FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NO. 333-122150
PROSPECTUS
AMBIENT CORPORATION
114,224,626 shares of Common Stock
This prospectus relates to the sale by the selling stockholders of up to
114,224,626 shares of our common stock, par value $0.001 (the "Common Stock").
The selling stockholders may sell the shares from time to time at the prevailing
market price or in negotiated transactions.
We will not receive any of the proceeds from the sale of the shares by
the selling stockholders.
Each of the selling stockholders may be deemed to be an "underwriter,"
as such term is defined in the Securities Act of 1933.
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 January 31, 2005, was $0.32.
AS YOU REVIEW THIS PROSPECTUS, YOU SHOULD CAREFULLY CONSIDER THE MATTERS
DESCRIBED IN "RISK FACTORS" BEGINNING ON PAGE 5.
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 February 1, 2005
PRINCIPAL EXECUTIVE OFFICE:
Ambient Corporation
79 Chapel Street
Newton, Massachusetts 02458
(617) 332-0004
TABLE OF CONTENTS
Page
Prospectus Summary........................................................ 2
Risk Factors.............................................................. 5
Use of Proceeds........................................................... 12
Description of the Agreements with the Holders of the Convertible
Debentures................................................................ 12
Selling Stockholders...................................................... 16
Plan of Distribution...................................................... 21
Description of Capital Stock.............................................. 23
Disclosure of SEC Position of Indemnification for Securities
Act Liabilities........................................................... 23
Interest of Named Expert and Counsel...................................... 23
Legal Matters............................................................. 23
Experts................................................................... 23
Where You can find more Information....................................... 24
Incorporation of Certain Documents by Reference........................... 24
Documents Delivered with this Prospectus.................................. 25
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.
1
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 "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 is engaged in the design, development, and marketing
of equipment and technologies designed to utilize existing electrical power
medium voltage and low voltage distribution lines as a medium for the delivery
of broadband and other services. The use of an electric power distribution
system as a high-speed communication medium is commonly referred to as "power
line communications" or "broadband over power lines." The proprietary equipment,
components and related technologies and power line communications networks that
we are designing, developing and testing will be referred to throughout this
Prospectus as the "PLC Technologies."
Power line communications technology has been in existence for many
years. Utilities have historically used low speed power line communications to
satisfy certain monitoring and control functions. During the past decade,
certain utilities and technology companies continued to experiment with
higher-bandwidth data transfer via electric distribution systems in Europe,
South America and the United States. The recent advances in power line
communications technology allow for the delivery of high-speed communications
over the medium and low voltage power lines. Globally, many utilities are
conducting commercial pilots, with a few utilities already offering limited
commercial services.
Historically, overcoming certain technical limitations inherent in
existing electric distribution grids has been one of the primary hindrances to
utilities' acceptance and implementation of high-speed power line
communications. We have developed and successfully tested, on a limited trial
basis, our unique and patented coupler technology that is designed to achieve
high-speed data transfer to and from the medium and low voltage distribution
lines without the need to establish an electrical connection to the medium
voltage line. Our couplers have been designed to clamp onto the electrical lines
and to slip around overhead low or medium voltage distribution wires without
having to make or break hard connections. We believe that our medium voltage
inductive coupler, a key component in the overall power line communications
network, overcomes significant hurdles in the development of an economically
viable power line communications solution.
We are currently working with leading utilities and technology companies
in the development and testing of the principal equipment, components and
technologies that comprise our PLC Technologies. Prototypes of these components
and technologies presently are being evaluated in field trials and pilots. For
Ambient to be commercially successful, the PLC Technologies must be commercially
deployed over one or more electric utilities distribution networks. We believe
that the ultimate decision by an electric utility to allow for commercial
deployment of our PLC Technologies may also be influenced by the enhanced
utility services such as AMR and outage reporting that such PLC Technologies may
ultimately provide to utilities. Our objective over the next twelve months is to
intensify our marketing efforts, begin selling our PLC Technologies and continue
the design, development and testing of enhanced versions of the equipment and
components comprising the PLC Technologies.
We are a development stage company that has generated significant losses
since our inception in June 1996. We expect to continue to incur operating
losses for the foreseeable
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future as we continue and complete the development of the PLC Technologies and
establish a commercial infrastructure for their exploitation. To date, we have
devoted substantially all of our efforts towards research and development
activities. As of September 30, 2004, we had an accumulated deficit of
approximately $73 million (which includes approximately $47 million in stock
based charges). As a development stage company, we have a limited operating
history upon which an evaluation of our prospects can be made. Our prospects
must therefore be evaluated in light of the challenges, expenses, delays and
complications associated with a development stage company. Our independent
accountants have included a "going concern" exception in their audit reports on
our audited 2003 and 2002 financial statements, and we expect such an exception
to continue in their 2004 report. The financial statements do not include any
adjustment that might result from the outcome of such uncertainty.
RECENT DEVELOPMENTS
In December 2004, we raised gross proceeds of $ 5,500,000 from the
private placement to institutional and individual investors of our three-year 6%
Convertible Debentures (the "Convertible Debentures). We intend to use the
proceeds of the financing for general corporate purposes, including working
capital and the funding of operating losses. The outstanding principal amount
and accrued interest on the Convertible Debentures is convertible into shares of
Common Stock at a per share conversion price of $0.25 (subject to adjustment if
there are certain capital adjustments or similar transactions, such as a stock
split or merger). In connection with the issuance of the Convertible Debentures,
we issued to the purchasers of these debentures three-year warrants (the
"Warrants") to purchase up to 22,000,000 shares of our Common Stock, at a per
share exercise price of $0.50. We received net proceeds of approximately
$4,900,000 from the placement of these securities, after the payment of offering
related fees and expenses. As compensation for the placement of these
securities, we also issued warrants to purchase up to an additional 4,400,000
shares of our Common Stock. A more complete description of this financing is
included elsewhere herein under "DESCRIPTION OF THE AGREEMENTS WITH THE HOLDERS
OF THE CONVERTIBLE DEBENTURES."
Additionally, we are registering for resale a total of 59,532,626 shares
of our Common Stock, consisting of 37,083,333 shares of our Common Stock
currently issued and outstanding and 22,449,293 shares of our Common Stock
issuable pursuant to warrants. A more complete description of the offering of
these shares is included elsewhere herein under the caption "SELLING
STOCKHOLDERS".
CORPORATE INFORMATION
Our principal offices are located at 79 Chapel Street Newton,
Massachusetts 02458 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.
All references to "we," "our," or "us" in this filing refer to Ambient
Corporation, a Delaware corporation, and our subsidiaries.
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 5 of this Prospectus in deciding whether to purchase the Common Stock
offered under this Prospectus.
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THE OFFERING
Securities offered by the
selling stockholders 114,224,626 shares of Common Stock. (1)
Shares outstanding before the
Offering 145,640,265 shares of Common Stock. (2)
Use of Proceeds We will not receive any proceeds from the
Sale of the Common Stock by the selling
stockholders.
