AMBIENT CORP NY S-1 Filing

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                                               As filed with the Securities and Exchange Commission on August 19, 2011
                                                                                                                                                Registration No. 333-

                                                        UNITED STATES
                                            SECURITIES AND EXCHANGE COMMISSION
                                                                        Washington, D.C. 20549
                                                                              FORM S-1
                                                               REGISTRATION STATEMENT
                                                                        UNDER
                                                               THE SECURITIES ACT OF 1933

                                            AMBIENT CORPORATION
                                                                 (Exact name of registrant as specified in its charter)


            DELAWARE                                                                       4813                                                           98-0166007

       (State or other jurisdiction of                                         (Primary Standard Industrial                                               (I.R.S. Employer
      incorporation or organization)                                           Classification Code Number)                                             Identification Number)

                                                                      7 WELLS AVENUE
                                                                 NEWTON, MASSACHUSETTS 02459
                                                                         (617) 332-0004

                               (Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

                                                                        JOHN J. JOYCE
                                                                      7 WELLS AVENUE
                                                                 NEWTON, MASSACHUSETTS 02459
                                                                         (617) 332-0004

                                         (Name, address, including zip code, and telephone number, including area code, of agent for service)

                                                                                      Copies to:


                               Donna L. Brooks, Esq.                                                                    Robert S. Kant, Esq.
                                Michael J. Fritz, Esq.                                                                  Brian H. Blaney, Esq.
                              Shipman & Goodwin LLP                                                                     Derek J. Mirza, Esq.
                               One Constitution Plaza                                                                 Greenberg Traurig, LLP
                             Hartford, Connecticut 06103                                                        2375 East Camelback Road, Suite 700
                              Telephone: (860) 251-5000                                                                Phoenix, Arizona 85016
                              Facsimile: (860) 251-5211                                                              Telephone: (602) 445-8000
                                                                                                                      Facsimile: (602) 445-8100

      Approximate Date of Proposed Sale to the Public: As soon as practicable after this Registration Statement becomes effective.

     If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
    of 1933, check the following box. 

     If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box
    and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 

      If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act
    registration statement number of the earlier effective registration statement for the same offering. 

      If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act
    registration statement number of the earlier effective registration statement for the same offering. 
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer                                                                                                         Accelerated filer 
Non-accelerated filer  (Do not check if a smaller reporting company)                                                              Smaller reporting
                                                                                                                                        company 

                                                CALCULATION OF REGISTRATION FEE


                                                                                                      Proposed Maximum                Amount of
                                    Title of Each Class of                                            Aggregate Offering              Registration
                                  Securities to be Registered                                             Price(1)(2)                     Fee
Common Stock, par value $0.001 per share                                                                  $   57,500,000             $   6,675.75


 (1) Includes shares that the underwriters have an option to purchase to cover over-allotments, if any.

 (2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) of the Securities Act of 1933, as amended.

 The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the
Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
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     The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the
     Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities, and it is not soliciting an offer to buy these
     securities, in any state or jurisdiction where the offer or sale is not permitted.

                                                SUBJECT TO COMPLETION, DATED AUGUST 19, 2011

         PRELIMINARY PROSPECTUS




                                                                                Shares
                                                                           Common Stock
                                                                           $  per share

         We are offering     shares of our common stock. Our common stock is listed on the NASDAQ Capital Market
         under the symbol “AMBT.” On August 18, 2011, the last reported sale price of our common stock on the
         NASDAQ Capital Market was $8.20 per share.


         Investing in our common stock involves risks. See “Risk Factors” beginning on page 11.



                                                                                                                   Per Share                         Total

         Public offering price                                                                                 $                             $
         Underwriting discount                                                                                 $                             $
         Proceeds, before expenses, to us                                                                      $                             $

         We have granted the underwriters a 30-day option to purchase up to an additional                                            shares of common stock
         to cover over-allotments, if any.

         Delivery of the shares is expected to be made on or about                                , 2011.


         Neither the Securities and Exchange Commission nor any state securities commission has approved or
         disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any
         representation to the contrary is a criminal offense.




                                                           Stifel Nicolaus Weisel

         Needham & Company, LLC                                                                                                    ThinkEquity LLC
         The date of this prospectus is                   , 2011.
                                                   TABLE OF CONTENTS


                                                                                                                           Page


Prospectus Summary                                                                                                            1
Risk Factors                                                                                                                 11
Special Note Regarding Forward-Looking Statements                                                                            26
Use of Proceeds                                                                                                              26
Price Range of Common Stock                                                                                                  27
Dividend Policy                                                                                                              27
Capitalization                                                                                                               28
Dilution                                                                                                                     29
Selected Consolidated Financial Data                                                                                         30
Management‟s Discussion and Analysis of Financial Condition and Results of Operations                                        32
Our Business                                                                                                                 44
Management                                                                                                                   58
Executive Compensation                                                                                                       63
Principal Stockholders                                                                                                       71
Certain Relationships and Related Party Transactions                                                                         72
Description of Capital Stock                                                                                                 73
Shares Eligible for Future Sale                                                                                              74
Material U.S. Federal Income Tax Considerations for Non-U.S. Holders of Our Common Stock                                     76
Underwriting                                                                                                                 80
Legal Matters                                                                                                                82
Experts                                                                                                                      82
Where You Can Find More Information                                                                                          82
Index to Consolidated Financial Statements                                                                                  F-1
  EX-3.1
  EX-3.2
  EX-4.1
  EX-10.25
  EX-21
  EX-23.1




   You should rely only on the information contained in this prospectus, any free writing prospectus prepared by us or
information to which we have referred you in this prospectus when you make a decision about whether to invest in our
common stock. We have not, and the underwriters have not, authorized anyone to provide you with additional information or
information different from that contained in this prospectus. This prospectus is not an offer to sell, nor is it seeking offers to
buy, shares of our common stock in any circumstance under which the offers, sales or solicitations are unlawful or in
jurisdictions where offers, sales or solicitations are not 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 shares of our
common stock. Our business, prospects, financial condition and results of operations may have changed since that date.


  In this prospectus, “company,” “we,” “us,” and “our” refer to Ambient Corporation and its subsidiary.


  The market data and certain other statistical information used throughout this prospectus are based on independent
industry publications, governmental publications, reports by market research firms or other independent sources. Some data
are also based on our good faith estimates.
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                                                            PROSPECTUS SUMMARY


                 You should read the following summary together with the more detailed information concerning our company, the
              common stock being sold in this offering, and our financial statements appearing elsewhere in this prospectus. Because
              this is only a summary, you should read this entire prospectus carefully, especially the risks described under “Risk
              Factors” beginning on page 11, before you invest in our common stock.


                                                                       Overview


                 We are a leading provider of a smart grid communications platform that enables utilities to effectively deploy, integrate
              and communicate with multiple smart grid applications within the electric power grid. Our smart grid communications
              platform significantly improves the ability of utilities to use advanced technologies to upgrade their electric power grids,
              effectively making the grids more intelligent.


                 The term “smart grid” refers to the use of advanced technologies to upgrade the electric power grid, or the grid,
              effectively making the grid more intelligent and efficient. The grid was largely designed and built decades ago to reliably
              distribute electricity from generators to customers in a manner resulting in sizable capital investments and operating costs.
              A number of factors are increasingly straining the grid, including rapidly growing electricity demand, two-way power
              flow, the implementation of renewable and distributed energy sources and advanced pricing plans. As such, the aging grid
              is prone to reliability, security, availability and power quality issues, costing utilities and consumers billions of dollars
              each year. Technology is now revolutionizing the grid and transforming it into an efficient, communicating energy service
              platform. We believe that the smart grid will address the current shortcomings of the grid and deliver significant benefits
              to utilities and consumers of energy, including reduced costs, increased power reliability and quality, accommodation of
              renewable energy technologies, consumer empowerment over energy consumption and a platform for continued
              integration of new technologies.


                 The Ambient Smart Grid ® communications platform, which includes hardware, software and firmware, enables
              utilities to effectively manage smart grid applications. Our communications platform provides utilities with a secure,
              two-way, flexible and open Internet protocol, or IP, architecture that efficiently networks smart grid applications and
              different technologies within each application and supports multiple communications technologies currently used by
              utilities, such as Wi-Fi, radio frequency, cellular technologies, power line communications, serial and Ethernet. Today,
              our communications platform enables the simultaneous integration and parallel communication of multiple smart grid
              applications provided by a variety of vendors, including smart metering, demand response and distribution automation.
              We believe that the Ambient Smart Grid ® communications platform delivers significant benefits to utilities, including
              support of a single network; an open, scalable and interoperable platform; preservation of utility investments; third-party
              application hosting; remote and distributed intelligence; secure communications; and reduced overall implementation and
              operating costs.


                 The Ambient Smart Grid ® products and services include communications nodes; a network management system,
              AmbientNMS ® ; integrated applications; and maintenance and consulting services. The communications nodes, our
              principal product, are physical boxes that contain the hardware and software needed for communications and data
              collection in support of smart grid assets. We have configured our communications nodes to act as individual data
              processors and collectors that receive signals from other networked devices, enabling smart grid applications. Duke
              Energy, our premier customer, has deployed approximately 55,000 of our communications nodes that receive data from
              smart electric and gas meters, using a variety of communications technologies, and process and transmit these data to the
              utility back office over a cellular carrier network for further processing. Furthermore, our communications nodes, in the
              fourth generation of development, also accommodate integrated applications that include our own developed technology
              and


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              third-party technology, thereby substantially increasing their functionality. By enabling such system interoperability, our
              communications platform both reduces implementation and ongoing communications costs and improves overall power
              management efficiencies. We believe that, to date, no other single solution or technology has provided the necessary
              flexibility in a cost-effective manner, enabling a comprehensive digital communications platform while leveraging
              standards-based technologies. We developed our communications platform to specifically fill this void.


                 Our long-standing relationship with Duke Energy, which we believe has one of the most forward-looking smart grid
              initiatives in North America, has led to rapid growth in our business. We entered into a long-term agreement in September
              2009 with Duke Energy, currently our sole customer, to supply Duke Energy with our Ambient Smart Grid ®
              communications platform and license our AmbientNMS ® through 2015. We increased revenue from $2.2 million in 2009
              to $20.4 million in 2010 and generated $28.0 million of additional revenue in the first six months of 2011. As of June 30,
              2011, we had backlog of approximately $68 million, consisting of products that we expect to deliver into 2012. We
              believe that there exists a significant opportunity for growth with Duke Energy and with Progress Energy, upon the
              anticipated completion of the proposed merger of Duke Energy and Progress Energy announced in January 2011. We also
              intend to leverage our success with Duke Energy to secure additional customers.


                                                                  Industry Overview


              The Electric Power Distribution Grid


                The grid was largely designed and built decades ago. As a result, the aging grid is prone to reliability, security,
              availability and power quality issues, costing utilities and consumers billions of dollars each year. The following factors
              highlight the deficiencies of today‟s grid:


                Increasing Energy Demand. Worldwide economies and populations are expanding and that expansion and the
              proliferation of electronic devices require more, and higher quality, electricity. The increased energy demand has already
              begun, and will increasingly continue, to strain the reliability and integrity of the grid.


                 Severely Strained and Aging Grid. The strain on the grid has led to efficiency losses, service interruptions, higher
              electricity rates and costly unplanned maintenance and repair expenses. As consumers and industries increase their
              reliance on electronic devices, these disturbances and quality issues will become more disruptive and more costly.


                 Inability of the Grid to Support Proliferation of Renewable Energy and Related Technologies. Over the past few years,
              utilities and consumers have increased their adoption of centralized and distributed renewable energy, such as wind, solar
              and energy storage technologies, as a source of electricity. Furthermore, expected growth in electric vehicles will create
              the need for charging stations, placing additional strain on the grid. The grid will not be able to accommodate all of these
              renewable energy initiatives.


                 Limited Real-Time Operational Insight, Communication and Analysis. The century-old grid in the United States
              consists of over 300,000 miles of transmission lines and over 1,000,000 megawatts of generating capacity. The
              importance of today‟s grid to modern society is unquestionable; however, it remains largely untouched by modern
              networking and communications technologies. The lack of these technologies has also had a limiting effect on the ability
              of utilities to engage with their customers and for customers to take an active role in their consumption and cost of energy
              and resources.


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              The Smart Grid


                 We believe that the smart grid transformation will address the shortcomings of the current grid as well as deliver
              significant benefits to utilities and consumers of energy. The smart grid encompasses multiple technologies and
              applications and represents significantly more than just smart electric meters. The term “smart grid” refers to the use of
              advanced communications technologies and modern computing capabilities to upgrade the electric power grid (and even
              other utility infrastructures, such as gas and water), effectively making the grid more intelligent and efficient. We believe
              that the implementation of intelligent and seamless communication across the grid represents the largest expected wave of
              information technology spending, similar to the previous telecommunications and Internet investment cycles.


              Smart Grid Requirements


                The success of the smart grid, with its promise of delivering significant benefits to utilities, consumers and the
              environment, will depend upon the successful implementation of smart grid applications that rely on a network
              communications infrastructure. Key requirements of the smart grid include the following:


                 Communications Platform. A secure, flexible and open communications platform is required to enable the smart grid.
              The communications platform provides real-time, two-way information flow from multiple smart grid applications to a
              network management system at a utility‟s operations center, providing the critical foundation upon which a utility deploys
              its smart grid applications.


                 Interoperability. Various agencies, including the U.S. National Institute of Standards and Technology and the Institute
              of Electrical and Electronics Engineers, are developing specific smart grid standards that will allow for software and
              hardware components from different applications, vendors and technologies to seamlessly work together.


                 Scalability. As utilities incorporate millions of smart grid devices into the grid, all of which will generate vast amounts
              of information, the communications platform must both support all connected applications in parallel and allow for quick
              and cost-effective deployment of new smart grid devices and new applications.


                 Security. With increasing threats of cyber-attacks and the corresponding increased sophistication of malicious
              technology, communications infrastructure must provide security to protect the assets of the utility, preserve the reliability
              of the grid and protect consumers.


                 Cost Effectiveness. An interoperable, scalable and flexible communications platform allows a utility to deploy a single
              platform for all smart grid applications, reducing operation and maintenance costs associated with running separate
              networks. A flexible communications platform also allows utilities to avoid stranding assets by incorporating legacy
              technologies into more advanced systems, while also providing a platform for future technologies.


              Smart Grid Benefits


                    The following represent some of the most significant benefits of the smart grid:


                Reduces Costs for Utilities and Consumers. To meet the growing demand for electricity, utilities will need to invest
              substantial capital for added generation and transmission and distribution infrastructure. However, utilities can save costs
              associated with this investment through increased energy efficiency with the grid, reducing transmission congestion and
              preserving reserve capacity resulting from the deployment of smart grid applications.


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                 Increases Power Reliability and Quality. The smart grid‟s two-way communications capabilities provide real-time
              information about the grid‟s electricity characteristics, such as current and voltage, allowing grid operators and smart
              devices to identify and optimize how electricity flows through the grid.


                Accommodates Renewable Energy Sources and Electric Vehicles. Utilities need smart grid technologies to support the
              widespread adoption of renewable energy sources, electric vehicles and other clean technology solutions. The intermittent
              nature of renewable electricity, the developing energy storage technologies and the demand of electric vehicles all create
              challenges for utilities in matching energy generating sources with demand.


                Facilitates Consumer Empowerment. Two-way communication will allow consumers to proactively monitor and
              control the way in which they consume electricity, which will ultimately help consumers to lower their electricity bills.
              Utilities can also develop improved pricing practices aimed at creating a more efficient pricing structure that addresses
              potential pricing inequalities during normal and peak demand cycles.


                 Provides a Platform for Technology Innovation. The smart grid will allow for the seamless integration of new
              technologies into the grid without the need to substantially change existing infrastructure, thereby avoiding significant
              capital costs required to support ever-evolving technologies.


                                                                          Our Solution


              The Ambient Smart Grid ® Communications Platform


                 The Ambient Smart Grid ® communications platform, which includes hardware, software and firmware, enables
              utilities to both effectively manage smart grid applications and directly integrate certain applications into our products
              themselves. Our communications platform provides a utility with a secure, two-way, flexible and open IP architecture that
              efficiently networks smart grid applications and different technologies within each application and supports multiple
              communications technologies currently used by utilities, such as Wi-Fi, radio frequency, cellular technologies, power line
              communications, serial and Ethernet. Our communications platform enables the integration of smart grid applications,
              such as smart metering, demand response, distribution automation and monitoring, and direct load control. It also
              provides an open and flexible platform allowing for the addition of multiple applications, as well as enhancements and
              future applications.


                 Our Ambient Smart Grid ® communications nodes are attached on or near a utility‟s transformer and they support
              applications and connectivity to devices that comprise the smart grid. These communications nodes are physical boxes we
              designed for use in the harsh, outdoor environments in which utilities operate. Our network management system, known
              as AmbientNMS ® , manages the large numbers of devices on a smart grid network. By enabling such system
              interoperability, our communications platform both reduces implementation and ongoing communications costs and
              improves overall power management efficiencies. Furthermore, our communications nodes also accommodate smart grid
              applications installed directly into the communications nodes, which include our own developed technology and
              third-party technology, thereby substantially increasing their functionality.


              Ambient Smart Grid ® Benefits


                    Our products offer the following benefits to utilities:


                Support of a Single Network Through Flexible Communications. Our communications nodes support multiple
              communication technologies simultaneously, allowing a utility to leverage a single communications


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              platform to support many smart grid applications that rely on different communication technologies, such as cellular,
              Wi-Fi, 900MHz radio frequency, power line carrier, serial and Ethernet, all operating in parallel in a single
              communications node.


                 Open Platform for Scalability and Interoperability. The AmbientNMS, ® or third-party management systems, can
              manage our open communications platform. Our communications platform offers flexibility that allows utilities to deploy
              multiple smart grid applications from multiple vendors, including our competitors, and it can evolve with new
              technologies.


                 Preservation of Utility Smart Grid Investments. The flexibility and open architecture of our communications platform
              protect a utility against stranding existing assets, including an investment in our communications platform itself. It is a
              major impediment for utility smart grid investment if a utility is not able to recover, or is concerned about recovering, the
              costs of previously deployed assets. As utilities gradually replace legacy smart grid assets with current technologies
              throughout the natural replacement cycle, they can seamlessly integrate into our existing communications nodes and
              communications platform, eliminating the need for a costly, wholesale deployment as smart grid technologies and
              applications continue to evolve.


                Local Application Hosting and Development Framework. We have designed our communications nodes to host both
              Ambient-developed applications and third-party applications. By leveraging our open communications platform, excess
              processing power and flash memory, we can integrate smart grid applications for utilities directly into our
              communications nodes, expanding their overall functionality.


                Remote and Distributed Intelligence. Our communications nodes are equipped with powerful processing capabilities
              that allow for local management and control of smart grid data, which may be aggregated from multiple smart grid
              applications. Processing and storage capabilities within the communications nodes allow a utility to more efficiently
              manage a vast amount of distributed data.


                Secure Communications. We secure our communications platform through the use of both physical tamper detection
              features and secure protocols that encrypt data traffic.


                 Reduced Overall Communications Implementation and Operating Costs. We deliver our communications platform
              completely preconfigured to the needs of the utility, allowing for a rapid and simplified deployment. Furthermore, there is
              no need for a utility to develop and invest in separate, application-specific communications platforms in order to integrate
              all smart grid-related assets because our communications platform provides for a single network that can accommodate a
              variety of applications and technologies in parallel.


                                                              Duke Energy Relationship


                 Since 2005, we have been a key strategic partner of Duke Energy and we believe the leading supplier of its smart grid
              communications technology in connection with its smart grid implementation. With what we believe is one of the most
              forward-looking smart grid initiatives in North America, Duke Energy announced plans to invest $1 billion over the next
              five years in smart grid equipment for its service territories, including Ohio, Indiana, Kentucky and the Carolinas.


                We believe that we are the predominant provider of communications nodes and network management system software
              for Duke Energy‟s Ohio deployment and we believe that Duke Energy will continue to predominantly use our
              communications platform for the remainder of its Ohio smart grid deployment. Throughout the past five years, we have
              worked with Duke Energy to develop our communications platform, which has enabled Duke Energy‟s ability to rapidly
              deploy its smart grid initiatives. Through July 2011, Duke


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              Energy has deployed approximately 55,000 of our communications nodes, primarily relating to its Ohio Smart grid
              implementation.


                We believe that we have a substantial opportunity to grow our business with Duke Energy. In January 2011, Duke
              Energy and Progress Energy announced a proposed merger that is subject to stockholder and regulatory approval.
              Together, Duke Energy and Progress Energy have committed to spend a combined $1.5 billion in smart grid initiatives,
              partially funded by approximately $400 million in total grants awarded to them in 2010 under the American Recovery and
              Reinvestment Act of 2009, or ARRA, and required to be spent by 2013. In addition to the 130,000 communications nodes
              scheduled for deployment in Ohio, we estimate that Duke Energy would require over 670,000 communications nodes if it
              implements a full deployment of smart grid communications nodes in Indiana, Kentucky and the Carolinas. If Duke
              Energy and Progress Energy complete their proposed merger and the combined company adopts Duke Energy‟s
              deployment strategy relating to smart grid initiatives, we estimate a potential deployment of 620,000 additional
              communications nodes in Progress Energy‟s territories in Florida and the Carolinas.


                                                               Competitive Strengths


                We believe that the following competitive strengths help us to maintain a leading position in providing smart grid
              communications solutions to utilities:


                Proven Technology. Since 2008, Duke Energy has successfully deployed our communications platform. With the
              deployment of approximately 55,000 communications nodes providing the connectivity for a variety of smart grid
              applications, we have demonstrated that our technology is quickly scalable and highly reliable.


                 Premier Utility Customer. Duke Energy is one of the largest utilities in the United States with what we believe to be
              one of the most forward-looking smart grid initiatives in North America. We have served as a strategic partner of Duke
              Energy‟s smart grid programs since 2005. We believe that other utilities will adopt Duke Energy‟s vision of
              implementing a communications platform that can accommodate a variety of smart grid applications and communications
              technologies, moving beyond a focus on smart meters, in order to realize the full benefits of the smart grid.


                Communications Focused. Since 2000, we have maintained a focus on the development of a communications platform
              that meets the needs of utilities. Our commitment to this market segment allows us to focus all research and development
              and engineering efforts on meeting the challenges of this market and rapidly responding to customer needs. Our focus,
              experience and industry know-how, built over three increasingly robust generations of our current communications
              platform, allow us to quickly react to the ever-changing and individualized needs of utilities.


                 Purpose-Built Products. Our substantial industry experience and relationship with Duke Energy have led to the
              development of products that are purpose-built for the harsh, outdoor environments in which utilities must operate. We
              have designed our equipment for direct placement onto the distribution infrastructure, which exposes it to the natural
              elements, without the need for an additional enclosure. Further, the internal elements of our communications nodes which
              includes hardened components, battery backups, excess surge protection and other components. Preconfigured and
              self-registering communications nodes allow for rapid and safe installation and eliminate the need for on-site field
              engineers, reducing installation time and cost.


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                                                                  Our Growth Strategy


                Our objective is to maintain our market leadership position in providing a communications and application platform
              that enables a utility‟s comprehensive smart grid initiatives. The following key initiatives comprise our growth strategy:


                Expand Our Relationship with Duke Energy. We plan to expand our relationship with Duke Energy as it continues its
              smart grid deployment initiatives in additional service territories and with additional applications. We expect that, as
              Duke Energy deploys smart grid assets in other regions, including Indiana, Kentucky and the Carolinas, a significant
              opportunity exists for us to provide hundreds of thousands of our communications nodes. Finally, if Duke Energy and
              Progress Energy complete their proposed merger, we believe that we will have further expansion opportunities.


                 Secure New Utility Customers. We intend to leverage our successful commercial deployment with Duke Energy to
              secure new domestic and international customers that are evaluating communications platforms to accommodate and
              integrate a variety of smart grid applications. These new customers may include utilities that have already deployed smart
              meter-centric systems and utilities that are still developing their smart grid plans.


                Establish Strategic Relationships. We plan to form additional strategic relationships with smart grid application
              vendors, including meter manufacturers, distribution automation equipment manufacturers, communications providers
              and other key value-added providers in the smart grid industry. By establishing such relationships, we believe that we can
              accelerate the sales of our products.


                 Continue Product Innovation and Development. We will continue to invest in the development of new capabilities for
              our communications platform in order to meet the evolving needs of utilities. We have released three generations of our
              Ambient Smart Grid ® products, and we are currently in the final testing stages of our fourth generation products, which
              we expect to begin shipping in the first half of 2012. With our commitment to research and development, we believe that
              we will provide significantly improved products with greater functionality delivered at lower cost than previously
              released products.


                                                                  Selected Risk Factors


               Our business is subject to a number of risks that you should understand before making an investment decision. We
              more fully discuss these risks in the “Risk Factors” section of this prospectus. These risks include the following:


                    • We currently depend on one customer, Duke Energy, for substantially all of our revenue, and any material delay,
                      reduction or cancellation of orders from this customer would significantly reduce our revenue and have a material
                      negative impact on our business.
                    • We have never achieved profitability on an annual basis, and we may be unable to achieve or maintain profitability
                      in future periods.
                    • Utility industry sales cycles can be lengthy and unpredictable, which can negatively impact our ability to expand the
                      deployment of our products with Duke Energy and to secure new customers.
                    • The market for our products and services, and smart grid technology generally, is still developing and we will have
                      difficulty expanding our business and securing new customers if the market develops less extensively or more
                      slowly than we expect.
                    • Because the markets for our products are highly competitive, we may lose sales to our competitors, which would
                      harm our revenue and operating results.


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                    • If we are unable to keep pace with technological innovations and are unable to continue to develop new products
                      and product enhancements, we may be unable to expand our business with Duke Energy or secure new customers.
                    • Our inability to protect our intellectual property could impair our competitive advantage, reduce our revenue and
                      increase our costs.
                    • Our principal stockholder will continue to be able to exert substantial influence over us.


                                                              Our Corporate Information


                Ambient is a Delaware corporation that was incorporated in 1996. Our principal offices are located at 7 Wells Avenue,
              Newton, Massachusetts 02459, and our telephone number is (617) 332-0004. Our common stock is listed on the
              NASDAQ Capital Market under the symbol “AMBT.” We maintain a website at www.ambientcorp.com . Information
              contained on our website is not part of this prospectus, and the inclusion of our website address in this prospectus is an
              inactive textual reference only.


                                                                    THE OFFERING

              Common stock offered by us                               shares

              Over-allotment option offered by us                      shares

              Common stock to be outstanding after this
              offering                                                 shares

              Use of proceeds                                   We intend to use the net proceeds from this offering for general corporate
                                                                purposes, which may include working capital and capital expenditures.

              Risk factors                                      You should read the “Risk Factors” section of this prospectus for a
                                                                discussion of the factors to consider carefully before deciding to invest in
                                                                shares of our common stock.

              NASDAQ Capital Market symbol                      “AMBT”


                 The number of shares of our common stock outstanding after this offering is based on 16,532,228 shares outstanding as
              of August 15, 2011 and excludes:


                    • an aggregate of 1,174,715 shares issuable upon the exercise of then outstanding stock options at a weighted average
                      exercise price of $11.18 per share;
                    • an aggregate of 1,151,807 shares issuable upon the exercise of then outstanding warrants at a weighted average
                      exercise price of $16.29 per share; and
                    • an aggregate of 2,322,916 shares reserved for issuance under our 2000 Equity Incentive Plan and 2002
                      Non-Employee Directors Stock Option Plan.


                Unless otherwise indicated, all information in this prospectus assumes no exercise of the underwriters‟ over-allotment
              option and has been adjusted to reflect the 1-for-100 reverse stock split of our common stock that became effective on
              July 18, 2011.


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                                                SUMMARY CONSOLIDATED FINANCIAL DATA

                 The following consolidated financial data should be read together with our consolidated financial statements and
              related notes and “Management‟s Discussion and Analysis of Financial Condition and Results of Operations” appearing
              elsewhere in this prospectus. We have derived the following consolidated statement of operations data and cash flow data
              for the years ended December 31, 2008, 2009 and 2010 and consolidated balance sheet data as of December 31, 2009 and
              2010 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the
              following consolidated statement of operations data and cash flow data for the years ended December 31, 2006 and 2007
              and consolidated balance sheet data as of December 31, 2006, 2007 and 2008 from our audited financial statements which
              are not included in this prospectus. We have derived the following consolidated statement of operations data and cash
              flow data for the six months ended June 30, 2010 and 2011 and the consolidated balance sheet data as of June 30, 2011
              from our unaudited consolidated financial statements included elsewhere in this prospectus. We have derived the
              consolidated balance sheet data as of June 30, 2010 from our unaudited consolidated financial statements which are not
              included in this prospectus. The unaudited consolidated financial statements include, in our opinion, all adjustments,
              consisting only of normal recurring adjustments that we consider necessary for the fair presentation of the financial
              information set forth in those statements. Share and per share information have been adjusted to reflect the 1-for-100
              reverse stock split of our common stock that became effective on July 18, 2011. Our historical results are not necessarily
              indicative of our results to be expected for the remainder of 2011 or in any future period.


                                                                                                                                    Six Months Ended
                                                                      Year Ended December 31,                                            June 30,
                                                    2006            2007           2008            2009            2010             2010          2011
                                                                             (In thousands, except per share data)


              STATEMENT OF
                OPERATIONS DATA:
              Total revenue                     $     2,337     $     2,265      $   12,622      $     2,193     $ 20,358       $    6,258      $ 27,993
              Cost of goods sold                      1,751           1,806           9,942            1,836       12,023            3,782        15,963

                    Gross profit                        586             459            2,680             357          8,335          2,476          12,030

              Operating expenses:
                Research and development
                  expenses                            3,559           3,675            4,351           4,946          6,314          2,975           4,893
                Selling, general and
                  administrative expenses             3,530           4,012            3,600           4,662          5,239          2,305           3,507

              Total operating expenses                7,089           7,687            7,951           9,608         11,553          5,280           8,400

              Operating (loss) income                (6,503 )        (7,228 )         (5,271 )        (9,251 )       (3,218 )        (2,804 )        3,630

              Interest (expense) income, net           (482 )        (1,102 )         (3,116 )        (4,963 )         (214 )          (213 )            12
              Amortization of beneficial
                 conversion feature of
                 convertible debt                    (2,194 )        (2,657 )             —               —               —              —               —
              Amortization of deferred
                 financing costs                     (3,560 )        (4,943 )             —               —             —                —               —
              Loss on extinguishment of debt             —               —            (2,789 )            —             —                —               —
              Other income (expense), net                —              174             (118 )           (32 )         246               —               —

                    Total other (loss) income        (6,236 )        (8,528 )         (6,023 )        (4,995 )            32           (213 )            12

              Provision for income taxes                   —              —               —               —               —              —            109

              Net (loss) income                 $   (12,739 )   $   (15,756 )    $   (11,294 )   $   (14,246 )   $ (3,186 )     $ (3,017 )      $    3,533

              Net (loss) income per share
                (basic)                         $     (7.29 )   $      (6.55 )   $     (3.75 )   $     (1.81 )   $    (0.21 )   $     (0.20 )   $     0.21
              Net (loss) income per share
                (diluted)                       $     (7.29 )   $      (6.55 )   $     (3.75 )   $     (1.81 )   $    (0.21 )   $     (0.20 )   $     0.21
              Weighted average shares used in
                computing basic net (loss)
                income per share                      1,747           2,405            3,016           7,891         15,385         15,022          16,496
              Weighted average shares used in
                computing diluted net (loss)          1,747           2,405            3,016           7,891         15,385         15,022          16,936
income per share



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                                                                   As of December 31,                                         As of June 30,
                                             2006           2007            2008              2009           2010           2010           2011


              BALANCE SHEET
               DATA:
               Cash and cash
                 equivalents             $    2,386     $     546       $     8,012       $     987      $    6,987     $   1,374      $ 12,545
               Total assets                   5,429         2,816            10,622           3,393          10,573         3,041        16,798
               Working capital,
                 net(1)                       2,197          (253 )              7,688         (225 )         5,577           (411 )      10,203
               Convertible debt
                 (current and
                 long-term portion)           1,164         2,672                 755         9,816                 —           —             —
               Total stockholders‟
                 equity (deficit)             2,795         (1,465 )             7,454        (9,535 )        6,136           109         11,109
              CASH FLOW DATA:
               Cash flows from
                 operations                  (6,362 )       (6,697 )         (5,549 )         (7,720 )       (1,592 )       (1,969 )       5,940
               Cash flows from
                 investing activities          (360 )           50               (576 )        (269 )         (527 )          (264 )        (511 )
               Cash flows from
                 financing activities         8,713         4,807            13,591             964           8,119         2,620            129


                (1) Excluding current portion of convertible debt


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                                                               RISK FACTORS


            An investment in our common stock involves a substantial risk of loss. You should read and carefully consider the
         following risks, together with the financial and other information contained in this prospectus, before you decide to invest in
         shares of our common stock. Our business, operating results and financial condition may be materially and adversely
         affected by any of these risks. As a result, the market price of our common stock could decline, and you could lose all or part
         of your investment.


