number of factors, including but not limited to those identified in this "RISK FACTORS" section;
	●	Additions or departures of key personnel;

●

Future sales of our common stock;

●

Stock market price and volume fluctuations attributable to inconsistent trading volume levels of our stock;

●

Commencement of or involvement in litigation; and/or

●

Announcements by us, or by our competitors of technological innovations or new products.

In addition, the equity markets have experienced volatility that has particularly affected the market prices of equity securities issued by high technology companies and that often has been unrelated or disproportionate to the operating results of those companies. These broad market fluctuations may adversely affect the market price of our common stock.

PENNY STOCK REGULATIONS ARE APPLICABLE TO INVESTMENT IN SHARES OF OUR COMMON STOCK.

Broker-dealer practices in connection with transactions in "penny stocks" are regulated by certain penny stock rules adopted by the SEC. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges, provided that current prices and volume information with respect to transactions in such securities are provided by the exchange or system). Penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver 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, 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 penny stock rules. Many brokers will not deal with penny stocks, restricting the market for our shares of common stock.

BECAUSE WE DO NOT INTEND TO PAY ANY CASH DIVIDENDS ON OUR SHARES OF COMMON STOCK, OUR STOCKHOLDERS WILL NOT BE ABLE TO RECEIVE A RETURN ON THEIR SHARES UNLESS THEY SELL THEM.

We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Prospectus contains some "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995 and information relating to us that are based on the beliefs of our management, as well as assumptions made by and the information currently available to our management. When used in this Prospectus, the words "estimate," "project," "believe," "anticipate," "intend," "expect" and similar expressions are intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in these forward-looking statements, including those risks discussed in this Prospectus.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Prospectus. Except for special circumstances in which a duty to update arises when prior disclosure becomes materially misleading in light of subsequent circumstances, we do not intend to update any of these forward-looking statements to reflect events or circumstances after the date of this Prospectus or to reflect the occurrence of unanticipated events.

USE OF PROCEEDS

The selling stockholders will receive the net proceeds from sales of the shares of Common Stock included in this Prospectus. We will not receive any proceeds from the sale of Common Stock by the selling stockholders. We would, however, receive proceeds from the exercise of the Retainer Warrants and Placement Agent Warrants to purchase up to 37,368,831 shares of Common Stock that are held by the selling stockholders, to the extent such warrants are exercised for cash. If the warrants are exercised on a cashless basis, we will not receive proceeds from those exercises.

The selling stockholders are not obligated to exercise these warrants, and there can be no assurance that they will do so. If all of these warrants were exercised for cash, we would receive proceeds of approximately $1.32 million. Any proceeds we receive from the exercise of these options and warrants will be used for working capital and general corporate purposes.

AGREEMENTS WITH THE SELLING STOCKHOLDERS

Between July 31, 2007 and January 15, 2008, we raised gross proceeds of $12,500,000 from the private placement of our three year 8% Secured Convertible Promissory Note to Vicis Master Master Fund. On April 23, 2008, we raised from Vicis $3,000,000 from the issuance of warrants, exercisable through April 2013, to purchase up to 135,000,000 shares of our Common Stock at a per share exercise price of $0.001. Finally, on November 21, 2008, we and Vicis entered into an agreement, pursuant to which Vicis invested in us an additional $8 million, in consideration of which we reduced the conversion price on the above referenced notes.

In January 2007, we and Kuhns Brothers (“Kuhns”), an investment firm and a registered broker dealer, entered into a placement agency agreement pursuant to which Kuhns provided to us investment banking services. In connection with the entry into the placement agency agreement, we issued to Kuhns warrants to purchase up 750,000 shares of our Common Stock (the “Retainer Warrants”). Thereafter, in connection with the above referenced transactions, we paid to Kuhns, an investment firm and a registered broker dealer which served as placement agent for the above transactions, a cash fee of $615,000 and we issued, between July 31, 2007 and November 21, 2008 warrants to purchase up to 45,016,665 shares of our Common Stock (the “Placement Warrants”; together with the Retainer Warrants, the “Placement Agent Warrants”). Of the Placement Warrants issued, warrants for 7,619,047 shares were issued in lieu of the payment of a cash fee of $300,000. The registration statements of which this prospectus forms a part was filed in order to register for resale the shares of Common Stock underlying the Placement Agent Warrants held by Kuhns or its designees, except for warrants for 1,383,334 shares.

The Retainer warrants first became exercisable on January 31, 2008 and are exercisable through January 30, 2012 at a per share exercise price of $0.075. The Placement Warrants are exercisable at a share price of $0.035. Of the Placement Warrants, warrants for 16,600,000 shares are exercisable through July 30, 2012, warrants for 11,666,666 are exercisable through November 1, 2012, warrants for 14,999,999 are exercisable through January 14, 2013, and warrants for 1,000,000 shares are exercisable through April 23, 2013. As of April 23, 2010, Placement Warrants exercisable through July 30, 2012, were exercised for an aggregate of 5,814,500 shares of the Company's Common Stock. The exercise price for the Placement Agent Warrants is subject to adjustment if there are certain capital adjustments or similar transactions, such as a stock split or merger. Placement Agent Warrants for fifty percent of the shares contain provisions providing the holders thereof with the right to exercise the Warrants on a "cashless" basis after the first anniversary of issuance if the Registration Statement is not in effect at the time of exercise. If the holder elects the cashless exercise option, it will receive a lesser number of shares and we will not receive any cash proceeds from that exercise. The lesser number of shares which the holder will receive is determined by a formula that takes into account the closing bid price of our Common Stock on the trading day immediately before the Warrant exercise. That closing price is multiplied by the full number of shares for which the Warrant is then being exercised. That result is reduced by the total exercise price the holder would have paid for those shares if it had not elected a cashless exercise. The number of shares actually issued under the cashless exercise option is equal to the balance amount divided by the closing price referred to above. We are filing the Registration Statement so that we can receive cash proceeds upon any exercise of the Placement Warrants.

The Placement Agent Warrants provide that the beneficial owner can exercise such warrant in accordance with their respective terms by giving notice to us. However, the holder may not exercise its Warrant to the extent that such exercise would result in such owner and its affiliates beneficially owning more than 4.99% of our stock then outstanding (after taking into account the shares of our Common Stock issuable upon such conversion or warrant exercise). If the holder then disposes of some or all of its holdings, it can again convert its debentures or exercise its warrant.

DIVIDEND POLICY

We have paid no dividends on our Common Stock and do not expect to pay cash dividends in the foreseeable future. It is the present policy of our board of directors to retain all earnings to provide funds for the growth of the Company. The declaration and payment of dividends in the future will be determined by our board of directors based upon our earnings, financial condition, capital requirements and such other factors as our board of directors may deem relevant. We are not under any contractual restriction as to present or future ability to pay dividends.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The following table shows the quarterly high and low bid prices for our Common Stock over the last two completed fiscal years as quoted on the OTC Bulletin Board. The prices represent quotations by dealers without adjustments for retail mark-ups, mark-downs or commission and may not represent actual transactions. The closing price of our Common Stock on April 21, 2011, was $0.072 per share.

	Low		High
Year Ended December 31, 2010
First Quarter	$	0.102	$	0.165
Second Quarter	$	0.062	$	0.101
Third Quarter		0.063		0.097
Fourth Quarter		0.088		0.139

Year Ended December 31, 2009
First Quarter	$	0.02	$	0.101
Second Quarter	$	0.091	$	0.198
Third Quarter	$	0.14	$	0.183
Fourth Quarter	$	0.13	$	0.25

As of April 21, 2011, there were 138 holders of record of our Common Stock. A significant number of shares of our Common Stock are held in either nominee name or street name brokerage accounts, and consequently, we are unable to determine the number of beneficial owners of our stock.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND THE NOTES RELATED TO THOSE STATEMENTS. SOME OF OUR DISCUSSION IS FORWARD-LOOKING AND INVOLVES RISKS AND UNCERTAINTIES. FOR INFORMATION REGARDING RISK FACTORS THAT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, REFER TO THE “RISK FACTORS” SECTION OF THIS ANNUAL REPORT.

OVERVIEW

Ambient Corporation is a pioneering integrator of smart grid communications platforms, creating high-speed Internet Protocols (IP) based data communications networks for the medium and low-voltage distribution grid. The Ambient smart grid platform, known as Ambient Smart Grid®, facilitates a two-way, real-time communications network designed to modernize the power grid infrastructure, making it more receptive to wide-scale adoption of renewable energy sources and supportive of new energy efficiency technologies and programs. The Ambient Smart Grid® platform facilitates a utility’s ability to implement smart grid applications such as Advanced Metering Infrastructures (AMI), Demand Side Management (DSM), Distribution Monitoring and Automation, direct load control and more. When combined, these applications offer economic, operational and environmental benefits for utilities, and ultimately the utility customers.

Since inception, we have funded operations primarily through the sale of our securities and most recently from the revenue generated from purchase orders received from our marquee customer. In connection with the continued development, upgrade, and marketing of our products, technology, and services, Ambient will continue to emphasize the ongoing research and development efforts necessary to complete development of our fourth generation Node, incorporate additional applications into our platform, and to continue to enhance the capabilities and functionality of our AmbientNMS® system used by customers to scale and manage the network created by the deployment of our Nodes.

Prospects and Outlook

Our business success in the immediate future will depend largely on our marquee customer expanding their existing deployments, as well as the deployment decisions of other utilities. Today, Ambient is reliant on one significant marquee customer that shares the Ambient vision for an open standards-based common communications infrastructure. We anticipate that we will continue to collaborate with this customer and continue to support their smart grid deployments.

Notwithstanding the above, Ambient recognizes that our customer could alter their vision regarding the common communications infrastructure, determine that a competing company offers a more desirable product, or slow its deployments indefinitely, significantly affecting the prospects and outlook of the Company.

As we have demonstrated success over the course of 2010, we believe that additional utilities will ultimately begin to accept and endorse the concept of one common communications infrastructure to support many utility and consumer applications, strengthening Ambient’s position. However, no assurance can be given that this development will in fact ultimately occur and even if it does that the Ambient Smart Grid® will be their choice technology.

RESULTS OF OPERATIONS

COMPARISON OF THE YEAR ENDED DECEMBER 31, 2010 (the “2010 Period”) AND THE YEAR ENDED DECEMBER 31, 2009 (the “2009 Period”)

REVENUES. Revenues for the 2010 Period were $20,358,040, compared to $2,193,338, for the 2009 Period. Revenues for each of the 2010 and 2009 Periods were attributable to the sales of products, and maintenance to our customer. Revenues for the 2010 and 2009 Periods related to the sales of products totaled $20,282,596 and $2,127,977, respectively. Revenues from the sale of software and services for the 2010 Period and the 2009 Period totaled $75,444 and $65,361, respectively. The increase in revenue during the 2010 Period compared to the 2009 Period reflects an increase in the number of communication nodes delivered as well as increased license fees recorded from the licensing of our AmbientNMS®.

COST OF GOODS SOLD. Cost of goods sold for the 2010 Period was $12,023,332 compared to $1,836,546 for the 2009 Period. Cost of goods sold included all costs related to manufacturing of our products and consisted primarily of direct material costs. Cost of goods sold also included expenses related to the write down of inventory to the lower of cost or market. For the 2010 and 2009 Periods, cost of goods sold included an inventory write-off of $0 and $151,689 and respectively for excess, obsolete inventory. The increase in cost of goods sold during the 2010 period reflected the increase in production to fill orders placed by our customer as discussed above in REVENUES.

GROSS PROFIT. Gross profits for the 2010 Period was $8,334,708 compared to $356,792 for the 2009 Period. The gross profit on product sales amounted to $11,177,367 during the 2010 Period compared to $291,431 during the 2009 Period. The overall gross margins for the 2010 Period increased to 41% compared to 16% during the 2009 Period. The increase in the gross margin percentage in the 2010 Period compared to the 2009 Period is a reflection of the maturing of our product set, an enhanced ability to plan production and scale based on increased lead-time and transparency in the forecasting and purchasing process of our customer, and a stable and productive relationship with our contract manufacturer.

RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses consisted of expenses incurred primarily in designing, developing and field testing our smart grid solutions. These expenses consisted primarily of salaries and related expenses for personnel, contract design and testing services, supplies used and consulting and license fees paid to third parties. Research and development expenses were approximately $6.1 million for the 2010 Period compared to $4.6 million for the 2009 Period. The increase in research and development during the 2010 Period was due primarily to the increase in personnel and consultants for the continued development of our fourth generation communications Node, and the enhancement of our AmbientNMS® system. We believe that our continued development efforts are critical to our strategic objectives of enhancing our technology while reducing cost and therefore we expect that our research and development expenses will increase over the next twelve months as we continue to focus our efforts on developing more robust solutions and additional value-added functionality for the Ambient Smart Grid® communications platforms.

OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES. Operating, general and administrative expenses primarily consisted of salaries and other related costs for personnel in executive and other administrative functions. Other significant costs included professional fees for legal, accounting and other services. General and administrative expenses for the 2010 Period were approximately $4.8 million compared to $4.1 million for the 2009 Period. The increase in operating, general and administrative expenses during the 2010 period as compared to the 2009 period was due to the increase in efforts to market and commercialize the Ambient Smart Grid® communications platforms. As we continue to increase our efforts to market and commercialize the Ambient Smart Grid® communication platforms, over the next twelve months, we expect our operating, general and administrative expenses to increase during that time.