(1) Includes up to (i) (a) 22,000,000 shares of our Common Stock issuable upon
conversion of Convertible Debentures in the aggregate principal amount of
$5,500,000 at a conversion price of $0.25 per share, (b) up to 1,320,000 shares
of Common Stock issuable in respect of interest on the Convertible Debentures
accrued and accruing through the first anniversary of issuance and (c)
22,000,000 shares of Common Stock issuable upon exercise of the Warrants and (d)
an additional 4,532,000 shares of Common Stock, representing our current good
faith estimate of additional shares that we might be required to issue to such
selling stockholders (X) based on adjustments to the conversion price of the
unconverted Convertible Debentures and/or to the number of shares covered by
their unexercised Warrants in the event that, on or prior to the 270th day after
the effective date of the Registration Statement of which this Prospectus forms
a part (the "Registration Statement"), we subsequently offer or issue securities
at a purchase price or conversion price lower than $0.25 per share or warrants
either (i) having an exercise price below the exercise price of the warrants or
(ii) exercisable for more shares, on a proportionate basis, than the number of
shares of Common Stock issuable to the selling stockholders upon exercise of the
Warrants and (Y) as liquidated damages through the projected effective date of
the Registration Statement, in each case as covered by terms of agreements
between us and such selling stockholders, (ii) (a) 4,400,000 shares of Common
Stock issuable upon exercise of certain other warrants issued as compensation to
a finder in connection with the issuance of the Convertible Debentures (the
"Compensation Warrants"). and (b) an additional 440,000 shares of Common Stock,
representing our current good faith estimate of additional shares that we might
be required to issue to such selling stockholders (X) based on adjustments to
the conversion price of the unconverted Convertible Debentures and/or to the
number of shares covered by their unexercised warrants in the event that, on or
prior to the 270th day after the effective date of the Registration Statement,
we subsequently offer or issue securities at a purchase price or conversion
price lower than $0.25 per share or warrants either (i) having an exercise price
below the exercise price of the warrants held by the selling stockholders or
(ii) exercisable for more shares, on a proportionate basis, than the number of
shares of Common Stock issuable to the selling stockholders upon exercise of the
Warrants and (Y) as liquidated damages through the projected effective date of
the Registration Statement, in each case as contemplated by terms of agreements
between us and such selling stockholders, (iii) 37,083,333 shares of Common
Stock and (iv) 22,449,293 shares of issued and outstanding Common Stock issuable
upon exercise of certain other warrants and options (together with the warrants
in (ii) above the "Other Warrants"). For a description of the agreement between
us and the holders of the Convertible Debentures, see "DESCRIPTION OF THE
AGREEMENTS WITH THE HOLDERS OF THE CONVERTIBLE DEBENTURES." See also, "SELLING
STOCKHOLDERS".
(2) As of January 18, 2005; Does not include (a) up to an aggregate of
14,486,000 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, (b) any of the shares described in clauses (i),(ii)
and (iv) in footnote (1) above and (c) 19,804,073 shares of Common Stock
issuable upon exercise of certain other outstanding options and warrants.
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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. IN THIS EVENT YOU COULD LOSE ALL OR PART
OF YOUR INVESTMENT.
RISKS CONCERNING OUR BUSINESS
WE HAVE INCURRED NET LOSSES IN EVERY QUARTER AND YEAR SINCE INCEPTION
AND WE EXPECT OUR NET LOSSES TO CONTINUE THROUGH THE FORESEEABLE FUTURE.
We are a development stage company engaged in the design, development
and marketing of the PLC Technologies. The PLC Technologies have not, to date,
generated any significant revenues. For the year ended December 31, 2003, we
incurred a net loss of $5,235,962 and we reported net losses of $3,480,373 and
$10,029,583 for the years ended December 31, 2002 and 2001, respectively. We
incurred a net loss of $5,649,124 for the nine months ended September 30, 2004.
From inception through September 30, 2004, we reported an accumulated deficit of
approximately $73 million. We expect to continue to incur net losses through
2005 and for the foreseeable future as we continue to further develop and test
the PLC Technologies and to intensify our commercialization efforts. To date we
have funded our operations through the sale of our securities and expect to
continue doing so for the foreseeable future. We will need to generate
significant revenue to achieve profitability. Our ability to generate and
sustain significant additional revenues or achieve profitability will depend
upon the factors discussed elsewhere in this "Risk Factors" section, as well as
numerous other factors outside of our control, including:
o development and marketing of competing broadband technologies,
including non-power line based broadband alternatives, that may
be more effective or less costly than the implementation of the
PLC Technologies;
o utilization of the PLC Technologies by electric utilities to
provide a commercially deployed power line communications
network; and
o collaboration agreements with Internet service resellers.
It is possible that we may never achieve profitability and, even if we
do achieve profitability, we may not sustain or increase profitability in the
future. If we do not achieve sustained profitability, we will be unable to
continue our operations.
WE HAVE A LIMITED OPERATING HISTORY.
We were incorporated in June 1996 and have been engaged since 1999 in
the power line communications field. We are subject to all of the risks inherent
in the establishment of a new business enterprise in a nascent and evolving
field. Our limited operating history makes it difficult to evaluate our
financial performance and prospects. No assurance can be made at this time that
we will operate profitably or that we will have adequate working capital to meet
our obligations as they become due.
5
IF WE ARE UNABLE TO OBTAIN SUFFICIENT FUNDS WHEN NEEDED, AND INCUR A
CASH FLOW DEFICIT, OUR BUSINESS COULD SUFFER.
Although we believe that available cash-on-hand will be sufficient for
our needs at least through the next twelve months, our existing resources may
not be sufficient to support the commercial introduction, production and
delivery of our PLC Technologies. We may be unable to obtain additional funds in
a timely manner or on acceptable terms, which would render us unable to fund our
commercialization efforts or expand our business. If we are unable to obtain
capital when needed, we may have to restructure our business or delay or abandon
our development and expansion plans. Although we have been successful in the
past in obtaining financing for working capital, we will have ongoing capital
needs as we intensify our commercialization efforts and expand our business. If
we raise additional funds through the sale of equity or convertible securities,
your ownership percentage and the value of your Common Stock will be diluted. We
may have to issue securities that have rights, preferences and privileges senior
to our Common Stock. The terms of any additional indebtedness may include
restrictive financial and operating covenants that would limit our ability to
compete and expand.
The independent registered public accounting firm and independent
certified public accountants' reports for our financial statements for the years
ended December 31, 2003 and 2002, respectively, include explanatory paragraphs
regarding substantial doubt about our ability to continue as a going concern. We
expect a going concern qualification in the 2004 report. This "going concern"
paragraph may have an adverse effect on our ability to obtain financing for
operations and to further develop and market products. If we do not receive
additional capital in the amounts needed in the near future, our ability to
continue as a going concern is in substantial doubt.
OUR COMMERCIAL SUCCESS IS CONTINGENT UPON THE INTEGRATION OF OUR PLC
TECHNOLOGIES BEING COMMERCIALLY DEPLOYED OVER THE UTILITIES DISTRIBUTION
NETWORK.
Our activities to date are primarily focused on the design, development
and marketing of the PLC Technologies for use on low and medium voltage
distribution systems. We have established contractual relationships with leading
technology companies and utilities for the design, development, evaluation and
testing of the PLC Technologies. No assurance can be given that these
arrangements will achieve their intended results or that they will result in our
PLC Technologies being commercially deployed over an electrical power
distribution network. We are in the process of integrating the PLC Technologies
with various other complementary and necessary technologies. While our couplers
and the other principal equipment and components comprising the PLC Technologies
have been successfully tested in limited field trials, no assurance can be given
that these components or technologies will be successfully developed or
technologically feasible for deployment on a commercial scale over a utilities
distribution network. In addition, the costs of developing and commercializing
the PLC Technologies may far outweigh the revenue stream from such
commercialization.
The nature of PLC Technologies requires us to market them, at least
initially, primarily to electric utilities. Our success is dependent, initially,
on the deployment by electric utilities of a communications network over their
powerline distribution system utilizing the PLC Technologies. If a significant
number of electric utilities ultimately elect not to commercially deploy a power
line communications system or to not utilize our PLC Technologies or to favor
other technologies or providers of similar services, our business may be
adversely affected and we may be required to cease operations.
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Moreover, the PLC Technologies may not achieve or sustain market
acceptance under emerging industry standards or may not meet, or continue to
meet, the changing demands of the media access and technology service companies.
If the market for our PLC Technologies does not develop or expand as we
anticipate, our business, financial condition and results of operations would be
materially adversely affected and we may be required to cease operations.
GOVERNMENTAL REGULATIONS MAY DELAY OR PRECLUDE COMMERCIAL DEPLOYMENT OF
A POWER LINE COMMUNICATIONS NETWORK.