                                                         Risks Related to our Business


         We currently depend on one customer for substantially all of our revenue, and any material delay, reduction or
         cancellation of orders from this customer would significantly reduce our revenue and have a material negative
         impact on our business.


            Duke Energy accounted for substantially all of our revenue for each of our last five fiscal years and for the first six months
         of our current fiscal year. Any material delay, reduction or cancellation of orders from Duke Energy would have a material
         adverse effect on our business, including significantly reduced revenue, unabsorbed overhead and incurred net losses.


            Although we have a long-term contract that stipulates the general terms of our relationship, Duke Energy does not provide
         us with firm purchase commitments for the duration of the contract. Instead, Duke Energy provides us with 12-month rolling
         order forecasts and monthly purchase orders. Duke Energy, can delay, reduce or cancel purchase orders at any time prior to
         the anticipated lead time for delivery of the products (typically three months), subject to Duke Energy‟s payment of a
         cancellation fee not to exceed the price of the products cancelled. Duke Energy may also delay, reduce or cancel its purchase
         orders without penalty if we are unable to deliver the products ordered thereunder within a specified time from the scheduled
         delivery date.


            Our immediate business opportunities continue to be primarily dependent on the success of our deployments with Duke
         Energy and the future decisions of Duke Energy relating to its smart grid deployment in its service territories. Our goal is to
         increase our business with Duke Energy and to attract new customers. We may not achieve this goal within an acceptable
         period of time or at all. The failure to increase our business with Duke Energy or to attract new customers would have a
         material adverse effect on our business and prospects.


            In January 2011, Duke Energy and Progress Energy announced a proposed merger that is subject to stockholder and
         regulatory approval. Since the merger of Duke Energy and Progress Energy is complex and each company has its own smart
         grid related investment plans, we are unable to assess the effects, if any, that the proposed merger will have on our business.
         We cannot assure you that the post-merger entity will continue or expand its business with us.


         We have never achieved profitability on an annual basis, and we may be unable to achieve or maintain profitability
         in future periods.


            We have never achieved profitability on an annual basis. We incurred net losses of $15.8 million in 2007, $11.3 million in
         2008, $14.2 million in 2009 and $3.2 million in 2010. At December 31, 2010, we had an accumulated deficit of
         $143.4 million. We had net income of $1.1 million in the first quarter of our current fiscal year and $2.4 million in the
         second quarter of our current fiscal year. We may not, however, be able to maintain profitability in our current or future
         fiscal years. To grow our revenue and customer base, we also plan to increase spending associated with technology and
         business development, thereby increasing our operating expenses. These increased costs may cause us to incur net losses in
         the foreseeable future, and we may be unable to grow our revenue and expand our customer base to become profitable on an
         annual basis.


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         We depend on factors affecting the utility industry.


           We expect to continue to derive substantially all of our revenue from sales of products to utilities. Purchases of our
         products may be deferred as a result of many factors, including economic downturns, slowdowns in new residential and
         commercial construction, access to capital at acceptable terms, utility specific financial circumstances, mergers and
         acquisitions, regulatory decisions, weather conditions and interest rates. We may experience variability in operating results
         on an annual and a quarterly basis as a result of these factors.


         Utility industry sales cycles can be lengthy and unpredictable, which can negatively impact our ability to expand the
         deployment of our products with Duke Energy and to secure new customers.


            Sales cycles for smart grid projects are generally long and unpredictable due to budgeting, procurement and regulatory
         approval processes that can take up to several years to complete. Utility customers typically issue requests for quotes and
         proposals, establish evaluation committees, review different technical options, require pilot programs prior to commercial
         deployments, analyze cost and benefit metrics, consider regulatory factors and follow their normal budget approval
         processes. In addition, many electric utilities tend to be risk averse and tend to follow industry trends rather than be the first
         to purchase new products or services. These tendencies can extend the lead time for, or prevent acceptance of, new products
         or services, including those for smart grid initiatives despite the support of the federal government through grants and other
         incentives.


            Accordingly, potential customers may take longer to reach a decision to initiate smart grid programs or to purchase our
         products or services. It is not unusual for a utility customer to go through the entire sales process and not accept any proposal
         or quote. This extended sales process requires the dedication of significant time by our personnel to develop relationships at
         various levels and within various departments of utilities and our use of significant financial resources, with no certainty of
         success or recovery of our related expenses. Long and unpredictable sales cycles with utility customers could have a material
         adverse effect on our business, operating results or our financial condition.


         The market for our products and services, and smart grid technology generally, is still developing and we will have
         difficulty expanding our business and securing new customers if the market develops less extensively or more slowly
         than we expect.


            The market for our products and services, and smart grid technology generally, is still developing, and it is uncertain
         whether our products and services will achieve and sustain high levels of demand and market acceptance. Our success will
         depend to a substantial extent on the willingness and ability of utilities to implement smart grid technology. Many utilities
         lack the financial resources and/or technical expertise required to evaluate, deploy and operate smart grid technology.
         Regulatory agencies, including public utility commissions, govern utilities‟ activities, and they may not create a regulatory
         environment that is conducive to the implementation of smart grid technologies in a particular jurisdiction. Furthermore,
         some utilities may be reluctant or unwilling to adopt smart grid technology because they may be unable to develop a
         business case to justify the up-front and ongoing expenditures. If utilities do not widely adopt smart grid technologies or do
         so more slowly than we expect, we will have difficulty expanding our business and securing new customers, which will
         adversely affect our business and operating results.


         Because the markets for our products are highly competitive, we may lose sales to our competitors, which would
         harm our revenue and operating results.


            Competition in the smart grid market is intense and involves rapidly changing technologies, evolving industry standards,
         frequent new product introductions, changes in customer or regulatory requirements and localized market requirements.
         Competitive pressures require us to keep pace with the evolving needs of utilities; to continue to develop and introduce new
         products, features and services in a timely, efficient and cost-effective manner; and to stay abreast of regulatory factors
         affecting the utility industry.


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            We compete with a wide array of manufacturers, vendors, strategic alliances, systems developers and other businesses,
         including other smart grid communications technology companies, ranging from relatively smaller companies focusing
         mainly on communications technology to large Internet and software-based companies. In addition, some providers of smart
         meters may add communications capabilities to their existing business in the future, which could decrease our base of
         potential customers and could decrease our revenue and profitability. “Early adopters,” or customers that have sought out
         new technologies and services, have largely comprised the target market for our products. Because the number of early
         adopters is limited, we will need to expand our target markets by marketing and selling our products to mainstream
         customers to continue our growth.


            Some of our present and potential future competitors have, or may have, greater name recognition, experience and
         customer bases as well as substantially greater financial, technical, sales, marketing, manufacturing and other resources than
         we possess and that afforded them competitive advantages. These potential competitors may undertake more extensive
         marketing campaigns, adopt more aggressive pricing policies, obtain more favorable pricing from suppliers and
         manufacturers and exert more influence on sales channels than we do. Competitors may sell products at lower prices in order
         to obtain market share. Competitors may be able to respond more quickly than we can to new or emerging technologies and
         changes in customer requirements. Competitors may also be able to devote greater resources to the development, promotion
         and sale of their products and services than we can. Competitors may introduce products and services that are more
         cost-efficient, provide superior performance or achieve greater market acceptance than our products and services. Our
         competitors may make strategic acquisitions or establish cooperative relationships among themselves or with third parties
         that enhance their ability to address the needs of our prospective customers. It is possible that new competitors or alliances
         among current and new competitors may emerge and rapidly gain significant market share. Other companies may also drive
         technological innovation and develop products that are equal or superior in quality and performance to our products and
         render our products non-competitive or obsolete.


            Any of these competitive factors could make it more difficult for us to attract and retain customers, cause us to lower our
         prices in order to compete and reduce our market share and revenue, any of which could have a material adverse effect on
         our operating results and financial condition. If we fail to compete successfully with current or future competitors, we could
         experience material adverse effects on our business, financial condition, results of operations and cash flows.


         If we are unable to keep pace with technological innovations and are unable to continue to develop new products and
         product enhancements, we may be unable to expand our business with Duke Energy or secure new customers.


            We operate in a new and evolving market. Technological advances, the introduction of new products, evolving industry
         standards, changing industry preferences and changes in utility industry regulatory requirements could adversely affect our
         business unless we are able to adapt to the changing conditions. Technological advances or changing industry preferences
         could render our products less desirable or obsolete, and we may not be able to respond effectively to the requirements of
         evolving market conditions. As a result, we may need to commit significant financial and other resources to the following:


            •   engaging additional engineering and other technical personnel;
            •   continuing research and development activities on existing and potential products;
            •   maintaining and enhancing our technological capabilities;
            •   pursuing innovative development of new products and technologies;
            •   designing and developing new products and product enhancements that appeal to customers;
            •   meeting the expectations of our customers in terms of product design, cost, performance and service;
            •   responding to changing industry preferences;
            •   maintaining efficient, timely and cost-effective manufacturing resources of our products; and
            •   achieving customer acceptance of our products and technologies.


           Our future success depends on our ability to address the changing market needs by developing and introducing new
         products and product updates that compare favorably on the basis of timely introduction, cost and performance


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         with the products of competitive suppliers and evolving technologies. We must also extend and keep pace with technological
         developments and emerging industry standards that address the needs of customers. We intend to commit substantial
         resources to developing new products, product enhancements and technological advances for the smart grid market. The
         smart grid market is relatively new, and industry standards for this market are evolving and changing. If the smart grid
         market does not develop as anticipated, or if demand for our products in this market does not materialize or occurs more
         slowly than we expect, we will have expended substantial resources and capital without realizing sufficient revenue, which
         will adversely affect our business and operating results.


         Existing and future regulations concerning the electric utility industry may present technical, regulatory and
         economic barriers that may significantly impact future demand for our products.


            International, federal, state and local government regulations and policies, as well as internal policies and regulations
         promulgated by electric utilities, heavily influence the market for the electric utility industry. These regulations and policies
         often relate to investment initiatives, including decisions relating to investment in smart grid technologies, as well as
         building codes, public safety regulations and licensing requirements. In addition, certain of our contracts with our potential
         utility customers may be subject to approval by federal, state or local regulatory agencies, which may not be obtained or be
         issued on a timely basis. In the United States and in a number of other countries, these regulations and policies are being
         modified and may continue to be modified and have a substantial impact on the market for our and other smart grid related
         technologies. If such regulations or policies do not continue to gain acceptance for smart grid initiatives or the adoption of
         such initiatives takes substantially longer than expected, our prospects for developing new customers could be significantly
         limited.


         Duke Energy and some potential utility customers have applied for government grants and may also seek to
         participate in other government incentive programs, and if those grants or other incentives are not received or are
         significantly delayed, our results of operations could suffer.


            Many utilities, including Duke Energy and some of our potential utility customers, have applied for grants and may seek
         to participate in other government incentive programs designed to stimulate the U.S. economy and support environmental
         initiatives, including smart grid technologies. In certain cases, such as with the American Reinvestment and Recovery Act of
         2009, or ARRA, the U.S. government has approved the funds, and the government and the utilities have entered into
         agreements under which the government has agreed to award funds to the utilities, but significant portions of the funds have
         not yet been distributed. Duke Energy has applied for and been granted funding under ARRA programs, which may account
         for a significant portion of our current and anticipated future revenue and billings. Duke Energy and our potential utility
         customers that seek these government grants or incentives may delay or condition the purchase of our products and services
         upon receipt of such funds or upon their confidence in the future disbursement and tax treatment of those funds. If Duke
         Energy and our potential utility customers do not receive these funds or if their receipt of funds is significantly delayed, our
         operating results could suffer. Similarly, the receipt of government funds or incentives may be conditioned upon utilities
         meeting milestones and other requirements, some of which may not be known until a future point in time. If our products
         and services do not meet the requirements necessary for receipt of government funds or other incentives, Duke Energy and
         our potential utility customers may delay or condition the purchase of our products and services until they meet these
         requirements, and our results of operations could suffer. Furthermore, there may not be government funds or incentives for
         utilities in future periods. As a result, Duke Energy and our potential utility customers may not have the resources or
         incentives to purchase our products and services in those future periods.


         The adoption of industry standards applicable to our products or services could limit our ability to compete in the
         marketplace.


            Standards bodies, which are formal and informal associations that seek to establish voluntary, non-governmental product
         and technology standards, are influential in the United States and abroad. We participate in voluntary standards
         organizations in order to both help promote non-proprietary, open standards for interoperability with our products and to
         prevent the adoption of exclusionary standards. However, we are not able to control the content of adopted voluntary
         standards and do not have the resources to participate in all voluntary standards processes that


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         may affect our markets. The adoption, or expected adoption, of voluntary standards that are incompatible with our products
         or technology or that favor our competitors‟ products or technology could limit the market opportunity for our products and
         services or render them obsolete, any of which could materially and adversely affect our revenue, results of operations and
         financial condition.


         If we become subject to product returns and product liability claims resulting from defects in our products, we may
         fail to achieve market acceptance of our products, and our business could be harmed.


           We develop complex products for use in an evolving marketplace and generally warrant our products for a period of
         12 months from the date of sale. Despite testing by us and customers, our products may contain or may be alleged to contain
         undetected errors or failures. In addition, a customer or its installation partners may improperly install or implement our
         products. The integration of our products in smart grid networks or applications may entail the risk of product liability or
         warranty claims based on disruption to these networks or applications. Any such manufacturing errors or product defects
         could result in a delay in recognition or loss of revenue, loss of market share or failure to achieve market acceptance.
         Additionally, these defects could result in financial or other damages to a customer; cause us to incur significant warranty,
         support and repair costs; and divert the attention of our engineering personnel from our product development efforts. A
         product liability claim brought against us, even if unsuccessful, would likely be time-consuming and costly to defend. The
         occurrence of these problems would likely harm our business.


            We currently maintain property, general commercial liability, errors and omissions and other lines of insurance. Such
         insurance may be insufficient in amount to cover any particular claim, or we might not carry insurance that covers a specific
         claim. In addition, such insurance may not be available in the future or the cost of such insurance may increase substantially.


         Our ability to provide bid bonds, performance bonds or letters of credit may be limited and could negatively affect
         our ability to bid on or enter into significant long-term agreements.


            We may be required to provide bid bonds or performance bonds to secure our performance under customer contracts or, in
         some cases, as a prerequisite to submit a bid on a potential project. Our ability to obtain such bonds will depend upon our
         capitalization, working capital, past performance, management expertise and reputation, and external factors beyond our
         control, including the overall capacity of the surety market. Surety companies consider those factors in relation to the
         amount of our tangible net worth and other underwriting standards that may change from time to time. Surety companies
         may require that we collateralize a percentage of the bond with our cash or other form of credit enhancement. Events that
         affect surety markets generally may result in bonding becoming more difficult to obtain in the future, or being available only
         at a significantly greater cost. In addition, utilities may require collateral guarantees in the form of letters of credit to secure
         performance or to fund possible damages as the result of an event of default under any contracts with them. If we enter into
         significant long-term agreements that require the issuance of letters of credit, our liquidity could be negatively impacted. Our
         inability to obtain adequate bonding or letters of credit and, as a result, to bid or enter into significant long-term agreements,
         could have a material adverse effect on our ability to effectively compete and could impact our future business.


         We currently rely on a single contract manufacturer to produce our products, and a loss of our sole contract
         manufacturer or its inability to satisfy our quality and other requirements could severely disrupt the production and
         supply of our products.


           We utilize one contract manufacturer for all of our production requirements. This manufacturing is conducted in China by
         a U.S.-based company that also performs services for numerous other companies. We depend on our manufacturer to
         maintain high levels of productivity and satisfactory delivery schedules. Our reliance on our manufacturer reduces our
         control over the manufacturing process, exposing us to risks, including reduced control over quality assurance, product costs
         and product supply. Any financial, operational or other difficulties involving our manufacturer could adversely affect us. We
         provide our manufacturer with up to 12-month rolling forecasts of our production requirements. We do not, however, have
         long-term agreements with our manufacturer that


                                                                         15
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         guarantees production capacity, prices, lead times or delivery schedules. Since our manufacturer serves other customers, a
         number of which have greater production requirements than we do, our manufacturer could determine to prioritize
         production capacity for other customers or reduce or eliminate production for us on short notice. We could also encounter
         lower manufacturing productivity and longer delivery schedules in commencing volume production of new products. Any of
         these problems could result in our inability to deliver our products in a timely manner and adversely affect our operating
         results. The loss of our relationship with our manufacturer or its inability to conduct its manufacturing services for us as
         anticipated in terms of cost, quality and timeliness could adversely affect our ability to fill customer orders in accordance
         with required delivery, quality and performance requirements. If this were to occur, the resulting decline in revenue would
         harm our business.


            If any one of these risks materializes, it could significantly impact our operations and our ability to fulfill our obligations
         under purchase orders with Duke Energy as well as future orders from Duke Energy or other customers. Qualifying new
         manufacturers is time consuming and might result in unforeseen manufacturing and operational problems. If we had to
         transition to an alternative contract manufacturer we could experience operational delays, increased product costs and
         increased operating costs which could irreparably harm our relationship with Duke Energy, harm our reputation and could
         potentially impact our ability to secure new customers.


         Shortages of components and materials may delay or reduce our sales and increase our costs, thereby harming our
         results of operations.


            The inability of our manufacturer to obtain sufficient quantities of components and other materials necessary for the
         production of our products could result in reduced or delayed sales or lost orders. Any delay in or loss of sales could
         adversely impact our operating results. Some of the materials used in the production of our products are available from a
         limited number of foreign suppliers, particularly suppliers located in Asia. In most cases, neither we nor our manufacturer
         has long-term supply contracts with these suppliers. As a result, we are subject to increased costs, supply interruptions and
         difficulties in obtaining materials.


         Security breaches involving our smart grid products or services, publicized breaches in smart grid products and
         services offered by others or the public perception of security risks or vulnerability created by the deployment of the
         smart grid in general, whether or not valid, could harm our business.


           The security technologies we have integrated into our communications platform and products that are designed to detect
         unauthorized activity and prevent or minimize security breaches may not function as expected and our products and services,
         those of other companies with whose products our products and services are integrated or interact, or even the products of
         other smart grid solutions providers may be subject to significant real or perceived security breaches.


           Our communications platform allows utilities to monitor, compile and analyze sensitive information related to consumers‟
         energy usage, as well as the performance of different parts of the electric power distribution grid. As part of our data transfer
         and managed services, we may store and/or come into contact with sensitive consumer information and data when we
         perform operational, installation or maintenance functions for a utility customer. If, in handling this information, we, our
         partners or a utility customer fails to comply with privacy or security laws, we could face significant legal and financial
         exposure to claims of government agencies, utility customers and consumers whose privacy is compromised. Even the
         perception that we, our partners or a utility customer has improperly handled sensitive, confidential information could have a
         negative effect on our business. In addition, third parties may, through computer viruses, physical or electronic break-ins and
         other means, attempt to breach our security measures or inappropriately use or access our AmbientNMS ® or the
         communications nodes we have in the field. If a breach is successful, sensitive information may be improperly obtained,
         manipulated or corrupted, and we may face legal and financial exposure. In addition, a breach could lead to a loss of
         confidence in our products and services, and our business could suffer.


            Our current and anticipated future products and services allow authorized personnel to remotely control equipment at
         residential and commercial locations, as well as at various points on the grid. For example, our software could allow a utility
         to remotely connect and disconnect electricity at specific customer locations. If an


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         unauthorized third party were to breach our security measures and disrupt, gain access to, or take control of, any of our
         products or services, our business and reputation could be severely harmed.


            Our products and services may also be integrated or interface with products and services sold by third parties, and rely on
         the security of those products and their secure transmission of proprietary data over the Internet and other networks. Because
         we do not have control over the security measures implemented by third parties in their products or in the transmission of
         data over the Internet and other networks, we cannot ensure the complete integrity or security of such third-party products
         and transmissions.


            Concerns about security or customer privacy may result in the adoption of state or federal legislation that restricts the
         implementation of smart grid technology or requires us to make modifications to our products, which could significantly
         limit the deployment of our technologies or result in significant expense to modify our products.


           Any real or perceived security breach could seriously harm our reputation and result in significant legal and financial
         exposure, inhibit market acceptance of our products and services, halt or delay the deployment by utilities of our products
         and services, cause us to lose sales, trigger unfavorable legislation and regulatory action and inhibit the growth of the overall
         market for smart grid products and services. Any of these risks could have a material adverse effect on our business,
         operating results and financial condition.


         Developments in data protection laws and regulations may affect technology relating to smart grid products and
         solutions, which could adversely affect the demand for our products and services.


            Our products and services may be subject to data protection laws and regulations that impose a general framework for the
         collection, processing and use of personal data. Our communications platform relies on the transfer of data relating to
         individual energy use and may be affected by these laws and regulations. It is unclear how the regulations governing the
         transfer of personal data in connection with privacy requirements will further develop in the United States and
         internationally, and to what extent this may affect technology relating to smart grid products and services. This could have a
         material adverse effect on our business, financial condition and results of operations.


         We use some open source software in our products and services that may subject our products and services to general
         release or require us to re-engineer our products and services, which may cause harm to our business.


            We use some open source software in connection with our products and services. From time to time, companies that
         incorporate open source software into their products have faced claims challenging the ownership of open source software
         and/or compliance with open source license terms. Therefore, we could be subject to suits by parties claiming ownership of
         what we believe to be open source software or noncompliance with open source licensing terms. Some open source software
         licenses require users who distribute open source software as part of their software to publicly disclose all or part of the
         source code to such software and/or make available any derivative works of the open source code on unfavorable terms or at
         no cost. We monitor the use of open source software in our products and services and try to ensure that none of the open
         source software is used in a manner that would require us to disclose the source code to the related product or that would
         otherwise breach the terms of an open source agreement. However, such use could inadvertently occur and we may be
         required to release our proprietary source code, pay damages for breach of contract, re-engineer our products, discontinue
         the sale of our products in the event re-engineering cannot be accomplished on a timely basis or take other remedial action
         that may divert resources away from our development efforts, any of which could adversely affect our business, operating
         results and financial condition.


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         Our quarterly results are inherently unpredictable and subject to substantial fluctuations, and, as a result, we may
         fail to meet the expectations of securities analysts and investors, which could adversely affect the trading price of our
         common stock.


           Our revenue and other operating results may vary significantly from quarter to quarter as a result of a number of factors,
         many of which are outside of our control. While our revenue has increased in recent periods, there can be no assurances that
         our revenue will continue to increase or will not decrease on a quarterly or annual basis.


            The factors that may affect the unpredictability of our quarterly results and cause our stock price to fluctuate include the
         following:


            •   long, and sometimes unpredictable, sales and customer deployment cycles;
            •   changes in the mix of products and services sold;
            •   our dependence on a single customer;
            •   changing market conditions;
            •   changes in the competitive environment;
            •   failures of our products or components that we use in our products that delay deployments, harm our reputation or
                result in high warranty costs, contractual penalties or terminations;
            •   product or project failures by third-party vendors, utility customers or competitors that result in the cancellation,
                slowing down or deferring of projects;
            •   liquidated damage provisions in our current or future contracts, which could result in significant penalties if triggered
                or, even if not triggered, could affect our ability to recognize revenue in a given period;
            •   the ability of our suppliers and manufacturers to deliver supplies and products to us on a timely basis;
            •   delays associated with government funding programs for smart grid projects;
            •   political and consumer sentiment and the related impact on the scope and timing of smart grid deployment; and
            •   economic, regulatory and political conditions in the markets where we operate or anticipate operating.


            As a result, we believe that quarter to quarter comparisons of operating results are not necessarily indicative of what our
         future performance will be. In future quarters, our operating results may be below the expectations of securities analysts or
         investors, in which case the price of our common stock may decline.


         Negative economic conditions in the United States and globally may have a material and adverse effect on our
         operating results, cash flow and financial condition.


            The economies in the United States and countries around the world have been recovering from a global financial crisis and
         recession, which began in 2008, but financial markets and world economies continue to be volatile. Significant long-term
         effects will likely result from the financial crisis and recession, including slower and more volatile future global economic
         growth than during the years prior to the financial crisis of 2008. A lower future economic growth rate could result in
         reductions in sales of our products and services, slower adoption of new technologies and an increase price competition. Any
         of these events would likely harm our business, results of operations and financial condition.


         International manufacturing and sales risks could adversely affect our operating results.


           Our products are produced in China by a U.S.-based, third-party contract manufacturer. We may also expand our
         addressable market by pursuing opportunities to sell our products in international markets. We have had no experience
         operating in markets outside of the United States. Accordingly, new markets may require us to respond to new and
         unanticipated regulatory, marketing, sales and other challenges. We may not be successful in responding to these and other
         challenges that we may face as we enter and attempt to expand in international markets. International operations also entail a
         variety of other risks. The manufacture of our products abroad and our


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         potential expansion into international markets expose us to various economic, political and other risks that could adversely
         affect our operations and operating results, including the following:


            •   potentially reduced protection for intellectual property rights;
            •   political, social or economic instability in certain parts of the world;
            •   unexpected changes in legislature or regulatory requirements of foreign countries;
            •   differing labor regulations;
            •   tariffs and duties and other trade barrier restrictions;
            •   possible employee turnover or labor unrest;
            •   the burdens and costs of compliance with a variety of foreign laws;
            •   currency exchange fluctuations;
            •   potentially adverse tax consequences; and
            •   potentially longer payment cycles and greater difficulty in accounts receivable collections.


           International operations are also subject to general geopolitical risks, such as political, social and economic instability and
         changes in diplomatic and trade relations. One or more of these factors could adversely affect any international operations
         and result in lower revenue than we expect and could significantly affect our profitability.


         Growth in our business may be impacted if international trade is hindered, disrupted or economically disadvantaged.


            Political and economic conditions abroad may adversely affect the foreign production of our products as well as the sale
         of our products if we expand our business internationally. Protectionist trade legislation in either the United States or foreign
         countries, such as a change in the current tariff structures, export or import compliance laws or other trade policies, could
         adversely affect our ability to obtain product production from foreign manufacturers and to sell our products in foreign
         countries.


            Changes in policies by the U.S. or foreign governments resulting in, among other things, higher taxation, currency
         conversion limitations, restrictions on the transfer of funds or the expropriation of private enterprises also could have a
         material adverse effect on us. Any actions by countries in which we conduct business to reverse policies that encourage
         foreign investment or foreign trade also could adversely affect our operating results. In addition, U.S. trade policies, such as
         “most favored nation” status and trade preferences for certain Asian nations, could affect the attractiveness of our services to
         our U.S. customers and adversely impact our operating results.


         Our operating results could be adversely affected by fluctuations in the value of the U.S. dollar against foreign
         currencies.


           We currently transact business in U.S. dollars with our U.S.-based manufacturer that produces our products in China. A
         weakening of the dollar could cause our overseas manufacturer to require renegotiation of either the prices or currency we
         pay for its services. In the future, our manufacturer and international customers, if any, could negotiate pricing and make or
         require payments in non-U.S. currencies.


            If our overseas vendors or customers require us to transact business in non-U.S. currencies, fluctuations in foreign
         currency exchange rates could affect our cost of goods, operating expenses and operating margins and could result in
         exchange losses. In addition, currency devaluation can result in a loss to us if we hold deposits of that currency. Hedging
         foreign currencies can be difficult, especially if the currency is not freely traded. We cannot predict the impact of future
         exchange rate fluctuations on our operating results. We currently do not hedge any foreign currencies.


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         Our inability to protect our intellectual property could impair our competitive advantage, reduce our revenue and
         increase our costs.


            Our success and ability to compete depend in part on our ability to maintain the proprietary aspects of our technologies
         and products. We rely on a combination of trade secrets, patents, copyrights, trademarks, confidentiality agreements and
         other contractual provisions to protect our intellectual property, but these measures may provide only limited protection. We
         generally enter into written confidentiality and non-disclosure agreements with our employees, consultants, customers,
         manufacturers and other recipients of our technologies and products and assignment of invention agreements with our
         employees and consultants. We may not always be able to enforce these agreements and may fail to enter into any such
         agreement in every instance when appropriate. We license from third parties certain technology used in and for our products.
         These third-party licenses are granted with restrictions; therefore, such third-party technology may not remain available to us
         on terms beneficial to us. Our failure to enforce and protect our intellectual property rights or obtain from third parties the
         right to use necessary technology could have a material adverse effect on our business, operating results and financial
         condition. In addition, the laws of some foreign countries do not protect proprietary rights as fully as do the laws of the
         United States.


            Patents may not issue from the patent applications that we have filed or may file in the future. Our issued patents may be
         challenged, invalidated or circumvented, and claims of our patents may not be of sufficient scope or strength, or issued in the
         proper geographic regions, to provide meaningful protection or any commercial advantage. We have not applied for, and do
         not have, any copyright registration on our technologies or products. We have applied to register certain of our trademarks in
         the United States and other countries. We cannot assure you that we will obtain registrations of principle or other trademarks
         in key markets. Failure to obtain registrations could compromise our ability to protect fully our trademarks and brands and
         could increase the risk of challenge from third parties to our use of our trademarks and brands.


         We may be required to incur substantial expenses and divert management attention and resources in defending
         intellectual property litigation against us.


            We cannot be certain that our technologies and products do not and will not infringe issued patents or other proprietary
         rights of others. While we are not currently subject to any infringement claim, any future claim, with or without merit, could
         result in significant litigation costs and diversion of resources, including the attention of management, and could require us
         to enter into royalty and licensing agreements, any of which could have a material adverse effect on our business. We may
         not be able to obtain such licenses on commercially reasonable terms, if at all, or the terms of any offered licenses may be
         unacceptable to us. If forced to cease using such technology, we may be unable to develop or obtain alternate technology.
         Accordingly, an adverse determination in a judicial or administrative proceeding or failure to obtain necessary licenses could
         prevent us from manufacturing, using or selling certain of our products, which could have a material adverse effect on our
         business, operating results, and financial condition.


           Furthermore, parties making such claims could secure a judgment awarding substantial damages, as well as injunctive or
         other equitable relief that could effectively block our ability to make, use or sell our products in the United States or abroad.
         Such a judgment could have a material adverse effect on our business, operating results and financial condition. In addition,
         we are obligated under certain agreements to indemnify the other party in connection with infringement by us of the
         proprietary rights of third parties. In the event we are required to indemnify parties under these agreements, it could have a
         material adverse effect on our business, financial condition and results of operations.


         We may incur substantial expenses and divert management resources in prosecuting others for their unauthorized
         use of our intellectual property rights.


           Other companies, including our competitors, may develop technologies that are similar or superior to our technologies,
         duplicate our technologies or design around our patents and may have or obtain patents or other


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         proprietary rights that would prevent, limit or interfere with our ability to make, use or sell our products. Effective
         intellectual property protection may be unavailable or limited in some foreign countries in which we may do business, such
         as China. Unauthorized parties may attempt to copy or otherwise use aspects of our technologies and products that we regard
         as proprietary. Our means of protecting our proprietary rights in the United States or abroad may not be adequate or
         competitors may independently develop similar technologies. If our intellectual property protection is insufficient to protect
         our intellectual property rights, we could face increased competition in the market for our technologies and products.


            Should any of our competitors file patent applications or obtain patents that claim inventions also claimed by us, we may
         choose to participate in an interference proceeding to determine the right to a patent for these inventions because our
         business would be harmed if we fail to enforce and protect our intellectual property rights. Even if the outcome is favorable,
         this proceeding could result in substantial cost to us and disrupt our business.


            In the future, we also may need to file lawsuits to enforce our intellectual property rights, to protect our trade secrets or to
         determine the validity and scope of the proprietary rights of others. This litigation, whether successful or unsuccessful, could
         result in substantial costs and diversion of resources, which could have a material adverse effect on our business, financial
         condition and results of operations.


         We depend on key personnel who would be difficult to replace, and our business will likely be harmed if we lose their
         services or cannot hire additional qualified personnel.