STOCK BASED COMPENSATION. A portion of our operating expenses was attributable to non-cash charges associated with the compensation of consultants and employees through the issuance of stock options and stock grants. Stock-based compensation is non-cash and will therefore have no impact on our cash flows or liquidity. For the 2010 Period, we incurred non-cash stock based compensation expense of $725,343 compared to $967,301 for the 2009 Period.

INTEREST AND FINANCE EXPENSES. For the 2010 Period, we incurred interest of $31,814 compared to $617,060 for the 2009 Period, respectively. The interest related primarily to our 8% Secured Convertible Promissory Notes, which were issued in July and November of 2007 and January 2008. Additionally, for the 2010 Period and 2009 Period, we incurred non-cash interest of $183,609 and $4,375,767, respectively. This interest related to the amortization of the beneficial conversion features and deferred financing costs incurred in connection with the placement of our convertible promissory notes. These costs are amortized to the date of maturity of the debt unless converted earlier. In January 2010, Vicis converted the remaining $10 million outstanding on the notes. Following the conversion of the notes, we no longer had any long-term debt. In addition, on June 30, 2009, we agreed to modify the terms of the expiring Class A warrants. Under the new terms, the warrants were exercisable through August 31, 2009 and the exercise prices were reduced from $0.20 to $0.15 per share. The resulting charge due to the modification was $1,147,167 and was reflected as additional interest expense.

LIQUIDITY AND CAPITAL RESOURCES

While we have, since inception, funded operations primarily through the sale of our securities, most recently the revenues generated from purchase orders received from our marquee customer have been applied to meet our operating requirement. In addition, the $5 million proceeds from the investment in December 2010 by our majority stockholder formerly on deposit in the escrow account established for our benefit strengthened our cash position. Management believes that cash on hand plus anticipated revenue from purchase orders received from our marquee customer will allow us to meet our operating requirements for fiscal year 2011. However, we may need to raise additional funds to expand existing commercial deployments, support strategic acquisitions and/ or joint venture opportunities, and/or to satisfy any additional significant purchase order that it may receive. At the present time, the Company does not have any commitments for additional funding.

Cash balances totaled $6,986,881 at December 31, 2010 and $987,010 at December 31, 2009. As of February 21, 2011, we have approximately $7,494,525 cash on hand.

Net cash used in operating activities during the year ended December 31, 2010 was approximately $1.7 million and was used primarily to pay ongoing research and development and operating, general and administrative expenses.

Net cash used in investing activities during the year ended December 31, 2010 was approximately $410,805 and was for additions to property and equipment.

Net cash provided by financing activities during the year ended December 31, 2010 was approximately $8,118,934, and represented the issuance of common stock, exercise of warrants and options and the payments on capitalized lease obligations.

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to revenue recognition, bad debts, investments, intangible assets and income taxes. Our estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

We have identified the accounting policies below as critical to our business operations and the understanding of our results of operations.

REVENUE RECOGNITION. Hardware sales consist of smart grid Nodes as well as system software embedded in the Nodes. System software embedded in Ambient’s Nodes is used solely in connection with the operation of the product. Upon the sale and shipment of its product, Ambient is not required to update the embedded software for newer versions that are subsequently developed. In addition, the Company does not offer or provide any free post-contract customer support. There is an original warranty period, which may run for a period of up to twelve months from sale of product, in which the Company will provide fixes for the Nodes when and if appropriate. As such, we recognize revenue from the sales of the Nodes when Product is received by the customer.

The Company’s other proprietary software consists of the AmbientNMS® an element management product that may be sold on a stand-alone basis. A purchaser of Ambient’s Nodes is not required to purchase this product, as our Nodes could be managed with independently developed management software. The sale and or license of the AmbientNMS® does not include post-contract customer support, unless the customer enters into a maintenance agreement with the Company. As such, Ambient recognizes revenue from the sale of this software product when shipped. Amounts billed to customers before software is shipped are classified as deferred revenue.

The Company offers maintenance service, on a fee basis that entitles the purchasers of its Nodes and NMS® software to benefits including telephone support, as well as updates and upgrades to our products. Such revenue, when received, will be amortized over the appropriate period based on the terms of individual agreements and contracts.

INVENTORY VALUATION. Inventory is valued at the lower of cost or market determined on the first-in, first-out (FIFO) basis. Market, with respect to direct materials, is replacement cost and is net realizable value for work-in-process and finished goods. The value of the inventory is adjusted for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions.

SOFTWARE DEVELOPMENT COSTS. Costs incurred in the research and development of new software products and enhancements to existing software products have historically been expensed as incurred. After technological feasibility is established, additional development costs are capitalized. No software development costs have been capitalized as of December 31, 2010 and 2009.

STOCK-BASED COMPENSATION. The Company accounts for stock-based compensation in accordance with accounting guidance now codified as Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718, “Compensation – Stock Compensation.” Under the fair value recognition provision of ASC 718 stock-based compensation cost is estimated at the grant date based on the fair value of the award. The Company estimates the fair value of stock options granted using the Black-Scholes option pricing model.

DEFERRED INCOME TAXES. Deferred income taxes are recognized for the tax consequences of "temporary differences" by applying enacted statutory rates applicable to future years to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. At December 31, 2010, our deferred income tax assets consisted primarily of net operating loss carry forwards and stock based compensation charges which have been fully offset with a valuation allowance due to the uncertainty that a tax benefit will be realized from the assets in the future.

WARRANTIES. The Company accounts for its warranties under the FASB ASC 450 “Contingencies.” The Company generally warrants that its products are free from defects in material and workmanship for a period of one year from the date of initial acceptance by our customers. The warranty does not cover any losses or damage that occurs as a result of improper installation, misuse or neglect or repair or modification by anyone other than the Company or its authorized repair agent. The Company's policy is to accrue anticipated warranty costs based upon historical percentages of items returned for repair within one year of the initial sale. The Company’s repair rate of products under warranty has been minimal, and a historical percentage has not been established. The Company has not provided for any reserves for such warranty liability.

The Company’s software license agreements generally include certain provisions for indemnifying customers against liabilities if the Company's software products infringe upon a third party's intellectual property rights. The Company has not provided for any reserves for such warranty liabilities.

The Company’s software license agreements also generally include a warranty that the Company's software products will substantially operate as described in the applicable program documentation. The Company also warrants that services the Company performs will be provided in a manner consistent with industry standards. To date, the Company has not incurred any material costs associated with these product and service performance warranties, and as such the Company has not provided for any reserves for any such warranty liabilities in its operating results.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board (FASB) ratified Accounting Statement Update 2009-13 (ASU), “Revenue Recognition-Milestone Method (Topic 605): Multiple-Deliverable Revenue Arrangements,” which eliminates the residual method of allocation, and instead requires companies to use the relative selling price method when allocating revenue in a multiple deliverable arrangement. When applying the relative selling price method, the selling price for each deliverable shall be determined using vendor specific objective evidence of selling price, if it exists, and otherwise using third-party evidence of selling price. If neither vendor specific objective evidence nor third-party evidence of selling price exists for a deliverable, companies shall use their best estimate of the selling price for that deliverable when applying the relative selling price method. ASU 2009-13 shall be effective in fiscal years beginning on or after June 15, 2010, with earlier application permitted. Companies may elect to adopt this guidance prospectively for all revenue arrangements entered into or materially modified after the date of adoption, or retrospectively for all periods presented. The Company will adopt this standard effective January 1, 2011. The Company does not expect the provisions of ASU 2010-13 to have a material effect on the financial position, results of operations or cash flows of the Company.

In April 2010, the FASB issued ASU 2010-17 (ASU 2010-17), “Revenue Recognition-Milestone Method (Topic 605): Milestone Method of Revenue Recognition.” The amendments in this Update are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. If a vendor elects early adoption and the period of adoption is not the beginning of the entity’s fiscal year, the entity should apply the amendments retrospectively from the beginning of the year of adoption. The Company will adopt this standard effective January 1, 2011. The Company does not expect the provisions of ASU 2010-17 to have a material effect on the financial position, results of operations or cash flows of the Company.

Management does not believe that any other recently issued, but not yet effective, accounting standard if currently adopted would have a material effect on the accompanying financial statements.

OFF-BALANCE SHEET ARRANGEMENTS

None.

TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

	Payments Due By Period
Contractual Obligations	Total		Less Than 1 Year		1 – 3 Years		3 – 5 Years		More Than 5 years
Short -Term Debt Obligations	$	0	$	0	$	0	$	0	$	0
Capital Lease Obligations		10,842		10,842		0		0		0
Operating Lease Obligations		793,724		389,885		403,839		0		0
Purchase Obligations		0		0		0		0		0
Other Long-Term Liabilities Reflected on the Registrant’s Balance Sheet under GAAP		0		0		0		0		0
Total	$	804,566	$	400,727	$	403,839	$	0	$	0

DESCRIPTION OF BUSINESS

OVERVIEW

We are a pioneering integrator of smart grid communications platforms, creating high-speed Internet Protocols (IP) based data communications networks for the medium and low-voltage distribution grid. The Ambient smart grid platform, known as Ambient Smart Grid®, facilitates a two-way, real-time communications network designed to modernize the power grid infrastructure, making it more receptive to wide-scale adoption of renewable energy sources and supportive of new energy efficiency technologies and programs. The Ambient Smart Grid® platform facilitates a utility’s ability to implement smart grid applications such as Advanced Metering Infrastructures (AMI), Demand Side Management (DSM), Distribution Monitoring and Automation, direct load control and more. When combined, these applications offer economic, operational and environmental benefits for utilities, and ultimately the utility customers.

Ambient has been focused, since 2000, on the collaborative development of communication solutions that meet the needs of utilities to ultimately deploy what is now referred to as the smart grid. From inception, Ambient’s platform, which includes nodes, management systems, current transformers and a suite of applications, has been designed to function as an open standards-based system intended to support a variety of applications and services simultaneously. Over the years, Ambient has developed and delivered three generations of smart grid communications nodes that with thousands of our units deployed in the field are already beginning to transform today’s century-old power delivery system into an advanced energy network that provides timely energy usage information and remote grid monitoring, automation and control. With each successive generation, Ambient has continued to support and integrate additional applications, while driving lower the manufacturing costs and price to our customers making our products even more attractive. In December 2010, Ambient delivered to our marquee customer, units of our fourth generation communications node which are being beta tested in the field.

Throughout the past five years, Ambient has been a key supplier to Duke Energy’s grid efficiency programs, and the leading supplier of the smart grid communications nodes for their smart grid deployments. During 2008, Ambient received purchase orders from Duke Energy to purchase its X2000 and X-3000 communications nodes and to license our AmbientNMS®, to enable the building out of an intelligent grid/intelligent-metering platform, which generated approximately $14.8 million in revenues throughout 2008 and 2009.

Ambient continues to seek new opportunities for commercial deployments and to bring new and existing networks to full commercialization. Throughout 2011, Ambient’s principal target customers will continue to be electric utilities that seek to both increase efficiencies in the delivery of energy and enable consumers to better understand and manage their energy consumption. Ambient seeks to continue to extend existing relationships and develop new relationships to collaborate on efforts to drive the development of new functionality for both utility and consumer applications that further enhance the value of the Ambient Smart Grid® platform.

Ambient is a Delaware Corporation incorporated on June 26, 1996. Since inception, we have funded operations primarily through the sale of our securities and most recently from the revenue generated from purchase orders received from our marquee customer. In connection with the continued development, upgrade, and marketing of our products, technology, and services, Ambient will continue to emphasize the ongoing development efforts necessary to complete development of our fourth generation node, incorporate additional applications into our platform, and to continue to enhance the capabilities and functionality of our AmbientNMS® system.

INDUSTRY BACKGROUND

The existing electrical power distribution system continues to be under increasing pressure to catch up to the digital economy. Through the incorporation and deployment of advanced communication technology throughout the grid system, the singular approach of building new environmentally unfriendly centrally located power plants to meet energy and capacity requirements will no longer be the sole solution to utilities. The smarter grid will help increase the use of renewable capacity, embrace the emergence of electric vehicles and distributed generation, and equip customers with the tools and technology needed to help navigate through an environment increasingly concerned with such issues as climate change, rising costs, increasing regulation, and energy independence. Increasing the efficiency in the delivery of energy will continue to be an emphasis for utilities and regulators alike. A dedicated communication infrastructure to monitor and manage the distribution grid is a key enabler for accomplishing this efficiency.

In 2007, the Federal Energy Independence and Security Act underscored the need for a smart grid and provided a mechanism for federal funds to help promote smart grid deployments and developments. The prospects of the deployment of smart grid technologies were significantly advanced through the passage of both the Troubled Asset Relief Program, which reduced the period of depreciation of smart grid assets from twenty years to ten years and the later passage of the American Reinvestment and Recovery Act (ARRA) in February 2009, which provided stimulus funding of smart grid projects. In March 2010, the smart grid received a further federal boost with the release of the National Broadband Plan that highlighted the role smart grid communications can have in improving the grid’s reliability, security and efficiency.

The ultimate allocation of funding from the federal government provided by the ARRA (Stimulus Funding) was intended to eliminate a portion of the risk associated with early adoption of technology. The promise of funding encouraged utilities considering smart grid deployments to actively develop business and deployment plans and to negotiate terms with the U.S. Department of Energy ("DOE") to receive the ARRA funds. For many utilities, this process required significant effort over many months, and thus resulted in the lack of available federal funds throughout 2009 and into 2010. Many of the ultimate grant recipients executed agreements with the DOE and thus smart grid deployments began in earnest in the later part of 2010.