Electric utilities are ordinarily subject to significant governmental
oversight and regulations, on both the state and federal level. Foreign
utilities and other providers of electric power are also subject to significant
governmental oversight and regulations in their respective home countries. In
certain countries, there may be regulations restricting the transmission of high
frequency signals over power lines, necessitating governmental permission. These
regulations, as well as regulations in the telecommunications field, may
inhibit, delay or preclude the commercial deployment of power line
communications networks or the utilization of the PLC Technologies.
The Federal Communications Commission (the "FCC") recently adopted rules
and regulations published in January 2005. In our view, these rules are
favorable to the development of broadband over powerlines. No assurance can be
given that these regulations will not be modified by FCC or will become subject
to legal challenges.
IF WE FAIL TO PROPERLY MANAGE OUR GROWTH, OUR BUSINESS AND OPERATIONS
WOULD BE HARMED.
We intend to expand management, design and development, testing, quality
control, marketing, sales and service and support operations, as well as
financial and accounting controls, in order to further the commercialization of
the PLC Technologies. The pace of our anticipated expansion, together with the
level of expertise and technological sophistication required to provide
implementation and support services, will demand an unusual amount of focus on
the operational needs of our future prospective customers for quality and
reliability. We anticipate that this development may strain our existing
managerial, operational and financial resources.
We may be unable to develop and expand our business and operations for
one or more of the following reasons:
o We may not be able to locate or hire at reasonable compensation
rates qualified and experienced sales staff and other employees
necessary to expand our capacity on a timely basis;
o We may not be able to integrate new management and employees
into our overall operations; and
o We may not be able to successfully integrate our internal
operations with the operations of product manufacturers and
suppliers to produce and market commercially viable products or
solutions.
If we cannot manage our growth effectively, our business and operating
results will suffer.
WE HAVE NO AGREEMENT RELATING TO REVENUE GENERATING ACTIVITIES.
7
We presently have no agreement or understanding with any electric
utility as to commercial exploitation of the PLC Technologies, and no assurance
can be provided that we will be successful in concluding any significant-revenue
generating agreement on terms commercially acceptable to us.
WE DEPEND ON ATTRACTING AND RETAINING KEY PERSONNEL.
We are highly dependent on the principal members of our management, and
technology staff. The loss of their services might significantly delay or
prevent the achievement of development or strategic objectives. Our success
depends on our ability to retain key employees and to attract additional
qualified employees. We make no assurance that we will be able to retain
existing personnel or attract and retain additional highly qualified employees
in the future.
RISKS CONCERNING THE PLC TECHNOLOGIES
AN INTERRUPTION IN THE SUPPLY OF COMPONENTS AND SERVICES THAT WE OBTAIN
FROM THIRD PARTIES COULD HAMPER OR IMPEDE THE COMMERCIALIZATION OF OUR PLC
TECHNOLOGIES.
The principal components comprising the PLC Technologies include our
proprietary and patent protected couplers, which we design and develop in-house,
and the nodes or communications controllers that are designed to interface with
the existing power lines. To manufacture and assemble our end products and
components, we depend on third parties to deliver and support reliable
components, enhance their current products and components, develop new
components on a timely and cost-effective basis and respond to emerging industry
standards and other technological changes. Any significant interruption in the
supply of any of these components, products or services could hamper or impede
our commercialization efforts and, following commercialization, if occurs, may
cause a decline in sales of our products and services, unless and until we are
able to replace the functionality provided by these suppliers and services.
WE FACE COMPETITION FROM SEVERAL SOURCES.
Certain companies engaged in the field of power line communications have
announced limited commercial deployment in specified geographic locations.
Additionally, as we are proposing an alternative broadband option, the
competition for the PLC Technologies also includes non-power line based
providers of broadband transmission and, to a lesser extent, other providers of
power line based solutions. Some of the providers of broadband access have
substantially greater financial resources, technological and marketing
personnel, and research and development resources than we do.
Numerous companies claim to provide non-power line based high-speed data
transmission. In particular, Internet service providers (ISPs) provide Internet
access over existing networks and have nationwide marketing presence and
strategic or commercial licenses with telecom carriers. Wireless and satellite
service providers have announced plans to expand fixed-wireless networks for
high-speed data customers. Cellular operators are establishing portals
facilitating access to web and information services.
Certain companies, including some with significantly greater resources
than we have, provide partial or complete power line based solutions. We believe
that our core strategy, which attempts principally to collaborate with
appropriate parties in the communications and service technology areas as well
as utilities, provides the most viable prospect for deploying a commercially
viable power line communications network. However, there can be no
8
assurance that this market strategy will be successful or that we will be able
to compete successfully in this market
There can also be no assurance that other companies will not enter the
market in the future. There can be no assurance that development by others of
similar or more effective technologies or solutions will not render our PLC
Technologies non-competitive or obsolete.
In addition, the PLC Technologies may be rendered obsolete or
uneconomical by technological advances or entirely different approaches
developed by one or more of our competitors.
WE MAY NOT HAVE ADEQUATELY PROTECTED OUR INTELLECTUAL PROPERTY RIGHTS.
We have filed with the United States Patent and Trademark Office
("USPTO"), and in other regions and countries globally, patent applications with
respect to the different PLC Technologies and applications on the medium and low
voltage distribution grid and for in-building wiring
In September 2002, the United States Patent and Trademark Office (the
"USPTO") issued to us a patent, with a priority date of December 1999, primarily
covering inductive coupling of data signals onto overhead and underground power
distribution cables. Subsequently, the USPTO issued two additional patents. Our
expanding patent portfolio includes six patents issued or allowed by the USPTO
and several pending patent applications in the United States and worldwide.
However, the PLC Technologies include several components and technologies for
which we may not have intellectual property rights. Accordingly, we are
currently undertaking a products and technology clearance review of the
technologies comprising the PLC Technologies.
While we rely on a combination of copyright and trade secret laws,
nondisclosure and other contractual provisions, and technical measures to
protect our intellectual property rights, it is possible that our rights
relating to the PLC Technologies may be challenged and invalidated or
circumvented. Further, effective intellectual property protection may be
unavailable or limited in certain foreign countries. Despite efforts to protect
our proprietary rights, unauthorized parties may attempt to copy 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.
Litigation may be necessary in the future to enforce our patent
portfolio and intellectual property rights, to protect trade secrets, or to
determine the validity and scope of the proprietary rights of others. There can
be no assurance that any such litigation will be successful. Litigation could
result in substantial costs, including indemnification of customers and
diversion of resources and could have a material adverse effect on our business,
financial condition and results of operations, whether or not this litigation is
determined adversely to us. In the event of an adverse ruling in any litigation,
we might be required to pay substantial damages, discontinue the use and sale of
infringing products, and expend significant resources to develop non-infringing
technology or obtain licenses to infringed technology.
NEW CORPORATE GOVERNANCE REQUIREMENTS ARE LIKELY TO INCREASE OUR COSTS
AND MAKE IT MORE DIFFICULT TO ATTRACT QUALIFIED DIRECTORS.
9
We face new corporate governance requirements under the Sarbanes-Oxley
Act of 2002, as well as rules adopted by the SEC. We expect that these laws,
rules and regulations will increase our legal and financial compliance costs and
make some activities more difficult, time-consuming and costly. We also expect
that these new requirements may make it more difficult and more expensive for us
to obtain director and officer liability insurance. We may be required to accept
reduced coverage or incur significantly higher costs to obtain coverage. These
new requirements may also make it more difficult for us to attract and retain
qualified individuals to serve as members of our board of directors or
committees of the board.
RISKS CONCERNING OUR CAPITAL STRUCTURE
CONSOLIDATED EDISON, INC., AN AFFILIATE OF THE CONSOLIDATED EDISON
COMPANY OF NEW YORK, INC., OUR PRINCIPAL UTILITY COLLABORATOR, CONTROLS A
SIGNIFICANT PORTION OF OUR COMMON STOCK AND COULD CONTROL OR INFLUENCE OUR
ACTIONS IN A MANNER THAT CONFLICTS WITH OUR INTERESTS AND THE INTERESTS OF OTHER
STOCKHOLDERS.