            Our success depends substantially on the efforts and abilities of our senior management and key personnel. The
         competition for qualified management and key personnel, especially engineers, is intense. Although we maintain
         noncompetition and nondisclosure covenants with most of our key personnel, we do not have employment agreements with
         most of them. The loss of services of one or more of our key employees or the inability to hire, train and retain key
         personnel, especially engineers and technical support personnel, could delay the development and sale of our products,
         disrupt our business and interfere with our ability to execute our business plan.


         Potential strategic alliances may not achieve their objectives, and the failure to do so could impede our growth.


            We anticipate that we will enter into strategic alliances. Among other matters, we continually explore strategic alliances
         designed to enhance or complement our technology or to work in conjunction with our technology; to provide necessary
         know-how, components or supplies; to attract additional customers; and to develop, introduce and distribute products
         utilizing our technology. Any strategic alliances may not achieve their intended objectives, and parties to our strategic
         alliances may not perform as contemplated. The failure of these alliances may impede our ability to introduce new products
         and expand our business.


         Any acquisitions that we undertake could be difficult to integrate, disrupt our business, dilute stockholder value and
         harm our operating results.


            We may pursue opportunities to acquire other businesses and technologies in order to complement our products, expand
         the breadth of our business, enhance our technical capabilities or otherwise grow our business. While we have no current
         definitive agreements underway, we may acquire businesses, products or technologies in the future. If we make any future
         acquisitions, we could issue stock that would dilute existing stockholders‟ percentage ownership, incur substantial debt,
         assume contingent liabilities or experience higher operating expenses. We have no experience in acquiring other businesses
         or technologies. Potential acquisitions also involve numerous risks, including the following:


            • problems assimilating the purchased operations, technologies or products;
            • unanticipated costs associated with the acquisition;
            • diversion of management‟s attention from our core businesses;


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            • adverse effects on existing business relationships with suppliers and customers;
            • risks associated with new ventures with respect to which we have little or no prior experience; and
            • potential loss of key employees of purchased organizations.


           We cannot assure you that we would be successful in overcoming problems encountered in connection with any
         acquisitions, and our inability to do so could disrupt our operations and adversely affect our business.


         Our compliance with the Sarbanes-Oxley Act of 2002 and SEC rules concerning internal controls may be time
         consuming, difficult and costly, and the failure to achieve and maintain effective internal controls in accordance with
         Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our ability to produce accurate
         financial statements and on our stock price.


            Under SEC regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we anticipate that we will be
         required to furnish a report by our management on our internal control over financial reporting with our Form 10-K for the
         fiscal year ending December 31, 2012 that includes a statement that our independent auditors have issued an attestation
         report on management‟s assessment of internal control over financial reporting. We have not previously been required to
         provide an attestation report of our independent auditors. While we have spent considerable time and effort in documenting
         and testing our internal control procedures in order to provide management‟s assessment of our internal control over
         financial reporting, we may need to spend additional financial and other resources improving our processes, which may
         result in increased general and administrative expenses and may shift management time and attention from
         revenue-generating activities to compliance activities. Despite our efforts, we can provide no assurance as to our
         independent auditors‟ conclusions with respect to the effectiveness of our internal control over financial reporting. There is a
         risk that our independent auditors will not be able to conclude that our internal controls over financial reporting are effective.


            If we fail to comply in a timely manner with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 regarding
         internal control over financial reporting or to remedy any material weaknesses in our internal controls that we may identify,
         such failure could result in material misstatements in our financial statements, cause investors to lose confidence in our
         reported financial information, limit our ability to raise needed capital and have a negative effect on the trading price of our
         common stock.


         We expect to incur increased costs as a result of our recent NASDAQ listing, this offering and our anticipated loss of
         our SEC filing status as a smaller reporting company.


            We expect to incur increased legal, accounting and other expenses as a result of our NASDAQ listing, the additional
         stockholders and other consequences of this offering and our anticipated loss of our SEC filing status as a smaller reporting
         company. Our NASDAQ listing will require changes in our corporate governance practices. We expect these rules and
         regulations to increase our legal and financial compliance costs and to make some activities more time consuming and
         costly. We will incur additional costs associated with our expanded public company reporting requirements. These new rules
         and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, and
         we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain our desired
         coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors
         or as executive officers.


         We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs.


           In the future, we may require additional capital to respond to business opportunities, challenges, acquisitions or
         unforeseen circumstances and may determine to engage in equity or debt financings or enter into credit facilities for other
         reasons. We may not be able to secure additional debt or equity financing in a timely basis or on favorable terms, or at all.
         Any debt financing obtained by us in the future could involve restrictive covenants relating to our capital raising activities
         and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to
         pursue business opportunities. If we raise additional funds through further issuances


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         of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer
         significant dilution in their percentage ownership of our company, and any new equity securities we issue could have rights,
         preferences and privileges senior to those of holders of our common stock, including shares of common stock sold in this
         offering. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our
         ability to continue to grow or support our business and to respond to business challenges could be significantly limited.


                                                     Risks Related to Our Common Stock


         Our principal stockholder will continue to be able to exert substantial influence over us.


            Vicis Capital Master Fund, or Vicis, owns approximately 84% of the outstanding shares of our common stock.
         Immediately after consummation of this offering, Vicis will beneficially own approximately % of our outstanding shares
         of common stock. Consequently, Vicis will be able to exert substantial influence over our company and control matters
         requiring approval by our stockholders, including the election of all our directors, approving any amendments to our
         certificate of incorporation, increasing our authorized capital stock, effecting a merger or sale of our assets and determining
         the number of shares available for issuance under our stock plans. As a result of Vicis‟ control, no change of control of our
         company can occur without Vicis‟ consent.


            Vicis‟ voting control may discourage transactions involving a change of control of our company, including transactions in
         which you as a holder of our common stock might otherwise receive a premium for your shares over the then current market
         price. Vicis is not prohibited from selling a controlling interest in our company to a third party and may do so without your
         approval and without providing for a purchase of your shares of common stock. Accordingly, your shares of common stock
         may be worth less than they would be if Vicis did not maintain voting control over us.


         If you purchase our common stock in this offering, you will incur immediate and substantial dilution in the book
         value of your shares.


             If you purchase shares of our common stock in this offering, your interest will be diluted by the amount by which the
         offering price per share exceeds our pro forma net tangible book value per share following this offering. Net tangible book
         value equals total tangible assets minus total liabilities. As of June 30, 2011, our net tangible book value was $0.67 per
         share. After giving effect to this offering and assuming an offering price of $ , our pro forma net tangible book value
         would be $      per share, or $     per share if the underwriters exercise their over-allotment option in full. This represents an
         immediate dilution of $      per share to new investors purchasing shares of common stock in this offering, or $         per share
         if the underwriters exercise their over-allotment option in full. The exercise of substantial options and future equity
         issuances, including future public offerings or private placements of equity securities and any additional shares issuances in
         connection with any acquisitions, could result in further dilution to investors.


         Because there has not been an active trading market for our common stock, the offering price in this offering may not
         be indicative of the market price of our common stock after this offering, which may decrease significantly.


            Prior to this offering, there has not been an active public market for our common stock. Our common stock was quoted on
         the OTC Bulletin Board until August 3, 2011 when our common stock was listed on the NASDAQ Capital Market. The
         weekly trading volume of our common stock averaged approximately 18,425 shares per week during 2010 and
         approximately 14,030 shares per week during the first six months of 2011. We cannot predict the extent to which investor
         interest in our company will lead to the development of an active trading market on the NASDAQ Capital Market or
         otherwise or how liquid that market might become. The lack of an active market may reduce the value of your shares and
         impair your ability to sell your shares at the time or price at which you wish to sell them. An inactive market may also impair
         our ability to raise capital by selling our common stock and may impair our ability to acquire or invest in other companies,
         products or technologies by using our common stock as consideration.


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         The market price of our common stock may be volatile, which could result in substantial losses for investors.


           The market price of our common stock is likely to be volatile and could fluctuate widely in response to various factors,
         many of which are beyond our control, including the following:


            •   our ability to execute our business plan;
            •   the gain or loss of significant orders;
            •   volume and timing of customer orders;
            •   actual or anticipated changes in our operating results;
            •   changes in expectations relating to our products, plans and strategic position or those of our competitors or customers;
            •   market conditions and trends within the utilities industry and the smart grid market;
            •   introductions of new products of new pricing policies by us or by our competitors;
            •   the gain or loss of significant customers;
            •   industry developments;
            •   regulatory, legislative or other developments affecting us or the utilities industry in general or the smart grid market in
                particular;
            •   economic and other external factors;
            •   general global economic and political instability;
            •   changes in laws or regulations affecting the utilities industry;
            •   announcements of technological innovations or new products by us or our competitors;
            •   acquisitions or strategic alliances by us or by our competitors;
            •   litigation involving us, the utilities industry or the smart grid market;
            •   recruitment or departure of key personnel;
            •   future sales of our common stock;
            •   price and volume fluctuations it the overall stock market from time to time;
            •   changes in investor perception;
            •   the level and quality of any research analyst coverage of our common stock;
            •   changes in earnings estimates or investment recommendations by securities analysts;
            •   the financial guidance we may provide to the public, any changes in such guidance or our failure to meet such
                guidance; and
            •   trading volume of our common stock or the sale of stock by our parent, management team or directors.


            In addition, the securities markets have experienced extreme price and volume fluctuations that often have been unrelated
         or disproportionate to the operating performance of particular companies. Public announcements by various companies
         concerning, among other things, their performance, accounting practices or legal problems could cause the market price of
         our common stock to decline regardless of our actual operating performance.


         We will have broad discretion over the use of proceeds from this offering and could spend or invest those proceeds in
         ways with which you might not agree.


           We will have broad discretion with respect to the use of the net proceeds of this offering, and you will be relying on the
         judgment of our management regarding the application of these proceeds. We currently expect to use these proceeds for
         general corporate purposes, which may include working capital and capital expenditures.


         Future sales of common stock by Vicis or others or other dilutive events may adversely affect the market price of our
         common stock, even if our business is doing well.


           Immediately after consummation of this offering, we will have outstanding           shares of common stock outstanding.
         Vicis and our directors and officers have agreed with the underwriters, subject to certain exceptions, not to dispose of or
         hedge any of their common stock or securities convertible into or exchangeable for shares of common stock during the
         180-day period beginning on the date of this prospectus, except with the prior written consent of Stifel, Nicolaus &
         Company, Incorporated. All of our outstanding shares are freely transferable except to


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         the extent covered by the 180-day lock-up and if held by affiliates such as Vicis subject to additional restrictions as to the
         manner of sale and volume of shares that may be sold in any three month period. Subject to these various restrictions, our
         existing stockholders could sell any or all of the shares of common stock owned by them from time to time for any reason.
         Issuance of additional shares upon exercise of options and warrants will further dilute your ownership in the company.


            Future sales of substantial amounts of our common stock in the public market, or the perception that such sales could
         occur, could adversely affect prevailing trading prices of our common stock and could impair our ability to raise capital
         through future offerings of equity or equity-related securities. We cannot predict what effect, if any, future sales of our
         common stock, or the availability of shares for future sales, will have on the market price of our stock. As of August 15,
         2011, we had the following outstanding securities:


            • 16,532,228 shares of common stock outstanding;
            • an aggregate of 1,174,715 shares of common stock issuable upon the exercise of then outstanding stock options at a
              weighted average exercise price of $11.18 per share;
            • an aggregate of 1,151,807 shares of common stock issuable upon the exercise of then outstanding warrants at a
              weighted average exercise price of $16.29 per share; and
            • an aggregate of 2,322,916 shares of common stock reserved for issuance under our 2000 Equity Incentive Plan and
              2002 Non-Employee Directors Stock Option Plan.


         We do not expect to pay any dividends for the foreseeable future.


            We have never declared or paid cash dividends on our common stock, and we do not anticipate doing so in the foreseeable
         future. We currently intend to return future earnings, if any, to fund our operations and support our growth strategies.
         Accordingly, you may have to sell some or all of your common stock in order to generate cash flow from your investment.
         You may not receive a gain on your investment when you sell our common stock and may lose some or all of the amount of
         your investment. Any determination to pay dividends in the future will be made at the discretion of our board of directors
         and will depend on our results of operations, financial conditions, contractual restrictions, restrictions imposed by applicable
         law, capital requirements and other factors our board of directors deems relevant.


         Our ability to use U.S. net operating loss carryforwards might be limited, subjecting our corporate income to earlier
         taxation.


            At December 31, 2010, we had available approximately $77 million of net operating loss carryforwards, for U.S. income
         tax purposes which expire in the years 2016 through 2029. However, due to changes in stock ownership resulting from
         historical investments provided by Vicis, we expect that the use of the U.S. net operating loss carryforwards are significantly
         limited under Section 382 of the Internal Revenue Code. As such, we estimate that $61 million or more of our net operating
         loss carryforwards will expire and will not be available to use against future tax liabilities. In addition, our ability to utilize
         the current net operating loss carryforwards might be further limited by the issuance of common stock in this offering. To the
         extent our use of net operating loss carryforwards is significantly limited, our income could be subject to corporate income
         tax earlier than it would if we were able to use net operating loss carryforwards, which could result in lower profits.


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                                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS


            Certain statements included in this prospectus are forward-looking statements within the meaning of Section 27A of the
         Securities Act of 1933, as amended, which we refer to as the Securities Act. Such forward-looking statements are contained
         principally in the sections entitled “Prospectus Summary,” “Risk Factors,” “Management‟s Discussion and Analysis of
         Financial Condition and Results of Operations” and “Our Business.” In some cases, you can identify forward-looking
         statements by terms such as “may,” “might,” “will,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,”
         “believe,” “estimate,” “predict,” “project,” “potential,” “plan,” “continue,” “anticipate,” “appear” or the negative of these
         terms, and similar expressions intended to identify forward-looking statements. These statements reflect our current views
         with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties,
         you should not place undue reliance on these forward-looking statements. Forward-looking statements include, but are not
         limited to, statements about:


            • our ability to retain and attract customers, particularly in light of our dependence on a single customer for substantially
              all of our revenue;
            • our expectations regarding our expenses and revenue, including our expectations that our research and development
              expenses and selling, general and administrative expenses may increase in absolute dollars;
            • anticipated trends and challenges in our business and the markets in which we operate, including the market for smart
              grid technologies;
            • our expectations regarding competition as more and larger companies enter our markets and as existing competitors
              improve or expand their product offerings;
            • our plans for future products and enhancements of existing products;
            • our anticipated cash needs and our estimates regarding our capital requirements; and
            • our anticipated growth strategies.


           These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results,
         performance or achievements to be materially different from any future results, performance or achievements expressed or
         implied by the forward-looking statements. We discuss many of these risks in this prospectus in greater detail under the
         heading “Risk Factors.”


            These forward-looking statements represent our estimates and assumptions only as of the date of this prospectus. Unless
         required by U.S. federal securities laws, we do not intend to update any of these forward-looking statements to reflect
         circumstances or events that occur after the statement is made.


            You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the
         registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results
         may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary
         statements.


                                                             USE OF PROCEEDS


            We estimate that we will receive net proceeds from this offering, after deducting the underwriting discount and estimated
         offering expenses payable by us, of approximately $       million (or approximately $     million, if the underwriters exercise
         their over-allotment option in full). A $1.00 increase (decrease) in the assumed public offering price of $     per share would
         increase (decrease) the net proceeds to us from this offering by $     million, assuming the number of shares offered by us, as
         set forth on the cover of this prospectus, remains the same, after deducting the underwriting discount and estimated offering
         expenses payable by us.


            We intend to use the net proceeds from this offering for general corporate purposes, which may include working capital
         and capital expenditures. If the opportunity arises, we may use a portion of the net proceeds from this offering to acquire or
         invest in businesses, products or technologies that are complementary to our own, although we have no commitments with
         respect to any such acquisition or investment at this time.
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           Pending the use of proceeds from this offering, we intend to invest the net proceeds in short-term, interest-bearing,
         investment-grade securities. We will have broad discretion in the application of the net proceeds from this offering, and
         investors will be relying on our judgment regarding the application of the proceeds.


                                                  PRICE RANGE OF COMMON STOCK


           Our common stock has been listed on the NASDAQ Capital Market under the symbol “AMBT” since August 3, 2011.
         Prior to August 3, 2011, our common stock was quoted on the OTC Bulletin Board under the symbol “ABTG.”


            Although trading in our common stock has occurred on a relatively consistent basis, the volume of shares traded has been
         sporadic. There can be no assurance that an established trading market will develop, that the current market will be
         maintained or that a liquid market for our common stock will be available in the future. Investors should not rely on
         historical stock price performance as an indication of future stock price performance.


            The following table shows the quarterly high and low bid prices or sales prices for our common stock over the last two
         completed fiscal years and subsequent interim periods, as quoted on the OTC Bulletin Board (prior to August 3, 2011) and
         as reported on the NASDAQ Capital Market (beginning on August 3, 2011). In the case of OTC Bulletin Board quotes, the
         prices represent quotations by dealers without adjustments for retail mark-ups, mark-downs or commissions and may not
         represent actual transactions. The last reported sale price of our common stock on August 18, 2011 was $8.20 per share.


                                                                                                                 Low            High


         Year Ending December 31, 2011:
           Third Quarter (through August 18, 2011)                                                           $    7.00        $ 13.98
           Second Quarter                                                                                         7.00           9.50
           First Quarter                                                                                          7.60          11.90
         Year Ended December 31, 2010:
           Fourth Quarter                                                                                         8.00           15.30
           Third Quarter                                                                                          6.00           10.40
           Second Quarter                                                                                         6.20           10.70
           First Quarter                                                                                         10.10           20.00
         Year Ended December 31, 2009:
           Fourth Quarter                                                                                        11.00           26.00
           Third Quarter                                                                                         13.60           18.60
           Second Quarter                                                                                         9.00           21.80
           First Quarter                                                                                          1.90           11.50


            As of August 15, 2011, there were 137 holders of record of our common stock. Other than our shares held by Vicis, a
         significant number of shares of our common stock are held in either nominee name or street name brokerage accounts, and
         consequently, we are unable to determine the number of beneficial owners of our stock.


                                                             DIVIDEND POLICY


            We have paid no dividends on our common stock and do not expect to pay cash dividends in the foreseeable future. We
         plan to retain all earnings to provide funds for the growth of our company. In the future, our board of directors will decide
         whether to declare and pay dividends based upon our earnings, financial condition, capital requirements and other factors
         that our board of directors may consider relevant. We are not under any contractual restriction as to present or future ability
         to pay dividends.


                                                                        27
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                                                              CAPITALIZATION


            The following table sets forth our cash and cash equivalents and capitalization as of June 30, 2011:


            • on an actual basis; and
            • on an as adjusted basis to reflect the sale of     shares in this offering at an assumed public offering price of $     per
              share, which was the last reported sales price of our common stock on          , 2011, after deducting the underwriting
              discount and estimated offering expenses payable by us.


           The information below is illustrative only, and our capitalization following the completion of this offering will be adjusted
         based on the actual public offering price and other terms of this offering determined at pricing. You should read this table
         together with “Management‟s Discussion and Analysis of Financial Condition and Results of Operations” and our
         consolidated financial statements and the related notes appearing elsewhere in this prospectus.


                                                                                                               As of June 30, 2011
                                                                                                         Actual              As Adjusted(1)
                                                                                                       (In thousands, except share and par
                                                                                                                   value data)


         Cash and cash equivalents                                                                 $        12,545
         Total long-term debt                                                                                   —
         Stockholders‟ equity:
         Common stock, $0.001 par value, 100,000,000 shares authorized, 16,532,228 shares
           issued and 16,522,228 outstanding, actual;    shares issued
           and       outstanding, as adjusted                                                                  16
                 Additional paid-in capital                                                               151,190
                 Accumulated deficit                                                                     (139,897 )
                 Treasury stock; 10,000 shares at cost                                                       (200 )
            Total stockholders‟ equity                                                                      11,109
               Total capitalization                                                                $        11,109




           (1) A $1.00 increase (decrease) in the assumed public offering price of $       per share would increase (decrease) each of
               cash and cash equivalents, total stockholders‟ equity and total capitalization by $    million, after deducting the
               underwriting discount and estimated offering expenses payable by us.


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                                                                   DILUTION


            If you invest in our common stock in this offering, your interest will be diluted to the extent of the difference between the
         public offering price per share of our common stock and the pro forma net tangible book value per share of our common
         stock after this offering. As of June 30, 2011, our net tangible book value was approximately $11.1 million, or $0.67 per
         share of common stock. Our net tangible book value per share represents the amount of our total tangible assets reduced by
         the amount of our total liabilities and divided by the total number of 16,522,228 shares of our common stock outstanding as
         of June 30, 2011. After giving effect to our sale in this offering of shares of our common stock at the public offering price of
         $      per share, after deducting the underwriting discount and estimated offering expenses payable by us, our pro forma net
         tangible book value as of June 30, 2011 would have been approximately $           million, or $    per share of our common
         stock. This amount represents an immediate increase in net tangible book value of $          per share to our existing
         stockholders and an immediate dilution of $ per share to new investors purchasing shares of common stock in this
         offering. The following table illustrates this per share dilution:


         Assumed public offering price per share:                                                                                $
           Net tangible book value per share as of June 30, 2011, before giving effect to this offering          $   0.67
           Increase in net tangible book value per share attributable to new investors in this offering          $
         Pro forma net tangible book value per share after giving effect to this offering                                        $
         Dilution per share to new investors in this offering                                                                    $



            A $1.00 increase (decrease) in the assumed public offering price of $       per share would increase (decrease) the pro
         forma net tangible book value, as adjusted to give effect to this offering, by $     per share and the dilution to new investors
         by $     per share, assuming the number of shares offered, as set forth on the cover of this prospectus, remains the same and
         after deducting the underwriting discount and estimated offering expenses payable by us. Similarly, each increase (decrease)
         of one million shares in the number of shares of common stock offered by us would increase (decrease) the pro forma net
         tangible book value, as adjusted to give effect to this offering, by $    per share and the dilution to new investors by
         $     per share, assuming the assumed public offering price remains the same and after deducting the underwriting discount
         and estimated offering expenses payable by us.


           The following table sets forth, on the pro forma basis described above, at June 30, 2011, the difference between the
         number of shares of common stock purchased, the total consideration paid and the average price per share paid by the
         existing stockholders and by new investors in this offering at an assumed public offering price of $    per share, before
         deducting the underwriting discount and estimated offering expenses payable by us.


                                                                                                                                 Average
                                                                        Shares Purchased             Total Consideration         Price per
                                                                      Number        Percent         Amount         Percent        Share
                                                                                              (In thousands)


         Existing stockholders                                                                %   $                          %   $
         New investors                                                                        %   $                          %   $
            Total                                                                             %   $                          %   $



           The above discussion and tables also assume no exercise of any outstanding stock options or warrants. As of June 30,
         2011, there were


            • an aggregate of 1,141,465 shares issuable upon the exercise of then outstanding options at a weighted average exercise
              price of $11.20 per share; and
            • an aggregate of 1,161,807 shares issuable upon the exercise of then outstanding warrants at a weighted average
              exercise price of $16.18 per share.
   If the underwriters exercise their over-allotment option in full, the pro forma net tangible book value, as adjusted to give
effect to this offering would be $     per share, and the dilution to investors would be $     per share.


                                                               29
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                                                SELECTED CONSOLIDATED FINANCIAL DATA


            The following consolidated financial data should be read together with our consolidated financial statements and related
         notes and “Management‟s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere
         in this prospectus. We have derived the following consolidated statement of operations data and cash flow data for the years
         ended December 31, 2008, 2009 and 2010 and consolidated balance sheet data as of December 31, 2009 and 2010 from our
         audited consolidated financial statements included elsewhere in this prospectus. We have derived the following consolidated
         statement of operations data and cash flow data for the years ended December 31, 2006 and 2007 and consolidated balance
         sheet data as of December 31, 2006, 2007 and 2008 from our audited financial statements which are not included in this
         prospectus. We have derived the following consolidated statement of operations data and cash flow data for the six months
         ended June 30, 2010 and 2011 and the consolidated balance sheet data as of June 30, 2011 from our unaudited consolidated
         financial statements included elsewhere in this prospectus. We have derived the consolidated balance sheet data as of
         June 30, 2010 from our unaudited consolidated financial statements which are not included in this prospectus. The unaudited
         consolidated financial statements include, in our opinion, all adjustments, consisting only of normal recurring adjustments
         that we consider necessary for the fair presentation of the financial information set forth in those statements. Share and per
         share information have been adjusted to reflect the 1-for-100 reverse stock split of our common stock that became effective
         on July 18, 2011. Our historical results are not necessarily indicative of our results to be expected for the remainder of 2011
         or in any future period.


                                                                                                                                    Six Months Ended
                                                                      Year Ended December 31,                                            June 30,
                                                    2006            2007           2008            2009            2010             2010          2011
                                                                             (In thousands, except per share data)


         STATEMENT OF
           OPERATIONS DATA:
         Total revenue                          $     2,337     $     2,265      $   12,622      $     2,193     $ 20,358       $    6,258      $ 27,993
         Cost of goods sold                           1,751           1,806           9,942            1,836       12,023            3,782        15,963

            Gross profit                                586             459            2,680             357          8,335          2,476          12,030

         Operating expenses:
           Research and development
             expenses                                 3,559           3,675            4,351           4,946          6,314          2,975           4,893
           Selling, general and
             administrative expenses                  3,530           4,012            3,600           4,662          5,239          2,305           3,507

         Total operating expenses                     7,089           7,687            7,951           9,608         11,553          5,280           8,400

         Operating (loss) income                     (6,503 )        (7,228 )         (5,271 )        (9,251 )       (3,218 )        (2,804 )        3,630

         Interest (expense) income, net                (482 )        (1,102 )         (3,116 )        (4,963 )         (214 )          (213 )            12
         Amortization of beneficial
            conversion feature of convertible
            debt                                     (2,194 )        (2,657 )             —               —               —              —               —
         Amortization of deferred financing
            costs                                    (3,560 )        (4,943 )             —               —             —                —               —
         Loss on extinguishment of debt                  —               —            (2,789 )            —             —                —               —
         Other income (expense), net                     —              174             (118 )           (32 )         246               —               —

            Total other (loss) income                (6,236 )        (8,528 )         (6,023 )        (4,995 )            32           (213 )            12

         Provision for income taxes                        —              —               —               —               —              —            109

         Net (loss) income                      $   (12,739 )   $   (15,756 )    $   (11,294 )   $   (14,246 )   $ (3,186 )     $ (3,017 )      $    3,533

         Net (loss) income per share (basic)    $     (7.29 )   $      (6.55 )   $     (3.75 )   $     (1.81 )   $    (0.21 )   $     (0.20 )   $     0.21
         Net (loss) income per share
           (diluted)                            $     (7.29 )   $      (6.55 )   $     (3.75 )   $     (1.81 )   $    (0.21 )   $     (0.20 )   $     0.21
         Weighted average shares used in
           computing basic net (loss)
           income per share                           1,747           2,405            3,016           7,891         15,385         15,022          16,496
         Weighted average shares used in
           computing diluted net (loss)               1,747           2,405            3,016           7,891         15,385         15,022          16,936
income per share


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                                                                As of December 31,                                        As of June 30,
                                          2006           2007            2008            2009           2010           2010            2011


         BALANCE SHEET
          DATA:
          Cash and cash
            equivalents               $   2,386      $     546       $    8,012      $     987      $    6,987     $   1,374      $ 12,545
          Total assets                    5,429          2,816           10,622          3,393          10,573         3,041        16,798
          Working capital, net(1)         2,197           (253 )          7,688           (225 )         5,577          (411 )      10,203
          Convertible debt
            (current and
            long-term portion)            1,164          2,672             755           9,816                 —           —              —
          Total stockholders‟
            equity (deficit)              2,795          (1,465 )         7,454          (9,535 )        6,136            109         11,109
         CASH FLOW DATA:
          Cash flows from
            operations                    (6,362 )       (6,697 )        (5,549 )        (7,720 )       (1,592 )       (1,969 )        5,940
          Cash flows from
            investing activities           (360 )            50           (576 )          (269 )         (527 )          (264 )         (511 )
          Cash flows from
            financing activities          8,713          4,807           13,591            964           8,119         2,620             129


           (1) Excluding current portion of convertible debt


                                                                         31
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                          MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                                          AND RESULTS OF OPERATIONS


            You should read the following discussion in conjunction with our consolidated financial statements and the notes related
         to those statements. Some of our discussion is forward-looking and involves risks and uncertainties. For more information
         regarding risk factors that could have a material adverse effect on our business, refer to the “Risk Factors” section of this
         prospectus. For a general overview of our business, refer to the “Our Business” section of this prospectus.


         Overview


            We are a leading provider of a smart grid communications platform that enables utilities to effectively deploy, integrate
         and communicate with multiple smart grid applications within the electric power grid. Our smart grid communications
         platform significantly improves the ability of utilities to use advanced technologies to upgrade their electric power grids,
         effectively making the grids more intelligent.


         Company History


           We were incorporated in 1996 in the state of Delaware. Through the third quarter of 2008, we were a development stage
         company. We are focused on the development of a communications platform that meets the needs of utilities, including
         specifically for the implementation of smart grid applications.


         Duke Energy Relationship


            Since 2005, we have been a key strategic partner of Duke Energy and we believe the leading supplier of its smart grid
         communications technology in connection with its smart grid implementation. With what we believe is one of the most
         forward-looking smart grid initiatives in North America, Duke Energy has announced plans to invest $1 billion over the next
         five years in smart grid equipment for its service territories, including Ohio, Indiana, Kentucky and the Carolinas.
         Specifically, Duke Energy‟s smart grid deployment includes digital and automated technology, such as communications
         nodes, smart meters and automated power delivery equipment.


            Duke Energy is actively deploying our communications nodes and is licensing our AmbientNMS ® for its deployment in
         Ohio. We believe that we are the predominant provider of communications nodes and network management system software
         for Duke Energy‟s Ohio deployment.


            We believe that we have demonstrated that our technology is secure, two-way, flexible, open, scalable, reliable and
         cost-effective through the total deployment of approximately 55,000 communications nodes in the field with Duke Energy,
         and we believe that Duke Energy will continue to predominantly use our communications platform for the remainder of its
         Ohio smart grid deployment. Furthermore, Duke Energy‟s pilot deployment of approximately 3,000 communications nodes
         in the Carolinas predominantly uses our communications platform as well. Throughout the past five years, we have worked
         with Duke Energy to develop our communications platform, which has enabled Duke Energy‟s ability to rapidly deploy its
         smart grid initiatives. Duke Energy has accelerated its historical deployment rates and is presently deploying approximately
         6,000 of our communications nodes each month.


            We believe that we have a substantial opportunity to grow our business with Duke Energy. In January 2011, Duke Energy
         and Progress Energy announced a proposed merger that is subject to stockholder and regulatory approval. Together, Duke
         Energy and Progress Energy have committed to spend a combined $1.5 billion in smart grid initiatives, partially funded by
         approximately $400 million in total grants awarded to them in 2010 under the American Recovery and Reinvestment Act of
         2009, or ARRA, and required to be spent by 2013. In addition to the 130,000 communications nodes scheduled for
         deployment in Ohio, we estimate that Duke Energy would require over 670,000 communications nodes if it implements a
         full deployment of smart grid communications nodes in


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         Indiana, Kentucky and the Carolinas. According to Duke Energy, it is currently working through the planning process to
         finalize full-scale deployment plans in Kentucky and the Carolinas and has filed with the North Carolina Public Utilities
         Commission for the required approvals. Duke Energy is using information from its North Carolina pilot programs and its
         Ohio deployment to enhance its customer experience in its other service territories. We believe that substantially all
         communications nodes deployed by Duke Energy to date are our communications nodes. If Duke Energy and Progress
         Energy complete their proposed merger and the combined company adopts Duke Energy‟s deployment strategy relating to
         smart grid initiatives, we estimate a potential deployment of 620,000 additional communications nodes in Progress Energy‟s
         territories in Florida and the Carolinas.


         Revenue History


            We have grown total revenue from $2.2 million in 2009 to $20.4 million in 2010 and to $28.0 million for the six-month
         period ended June 30, 2011 due to increased sales of our communications nodes to Duke Energy. Our total revenue of
         $2.2 million in 2009 declined from $12.6 million in 2008 due mainly to the impact of the introduction of the ARRA.
         Although the ARRA was passed in September 2009, by late 2008 and early 2009, there was widespread speculation that a
         significant amount of funding would be made available for smart grid related initiatives. As a result, many utilities with
         smart grid projects underway, including Duke Energy, substantially slowed their spending until there was further clarity
         regarding the amount of funding available under the federal program. Furthermore, the language of the Smart Grid
         Investment Grants, which are part of the ARRA, also provided initial guidance regarding certain technical criteria required
         for grant eligibility. As such, utilities needed further clarity that the technology in their smart grid programs would qualify
         for funding. As soon as the ARRA was passed in September 2009, sales of our communications nodes to Duke Energy
         increased significantly as Duke Energy resumed its smart grid implementation in Ohio. Correspondingly, our total revenue
         realized for the end of 2009 also began to increase. This phenomenon impacted revenue trends across the entire smart grid
         sector.