AMBIENT SOLUTION

THE AMBIENT SMART GRID® COMMUNICATIONS NETWORK

Ambient’s vision for the smart grid calls for solutions based on interoperable and open, standards-based technologies. This vision is made a reality through the Ambient Smart Grid® Node and network management system - AmbientNMS® and an open application environment. A common underlying communications platform (Ambient Smart Grid®) is utilized to support all the smart grid applications and services in parallel to achieve the lowest cost point on an overall system basis while achieving a high level of integration of communications services and applications. The use of open, standards-based technologies is widely accepted as the basis for the success of the Internet and credited with enabling all of the applications that have evolved on the Internet. Ambient’s communication platform relies on distributed Ambient Smart Grid® Nodes incorporating remote processing and flash memory that allow for a robust application-hosting environment enabling the platform to evolve like the Internet. Additionally, remote processing and storage of data combined with the ability to access this locally, without the use of the backhaul connection, allow the utility and end users to limit network charges.

Ambient’s distributed platform system architecture are depicted below in Figure 1.

Rather than the typical disconnected and application specific communications systems that have been the norm in the utility environment, Ambient provides a common communications platform that allows costs to be allocated across many applications or purposes thus enhancing the value and minimizing the overall costs of the communications infrastructure and total smart grid build out. The Internet is an excellent reference and analogy for the common infrastructure concept. The growing trend of providing multiple communications services (television, telephone, and Internet access) over a single medium into the premises demonstrates the concept, both technically and economically, of supporting multiple services and applications over a common network infrastructure. This holistic approach will enable a variety of distribution system monitoring and management capabilities that have not thus far not been feasible or not even envisioned today.

AMBIENT SMART GRID® COMMUNICATIONS PLATFORM FUNCTIONALITY AND BENEFITS

Complete Turnkey Delivery: Ambient designs and builds the core network hardware and management software incorporating smart grid communication technologies. Our familiarity with multiple communications protocols, architecture, hardware, and software requirements, coupled with experienced field engineers, provides us with the tools necessary for a successful rollout.

Open Architecture: For a smart grid to evolve with the advancement in technologies, and expectations of what the smart grid will enable, utilities need an open and flexible platform architecture comprised of open and flexible building blocks such as the Ambient Smart Grid® Node (“Node”) and AmbientNMS®. Ambient’s architecture for the communications Node, offers the openness and flexibility that allows utilities to mix and match smart grid application technologies today, and a platform that can evolve with the technology. As no single communication technology is likely to meet all smart grid requirements for all environments or locations, the use of an open and flexible communications architecture and Node is more likely to ensure higher levels of interoperability, longevity and overall success. Having several available Node components and options overcomes fundamental impediments, such as topographical, economical, or other inherent impediments in the physical infrastructure itself, and will be required to successfully address as large a portion of the system requirements as possible.

Wide Area Network (WAN) Technologies: There are a variety of Ethernet technologies, both wired and wireless, that can be used by Ambient’s Node for backhaul or WAN purposes. The use of 3G/4G cellular wireless networks for WAN services for a large, if not the most significant, portions of the smart grid infrastructure is most practical as it leverages the cellular carrier's commitment and investment into their wireless network. Although utilities have a long history of using cellular networks for some applications, the scale required for the smart grid is unprecedented. The availability of multiple carriers and technologies is beneficial. The 3G networks of today and the planned 4G networks being rolled-out certainly provide sufficient bandwidth to address the requirements of the smart grid.

Local Area Network (LAN) Technologies: Ambient’s Node also supports a variety of LAN technologies. As demonstrated with its products to date, Ambient has been able to support a variety of smart grid applications and services with these technologies. Ethernet and serial ports are the basic and most commonly found technologies used for communications interfaces. This is why Ambient’s typical Node configuration has included both Ethernet and serial (RS-232) ports.

The Ambient Node supports multiple communication technologies simultaneously allowing a utility to leverage a single communications infrastructure to support many smart grid applications that rely on different communication methods i.e. 3G cellular, Wi-Fi, 900MHz radio frequency, power line carrier etc., all operating in parallel in a single communications Node. Each customizable Node combines to create the overarching communication platform that protects a utility against stranding IT and smart grid related assets. A graphical description of how an individual Node can function as part of a collected platform is below.

The Node utilizes standard-based protocols as well as proprietary technologies for communications. This allows the Ambient Smart Grid® platform to connect with any IP device as well as legacy systems and vendor technologies reliant on proprietary protocols. Ambient’s architecture provides utilities an open IP-based architecture that pushes proprietary technologies out to the fringes of the network, which enhances the flexibility and longevity of the overall architecture. Flexibility with communication technologies and protocols means in different segments of the utility’s distribution network a single communications platform and foundational architecture can be leveraged yet customized to meet locational needs and economies that vary between urban and rural environments.

Flexible and Expandable Network Architecture: The Ambient Smart Grid® communications platform permits sequential expansions corresponding to actual demand. When the platform is first deployed, separate network elements can be “bridged” at specific points. As the network load increases, switches and/or routers can maximize the bandwidth available to a particular network segment. At higher subscriber densities, additional backhaul connectivity points may be added. By allowing utilities to build networks that provide just the capacity that is needed, as it is needed, we help our customers minimize initial installation costs, shorten the time between investment and realization of revenues, and reduce operations and maintenance expense.

Ability to Integrate Many Applications: Utility operators are not limited to Advanced Meter Reading (AMR), smart metering, or other applications at the end of the distribution grid: Grid operators can monitor and communicate with Nodes or any piece of IP-based equipment integrated at any point along the medium and low voltage distribution network, which can range from distributed generation resources, power quality control devices, and a range of Demand Side Management and Demand Response applications. When couplers are integrated into an Ambient Smart Grid® communications network, information on the current of the distribution grid can be obtained in real-time enabling better energy management, predictive maintenance and less system down-time which can combine to reduce the need for additional generation facilities.

Outage Detection and Restoration Confirmation: Rather than dedicated outage detection systems that employ either customer premise or service side equipment, the Node is powered from the low voltage line itself and can be equipped with an optional battery that can help a utility specifically identify line outages and allow for continued Node operation in the event of such a power outage. Access to the Nodes in an outage scenario allows timely recognition of outage locations and provides invaluable input to the restoration process. Additional information provided by our energy sensing capabilities may also provide useful and preventative information to utilities.

Support External Applications: A high-speed Ambient Smart Grid® enhances traditional low bandwidth, one-way applications such as meter reading. In addition to the elimination of the labor required to visit every customer location each month, or the inaccuracies introduced by customer self-reporting, the constant real-time load data can enhance a utility's ability to balance its supply portfolio, improve its load profiling, and increase its knowledge of customer usage patterns. Meters that remotely turn service on or off can be deployed, eliminating the labor involved in this non-repair, non-revenue task. Additionally, real-time communications enabled by Ambient’s high-speed backhaul network allow utilities the flexibility to introduce time-of-use pricing models.

Application Development Environment: To support our collaborative efforts, Ambient has developed specifications for developing and supporting third-party applications to run on the Ambient’s platform. The specifications provide for third-party applications to run in a structured, controlled, and predictable environment. This framework has been used to support third party application to provide connectivity to, and management of, their distribution line sensors. This configuration is deployed for testing in the field today.

AMBIENT STRATEGY

We intend to generate revenues and gross margin from the sales, and support of the necessary equipment and technologies, of the Ambient Smart Grid® communications platform, licensing of our network management system, AmbientNMS®, and from software maintenance. Our efforts include the following areas of focus:

BUSINESS DEVELOPMENT

Ambient believes the industry is being driven by a few key early adopters who will set the stage for additional smart grid deployments of our open architecture design. Ambient has and will continue to work closely with utility partners to develop an increasing value proposition for each utility’s unique needs and infrastructure. Ambient will focus engineering efforts on developing more robust solutions and additional value-added functionality for the Ambient Smart Grid® solution, creating an even more attractive business model for other utilities. In 2010, Ambient expanded our relationships with the public carriers by adding certifications on the Sprint Network to our long-standing relationship with Verizon Wireless.

EXPAND THE RANGE OF AMBIENT SMART GRID® APPLICATIONS

Applications create the need for the platform, and thus our goal is to drive application development. The Ambient Smart Grid® communications platform incorporates our voltage and current sensing capabilities (Energy Sensing) allowing for outage notification. We believe that growth in the smart grid communications industry will come primarily as utilities deploy and adopt smart grid applications. Applications, such as AMR/AMI allowing for time-of-day pricing, demand side management, and the potential to assist in direct load control, which enables the reduction of electrical usage at critical times, will require the backhaul capability provided by the Ambient Smart Grid® network. Ambient is currently piloting and deploying some of the aforementioned applications.

PURSUE OUR ROLE AS A PIONEERING SYSTEMS INTEGRATOR

We are committed to continuing our role as a supplier of a turnkey smart grid communications platform, taking responsibility for network design, hardware and software delivery, installation support, operator training and network management. Our familiarity with the architecture, hardware, and software requirements from years of close collaboration with major utility clients has enabled us to design the Ambient Smart Grid® communications platform from the ground up and to meet individual utility requirements. Ambient designs, manufactures (through a contract manufacturer) and markets the key hardware and software components of the Ambient Smart Grid® network. We have developed strategic relationships with key material and fabrication suppliers, and have put in place a reliable, scalable supply chain for timely delivery of the necessary product. Our technical personnel, including experienced field engineers, support pilot as well as larger deployments, ensuring successful Ambient Smart Grid® rollouts.

FURTHER ENHANCE THE AMBIENTNMS®

To manage communications networks, we have developed, and continue to improve, our network management software solution, AmbientNMS®. Ambient has developed AmbientNMS® to work with Ambient and non-Ambient hardware and it currently manages multiple Ambient-supported networks. AmbientNMS® allows for multiple user groups, each with customizable permission and views. Using the AmbientNMS®, a user can sort and filter lists and views via many Node parameters including geographical views, enabled applications, firmware and software versions and more. We intend to continue to develop and extend our network design expertise, as well as our hardware and software technology and our deployment and network management capabilities, to generate revenues from all phases of Ambient Smart Grid® communication deployments. To date, we have not sold and /or licensed any software for use on third party equipment.

EXPAND OUR STRATEGIC COLLABORATIVE RELATIONSHIPS

Continued collaboration with smart grid application providers, suppliers, and utility customers will enhance the development and functionality of our Ambient Smart Grid® platform. To keep us on the cutting edge of new technologies, we maintain collaborative working relationships with leading suppliers of critical network components such as signal processing chips, wireless devices and cellular modems, as well as metering solution providers to develop and demonstrate Ambient Smart Grid® utility applications, and our network management system, AmbientNMS®. We intend to strengthen these existing relationships and to seek out new strategic and commercial relationships with utilities and other technology companies.

INDUSTRY STANDARDIZATION EFFORTS

We believe that open standards and interoperability will hasten the deployment of all smart grid technology and lead to greater success for both Ambient and the entire smart grid industry, and we are active in standards organizations and efforts to promote openness and interoperability. Ambient is a voting member of the National Institute of Standards and Technology’s Smart Grid Interoperability Panel (NIST SGIP) and several working groups such as PAP15.

We will continue to drive industry standardization efforts through leadership roles in the major industry associations and standards setting organizations, and promote open standards through our participation in both local and federal smart grid and utility organizations including the GridWise Alliance, DRSG, UTC, EEI, NRECA, IEEE and more.

COMMERCIAL DEPLOYMENTS

Duke Energy is currently deploying the Ambient Smart Grid® and AmbientNMS®. The deployments are directed towards a variety of goals, including developing, integrating, and demonstrating smart grid utility applications within our product offering.

DUKE ENERGY

Since 2005, Ambient has worked and collaborated with Duke Energy, our marquee customer, and an innovator and early adopter of smart grid technologies. Over the course of that time, 98% of Ambient’s revenue has been generated from contracts with and purchase orders received from Duke Energy for the Ambient Smart Grid® platform which has allowed this utility to deploy a robust smart grid platform. Our relationship with this customer has supported the development and enhancement of the Ambient Smart Grid® platform. Because Duke Energy is subject to both federal regulations and state utility regulators, much of Duke’s ability to deploy our technology is influenced by federal and state regulations.

In 2005, Ambient entered into an initial pilot agreement to test our Communications Node and newly developed AmbientNMS® with Duke Energy. In September 2006, we entered into an additional agreement expanding the scope and functionality of our developing network.

During 2007, Ambient focused on the execution of the agreement entered into in September 2006 that expanded the scope of Ambient's platform while addressing the challenges raised in our early 2006 pilot. In late 2007, Ambient enhanced the communication options available in our Node by introducing cellular technology into our platform.

During 2008, Ambient furthered its relationship with Duke Energy with the execution of a second Commercial Deployment Agreement to serve, initially, 50,000 end points in Cincinnati, Ohio. The Company received purchase orders from Duke Energy to purchase its X2000 and X-3000 communications Nodes and license of its AmbientNMS® software in support of building out an intelligent grid/intelligent-metering platform. As a result of these purchase orders, we generated approximately $12.6 million in revenues for the year ended December 31, 2008.