As of January 18, 2005, Consolidated Edison, Inc. ("ConEd"), an
affiliate of the Consolidated Edison Company of New York, Inc. ("CECONY"), our
leading utility development collaborator, beneficially owned approximately 26.5%
of the outstanding shares of our Common Stock (prior to the exercise of
outstanding warrants and options). In addition, ConEd is contractually entitled
to designate a member of our board of directors, so long as it continues to
beneficially hold, in the aggregate, 20% of Ambient's issued and outstanding
equity capital. As of the date of this Prospectus, ConEd has not exercised this
right. When and if this right is exercised, ConEd may be able to exercise
considerable influence over matters requiring approval by our stockholders,
including the election of directors and the sale of our company. Such a
concentration of ownership may also have the effect of delaying or preventing a
change in control of our company, including transactions in which our
stockholders might otherwise receive a premium for their shares over then
current market prices. Any of these events could decrease the market price of
our Common Stock.
FUTURE SALES OF COMMON STOCK OR OTHER DILUTIVE EVENTS MAY ADVERSELY
AFFECT PREVAILING MARKET PRICES FOR OUR COMMON STOCK.
As of January 18, 2005, we had 145,640,265 shares of Common Stock
outstanding. We are registering 37,083,333 of such shares hereunder. In
addition, we are registering 54,692,000 shares of our Common Stock, which may be
issued upon the conversion or exercise of the Convertible Debentures and
Warrants, as well as additional shares which may become issuable in connection
therewith resulting form adjustments to the conversion or exercise prices or as
liquidated damages. Under certain conditions, we can require a mandatory
conversion of the outstanding Convertible Debentures. See "DESCRIPTION OF THE
AGREEMENTS WITH THE CONVERTIBLE DEBENTURE HOLDERS." We are also registering
22,449,293 shares of our Common Stock issuable upon exercise of the Other
Warrants.
Availability of a significant number of additional shares of our Common
Stock for future sale and issuance could depress the price of our Common Stock.
IT MAY BE DIFFICULT FOR A THIRD PARTY TO ACQUIRE US.
Provisions of Delaware law, as well as the presence of ConEd, our
10
largest stockholder, could make it more difficult for a third party to acquire
us, even if such acquisition would be beneficial to our stockholders.
OUR STOCK PRICE MAY FLUCTUATE AFTER THIS OFFERING
We cannot guarantee that you will be able to resell the shares of our
Common Stock at or above your purchase, exercise or conversion price. The market
price of our Common Stock may fluctuate significantly in response to a number of
factors, some of which are beyond our control. These factors include:
o Quarterly variations in operating results;
o The progress or perceived progress of our research, development
and marketing efforts;
o Changes in accounting treatments or principles;
o Announcements by us or our competitors of new product and
service offerings, significant contracts, acquisitions or
strategic relationships;
o Additions or departures of key personnel;
o Future public and private offerings or resale of our common
stock or other securities;
o Stock market price and volume fluctuations of publicly-traded
companies in general and development companies in particular;
and
o General political, economic and market conditions.
VOLATILITY OF TRADING MARKET MAY AFFECT YOUR INVESTMENT.
The market price for our Common Stock is highly volatile. The factors
enumerated above, as well as various factors affecting the
telecommunications/broadband industry generally, and price and volume volatility
unrelated to operating performance affecting small and emerging growth companies
generally, may have a significant impact on 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 or quoted on
the NASDAQ system, provided that current prices and volume information with
respect to transactions in such securities are provided by the exchange or
system). 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; this restricts the market.
11
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.
Assuming all of the warrants and options for which the underlying shares
of Common Stock that are covered by this Prospectus are exercised for cash, we
will receive approximately $20.5 million in cash proceeds (before deducting fees
and commission). However, the holders of warrants having an aggregate exercise
price of approximately $13.3 million have cashless exercise provisions that
become effective under certain conditions and if these warrants are exercised by
the cashless exercise provision, we will not receive any cash proceeds from the
exercise of those warrants.
DESCRIPTION OF THE AGREEMENTS WITH THE HOLDERS OF THE
CONVERTIBLE DEBENTURES
Under a Securities Purchase Agreement, dated as of December 23, 2004
(the "Securities Purchase Agreement"), with each of the lenders named therein we
issued $5,500,000 in aggregate principal amount of our Convertible Debentures.
In connection with the issuance of the Convertible Debentures, we issued to the
holders of the Convertible Debentures three-year warrants to purchase up to
22,000,000 shares of our Common Stock at an exercise price of $0.50 per share
(the "Warrants").
The following is a summary of the principal terms of the Convertible
Debentures. The term of the Convertible Debentures is three years and they may
be prepaid at any time by notice given by us after the first anniversary of
issuance at least 30 days in advance of such prepayment, subject to the holder's
conversion rights described herein. Each Convertible
12
Debenture is convertible into shares of Common Stock at an initial conversion
price of $0.25 per share, subject to adjustment in the event of certain capital
adjustments or similar transactions, such as a stock split or merger. Interest
at the rate of 6% per annum is payable on a bi-annual basis and on conversion
and may be paid, at our option, either in cash or in shares of Common Stock at a
rate equal to, with respect to interest accrued through December 31, 2005, $0.25
per share; with respect to interest accrued after December 31, 2005, 90% of the
average closing bid price of the Common Stock during the ten trading days
preceding the date of payment. The option to pay dividends in shares of our
Common Stock, however, is subject to the condition that the issuance of such
shares of Common Stock to the holder cannot result in such holder and its
affiliates beneficially owning more than 4.99% of the shares of our Common Stock
outstanding immediately after such issuance (this limitation is further
discussed below in this section). The Convertible Debentures may first be
converted on the earlier of the 65th day after issuance of the effective date of
the Registration Statement. The Convertible Debentures are subject to mandatory
conversion, at our election upon notice given to the holders of such debentures
if the closing bid price of the Common Stock exceeds $1.00 for 20 consecutive
days, but only if the Registration Statement is then effective and certain other
conditions are met. Unless converted earlier, on the third anniversary of
issuance the Convertible Debentures convert into shares of our Common Stock at
the conversion price then in effect (subject to extension under certain
circumstances).
The holders may declare the principal amount of and the interest accrued
on the Convertible Debentures immediately due and payable upon the occurrence of
certain events of default including (1) our failure to pay principal and
interest when due (subject to a five day grace period), (2) our material breach
of any of the representations or warranties we make in the Securities Purchase
Agreement , (3) our failure to have stock certificates delivered within seven
trading days from delivery of a conversion notice if such failure continues for
ten trading days after notice thereof to us, (4) our failure to observe any
undertaking contained in the Convertible Debentures or the other transaction
documents in a material respect if such failure continues for 30 calendar days
after notice, (5) our insolvency, liquidation or a bankruptcy event, (6) the
entry of money judgment or similar process in excess of $750,000 if such
judgment remains unvacated for 60 days or (7) the suspension of the Common Stock
from trading on the Over the Counter Bulletin Board or such other market on
which our Common Stock is then traded, if such suspension continues for 20
trading days. In addition, under certain circumstances the holder of a
Convertible Debenture has the right to give us a notice requiring us to redeem
all or any portion of such Convertible Debenture. Such redemption will be at a
redemption price equal to V/CP x M, where "V" means the principal of, plus the
accrued and unpaid interest on such Convertible Debenture, "CP" means the
conversion price in effect on the date of the redemption notice, and "M" means
the average of the closing sale prices for any five (5) trading days (which need
not be consecutive) selected by the holder of the unconverted debenture being
redeemed.