         Backlog


           We define our backlog as products that we are obligated to deliver based on firm commitments relating to purchase orders
         received from customers, currently solely Duke Energy. As of June 30, 2011, we had backlog of approximately $68 million,
         consisting of products that we expect to deliver into 2012.


         Capitalization History


            Since inception, we have primarily funded our operations with proceeds from the sale of our securities and with revenue
         from the sale of our products. Until the third quarter of 2008, we were a development stage company focused on developing
         and piloting our technology with utilities. Since 1998, we have raised a total of $69.5 million in gross proceeds from
         financing transactions to fund our operations and development efforts. Of the $69.5 million in total gross proceeds raised to
         date, approximately $4.2 million was raised from our initial public offering of our common stock in 1998, approximately
         $33.8 million in gross proceeds from the sale of shares of our common stock and the issuance of convertible debt from 2000
         to 2006 and approximately $31.5 million in gross proceeds from the sale of shares of our common stock and the issuance of
         convertible debt to Vicis Capital Master Fund, or Vicis, from 2007 to 2010. As of December 31, 2010, all convertible debt
         had converted into common stock. Vicis is currently our largest stockholder, owning approximately 84% of our outstanding
         common stock before taking into account the effect of this offering.


         Critical Accounting Policies and Use of Estimates


            The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial
         statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The
         preparation of these financial statements requires management to make estimates and judgments that affect the reported
         amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent


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         assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to revenue recognition, bad
         debts, investments, intangible assets and income taxes. Our estimates are based on historical experience and on various other
         assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.


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


            Revenue Recognition. Hardware sales consist of smart grid communications nodes as well as system software embedded
         in the communications nodes. The system software embedded in our communications nodes is used solely in connection
         with the operation of the products. Upon the sale and shipment of our products, we are not required to update the embedded
         software for newer versions that are subsequently developed. In addition, we do not offer or provide any free post-contract
         customer support. There is an original warranty period, which may run for a period of up to 12 months from the sale of the
         products, in which we may repair or replace products when and if appropriate. As such, we recognize revenue from the sales
         of our products upon delivery to the customer.


            Our proprietary software consists of AmbientNMS ® , which may be sold on a stand-alone basis. The sale or license of
         AmbientNMS ® does not include post-contract customer support unless the customer enters into a maintenance agreement
         with us. As a result, we recognize revenue from the sale of this software product when shipped. We classify amounts billed
         to customers before software is shipped as deferred revenue.


            We offer maintenance service, on a fee basis, that entitles the purchasers of our products and AmbientNMS ® software to
         benefits including telephone support, updates and upgrades to our products. We amortize such revenue when received over
         the appropriate period based on the terms of individual agreements and contracts.


            Inventory Valuation. We value inventory at the lower of cost or market determined on a first-in, first-out basis. Certain
         factors may impact the net realizable value of our inventory, including technological changes, market demand, new product
         introductions and significant changes to our cost structure. We make estimates of reserves for obsolescence based on the
         current product mix on hand and its expected net realizable value. If actual market conditions are less favorable or other
         factors arise that are significantly different than those anticipated by us, additional inventory write-downs or increases in
         obsolescence reserves may be required. We consider lower of cost or market adjustments and inventory reserves as an
         adjustment to the cost basis of the underlying inventory. Accordingly, we do not record favorable changes in market
         conditions to inventory in subsequent periods.


            Software Development Costs. We have historically expensed costs incurred in the research and development of new
         software products and enhancements to existing software products as incurred. After we establish technological feasibility,
         we capitalize additional development costs. No software development costs have been capitalized as of December 31, 2009
         or 2010.


            Stock-Based Compensation. We account for stock-based compensation in accordance with accounting guidance now
         codified as Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, 718,
         “Compensation — Stock Compensation (formerly known as SFAS No. 123(R)).” Under the fair value recognition provision
         of ASC 718, stock-based compensation cost is estimated at the grant date based on the fair value of the award. We estimate
         the fair value of stock options granted using the Black-Scholes option pricing model. Key input assumptions used to estimate
         the fair value of stock options include the exercise price of the award, the expected option term, the expected volatility of our
         stock over the option‟s expected term, the risk-free interest rate over the stock option‟s expected term and the annual
         dividend yield.


            Deferred Income Taxes. We recognize deferred income taxes for the tax consequences of “temporary differences” by
         applying enacted statutory rates applicable to future years to differences between the financial statement carrying amounts
         and the tax basis of existing assets and liabilities. At December 31, 2010, our deferred income tax assets consisted primarily
         of net operating loss carryforwards and stock-based compensation charges that have been fully offset with a valuation
         allowance due to the uncertainty that a tax benefit will be realized from the assets in the


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         future. At December 31, 2010, we had available approximately $77 million of net operating loss carryforwards, for
         U.S. income tax purposes which expire in the years 2016 through 2029. However, due to changes in stock ownership
         resulting from historical investments provided by Vicis, we expect that the use of the U.S. net operating loss carryforwards
         are significantly limited under Section 382 of the Internal Revenue Code. As such, we estimate that $61 million or more of
         our net operating loss carryforwards will expire and will not be available to use against future tax liabilities.


            Warranties. We account for our warranties under the FASB ASC 450, “Contingencies.” We generally warrant that our
         products will be free from defects in material and workmanship for a period of one year from the date of initial acceptance
         by our customers. The warranty does not cover any losses or damage that occur as a result of improper installation, misuse or
         neglect or repair or modification by anyone other than us or our authorized repair agent. Our policy is to accrue anticipated
         warranty costs based upon historical percentages of items returned for repair within one year of the initial sale. Because the
         repair rate of products under warranty has been minimal, we have not established an historical percentage; therefore, we
         have not provided for any warranty liability reserves. We continue to monitor the rate of actual product returns each quarter
         to determine whether a provision for such warranty liability is required.


            Our software license agreements generally include provisions for indemnifying customers against liabilities if our
         software infringes upon a third party‟s intellectual property rights. We have not provided for any reserves for such warranty
         liabilities. Our software license agreements also generally include a warranty that our software will substantially operate as
         described in the applicable program documentation. We also warrant that we will perform services in a manner consistent
         with industry standards. To date, we have not incurred any material costs associated with these product and service
         performance warranties, and as such we have not provided for any reserves for any such warranty liabilities in our operating
         results.


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         Results of Operations


            The following table sets forth, for the periods indicated, our results of operations:


                                                                        Year Ended December 31,                    Six Months Ended June 30,
                                                                 2008              2009              2010              2010          2011
                                                                                 (In thousands, except per share data)


         Total revenue                                       $    12,622       $      2,193      $ 20,358         $    6,258      $ 27,993
         Cost of goods sold                                        9,942              1,836        12,023              3,782        15,963
            Gross profit                                            2,680               357           8,335            2,476          12,030
         Operating expenses:
           Research and development expenses                        4,351             4,946           6,314            2,975           4,893
           Selling, general and administrative expenses             3,600             4,662           5,239            2,305           3,507
         Total operating expenses                                   7,951             9,608          11,553            5,280           8,400
         Operating (loss) income                                   (5,271 )          (9,251 )        (3,218 )         (2,804 )         3,630
         Interest (expense) income, net                            (3,116 )          (4,963 )          (214 )           (213 )            12
         Loss on extinguishment of debt                            (2,789 )              —               —                —               —
         Other (expense) income, net                                 (118 )             (32 )           246               —               —
               Total other (loss) income                           (6,023 )          (4,995 )             32            (213 )            12
         Provision for income taxes                                     —                —                —               —              109
         Net (loss) income                                   $   (11,294 )     $    (14,246 )    $ (3,186 )       $ (3,017 )      $    3,533

         Net (loss) income per share (basic)                 $      (3.75 )    $      (1.81 )    $     (0.21 )    $    (0.20 )    $     0.21
         Net (loss) income per share (diluted)               $      (3.75 )    $      (1.81 )    $     (0.21 )    $    (0.20 )    $     0.21
         Weighted average shares used in computing
           basic net (loss) income per share                        3,016             7,891          15,385           15,022          16,496
         Weighted average shares used in computing
           diluted net (loss) income per share                      3,016             7,891          15,385           15,022          16,936


                                                                          36
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           The following table sets forth, for the periods indicated, our results of operations expressed as a percentage of total
         revenue:

                                                                                                                     Six Months Ended
                                                                              Year Ended December 31,                     June 30,
                                                                          2008          2009          2010          2010           2011


         Total revenue                                                      100 %          100 %        100 %        100 %           100 %
         Cost of goods sold                                                  79 %           84 %         59 %         60 %            57 %
            Gross profit                                                     21 %           16 %          41 %        40 %            43 %
         Operating expenses:
           Research and development expenses                                 34 %          226 %          31 %        48 %            17 %
           Selling, general and administrative expenses                      29 %          213 %          26 %        37 %            13 %
         Total operating expenses                                            63 %          438 %          57 %        85 %            30 %
                                                                                )              )             )           )
         Operating (loss) income                                            (42 %         (422 %         (16 %       (45 %            13 %
                                                                                )              )             )            )
         Interest (expense) income, net                                     (25 %         (226 %          (1 %         (3 %            0%
                                                                                )
         Loss on extinguishment of debt                                     (22 %           —             —           —               —
                                                                                )              )
         Other (expense) income, net                                         (1 %           (2 %           1%         —               —
                                                                                )              )                          )
            Total other (loss) income                                       (48 %         (228 %           0%          (3 %            0%
         Provision for income taxes                                          —              —             —           —                0%
                                                                                )              )             )           )
         Net (loss) income                                                  (90 %         (650 %         (16 %       (48 %            13 %



         Comparison of the Six Months Ended June 30, 2011 and the Six Months Ended June 30, 2010


            Total Revenue. Total revenue for the six months ended June 30, 2011 was approximately $28.0 million, an increase of
         approximately 344% from approximately $6.3 million for the corresponding period in 2010. The increase in total revenue
         during each of the three and six months ended June 30, 2011, as compared with the corresponding periods in 2010, reflected
         a substantial increase in the number of communications nodes delivered as part of Duke Energy‟s Ohio smart grid initiative,
         as well as increased software maintenance fees related to our AmbientNMS ® .


            Cost of Goods Sold. Cost of goods sold for the six months ended June 30, 2011 was approximately $16.0 million, an
         increase of $12.2 million from $3.8 million for the corresponding period in 2010. The increase in cost of goods sold was due
         primarily to the increase in sales volume associated with increased activity related to the Duke Energy Ohio smart grid
         initiative.


            Our policy is to accrue anticipated warranty costs based upon historical percentages of items returned for repair within one
         year of the initial sale. Because the repair rate of products under warranty has been minimal, we have not established an
         historical percentage; therefore, we have not provided for any warranty liability reserves for the six months ended June 30,
         2010 and 2011.


           Gross Profit. Gross profit for the six months ended June 30, 2011 was approximately $12.0 million, an increase of
         $9.5 million from approximately $2.5 million for the corresponding period in 2010. Our overall gross margin for the six
         months ended June 30, 2011 increased to approximately 43% compared with approximately 40% for the corresponding
period in 2010. Gross margin improved over 2010 primarily because of improved manufacturing costs associated primarily
with increased volumes.


  Research and Development Expenses. Research and development expenses for the six months ended June 30, 2011 were
approximately $4.9 million, an increase of $1.9 million from approximately $3.0 million for the corresponding period in
2010. The increase in research and development during the 2011 periods was due primarily to increased personnel and
consultant expenses for the continued development of our fourth generation


                                                          37
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         communications platform, and the enhancement of our AmbientNMS ® . We believe that our continued development efforts
         are critical to our strategic objectives of enhancing our technology while reducing costs, and therefore, we expect that our
         research and development expenses will increase over the next 12 months as we continue to focus our efforts on developing
         more robust solutions and providing additional value-added functionality for our communications platform. Research and
         development expenses consisted of expenses incurred primarily in designing, developing and field testing our smart grid
         communications platform. These expenses consisted primarily of salaries and related expenses for personnel, contract design
         and testing services, supplies used and consulting and license fees paid to third parties.


           Selling, General and Administrative Expenses. Selling, general and administrative expenses for the six months ended
         June 30, 2011 were approximately $3.5 million, an increase of $1.2 million from approximately $2.3 million for the
         corresponding period in 2010. The increase in selling, general and administrative expenses was due primarily to increased
         personnel costs and increased activity regarding our efforts to market the Ambient Smart Grid ® communications platform.
         Selling, general and administrative expenses consisted primarily of salaries and other related costs for personnel in executive
         and other administrative functions. Other significant costs included professional fees for legal, accounting and other services.
         We expect that selling, general and administrative expenses will increase over the next 12 months as we hire additional
         personnel associated with business development activities, incur more expenses associated with our listing on the NASDAQ
         Capital Market, incur increased costs associated with compliance with Sarbanes-Oxley and increase activity associated with
         marketing programs targeted at increasing our overall brand awareness.


            Interest Income and Expense. Net interest income for the six months ended June 30, 2011 was approximately $11,500 as
         compared with net interest expense of approximately $213,000 for the corresponding period in 2010. Interest expense during
         the six months ended June 30, 2010 related primarily to our 8% Secured Convertible Promissory Notes, which were issued
         in July and November of 2007 and January 2008 and included non-cash charges associated with the amortization of the
         beneficial conversion features and deferred financing costs incurred in connection with the placement of the convertible
         promissory notes. As of January 31, 2010, all of the outstanding convertible promissory notes were converted into shares of
         our common stock, for which we will no longer incur interest expenses.


            Provision for Income Taxes. As a result of our net income of approximately $3.5 million for the six months ended
         June 30, 2011, we recorded a provision for income taxes of approximately $109,000 for the six months ended June 30, 2011.
         The provision reflected federal alternative minimum taxes. At December 31, 2010, we had available approximately
         $77 million of net operating loss carryforwards for federal income tax purposes, which expire in the years 2016 through
         2029. However, due to changes in stock ownership resulting from historical investments provided by Vicis, we expect that
         the use of the U.S. net operating loss carryforwards are significantly limited under Section 382 of the Internal Revenue
         Code. As such, we estimate that $61 million or more of our net operating loss carryforwards will expire and will not be
         available to use against future tax liabilities.


         Comparison of the Year Ended December 31, 2010 and the Year Ended December 31, 2009


            Total Revenue. Total revenue for 2010 was $20.4 million compared with $2.2 million for 2009. Total revenue for each of
         2009 and 2010 represented the sale of products and license of software to, and maintenance fees from, Duke Energy. The
         increase in total revenue for 2010 compared with 2009 reflected an increase in the number of communications nodes
         delivered as part of Duke Energy‟s Ohio smart grid initiative as well as increased software license fees from the licensing of
         our AmbientNMS ® .


            Costs of Goods Sold. Cost of goods sold for 2010 was $12.0 million compared with $1.8 million for 2009. The increase
         in cost of goods sold during 2010 primarily reflected the increase in sales volume to Duke Energy. Cost of goods sold
         included all costs related to the manufacture of our products by a contract manufacturer. The contract manufacturer is
         responsible for all aspects of manufacturing, including procuring most of the key components required for assembly.
         Additionally, we recorded approximately $152,000 in charges associated with the write-off of obsolete inventory during
         2009.


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            Our policy is to accrue anticipated warranty costs based upon historical percentages of items returned for repair within one
         year of the initial sale. Because the repair rate of products under warranty has been minimal, we have not established an
         historical percentage; therefore, we have not provided for any warranty liability reserves for the years ended December 31,
         2010 and 2009.


            Gross Profit. Gross profit for 2010 was $8.3 million compared with $357,000 for 2009. Gross margin for 2010 increased
         to approximately 41% compared with approximately 16% for 2009. The increase in the gross margin for 2010 compared
         with 2009 was a reflection of the maturing of our product offering and more stable manufacturing costs, our enhanced ability
         to plan production and scale based on increased lead-time and transparency in the forecasting and purchasing process of our
         customer, and a stable and productive relationship with our contract manufacturer.


            Research and Development Expenses. Research and development expenses were approximately $6.3 million for 2010
         compared with $4.9 million for 2009. Research and development expenses were incurred primarily in designing, developing
         and field testing our smart grid communications platform and consisted primarily of salaries and related expenses for
         personnel, contract design and testing services, supplies used and consulting and license fees paid to third parties. The
         increase in research and development during 2010 was primarily due to increased personnel and consultant expenses
         required for the continued development of our fourth generation communications nodes and enhancement of our
         AmbientNMS ® . We believe that our continued development efforts are critical to our strategic objectives of enhancing our
         technology while simultaneously reducing costs. We expect that our research and development expenses will increase in
         2011 as we continue to develop and improve our communications platform.


            Selling, General and Administrative Expenses. Selling, general and administrative expenses for 2010 were approximately
         $5.2 million compared with $4.7 million for 2009. The selling, general and administrative expenses consisted primarily of
         salaries and other related costs for personnel in executive and other administrative functions. Other significant costs included
         professional fees for legal, accounting and other services. The increase in selling, general and administrative expenses for
         2010 compared with 2009 was due to increased efforts to market and commercialize our communications platform. In 2011,
         we expect our selling, general and administrative expenses to increase as we continue to increase our efforts to market and
         commercialize our communication platform.


            Interest Income and Expense. We incurred interest expense of approximately $32,000 for 2010 compared with
         approximately $617,000 for 2009. Interest expense related primarily to our 8% Secured Convertible Promissory Notes,
         which were issued in July 2007, and November 2007 and January 2008. Additionally, we incurred non-cash interest expense
         of approximately $184,000 and approximately $4.4 million, for 2010 and 2009, respectively. This non-cash interest expense
         related to the amortization of the beneficial conversion features and deferred financing costs incurred in connection with the
         placement of our convertible promissory notes with Vicis. These costs were amortized to the date of maturity of the debt
         unless converted earlier. In January 2010, Vicis converted the remaining $10 million outstanding on the notes. Following the
         conversion of the notes, we no longer had any long-term debt outstanding. In addition, on June 30, 2009, we agreed to
         modify the terms of the expiring Class A warrants. Under the new terms, the warrants were exercisable through August 31,
         2009 and the exercise prices were reduced from $20.00 to $15.00 per share. The resulting charge of approximately
         $1.1 million due to this modification was reflected as additional interest expense during 2009.


         Comparison of the Year Ended December 31, 2009 and the Year Ended December 31, 2008


            Total Revenue. Total revenue for 2009 was approximately $2.2 million compared with approximately $12.6 million for
         2008. Total revenue for 2009 was attributable to the sales of equipment, software and services to Duke Energy. Total
         revenue of $2.2 million in 2009 declined from $12.6 million in 2008 due mainly to the impact of the introduction of the
         ARRA. Although the ARRA was passed in September 2009, by late 2008 and early 2009, there was widespread speculation
         that a significant amount of funding would be made available for smart grid related initiatives. As a result, many utilities
         with smart grid projects underway, including Duke Energy, substantially slowed their spending until there was further clarity
         regarding the amount of funding available under the federal program. Furthermore, the language of the Smart Grid
         Investment Grants, which are part


                                                                       39
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         of the ARRA, also provided initial guidance regarding certain technical criteria required in order for grant eligibility. As
         such, utilities needed further clarity that the technology in their smart grid programs would qualify for funding. As soon as
         the ARRA was passed in September 2009, sales of our communications nodes to Duke Energy increased significantly as
         Duke Energy resumed its smart grid implementation in Ohio. Correspondingly, our total revenue realized for the end of 2009
         also began to increase. This phenomena impacted revenue trends across the entire smart grid sector.


           Cost of Goods Sold. Cost of goods sold for 2009 was approximately $1.8 million compared with approximately
         $9.9 million for 2008. The decrease in cost of goods sold during 2009 was due primarily to a decrease in sales volume
         compared with 2008. For 2008 and 2009, cost of goods sold included inventory write-offs of approximately $482,000 and
         approximately $152,000, respectively, for excess, obsolete and surplus inventory resulting from the transition from the
         second generation to the third generation of our technology.


            Our policy is to accrue anticipated warranty costs based upon historical percentages of items returned for repair within one
         year of the initial sale. Because the repair rate of products under warranty has been minimal, we have not established an
         historical percentage; therefore, we have not provided for any warranty liability reserves for the years ended December 31,
         2009 and 2008.


           Gross Profit. Gross profit for 2009 was approximately $357,000 compared with approximately $2.7 million for 2008.
         Our overall gross margin also decreased to 16% in 2009 from 21% in 2008. The decrease in gross margin in 2009 compared
         with 2008 was primarily due to changes to our product mix, higher associated cost of our older generation products and
         higher inventory markdowns.


            Research and Development Expenses. Research and development expenses were approximately $4.9 million for 2009
         compared with $4.4 million for 2008. The increase in research and development expenses during 2009 was primarily due to
         the increased personnel and consultant expenses for the development of our X-3100 communications nodes. Research and
         development expenses consisted of expenses incurred primarily in designing, developing and field testing our smart grid
         communications platform. These expenses consisted primarily of salaries and related expenses for personnel, contract design
         and testing services, supplies used and consulting and license fees paid to third parties.


            Selling, General and Administrative Expenses. Selling, general and administrative expenses consisted primarily of
         salaries and other related costs for personnel in executive and other functions. Other significant costs included insurance and
         professional fees for legal, accounting and other services. General and administrative expenses for 2009 were approximately
         $4.7 million compared with $3.6 million for 2008. The increase in operating, general and administrative expenses was due to
         the increase in efforts to market and commercialize our communications platform.


            Interest Income and Expense. Interest expense totaled approximately $5.0 million and $3.1 million, respectively for 2009
         and 2008. Interest totaling approximately $617,000 for 2009 and approximately $674,000 for 2008 related primarily to our
         8% Secured Convertible Promissory Notes, which were issued in July 2007, November 2007 and January 2008, and our
         8% Convertible Debentures, which were issued in May 2006 and were retired in their entirety as of January 2, 2008.
         Additionally, for 2009 and 2008, we incurred non-cash interest expense of approximately $4.4 million and $2.5 million,
         respectively. This interest related to the amortization of the beneficial conversion features and deferred financing costs
         incurred in connection with the placement of our convertible debentures and notes. These costs were amortized to the date of
         maturity of the debt unless converted earlier. In addition, on June 30, 2009, we agreed to modify the terms of the expiring
         Class A warrants. Under the new terms, the warrants were exercisable through August 31, 2009 and the exercise prices were
         reduced from $20.00 to $15.00 per share. The resulting charge due to the modification was approximately $1.1 million and
         was reflected as additional interest expense.


            Loss on Extinguishment of Debt. We accounted for the November 2008 modification of the convertible promissory notes
         that we issued to Vicis between July 2007 and January 2008 as an extinguishment of debt. We deemed the terms of the
         amendment to be substantially different and treated the notes as extinguished and


                                                                       40
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         exchanged for new notes. As such, it was necessary to reflect the convertible promissory notes at fair market value and
         record a loss on extinguishment of debt of approximately $2.8 million.


         Liquidity and Capital Resources


           Since inception, we have primarily funded our operations with proceeds from the sale of our securities and, most recently,
         with revenue from sales of our products. At June 30, 2011, we had working capital of $10.2 million, including cash and cash
         equivalents of $12.5 million. Our cash and cash equivalents were $8.1 million, $1.0 million and $7.0 million as of
         December 31, 2008, 2009 and 2010, respectively.


            Net cash used in operating activities during the years ended December 31, 2008, 2009 and 2010 was approximately
         $5.6 million, $7.7 million and $1.6 million, respectively. Cash used in operations for the years ended December 31, 2008,
         2009 and 2010 was primarily due to funding operating losses attributed to spending in research and development and general
         and administrative expenses associated with the development of our technologies and products and to support the growth of
         our business. Cash provided by operating activities was $5.9 million for the six months ended June 30, 2011 compared with
         net cash used in operating activities of $2.0 million for the corresponding period in 2010. Cash provided by operating
         activities for the six months ended June 30, 2011 was primarily due to an increase in product revenue of $21.7 million over
         the corresponding period in 2010, thereby significantly increasing gross profit and generating cash to pay our ongoing
         operating expenses.


            Net cash used in investing activities during the years ended December 31, 2008, 2009 and 2010 was approximately
         $576,000, $269,000 and $527,000, respectively. Net cash used in investing activities for the six months ended June 30, 2010
         and 2011 was approximately $264,000 and $511,000, respectively. Net cash used in investing activities for all periods was
         primarily for additions to fixed assets.


           Net cash provided by financing activities during the years ended December 31, 2008, 2009 and 2010 was approximately
         $13.6 million, $964,000 and $8.1 million, respectively. Net cash provided by financing activities for the six months ended
         June 30, 2010 and 2011 was approximately $2.6 million and $129,000, respectively. Net cash provided by financing
         activities for all periods consisted primary of sales of our securities, which are described in more detail in the section titled
         “Capitalization History.”


           We believe that our business plan will provide sufficient liquidity to fund our operating needs for the next 12 months.
         However, there are factors that can impact our ability continue to fund our operating needs, including:


            • Our ability to maintain product pricing as expected, particularly in light of increased competition and its unknown
              effects on market dynamics;
            • Our and our contract manufacturer‟s ability to reduce manufacturing costs as expected;
            • Our ability to expand sales volume, which is highly dependent on the smart grid implementation plans of Duke Energy
              and other utilities; and
            • The need for us to continue to invest in operating activities in order to remain competitive or acquire other businesses
              and technologies in order to complement our products, expand the breadth of our business, enhance our technical
              capabilities or otherwise offer growth opportunities.


            If we cannot effectively manage these factors, we may need to raise additional capital in order to fund our operating
         needs. We currently do not have any commitments for additional funding. If we are unable to obtain adequate financing or
         financing on terms satisfactory to us when we require it, our ability to continue to grow or support our business and to
         respond to business challenges could be significantly limited.


         Off-Balance Sheet Arrangements


            As of December 31, 2009 and 2010, we did not have any relationships with unconsolidated entities or financial
         partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been
         established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or
41
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         limited purposes. Other than our operating leases for office space and certain other capital lease obligations, we do not
         engage in off-balance sheet financing arrangements. In addition, we do not engage in trading activities involving
         non-exchange traded contracts. As such, we are not materially exposed to any financing, liquidity, market or credit risk that
         could arise if we had engaged in these relationships.


         Contractual Obligations and Commitments


           The following table summarizes our contractual obligations as of December 31, 2010. These contractual obligations
         require us to make future cash payments.


                                                                                          Payments Due By Period
                                                                              Less than                                      More than
                                                                                  1                                             5
         Contractual Obligations                                   Total        Year          1 - 3 Years      3 - 5 Years    Years
                                                                                              (In thousands)


         Short-Term Debt Obligations                              $ —         $     —         $      —         $        —    $       —
         Capital Lease Obligations                                  11              11               —                  —            —
         Operating Lease Obligations                               794             390              404                 —            —
         Purchase Obligations                                       —               —                —                  —            —
         Other Long-Term Liabilities Reflected on the
           Company‟s Balance Sheet under GAAP                         —             —                —                  —            —
         Total                                                    $ 805       $    401        $     404        $        —    $       —



         Quantitative and Qualitative Disclosures About Market Risk


            Foreign Currency Exchange Risk. We bill our customers predominately in U.S. dollars and receive payment
         predominately in U.S. dollars. Additionally, although our products are manufactured by our contract manufacturer in China,
         we pay our obligations to it in U.S. dollars. Accordingly, our results of operations and cash flows are not materially subject
         to fluctuations due to changes in foreign currency exchange rates. If we increase sales of our products outside of the United
         States, our contracts with foreign customers may be denominated in foreign currency and may become subject to changes in
         currency exchange rates.


           Interest Rate Sensitivity. Interest income and expense are sensitive to changes in the general level of U.S. interest rates.
         However, based on the nature and current level of our investments, which are primarily cash and cash equivalents, we
         believe there is no material risk of exposure.


         Seasonality


            Historically, we have not experienced significant seasonal fluctuations or variations in sales. Since our communications
         nodes are physical devices that are manually installed by utilities, weather conditions may temporarily impact the timing of
         deployment. However, we do not expect that adverse weather conditions will result in substantial fluctuations or variations
         of sales in any particular reporting period.


         Recently Issued Accounting Pronouncements


           The FASB ratified Accounting Statement Update, or ASU, 2009-13, “Revenue Recognition-Milestone Method (Topic
         605): Multiple-Deliverable Revenue Arrangements,” which eliminates the residual method of allocation, and instead requires
         companies to use the relative selling price method when allocating revenue in a multiple deliverable arrangement. When
         applying the relative selling price method, the selling price for each deliverable shall be determined using vendor specific
         objective evidence of selling price, if it exists, and otherwise using third-party evidence of selling price. If neither vendor
         specific objective evidence nor third-party evidence of selling price exists for a deliverable, companies shall use their best
estimate of the selling price for that deliverable when applying the relative selling price method. ASU 2009-13 shall be
effective in fiscal years beginning on or after June 15, 2010, with earlier application permitted. Companies may elect to
adopt this guidance prospectively for all


                                                              42
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         revenue arrangements entered into or materially modified after the date of adoption, or retrospectively for all periods
         presented. We have adopted this standard effective January 1, 2011. We do not expect the provisions of ASU 2010-13 to
         have a material effect on our financial position, results of operations or cash flows.


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


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


         Quarterly Results of Operations


            The following tables set forth selected unaudited quarterly statements of operations data for the last ten quarters. The
         information for each of these quarters has been prepared on the same basis as the audited annual financial statements
         included elsewhere in this prospectus and, in our opinion, includes all adjustments, which consist only of normal recurring
         adjustments, necessary for the fair presentation of the results of operations for these periods. This data should be read in
         conjunction with our audited consolidated financial statements and related notes included elsewhere in this prospectus.
         These quarterly operating results are not necessarily indicative of our operating results for any future period.

                                                                2009                                                          2010                                             2011
                                       Mar. 31            June 30      Sept. 30           Dec. 31      Mar. 31         June 30       Sept. 30           Dec. 31      Mar. 31              June 30
                                                                                           (In thousands, except per share data)


             Total revenue             $     826      $         31     $      61      $      1,275     $    1,684     $    4,574     $    4,976     $      9,124     $ 12,007         $ 15,986
             Cost of goods sold              731                26           178               901          1,141          2,641          2,998            5,243        6,801            9,162

               Gross profit                    95                5          (117 )             374            543          1,933          1,978            3,881          5,206              6,824

             Operating expenses:
               Research and
                 development
                 expenses                  1,082             1,109         1,342             1,413          1,577          1,398          1,273            2,066          2,088              2,805
               Selling, general and
                 administrative
                 expenses                  1,215             1,226         1,146             1,075          1,175          1,130          1,270            1,664          2,011              1,496

             Total operating
               expenses                    2,297             2,335         2,488             2,488          2,752          2,528          2,543            3,730          4,099              4,301

             Operating (loss) income       (2,202 )         (2,330 )       (2,605 )         (2,114 )       (2,209 )         (595 )         (565 )            151          1,107              2,523

             Interest (expense)
                income, net                (1,832 )         (2,493 )        (429 )            (209 )         (213 )           —              —                (1 )             6                    6
             Other (expense) income,
                net                            (9 )             —              (1 )            (22 )           —              —             252               (6 )          —                   —

               Total other (loss)
                 income                    (1,841 )         (2,493 )        (430 )            (231 )         (213 )           —             252               (7 )             6                    6

             Provision for income
               taxes                           —                —              —                —              —              —              —                —             28                  81

             Net (loss) income         $   (4,043 )   $     (4,823 )   $   (3,035 )   $     (2,345 )   $   (2,422 )   $     (595 )   $     (313 )   $        144     $    1,085       $      2,448

             Net (loss) income per
               share (basic)           $    (0.56 )   $      (0.67 )   $    (0.37 )   $      (0.26 )   $    (0.17 )   $    (0.04 )   $    (0.02 )   $       0.01     $     0.07       $       0.15
             Net (loss) income per
               share (diluted)         $   (0.56 )    $      (0.67 )   $   (0.37 )    $      (0.26 )   $    (0.17 )   $    (0.04 )   $    (0.02 )   $      0.01      $     0.06       $      0.14
             Weighted average              7,200             7,209         8,167             8,974         14,162         15,871         15,932          15,988          16,486            16,505
 shares used in
 computing basic net
 (loss) income per
 share
Weighted average
 shares used in
 computing diluted net
 (loss) income per
 share                   7,200   7,209   8,167   8,974   14,162   15,871   15,932   16,513   16,946   16,909



                                                 43
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                                                               OUR BUSINESS


         Overview


            We are a leading provider of a smart grid communications platform that enables utilities to effectively deploy, integrate
         and communicate with multiple smart grid applications within the electric power grid. Our smart grid communications
         platform significantly improves the ability of utilities to use advanced technologies to upgrade their electric power grids,
         effectively making the grids more intelligent.