In September 2009, the Company and Duke Energy entered into a long-term agreement to supply Ambient’s latest X-series smart grid communications Nodes, the X-3100, for deployment throughout the utility’s electric power distribution grid. The agreement also provides for a license of the Node software and the network management system software to operate and manage the product. Additionally, the agreement set forth the terms for Ambient to provide maintenance service and support for which Duke Energy will be required to pay an established maintenance fee beginning at the expiration of the stated warranty period.

Since entering into the long- term supply agreement in 2009, Ambient has delivered approximately 23,900 units of the X-3100s. Today there are three generations of Nodes deployed in the field totaling over 25,000 Nodes which are supplying connectivity to over 250,000 endpoints.

The agreement is in effect until December 31, 2015, subject to various rights of the parties to terminate the agreement prior to such time. Ambient has agreed to provide maintenance services potentially extending for ten years after the termination of the agreement if Duke Energy continues to pay for such maintenance services on an uninterrupted basis throughout the extended period. Since the execution of the long-term supply agreement, we have generated, approximately $21.1 million in revenues through December 31, 2010 from the sale of our product.

KEY ALLIANCES / PRODUCTION & SUPPLIES

In addition to working closely with our electric utility customers, we have cultivated, maintained and grown collaborative working relationships with leading suppliers of the critical components necessary for Ambient Smart Grid® solutions. These relationships and advancements of our technology have provided us with the means of significant scalability.

Ambient continuously looks to further collaborative efforts to enhance our smart grid capabilities. Ambient’s communications platform facilitates the delivery of data and information over the utility distribution grid from low-speed control networks and other devices allowing utilities the ability to enable such smart grid functionality as advanced metering, load profiles, remote disconnect/reconnect and more.

We believe that an enhanced suite of utility automation products is complementary to Ambient’s communications platform, and such collaborative efforts will enable comprehensive offerings to utilities enabling a more efficient platform for Ambient Smart Grid® applications.

In September 2009 we entered into a Master Supply and Alliance Agreement with an equipment manufacturer with global manufacturing capabilities, for the supply of our communication Nodes. This relationship has been instrumental in allowing us to successfully deliver 23,900 Nodes over the sixteen month period ended December 31, 2010. We are also a party to a number of third party software license agreements that allow us to incorporate third party software products and features into our products.

Ambient continues to maintain open dialogue with leaders in the utility and communications industries to keep Ambient’s solution at the cutting edge. In the future, we intend to continue leveraging our technology and distribution alliances along with value-added manufacturing services to ensure we are positioned to support continued large-scale rollouts of our products and technology, allowing us to ensure competitive pricing.

COMPETITION

Competition in our market involves rapidly changing technologies, evolving industry standards, frequent new product introductions, and changes in customer requirements. To maintain and improve our competitive position, we must keep pace with the evolving needs of our customers and continue to develop and introduce new products, features and services in a timely and efficient manner.

Our competitors include both small companies as well as some of the largest companies in the electronics industry, operating either alone or together with trade associations and partners. Some of our potential competitors have longer operating histories, greater name recognition and substantially greater financial, technical, sales, marketing and other resources than Ambient.

PROPRIETARY RIGHTS

We have taken steps to ensure the protection of our internally developed intellectual property (IP). We currently rely on a combination of patent, trade secret, copyright and trademark law, as well as non-disclosure agreements and invention assignment agreements, to protect our technologies and other proprietary company information.

Our IP portfolio includes twenty-six patents issued or allowed by the United States Patent and Trademark Office ("USPTO") primarily relating to coupling technology, and we have several pending patent applications in the United States and in other jurisdictions. We have filed with the USPTO and with the appropriate agencies in foreign countries and other jurisdictions, patent applications with respect to various aspects and applications of our smart grid technology including the Energy Sensing portion of Ambient Smart Grid®.

Ambient, Ambient Smart Grid, Communications for a Smarter Grid and AmbientNMS are registered trademarks of Ambient Corporation with the USPTO. Other marks are pending with the USPTO.

Our policy is to require our employees, consultants, advisors, and collaborators to execute confidentiality agreements. Additionally, we require employees and consultants, to execute assignment of invention agreements, upon the commencement of employment, consulting or advisory relationships. These agreements generally provide that all confidential information developed or made known to a party by us during the course of the party's association with the Company is to be kept confidential and not to be disclosed to third parties except in specific circumstances. In the case of employees and consultants, the agreements also provide that all inventions conceived by the individual in the course of their employment or consulting relationship will be our exclusive property.

EMPLOYEES

As of April 21, 2011, we employed 62 full time employees, 59 of whom work out of our offices in Newton, Massachusetts. The three off site employees are field engineers dedicated to active network deployments.

RESEARCH AND DEVELOPMENT

During our 2010 and 2009 fiscal years, we incurred approximately $6.1 and $4.6 million, respectively, on the research and development of our Ambient Smart Grid® and related solutions.

AVAILABLE INFORMATION

Our Internet website is located at http://www.ambientcorp.com. The reference to our Internet website does not constitute incorporation by reference of the information contained on or hyperlinked from our Internet website and should not be considered part of this document. The public may read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Rooms by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The SEC's Internet website is located at http://www.sec.gov.

DESCRIPTION OF PROPERTY

Ambient does not own any real property. The Company's corporate office in Newton, Massachusetts consists of two floors comprised of approximately 20,242 square feet. The lease term for the premises was scheduled to commence on September 1, 2009 and continues through December 31, 2012. At our request, the landlord agreed that we could commence the lease earlier, and we completed the move into our new headquarters in August 2009.

The lease provides for an initial period of the lease to be rent-free and includes scheduled rent escalations. Accounting principals generally accepted in the United States of America require that the total rent expense to be incurred over the term of the lease be recognized on a straight-line basis. Deferred rent represents the cumulative excess of the straight-line expense over the payments made. The average annual rent expense over the term of the lease is approximately $304,000.

LEGAL PROCEEDINGS

We are not involved in any pending legal proceedings that we anticipate can result in a material adverse effect on our business or operations.

MANAGEMENT

The following table sets forth the name, age, the position of each of our Directors, and the year in which they began serving:

Name	Age		Position	Year Became a Director
John J. Joyce		59	Chairman of the Board, CEO, Treasurer and Director		2001
Michael Widland		70	Director		2000
D. Howard Pierce		69	Director		2004
Thomas Michael Higgins		55	Director		2006
Shad Stastney		41	Director		2008

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

JOHN J. JOYCE has been the Company’s Chairman of the Board of Directors and Chief Executive Officer since September 2001 and served as Chief Operating Officer from November 2000 through August 2001. From September 1996 to October 2000, Mr. Joyce served as Senior Vice President of ABB Financial Services Inc. and President of ABB Financial Consulting, the Americas, where he also led the global energy consulting practice within Financial Services. Mr. Joyce developed the Americas branch of ABB Financial Consulting, the financial management consultancy business of ABB Financial Services. From December 1993 to August 1996, Mr. Joyce served with The Capital Markets & Treasury Practice of Price Waterhouse LLP. Returning to the firm he had previously served for more than five years in the general audit practice, Mr. Joyce assumed the responsibilities of Manager, in which he advised corporations on a variety of business issues and strategies. Mr. Joyce was promoted to Director in June 1995. Mr. Joyce is a CPA and holds an MBA from the Stern School of Business, New York University, where he majored in Finance and International Business. Mr. Joyce brings to our Board significant experience in the energy industry, a deep knowledge of our business and our customers, and contributes a perspective based on his previous career in both finance and accounting.

MICHAEL WIDLAND has served on the Board of Directors since November 2000 and has served on the Compensation Committee since March 2001. Mr. Widland has been actively practicing law since 1965 and is presently a partner at Shipman & Goodwin LLP of Stamford, Connecticut. Mr. Widland practices in the areas of commercial and corporate transactions, including financing. He is a former Connecticut Chairman of the Public Contract Section and Business Law Section of the American Bar Association and a member of the Association of Commercial Finance Attorneys. Mr. Widland’s academic degrees combined with his extensive professional experience in corporate law, provides our Board with valuable resources in its work to ensure that we comply with rules and regulations applicable to us.

D. HOWARD PIERCE has served on the Board of Directors since November 2004. Until his retirement in June 2001, he served as President and CEO of ABB, Inc., the $5 billion U.S. subsidiary of global industrial, energy and automation provider ABB, Ltd. Prior to assuming leadership of ABB, Inc., Mr. Pierce served in a number of key executive positions, including President of ABB’s Steam Power Plants and Environmental Systems and President of ABB China Ltd. In addition to serving on the Ambient’s Board Mr. Pierce serves on the board of directors of Harsco Corporation, a publicly traded, New York Stock Exchange listed company, where he also serves as Chairman of the Audit and Compensation committees. Mr. Pierce’s executive experience in the international business community with a specific focus on serving the utility industry while at ABB provides the Board with a business perspective and insight that is beneficial to a small cap company, especially when establishing relationships and negotiating agreements with the larger industrial companies in the utility and communication space.

THOMAS MICHAEL HIGGINS has served on the Board of Directors since September 2006. Mr. Higgins has served as the Senior Vice President for Finance and Chief Financial Officer of the College Board since June 2003. Prior to the College Board, Mr. Higgins was a partner in the New York City accounting firm of Silverman Linden Higgins LLP from February 1993 to June 2003. Previously, Mr. Higgins worked in the New Jersey offices of Coopers & Lybrand LLP from January 1992 to January 1993 and Ernst & Young LLP from 1977 to 1991. Mr. Higgins is a member of the American Institute of CPAs as well as the New Jersey and New York State Society of CPAs. Mr. Higgins’ extensive experience as a certified public accountant was instrumental in his appointment to the audit committee of our Board of Directors, and provides our board with a critical accounting perspective.

SHAD L. STASTNEY has served on the Board of Directors since June 2008. Mr. Stastney is a founding partner of Vicis Capital, LLC, the investment advisor to Vicis Capital Master Fund, a multi-strategy hedge fund. Mr. Stastney has served as Chief Operating Officer of Vicis Capital since June 2004. Prior to Vicis Capital, from July 2001 through May 2004 Mr. Stastney served in the same capacity at Victus Capital. Before Victus Capital, Mr. Stastney was a Director at Credit Suisse First Boston in New York. He received his J.D. from Yale Law School and his B.A. from the University of North Dakota. Mr. Stastney currently serves on the Boards of Directors of China Hydroelectric Corp., China New Energy Group Company, OptimizeRx Corporation, The Amacore Group, Inc., Master Silicon Carbide Industries, Inc., Deer Valley Corporation, Infusion Brands International, Inc., and Zurvita Holdings, Inc. and formerly served on the Board of MDWerks, Inc. and Medical Solutions Management, Inc. Mr. Stastney’s background and business experience provide our Board with a greater understanding of financial and investor relations.

There are no family relationships between any of the above directors, and, there is no arrangement or understanding between any of the above directors and any other person pursuant to which the director was elected to hold office.

All directors hold office until the next annual meeting of stockholders and the election and qualification of a successor.

INFORMATION RELATING TO EXECUTIVE OFFICERS AND KEY EMPLOYEES WHO ARE NOT DIRECTORS

Below is certain information relating to the sole executive officer and the other sole key employee of the Company who are not also members of the Board of Directors:

Ramdas Rao, age 45, has been the Company’s Chief Technology Officer since September 2000, and Senior Vice President and Chief Technology Officer since October 2010. From March 2000 until he joined the Company, Mr. Rao was the Chief Information Officer at Mullen, one of the larger advertising agencies in North America. From November 1995 through February 2000, he was the President and Co-Founder of Gaialinks Inc., a company engaged in the development of network management software tools and providing network analysis and consulting services for large heterogeneous, multi-vendor, multi-protocol networks and systems. From January 1990 through November 1995, he was affiliated with Boston University where he was Associate Director (from January 1995 through November 1995) and a Network Systems Manager (from July 1990 through December 1994). Mr. Rao received a B.S. degree in Computer Engineering (cum laude) from Boston University College of Engineering in 1988.

Michael Quarella, age 56, has been Vice President of Operations since March 2005. From October 2003 until he joined the Company, Mr. Quarella was Director of Operations for Verso Technologies, formerly MCK Communications and has led a long distinguished career in start-up/development stage operations and manufacturing. Mr. Quarella has introduced risk management techniques in support of new product introduction practices to meet time-to-market, quality, and cost requirements at Ambient. Mr. Quarella is also responsible for developing and maintaining a highly responsive and dedicated Manufacturing and Development organization.

EXECUTIVE COMPENSATION

The following table sets forth all compensation for the last two fiscal year awarded to, earned by, or paid to our Chief Executive Officer and Senior Vice President and Chief Technology Officer, who were the only executive officers serving as such at the end of 2010 whose total compensation exceeded $100,000 for the year ended December 31, 2010 (the “Named Executive Officers”).

SUMMARY COMPENSATION TABLE

Name & Principal Position	Year	Salary ($)		Bonus ($)		Option Awards ($)(1)		Total ($)
JOHN J. JOYCE
President and Chief Executive Officer	2010		360,457		60,000		1,165,280		1,585,737
	2009		344,362		50,000		148,890		543,252

RAMDAS RAO
Senior Vice President and Chief Technology Officer	2010		250,000		50,000		1,059,345		1,359,345
	2009		241,170		50,000		148,890		440,060

———————

(1)

Amounts in this column reflect the aggregate grant date fair value computed in accordance with FASB ASC 718 with respect to employee stock options issued during 2010 and 2009 under the Company’s 2000 Employee Stock Option plan. The assumption used to calculate the fair value of stock option grant were: for 2010: expected holding period of 5.75 years, risk free interest rate of 1.475%, no dividend yield and volatility of 154.9% . For 2009: expected holding period of 5.50 years, risk free interest rate of 1.44%, no dividend yield and volatility of 162.4%.