The Warrants are exercisable at the earlier of the 65th day following
issuance and the effective date of the Registration Statement and shall expire
on the third anniversary thereof. The exercise price for the Warrants is subject
to adjustment if there are certain capital adjustments or similar transactions,
such as a stock split or merger. Holders are entitled to exercise their Warrants
on a "cashless" basis following 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.
13
The terms of the Convertible Debentures and Warrants specify that the
beneficial owner can convert such debenture or exercise such warrant in
accordance with their respective terms by giving notice to us. However, the
holder may not convert the Convertible Debentures or exercise its Warrant to the
extent that such conversion or 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.
Pursuant to the Securities Purchase Agreement and a Registration Rights
Agreement executed and delivered at the same time, we are obligated initially to
register under the Act the number of shares issuable on conversion in full of
the Convertible Debentures outstanding plus interest accrued thereon through the
third anniversary of the issuance thereof and the number of shares of Common
Stock issuable upon exercise of the Warrants, as well as our good faith estimate
of certain additional shares we might have to issue to certain selling
shareholders. Some of those additional shares would be issuable if we file the
Registration Statement or if its effective date is later than the dates
specified in the Registration Rights Agreement, or if, after the effective date,
the stockholder's right to sell under the Registration Statement is suspended
for periods in excess of those specified in the Registration Rights Agreement.
Other shares we might be required to register to such selling stockholder would
be based on adjustments to the conversion price of the unconverted debentures
and/or to the number of shares covered by its unexercised warrants in the event
that, on or prior to the 270th day after the effective date of the Registration
Statement, we subsequently offer or issue securities at a purchase price or
conversion price lower than the conversion price then in effect or issue
warrants either (i) having an exercise price below the exercise price of the
Warrants held by the selling stockholder or (ii) exercisable for more shares, on
a proportionate basis, than the number of shares of Common Stock issuable upon
exercise thereof. We are also obligated to keep the Registration Statement
effective until the earlier of the date on which the holders may sell without
restriction all shares registered on their behalf under this Prospectus under
Rule 144 promulgated under the Act or the date on which such holders no longer
own any of those shares.
We are also registering 4,400,000 shares of Common Stock that may become
issuable upon exercise of Compensation Warrants, of which 2,200,000 Compensation
Warrants are exercisable at a per share exercise price of $0.25 and 2,200,000
Compensation Warrants may become exercisable under certain conditions at a per
share exercise price of $0.50. These Compensation Warrants are otherwise
exercisable on substantially the same terms and conditions as the Warrants. We
are also registering an additional 440,000 shares of Common Stock representing
our current good faith estimate of additional shares that we might be required
to issue in respect of the Compensation Warrants based on adjustments to the
number of shares covered thereby in the event that, on or prior to the 270th day
after the effective date of the Registration Statement, we subsequently offer or
issue securities at a purchase price or conversion price lower than $0.25 per
share or warrants either (i) having an exercise price below the exercise price
of the Warrants or (ii) exercisable for more shares, on a proportionate basis,
than the number of shares of Common Stock issuable upon exercise of such
Compensation Warrants.
Finally, we are also registering 37,083,333 shares of our Common Stock
and 22,449,293 shares of our Common Stock issuable upon exercise of certain
other warrants, in each case held by persons who are not holders of Convertible
Debentures but have piggyback registration rights.
In the Securities Purchase Agreement, we have agreed that if we enter
into any offer or sale of our Common Stock (or securities convertible into
Common Stock) with any third
14
party (a "New Transaction") on any date which is earlier than 270th day after
the effective date of the Registration Statement (plus the number of days, if
any, during which the Registration Statement is suspended in the interim) in
which the (i) lowest per share purchase price contemplated thereunder or the
lowest conversion price which would be applicable under the terms of such New
Transaction is below the initial conversion price and/or (ii) the lowest
exercise price of any warrants issued thereunder is lower than the initial
exercise prices of the Warrants (such transaction being a "Lower Price
Transaction"), then the terms of any unconverted share of Convertible Debentures
or any unexercised Warrants shall be modified to adjust the relevant conversion
price in such convertible Debentures, the warrant exercise price or the number
of warrant shares to be equal to that provided in the transaction as so
consummated. In addition, if during such period we enter into any offer or sale
of our Common Stock (or securities convertible into Common Stock), whether or
not a Lower Price Transaction, we are required to incorporate in the selling
shareholders' agreements or instruments the terms, if any, from the instruments
relating to such transaction which are more beneficial to the investors.
The foregoing restrictions will not apply to the issuance of securities
(a) in connection with the exercise of conversion or other rights under
documents executed and transactions consummated prior to December 23, 2004, (b)
pursuant to any of our existing employee or non-employee directors stock option
plans, or (c) pursuant to certain transactions with any of our strategic
partners (as defined in the Securities Purchase Agreement).
Other additional shares, if any, which might be issued to a holder on
account of any of such adjustments referred to in the preceding paragraphs are
not covered by the Registration Statement and this Prospectus. However, if in
fact we are required to issue any of these securities as a result of any action
taken by us then we may be required to file a new registration statement in
respect of the resale of the Common Stock underlying these securities.
Under the Registration Rights Agreement, we will be obligated to pay
liquidated damages to the holders of the Convertible Debentures if (i) the
Registration Statement is filed after January 22, 2005, (ii) the Registration
Statement is not declared effective by April 22, 2005, or (iii) the
effectiveness of the Registration Statement is subsequently suspended for more
than certain permitted periods. The permitted suspension periods are any one or
more periods during any consecutive 12-month period aggregating not more than 50
days, but each period shall neither be for more than 20 days nor begin less than
10 trading days after the preceding suspension period ended (the date any such
suspension commences, beyond such permitted restrictions, is referred to as a
"Restricted Sale Date"). The amount of liquidated damages that we must pay to
the holders of the Convertible Debentures if any of the events described in
clauses (i), (ii) or (iii) above occurs will be 1% of the stated value of all
the Convertible Debentures during the first 30-day period (and pro rata for any
such period which is less than 30 days) and 2% of the stated value of all the
Convertible Debentures during each subsequent 30-day period (and pro rata for
any such period which is less than 30 days). Liquidated damages shall cease to
accrue on October 19, 2005, with respect to any failure to timely file the
Registration Statement or any failure of the Registration Statement to be timely
declared effective. After the effective date, however, the stated value of the
Convertible Debentures used in determining the liquidated damages will be equal
to the sum of (X) the stated value of all Convertible Debentures not yet
converted and (Y) the stated value of Convertible Debentures converted within
the preceding 20 trading days, if the Common Stock issued upon conversion of any
such Convertible Debentures is still held by the converting debenture holder.
The Convertible Debenture holders have the right to have these liquidated
damages paid in shares of Common Stock (valued at the conversion price). In
addition, the Company is entitled to pay these liquidated damages in shares of
Common Stock if the Registration Statement becomes effective on or before July
20, 2005, and the Registration Statement is effective at the time of payment.
Notwithstanding the foregoing, if the
15
Registration Statement is declared effective on or before May 22, 2005, then the
Company will not be required to pay any liquidated damages in respect of the
delay in the filing of such registration statement or effectiveness thereof.