            The term “smart grid” refers to the use of advanced technologies to upgrade the electric power grid, or the grid, effectively
         making the grid more intelligent and efficient. The grid was largely designed and built decades ago to reliably distribute
         electricity from generators to customers in a manner resulting in sizable capital investments and operating costs. A number
         of factors are increasingly straining the grid, including rapidly growing electricity demand, two-way power flow, the
         implementation of renewable and distributed energy sources and advanced pricing plans. As such, the aging grid is prone to
         reliability, security, availability and power quality issues, costing utilities and consumers billions of dollars each year.
         Technology is now revolutionizing the grid and transforming it into an efficient, communicating energy service platform.
         We believe that the smart grid will address the current shortcomings of the grid and deliver significant benefits to utilities
         and consumers of energy, including reduced costs, increased power reliability and quality, accommodation of renewable
         energy technologies, consumer empowerment over energy consumption and a platform for continued integration of new
         technologies.


            The Ambient Smart Grid ® communications platform, which includes hardware, software and firmware, enables utilities
         to effectively manage smart grid applications. Our communications platform provides utilities with a secure, two-way,
         flexible and open Internet protocol, or IP, architecture that efficiently networks smart grid applications and different
         technologies within each application and supports multiple communications technologies currently used by utilities, such as
         Wi-Fi, radio frequency, cellular technologies, power line communications, serial and Ethernet. Today, our communications
         platform enables the simultaneous integration and parallel communication of multiple smart grid applications provided by a
         variety of vendors, including smart metering, demand response and distribution automation. We believe that the Ambient
         Smart Grid ® communications platform delivers significant benefits to utilities, including support of a single network; an
         open, scalable and interoperable platform; preservation of utility investments; third-party application hosting; remote and
         distributed intelligence; secure communications; and reduced overall implementation and operating costs.


            The Ambient Smart Grid ® products and services include communications nodes; a network management system,
         AmbientNMS ® ; integrated applications; and maintenance and consulting services. The communications nodes, our
         principal product, are physical boxes that contain the hardware and software needed for communications and data collection
         in support of smart grid assets. We have configured our communications nodes to act as individual data processors and
         collectors that receive signals from other networked devices, enabling smart grid applications. Duke Energy, our premier
         customer, has deployed approximately 55,000 of our communications nodes that receive data from smart electric and gas
         meters, using a variety of communications technologies, and process and transmit these data to the utility back office over a
         cellular carrier network for further processing. Furthermore, our communications nodes, in the fourth generation of
         development, also accommodate integrated applications that include our own developed technology and third-party
         technology, thereby substantially increasing their functionality. By enabling such system interoperability, our
         communications platform both reduces implementation and ongoing communications costs and improves overall power
         management efficiencies. We believe that, to date, no other single solution or technology has provided the necessary
         flexibility in a cost-effective manner, enabling a comprehensive digital communications platform while leveraging
         standards-based technologies. We developed our communications platform to fill this void.


            Our long-standing relationship with Duke Energy, which we believe has one of the most forward-looking smart grid
         initiatives in North America, has led to rapid growth in our business. We entered into a long-term agreement in September
         2009 with Duke Energy, currently our sole customer, to supply Duke Energy with our Ambient Smart Grid ®
         communications platform and license our AmbientNMS ® through 2015. We increased revenue from


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         $2.2 million in 2009 to $20.4 million in 2010 and generated $28.0 million of additional revenue in the first six months of
         2011. As of June 30, 2011, we had backlog of approximately $68 million, consisting of products that we expect to deliver
         into 2012. We believe that there exists a significant opportunity for growth with Duke Energy and with Progress Energy,
         upon the anticipated completion of the proposed merger of Duke Energy and Progress Energy announced in January 2011.
         We also intend to leverage our success with Duke Energy to secure additional customers.


         Industry Overview


            The Electric Power Distribution Grid


            The grid was largely designed and built decades ago. Rapidly growing electricity demand and the implementation of
         renewable and distributed energy sources, among other factors, are increasingly straining the grid. According to the
         U.S. Department of Energy, or DOE, in the United States 70% of transmission lines are 25 years old or older; 70% of power
         transformers are 25 years old or older; and 60% of circuit breakers are 30 years old or older. The current grid infrastructure,
         both in the United States and abroad, simply is not designed to accommodate the dynamic electricity distribution
         requirements of today or the future. As a result, the aging grid is prone to reliability, security, availability and power quality
         issues, costing utilities and consumers billions of dollars each year. For example, according to the Electrical Power Research
         Institute, or EPRI, power disturbances and quality problems alone cost U.S. businesses between $119 billion and
         $188 billion each year.


            The following factors highlight the deficiencies of today‟s grid:


            Increasing Energy Demand. Worldwide economies and populations are expanding and that expansion and the
         proliferation of electronic devices require more, and higher quality, electricity. According to the U.S. Energy Information
         Administration, or EIA, demand for electricity in the United States is projected to grow 30% by 2030, requiring
         approximately $1.5 trillion in generating and distribution infrastructure investment. Electrical generation worldwide is
         expected to increase approximately 87% from 2007 to 2035. In comparison, between the years of 1990 and 2003, worldwide
         electricity demand increased by only 25%. The increased energy demand has already begun, and will increasingly continue,
         to strain the reliability and integrity of the grid.


            Severely Strained and Aging Grid. The strain on the grid has led to efficiency losses, service interruptions, higher
         electricity rates and costly unplanned maintenance and repair expenses. According to the EPRI, power quality issues alone
         already cost between $15 billion and $24 billion per year in the United States. As consumers and industries increase their
         reliance on electronic devices, these disturbances and quality issues will become more disruptive and more costly. Increased
         grid efficiency will help reduce the capital required for added grid infrastructure.


            Inability of the Grid to Support Proliferation of Renewable Energy and Related Technologies. Over the past few years,
         utilities and consumers have increased their adoption of centralized and distributed renewable energy, such as wind, solar
         and energy storage technologies, as a source of electricity. According to the EIA, renewable energy sources will account for
         23% of total electricity generation worldwide in 2035. Furthermore, expected growth in electric vehicles will create the need
         for charging stations, placing additional strain on the grid. The grid will not be able to accommodate all of these renewable
         energy initiatives. Moreover, approximately half of the states in the United States have some form of renewable portfolio
         standards, which require that specified amounts of electricity are sourced from renewable sources, resulting in a substantial
         anticipated increase in the need for grid modernization. This is a global trend evidenced, in part, by the European Union, or
         EU, climate energy goals. The EU has adopted aggressive climate and energy goals — the “20-20-20” targets — that aim to
         reduce EU greenhouse gas emissions at least 20% below 1990 levels, derive 20% of EU energy consumption from
         renewable resources and create a 20% reduction in primary energy use compared with projected levels through improving
         energy efficiency, in each case, by 2020.


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            Limited Real-Time Operational Insight, Communication and Analysis. The century-old grid in the United States consists
         of over 300,000 miles of transmission lines and over 1,000,000 megawatts of generating capacity. The importance of today‟s
         grid to modern society is unquestionable; however, it remains largely untouched by modern networking and communications
         technologies. For example, power outages are still manually reported for the majority of the grid. The lack of
         communications technologies represents a significant limiting factor in the amount of information and control available to
         both utility operators and their customers. The lack of these technologies has also had a limiting effect on the ability of
         utilities to engage with their customers and for customers to take an active role in their consumption and cost of energy and
         resources.


            The Smart Grid


            We believe that the smart grid transformation will address the shortcomings of the current grid as well as deliver
         significant benefits to utilities and consumers of energy. The smart grid encompasses multiple technologies and applications,
         and represents significantly more than just smart electric meters. The U.S. Energy Independence and Security Act of 2007
         provided the following, thorough definition of the smart grid:


                  The term “smart grid” refers to a modernization of the electricity delivery system so it monitors, protects and
               automatically optimizes the operation of its interconnected elements — from the central and distributed generator
               through the high-voltage network and distribution system, to industrial users and building automation systems, to
               energy storage installations and to end-use consumers and their thermostats, electric vehicles, appliances and other
               household devices. The smart grid will be characterized by a two-way flow of electricity and information to create
               an automated, widely distributed energy delivery network. It incorporates into the grid the benefits of distributed
               computing and communications to deliver real-time information and enable the near-instantaneous balance of
               supply and demand at the device level.


         In brief, the term “smart grid” refers to the use of advanced communications technologies and modern computing
         capabilities to upgrade the electric power grid (and even other utility infrastructures, such as gas and water), effectively
         making the grid more intelligent and efficient. We believe that the implementation of intelligent and seamless
         communication across the grid represents the largest expected wave of information technology spending, similar to the
         previous telecommunications and Internet investment cycles.


            Smart Grid Applications


            The smart grid will connect millions of devices that generate, distribute, control, monitor and use energy, thereby enabling
         utilities and consumers to dynamically interact with the energy supply chain. The smart grid is more than just smart meters,
         and we believe that fully realizing the benefits of the smart grid will require the implementation of a variety of technologies
         and applications. For all smart grid applications to work seamlessly together, a flexible and open communications platform is
         needed for the interoperability of each connected smart grid application, including the following:


            Smart Meters. Smart meters encompass the meters themselves, related communications equipment and data management
         systems that record and monitor real-time energy consumption information at regular intervals. Smart meters allow for
         two-way communication of data between the smart meter and a utility‟s back office, providing utilities with valuable
         information to measure and control production, transmission and distribution more efficiently and providing consumers with
         information to make informed choices regarding energy consumption. This technology further enables a utility to reduce the
         costs of operating its distribution system by automating various functions that are currently performed manually, such as
         reading customer meters and turning power on and off at the customer meter.


           Demand Response. Demand response is an initiative in which utilities provide incentives to consumers to reduce energy
         usage during times of peak demand. Demand response includes technology that can manage the consumption of electricity in
         conjunction with supply and demand fluctuations, enabling variable pricing and


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         providing information to encourage consumers to make more active decisions about their energy usage. Utilities can use
         demand response to enable consumers to reduce, or provide direct utility control of, electricity use, particularly during high
         price/demand periods, by sending time-differentiated prices to customers via the meter and recording customers‟ actual
         real-time usage. Demand response technology enables utilities to better manage their distribution network, delivering
         electricity more efficiently and potentially reducing peak and baseload generation requirements.


            Distribution Automation. Distribution automation encompasses utilities deploying control devices and communications
         infrastructure to monitor and control energy distribution in real time, enabling intelligent control over grid functions at the
         distribution level. Utilities use distribution automation applications to directly control the flow of electricity from individual
         substations to consumers in order to improve the quality of power generation, reduce the frequency, duration and scale of
         power outages, reduce energy losses and ultimately optimize operating efficiency and reliability of the grid.


           Network Management Systems. Utilities require back office software and computer hardware systems to monitor and
         manage the vast numbers of devices and information collected by those devices from various smart grid applications.
         Network management systems control smart grid devices and collect and process data in the back office relying on two-way
         communications.


            Smart Grid Requirements


           The success of the smart grid, with its promise of delivering significant benefits to utilities, consumers and the
         environment, will depend upon the successful implementation of smart grid applications that rely on a network
         communications infrastructure. Due to the varied nature of applications, technologies and communication methods, the
         dedicated communications infrastructure requires ample flexibility in order to accommodate and support all connected
         applications. Key requirements of the smart grid include the following:


            Communications Platform. A secure, flexible and open communications platform is required to enable the smart grid.
         The communications platform provides real-time, two-way information flow from multiple smart grid applications to a
         network management system at a utility‟s operations center, providing the critical foundation upon which a utility deploys its
         smart grid applications. A flexible, purpose-built communications platform accommodates different functional requirements
         of each smart grid application, allows different communications technologies to work in parallel and allows a utility to
         rapidly scale a large number of smart grid applications.


           Interoperability. Various agencies, including the U.S. National Institute of Standards and Technology and the Institute of
         Electrical and Electronics Engineers, are developing specific smart grid standards that will allow for software and hardware
         components from different applications, vendors and technologies to seamlessly work together. Interoperability standards,
         and an open communications platform that supports them, will allow for growth of the smart grid that is not predicated on
         any one proprietary network architecture or communication technology.


            Scalability. As utilities incorporate millions of smart grid devices into the grid, all of which will generate vast amounts of
         information, the communications platform must both support all connected applications in parallel and allow for quick and
         cost-effective deployment of new smart grid devices and new applications. A communications platform that cannot scale or
         is limited with latency or bandwidth issues seriously curtails realizing the full benefits of a smart grid.


            Security. With increasing threats of cyber-attacks and the corresponding increased sophistication of malicious
         technology, communications infrastructure must provide security to protect the assets of the utility, preserve the reliability of
         the grid and protect consumers. Secure, IP-based communication protocols are an integral part of any communications
         platform.


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            Cost Effectiveness. An interoperable, scalable and flexible communications platform allows a utility to deploy a single
         platform for all smart grid applications, reducing operation and maintenance costs associated with running separate
         networks. A flexible communications platform also allows utilities to avoid stranding assets by incorporating legacy
         technologies into more advanced systems, while also providing a platform for future technologies.


            Anticipated Smart Grid Investment


            Pike Research forecasts that smart grid investment will total $52 billion in North America by 2015, $80 billion in Europe
         by 2020 and $171 billion in Asia by 2015. The U.S. government is a substantial proponent of smart grid technologies,
         primarily through the American Recovery and Reinvestment Act of 2009, or ARRA, which awarded more than $3.4 billion
         in stimulus funding for smart grid technology development and demonstration, plus $615 million for smart grid storage,
         across 99 smart grid initiatives to be spent by 2013. Due to the cost-share nature of the awards, U.S. investment in smart grid
         technologies associated with the ARRA reached approximately $8 billion in projects to be completed by 2015. The rollout of
         smart meters, one specific smart grid application, is currently a driving factor in the deployment of the smart grid. According
         to EIA, approximately 7% of all electric meters in the United States are smart meters, illustrating a large remaining
         opportunity for smart meters alone.


            We expect that distribution automation, another important smart grid application, may represent the fastest growing and
         potentially largest area of smart grid investment. According to SBI Energy, the global substation automation product market
         is expected to reach $106 billion by 2015, where a bulk of the growth is expected to come from countries that are working to
         modernize their electricity networks and accommodate smart grid technologies. We expect future investment in all smart
         grid applications and technologies to substantially increase.


            Smart Grid Benefits


            The following represent some of the most significant benefits of the smart grid:


            Reduces Costs for Utilities and Consumers. To meet the growing demand for electricity, utilities will need to invest
         substantial capital for added generation and transmission and distribution infrastructure. However, according to the DOE,
         utilities in the United States can save up to $163 billion through 2025 in costs associated with this investment through
         increased energy efficiency with the grid, reducing transmission congestion and preserving reserve capacity resulting from
         the deployment of smart grid applications. By avoiding such substantial costs, utilities can therefore better mitigate
         anticipated consumer rate increases. Moreover, the two-way communication facilitated by smart grid technologies will
         enhance utilities‟ ability to balance supply and demand of electricity, allowing them to more efficiently utilize their
         generation assets and reduce the amount of expensive peak demand assets. According to the EPRI, an investment of $338 to
         $476 billion in smart grid initiatives over the next 20 years will provide overall benefits valued between $1.3 and $2.0
         trillion.


            Increases Power Reliability and Quality. The smart grid‟s two-way communications capabilities provide real-time
         information about the grid‟s electricity characteristics, such as current and voltage, allowing grid operators and smart devices
         to identify and optimize how electricity flows through the grid. Smart grid technologies, such as distributed capacitor banks
         and Volt/VAR controls, can smooth out the overall quality of electricity as well as protect grid elements and customers
         against sudden power surges and other transient power events, all while decreasing line loss. According to the EPRI, power
         quality issues cost between $15 billion and $24 billion per year in the United States, costs that we believe can be
         substantially avoided by utilizing the smart grid.


            Accommodates Renewable Energy Sources and Electric Vehicles. Utilities need smart grid technologies to support the
         widespread adoption of renewable energy sources, electric vehicles and other clean technology solutions. The intermittent
         nature of renewable electricity, the developing energy storage technologies and the demand of electric vehicles all create
         challenges for utilities in matching energy generating sources with demand. We believe that each of these issues is
         effectively addressed with a full smart grid implementation.


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            Facilitates Consumer Empowerment. Two-way communication will allow consumers to proactively monitor and control
         the way in which they consume electricity, which will ultimately help consumers to lower their electricity bills. According to
         Energy Insights, 70% of respondents to a survey conducted in the United States indicated a high interest in implementing
         technology in their homes that would keep them informed of their energy use. Utilities can also develop improved pricing
         practices aimed at creating a more efficient pricing structure that addresses potential pricing inequalities during normal and
         peak demand cycles.


            Provides a Platform for Technology Innovation. The development of new smart grid applications and technologies and
         their continued integration into the grid are critical to full development of the smart grid. The smart grid will allow for the
         seamless integration of new technologies into the grid without the need to substantially change existing infrastructure,
         thereby avoiding significant capital costs required to support ever-evolving technologies.


         Our Solution


            The Ambient Smart Grid ® Communications Platform


            The Ambient Smart Grid ® communications platform, which includes hardware, software and firmware, enables utilities
         to both effectively manage smart grid applications and directly integrate certain applications into our products themselves.
         Our communications platform provides a utility with a secure, two-way, flexible and open IP architecture that efficiently
         networks smart grid applications and different technologies within each application and supports multiple communications
         technologies currently used by utilities, such as Wi-Fi, radio frequency, cellular technologies, power line communications,
         serial and Ethernet. Our communications platform enables the integration of smart grid applications, such as smart metering,
         demand response, distribution automation and monitoring, and direct load control. It also provides an open and flexible
         platform allowing for the addition of multiple applications, as well as enhancements and future applications.


            Our Ambient Smart Grid ® communications nodes are attached on or near a utility‟s transformer, and they support
         applications and connectivity to devices that comprise the smart grid. These communications nodes are physical boxes we
         designed for use in the harsh, outdoor environments in which utilities operate. Our network management system, known as
         AmbientNMS ® , manages the large numbers of devices on a smart grid network. By enabling such system interoperability,
         our communications platform both reduces implementation and ongoing communications costs, and improves overall power
         management efficiencies. Furthermore, our communications nodes also accommodate smart grid applications installed
         directly into the communications nodes, which include our own developed technology and third-party technology, thereby
         substantially increasing their functionality.


            The following diagram depicts our products in the utility infrastructure:




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            Ambient Smart Grid ® Benefits


            Our products offer the following benefits to utilities:


            Support of a Single Network Through Flexible Communications. Our communications nodes support multiple
         communication technologies simultaneously, allowing a utility to leverage a single communications platform to support
         many smart grid applications that rely on different communication technologies, such as cellular, Wi-Fi, 900MHz radio
         frequency, power line carrier, serial and Ethernet, all operating in parallel in a single communications node.


           Open Platform for Scalability and Interoperability. Our AmbientNMS ® , or third-party management systems, can
         manage our open communications platform. Our communications platform offers flexibility that allows utilities to deploy
         multiple smart grid applications from multiple vendors, including our competitors, and it can evolve with new technologies.


            Preservation of Utility Smart Grid Investments. The flexibility and open architecture of our communications platform
         protect a utility against stranding existing assets, including an investment in our communications platform itself. It is a major
         impediment for utility smart grid investment if a utility is not able to recover, or is concerned about recovering, the costs of
         previously deployed assets. For example, our communications nodes can support the collection of data from legacy, one-way
         communicating meters, which many utilities have previously installed and carry significant undepreciated value on their
         balance sheets. It is generally not cost effective for utilities to replace these legacy meters with current, two-way
         communicating smart meters; however, they can use our communications nodes to increase the intelligence/functionality of
         the existing system and eliminate costly, time-delayed manual data collection routines, such as drive-by meter readings. As
         utilities gradually replace legacy smart grid assets with current technologies throughout the natural replacement cycle, they
         can seamlessly integrate into our existing communications nodes and communications platform, eliminating the need for a
         costly, wholesale deployment as smart grid technologies and applications continue to evolve.


           Local Application Hosting and Development Framework. We have designed our communications nodes to host both
         Ambient-developed applications and third-party applications. By leveraging our open communications platform, excess
         processing power and flash memory, we can integrate smart grid applications for utilities directly into our communications
         nodes, expanding their overall functionality. Our open framework and flexibility provide an environment for new
         applications and the ability to add newly developed or tailored applications to our communications nodes even after they
         have been deployed. Utilities can perform central updates to our communications nodes, eliminating the need for deploying
         human and equipment capital, thereby providing for quick and inexpensive software updates.


            Remote and Distributed Intelligence. Our communications nodes are equipped with powerful processing capabilities that
         allow for local management and control of smart grid data, which may be aggregated from multiple smart grid applications.
         Processing and storage capabilities within our communications nodes allow a utility to more efficiently manage a vast
         amount of distributed data.


            Secure Communications. We secure our communications platform through the use of both physical tamper detection
         features and secure protocols that encrypt data traffic. Additionally, we are active participants in helping to establish industry
         standards regarding security and other technical requirements, allowing us to continually improve the security of our
         products.


            Reduced Overall Communications Implementation and Operating Costs. We deliver our communications platform
         completely preconfigured to the needs of the utility, allowing for a rapid and simplified deployment. Simplifying the
         deployment process of smart grid applications saves utilities time and cost because the deployments of smart grid
         applications require a substantial human effort. Our communications nodes are deployed preconfigured and are capable of
         communicating with several different applications via a variety of communication technologies. As a result, no other
         follow-on effort is required in order to become active


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         within a utility‟s communications network. Furthermore, there is no need for a utility to develop and invest in separate,
         application-specific communications platforms in order to integrate all smart grid-related assets because our communications
         platform provides for a single network that can accommodate a variety of applications and technologies in parallel.


         Our Products and Services


            We designed an open and flexible communications platform to ensure interoperability and longevity of smart grid
         applications on a cost-effective basis, regardless of environment or location. Our communications nodes can integrate
         applications without the need for further investment in multiple communications equipment, saving a utility considerable
         deployment time and cost. To date, no other single solution or technology has provided the necessary flexibility in a
         cost-effective manner enabling a comprehensive digital communications platform while leveraging standards-based
         technologies. We developed our communications platform to specifically fill this void. Our communications platform
         includes the following:


            Ambient Smart Grid ® Communications Nodes. Communications nodes are physical boxes that contain the hardware and
         software needed for communications and data collection in support of smart grid assets. We configured our communications
         nodes to act as individual data processors and collectors that receive signals from other networked devices, enabling smart
         grid applications. Our communications nodes can also contain our own or third-party embedded smart grid applications. We
         are currently in final testing and evaluation of our fourth-generation communications nodes. The following is a graphical
         depiction of how our communications nodes interact and connect with smart grid applications and the utility.




            AmbientNMS ® . AmbientNMS ® is a network management system that manages large numbers of communications
         nodes, devices and customers on a smart grid network. A utility can use the AmbientNMS ® to effectively manage its entire
         smart grid distribution system, providing valuable information over a single communications network. We customize
         AmbientNMS ® , providing a utility with the tools necessary to tailor its monitoring and processing and to act upon vast
         amounts of information on a real-time basis. AmbientNMS ® also provides the functionality to predict, and precisely control,
         the amount of data traffic to be used by individual devices and the communications network as a whole. Utilities can
         systematically push software updates to deployed communications nodes and other downstream devices.


            Ambient Energy Sensing Solution. Our Energy Sensing Solution monitors critical aspects of a utility‟s distribution
         network through measurement of current and voltage characteristics. Having the capability of measuring and monitoring
         power quality allows a utility to obtain real-time insight into characteristics such as power factor and general power quality,
         as well as the ability to quickly identify problem areas from a central location without having to deploy equipment and
         human capital to do so. Real-time power quality monitoring also


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         allows utilities to better interface with their customers who may have strict tolerances associated with their power
         requirements, and it also can provide critical information for outage notification and restoration systems. The hardware and
         software used in our Energy Sensing Solution are incorporated directly into our communications nodes, creating a much
         more efficient use of capital and utility pole real estate.


            Partial Discharge Monitoring. The same Energy Sensing technology that allows our communications platform to pull
         current information from the medium voltage distribution lines, also allows our communications nodes to monitor the health
         of the power lines. Real-time information regarding the health of buried power lines is not generally available today. Our
         communications platform offers utilities this information, thereby allowing utilities the ability to more-effectively maintain
         their underground distribution lines and manage their replacement schedules.


            Maintenance and Consulting Services. We provide maintenance and implementation services to maintain the software
         installed within our communications platform. We can remotely distribute software upgrades and added features to deployed
         communications nodes within the network. We also provide a variety of consulting services relating to product development,
         network management services and smart grid deployment strategies. We provide maintenance and consulting services to
         provide a turnkey offering of our communications platform.


         Duke Energy Relationship


            Since 2005, we have been a key strategic partner of Duke Energy and we believe the leading supplier of its smart grid
         communications technology in connection with its smart grid implementation. With what we believe is one of the most
         forward-looking smart grid initiatives in North America, Duke Energy announced plans to invest $1 billion over the next
         five years in smart grid equipment for its service territories including Ohio, Indiana, Kentucky and the Carolinas.
         Specifically, Duke Energy‟s smart grid deployment includes digital and automated technology, such as communications
         nodes, smart meters and automated power delivery equipment. The following table summarizes the evolution of our
         relationship with Duke Energy:


         2005        •   Security and safety testing of our communications nodes
         2006        •   Delivery of approximately 700 communications nodes for pilot deployment
         2008        •   Commercial agreement for 9,000 communications nodes
         2009        •   Award to Duke Energy of $204 million in ARRA digital grid stimulus funds and Duke Energy
                         announcement of plans to invest a total of $1 billion in smart grid deployment initiatives over five years
                     •   Long-term supply agreement with Duke Energy to supply our communications nodes and services through
                         2015
         2010        •   Full-scale smart grid deployment by Duke Energy in Ohio, which includes smart meters, automated power
                         distribution equipment and a communications network encompassing more than 130,000 of our
                         communications nodes, 700,000 electric meters and 450,000 gas meters
                     •   Deployment by Duke Energy of approximately 20,000 of our communications nodes
         2011        •   Cumulative pilot deployment by Duke Energy of approximately 3,000 of our communications nodes in the
                         Carolinas
                     •   Cumulative total of approximately 55,000 communications nodes deployed
                     •   Ambient total backlog of approximately $68 million, as of June 30, 2011.


            Duke Energy is actively deploying our communications nodes and is licensing the AmbientNMS ® system, specifically
         for its deployment in Ohio. We believe that we are the predominant provider of communications nodes and network
         management system software for Duke Energy‟s Ohio deployment.


           We believe that we have demonstrated that our technology is secure, two-way, flexible, open, scalable, reliable and
         cost-effective through the total deployment of approximately 55,000 communications nodes in the field with Duke Energy.
         We believe that Duke Energy will continue to predominantly use our communications platform for the remainder of its Ohio
         smart grid deployment. Furthermore, Duke Energy‟s pilot deployment of approximately 3,000 communications nodes in the
         Carolinas predominantly uses our communications platform as well. Throughout the past five years, we have worked with
         Duke Energy to develop our communications platform,
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         which has enabled Duke Energy‟s ability to rapidly deploy its smart grid initiatives. Duke Energy has accelerated its
         historical deployment rates and is presently deploying approximately 6,000 of our communications nodes each month.


            We believe that we have a substantial opportunity to grow our business with Duke Energy. In January 2011, Duke Energy
         and Progress Energy announced a proposed merger that is subject to stockholder and regulatory approval. Together, Duke
         Energy and Progress Energy have committed to spend a combined $1.5 billion in smart grid initiatives, partially funded by
         approximately $400 million in total grants awarded to them in 2010 under the ARRA and required to be spent by 2013. In
         addition to the 130,000 communications nodes scheduled for deployment in Ohio, we estimate that Duke Energy would
         require over 670,000 communications nodes if it implements a full deployment of smart grid communications nodes in
         Indiana, Kentucky and the Carolinas. According to Duke Energy, it is currently working through the planning process to
         finalize full-scale deployment plans in Kentucky and the Carolinas and has filed with the North Carolina Public Utilities
         Commission for the required approvals. Duke Energy is using information from its North Carolina pilot programs and its
         Ohio deployment to enhance its customer experience in its other service territories. We believe that substantially all
         communications nodes deployed by Duke Energy to date are our communications nodes. If Duke Energy and Progress
         Energy complete their proposed merger and the combined company adopts Duke Energy‟s deployment strategy relating to
         smart grid initiatives, we estimate a potential deployment of 620,000 additional communications nodes in Progress Energy‟s
         territories in Florida and the Carolinas.


         Competitive Strengths


           We believe that the following competitive strengths help us to maintain a leading position in providing smart grid
         communications solutions to utilities:


            Proven Technology. Since 2008, Duke Energy has successfully deployed our communications platform. With the
         deployment of approximately 55,000 communications nodes providing the connectivity for a variety of smart grid
         applications, we have demonstrated that our technology is quickly scalable and highly reliable. We believe that our
         communications nodes have met all of the strict reliability requirements of Duke Energy and have proven reliable through
         years of exposure to the elements. We believe that our continued ability to satisfy Duke Energy‟s rigorous qualification
         standards and testing, as well as our proven ability to scale, provides us with an advantage over many of our competitors.


            Premier Utility Customer. Duke Energy is one of the largest utilities in the United States with what we believe to be one
         of the most forward-looking smart grid initiatives in North America. We have served as a strategic partner of Duke Energy‟s
         smart grid programs since 2005. Duke Energy has successfully deployed our products on a commercial scale. We believe
         that other utilities will adopt Duke Energy‟s vision of implementing a communications platform that can accommodate a
         variety of smart grid applications and communications technologies, moving beyond a focus on smart meters, in order to
         realize the full benefits of the smart grid.


            Communications Focused. Since 2000, we have maintained a focus on the development of a communications platform
         that meets the needs of utilities. Our commitment to this market segment allows us to focus all research and development
         and engineering efforts on meeting the challenges of this market and rapidly responding to customer needs. We do not
         design or provide equipment such as meters or home area network devices. Rather, we focus on the communications
         platform that enables these devices. Our focus, experience and industry know-how, built over three increasingly robust
         generations of our current communications platform, allow us to quickly react to the ever-changing and individualized needs
         of utilities, thereby providing a competitive edge over our competitors with products that may not represent their core
         competency.


           Purpose-Built Products. Our substantial industry experience and relationship with Duke Energy have led to the
         development of products that are purpose-built for the harsh, outdoor environments in which utilities must operate. We have
         designed our equipment for direct placement onto the distribution infrastructure, which exposes it to the natural elements,
         without the need for an additional enclosure. Further, the internal elements of our communications


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         nodes include, which includes hardened components, battery backups, excess surge protection and other components.
         Preconfigured and self-registering communications nodes allow for rapid and safe installation and eliminate the need for
         on-site field engineers, reducing installation time and cost.


         Our Growth Strategy


           Our objective is to maintain our market leadership position in providing a communications and application platform that
         enables a utility‟s comprehensive smart grid initiatives. The following key initiatives comprise our growth strategy:


           Expand Our Relationship with Duke Energy. We plan to expand our relationship with Duke Energy as it continues its
         smart grid deployment initiatives in additional service territories and with additional applications. We expect that, as Duke
         Energy deploys smart grid assets in other regions, including Indiana, Kentucky and the Carolinas, a significant opportunity
         exists for us to provide hundreds of thousands of our communications nodes. Furthermore, as we continue to work with
         Duke Energy, we expect that we will be able to develop and provide additional product offerings. Finally, if Duke Energy
         and Progress Energy complete their proposed merger, we believe that we will have further expansion opportunities.


           Secure New Utility Customers. We intend to leverage our successful commercial deployment with Duke Energy to secure
         new domestic and international customers that are evaluating communications platforms to accommodate and integrate a
         variety of smart grid applications. These new customers may include utilities that have already deployed smart meter-centric
         systems and utilities that are still developing their smart grid plans. We intend to use this industry momentum in promoting
         our communications platform to the many utilities with whom we have relationships, as well as other utilities interested in an
         open communications architecture. We will also promote our communications platform to utilities that are limited by legacy
         metering technology. We believe that our technology can help utilities expand the functionality of their previously deployed
         smart metering initiatives, and we intend to pursue this market segment. To facilitate this initiative, we expect to
         substantially increase our investment in business development activities, including investing in initiatives aimed at
         penetrating both domestic and international markets.