The following table sets forth information concerning unexercised options for each of our executive officers named in the Summary Compensation Table that were outstanding as of December 31, 2010.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END — DECEMBER 31, 2010

	Number of Securities Underlying Options (#)		Number of Securities Underlying Options (#)		Option Exercise Price		Option Expiration
Name	Exercisable		Unexercisable		($)		Date

John J. Joyce		1,000,000			$	0.500	11/17/2011
		375,000			$	0.100	9/11/2012
		1,000,000			$	0.200	1/23/2014
		500,000			$	0.300	5/25/2014
		500,000			$	0.500	5/25/2014
		2,500,000			$	0.045	11/15/2015
		4,500,000			$	0.035	1/13/2019
		1,375,000		9,625,000	$	0.120	10/18/2020
Ramdas Rao		1,000,000			$	0.200	1/16/2012
		200,000			$	0.200	9/12/2012
		800,000			$	0.200	1/26/2014
		375,000			$	0.200	8/12/2014
		375,000			$	0.200	8/12/2014
		1,000,000			$	0.045	11/15/2015
		4,500,000			$	0.035	1/13/2009
		4,500,000			$	0.035	1/13/2009
		1,375,000		8,750,000	$	0.120	10/18/2020

EMPLOYMENT AGREEMENTS

We and John J. Joyce entered into an amended and restated employment agreement dated as of December 30, 2008, pursuant to which Mr. Joyce continues to be employed as our Chief Executive Officer. Under the agreement, Mr. Joyce is entitled to be paid an annual salary of $330,000 subject to an annual review and adjustments. By its terms, the agreement provided for an initial term ending December 31, 2010. After expiration of the initial term, the agreement will automatically renew for successive two-year terms unless terminated by us upon written notice given not less than 90 days prior to the expiration of the then-current term. As no such notice has been given, the agreement remains in effect through December 31, 2012. The agreement also contains certain provisions for early termination, including in the event of a change in control, which may result in a severance payment equal to two years of base salary then in effect and the continuation of certain benefits.

We and Ramdas Rao entered into an amended and restated employment agreement dated as of June 2, 2008, pursuant to which Mr. Rao continues to be employed as our Senior Vice President and Chief Technology Officer at an annual salary of approximately $225,000, subject to review. The employment agreement had an initial term that extended through December 31, 2009, provided that the agreement is subject to renewal for successive one-year terms unless either party gives notice of its election to not renew to the other at least 60 days prior to the expiration of the then-current term. The agreement was renewed through December 31, 2010 and has been further renewed through December 31, 2011. The agreement also contains certain provisions for early termination, which may result in a severance payment equal to one year of base salary then in effect.

Each of these agreements includes certain customary confidentiality and non-compete provisions that prohibit the executive from competing with us for one year, or soliciting our employees for one year, following the termination of his employment.

COMPENSATION OF DIRECTORS

With the exception of Shad Stastney, we paid each outside director $2,500 per quarter for service on our Board of Directors in 2010, and an additional $1,500 was paid quarterly for heading the Audit Committee. In addition, the company granted 4,320,000 options to Michael Widland, 4,200,000 options to Howard D. Pierce, and 3,8000,000 options to Thomas Michael Higgins at an exercise price $0.12. The options for each of the Directors vest on a quarterly basis over a two year period at the end of each quarter beginning on December 31, 2010. The options issued are all non-qualified and expire on October 18, 2016.

The following table summarizes data concerning the compensation of our non-employee directors for the fiscal year ended December 31, 2010.

Name	Fees Earned or Paid ($)		Options Awards ($) (1)		Total ($)
Michael Widland		10,000		425,383		435,383

D. Howard Pierce		10,000		413,567		423,567

Thomas Michael Higgins (2)		16,000		374,180		390,180

———————

(1)

Amounts in this column reflect the aggregate grant date fair value computed in accordance with FASB ASC 718 with respect to stock options issued during 2010 under the Company’s 2002 Non-Employee Directors Stock Option Plan. The assumption used to calculate the fair value of stock options granted were: expected holding period of 3.75 years, risk free interest rate of .8457%, no dividend yield and volatility of 157.7% for 2010.

(2)	Heads the Audit Committee

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We retain the law firm of Shipman & Goodwin LLP (“S&G”), of which Mr. Michael Widland, a non-employee director, is a partner, to perform legal services from time to time. We paid S&G $57,161 and $88,797 for legal services rendered during 2010 and 2009, respectively.

Mr. Shad Stastney, a director, is a founding partner of Vicis Capital Master Fund, which holds, as of the Record Date, approximately 84.2% of our outstanding stock. The shares are held directly by Vicis Capital Master Fund, for which Vicis Capital LLC acts as investment advisor. Vicis Capital LLC may be deemed to beneficially own the shares within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended, by virtue of the voting and dispositive power over such shares granted by Vicis Capital Master Fund to Vicis Capital LLC. The voting and dispositive power granted to Vicis Capital LLC by Vicis Capital Master Fund may be revoked at any time. Vicis Capital LLC disclaims beneficial ownership of any shares reported herein.

DIRECTOR INDEPENDENCE

The Board of Directors of the Company has concluded that each of Messrs. Pierce, Higgins and Widland is “independent” based on the listing standards of the NASDAQ Stock Market, if the Company were listed thereon (which it is not), having concluded that any relationship between such director and the Company, in its opinion, does not interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The Board of Directors of the Company has also concluded that the directors serving on the audit committee, namely Mr. Pierce and Mr. Higgins, are “independent” based on the more stringent independence standard of the NASDAQ Stock Market applicable to directors serving on audit committees.

STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL HOLDERS

The following table sets forth certain information, as of April 21, 2011, concerning the ownership of the Common Stock by (a) each person who, to the Company’s knowledge, beneficially owned on that date more than 5% of the outstanding Common Stock, (b) each of the Company’s directors and the Named Executive Officers (as defined below) and (c) all current directors and executive officers of the Company as a group.

Name of Beneficial Owner (1)	Number of Shares Beneficially Owned (2)			Percent of Common Stock (2)
John J. Joyce, Chairman, CEO, President, and Director		14,065,000	(3)		*

Ramdas Rao, Senior Vice President and Chief Technology Officer		11,780,000	(4)		*

Michael Widland, Director		4,983,334	(5)		*

D. Howard Pierce, Director		4,950,000	(6)		*

Thomas Michael Higgins, Director		4,750,000	(7)		*

Shad Stastney, Director		––			*

Vicis Capital Master Fund		1,483,711,722	(8)		85.04	%

All directors and executive officers as a group (6 persons) (9)		40,528,334			2.40	%

———————

*	Indicates less than 1%.

(1)	Unless otherwise indicated, the address of each person listed is c/o Ambient Corporation, 7 Wells Avenue, Newton, Massachusetts 02459.

(2)

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission (the “SEC”) and generally includes voting or investment power with respect to securities. In accordance with SEC rules, shares of Common Stock issuable upon the exercise of options or warrants which are currently exercisable or which become exercisable within 60 days following the Record Date are deemed to be beneficially owned by, and outstanding with respect to, the holder of such option or warrant. Except as indicated by footnote, and subject to community property laws where applicable, to the knowledge of the Company, each person listed is believed to have sole voting and investment power with respect to all shares of Common Stock beneficially owned by such person.

(3)

Includes (i) 940,000 shares of Common Stock, and (ii) 13,125,000 shares of Common Stock issuable upon the exercise of options issued under the Company’s 2000 Equity Incentive Plan (the “2000 Incentive Plan”). Does not include 8,250,000 shares of Common Stock issuable upon exercise of options issued under the 2000 Incentive Plan

(4)	Includes (i) 1,030,000 shares of Common Stock, (ii) 10,750,000 shares of Common Stock issuable upon exercise of options issued under the 2000 Incentive Plan. Does not include 7,500,000 shares of Common Stock issuable upon exercise of options issued under the 2000 Incentive Plan

(5)	Includes (i) 133,334 shares of Common Stock, and (ii) 4,850,000 shares of Common Stock issuable upon exercise of options issued under the 2002 Directors Plan. Does not include 3,240,000 shares of Common Stock issuable upon exercise of options issued under the 2002 Directors Plan.

(6)	Includes (i) 200,000 shares of Common Stock, and (ii) 4,750,000, shares of Common Stock issuable upon exercise of options issued under the 2002 Directors Plan. Does not include 3,150,000 shares of Common Stock issuable upon exercise of options issued under the 2002 Directors Plan.

(7)	Includes 4,750,000 shares of Common Stock issuable upon exercise of options issued under the 2002 Directors Plan. Does not include 2,850,000 shares of Common Stock issuable upon exercise of options issued under the 2002 Directors Plan.

(8)

Includes (i) 1,388,208,414 shares of Common Stock and (ii) 95,503,308 shares of Common Stock issuable upon exercise of warrants. All securities are held directly by Vicis Capital Master Fund, for which Vicis Capital LLC acts as investment advisor. Vicis Capital LLC may be deemed to beneficially own shares held by Vicis Capital Master Fund and any shares issuable to Vicis Capital Master Fund upon exercise of the Warrants within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended, by virtue of the voting and dispositive power over such shares granted by Vicis Capital Master Fund to Vicis Capital LLC. The voting and dispositive power granted to Vicis Capital LLC by Vicis Capital Master Fund may be revoked at any time. Vicis Capital LLC disclaims beneficial ownership of any shares reported herein. Shad L. Stastney, a founder and principal of Vicis Capital LLC, John Succo and Sky Lucas share voting and dispositive control of these securities. No single natural person can exercise voting or investment power with respect to the securities owed by Vicis Capital Master Fund and investment decisions with respect to these securities are made by a majority of these persons.

(9)	See Footnotes 3 through 7.

SELLING STOCKHOLDERS

Up to37, 368,831 shares of Common Stock issuable upon exercise of outstanding warrants are being offered under this Prospectus, all of which are being registered for sale for the account of the selling stockholders.

Beneficial ownership is determined in accordance with SEC rules and includes voting or investment power with respect to the securities. However, no selling stockholder may exercise its warrants if such exercise would cause such holder's beneficial ownership of our Common Stock (excluding shares underlying any of their unexercised warrants) to exceed 4.99% of the outstanding shares of Common Stock immediately after the exercise. (If the holder subsequently disposes of some or all of its holdings, it can again exercise its warrant, subject to the same limitation). The table below also includes the number of shares which might be issuable on the occurrence of certain events, such as the accrual of dividends, which have not yet occurred and may not occur. Therefore, although they are included in the table below, the number of shares of Common Stock for some listed persons may include shares that are not subject to purchase during the 60-day period.

SELLING STOCKHOLDERS TABLE

The following table sets forth the shares beneficially owned, as of April 21, 2011, by the selling stockholders (as represented to us by the selling stockholders) prior to the offering contemplated by this Prospectus, the number of shares each selling stockholder is offering by this Prospectus and the number of shares which each would own beneficially if all such offered shares are sold. The selling stockholders acquired their beneficial interests in the shares being offered hereby in the private placement described above under the caption "AGREEMENTS WITH THE SELLING STOCKHOLDERS" in which each such selling stockholder advised us that it purchased the relevant securities solely for investment and not with a view to or for resale or distribution of such securities.

SELLING	NUMBER OF SHARES OWNED BEFORE		SHARES OFFERED PURSUANT TO THIS			COMMON STOCK TO BE BENEFICIALLY OWNED IF ALL SHARES OFFERED HEREUNDER ARE SOLD
STOCKHOLDER	OFFERING		PROSPECTUS			SHARES		PERCENT

GREGORY DRYER		21,050,000		21,050,000	(1)		––		––
VICIS CAPITAL MASTER FUND		1,483,711,722		14,119,974 (2)			1,469,591,748		85%
SAMUEL SHOEN		1,832,381		1,832,381	(1)		––		––
PAUL KUHNS		366,476		366,476	(1)		––		––

———————

*	Represents less than 1%

1.	Represents shares of Common Stock issuable upon exercise Placement Agent Warrants. The selling stockholder is an assignee of Kuhn Brothers, Inc. (“Kuhn”), the original stockholder and a registered broker-dealer, which served as a placement agent in the transactions described in the section "DESCRIPTION OF THE AGREEMENTS WITH THE SELLING STOCKHOLDERS." The selling stockholder is an employee of Kuhn. Each of Kuhn and the selling stockholders have advised us that it purchased the securities solely for investment and not with a view to or for resale or distribution of such securities.

Represents shares of Common Stock issuable upon exercise Placement Agent Warrants. The original rights-holders, Kuhns Brothers Inc. (“Kuhn”), John Kuhns (“JK”) and Mary Fellows (“MF”), sold these warrants to Vicis Capital Master Fund (“Vicis Capital”), the Company’s principal stockholder, in privately negotiated transactions. Each of JK and MF are employees of Kuhn. Following the sale, all securities are held directly by Vicis Capital, for which Vicis Capital LLC acts as investment advisor. Vicis Capital LLC may be deemed to beneficially own shares held by Vicis Capital and any shares issuable to Vicis Capital upon exercise of the Warrants within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended, by virtue of the voting and dispositive power over such shares granted by Vicis Capital to Vicis Capital LLC. The voting and dispositive power granted to Vicis Capital LLC by Vicis Capital may be revoked at any time. Vicis Capital LLC disclaims beneficial ownership of any shares reported herein. Shad L. Stastney, a founder and principal of Vicis Capital LLC, John Succo and Sky Lucas share voting and dispositive control of these securities. No single natural person can exercise voting or investment power with respect to the securities owed by Vicis Capital and investment decisions with respect to these securities are made by a majority of these persons.