Each of our officers has signed an agreement with us limiting the number
of shares of Common Stock that he can sell during certain periods of time (the
"Principal's Agreement"). The obligation of each officer and director under his
Principal's Agreement is separate from the obligation of each other officer and
director under his Principal's Agreement. Each Principal's Agreement provides
that, without the prior consent of a majority in interest of the holders of the
Convertible Debentures in each instance, the officer or director will not sell
or otherwise transfer or offer to sell or otherwise transfer any shares of
Common Stock directly or indirectly held by him at any time prior to 60 days
after the effective date of the Registration Statement (plus any days during
which the Registration Statement is suspended, if any). Thereafter, and for the
next succeeding 60 days (plus any days in the interim during which the
Registration Statement is suspended, if any), he will not sell or otherwise
transfer or offer to sell or otherwise transfer (except in a private transaction
in which the transferee agrees to be bound by the Principal's Agreement), during
any given 30-day period, any shares of Common Stock directly or indirectly held
by him in an amount exceeding 5% of his then aggregate holdings. Finally, for
the next succeeding 60 days, the amount that such officer can sell during each
such 30-day period may not exceed, on a cumulative basis, 10% of their then
aggregate holdings. The Principal's Agreement also provides that, under certain
conditions (including, most significantly, that the Registration Statement is
effective and the closing bid price for our Common Stock has been $0.75 or more
for each of 10 consecutive trading days), these restrictions terminate. An
exception to this limitation is a private transaction in which the transferee
agrees to be bound by the Principal's Agreement; in that case, the transferee
would be bound by the terms of this agreement.
Reference is made to the form of Convertible Debenture, the form of
Warrant, the Securities Purchase Agreement, the Registration Rights Agreement
and the form of Principal's Agreement filed as exhibits to our Current Report on
Form 8-K that was filed on December 28, 2004, for more complete description of
the complex provisions that are summarized under this caption.
SELLING STOCKHOLDERS
Up to 114,224,626 shares are being offered hereby under this Prospectus,
all of which are being registered for sale for the account of the selling
stockholders.
SALE OF THE CONVERTIBLE DEBENTURES AND RELATED WARRANTS
For a detailed description of the placement of the Convertible
Debentures and related warrants completed in December 2004 refer to the
description in this Prospectus under the caption "DESCRIPTION OF AGREEMENTS WITH
THE HOLDERS OF THE CONVERTIBLE DEBENTURES".
The selling stockholders who participated in the December 23, 2004
financing transaction are offering up to 54,692,000 shares of our Common Stock
issuable pursuant to the Convertible Debentures, the related Warrants and the
Compensation Warrants issued in connection with this transaction.
Beneficial ownership is determined in accordance with SEC rules and
includes voting or investment power with respect to the securities. However, the
rights of each selling stockholder to convert its Convertible Debentures and to
exercise its Warrants are subject to certain limitations. These limitations
provide that the conversion of the Convertible Debentures or the exercise of the
Warrants is first available on the earlier of 65 days after
16
such securities were originally issued or the effective date of the registration
statement of which this Prospectus is a part. The other significant limitation
is that such selling stockholder may not convert its debentures or exercise its
warrants, if such conversion or exercise would cause such holder's beneficial
ownership of our Common Stock (excluding shares underlying any of their
unconverted debentures or unexercised warrants) to exceed 4.99% of the
outstanding shares of Common Stock immediately after the conversion or exercise.
(If the holder subsequently disposes of some or all of its holdings, it can
again convert its debenture or exercise its warrant, subject to the same
limitation). Also, 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.
THE 2003 FINANCINGS
In June 2003 and in October - November 2003, we raised approximately
$5,277,500 in gross proceeds from the private placement of our securities.
Certain of the selling stockholders who participated in the 2003 private
placements are offering up to 4,062,084 of our Common Stock issuable pursuant to
warrants issued in connection with this transaction. We are required to register
the shares of Common Stock underlying these warrants.
ADDITIONAL SELLING STOCKHOLDERS WITH PIGGY-BACK REGISTRATION RIGHTS
The selling stockholders with piggy-back registration rights are
offering up to 55,470,542 shares of our Common Stock, which are being registered
for resale hereunder, consisting of 37,083,333 shares of our Common Stock and
22,449,293 shares of our Common Stock issuable pursuant to warrants.
SELLING STOCKHOLDERS TABLE
The following table sets forth the shares beneficially owned, as of
January 18, 2005, 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 private placements 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.
- ------------------------------ -------------------- --------------------- -------------------------------
COMMON STOCK TO BE
BENEFICIALLY OWNED IF
NUMBER OF ALL SHARES OFFERED
SHARES OWNED SHARES OFFERED HEREUNDER ARE SOLD
SELLING BEFORE OFFERING PURSUANT TO THIS
STOCKHOLDER PROSPECTUS SHARES PERCENT
- ------------------------------ -------------------- --------------------- ---------------- --------------
Platinum Partners Value 9,064,000 9,064,000 (1) -- --
Arbitrage Fund LP
- ------------------------------ -------------------- --------------------- ---------------- --------------
Double U Master Fund, L.P. 5,891,600 5,891,600 (2) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
Bristol Investment Fund, Ltd. 4,532,000 4,532,000 (3) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
17
- ------------------------------ -------------------- --------------------- ---------------- --------------
Seventh Generation Corp. 3,172,400 3,172,400 (4) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
Gross Foundation, Inc. 2,266,000 2,266,000 (5) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
Vicsons Ltd. 2,266,000 2,266,000 (5) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
Sol Gross 2,266,000 2,266,000 (5) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
L&B Trading Corp. 2,266,000 2,266,000 (5) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
DKR Soundshore Oasis Holding 2,266,000 2,266,000 (5) -- --
Fund Ltd.
- ------------------------------ -------------------- --------------------- ---------------- --------------
Levi Schapira 2,266,000 2,266,000 (5) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
Edelweiss Trading Ltd. 1,812,800 1,812,800 (6) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
Notzer Chesed 1,812,800 1,812,800 (6) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
Quines Financial SA 1,812,800 1,812,800 (6) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
Jason Shohet 2,579,457 2,229,466 (6) (7) 349,990 *
- ------------------------------ -------------------- --------------------- ---------------- --------------
Sturm Investment Group, Inc. 1,509,600 1,359,600 (8) 150,000 *
- ------------------------------ -------------------- --------------------- ---------------- --------------
Wayne Saker 1,359,600 1,359,600 (8) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
Blumfield Investments Inc. 1,359,600 1,359,600 (8) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
Mordechai Vogel 906,400 906,400 (9) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
Simon Vogel 906,400 906,400 (9) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
Tower Paper Co. Inc. 453,200 453,200 (10) -- --
Retirement Plan
- ------------------------------ -------------------- --------------------- ---------------- --------------
Brasshorn Limited 4,840,000 4,840,000 (11) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
- ------------------------------ -------------------- --------------------- ---------------- --------------
Ronald Kimelman 1,104,168 687,501 (12) 416,667 *
- ------------------------------ -------------------- --------------------- ---------------- --------------
Joel Kimelman 291,667 208,333 (12) 83,334 *
- ------------------------------ -------------------- --------------------- ---------------- --------------
Cyril Jalon 52,083 52,083 (12) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
Rocco Trotta 416,667 416,667 (12) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
Richard Heller 104,167 104,167 (12) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
Maloney and Company 208,334 208,334 (12) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
Michael Hamblett 1,000,000 1,000,000 (12) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
Yehuda Friedman 208,333 208,333 (12) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
Oleg Voronstov 1,760,000 760,000 (12) 1,000,000 *
- ------------------------------ -------------------- --------------------- ---------------- --------------
- ------------------------------ -------------------- --------------------- ---------------- --------------
Consolidated Edison, Inc. 40,000,000 40,000,000 (13) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
EarthLink, Inc. 6,253,766 6,253,766 (14) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
- ------------------------------ -------------------- --------------------- ---------------- --------------
Bennet Johnston, Advisory 200,000 200,000 (15) -- --
Board Member
- ------------------------------ -------------------- --------------------- ---------------- --------------
Rudy Boshowtiz, Advisory 20,000 20,000 (15) -- --
Board Member
- ------------------------------ -------------------- --------------------- ---------------- --------------
George Jee, Advisory Board 10,000 10,000 (15) -- --
Member
- ------------------------------ -------------------- --------------------- ---------------- --------------
Robert Abrams, Advisory 45,000 45,000 (15) -- --
Board Member
- ------------------------------ -------------------- --------------------- ---------------- --------------
- ------------------------------ -------------------- --------------------- ---------------- --------------
Mark Isaacson 2,350,000 2,350,000 (16) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
- ------------------------------ -------------------- --------------------- ---------------- --------------
Belle Haven Investments LLP 660,000 660,000 (17) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
- ------------------------------ -------------------- --------------------- ---------------- --------------
Aquilla Technologies Group, 1,657,834 325,000 (17) 1,332,834 *
Inc.