            Establish Strategic Relationships. We plan to form additional strategic relationships with smart grid application vendors,
         including meter manufacturers, distribution automation equipment manufacturers, communications providers and other key
         value-added providers in the smart grid industry. By establishing such relationships, we believe that we can accelerate the
         sales of our products. Further, by incorporating our communications platform into existing smart grid applications, we can
         help such providers offer a complete smart grid solution in addition to the equipment that they offer, while lowering the
         overall cost of deployment for a utility.


            Continue Product Innovation and Development. We will continue to invest in the development of new capabilities for
         our communications platform in order to meet the evolving needs of utilities. For example, we have already developed
         Energy Sensing Solutions and Partial Discharge Monitoring that are directly integrated into our communications nodes. We
         will also continue to invest in expanding the functionality of our communications platform to accommodate the proprietary
         technologies of our competitors, thereby providing utilities with the added flexibility of utilizing multiple vendors. We have
         released three generations of our Ambient Smart Grid ® products, and we are currently in the final testing stages of our
         fourth generation products, which we expect to begin shipping in the first half of 2012. With our commitment to research
         and development, we believe that we will provide significantly improved products with greater functionality delivered at
         lower cost than previously released products.


         Sales and Marketing


           We believe that the successful deployment of Duke Energy‟s smart grid implementation in Ohio, which includes our
         communications platform, will result in other utilities adopting similar smart grid strategies to fully realize the benefits of the
         smart grid. We expect to leverage this success in order to acquire new utility customers. We expect to


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         increase selling, marketing and business development activities, including the hire of additional personnel, to secure new
         customers domestically and internationally.


            Given the strategic impact of smart grid applications on a utility, a utility‟s decision-making processes typically involves
         top-level executives and large multi-functional teams across many organizational layers. Utilities generally undertake
         extensive budgeting, procurement, competitive bidding, technical and performance review activities. Additionally, the
         regulatory approval processes can be lengthy. A typical sales cycle with a new utility can take 12 months or more, depending
         on the size of the utility and the smart grid initiatives it intends to deploy. Utilities generally conduct both lab testing and
         field pilots to verify the functionality of products prior to awarding a contract for a larger deployment. However, based upon
         our experience with pilot programs with Duke Energy and the flexible nature of our communications platform, we believe
         that we are well positioned to effectively execute such pilot programs. Furthermore, new customers can learn how our
         technology is deployed within Duke Energy‟s territories. For example, our communications platform is profiled at Duke
         Energy‟s Envision Center in Ohio where prospective customers can observe the integration of our technology into Duke
         Energy‟s smart grid initiatives.


         Strategic Alliances and Relationships


            We believe that we possess the internal resources for the further development of our technology. However, we have, and
         will continue to develop, relationships with certain suppliers, smart grid equipment manufacturers and wireless
         communication providers to ensure that we can offer competitive products to support our business development initiatives.
         Specifically, we have established relationships with certain component suppliers, such as Qualcomm, Sierra Wireless and
         Novatel Wireless. We have also entered into joint marketing agreements with certain wireless communication providers,
         including Verizon Wireless and Sprint.


            As an example of our efforts to improve the interoperability of our communications platform with various smart grid
         applications, we have entered into an Interoperability and Co-Marketing Agreement with Tollgrade Communications, Inc., a
         leading provider of network assurance solutions for the telecommunications and utility industries, which allows us to
         incorporate its LightHouse TM centralized remote monitoring system for electric power utilities and also provides for the
         opportunity to develop additional technologies.


         Research and Development


           The majority of our employees are engaged in product research and development activities. We also engage independent
         contractors to provide research and development services. Research and development is critical to ensure the continued
         success and growth of our business. We plan to expand our research and development activities, including hiring additional
         personnel. We also intend to continue to work with our customers so that we can continue to develop and provide additional
         product offerings.


            We incurred research and development expenses of approximately $4.4 million in 2008, $4.9 million in 2009, $6.3 million
         in 2010 and $4.9 million for the six months ended June 30, 2011.


         Intellectual Property


            We currently rely upon a combination of trade secrets, patents, copyrights and trademarks, as well as non-disclosure
         agreements and invention assignment agreements, to protect our technologies and other proprietary company information.
         As of June 30, 2011, our intellectual property portfolio included 25 patents issued or allowed by the United States Patent and
         Trademark Office, or USPTO, and we have 5 pending patent applications in the United States. We have also filed many of
         our U.S. patents in various foreign jurisdictions, and expect that we will file our U.S. pending patent applications in foreign
         jurisdictions as well. Approximately half of our issued and pending U.S. patents relate to our legacy utilities communications
         technologies, and the other half relate to our communications platform, including our Energy Sensing Solution. Our issued
         U.S. patents will expire between 2020 and 2029. Ambient ® , Ambient Smart Grid ® , Communications for a Smarter Grid ®
         and AmbientNMS ® are registered trademarks of Ambient Corporation with the USPTO. We have other marks pending with
         the USPTO.
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           Our policy is to require our employees, consultants, advisors and collaborators to execute confidentiality agreements.
         Additionally, we require our employees and consultants to execute assignment of invention agreements upon the
         commencement of employment, consulting or advisory relationships. These agreements generally provide that all
         confidential information developed or made known to a party by us during the course of the party‟s association with our
         company is to be kept confidential and not to be disclosed to third parties except in specific circumstances. In the case of
         employees and consultants, the agreements also provide that all inventions conceived by the individuals in the course of their
         employment or consulting relationship will be our exclusive property.


         Employees


           As of August 15, 2011, we had 79 full-time employees. Almost of all of our employees are located at our Newton,
         Massachusetts headquarters, and we have three field engineers located at various Duke Energy locations. None of our
         employees are covered by collective bargaining agreements. We have never experienced any work stoppages and consider
         our relations with our employees to be good.


            We have a contract with Insperity, formerly known as Administaff, which is a professional employment organization.
         Pursuant to this contract, we and Insperity are co-employers of our personnel. Insperity is responsible for paying the salaries
         and wages of our personnel and providing our personnel with health, dental and various other types of insurance and benefits
         at favorable rates for which we would not otherwise qualify. Insperity pays salaries and wages of our personnel directly from
         our bank accounts, and we pay Insperity a fee for its services.


         Manufacturing and Assembly


           We have a Master Supply and Alliance Agreement with Bel Fuse Inc., a global producer of high-quality electronic
         components, for the manufacture and assembly of our communications nodes. We leverage the capabilities of Bel Fuse Inc.
         with respect to its low-cost, global manufacturing capabilities, supply-chain management and engineering expertise. As we
         continue to value engineer our communications nodes, deliver higher volumes and source alternative key components, we
         believe that we will continue to reduce our production costs.


            Our products are made to order and are shipped directly to our customer‟s warehouses in the United States. We purchase
         components, such as power cords, brackets and other accessories, which typically are shipped directly to our customer. In
         order to minimize total cost and limit our exposure of excess inventory, we typically do not hold significant amounts of
         finished goods or component materials at any given time.


         Competition


            Competition in the smart grid market is increasing and involves evolving technologies, developing industry standards,
         frequent new product introductions, changes in customer or regulatory requirements and localized market requirements.
         Competitive pressures require us to keep pace with the evolving needs of utilities; to continue to develop and introduce new
         products, features and services in a timely, efficient and cost-effective manner; and to stay abreast of regulatory factors
         affecting the utility industry.


            We compete with a wide array of manufacturers, vendors, strategic alliances, systems developers and other businesses.
         These include smart grid communications technology companies, ranging from relatively smaller companies focusing
         mainly on communications technology to large Internet, hardware and software companies. In addition, some providers of
         smart meters may add communications capabilities in the future to provide some level of connectivity to the utility‟s back
         office.


           Some of our present and potential future competitors have, or may have, greater name recognition, experience and
         customer bases, as well as substantially greater financial, technical, sales, marketing, manufacturing and other resources than
         we possess and that afford them competitive advantages. These potential competitors may undertake more extensive
         marketing campaigns, adopt more aggressive pricing policies, obtain more favorable pricing from
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         suppliers and manufacturers and exert more influence on sales channels than we do. Competitors may sell products at lower
         prices in order to obtain market share. Competitors may be able to respond more quickly than we can to new or emerging
         technologies and changes in customer requirements. Competitors may also be able to devote greater resources to the
         development, promotion and sale of their products and services than we can. Competitors may introduce products and
         services that are more cost-efficient, provide superior performance or achieve greater market acceptance than our products
         and services. Other companies may also drive technological innovation and develop products that are equal or superior in
         quality and performance to our products and render our products non-competitive or obsolete.


            We believe that we compete effectively in the market based on a number of factors. These factors include the proven
         technology of our communications platform, our successful commercial deployments with Duke Energy, our focus on our
         communications platform, our scalable and interoperable products that we have purpose-built for the utility environment and
         our competitive cost of ownership. However, we may have to change our product offerings, invest more heavily in research
         and development or business development or acquire complementary technologies in order to remain competitive in the
         future.


         Properties


            We do not own any real property. Our corporate office in Newton, Massachusetts consists of approximately 20,242 square
         feet used for office and research and development purposes. The lease term for the premises commenced in September 2009
         and continues through December 2012. At our request, the landlord agreed that we could commence the lease earlier, and we
         completed the move into our headquarters in August 2009.


         Legal Proceedings


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


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                                                               MANAGEMENT


            The following table sets forth the name, age, and position of each of our named executive officers and directors:


         Name                                                    Age                                Position


         John J. Joyce(1)                                         59     Chairman of the Board, Chief Executive Officer, President
                                                                         and Director
         Ramdas Rao                                               45     Chief Technology Officer and Senior Vice President
         Mark L. Fidler                                           40     Chief Financial Officer, Vice President and Treasurer
         Michael L. Widland(2)                                    70     Director
         D. Howard Pierce(3)(4)                                   70     Director
         Thomas Michael Higgins(3)(4)                             55     Director
         Shad L. Stastney(1)                                      41     Director
         Francesca E. Scarito(2)(3)                               47     Director


           (1) Member of the finance committee.

           (2) Member of the compensation committee.

           (3) Member of the audit committee.

           (4) Member of the nominating and corporate governance committee.


            John J. Joyce has been the Chairman of our board of directors and President and Chief Executive Officer since September
         2001, and served as our Chief Operating Officer from November 2000 through August 2001. Since September 2010,
         Mr. Joyce has served on the finance committee. Prior to August 2011, Mr. Joyce also served as our Treasurer. From
         September 1996 to October 2000, Mr. Joyce served as Senior Vice President of ABB Financial Services Inc. and President
         of ABB Financial Consulting, the Americas, where he also led the global energy consulting practice within Financial
         Services. Mr. Joyce developed the Americas branch of ABB Financial Consulting, the financial management consultancy
         business of ABB Financial Services. From December 1993 to August 1996, Mr. Joyce served with The Capital Markets &
         Treasury Practice of Price Waterhouse LLP. Returning to the firm he had previously served for more than five years in the
         general audit practice, Mr. Joyce assumed the responsibilities of Manager, in which he advised corporations on a variety of
         business issues and strategies. Mr. Joyce was promoted to Director in June 1995. Mr. Joyce brings to our board significant
         experience in the energy industry and a deep knowledge of our business and our customers, and contributes a perspective
         based on his previous career in both finance and accounting.


           Ramdas Rao has been our Chief Technology Officer and Senior Vice President since October 2010, has served as our
         Chief Technology Officer since July 2006 and served as our Chief Network Architect from September 2000 through
         July 2006. From March 2000 until September 2000, Mr. Rao was the Chief Information Officer at Mullen, a large
         advertising agency in North America. From November 1995 until February 2000, he was the President and Co-Founder of
         Gaialinks Inc., a company engaged in the development of network management software tools and providing network
         analysis and consulting services for large heterogeneous, multi-vendor, multi-protocol networks and systems. From January
         1990 through November 1995, he was affiliated with Boston University where he was Associate Director (from January
         1995 through November 1995) and a Network Systems Manager (from July 1990 through December 1994).


           Mark L. Fidler joined us as our Principal Financial Officer and Vice President in June 2011 and became our Chief
         Financial Officer, effective as of August 4, 2011, upon the listing of our common stock on the NASDAQ Capital Market on
         August 3, 2011. Mr. Fidler has also served as our Treasurer since August 15, 2011. Prior to joining our company, Mr. Fidler
         spent the last ten years at Evergreen Solar Inc. in positions of increasing responsibility, first as Corporate Controller from
         2001 to 2006 and most recently as Vice President of Finance and Treasurer. Prior to his tenure at Evergreen Solar, Mr. Fidler
         held various senior finance roles at The Boston Consulting Group from 1998 to 2001 and Hampshire Chemical, a division of
         Dow Chemical, from 1996 to 1998. From 1992 to 1995, Mr. Fidler was with the audit practice of Coopers & Lybrand.
         Mr. Fidler brings to our company significant public company
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         experience within clean technology and provides us with financial and strategic leadership for our growing company.


            Michael L. Widland has served on our board of directors since November 2000 and serves on the compensation committee
         as its chair (since March 2001). Mr. Widland has been actively practicing law since 1965 and is presently a partner at
         Shipman & Goodwin LLP of Stamford, Connecticut. Mr. Widland practices in the areas of commercial and corporate
         transactions, including financing. He is a former Connecticut Chairman of the Public Contract Section and Business Law
         Section of the American Bar Association and a member of the Association of Commercial Finance Attorneys. Mr. Widland‟s
         academic degrees combined with his extensive professional experience in corporate law provide our board with valuable
         resources in its work to ensure that we comply with rules and regulations applicable to us.


            D. Howard Pierce has served on our board of directors since November 2004 and serves on the audit committee (since
         November 2004) and nominating and corporate governance committee as its chair (since July 2011). Until his retirement in
         June 2001, he served as President and CEO of ABB, Inc., a $5 billion U.S. subsidiary of global industrial, energy and
         automation provider ABB, Ltd. Prior to assuming leadership of ABB, Inc., Mr. Pierce served in a number of key executive
         positions, including President of ABB‟s Steam Power Plants and Environmental Systems and President of ABB China Ltd.
         In addition to serving on our board, Mr. Pierce serves on the board of directors of Harsco Corporation, a publicly traded,
         New York Stock Exchange-listed company, where he also serves as chairman of the audit and compensation committees.
         Mr. Pierce‟s executive experience in the international business community with a specific focus on serving the utility
         industry while at ABB provides our board with a business perspective and insight that is beneficial to a small cap company,
         especially when establishing relationships and negotiating agreements with the larger industrial companies in the utility and
         communications industry.


            Thomas Michael Higgins has served on our board of directors since September 2006 and serves on the audit committee as
         its chair (since September 2006) and the nominating and corporate governance committee (since July 2011). Mr. Higgins has
         served as the Senior Vice President for Finance and Chief Financial Officer of the College Board since June 2003. Prior to
         the College Board, Mr. Higgins was a partner in the New York City accounting firm of Silverman Linden Higgins LLP from
         February 1993 to June 2003. Mr. Higgins also worked in the New Jersey offices of Coopers & Lybrand LLP from January
         1992 to January 1993 and at Ernst & Young LLP from 1977 to 1991. Mr. Higgins is a member of the American Institute of
         Certified Public Accountants as well as the New Jersey and New York State Society of Certified Public Accountants.
         Mr. Higgins‟ extensive experience as a certified public accountant was instrumental in his appointment to the audit
         committee of our board of directors and provides our board with a critical accounting perspective.


            Shad L. Stastney has served on our board of directors since June 2008. He has also served on the finance committee since
         September 2010 and as its chair since August 2011. Mr. Stastney is a founding partner of Vicis Capital, LLC, the investment
         advisor to Vicis Capital Master Fund, or Vicis, a multi-strategy hedge fund. Mr. Stastney has served as Chief Operating
         Officer of Vicis Capital since June 2004. Prior to Vicis Capital, from July 2001 through May 2004, Mr. Stastney served in
         the same capacity at Victus Capital. Before Victus Capital, Mr. Stastney was a Director at Credit Suisse First Boston in New
         York. Mr. Stastney currently serves on the boards of directors of China Hydroelectric Corp., China New Energy Group
         Company, OptimizeRx Corporation, The Amacore Group, Inc., Master Silicon Carbide Industries, Inc., Deer Valley
         Corporation, Infusion Brands International, Inc., and Zurvita Holdings, Inc. and formerly served on the board of MDWerks,
         Inc. and Medical Solutions Management, Inc. Mr. Stastney‟s background and business experience provide our board with a
         greater understanding of financial and investor relations.


            Francesca E. Scarito has served on our board of directors since June 2011 and serves on the audit committee (since July
         2011) and compensation committee (since July 2011). Ms. Scarito is President of RS Finance & Consulting, LLC, a
         boutique investment bank located in Boston, Massachusetts. Ms. Scarito has been an investment banker for over 20 years
         and has extensive experience in private capital, equity capital markets and mergers and acquisitions. Prior to joining RS
         Finance & Consulting, LLC in April 2009, Ms. Scarito was a Managing Director of Canaccord Adams Inc. from May 2007
         through October 2008. Ms. Scarito also was a Managing Director at Legacy Partners Group LLC from July 2004 through
         February 2007 and at its successor Friedman Billings Ramsey from


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         February 2007 through April 2007. Ms. Scarito‟s extensive experience advising corporate executives and boards of directors
         on strategic initiatives, financings and capital markets strategy make her a valuable, objective resource for our company on
         these matters.


            Our executive officers are appointed by, and serve at the discretion of, our board of directors. There are no family
         relationships between any of the above executive officers or directors or any other person nominated or chosen to become an
         executive officer or a director. Pursuant to the terms of the employment agreement between us and Mr. Joyce, so long as the
         employment agreement remains in effect, Mr. Joyce will be nominated to the board of directors as part of management‟s
         slate of directors. Additionally, pursuant to the terms of a securities purchase agreement, dated July 31, 2007, between us
         and Vicis, so long as Vicis‟ fully diluted ownership of the company is 10% or greater, Vicis is entitled to designate one
         member to our board of directors.


         Board of Directors


            Our board of directors currently consists of six directors. All directors hold office until the next annual meeting of
         stockholders. At each annual meeting of stockholders, the successors to directors whose terms then expire are elected to
         serve from the time of election and qualification until the next annual meeting following election.


         Director Independence


           Our board of directors has determined that four of our six directors are independent directors within the meaning of the
         independent director guidelines of the NASDAQ Listing Rules. The independent directors are Messrs. Pierce, Higgins and
         Widland and Ms. Scarito.


         Board Committees


            Our board of directors has established an audit committee, a compensation committee and a nominating and corporate
         governance committee, with each comprised of independent directors. Our board of directors has also established a finance
         committee. Each committee operates under a charter that has been approved by our board of directors. Copies of our
         committee charters are available, without charge, upon request in writing to Ambient Corporation, 7 Wells Avenue, Newton,
         Massachusetts 02459, Attn: Secretary and are posted on the investor relations section of our website, which is located at
         www.ambientcorp.com. The inclusion of our website address in this prospectus does not include or incorporate by reference
         the information on our website into this prospectus.


            Audit Committee


            The members of our audit committee are Messrs. Higgins and Pierce and Ms. Scarito. Mr. Higgins is the chair of the audit
         committee and is also an “audit committee financial expert,” as defined in applicable SEC rules. The audit committee‟s
         responsibilities include the following:


            • appointing, approving the compensation of, and assessing the independence of our independent registered public
              accounting firm;
            • overseeing the work of our independent registered public accounting firm, including through the receipt and
              consideration of reports from such firm;
            • reviewing and discussing with management and the independent registered public accounting firm our annual and
              quarterly financial statements and related disclosures;
            • monitoring our internal control over financial reporting, disclosure controls and procedures and code of business
              conduct and ethics;
            • discussing our risk management policies;
            • establishing policies regarding hiring employees from the independent registered public accounting firm and
              procedures for the receipt and retention of accounting related complaints and concerns;
            • meeting independently with our independent registered public accounting firm and management;
            • reviewing and approving or ratifying any related person transactions; and
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            • preparing the audit committee report required by SEC rules.


           Our audit committee must approve in advance audit and non-audit services, other than de minimis non-audit services, to
         be provided to us by our independent registered public accounting firm.


            Compensation Committee


           The members of our compensation committee are Mr. Widland and Ms. Scarito. Mr. Widland is the chair of the
         compensation committee. The compensation committee‟s responsibilities include the following:


            • reviewing and approving, or making recommendations to our board with respect to the compensation of our executive
              officers;
            • overseeing an evaluation of our senior executives;
            • reviewing and making recommendations to our board with respect to cash and equity incentive plans;
            • administering our equity incentive plans;
            • reviewing and making recommendations to our board with respect to director compensation;
            • reviewing and discussing annually with management our “Compensation Discussion and Analysis” disclosure as and
              when required by SEC rules; and
            • preparing the annual compensation committee report required by SEC rules.


            Nominating and Corporate Governance Committee


            The members of our nominating and corporate governance committee are Messrs. Pierce and Higgins. Mr. Pierce is the
         chair of the nominating and corporate governance committee. The nominating and corporate governance committee‟s
         responsibilities include the following:


            • identifying individuals qualified to become members of our board;
            • recommending to our board the persons to be nominated for election as directors and to each of our board‟s
              committees;
            • reviewing and making recommendations to our board with respect to management succession planning;
            • developing and recommending to our board corporate governance principles; and
            • overseeing an annual evaluation of our board.


            Finance Committee


           The members of our finance committee are Mr. Joyce and Mr. Stastney. Mr. Stastney is the chair of the finance
         committee. The finance committee‟s responsibilities include the following:


            • reviewing the finance policies and strategies used by our company to achieve our objectives, including the
              performance of, and risk relating to, such policies and strategies;
            • reviewing the investment policies and strategies used by our company to achieve our objectives, including the
              performance of, and risk relating to, such policies and strategies; and
            • considering both the ongoing financing needs of our company and alternative financing mechanisms available to our
              company, as well as, making recommendations to the board of directors regarding the implementation of appropriate
              financing mechanisms.


            Our board of directors may from time to time establish other committees.


         Code of Business Conduct and Ethics
  Our board of directors has adopted a written code of business conduct and ethics that applies to our directors, officers and
employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or
persons performing similar functions. Copies of our code of business conduct and ethics are


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         available, without charge, upon request in writing to Ambient Corporation, 7 Wells Avenue, Newton, Massachusetts 02459,
         Attn: Secretary and are posted on the investor relations section of our website, which is located at www.ambientcorp.com .
         The inclusion of our website address in this prospectus does not include or incorporate by reference the information on our
         website into this prospectus. We also intend to disclose any amendments to the Code of Business Conduct and Ethics, or any
         waivers of its requirements, on our website.


         Director Compensation


            The following table presents the total compensation for each person who served as a non-employee member of our board
         of directors for the fiscal year ended December 31, 2010. Mr. Joyce, who is our President and Chief Executive Officer,
         receives no compensation for his service as a director.


                                                                                       Fees Earned
                                                                                            or            Option
                                                                                       Paid in Cash       Awards            Total
         Director Name                                                                      ($)            ($)(1)            ($)


         Michael L. Widland                                                                 10,000         425,383          435,383
         D. Howard Pierce                                                                   10,000         413,567          423,567
         Thomas Michael Higgins                                                             16,000         374,180          390,180
         Shad L. Stastney                                                                       —               —                —


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


         Compensation Committee Interlocks and Insider Participation


            During 2010, our compensation committee consisted of Mr. Widland. Mr. Widland has not at any time in the last year
         been one of our officers or employees; however, Mr. Widland is a partner of Shipman & Goodwin LLP, a law firm which
         provides legal services for our company from time to time. Please see “Certain Relationships and Related Party
         Transactions” for more information about our relationship with Shipman & Goodwin LLP. None of our executive officers
         has served as a member of the board of directors, or as a member of the compensation or similar committee, of any entity
         that has one or more executive officers who served on our board of directors or compensation committee during the fiscal
         year ended December 31, 2010.


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                                                      EXECUTIVE COMPENSATION


         Summary Compensation Table


            The following table sets forth the total compensation received for services rendered in all capacities to our company for
         the last three fiscal years, which was awarded to, earned by, or paid to our Chief Executive Officer, Principal Financial
         Officer and each of our other most highly compensated executive officers whose total compensation exceeded $100,000
         during 2010, which we refer to collectively as our Named Executive Officers.


                                                                                                      Option
                                                                   Salary             Bonus           Awards                Total
         Name and Principal Position                 Year           ($)                ($)             ($)(1)               ($)(2)


         John J. Joyce,                              2010          360,457            60,000          1,165,280            1,585,737
           President and Chief Executive             2009          349,538            50,000            148,890              548,428
           Officer and Principal Financial
           Officer                                   2008          338,760            50,000                 —               388,760
         Ramdas Rao,                                 2010          255,000            60,000          1,059,345            1,374,345
           Chief Technology Officer and              2009          245,192            50,000            148,890              444,082
           Senior Vice President                     2008          213,000            50,000                 —               263,000


           (1) Amounts in this column reflect the aggregate grant date fair value computed in accordance with FASB ASC 718 with
               respect to employee stock options issued during 2010, 2009 and 2008 under our 2000 Equity Incentive Plan. The
               assumptions used to calculate the fair value of stock option grant were: for 2010: expected holding period of
               5.75 years, risk free interest rate of 1.475%, no dividend yield and volatility of 154.9% and for 2009: expected holding
               period of 5.50 years, risk free interest rate of 1.44%, no dividend yield and volatility of 162.4%.

           (2) The Named Executive Officers received certain perquisites and other personal benefits during the periods indicated,
               the aggregate value of which did not exceed $10,000.


           Mark L. Fidler joined us as our Principal Financial Officer and Vice President in June 2011 and became our Chief
         Financial Officer effective as of August 4, 2011. Mr. Fidler is also our Treasurer. Mr. Fidler receives an annual salary of
         $250,000, and he received a signing bonus of $12,500. We also granted to Mr. Fidler a stock option to purchase
         20,000 shares of common stock under our 2000 Equity Incentive Plan at an exercise price of $7.50 per share, which options
         will vest in equal installments of 1,667 shares at the end of each 90 day period, with the first installment vesting on
         September 27, 2011. When Mr. Fidler became Chief Financial Officer, we entered into an employment agreement with
         Mr. Fidler, paid him an additional $12,500 bonus and granted him an additional stock option to purchase 30,000 shares of
         common stock at an exercise price of $10.40 per share, which options will vest in equal installments of 2,500 shares at the
         end of each 90 day period, with the first installment vesting on October 31, 2011.


         Grants of Plan-Based Awards in 2010


            The following table sets forth information on grants of plan-based awards in 2010 to our Named Executive Officers.


                                                                                                 All Other
                                                                                               Stock Awards:           Grant Date/
                                                                                                 Number of              Fair Value
                                                                                                  Shares of            of Stock and
                                                                                                  Stock or            Option Awards
         Name                                                            Grant Date               Units (#)                 ($)


         John J. Joyce,                                                     10/18/2010            110,000                1,165,280
           President and Chief Executive Officer and Principal
           Financial Officer
         Ramdas Rao,                                                        10/18/2010            100,000                1,059,345
Chief Technology Officer and Senior Vice
President


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         Outstanding Equity Awards at December 31, 2010

           The following table sets forth information concerning equity awards held by each of our Named Executive Officers as of
         December 31, 2010.


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


         John J. Joyce,                                      10,000                   —            $ 50.00              11/16/2011
           President and Chief Executive Officer
           and                                                3,750                  —             $   10.00            09/11/2012
           Principal Financial Officer                       10,000                  —             $   20.00            01/26/2014
                                                              5,000                  —             $   30.00            07/20/2014
                                                              5,000                  —             $   50.00            07/20/2014
                                                             25,000                  —             $    4.50            11/15/2017
                                                             45,000                  —             $    3.50            01/13/2019
                                                             13,750              96,250            $   12.00            10/18/2020
         Ramdas Rao,                                         10,000                  —             $   20.00            01/15/2012
           Chief Technology Officer and                       2,000                  —             $   20.00            09/11/2012
           Senior Vice President                              8,000                  —             $   20.00            01/26/2014
                                                              3,750                  —             $   20.00            08/11/2014
                                                              3,750                  —             $   20.00            08/11/2014
                                                             10,000                  —             $    4.50            11/15/2017
                                                             45,000                  —             $    3.50            01/13/2019
                                                             12,500              87,500            $   12.00            10/18/2020


            When he joined our company on June 27, 2011, we granted to Mark L. Fidler a stock option to purchase 20,000 shares of
         common stock under our 2000 Equity Incentive Plan at an exercise price of $7.50 per share, which options will vest in equal
         installments of 1,667 shares at the end of each 90 day period, with the first installment vesting on September 27, 2011. In
         connection with the execution of Mr. Fidler‟s employment agreement, we granted Mr. Fidler an additional stock option to
         purchase 30,000 shares of common stock at an exercise price of 10.40 per share, which options will vest in equal
         installments of 2,500 shares at the end of each 90 day period, with the first installment vesting on October 31, 2011.


         Option Exercises and Stock Vested in 2010


           None of our Named Executive Officers acquired shares upon exercise of options, or had any stock awards vest, during
         2010.


         Employment Agreements


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


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            We and Ramdas Rao entered into an amended and restated employment agreement dated as of June 2, 2008, pursuant to
         which Mr. Rao serves as our Senior Vice President and Chief Technology Officer at an annual salary of $225,000, subject to
         review. The employment agreement had an initial term that extended through December 31, 2009, subject to renewal for
         successive one-year terms unless either party gives notice of that party‟s election to not renew to the other at least 60 days
         prior to the expiration of the then-current term. The agreement was renewed through December 31, 2010 and has been
         further renewed through December 31, 2011. The agreement also contains certain provisions for early termination, which
         may result in a severance payment equal to one year of base salary then in effect. These severance benefits are discussed in
         more detail below under “Potential Payments upon Change of Control or Termination following a Change of Control.”


            We and Mark L. Fidler entered into an employment agreement dated as of August 4, 2011, pursuant to which Mr. Fidler
         serves as our Chief Financial Officer at an annual salary of $250,000, subject to review. We are obligated to pay Mr. Fidler,
         within 10 days of the execution of the agreement, a $12,500 bonus, less all required deductions. Further, upon entering into
         the agreement, we granted Mr. Fidler a non-qualified stock option to purchase 30,000 shares of our common stock under the
         2000 Equity Incentive Plan. The stock option will vest in equal installments of 2,500 shares at the end of each 90 day period,
         with the first installment vesting on October 31, 2011 and has an exercise price of $10.40 per share. The agreement also
         contains certain provisions for early termination, which may result in a severance payment equal to one year of base salary
         then in effect.


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


         Potential Payments upon Change of Control or Termination following a Change of Control


            Automatic Acceleration of Vesting Following a Change of Control. The following table provides the intrinsic value (that
         is, the value based upon our closing stock price on December 31, 2010 of $10.40, less any applicable exercise price) of stock
         options of our Named Executive Officers that would become exercisable or vested as a result of a change of control as of
         December 31, 2010.


                                                                                                                              Total
                                                                                                                            Payments
                                                                                                           Value of        and Value of
                                                                                                          Unvested           Equity
                                                                                                        Stock Options        Awards
                                                                                                             ($)               ($)


         John J. Joyce,                                                                                       —                 —
           President and Chief Executive Officer and Principal Financial Officer
         Ramdas Rao,                                                                                          —                 —
           Vice President and Chief Technology Officer


            Automatic Acceleration of Vesting upon an Involuntary Termination Following a Change of Control. Assuming the
         employment of our Named Executive Officers was terminated involuntarily and without cause, or such officers resigned
         with good reason, during the 12 months following a change of control occurring on December 31, 2010, in accordance with
         the terms of the employment agreements with the Named Executive Officers, our Named Executive Officers would be
         entitled to cash payments in the amounts set forth opposite their names in the below table, subject to any deferrals required
         under Section 409A of the Internal Revenue Code of 1986, as amended, or the Code, as well as acceleration of vesting for
         outstanding equity awards, as set forth in the below table. The following table provides the value of compensation and
         benefits payable and intrinsic value (that is, the value based upon our closing stock price on December 31, 2010 of $10.40,
         less any applicable exercise price) of stock options


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         that would become exercisable or vested as a result of a termination occurring immediately following a change of control as
         of December 31, 2010.