PLAN OF DISTRIBUTION

The selling stockholders and any of their pledgees, donees, transferees, assignees and successors-in-interest may, from time to time, sell any or all of the shares that are included in the Registration Statement on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices.

The selling stockholders may use any one or more of the following methods when selling shares:

●	directly as principals;
●	ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
●	block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
●	purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
●	an exchange distribution in accordance with the rules of the applicable exchange;
●	privately negotiated transactions;
●	to cover short sales made in compliance with applicable laws and regulations;
●	broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;
●	a combination of any such methods of sale; and
●	any other method permitted pursuant to applicable law.

The selling stockholders may also sell shares under Rule 144 under the Act if available, rather than under this Prospectus.

Broker-dealers engaged by the selling stockholders may arrange for other broker-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as an agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The selling stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved. We are not aware of any definitive selling arrangement at the date of this prospectus between any selling stockholder and any broker-dealer or agent.

Upon our being notified by a selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of shares through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, a supplement to this prospectus will be filed by us, if required, pursuant to Rule 424(b) under the Act, disclosing:

●	The name of each such selling stockholder and of the participating broker-dealer(s);
●	The number of shares involved;
●	The price at which such shares were sold;
●	The commissions paid or discounts or concessions allowed to such broker-dealer(s), where applicable;
●	That such broker-dealer(s) did not conduct any investigation to verify the information set out or incorporated by reference in this Prospectus; and
●	Other facts material to the transaction.

The selling stockholders may from time to time pledge or grant a security interest in some or all of the shares owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell shares from time to time under this Prospectus, or under an amendment to this Prospectus under Rule 424(b)(3) or other applicable provision of the Act amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this Prospectus.

The selling stockholders may also transfer the shares in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this Prospectus.

The selling stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be "underwriters" within the meaning of the Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Act. Discounts, concessions, commissions and similar selling expenses, if any, that can be attributed to the sale of securities will be paid by the applicable selling stockholder and/or the purchasers.

If a selling stockholder uses this Prospectus for any sale of the shares, it will be subject to the prospectus delivery requirements of the Act. The selling stockholders will be responsible to comply with the applicable provisions of the Act and the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, including, without limitation, Regulation M, as applicable to such selling stockholders in connection with resales of their respective shares under this Registration Statement.

We are required to pay all fees and expenses incident to the registration of the shares being offered by the selling stockholders, but we will not receive any proceeds from the sale of the shares except for, upon exercise, the exercise price of options and warrants exercised on a cash basis. We have agreed to indemnify certain selling stockholders against certain losses, claims, damages and liabilities, including liabilities under the Act.

DESCRIPTION OF CAPITAL STOCK

We are authorized to issue 2,000,000,000 shares of Common Stock, $.001 par value per share, of which 1,649,301,354 shares were outstanding as of April 21, 2011. We have approximately 138 stockholders of record as of such date. Except for those shares held by Vicis, some of our Common Stock is held in either nominee name or street name brokerage accounts. 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 therefore and to share ratably in our assets available upon liquidation, dissolution or winding up. The holders of shares of the Common Stock do not have cumulative voting rights for the election of directors and, accordingly, the holders of approximately 85.04% of the shares of Common Stock are able to elect all directors.

DISCLOSURE OF SEC POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Pursuant to our certificate of incorporation and by-laws, our officers and directors are indemnified by us to the fullest extent allowed under Delaware law for claims brought against them in their capacities as officers and directors. Indemnification is not allowed if the officer or director does not act in good faith and in a manner reasonably believed to be in our best interest, 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 Act. Insofar as indemnification for liabilities arising under the Act may be permitted for our directors, officers and controlling persons pursuant to the foregoing provisions or otherwise, we have been advised that in the opinion of the SEC, such indemnification is against public policy as expressed in the act and is, therefore, unenforceable.

LEGAL MATTERS

The validity of the Common Stock offered under this Prospectus will be passed on by Aboudi & Brounstein, Law Offices.

EXPERTS

The financial statements for the years ended December 31, 2010 and December 31, 2009 included in this Prospectus have been so included in reliance on the report of Rotenberg Meril Solomon Bertiger & Guttilla, P.C., independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any reports, statements or other information on file at the SEC public reference room in Washington, D.C. You can request copies of those documents, upon payment of a duplicating fee, by writing to the SEC. Copies of such material may be obtained by mail from the Public Reference Room of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the SEC maintains a Web site at www.sec.gov containing reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including us. You may obtain information on the operation of the Public Reference Room by calling the SEC at1-800-SEC-0330.

We have filed with the SEC under the Act a Registration Statement on Form S-1, of which this Prospectus is a part, with respect to the shares offered hereby. This Prospectus, which constitutes a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement, certain items of which are contained in exhibits and schedules as permitted by the rules and regulations of the SEC. You can obtain a copy of the Registration Statement from the SEC at the address listed above or from the SEC's Internet website at www.sec.gov.

Statements made in this Prospectus as to the contents of any contract, agreement or other document referred to herein are not necessarily complete. With respect to each contract, agreement or other document filed as an exhibit to the Registration Statement or in a filing incorporated by reference herein or otherwise, reference is made to the exhibit for a more complete description of the matters involved, and each statement shall be deemed qualified in its entirety by this reference.

Prospective investors may rely on the information contained in this Prospectus. Neither we nor the selling stockholders have authorized anyone to provide prospective investors with information different from that contained in this Prospectus. The information in this Prospectus is correct only as of the date of this Prospectus, regardless of the time delivery of this Prospectus or any sale of these securities.

AMBIENT CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page

Report of Independent Registered Accounting Firm		F-2

Consolidated Financial Statements

Consolidated Balance Sheets		F-3

Consolidated Statements of Operations		F-4

Consolidated Statement of Changes in Stockholders’ Equity (Deficit)		F-5

Consolidated Statements of Cash Flows		F-6

Notes to Consolidated Financial Statements		F-7

F-1

REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Ambient Corporation

We have audited the accompanying consolidated balance sheets of Ambient Corporation and Subsidiary (the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of operations, changes in stockholders’ equity (deficit) and cash flows for the years then ended. The consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2010 and 2009 and the results of their operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ ROTENBERG MERIL SOLOMON BERTIGER & GUTTILLA, P.C.

ROTENBERG MERIL SOLOMON BERTIGER & GUTTILLA, P.C.

Saddle Brook, New Jersey

February 23, 2011

F-2

AMBIENT CORPORATION

CONSOLIDATED BALANCE SHEETS

	December 31,			December 31,
	2010			2009

ASSETS
CURRENT ASSETS
Cash and Cash Equivalents	$	6,986,881		$	987,010
Accounts receivable		1,731,096			1,238,708
Inventory		834,117			361,201
Prepaid expenses and other current assets		276,121			202,568

Total current assets		9,828,215			2,789,487

Property and equipment, net		744,944			603,412

Total assets	$	10,573,159		$	3,392,899

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable	$	3,608,293		$	2,015,771
Accrued expenses and other current liabilities (including related party interest		632,994			829,041
of $244,262 and $690,027 respectively)
Deferred revenue		-			158,686
Capital lease obligations, current portion		10,325			11,463
Convertible debt, current portion (net of discount of $-0- and $183,609)		-			9,816,391

Total current liabilities		4,251,612			12,831,352

NON-CURRENT LIABILITIES
Deferred rent		185,721			84,906
Capital lease obligations, less current portion		-			11,504

Total liabilities		4,437,333			12,927,762

STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.001 par value;
2,000,000,000 and 2,000,000,000 shares authorized in 2010 and 2009;
1,649,376,354 and 899,039,687
issued; 1,648,376,354 and 898,039,687 outstanding, respectively		1,649,377			899,040
Additional paid-in capital		148,114,946			130,008,365
Accumulated deficit		(143,428,497	)		(140,242,268	)
Less: treasury stock; 1,000,000 shares at cost		(200,000	)		(200,000	)

Total stockholders' equity (deficit)		6,135,826			(9,534,863	)

Total liabilities and stockholders' equity (deficit)	$	10,573,159		$	3,392,899

See Notes to Consolidated Financial Statements.

F-3

AMBIENT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended
	December 31,
	2010			2009



Revenues	$	20,358,040		$	2,193,338

Less Cost of goods sold		12,023,332			1,836,546

Gross profit		8,334,708			356,792

Expenses
Research and Development		6,072,010			4,585,979
Operating, general and administrative expenses		4,755,352			4,054,255
Stock based compensation - operating, general and administrative		725,343			967,301

Total expenses		11,552,705			9,607,535


Loss on disposition of property and equipment		(5,541	)		(31,590	)

Operating loss		(3,223,538	)		(9,282,333	)

Interest and finance expenses		(215,424	)		(4,992,827	)
Gain on conversion of debentures		251,840
Interest income		893			28,876

Net loss	$	(3,186,229	)	$	(14,246,284	)

Basic and diluted loss per share:
Net loss	$	(0.00	)	$	(0.02	)

Weighted average number of shares outstanding		1,538,475,035			789,088,699

See Notes to Consolidated Financial Statements.

F-4

AMBIENT CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

					Additional						Accumulated
	Common Stock				Paid-in			Treasury			Accumulated
	Shares		Amount		Capital			Stock			Deficit			Total

Balance - January 1, 2009		719,980,784	$	719,981	$	132,930,334			(200,000	)	$	(125,995,984	)	$	7,454,331

Common stock issued upon exercise of warrants		11,642,236		11,642		940,063									951,705
Common stock issued upon exercise of options		750,000		750		23,500									24,250
Common stock issued upon conversion of convertible debt		166,666,667		166,667		2,333,333									2,500,000
Remeasurement of beneficial conversion feature of convertible promissory note						(8,333,333	)								(8,333,333	)
Warrant repricing						1,147,167									1,147,167
Share-based compensation expense						967,301									967,301
Net loss												(14,246,284	)		(14,246,284	)

Balance - December 31, 2009		899,039,687	$	899,040	$	130,008,365		$	(200,000	)	$	(140,242,268	)	$	(9,534,863	)

Common stock issued upon exercise of warrants		2,859,000		2,859		97,206									100,065
Common stock issued upon exercise of options		811,000		811		30,699									31,510
Proceeds from sale of common stock		80,000,000		80,000		7,920,000									8,000,000
Common stock issued upon conversion of convertible debt		666,666,667		666,667		9,333,333									10,000,000
Share-based compensation expense						725,343									725,343
Net loss												(3,186,229	)		(3,186,229	)

Balance - December 31, 2010		1,649,376,354	$	1,649,377	$	148,114,946		$	(200,000	)	$	(143,428,497	)	$	6,135,826

See Notes to Consolidated Financial Statements.

F-5

AMBIENT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended
	December 31,
	2010			2009


CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(3,186,229	)	$	(14,246,284	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		380,256			302,871
Amortization of beneficial conversion feature of convertible debt		183,609			3,228,600
Financing costs related to warrant modification		-			1,147,167
Financing, consulting and other expenses paid via the
issuance of common stock and warrants		725,343			967,301
Gain on conversion of debentures		(251,840	)		-
Loss on disposition of property and equipment		5,541			31,590
Changes in operating assets and liabilities
(Increase) decrease in:
Accounts receivables		(492,387	)		430,178
Inventory		(472,916	)		(263,157	)
Prepaid expenses and other current assets		(73,553	)		(28,143	)
Increase (decrease) in:
Accounts payable		1,592,521			681,994
Deferred rent		100,815			84,906
Accrued expenses and other current liabilities		55,792			(107,919	)
Deferred revenue		(158,686	)		50,619

Net cash used in operating activities		(1,591,734	)		(7,720,277	)

CASH FLOWS FROM INVESTING ACTIVITIES
Redemption of marketable securities		-			125,000
Additions to property and equipment		(527,329	)		(394,429	)
Proceeds from sale of property and equipment		-			460

Net cash used in investing activities		(527,329	)		(268,969	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock		8,000,000			975,955
Proceeds from exercise of warrants		100,065			-
Proceeds from exercise of options		31,510			-
Payments of capitalized lease obligations		(12,641	)		(11,463	)

Net cash provided by financing activities		8,118,934			964,492

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		5,999,871			(7,024,754	)

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR		987,010			8,011,764

CASH AND CASH EQUIVALENTS - END OF YEAR	$	6,986,881		$	987,010

Noncash financing and investing activities:
Issuance of common stock in connection with conversion of debt	$	10,000,000		$	-

Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	225,740		$	675,228

See Notes to Consolidated Financial Statements.

F-6

AMBIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - DESCRIPTION OF BUSINESS

Ambient Corporation (“Ambient,” the “Company,” “we or “us”) is a Delaware Corporation incorporated on June 26, 1996 and is a pioneering integrator of smart grid communications platforms, creating high-speed Internet Protocols (IP) based data communications networks for the medium and low-voltage distribution grid. The Ambient smart grid platform, known as Ambient Smart Grid®, facilitates a two-way, real-time communications network designed to modernize the power grid infrastructure, making it more receptive to wide-scale adoption of renewable energy sources and supportive of new energy efficiency technologies and programs. The Ambient Smart Grid® platform facilitates a utility’s ability to implement smart grid applications such as Advanced Metering Infrastructures (AMI), Demand Side Management (DSM), Distribution Monitoring and Automation, direct load control and more. When combined, these applications offer economic, operational and environmental benefits for utilities, and ultimately the utility customers.