- ------------------------------ -------------------- --------------------- ---------------- --------------
Westerman Ball Ederer Miller 75,000 75,000 (17) -- --
& Sharfstein
- ------------------------------ -------------------- --------------------- ---------------- --------------
John Moore 40,000 40,000 (17) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
Schneider & Associates 50,000 50,000 (17) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
Dennis Quirk 330,915 250,000 (17) 80,915 *
- ------------------------------ -------------------- --------------------- ---------------- --------------
Scott Sherman 1,956,564 1,190,776 (17) 765,788 *
- ------------------------------ -------------------- --------------------- ---------------- --------------
18
- ------------------------------ -------------------- --------------------- ---------------- --------------
Digiton 56,000 56,000 (17)
- ------------------------------ -------------------- --------------------- ---------------- --------------
Aboudi & Brounstein 300,000 300,000 (18) -- --
- ------------------------------ -------------------- --------------------- ---------------- --------------
- ------------------------------ -------------------- --------------------- ---------------- --------------
- ------------------------------ -------------------- --------------------- ---------------- --------------
Yehuda Cern 2,319,167 1,900,000 (19) 419,167 *
- ------------------------------ -------------------- --------------------- ---------------- --------------
- ------------------------------ -------------------- --------------------- ---------------- --------------
Michael Widland, Board of 1,033,334 605,000 (20) 428,334 *
Directors
- ------------------------------ -------------------- --------------------- ---------------- --------------
Henry Seduski, Board of 845,000 550,000 (20) 295,000 *
Directors
- ------------------------------ -------------------- --------------------- ---------------- --------------
D. Howard Pierce, Board of 500,000 500,000 (20) -- --
Directors
- ------------------------------ -------------------- --------------------- ---------------- --------------
Michael Braunold 590,000 40,000 (21) 550,000 *
- ------------------------------ -------------------- --------------------- ---------------- --------------
Marvin Fiegenbaum 50,000 50,000 (22) --
- ------------------------------ -------------------- --------------------- ---------------- --------------
* Less than 1%
(1) Represents (i) 4,000,000 shares of Common Stock issuable upon conversion of
$1,000,000 in principal amount of Convertible Debentures based on a conversion
price of $0.25 per share, together with 240,000 shares of Common Stock issuable
in respect of interest accrued thereon through the first anniversary of issuance
("Interest Shares"), and (ii) 4,000,000 shares issuable upon the exercise of
Warrants. We are also registering an additional 824,000 shares that we might be
required to issue to such selling stockholder (A) based on adjustments to the
conversion price of the Convertible Debentures and/or to the number of shares
covered by its unexercised warrants in the event that, on or prior to the 270th
after the effective date of the Registration Statement, we subsequently offer or
issue securities at a purchase price or conversion price lower than $0.25 per
share or warrants either (i) having an exercise price below the exercise price
of the Warrants held by the selling stockholder or (ii) exercisable for more
shares, on a proportionate basis, than the number of shares of Common Stock
issuable to the selling stockholder and (B) as liquidated damages through the
projected effective date of the Registration Statement (the "Adjustment
Shares").
(2) Represents (i) 2,600,000 shares of Common Stock issuable upon conversion of
$650,000 in principal amount of Convertible Debentures together with 156,000
Interest Shares, and (ii) 2,600,000 shares issuable upon the exercise of
Warrants. We are also registering an additional 535,600 Adjustment Shares
issuable to such selling stockholder.
(3) Represents (i) 2,000,000 shares of Common Stock issuable upon conversion of
$500,000 principal amount of Convertible Debentures together with 120,000
Interest Shares, and (ii) 2,000,000 shares issuable upon the exercise of
Warrants. We are also registering an additional 412,000 Adjustment Shares
issuable to such selling stockholder.
(4) Represents (i) 1,400,000 shares of Common Stock issuable upon conversion of
$350,000 principal amount of Convertible Debentures together with 84,000
Interest Shares, and (ii) 1,400,000 shares issuable upon the exercise of
Warrants. We are also registering an additional 288,400 Adjustment Shares
issuable to such selling stockholder.
(5) Represents (i) 1,000,000 shares of Common Stock issuable upon conversion of
$250,000 principal amount of Convertible together with 60,000 Interest Shares,
and (ii) 1,000,000 shares issuable upon the exercise of Warrants. We are also
registering an additional 206,000 Adjustment Shares issuable to such selling
stockholder.
(6) Represents (i) 800,000 shares of Common Stock issuable upon conversion of
$200,000 principal amount of Convertible Debentures, together with 48,000
Interest Shares and (ii) 800,000 shares issuable upon the exercise of Warrants.
We are also registering an additional 164,800 Adjustment Shares issuable to such
selling stockholder.
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(7) The selling stockholder is also offering 416,666 shares issuable pursuant to
warrants issued in connection with the 2003 private placements.
(8) Represents (i) 600,000 shares of Common Stock issuable upon conversion of
$150,000 principal amount of Convertible Debentures, together with 36,000
Interest Shares, and (ii) 600,000 shares issuable upon the exercise of Warrants.
We are also registering an additional 123,600 Adjustment Shares issuable to such
selling stockholder.
(9) Represents (i) 400,000 shares of Common Stock issuable upon conversion of
$100,000 principal amount of Convertible Debentures, together with 24,000
Interest Shares, and (ii) 400,000 shares issuable upon the exercise of Warrants.
We are also registering an additional 82,400 Adjustment Shares issuable to such
selling stockholder.
(10) Represents (i) 200,000 shares of Common Stock issuable upon conversion of
$50,000 principal amount of Convertible Debentures, together with 12,000
Interest Shares, and (ii) 200,000 shares issuable upon the exercise of Warrants.
We are also registering an additional 41,200 Adjustment shares issuable to such
selling stockholder.
(11) Represents 4,400,000 shares of Common Stock issuable upon exercise of
Compensation Warrants. We are also registering an additional 440,000 Adjustment
Shares issuable to such selling stockholder.
(12) Represents shares of Common Stock issuable upon exercise of warrants issued
to investors in connection with the 2003 financings.
(13) Includes 5,000,000 shares of Common Stock issuable upon exercise of
warrants issued in October 2003 in connection with certain waivers granted by
the selling stockholder.
(14) Comprised of (i) 4,170,433 shares of Common Stock and (ii) 2,083,333 shares
of Common Stock issuable upon exercise of warrants issued in March 2004 in
connection with an investment by the selling stockholder in our company.
(15) Represents shares of Common Stock issuable upon exercise of warrants issued
by us in consideration of service on our advisory board.
(16) Represents shares of Common Stock issuable upon exercise of warrants issued
by us in connection with the selling stockholder's resignation from our
employment in September 2001. The selling stockholder was our Chief Executive
officer and Chairman of our Board of Directors from January 2001 until his
resignation from all positions with us on September 5, 2001.
(17) Represents shares of Common Stock issuable upon exercise of warrants.
(18) Represents shares of Common Stock issuable upon exercise of warrants issued
by us in connection with services rendered to our company. These selling
stockholders provide legal services to us. See "INTEREST OF NAMED EXPERTS AND
COUNSEL."
(19) Represents shares of Common Stock issuable upon the exercise of currently
exercisable non-plan options. The selling stockholder has been our Chief
Engineer since December 2001. The principal executive officer has agreed to a
lock-up agreement restricting the number of shares which he can sell for a
specified period following the effective date of this Prospectus. See
"DESCRIPTION OF THE AGREEMENTS WITH THE HOLDERS OF CONVERTIBLE DEBENTURES."