                                                                                                                            Total
                                                                                           Accrued        Value of       Payments and
                                                                       Continuation        Vacation       Unvested         Value of
                                                                                                           Stock
                                            Base Salary     Bonus       of Benefits          Pay          Options        Equity Awards
                                                ($)          ($)            ($)              ($)            ($)                ($)


         John J. Joyce,                       759,000         —            59,115           14,596           —              832,711
           President and Chief
           Executive Officer and
           Principal Financial Officer
         Ramdas Rao,                          250,000         —            11,410             9,615          —              271,025
           Vice President and Chief
           Technology Officer


         Risk Assessment of Compensation Policies and Practices


            Our board of directors is responsible for reviewing our policies and practices with respect to risk assessment and risk
         management. In certain circumstances, board committees assist our board of directors in fulfilling its oversight role in certain
         areas of risk. For example, pursuant to its charter, the audit committee reviews our policies with respect to risk assessment
         and risk management associated with the accumulation, reporting and disclosure of our quarterly and annual historical
         financial information.


           We have assessed the compensation policies and practices with respect to our employees, including our executive officers,
         and have concluded that they do not create risks that are reasonably likely to have a material adverse effect on our company.
         We will continue to monitor our compensation policies and practices to determine whether the incentives they create meet
         our risk management objectives.


         2000 Equity Incentive Plan


            The following is a summary of certain material terms of the 2000 Equity Incentive Plan:


               Plan Administration. The 2000 Equity Incentive Plan is administered by our board of directors or, at the discretion of
            the board of directors, by a committee composed of at least one member of the board of directors. The compensation
            committee of the board of directors administers the 2000 Equity Incentive Plan. The compensation committee is
            authorized, among other things, to construe, interpret and implement the provisions of the 2000 Equity Incentive Plan, to
            select the key employees to whom awards will be granted, to determine the terms and conditions of such awards and to
            make all other determinations deemed necessary or advisable for the administration of the 2000 Equity Incentive Plan.


               Shares Available. The aggregate number of shares of common stock available for issuance, subject to adjustment as
            described below, under the 2000 Equity Incentive Plan is 2,750,000 after giving effect to an increase in shares recently
            approved by our board of directors and majority stockholder. Such shares may be authorized and unissued shares or
            treasury shares. Shares reserved for issuance for grants under the 2000 Equity Incentive Plan represent approximately
            11.1% of our company‟s issued and outstanding common stock as of June 30, 2011. Together with the shares reserved for
            issuance under the 2002 Non-Employee Directors Stock Option Plan described below, the shares reserved for issuance
            under these plans will represent approximately 14.3% of our company‟s outstanding common stock as of June 30, 2011. If
            any shares of common stock subject to an award are forfeited or an award is settled in cash or otherwise terminates for any
            reason whatsoever without an actual distribution of shares, the shares subject to such award will again be available for
            awards. If any performance units awarded under the 2000 Equity Incentive Plan are forfeited or canceled, the performance
            units will again be available for awards. If the compensation committee determines that any stock dividend,
            recapitalization, split, reorganization, merger, consolidation, combination, repurchase or other similar corporate
            transaction or event, affects the common stock or the book value of our company such that an
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            adjustment is appropriate in order to prevent dilution or enlargement of the rights of participants, then the compensation
            committee shall adjust any or all of (i) the number and kind of shares of common stock that may thereafter be issued in
            connection with awards, (ii) the number and kind of shares of common stock issuable in respect of outstanding awards,
            (iii) the aggregate number and kind of shares of common stock available, (iv) the number of performance units which may
            thereafter be granted and the book value of our company with respect to outstanding performance units, and (v) the
            exercise price, grant price or purchase price relating to any award. If deemed appropriate, the compensation committee
            may also provide for cash payments relating to outstanding awards; provided, however, in each case that no adjustment
            shall be made which would cause the plan to violate Section 422(b)(1) of the Code with respect to incentive stock options
            or would adversely affect the status of a performance-based award as “performance based compensation” under
            Section 162(m) of the Code. The compensation committee may also adjust performance conditions and other terms of
            awards in response to unusual or nonrecurring events or to changes in applicable laws, regulations or accounting
            principles, except to the extent that such adjustment would adversely affect the status of any outstanding
            performance-based awards as “performance-based compensation” under Section 162(m) of the Code.


               Eligibility. Persons eligible to participate in the 2000 Equity Incentive Plan include all key employees and consultants
            of our company and its subsidiaries, including our Named Executive Officers and other senior management as determined
            by the compensation committee.


               Awards. The 2000 Equity Incentive Plan is designed to give the compensation committee the maximum flexibility in
            providing incentive compensation to key employees and consultants. The 2000 Equity Incentive Plan provides for the
            grant of incentive stock options (which may no longer be granted under the plan since it was established more than ten
            years ago), nonqualified stock options, stock appreciation rights, restricted stock, bonus stock, awards in lieu of cash
            obligations, other stock-based awards and performance units. The 2000 Equity Incentive Plan also permits cash payments
            either as a separate award or as a supplement to a stock-based award, and for the income and employment taxes imposed
            on a participant in respect of any award.


               Stock Options and Stock Appreciation Rights. The compensation committee is currently authorized to grant
            nonqualified stock options. The compensation committee can also grant stock appreciation rights entitling the participant
            to receive the excess of the fair market value of a share of common stock on the date of exercise over the grant price of the
            SAR. The exercise price per share of common stock subject to an option and the grant price of an SAR are determined by
            the compensation committee, provided that the exercise price of an incentive stock option or SAR may not be less than the
            fair market value (110% of the fair market value in the case of an incentive stock option granted to a 10% stockholder) of
            the common stock on the date of grant. However, the 2000 Equity Incentive Plan also allows the compensation committee
            to grant an option, an SAR or other award allowing the purchase of common stock at an exercise price or grant price less
            than fair market value when it is granted in substitution for some other award or retroactively in tandem with an
            outstanding award. In those cases, the exercise or grant price may be the fair market value at that date, at the date of the
            earlier award or at that date reduced to reflect the fair market value of the award required to be surrendered as a condition
            to the receipt of the substitute award. The terms of each option or SAR, the times at which each option or SAR will be
            exercisable, and provisions requiring forfeiture of unexercised options or SARs and relating to exercisability or following
            termination of employment will be fixed by the compensation committee. However, no incentive stock option or SAR
            granted in tandem will have a term exceeding ten years (or shorter period applicable under Section 422 of the Code).
            Options may be exercised by payment of the exercise price in cash or in common stock, outstanding awards or other
            property (including notes or obligations to make payment on a deferred basis, or through “cashless exercises”) having a
            fair market value equal to the exercise price, as the compensation committee may determine from time to time. The
            compensation committee also determines the methods of exercise and settlement and certain other terms of the SARs.


               Restricted Stock. The 2000 Equity Incentive Plan also authorizes the compensation committee to grant restricted stock.
            Restricted stock is an award of shares of common stock which may not be disposed of by participants and which may be
            forfeited in the event of certain terminations of employment or certain other events prior to the end of a restriction period
            established by the compensation committee. Such an award entitles the


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            participant to all of the rights of a stockholder of our company, including the right to vote the shares and the right to
            receive any dividends thereon, unless otherwise determined by the compensation committee.


               Other Stock-Based Awards, Bonus Stock and Awards in lieu of Cash Obligations. In order to enable us to respond to
            business and economic developments and trends in executive compensation practices, the 2000 Equity Incentive Plan
            authorizes the compensation committee to grant awards that are denominated or payable in, or valued in whole or in part
            by reference to the value of, our common stock. The compensation committee will determine the terms and conditions of
            such awards, including consideration to be paid to exercise awards in the nature of purchase rights, the period during
            which awards will be outstanding and forfeiture conditions and restrictions on awards. In addition, the compensation
            committee is authorized to grant shares as a bonus, free of restrictions, or to grant shares or other awards in lieu of our
            obligations to pay cash or deliver other property under other plans or compensatory arrangements, subject to such terms as
            the compensation committee may specify.


               Cash Payments. The compensation committee may grant the right to receive cash payments whether as a separate
            award or as a supplement to any stock-based awards. Also, to encourage participants to retain awards payable in stock by
            providing a source of cash sufficient to pay the income and employment taxes imposed as a result of a payment pursuant
            to, or the exercise or vesting of, any award, the 2000 Equity Incentive Plan authorizes the compensation committee to
            grant a tax bonus in respect of any award.


               Performance Units. The compensation committee is also authorized to grant performance units. A performance unit is
            a right to receive a payment in cash equal to the increase in the book value of our company if specified performance goals
            during a specified time period are met. The compensation committee has the discretion to establish the performance goals
            and the performance periods relating to each performance unit. A performance goal is a goal expressed in terms of growth
            in book value, earnings per share, return on equity or any other financial or other measurement selected by the
            compensation committee, in its discretion, and may relate to the operations of our company as a whole or any subsidiary,
            division or department, and the performance periods may be of such length as the compensation committee may select.
            Neither the performance goals nor the performance periods need be identical for all performance units awarded at any
            time or from time to time.


               Performance-Based Awards. The compensation committee may grant awards pursuant to the 2000 Equity Incentive
            Plan to a participant who, in the year of grant, may be among our Chief Executive Officer and the two other most highly
            compensated executive officers which are intended to qualify as a performance-based award. If the compensation
            committee grants an award as a performance-based award, the right to receive payment of such award, other than stock
            options and SARs granted at not less than fair market value on the date of grant, will be conditional upon the achievement
            of performance goals established by the compensation committee in writing at the time such performance-based award is
            granted. Such performance goals may vary from participant to participant and performance-based award to
            performance-based award. The goals will be based upon (i) the attainment of specific amounts of, or increases in, one or
            more of the following, any of which may be measured either in absolute terms or as compared to another company or
            companies: revenue, earnings, cash flow, net worth, book value, stockholder‟s equity, financial return ratios, market
            performance or total stockholder return, and/or (ii) the completion of certain business or capital transactions. Before any
            performance-based award is paid, the compensation committee will certify in writing that the performance goals
            applicable to the performance-based award were in fact satisfied.


              Other Terms of Awards. The maximum amount that may be granted as performance-based awards to any participant in
            any calendar year shall not exceed (i) 500,000 performance units, (ii) a tax bonus payable with respect to the stock-based
            awards and performance units and (iii) cash payments (other than tax bonuses) of $1,000,000. The compensation
            committee has the discretion to grant an award to a participant who may be a Covered Employee which is not a
            performance-based award.


            In the discretion of the compensation committee, awards may be settled in cash, common stock, other awards or other
         property. The compensation committee may require or permit participants to defer the distribution of all or part of an award
         in accordance with such terms and conditions as the compensation committee may establish,


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         including payment of reasonable interest on any amounts deferred under the 2000 Equity Incentive Plan. Awards granted
         under the 2000 Equity Incentive Plan may not be pledged or otherwise encumbered. Generally, unless the compensation
         committee determines otherwise, awards are not transferable except by will or by the laws of descent and distribution, or
         (except in the case of an incentive stock option) otherwise if permitted under Rule 16b-3 of the Exchange Act and by the
         compensation committee. The 2000 Equity Incentive Plan grants the compensation committee broad discretion in the
         operation and administration of the 2000 Equity Incentive Plan. This discretion includes the authority to make adjustments in
         the terms and conditions of, and the criteria included in performance conditions related to, any awards in recognition of
         unusual or nonrecurring events affecting our company or in response to changes in applicable laws, regulations or
         accounting principles. However, no such adjustment may adversely affect the status of any outstanding award as a
         performance-based award. The compensation committee can waive any condition applicable to any award, and may adjust
         any performance condition specified in connection with any award, if such adjustment is necessary, to take account of a
         change in our company‟s strategy, performance of comparable companies or other circumstances. However no adjustment
         may adversely affect the status of any outstanding award as a performance-based award. Awards under the 2000 Equity
         Incentive Plan generally will be granted for no consideration other than services. The compensation committee may,
         however, grant awards alone, in addition to, in tandem with, or in substitution for, any other award under the 2000 Equity
         Incentive Plan, other awards under other company plans or other rights to payment from our company. Awards granted in
         addition to or in tandem with other awards may be granted either at the same time or at different times. If an award is granted
         in substitution for another award, the participant must surrender such other award in consideration for the grant of the new
         award.


            Change of Control. In the event of a change of control of the company, all awards granted under the 2000 Equity
         Incentive Plan (including performance-based awards) that are outstanding and not yet vested or exercisable or which are
         subject to restrictions, will become immediately 100% vested in each participant or will be free of any restrictions, and will
         be exercisable for the remaining duration of the award. All awards that are exercisable as of the effective date of the change
         of control will remain exercisable for the remaining duration of the award. Under the 2000 Equity Incentive Plan, a change
         of control occurs upon any of the following events: (i) the acquisition, in one or more transactions, of beneficial ownership
         by any person or group (other than a trustee or other fiduciary holding securities under an employee benefit plan of our
         company or a subsidiary), of any securities of the company such that, as a result of such acquisition, such person or group,
         either (A) beneficially owns, directly or indirectly, more than 50% of our company‟s outstanding voting securities entitled to
         vote on a regular basis for a majority of the members of the board of directors or (B) otherwise has the ability to elect,
         directly or indirectly, a majority of the members of the board of directors; (ii) a change in the composition of the board of
         directors such that a majority of the members of the board of directors are not “Continuing Directors” (as defined in the 2000
         Equity Incentive Plan); or (iii) our stockholders approve a merger or consolidation of our company with any other
         corporation, other than a merger or consolidation which would result in the voting securities of our company outstanding
         immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting
         securities of the surviving entity) at least 50% of the total voting power represented by the voting securities of our company
         or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the company
         approve a plan of complete liquidation of our company or an agreement for the sale or disposition by the company, in one or
         more transactions, of all or substantially all our company‟s assets. The foregoing events will not be deemed to be a change of
         control if the transactions causing such change are approved in advance by the affirmative vote of at least a majority of the
         Continuing Directors.


            Amendment and Termination. The 2000 Equity Incentive Plan is of indefinite duration, continuing until all shares and
         performance units reserved therefor have been issued or until terminated by the board of directors. The board of directors
         may amend, alter, suspend, discontinue or terminate the 2000 Equity Incentive Plan or the compensation committee‟s
         authority to grant awards thereunder without further stockholder approval or the consent of the participants, except
         stockholder approval must be obtained within one year after the effectiveness of such action if required by law or regulation
         or under the rules of the securities exchange on which the common stock is then quoted or listed or as otherwise required by
         Rule 16b-3 under the Exchange Act. Notwithstanding the foregoing, unless approved by the stockholders, no amendment
         will: (i) change the class of persons eligible to receive awards;


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         (ii) materially increase the benefits accruing to participants under the 2000 Equity Incentive Plan; or (iii) increase the
         number of shares of common stock subject to the 2000 Equity Incentive Plan.


         2002 Non-Employee Directors Stock Option Plan


            The following is a summary of certain material terms of the 2002 Non-Employee Directors Stock Option Plan:


            Plan Administration. The 2002 Non-Employee Directors Stock Option Plan is administered by the board of directors or,
         if so determined by our board of directors, by a committee consisting solely of two or more non-employee directors of our
         company. The body administrating the 2002 Non-Employee Directors Stock Option Plan is referred to as the
         “Administrative Body.” The Administrative Body is authorized to construe, interpret and implement the provisions of the
         2002 Non-Employee Directors Stock Option Plan, to select the non-employee directors to whom awards will be granted, to
         determine the amount, terms and conditions of such awards and to make all other determinations deemed necessary or
         advisable for the administration of the 2002 Non-Employee Directors Stock Option Plan. The shares available for grant
         under the 2002 Non-Employee Directors Stock Option Plan may be authorized and unissued shares or treasury shares. If any
         shares of common stock subject to an award are forfeited or the award otherwise terminates for any reason whatsoever
         without an actual distribution of shares, the shares subject to such award will again be available for awards. Only directors
         not employed by our company or any of its subsidiaries are eligible to participate in the 2002 Non-Employee Directors Stock
         Option Plan.


            Shares Available. The aggregate number of shares of common stock available for issuance, subject to adjustment as
         described below, under the 2002 Non-Employee Directors Stock Option Plan is 750,000 shares after giving effect to an
         increase in shares recently approved by our board of directors and majority stockholder. The number of shares available for
         issuance under the plan and the number of options and prices at which they are exercisable are subject to adjustment in the
         case of certain transactions such as mergers, recapitalizations, stock splits or stock dividends.


            Awards. Under the 2002 Non-Employee Directors Stock Option Plan, the Administrative Body may issue only
         non-qualified options. Each option granted under the 2002 Non-Employee Directors Stock Option Plan will, unless earlier
         terminated as provided in the 2002 Non-Employee Directors Stock Option Plan, expire six years from the date of grant. If a
         non-employee director ceases to serve as a director of our company, options issued to such a director under the 2002
         Non-Employee Directors Stock Option Plan will: (i) in the case of removal for cause, terminate immediately; (ii) in the case
         of death or disability, terminate two years after the date on which such director ceased to serve; and (iii) in all other the cases
         (including failure to be renominated or reelected), terminate 12 months after such director ceased to serve. The exercise price
         of the option will be the fair market value of the common stock on the date of the grant of the option.


            Amendment and Termination. The 2002 Non-Employee Directors Stock Option Plan continues in effect through
         December 31, 2012. The board of directors may amend, alter, suspend, discontinue or terminate the 2002 Non-Employee
         Directors Stock Option Plan. Notwithstanding the foregoing, any such amendment, alteration, suspension, discontinuation or
         termination shall be subject to the approval of our company‟s stockholders if such approval is required by any applicable law
         or regulation or any applicable stock exchange rule. Additionally, without the consent of the an affected non-employee
         director, no amendment, alteration, suspension, discontinuation or termination of the 2002 Non-Employee Directors Stock
         Option Plan may materially, adversely affect the rights of such non-employee director under any option previously granted.


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                                                      PRINCIPAL STOCKHOLDERS


           The following table sets forth certain information, as of August 15, 2011, concerning the ownership of our common stock
         by: (a) each person who, to our knowledge, beneficially owned on that date more than 5% of our outstanding common stock;
         (b) each of our directors and the Named Executive Officers; and (c) all of our current directors and executive officers as a
         group.


                                                                    Number of Shares               Percent Beneficially Owned(2)
                                                                                                                           After this
         Name of Beneficial Owner(1)                              Beneficially Owned(2)       Before this Offering         Offering


         Directors and Executive Officers:
         John J. Joyce(3)                                                  168,150                          *
         Ramdas Rao(4)                                                     142,650                          *
         Mark L. Fidler(5)                                                   1,667                          *
         Michael L. Widland(6)                                              58,133                          *
         D. Howard Pierce(7)                                                57,000                          *
         Thomas Michael Higgins(8)                                          57,000                          *
         Shad L. Stastney                                                       —                       —
         Francesca E. Scarito                                                   —                       —
         All directors and executive officers as a group
           (8 persons)(9)                                                  484,750                     2.7 %
         5% Stockholders:
         Vicis Capital Master Fund(10)                                  14,837,117                    84.8 %


            * Indicates less than 1%

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

           (2) Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or
               investment power with respect to securities. In accordance with SEC rules, shares of common stock issuable upon the
               exercise of options or warrants that are currently exercisable or that become exercisable within 60 days following
               August 15, 2011 are deemed to be beneficially owned by, and outstanding with respect to, the holder of such option or
               warrant. Except as indicated by footnote, and subject to community property laws where applicable, to our knowledge,
               each person listed is believed to have sole voting and investment power with respect to all shares of common stock
               beneficially owned by such person.

           (3) Represents (i) 9,400 shares of common stock, and (ii) 158,750 shares of common stock issuable upon the exercise of
               vested options issued under our 2000 Equity Incentive Plan. Does not include 55,000 shares of common stock issuable
               upon exercise of unvested options issued under our 2000 Equity Incentive Plan.

           (4) Represents (i) 10,150 shares of common stock, and (ii) 132,500 shares of common stock issuable upon exercise of
               vested options issued under our 2000 Equity Incentive Plan. Does not include 50,000 shares of common stock issuable
               upon exercise of unvested options issued under our 2000 Equity Incentive Plan.

           (5) Represents 1,667 shares of common stock issuable upon exercise of vested options issued under our 2000 Equity
               Incentive Plan. Does not include 48,333 shares of common stock issuable upon exercise of unvested options issued
               under our 2000 Equity Incentive Plan.

           (6) Represents (i) 1,333 shares of common stock, and (ii) 56,800 shares of common stock issuable upon exercise of vested
               options issued under our 2002 Directors Plan. Does not include 21,600 shares of common stock issuable upon exercise
               of unvested options issued under our 2002 Directors Plan.

           (7) Represents (i) 2,000 shares of common stock, and (ii) 55,000 shares of common stock issuable upon exercise of vested
               options issued under our 2002 Directors Plan. Does not include 21,000 shares of common stock issuable upon exercise
    of unvested options issued under our 2002 Directors Plan.

(8) Represents 57,000 shares of common stock issuable upon exercise of vested options issued under our 2002 Directors
    Plan. Does not include 19,000 shares of common stock issuable upon exercise of unvested options issued under our
    2002 Directors Plan.


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            (9) Represents (i) 23,033 shares of common stock, (ii) 292,917 shares of common stock issuable upon exercise of vested
                options issued under our 2000 Equity Incentive Plan, and (iii) 168,800 shares of common stock issuable upon
                exercise of vested options issued under the 2002 Directors Plan. Does not include 153,333 shares of common stock
                issuable upon exercise of unvested options issued under our 2000 Equity Incentive Plan and 61,600 shares of
                common stock issuable upon exercise of unvested options issued under our 2002 Directors Plan.

           (10) Represents (i) 13,882,084 shares of common stock, and (ii) 955,033 shares of common stock issuable upon exercise
                of warrants. All securities are held directly by Vicis Capital Master Fund, for which Vicis Capital LLC acts as
                investment advisor. Vicis Capital LLC may be deemed to beneficially own shares held by Vicis Capital Master Fund
                and any shares issuable to Vicis Capital Master Fund upon exercise of the warrants within the meaning of Rule 13d-3
                of the Securities Exchange Act of 1934, as amended, by virtue of the voting and dispositive power over such shares
                granted by Vicis Capital Master Fund to Vicis Capital LLC. The voting and dispositive power granted to Vicis
                Capital LLC by Vicis Capital Master Fund may be revoked at any time. Vicis Capital LLC disclaims beneficial
                ownership of any shares reported herein. Shad L. Stastney, a member of our board of directors and a founder and
                principal of Vicis Capital LLC, John Succo and Sky Lucas share voting and dispositive control of these securities.
                No single natural person can exercise voting or investment power with respect to the securities owed by Vicis Capital
                Master Fund and investment decisions with respect to these securities are made by a majority of these persons. Vicis‟
                address is 445 Park Avenue, 19 th Floor, Suite 1901, New York, New York 10022.


                               CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS


         Director Relationships


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


            Mr. Shad Stastney, a director, is a founding partner of Vicis Capital Master Fund, which holds, as of the date of this
         prospectus, approximately 84% of our outstanding stock. The shares are held directly by Vicis Capital Master Fund, for
         which Vicis Capital LLC acts as investment advisor. Vicis Capital LLC may be deemed to beneficially own the shares
         within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended, by virtue of the voting and
         dispositive power over such shares granted by Vicis Capital Master Fund to Vicis Capital LLC. The voting and dispositive
         power granted to Vicis Capital LLC by Vicis Capital Master Fund may be revoked at any time. Vicis Capital LLC disclaims
         beneficial ownership of any shares reported herein.


         Registration Rights


            In connection with the purchase of certain of our securities, we have granted Vicis registration rights for our common
         stock, including shares which may be issued upon conversion of debentures or exercise of warrants. See “Description of
         Capital Stock — Registration Rights.”


         Employment Agreements


          We have entered into employment agreements with Messrs. Joyce, Rao and Fidler. See “Executive Compensation —
         Employment Agreements” for additional information.


         Policy for Approval of Related Party Transactions


            The charter of our audit committee requires it to review our policies and procedures for reviewing and approving or
         ratifying “related person transactions” and to recommend any changes to our board of directors. In accordance with
         NASDAQ rules, the audit committee must conduct appropriate review and oversight of all related person
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         transactions for potential conflict of interest situations on an ongoing basis. The audit committee has not adopted policies or
         procedures for review of, or standards for approval of, these transactions.


                                                    DESCRIPTION OF CAPITAL STOCK


            The following description briefly summarizes information about our capital stock. This information does not purport to be
         complete and is subject to, and qualified in its entirety by reference to, the terms of our restated certificate of incorporation,
         as amended, and our bylaws, and the applicable provisions of Delaware law, the state in which we are incorporated. We urge
         you to read our restated certificate of incorporation, as amended, and our bylaws, which are exhibits to the registration
         statement of which this prospectus forms a part.


         Authorized Capital Stock


           Our authorized capital stock consists of 100,000,000 shares of common stock, $0.001 par value per share, and
         5,000,000 shares of preferred stock, $0.001 par value per share.


            As of August 15, 2011, there were 16,532,228 shares of common stock outstanding held by approximately 137
         stockholders of record of our common stock. As of August 15, 2011, there were no shares of preferred stock outstanding.


         Common Stock


            Voting. Except as otherwise required by Delaware law, holders of our common stock are entitled to one vote for each
         share held of record on all matters submitted to a vote of the stockholders. There is no cumulative voting in the election of
         directors.


            Dividend Rights. Dividends or other distributions in cash, securities or other property of our company may be declared
         from time to time by our board of directors out of assets and funds legally available for dividend payments. To date, we have
         not paid any dividends on our common stock. See “Dividend Policy.”


            Liquidation and Preemptive Rights. In the event of our liquidation, dissolution or winding-up, holders of our common
         stock are entitled to share equally on a per share basis in all assets remaining after payment or provision of payment of our
         debts. Holders of our common stock have no conversion, exchange, preemptive or other subscription rights. There are no
         redemption or sinking fund provisions applicable to our common stock.


            Listing. Our common stock is listed on the NASDAQ Capital Market under the symbol “AMBT.”


           Transfer Agent and Registrar. The transfer agent and registrar for our common stock is American Stock Transfer &
         Trust Company, LLC. Its address is 6201 15 th Avenue, Brooklyn, New York, 11219, and its telephone number is
         (718) 921-8200.


         Preferred Stock


           We have 5,000,000 shares of preferred stock authorized, but we have not designated the rights and preferences of these
         shares. Our stockholders would have to approve the rights and preferences of any class or series of preferred stock.


         Registration Rights


           Holders of 15,043,891 shares of common stock outstanding and issuable upon exercise of various warrants are entitled to
         specific rights to register those shares in the public market. These registration rights are set forth in the registration rights
         agreement, dated July 31, 2007, as amended on November 1, 2007, January 15, 2008, April 23,
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         2008 and November 21, 2008, and the registration rights agreement dated November 16, 2009, in each case, between us and
         Vicis and, in some circumstances, in warrants issued by us. The following description of the terms of the registration rights
         agreements and amendments is intended as a summary only and is qualified in its entirety by reference to the registration
         rights agreements and amendments filed as exhibits to the registration statement, of which this prospectus forms a part.


            Demand Registration Rights. At any time after the expiration of the lock-up agreement with Vicis (see “Shares Eligible
         for Future Sale — Lock-up Agreements”) Vicis may, pursuant to a registration rights agreement dated July 31, 2007, which
         was amended by a debenture amendment agreement, dated November 21, 2008 between us and Vicis and a registration
         rights agreement dated November 16, 2009 between us and Vicis, request that we register certain registrable shares,
         including shares issuable upon conversion of notes and exercise of warrants, for sale under the Securities Act. Pursuant to
         this agreement, we will be required to file a registration statement covering such registrable securities within 120 days of
         Vicis‟ request.


            Piggyback Registration Rights. After the completion of this offering, in the event that we propose to register any of our
         securities under the Securities Act (except for the registration of securities to be offered pursuant to an employee benefit plan
         on Form S-8 or pursuant to a registration made on Form S-4 or any successor forms then in effect), we are required to
         include in these registrations all securities with respect to which we have received written requests for inclusion under our
         registration rights agreements, subject to certain limitations.


           Expenses of Registration. We will pay all registration expenses, other than underwriting discounts and commissions and
         any transfer taxes related to any registration.


            Indemnification. The registration rights agreements contain indemnification provisions pursuant to which we are
         obligated to indemnify the selling stockholders and any person who might be deemed to control any selling stockholder in
         the event of violation of securities laws or untrue or alleged untrue statement of material fact attributable to us contained in
         the registration statement, any prospectus or form of prospectus or in any amendment or supplement thereto. The registration
         rights agreements require that, as a condition to including their securities in any registration statement filed pursuant to
         demand or piggyback registration rights, the selling stockholders indemnify us for material misstatements or omissions
         attributable to them.


            Additionally, the holders of certain warrants are entitled to registration rights with respect to the shares of our common
         stock issuable upon exercise of the warrants. Pursuant to the terms of these warrants, in the event that we propose to register
         any of our securities under the Securities Act (other than on a registration statement on Form S-4, S-8 or other limited
         purpose form), we are required, subject to certain limitations, to include in the registration statement all shares of our
         common stock issuable upon exercise of the warrants with respect to which we have received written requests for inclusion
         of such shares under our warrants. An aggregate amount of 1,161,807 shares of our common stock are issuable upon
         exercise of warrants containing these registration rights.


                                                  SHARES ELIGIBLE FOR FUTURE SALE


            We cannot predict the effect, if any, that market sales of shares of our common stock or the availability of shares of our
         common stock for sale will have on the market price of our common stock prevailing from time to time. Sales of substantial
         amounts of our common stock in the public market, including shares issued upon exercise of outstanding options and
         warrants or in the public market after this offering, or the anticipation of these sales, could adversely affect the market prices
         of our common stock and could impair our future ability to raise capital through the sale of our equity securities.


            Upon completion of this offering, based on our outstanding shares as of June 30, 2011, we will have outstanding an
         aggregate of        shares of our common stock (           shares if the underwriters‟ over-allotment is exercised in full). All of
         these shares and all of the shares sold in this offering (plus any shares sold as a result of the underwriters‟ exercise of the
         over-allotment option) will be freely tradable without restriction or further registration


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         under the Securities Act, unless those shares are held by our affiliates as that term is defined in Rule 144 under the Securities
         Act.


         Lock-Up Agreements


            In connection with this offering, Vicis and our officers and directors holding an aggregate of 13,904,967 shares of our
         common stock and options and warrants to purchase an aggregate of 1,631,683 shares of our common stock issuable upon
         exercise of outstanding options and warrants, have entered into lock-up agreements pursuant to which they have agreed,
         subject to limited exceptions, not to offer, sell or otherwise transfer or dispose of, directly or indirectly, any shares of
         common stock or securities convertible into or exchangeable or exercisable for shares of common stock for a period of
         180 days from the date of this prospectus without the prior written consent of Stifel, Nicolaus & Company, Incorporated. We
         have agreed, subject to limited exceptions, that for a period of 180 days from the date of this prospectus, we will not, without
         the prior written consent of Stifel, Nicolaus & Company, Incorporated, offer, sell or otherwise transfer or dispose of any
         shares of common stock or securities convertible into or exchangeable or exercisable for shares of common stock, except for
         the shares of common stock offered in this offering and the shares of common stock issuable upon exercise or conversion of
         options, warrants or securities outstanding on the date of this prospectus and the awards that may be granted under our 2000
         Equity Incentive Plan and 2002 Non-Employee Directors Stock Option Plan and shares of our common stock that are issued
         upon exercise of such awards. There are no contractually specified conditions for the waiver of lock-up restrictions, and any
         waiver is at the sole discretion of Stifel, Nicolaus & Company, Incorporated, which may be granted or denied by Stifel,
         Nicolaus & Company, Incorporated for any reason. After the lock-up period, these shares may be sold, subject to applicable
         securities laws. See “Underwriting.”


         Rule 144


            In general, under Rule 144 under the Securities Act of 1933, as amended, as currently in effect, a person who is not
         deemed to have been one of our affiliates for purposes of the Securities Act at any time during the three months preceding a
         sale and who has beneficially owned the shares proposed to be sold for at least six months, including the holding period of
         any prior owner other than our affiliates, is entitled to sell those shares without complying with the manner of sale, volume
         limitation or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. If
         such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any
         prior owner other than our affiliates, then that person is entitled to sell those shares without complying with any of the
         requirements of Rule 144.


           In general, under Rule 144, as currently in effect, our affiliates or persons selling shares on behalf of our affiliates are
         entitled to sell upon expiration of the lock-up agreements described above, within any three-month period beginning
         180 days after the date of this prospectus, a number of shares that does not exceed the greater of the following:

            • 1% of the number of shares of our common stock then outstanding; or
            • the average weekly trading volume of the common stock during the four calendar weeks preceding the filing of a
              notice on Form 144 with respect to that sale.