Throughout the past five years, Ambient has been a key supplier to Duke Energy’s grid efficiency programs, and the leading supplier of the smart grid communications Nodes for their smart grid deployments. In September 2009, we entered into a long-term agreement, running through 2015 to supply Ambient’s X-3100 Node and to license our management software – AmbientNMS® for deployment throughout the utility’s electric power distribution grid.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and its inactive, wholly-owned subsidiary, Insulated Connections Corporation Limited. The subsidiary has been inactive since 2001. All inter-company balances and transactions have been eliminated in consolidation.

USE OF ESTIMATES

The preparation of 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 dates of the financial statements. Actual results may differ from those estimates.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash and short-term investments with insignificant interest rate risk and original maturities of 90 days or less.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Substantially all of the Company's financial instruments, consisting primarily of cash, accounts receivable, accounts payable and accrued expenses, other current liabilities and convertible debentures, are carried at, or approximate, fair value because of their short-term nature or because they carry market rates of interest.

STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation in accordance with accounting guidance now codified as Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718, “Compensation – Stock Compensation.” Under the fair value recognition provision of financial stock-based compensation cost is estimated at the grant date based on the fair value of the award. The Company estimates the fair value of stock options granted using the Black-Scholes-Merton option pricing model.

F-7

NET LOSS PER SHARE

Basic loss per share (EPS) is computed by dividing net loss available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted loss per share adjusts basic loss per share for the effects of convertible securities, stock options and other potentially dilutive instruments, only in the periods in which such effect is dilutive. The following securities have been excluded from the calculation of net loss per share, as their effect would be anti-dilutive.

	2010		2009
Stock options		112,946,500		58,537,000
Warrants		155,968,831		78,827,831
Convertible debentures		-		666,666,667

PROPERTY AND EQUIPMENT

Equipment, furniture and fixtures are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets, which range from one to five years.

REVENUE RECOGNITION

Hardware sales consist of smart grid nodes ("Nodes") as well as system software embedded in the Nodes. System software embedded in Ambient’s Nodes is used solely in connection with the operation of the product. Upon the sale and shipment of its products, Ambient is not required to update the embedded software for newer versions that are subsequently developed. In addition, the Company does not offer or provide any free post-contract customer support. There is an original warranty period, which may run for a period of up to twelve months from sale of product, in which the Company will provide fixes for the Nodes when and if appropriate. As such, we recognize revenue from the sales of the Nodes when products are received by the customer.

The Company’s other proprietary software consists of the AmbientNMS®; an element management product that may be sold on a stand-alone basis. A purchaser of Ambient’s Nodes is not required to purchase this product, as our Nodes could be managed with independently developed management software. The sale of the AmbientNMS® does not include post-contract customer support, unless the customer enters into a maintenance agreement with the company. As such, Ambient recognizes revenue from the sale of this software product when shipped. Amounts billed to customers before software is shipped are classified as deferred revenue.

ACCOUNTS RECEIVABLE

Accounts receivable are recorded net of an allowance for doubtful accounts based upon management's analysis of the collectability of the balances. At December 31, 2010 and 2009, management believed that no allowance was necessary.

At December 31, 2010 and 2009, one customer accounted for 100% of accounts receivable. See Note 10.

F-8

INVENTORY

Inventory is valued at the lower of cost or market determined on the first-in, first-out (FIFO) basis. Market, with respect to direct materials, is replacement cost and is net realizable value for finished goods. The value of the inventory is adjusted for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions.

RESEARCH AND DEVELOPMENT AND PATENT COSTS

Both research and development costs and patent costs are charged to operations as incurred.

SOFTWARE DEVELOPMENT COSTS

Costs incurred in the research and development of new software products and enhancements to existing software products have historically been expensed as incurred. After technological feasibility is established, additional development costs are capitalized. No software development costs have been capitalized as of December 31, 2010 and 2009.

LEASED EMPLOYEES

Ambient has a contract with Administaff to provide certain professional employment services such as health, dental and various other types of insurance to its employees at rates that it would not qualify for otherwise and payroll services to its personnel. Pursuant to this contract, the Company’s personnel are employees of, and paid by, Administaff as part of an employee leasing arrangement. The Company leases the services of these employees from Administaff, and reimburses Administaff for the costs of compensation and benefits. All of the employees referred to in the Annual Report are full time employees. For purposes of reporting the number of employees in our Annual Report, the Company considers employees of Administaff covered by this contract to be employees of the Company.

The Company records these payments using the same classifications for which the reimbursement is made (i.e. wage reimbursements are recorded as wage expense).

INCOME TAXES

The Company accounts for income taxes in accordance with accounting guidance now codified as FASB ASC 740, “Income Taxes,” which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more likely than not that some or all deferred tax assets will not be realized.

The Company has adopted the provisions of FASB ASC 740-10-05, “Accounting for Uncertainties in Income Taxes.” The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

WARRANTIES

The Company accounts for its warranties under the FASB ASC 450 “Contingencies.” The Company generally warrants that its products are free from defects in material and workmanship for a period of one year from the date of initial acceptance by our customers. The warranty does not cover any losses or damage that occurs as a result of improper installation, misuse or neglect or repair or modification by anyone other than the Company or its authorized repair agent. The Company's policy is to accrue anticipated warranty costs based upon historical percentages of items returned for repair within one year of the initial sale. The Company’s repair rate of products under warranty has been minimal, and a historical percentage has not been established. The Company has not provided for any reserves for such warranty liability.

F-9

IMPAIRMENT OF LONG-LIVED ASSETS

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable from future undiscounted cash flows. Impairment losses are recorded for the excess, if any, of the carrying value over the fair value of the long-lived assets. The Company did not record an impairment charge in 2010 and 2009.

FAIR VALUE MEASUREMENTS

FASB ASC Topic 820, "Fair Value Measurements and Disclosures" ("ASC 820"), defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1	—	Quoted prices in active markets for identical assets or liabilities.
Level 2	—	Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3	—	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board (FASB) ratified Accounting Statement Update (ASU) 2009-13 (ASU 2009-13), “Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements,” which eliminates the residual method of allocation, and instead requires companies to use the relative selling price method when allocating revenue in a multiple deliverable arrangement. When applying the relative selling price method, the selling price for each deliverable shall be determined using vendor specific objective evidence of selling price, if it exists and otherwise using third-party evidence of selling price. If neither vendor specific objective evidence nor third-party evidence of selling price exists for a deliverable, companies shall use their best estimate of the selling price for that deliverable when applying the relative selling price method. ASU 2009-13 shall be effective in fiscal years beginning on or after June 15, 2010, with earlier application permitted. Companies may elect to adopt this guidance prospectively for all revenue arrangements entered into or materially modified after the date of adoption, or retrospectively for all periods presented. The Company will adopt this standard effective January 1, 2011. The Company does not expect the provisions of ASU 2009-13 to have a material effect on the financial position, results of operations or cash flows of the Company.

F-10

In April 2010, the FASB issued Accounting Standards Update 2010-17 (ASU 2010-17), "Revenue Recognition-Milestone Method (Topic 605): Milestone Method of Revenue Recognition." The amendments in this Update are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. If a vendor elects early adoption and the period of adoption is not the beginning of the entity’s fiscal year, the entity should apply the amendments retrospectively from the beginning of the year of adoption. The Company does not expect the provisions of ASU 2010-17 to have a material effect on the financial position, results of operations or cash flows of the Company.

Management does not believe that any other recently issued, but not yet effective, accounting standard if currently adopted would have a material effect on the accompanying consolidated financial statements.

NOTE 3 – INVENTORY

Inventory consisted of the following:

	December 31,
	2010			2009
Raw material		$	138,722		$	137,026
Finished goods			695,395			224,175
		$	834,117		$	361,201

NOTE 4 - PROPERTY AND EQUIPMENT

	December 31,
	2010		2009
Computers	$	309,191	$	162,768
Software		505,199		367,844
Software (capital lease)		30,429		30,429
Machinery and equipment		626,393		539,005
Furniture and office equipment		195,492		161,394
		1,666,704		1,261,440
Less – accumulated depreciation		921,760		658,028
	$	744,944	$	603,412

Depreciation expense was $380,256 and $302,871 for the years ended December 31, 2010 and 2009, respectively.

NOTE 5 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

	December 31,
	2010			2009
Accrued interest		$	244,262		$	690,028
Accrued payroll and payroll taxes			139,276			83,070
Accrued professional fees			31,440			33,034
Accrued liabilities			218,016			22,909
		$	632,994		$	829,041

Accrued interest represents amounts owed to Vicis Capital Master Fund on secured convertible promissory notes. See Note 7.

F-11

NOTE 6 – CAPITAL LEASE OBLIGATION

The Company is the lessee of software under a capital lease expiring in 2011. The asset and liability under the capital lease are recorded at the lower of the present value of the minimum lease payments or the fair value of the asset. The asset is amortized over its estimated productive life. Amortization of assets under capital leases is included in depreciation expense.

Minimum future lease payments under capital leases as of December 31, 2010, were as follows:

	Amount
Net minimum lease payments – 2011	$	10,842
Amount representing interest		(517	)
Present value of net minimum lease payments	$	10,325

The interest rate on the capitalized lease is 9.1%. Interest is computed based on the lower of the Company’s incremental borrowing rate at the inception of lease or the lessor’s implicit rate of return.

NOTE 7 – CONVERTIBLE DEBT

	December 31,
	2010		2009
Secured Convertible Promissory note payable - interest at 8%, due July 31, 2010 (i)	$	––	$	7,500,000

Secured Convertible Promissory note payable - interest at 8%, due November 1, 2010 (ii)		––		2,500,000

Secured Convertible Promissory note payable - interest at 8%, due January 15, 2011 (iii)		––		––

Total		––		10,000,000

Less: Discount		––		(183,609	)
		––		9,816,391
Less Current Portion		––		9,816,391

Total	$	–	$	–

Securities Purchase Agreements

(i) On July 31, 2007, the Company entered into the Securities Purchase Agreement (the "July 07 Purchase Agreement") with Vicis, pursuant to which the Investor purchased the Company’s Secured Convertible Promissory Note in aggregate principal amount of $7,500,000 (the “July 07 Note”). The July 07 Note had a term of three years and was scheduled to become due on July 31, 2010. The outstanding principal amount of the July 07 Note was convertible at the option of the holder into shares of the Company’s common stock (the “Common Stock”) at an initial conversion price of $0.075 per share, subject to certain adjustments. The conversion price was adjusted to $0.015 in connection with the various Agreements discussed below. Amounts owing under the July 07 Note were secured by substantially all of the assets of the Company. In January 2010, the July 07 Note was converted into 500,000,000 shares of Common Stock.

(ii) On November 1, 2007, the Company entered into a Securities Purchase Agreement (the "November 07 Purchase Agreement") with the Investor pursuant to which the Investor purchased the Company’s Secured Convertible Promissory Note in the principal amount of $2,500,000 (the “November 07 Note”). The November 07 Note had a term of three years and was scheduled to become due on November 1, 2010. The outstanding principal amount of the November 07 Note was convertible at the option of the holder into shares of Common Stock at an initial conversion price of $0.045 per share. In connection with the Debenture Amendment Agreement discussed below, the conversion price was adjusted to $0.015 per share. Amounts owing under the November 07 Note were secured by substantially all of the assets of the Company. In January 2010, the November 07 Note was converted into 166,666,667 shares of Common Stock.

F-12

(iii) On January 15, 2008, the Company entered into a Securities Purchase Agreement (the "January 2008 Purchase Agreement") with the Investor pursuant to which the Investor purchased the Company’s Secured Convertible Promissory Note in the principal amount of $2,500,000 (the “January 08 Note”; together with the November 07 Note and the July 07 Note, the “Notes”). The January 08 Note had a term of three years and was scheduled to become due on January 15, 2011. The outstanding principal amount of the January 08 Note was convertible at the option of the holder into shares of Common Stock at an initial conversion price of $0.035 per share. In connection with the Debenture Amendment Agreement discussed below, the conversion price was adjusted to $0.015 per share. Amounts owing under the January 08 Note were secured by substantially all of the assets of the Company. In August 2009, the January 08 Note was converted into 166,666,667 shares of Common Stock.

The Company determined and adjusted the amount of accrued interest owed to Vicis after the notes were converted as discussed above. For the year ended December 31, 2010, the Company recorded a gain on the conversion of the debentures totaling $251,840. Such gain represents the reversal of accrued interest recorded in previous periods.

At December 31, 2010 and 2009, accrued interest owed to Vicis amounted to $244,262 and $690,027, respectively. See Note 5.

Debt Modification

On November 21, 2008, the Company and the Investor entered into a Debenture Amendment Agreement (the “Debenture Amendment Agreement”), pursuant to which the Investor invested in the Company an additional $8 million. In consideration of the investment, the Company reduced the conversion price on the Notes referred to above to $0.015 per share. The parties also agreed that in the event that on the trading day immediately preceding June 1, 2009, the closing per share price of the Common Stock was less than $0.10, then the per share conversion price with respect to any amount then outstanding under the Notes would automatically be further adjusted to $0.01. The price of the Common Stock was greater than $0.10 on the trading day immediately preceding June 1, 2009, and therefore no further adjustment of the conversion price was effected.