(20) Represents shares of Common Stock issuable upon exercise of non-plan
options issued by us in consideration of service on our Board of Directors.
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(21) Represents shares of Common Stock issuable upon exercise of warrants issued
by us in consideration of service on our Board of Directors. The selling
stockholder resigned from our Board of Directors in November 2004.
(22) Represents shares of Common Stock issuable upon exercise of warrants issued
by us in consideration of service on our Board of Directors. The selling
stockholder resigned from our Board of Directors in March 2004.
PLAN OF DISTRIBUTION
As used in this Prospectus, stockholders selling our shares pursuant to
this Prospectus include donees and pledgees selling shares received after the
date of this Prospectus from a selling stockholder named in this Prospectus.
We have agreed, subject to certain limits, to bear all costs, expenses
and fees of registration of the shares of Common Stock offered by the selling
stockholders for resale. However, any brokerage commissions, discounts,
concessions or other fees, if any, payable to broker-dealers in connection with
any sale of the shares of Common Stock will be borne by the selling stockholders
selling those shares or by the purchasers of such shares.
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, if required, pursuant to Rule 424(b) under the Act,
disclosing:
o The name of each such selling stockholder and of the
participating broker-dealer(s);
o The number of securities involved;
o The price at which such securities were sold;
o The commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
o That such broker-dealer(s) did not conduct any investigation to
verify the information set out or incorporated by reference in
this prospectus; and
o Other facts material to the transaction.
The selling stockholders may use any one or more of the following
methods when selling shares:
o directly as principals;
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o 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;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o short sales made in compliance with applicable laws and
regulations;
o broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
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o a combination of any such methods of sale; and
o 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.
Any sales of the shares may be effected in private transactions or
otherwise, and the shares may be sold 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 also engage in short sales against the box,
puts and calls and other transactions in our securities or derivatives of our
securities and may sell or deliver shares in connection with these trades. The
selling stockholders may pledge their shares to their brokers under the margin
provisions of customer agreements. If a selling stockholder defaults on a margin
loan, the broker may, from time to time, offer and sell the pledged shares. We
believe that the selling stockholders have not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding
the sale of their shares other than ordinary course brokerage arrangements, nor
is there an underwriter or coordinating broker acting in connection with the
proposed sale of shares by the selling stockholders.
Broker-dealers engaged by the selling stockholders may arrange for other
brokers-dealers to participate in sales. If the selling stockholders effect
sales through underwriters, brokers, dealers or agents, such firms may receive
compensation in the form of discounts, concessions or commissions from the
selling stockholders or the purchasers of the shares for whom they may act as
agent, principal or both in amounts to be negotiated. Those persons who act as
broker-dealers or underwriters in connection with the sale of the shares may be
selected by the selling stockholders and may have other business relationships
with, and perform services for, us. The selling stockholders do not expect these
commissions and discounts to exceed what is customary in the types of
transactions involved.
Any selling stockholder or broker-dealer who participates in the sale of
the shares may be deemed to be an "underwriter" within the meaning of Section
2(11) of the Act. Any commissions received by any underwriter or broker-dealer
and any profit on any sale of the shares as principal may be deemed to be
underwriting discounts and commissions under the Act.
The anti-manipulation provisions of Rules 101 through 104 under the
Securities Exchange Act of 1934, as amended the (the "Exchange Act"), may apply
to purchases and sales of shares of Common Stock by the selling stockholders. In
addition, there are restrictions on market-making activities by persons engaged
in the distribution of the Common Stock.
Under the securities laws of certain states, the shares may be sold in
such states only through registered or licensed brokers or dealers. In addition,
in certain states the shares may not be able to be sold unless the Common Stock
has been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.
We are required to pay expenses incident to the registration, offering
and sale of the shares pursuant to this offering. We estimate that our expenses
will be approximately $80,489 in the aggregate. We have agreed to indemnify
certain selling stockholders and certain other persons against certain
liabilities, including liabilities under the Act or to contribute to payments to
which such selling stockholders or their respective pledgees, donees,
transferees or other successors in interest may be required to make in respect
thereof. Insofar as
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indemnification for liabilities arising under the Act may be permitted to
directors, officers and controlling persons, 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.
DESCRIPTION OF CAPITAL STOCK
We are authorized to issue 300,000,000 shares of Common Stock, $.001 par
value per share, of which 145,640,265 shares were outstanding as of January 18,
2005. We have approximately 155 shareholders of record as of such date. A
significant portion of our Common Stock is held in either nominee name or street
name brokerage accounts and, consequently, we are not able to determine the
beneficial owners of our Common stock. Holders of shares of our Common Stock are
entitled to one vote for each share held of record on all matters to be voted on
by stockholders. 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 more than 50% 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 and is, therefore, unenforceable.
INTEREST OF NAMED EXPERTS AND COUNSEL
In September 2003, Aboudi & Brounstein, Law Offices received a three
year warrant to purchase up to 200,000 shares of our Common Stock at an exercise
price of $0.12 per share in connection with legal services rendered by them.
LEGAL MATTERS
The validity of the Common Stock offered under this Prospectus will be
passed on for us by Lawrence Kallaur, Esq.
EXPERTS
The financial statements incorporated by reference in this Prospectus by
reference to our Annual Report on Form 10-KSB for the year ended December 31,
2003 have been so incorporated 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.
The financial statements for the year ended December 31, 2002, and incorporated
by reference in this Prospectus have been so incorporated in reliance on the
report of Brightman Almagor & Co., certified public accountants, independent
auditor based in Israel and a member of Deloitte Touche Tohmatsu.
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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.
We have filed with the SEC under the Act a Registration Statement on
Form S-2, 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
site.
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.
We are subject to the informational requirements of the Exchange Act and
file periodic reports, proxy statements and other information with the SEC.
Reports and other information filed by us may be inspected and copied at the
public reference facilities maintained by the SEC at:
Judiciary Plaza 450 Fifth Street, N. W.
Room 1024
Washington, D.C. 20549
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
HTTP://WWW.SEC.GOV containing reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC,
including us. The SEC's telephone number is 1-800-SEC-0330.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows us to "incorporate" into this Prospectus
information that we file with the SEC in other documents. This means that we can
disclose important information to you by referring to other documents that
contain that information. The information incorporated by reference is
considered to be part of this Prospectus. Information contained in this
Prospectus automatically updates and supersedes previously filed information. We
are incorporating by reference the documents listed below and all of our filings
pursuant to the Exchange Act after the date of filing the initial Registration
Statement and prior to effectiveness of the Registration Statement.
The following documents filed by Ambient with the SEC are incorporated
herein by reference:
o our Annual Report on Form 10-KSB for the year ended December 31, 2003, as
filed with the SEC on March 30, 2004;
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o our Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004, as
filed with the SEC on May 17, 2004;
o our Quarterly Report on Form 10-QSB for the quarter ended June 30, 2004 as
filed with the SEC on August 16, 2004;
o our Quarterly Report on Form 10-QSB for the quarter ended September 30, 2004
as filed with the SEC on November 15, 2004;
o our Current Report on Form 8-K, as filed with the SEC on November 15, 2004;
and
o our Current Report on Form 8-K, as filed with the SEC on December 28, 2004.
DOCUMENTS DELIVERED WITH THIS PROSPECTUS
This Prospectus is accompanied by a copy of our most Annual Report on
Form 10-KSB (which is currently our Annual Report for the fiscal year ended
December 31, 2003) and our most recent Quarterly Report on Form 10-QSB (which is
currently our Quarterly Report for the quarter ended September 30, 2004).
If you need an additional copy of these documents, or if you would like
to receive a copy of any of the other items referenced above, you may request
copies, at no cost, by writing or telephoning us at the address set forth below.
We will provide copies of the exhibits to these filings only if they are
specifically incorporated by reference in these filings.
Ambient Corporation
79 Chapel Street
Newton, Massachusetts, 02458
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