The fair value of the Convertible Promissory Notes was determined utilizing Level 3 inputs. The fair value of the Convertible Promissory Notes was calculated utilizing the fully diluted market value of the invested capital of the Company immediately before and after the date of the debt modification. The fair value was determined to be the face value of the Convertible Promissory Notes at the date of the debt modification.

For financial reporting purposes, the Company recorded an initial discount of $12,500,000, based upon a conversion price of $0.01 to reflect the beneficial conversion feature related to the Debenture Modification Agreement. The discount was being amortized to the date of maturity of the various Convertible Promissory Notes unless converted earlier. On June 1, 2009, the beneficial conversion feature was re-measured based on the final conversion price being set at $0.015. This resulted in a reduction in the initial value of the beneficial conversion feature of $8,333,333 and a like reduction to additional paid-in capital.

Interest incurred on convertible debt amounted to $28,296 and $614,827 for the years ended December 31, 2010 and 2009, respectively.

On June 30, 2009, the Company agreed to modify the terms of the expiring Class A warrants. Under the new terms the warrants were exercisable through August 31, 2009 and the exercise prices were reduced from $0.20 to $0.15 per share. The resulting charge due to the modification was $1,147,167 and is reflected as additional interest expense in the year ended December 31, 2009 As a result of the debt conversions of the July 07 Note and the January 08 Note in January 2010, the unamortized debt discounts totaling $183,609 were charged to interest expense in fiscal 2010. Amortization of the discounts related to the convertible notes above totaled $183,609 and $3,228,600 for the years ended December 31, 2010 and 2009.

F-13

NOTE 8 - STOCKHOLDERS' EQUITY

SECURITY PURCHASE AGREEEMENT

On November 16, 2009, we and Vicis entered into an agreement, which was subsequently amended in January 2010, pursuant to which Vicis furnished to us access to a $8,000,000 equity based credit line. Pursuant to the arrangement, Vicis deposited into an escrow account $8,000,000. From time to time as our cash resources fall below $1,500,000 (the “ Cash Balance Condition precedent”), we are entitled to receive $500,000 from the account in consideration of which we will issue to Vicis 5,000,000 shares of Common Stock and warrants for a corresponding number of shares of Common Stock. Between January 19 and December 29, 2010, we effected six draw-downs in the amount of the $3,000,000 and issued 30 million shares of our Common Stock.

On December 30, 2010, we and Vicis further amended the arrangement described above ("2nd amendment") pursuant to which Vicis applied the $5 million then remaining in escrow account to the purchase of Company securities (the “Investment”). Vicis made the Investment despite the fact that the Cash Balance Condition Precedent has not been met. In consideration of the Investment, the Company issued to Vicis 50,000,000 shares of its Common Stock as well as Series G Warrants to purchase, over a two year period from the date of issuance, an additional 50,000,000 share of Common Stock. Under the terms of the 2nd Amendment, the per share exercise price of the Series G Warrants issuable in connection with the Investment was set at $0.20 (rather than the $0.25 per share exercise price provided under the original terms of the agreement).

STOCK OPTION PLANS

In November 2000, the Company adopted the 2000 Equity Incentive Plan (the "2000 Incentive Plan"). The 2000 Incentive Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, bonus stock, awards in lieu of cash obligations, other stock-based awards and performance units. The 2000 Incentive Plan also permits cash payments under certain conditions. As of December 31, 2007, the number of shares of Common Stock reserved for issuance under the 2000 Incentive Plan was 25,000,000. On June 27, 2008, the number of shares reserved for issuance was further increased to 50,000,000 shares. On February 4, 2010, the number of shares reserved for issuance was further increased to 110,000,000 shares

The compensation committee of the Board of Directors is responsible for determining the type of award, when and to whom awards are granted, the number of shares and the terms of the awards and exercise prices. The options are exercisable for a period not to exceed ten years from the date of grant. Vesting periods range from immediately to four years.

In December 2002, the Company adopted the 2002 Non-Employee Directors Stock Option Plan (the "2002 Directors Plan") providing for the issuance of shares of Common Stock to non-employee directors. Under the 2002 Directors Plan, only non-qualified options may be issued, and they will be exercisable for a period of six years from the date of grant. As of December 31, 2007, the number of shares of Common Stock reserved for issuance under the 2002 Directors Plan was 6,000,000 shares. On June 27, 2008, the number of shares reserved for issuance was increased to 12,000,000 shares. On February 4, 2010, the number of shares of Common Stock reserved for issuance was further increased to 25,000,000 shares.

EMPLOYEE OPTIONS

In February, 2011, the Company issued options to employees from the Company’s 2000 Equity Incentive Plan to purchase up to a total of 300,000 shares of the Company’s Common Stock at an exercise price of $0.10. The options will be fully vested as of February 15, 2013.

F-14

OTHER OPTION GRANTS

In addition to the options granted under the stock option plans discussed above (the "Plans”), the Company has issued options outside of the Plans, pursuant to various employment, consulting and separation agreements.

Option activity for 2010 and 2009 is summarized as follows:

	Plan			Nonplan		Total			Weighted Average Exercise Price
Options outstanding, January 1, 2009		28,612,000			3,775,000		32,387,000		$	0.17
Granted		27,450,000			----		27,450,000			0.04
Exercised		(750,000)			––		(750,000)			0.06
Forfeited		(400,000	)		(150,000)		(550,000	)		0.13

Options outstanding, December 31, 2009		54,912,000			3,625,000		58,537,000			.11
Granted		58,145,000			1,500,000		59,645,000			0.104
Exercised		(686,000)			––		(686,000)			0.04
Forfeited		(4,549,500	)		---		(4,549,500	)		0.13

Options outstanding, December 31, 2010		107,821,500			5,125,000		112,946,500		$	0.114

Shares of Common Stock available for
Future grant under the plans		24,016,600
Aggregate intrinsic value	$	2,268,461

The aggregate intrinsic value was calculated based on the positive difference between the closing market price of the Company’s Common Stock and the exercise price of the underlying options.

The following table summarizes information about stock options outstanding at December 31, 2010:

			Weighted Average				Options Exercisable
			Remaining				Weighted Average
		Number	Contractual		Exercise		Number		Exercise
Ranges of price		Outstanding	Life		Price		Exercisable		Price
$	0.03-.05	35,081,500		6.92	$	0.038		35,081,500	$	0.038
$	.06 - .095	300,000		8.64	$	0.083		100,000	$	0.060
$	.10 - .12	58,190,000		8.77	$	0.120		6,845,419	$	0.119
$	.15 - .20	16,075,000		2.95	$	0.198		15,850,000	$	0.198
$	.25 - .30	1,075,000		4.51	$	0.279		1,075,000	$	0.279
$	0.50	2,225,000		1.54	$	0.500		2,225,000	$	0.500
$	0.03-0.50	112,946,500		7.18	$	0.114		61,176,919	$	0.109

Share based compensation - The fair values of stock options granted were estimated using the Black-Scholes option-pricing model with the following assumptions:

F-15

	2010			2009
Risk free interest rate		.85-2.38	%		1.07- 2.66	%
Expected life		3.5 -5.75			3.5 -5.75
Expected volatility		155 - 168	%		162 - 169	%
Dividend yield		––			––

Weighted-average grant date fair value per share	$	0.104		$	0.035

As of December 31, 2010, there was $5,387,846 of unrecognized compensation cost related to non-vested options granted. That cost is expected to be recognized over a weighted-average period of 19.2 months.

WARRANTS

A summary of the warrants outstanding at December 31, 2010 is as follows:

		Exercise		Expiration
Warrants		Price		Date
	38,452,165	$	0.035	2012 - 2013
	750,000	$	0.075	2012
	50,000,000	$	0.20	2012
	66,766,666	$	0.25	2011- 2012
	155,968,831

In February 2011, the Company issued 450,000 shares of Common Stock upon the exercise of finder warrants previously issued from an April 2008 funding.

Warrant Modification

In May 2006, the Company raised net proceeds of $8.986 million in a private placement of $10,000,000 in principal amount of its two-year 8% Convertible Debentures (the "2006 Debentures"). The balance was repaid in its entirety by January 2008. Investors in the private placement also received Class A warrants, exercisable through June 30, 2009, to purchase up to 33,333,333 shares of the Company's Common Stock at a per share exercise price of $0.20 and Class B warrants, exercisable through June 30, 2011, to purchase up to 33,333,333 shares of the Company’s Common Stock at a per share exercise price of $0.25.

In connection with the placement of the 2006 Debentures, the Company issued to a registered broker dealer that acted as placement agent warrants consisting of (x) warrants to purchase an aggregate of 6,666,667 shares of Common Stock having an initial exercise price equal to $0.15, (y) warrants to purchase an aggregate of 3,333,333 shares of Common Stock having an initial exercise price equal to $0.20, and (z) warrants to purchase an aggregate of 3,333,333 shares of Common Stock having an initial exercise price equal to $0.25. Except as specifically noted, these warrants otherwise are on substantially the same terms and conditions as the investor warrants.

On June 30, 2009, the Company modified the terms of the expiring Class A warrants. Under the new terms the warrants were exercisable though August 31, 2009 and the exercise prices were reduced from $.20 to $0.15 per share. The Company valued the warrant modification at $1,147,167 using the Black-Scholes pricing model and the following assumptions: contractual term of 0.167 years, an average risk-free interest rate of 0.19% a dividend yield of 0% and volatility of 93%. The resulting of $1,147,167 is reflected in the Statement of Operations for 2009 as interest expense.

Following the modification, Class A warrants for an aggregate of 6,283,333 shares of the Company’s Common Stock have been exercised for total net cash exercise proceeds of $848,250 through August 31, 2009, and 30,383,333 Class A warrants expired.

F-16

NOTE 9 - INCOME TAXES

At December 31, 2010, the Company had available $77 million of net operating loss carry forwards, for U.S. income tax purposes which expire in the years 2016 through 2029. However, due to changes in stock ownership, the use of the U.S. net operating loss carry forwards is severely limited under Section 382 of the Internal Revenue Code. As such, approximately $61 million of these net operating loss carry forwards will expire as worthless. The Company has ceased its foreign operations and has abandoned the foreign net operating loss carry forwards.

Due to the uncertainty of their realization, no income tax benefit has been recorded by the Company for these loss carry forwards as valuation allowances have been established for any such benefits.

Significant components of the Company's deferred tax assets for U.S. income taxes are as follows:

	December 31,
	2010			2009
Net operating loss carry forwards	$	6,827,616		$	6,568,369
Stock based compensation		1,024,791			734,654
Other		615,257			583,860
Total deferred tax assets		8,467,664			7,886,883
Valuation allowance		(8,467,664	)		(7,886,883	)
Net deferred tax assets	$	––		$	––

The increase in the valuation allowance was due to the increases in the items in the table above.

The following is a reconciliation of the federal statutory tax rate of 35% for 2010 and 2009, with the provision for income taxes:

	December 31,
	2010			2009
Statutory tax rate		(35	%)		(35	%)
Valuation allowance		35	%		35	%
Effective federal tax rate		0	%		0	%

At December 31, 2010 and 2009, the Company had no material unrecognized tax benefits, and no adjustments to liabilities or operations were required. The Company does not expect that its unrecognized tax benefits will materially increase within the next twelve months. The Company did not recognize any interest or penalties related to uncertain tax positions at December 31, 2010 and 2009.

The Company files U.S. and state income tax returns in jurisdictions with varying statutes of limitations. The 2006 through 2010 tax years generally remain subject to examination by federal and most state tax authorities.

NOTE 10 – CONCENTRATIONS

CASH

Cash is maintained with major financial institutions in the United States. At December 31, 2010 and 2009, no amounts were in excess of insured amounts.

F-17

SALES AND MAJOR CUSTOMERS

Revenues for the years ended December 31, 2010 and 2009 were as follows:

	December 31, 2010		December 31, 2009
Hardware	$	20,282,596	$	2,127,977
Software and services		75,444		65,361
	$	20,358,040	$	2,193,338

Duke Energy accounted for 100% of hardware, software and services revenues for the years ended December 31, 2010 and 2009, respectively.

MAJOR SUPPLIER

NOTE 11 – OPERATING LEASES

Ambient does not own any real property. The Company's corporate office in Newton, Massachusetts consists of two floors comprised of approximately 20,242 square feet. The lease term for the premises was scheduled to commence on September 1, 2009 and continues through December 31, 2012. At our request, the landlord agreed that we could commence the lease earlier and we completed the move into our new headquarters in August 2009.

The lease provides for an initial period of the lease to be rent free and includes scheduled rent escalations. Accounting principals generally accepted in the United States of America require that the total rent expense to be incurred over the term of the lease be recognized on a straight-line basis. Deferred rent represents the cumulative excess of the straight-line expense over the payments made. The average annual rent expense over the term of the lease is approximately $304,000.

Rent expense for 2010 and 2009 was $304,000 and $290,430, respectively.

Future minimum annual rentals through 2012 are as follows:

Years ended December 31,
2011	$	389,885
2012		403,839

Total	$	793,724

NOTE 12 – SUBSEQUENT EVENTS

The Company reviewed subsequent events through the date of this filing.

F-18

AMBIENT CORPORATION

up to 37,368,831 shares of Common Stock

PROSPECTUS

April 27, 2011

Ambient (AMBT) Inactive 424B3Prospectus supplement