           Sales under Rule 144 by our affiliates are also subject to manner of sale provisions and notice requirements and to the
         availability of current public information about us.


         Stock Options


            We have filed registration statements on Form S-8 under the Securities Act covering all of the shares of our common
         stock subject to options outstanding or reserved for issuance under our stock incentive plans. Unless subject to a lock-up
         agreement, the shares registered on a Form S-8 will be eligible for resale at any time.


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         Registration Rights


           After the completion of this offering, holders of 15,043,891 shares of common stock outstanding and issuable upon
         exercise of various warrants will be entitled to specific rights to register those shares for sale in the public market upon
         expiration of applicable lock-up agreements. See “Description of Capital Stock — Registration Rights.” Registration of these
         shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities
         Act, except for shares purchased by affiliates, immediately upon the effectiveness of the registration statement relating to
         such shares.


            On August 18, 2011, Vicis executed and delivered to us a Waiver and Consent, pursuant to which Vicis, among other
         things, waived its rights to include its shares of common stock and any shares of common stock covered by warrants that it
         holds in the registration statement of which this prospectus forms a part.


                     MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. HOLDERS
                                             OF OUR COMMON STOCK


           The following discussion summarizes certain material U.S. federal income and estate tax considerations relating to the
         acquisition, ownership and disposition of our common stock purchased pursuant to this offering by a non-U.S. holder (as
         defined below). This discussion is based on the provisions of the U.S. Internal Revenue Code of 1986, as amended, final,
         temporary and proposed U.S. Treasury regulations promulgated thereunder and current administrative rulings and judicial
         decisions, all as in effect as of the date hereof. All of these authorities may be subject to differing interpretations or repealed,
         revoked or modified, possibly with retroactive effect, which could materially alter the tax consequences to non-U.S. holders
         described in this prospectus.


           There can be no assurance that the Internal Revenue Service, or IRS, will not take a contrary position to the tax
         consequences described herein or that such position will not be sustained by a court. No ruling from the IRS or opinion of
         counsel has been obtained with respect to the U.S. federal income or estate tax consequences to a non-U.S. holder of the
         purchase, ownership or disposition of our common stock.


           This discussion is for general information only and is not tax advice. All prospective non-U.S. holders of our
         common stock should consult their own tax advisors with respect to the U.S. federal, state, local and non-U.S. tax
         consequences of the purchase, ownership and disposition of our common stock.


            As used in this discussion, the term “non-U.S. holder” means a beneficial owner of our common stock that is not any of
         the following for U.S. federal income tax purposes:


            • an individual who is a citizen or a resident of the United States;
            • a corporation or other entity taxable as a corporation for U.S. federal income tax purposes that was created or
              organized in or under the laws of the United States, any state thereof or the District of Columbia;
            • an estate whose income is subject to U.S. federal income taxation regardless of its source;
            • a trust (a) if a U.S. court is able to exercise primary supervision over the trust‟s administration and one or more
              U.S. persons have the authority to control all of the trust‟s substantial decisions or (b) that has a valid election in effect
              under applicable U.S. Treasury regulations to be treated as a U.S. person; or
            • an entity that is disregarded as separate from its owner if all of its interests are owned by a single person described
              above.


            An individual may be treated, for U.S. federal income tax purposes, as a resident of the United States in any calendar year
         by being present in the United States on at least 31 days in that calendar year and for an aggregate of at least 183 days during
         a three-year period ending in the current calendar year. The 183-day test is determined by counting all of the days the
         individual is treated as being present in the current year, one-third of such days in the immediately preceding year and
         one-sixth of such days in the second preceding year. Residents are subject to U.S. federal income tax as if they were
         U.S. citizens. Certain individuals may avoid classification as a resident alien
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         under various statutory exceptions or, in the case of individuals who would be classified as income tax residents of the
         United States and a country with a treaty with the United States, tie breaker rules set forth in applicable tax treaties.


            This discussion assumes that a prospective non-U.S. holder will hold shares of our common stock as a capital asset
         (generally, property held for investment). This discussion does not address all aspects of U.S. federal income and estate
         taxation that may be relevant to a particular non-U.S. holder in light of that non-U.S. holder‟s individual circumstances. In
         addition, this discussion does not address any aspect of U.S. state or local or non-U.S. taxes, or the special tax rules
         applicable to particular non-U.S. holders, such as the following:


            • insurance companies and financial institutions;
            • tax-exempt organizations;
            • controlled foreign corporations and passive foreign investment companies;
            • partnerships or other pass-through entities;
            • regulated investment companies or real estate investment trusts;
            • pension plans;
            • persons who received our common stock as compensation;
            • brokers and dealers in securities;
            • owners that hold our common stock as part of a straddle, hedge, conversion transaction, synthetic security or other
              integrated investment; and
            • former citizens or residents of the United States subject to tax as expatriates.


            If a partnership or other entity treated as a partnership for U.S. federal income tax purposes is a beneficial owner of our
         common stock, the treatment of a partner in the partnership generally will depend on the status of the partner and the
         activities of the partnership. We urge any beneficial owner of our common stock that is a partnership and partners in that
         partnership to consult their tax advisors regarding the U.S. federal income tax consequences of acquiring, owning and
         disposing of our common stock.


         Distributions on Our Common Stock


            Any distribution on our common stock paid to non-U.S. holders will generally constitute a dividend for U.S. federal
         income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under
         U.S. federal income tax principles. Distributions in excess of our current and accumulated earnings and profits will generally
         constitute a return of capital to the extent of the non-U.S. holder‟s adjusted tax basis in our common stock, and will be
         applied against and reduce the non-U.S. holder‟s adjusted tax basis. Any remaining excess will be treated as capital gain,
         subject to the tax treatment described below in “— Gain on Sale, Exchange or Other Disposition of Our Common Stock.”


            Dividends paid to a non-U.S. holder that are not treated as effectively connected with the non-U.S. holder‟s conduct of a
         trade or business in the United States generally will be subject to withholding of U.S. federal income tax at a rate of 30% on
         the gross amount paid, unless the non-U.S. holder is entitled to an exemption from or reduced rate of withholding under an
         applicable income tax treaty. In order to claim the benefit of a tax treaty or to claim an exemption from withholding, a
         non-U.S. holder must provide an IRS-approved certificate of eligibility prior to payment of the dividends. For most
         individuals and corporations, such certificate will be a properly completed and executed IRS Form W-8BEN (or successor
         form). For most partnerships or other pass-through entities, a certificate of eligibility may consist of a completed, signed IRS
         Form W-8IMY. A non-U.S. holder eligible for a reduced rate of withholding pursuant to an income tax treaty may be
         eligible to obtain a refund of any excess amounts withheld by timely filing an appropriate claim for a refund with the IRS.


            Dividends paid to a non-U.S. holder that are treated as effectively connected with a trade or business conducted by the
         non-U.S. holder within the United States (and, if an applicable income tax treaty so provides, are also attributable to a
         permanent establishment or a fixed base maintained within the United States by the non-U.S. holder) are generally exempt
         from the 30% withholding tax if the non-U.S. holder satisfies applicable certification and


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         disclosure requirements. To obtain the exemption, a non-U.S. holder must provide us with a properly executed IRS
         Form W-8ECI (or successor form) prior to the payment of the dividend. Dividends received by a non-U.S. holder that are
         treated as effectively connected with a U.S. trade or business generally are subject to U.S. federal income tax at rates
         applicable to U.S. persons. A non-U.S. holder that is a corporation may, under certain circumstances, be subject to an
         additional “branch profits tax” imposed at a rate of 30%, or such lower rate as specified by an applicable income tax treaty
         between the United States and such holder‟s country of residence.


            A non-U.S. holder who provides us with an IRS Form W-8BEN, Form W-8IMY or Form W-8ECI must update the form
         or submit a new form, as applicable, if there is a change in circumstances that makes any information on such form incorrect.


           All non-U.S. holders are encouraged to consult with their tax advisors regarding U.S. tax return filing requirements in
         connection with distributions on our common stock. In some cases, if there is adequate withholding at the source, the
         non-U.S. holder may be exonerated from having to file a return.


         Gain on Sale, Exchange or Other Disposition of Our Common Stock


            In general, a non-U.S. holder will not be subject to any U.S. federal income tax or withholding on any gain realized from
         the non-U.S. holder‟s sale, exchange or other disposition of shares of our common stock except as follows:


            • the gain is effectively connected with a U.S. trade or business (and, if an applicable income tax treaty so provides, is
              also attributable to a permanent establishment or a fixed base maintained within the United States by the
              non-U.S. holder), in which case the gain will be taxed on a net income basis generally in the same manner as if the
              non-U.S. holder were a U.S. person, and, if the non-U.S. holder is a corporation, the additional branch profits tax
              described above in “— Distributions on Our Common Stock” may also apply;
            • the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of the
              disposition and certain other conditions are met, in which case the non-U.S. holder will, unless exempted by an
              applicable tax treaty, be subject to a 30% tax on the net gain derived from the disposition, which may be offset by
              U.S.-source capital losses of the non-U.S. holder (for that year only), if any;
            • the non-U.S. holder is an entity that fails to meet certain disclosure requirements imposed under the Hiring Incentives
              to Restore Employment Act of 2010 described below in “Backup Withholding and Information Reporting”; or
            • we are, or have been at any time during the five-year period preceding such disposition (or the non-U.S. holder‟s
              holding period, if shorter), a “United States real property holding corporation.”


            Generally, we will be a “United States real property holding corporation” if the fair value of our U.S. real property
         interests equals or exceeds 50% of the sum of the fair values of our worldwide real property interests and other assets used or
         held for use in a trade or business, all as determined under applicable U.S. Treasury regulations. We believe that we have not
         been and are not currently, and do not anticipate becoming in the future, a “United States real property holding corporation”
         for U.S. federal income tax purposes.


         Backup Withholding and Information Reporting


            We must report annually to the IRS and to each non-U.S. holder the amount of distributions paid to such holder and the
         amount of tax withheld, if any. Copies of the information returns filed with the IRS to report the distributions and
         withholding also may be made available to the tax authorities in a country in which the non-U.S. holder is a resident under
         the provisions of an applicable income tax treaty or agreement.


           The United States imposes a backup withholding tax on the gross amount of dividends and certain other types of payments
         (currently at a rate of 28%). Dividends paid to a non-U.S. holder will not be subject to backup withholding if proper
         certification of foreign status is provided, (usually on IRS Form W-8BEN) and we do not have actual knowledge or reason to
         know that the non-U.S. holder is a U.S. person. In addition, no backup withholding or


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         information reporting will be required regarding the proceeds of a disposition of our common stock made by a
         non-U.S. holder within the United States or conducted through certain U.S. financial intermediaries if we receive the
         certification of foreign status described in the preceding sentence and we do not have actual knowledge or reason to know
         that such non-U.S. holder is a U.S. person or the non-U.S. holder otherwise establishes an exemption. Non-U.S. holders
         should consult their own tax advisors regarding the application of the information reporting and backup withholding rules to
         them.


            Backup withholding is not an additional tax. Amounts withheld under the backup withholding rules from a payment to a
         non-U.S. holder can be refunded or credited against the non-U.S. holder‟s U.S. federal income tax liability, if any, provided
         that certain required information is furnished to the IRS in a timely manner.


            In addition to backup withholding, the Hiring Incentives to Restore Employment Act of 2010, or the HIRE Act, requires
         that dividends and certain other payments made after December 31, 2012 to non-U.S. entities (including without limitation
         foreign financial institutions and foreign corporations) be subject to a 30% withholding tax if the non-U.S. entity does not
         meet certain disclosure requirements. If the non-U.S. entity is a foreign financial institution, the 30% withholding tax would
         apply to dividends and to gains on the sale, exchange or other disposition of our common stock unless the foreign financial
         institution enters a written agreement with the IRS to provide information and disclosure regarding certain accounts owned
         by U.S. persons held with such financial institution including written annual reports regarding such accounts and the
         U.S. account holders. If the non-U.S. entity is not a financial institution, the 30% withholding tax would apply to dividends
         and to gains on the sale, exchange or other disposition of our common stock unless such non-U.S. entity certifies to us (on an
         IRS-approved form) that such entity does not have a substantial U.S. owner or otherwise provides the name, current address
         and U.S. taxpayer identification number of each substantial U.S. owner. Certain non-financial foreign entities, including
         publicly traded corporations, are not required to provide such certification. We will require compliance with the HIRE Act
         on or before December 31, 2012 from all non-U.S. entities holding our common stock or will impose the mandatory 30%
         withholding tax (regardless of receipt of a properly completed IRS Form W-8BEN noted above).


           All non-U.S. holders are encouraged to consult with their tax advisors regarding possible implications of backup
         withholding or the HIRE Act.


         U.S. Federal Estate Tax


            An individual non-U.S. holder who is treated as the owner, or who has made certain lifetime transfers, of an interest in our
         common stock may be required to include the value of the common stock in his or her gross estate for U.S. federal estate tax
         purposes, and may be subject to U.S. federal estate tax unless an applicable estate tax treaty provides otherwise. Under
         current U.S. federal law, individual non-U.S. holders of our common stock may be subject to U.S. federal estate tax at a
         maximum rate of 35% on taxable U.S. assets that exceed $60,000 in value (a U.S. federal estate tax return may be required
         for amounts below $60,000 if the decedent made substantial lifetime gifts of U.S. property). This federal estate tax would
         apply to any individual non-U.S. holder if such person owned our common stock at the time of his or her death on or after
         January 1, 2011.


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                                                              UNDERWRITING


           Subject to the terms and conditions set forth in an underwriting agreement, each of the underwriters named below has
         severally agreed to purchase from us the aggregate number of shares of common stock set forth opposite its name below:


         Underwriters                                                                                                 Number of Shares


         Stifel, Nicolaus & Company, Incorporated
         Needham & Company, LLC
         ThinkEquity LLC
            Total



            The underwriting agreement provides that the obligations of the several underwriters are subject to various conditions,
         including approval of legal matters by counsel. The nature of the underwriters‟ obligations commits them to purchase and
         pay for all of the shares of common stock listed above if any shares are purchased.


           The underwriting agreement provides that we will indemnify the underwriters against liabilities specified in the
         underwriting agreement under the Securities Act, or will contribute to payments that the underwriters may be required to
         make relating to these liabilities.


           Stifel, Nicolaus & Company, Incorporated expects to deliver the shares of common stock to purchasers on or about                ,
         2011.


         Over-Allotment Option


           We have granted a 30-day over-allotment option to the underwriters to purchase up to a total of         additional shares of
         our common stock from us at the public offering price, less the underwriting discount payable by us, as set forth on the cover
         page of this prospectus. If the underwriters exercise this option in whole or in part, then each of the underwriters will be
         separately committed, subject to the conditions described in the underwriting agreement, to purchase the additional shares of
         our common stock in proportion to their respective commitments set forth in the table above.


         Underwriting Discount


            The underwriters propose to offer the shares of common stock directly to the public at the public offering price set forth
         on the cover page of this prospectus, and at this price less a concession not in excess of $    per share of common stock to
         other dealers specified in a master agreement among underwriters who are members of the Financial Industry Regulatory
         Authority, Inc. After this offering, the offering price, concessions and other selling terms may be changed by the
         underwriters. Our common stock is offered subject to receipt and acceptance by the underwriters and to other conditions,
         including the right to reject orders in whole or in part.


           The following table summarizes the compensation to be paid to the underwriters by us and the proceeds, before expenses,
         payable to us:


                                                                                                                      Total
                                                                                                        Without                   With
                                                                                          Per
                                                                                         Share       Over-Allotment           Over-Allotment


         Public offering price
         Underwriting discount
         Proceeds, before expenses, to us
  We estimate that the expenses in this offering payable by us, not including the underwriting discount, will be
approximately $ .


                                                             80
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         Indemnification of Underwriters


            We will indemnify the underwriters against some civil liabilities, including liabilities under the Securities Act and
         liabilities arising from breaches of our representations and warranties contained in the underwriting agreement. If we are
         unable to provide this indemnification, we will contribute to payments the underwriters may be required to make in respect
         of those liabilities.


         No Sales of Similar Securities


            The underwriters will require all of our directors and officers and our majority stockholder, Vicis, to agree not to offer,
         sell, agree to sell, directly or indirectly, or otherwise dispose of any shares of common stock or any securities convertible
         into or exchangeable for shares of common stock except for the shares of common stock offered in this offering without the
         prior written consent of Stifel, Nicolaus & Company, Incorporated for a period of 180 days after the date of this prospectus.


            We have agreed, subject to limited exceptions, that for a period of 180 days from the date of this prospectus, we will not,
         without the prior written consent of Stifel, Nicolaus & Company, Incorporated, offer, sell or otherwise transfer or dispose of
         any shares of common stock or securities convertible into or exchangeable or exercisable for shares of common stock, except
         for the shares of common stock offered in this offering and the shares of common stock issuable upon exercise or conversion
         of options, warrants or securities outstanding on the date of this prospectus and the awards that may be granted under our
         2000 Equity Incentive Plan and 2002 Non-Employee Directors Stock Option Plan and shares of our common stock that are
         issued upon exercise of such awards. There are no contractually specified conditions for the waiver of lock-up restrictions,
         and any waiver is at the sole discretion of Stifel, Nicolaus & Company, Incorporated, which may be granted or denied by
         Stifel, Nicolaus & Company, Incorporated for any reason.


         NASDAQ Capital Market Listing


            Our common stock is listed on the NASDAQ Capital Market under the symbol “AMBT.”


         Short Sales, Stabilizing Transactions, and Penalty Bids


            In order to facilitate this offering, persons participating in this offering may engage in transactions that stabilize, maintain
         or otherwise affect the price of our common stock during and after this offering. Specifically, the underwriters may engage
         in the following activities in accordance with the rules of the SEC.


            Short Sales. Short sales involve the sales by the underwriters of a greater number of shares than they are required to
         purchase in the offering. Covered short sales are short sales made in an amount not greater than the underwriters‟
         over-allotment option to purchase additional shares from us in this offering. The underwriters may close out any covered
         short position by either exercising their over-allotment option to purchase shares or purchasing shares in the open market. In
         determining the source of shares to close out the covered short position, the underwriters will consider, among other things,
         the price of shares available for purchase in the open market as compared to the price at which they may purchase shares
         through the over-allotment option. Naked short sales are any short sales in excess of such over-allotment option. The
         underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is
         more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common
         stock in the open market after pricing that could adversely affect investors who purchase in this offering.


            Stabilizing Transactions. The underwriters may make bids for or purchases of the shares for the purpose of pegging,
         fixing or maintaining the price of the shares, so long as stabilizing bids do not exceed a specified maximum.


                                                                         81
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            Penalty Bids. If the underwriters purchase shares in the open market in a stabilizing transaction or syndicate covering
         transaction, they may reclaim a selling concession from the underwriters and selling group members who sold those shares
         as part of this offering. Stabilization and syndicate covering transactions may cause the price of the shares to be higher than
         it would be in the absence of these transactions. The imposition of a penalty bid might also have an effect on the price of the
         shares if it discourages presales of the shares.


            The transactions above may occur on the NASDAQ Capital Market or otherwise. Neither we nor the underwriters make
         any representation or prediction as to the effect that the transactions described above may have on the price of the shares. If
         these transactions are commenced, they may be discontinued without notice at any time.


                                                              LEGAL MATTERS


            Shipman & Goodwin LLP, Hartford, Connecticut, which has acted as our counsel in connection with this offering, will
         pass on the validity of the common stock being offered by this prospectus. Mr. Michael L. Widland, a non-employee
         director, is a partner in the law firm Shipman & Goodwin LLP, and owns 1,333 shares of our common stock and holds
         options to purchase 78,400 shares of our common stock at various prices. Greenberg Traurig, LLP, Phoenix, Arizona, is
         acting as counsel to the underwriters.


                                                                   EXPERTS


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


                                            WHERE YOU CAN FIND MORE INFORMATION


            We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and
         copy any reports, statements or other information we file with the SEC at the SEC‟s Public Reference Room at 100 F Street,
         NE, Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the
         SEC at 1-800-SEC-0330. In addition, the SEC maintains a website at www.sec.gov containing reports, proxy and information
         statements and other information regarding registrants that file electronically with the SEC, including us.


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


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


                                                                        82
                                            AMBIENT CORPORATION

                            INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


                                                                                                               Page


Report of Independent Registered Public Accounting Firm                                                        F-2
Audited Consolidated Financial Statements:
  Consolidated Balance Sheets as of December 31, 2009 and 2010                                                 F-3
  Consolidated Statements of Operations for the years ended December 31, 2008, 2009 and 2010                   F-4
  Consolidated Statement of Changes in Stockholders‟ Equity (Deficit) for the years ended December 31, 2008,
    2009 and 2010                                                                                              F-5
  Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2009 and 2010                   F-6
  Notes to Audited Consolidated Financial Statements                                                           F-7
Unaudited Consolidated Financial Statements:
  Consolidated Balance Sheets as of December 31, 2010 (Audited) and June 30, 2011 (Unaudited)                  F-22
  Consolidated Statements of Operations for the six months ended June 30, 2010 and 2011 (Unaudited)            F-23
  Consolidated Statements of Cash Flows for the six months ended June 30, 2010 and 2011 (Unaudited)            F-24
  Notes to the Unaudited Consolidated Financial Statements                                                     F-25


                                                          F-1
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                             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


         To the Board of Directors and Stockholders of
         Ambient Corporation:


            We have audited the accompanying consolidated balance sheets of Ambient Corporation and Subsidiary (the “Company”)
         as of December 31, 2009 and 2010, and the related consolidated statements of operations, changes in stockholders‟ equity
         (deficit) and cash flows for the years ended December 31, 2008, 2009 and 2010. The consolidated financial statements are
         the responsibility of the Company‟s management. Our responsibility is to express an opinion on these financial statements
         based on our audits.


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


            In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
         position of the Company as of December 31, 2009 and 2010 and the results of its operations and cash flows for the years
         ended December 31, 2008, 2009 and 2010 in conformity with accounting principles generally accepted in the United States
         of America.


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

         ROTENBERG MERIL SOLOMON BERTIGER & GUTTILLA, P.C.


         Saddle Brook, New Jersey
         February 23, 2011, except Note 2 relating to the reverse
         stock split, which is July 18, 2011


                                                                        F-2
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                                                           AMBIENT CORPORATION

                                                    CONSOLIDATED BALANCE SHEETS


                                                                                                                     December 31,
                                                                                                              2009                  2010
                                                                                                                      (Audited)
                                                                                                           (In thousands, except share and
                                                                                                                   per share data)


         Assets
         Current assets:
           Cash and cash equivalents                                                                   $           987        $        6,987
           Accounts receivable                                                                                   1,239                 1,731
           Inventory                                                                                               361                   834
           Prepaid expenses and other current assets                                                               203                   276
           Total current assets                                                                                  2,790                 9,828
         Fixed assets, net                                                                                         603                   745
         Total assets                                                                                  $         3,393        $       10,573

         Liabilities and stockholders’ (deficit) equity
         Current liabilities:
           Accounts payable                                                                            $         2,016        $        3,608
           Accrued expenses                                                                                        829                   633
           Deferred revenue                                                                                        159                    —
           Capital lease obligations, current portion                                                               11                    10
           Convertible debt, current portion (net of discount)                                                   9,816                    —
           Total current liabilities                                                                            12,831                 4,251
         Deferred rent                                                                                              85                   186
         Capital lease obligations, less current portion                                                            12                    —
         Total liabilities                                                                                      12,928                 4,437
         Stockholders‟ (deficit) equity:
         Common stock, $0.001 par value, 20,000,000 shares authorized, 8,990,397 and
           16,493,764 shares issued; and 8,980,397 and 16,483,764 shares outstanding,
           respectively                                                                                             9                     16
         Additional paid-in capital                                                                           130,898                149,748
         Accumulated deficit                                                                                 (140,242 )             (143,428 )
           Less: treasury stock; 10,000 shares at cost                                                           (200 )                 (200 )
         Total stockholders‟ (deficit) equity                                                                   (9,535 )               6,136
         Total liabilities and stockholders‟ (deficit) equity                                          $         3,393        $       10,573


                                             See Notes to Audited Consolidated Financial Statements.


                                                                      F-3
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                                                      AMBIENT CORPORATION

                                          CONSOLIDATED STATEMENTS OF OPERATIONS


                                                                                                Year Ended December 31,
                                                                                         2008               2009                2010
                                                                                                       (Audited)
                                                                                          (In thousands, except per share data)


         Total revenue                                                               $    12,622       $      2,193        $ 20,358
         Cost of goods sold                                                                9,942              1,836          12,023
            Gross profit                                                                   2,680                 357             8,335
         Operating expenses:
           Research and development expenses                                               4,351              4,946              6,314
           Selling, general and administrative expenses                                    3,600              4,662              5,239
         Total operating expenses                                                          7,951              9,608            11,553
         Operating loss                                                                   (5,271 )           (9,251 )           (3,218 )
         Interest (expense) income, net                                                   (3,116 )           (4,963 )             (214 )
         Loss on extinguishment of debt                                                   (2,789 )               —                  —
         Other (expense) income, net                                                        (118 )              (32 )              246
            Total other (loss) income                                                     (6,023 )           (4,995 )                  32
         Net loss                                                                    $   (11,294 )     $    (14,246 )      $ (3,186 )

         Net loss per share                                                          $     (3.75 )     $      (1.81 )      $    (0.21 )
         Weighted average shares used in computing net loss per share                      3,016              7,891            15,385

                                          See Notes to Audited Consolidated Financial Statements.


                                                                    F-4
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                                                  AMBIENT CORPORATION

                    CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)


                                                                       Additional
                                           Common Stock                  Paid-in         Treasury     Accumulated
                                         Shares         Amount           Capital           Stock         Deficit           Total
                                                                            (Audited)
                                                                 (In thousands, except share data)


         Balance — January 1, 2008       2,556,157    $    256       $ 113,181          $    (200 )   $   (114,702 )   $    (1,465 )
         Common stock issued upon
            exercise of warrants         4,643,651         464               (222 )                                            242
         Issuance of warrants in
            connection with
            convertible promissory
            note                                                            3,146                                            3,146
         Beneficial conversion feature
            of convertible promissory
            note                                                           13,541                                           13,541
         Issuance of warrants                                               2,955                                            2,955
         Share-based compensation
            expense                                                           329                                              329
         Net loss                                                                                          (11,294 )       (11,294 )
         Balance — December 31,
           2008                          7,199,808    $    720       $ 132,930          $    (200 )   $   (125,996 )   $     7,454

         Common stock issued upon
           exercise of warrants            116,422          12                940                                              952
         Common stock issued upon
           exercise of options               7,500           1                  24                                                 24
         Common stock issued upon
           conversion of convertible
           debt                          1,666,667         167              2,333                                            2,500
         Remeasurement of beneficial
           conversion feature of
           convertible promissory
           note                                                            (8,333 )                                         (8,333 )
         Warrant repricing                                                  1,147                                            1,147
         Share-based compensation
           expense                                                            967                                              967
         Net loss                                                                                          (14,246 )       (14,246 )
         Balance — December 31,
           2009                          8,990,397    $    899       $ 130,008          $    (200 )   $   (140,242 )   $    (9,535 )

         Common stock issued upon
           exercise of warrants             28,590           3                  97                                             100
         Common stock issued upon
           exercise of options               8,110           1                  31                                                 32
         Proceeds from sale of
           common stock                    800,000          80              7,920                                            8,000
         Common stock issued upon
           conversion of convertible
           debt                          6,666,667         667              9,333                                           10,000
         Share-based compensation
           expense                                                            725                                              725
         Net loss                                                                                           (3,186 )        (3,186 )
Balance — December 31,
  2010                     16,493,764     $ 1,649         $ 148,115   $   (200 )   $   (143,428 )   $   6,136


                         See Notes to Audited Consolidated Financial Statements.


                                                    F-5
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                                                         AMBIENT CORPORATION

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                                             For the Years Ended December 31,
                                                                                           2008               2009            2010
                                                                                                          (Audited)
                                                                                                       (In thousands)


         Cash flows from operating activities:
           Net loss                                                                    $   (11,294 )    $   (14,246 )     $ (3,186 )
         Adjustments to reconcile net loss to net cash used in operating activities:
           Depreciation and amortization                                                       307               303             380
           Amortization of note discount                                                     1,235                —               —
           Amortization of beneficial conversion feature of convertible debt                 1,247             3,228             184
           Financing costs related to warrant modification                                      —              1,147              —
           Financing, consulting and other expenses paid via the
             issuance of common stock and warrants                                             329               967             725
           Gain (loss) on conversion and extinguishment of debt                              2,789                —             (252 )
           Gain on disposition of property and equipment                                       118                32               6
           Changes in operating assets and liabilities:
             (Increase) decrease in:
                Accounts receivables                                                        (1,475 )             430            (492 )
                Inventory                                                                      376              (263 )          (473 )
                Prepaid expenses and other current assets                                       49               (28 )           (74 )
             Increase (decrease) in:
                Accounts payable                                                               320               682           1,592
                Deferred rent                                                                   —                 85             101
                Accrued expenses and other current liabilities                                 342              (108 )            56
                Deferred revenue                                                               108                51            (159 )
         Net cash used in operating activities                                              (5,549 )          (7,720 )        (1,592 )
         Cash flows from investing activities:
           Redemption of marketable securities                                                  —                125              —
           Purchases of marketable securities                                                 (125 )              —               —
           Additions to property and equipment                                                (451 )            (394 )          (527 )
         Net cash used in investing activities                                                (576 )            (269 )          (527 )
         Cash flows from financing activities:
           Proceeds from issuance of common stock                                              242               976           8,000
           Proceeds from issuance of warrants                                                3,000                —              100
           Proceeds from exercise of stock options                                              —                 —               32
           Finance costs relating to the issuance of warrants                                  (45 )              —               —
           Proceeds from issuance of notes payable                                           2,500                —               —
           Proceeds related to the adjustment of terms of convertible debentures             8,000                —               —
           Repayment of convertible debentures                                                (103 )              —               —
           Payments of capitalized lease obligations                                            (3 )             (12 )           (13 )
         Net cash provided by financing activities                                          13,591               964           8,119
         Net increase (decrease) in cash and cash equivalents                                7,466            (7,025 )         6,000
         Cash and cash equivalents at beginning of year                                        546             8,012             987
         Cash and cash equivalents at end of year                                      $     8,012      $        987      $    6,987

         Non-cash financing and investing activities:
           Issuance of common stock in connection with conversion of debt              $        —       $         —       $ 10,000
           Issuance of warrants in connection with issuance of notes payable                 3,146                —             —
           Acquisition of property and equipment financed by capital lease                      37                —             —
         Supplemental cash flow information:
Interest paid                                              $       115    $   675   $   226

                See Notes to Audited Consolidated Financial Statements.


                                         F-6
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                                                         AMBIENT CORPORATION

                                  NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS


         NOTE 1 — DESCRIPTION OF BUSINESS


            Ambient Corporation (“Ambient,” the “Company,” “we” or “us”) is a leading provider of a smart grid communications
         platform that enables utilities to effectively deploy, integrate and communicate with multiple smart grid applications within
         the electrical power distribution grid. The Ambient Smart Grid ® communications platform, which includes hardware,
         software and firmware, today enables the simultaneous integration and parallel communication of multiple smart grid
         applications provided by a variety of vendors, including smart metering, demand response and distribution automation.


           Our long-standing relationship with Duke Energy, which we believe has one of the most forward-looking smart grid
         investment initiatives in North America, has led to rapid growth in our business. We entered into a long-term agreement in
         September 2009 with Duke Energy, currently our sole customer, to supply Duke Energy our Ambient Smart Grid ®
         communications nodes and license our AmbientNMS ® through 2015.


         NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


            Reverse Stock Split


           All share and per share data have been adjusted to reflect the 1-for-100 reverse stock split of our common stock that
         became effective on July 18, 2011.


            Principles of Consolidation


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


            Use of Estimates


            The preparation of financial statements in conformity with generally accepted accounting principles requires management
         to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
         assets and liabilities at the dates of the financial statements. Actual results may differ from those estimates.


            Cash and Cash Equivalents


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


            Fair Value of Financial Instruments


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


            Stock-Based Compensation
  We account for stock-based compensation in accordance with accounting guidance now codified as Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718, “Compensation — Stock


                                                         F-7
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                                                        AMBIENT CORPORATION

                        NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


         Compensation.” Under the fair value recognition provision of financial stock-based compensation cost is estimated at the
         grant date based on the fair value of the award. We estimate the fair value of stock options granted using the
         Black-Scholes-Merton option pricing model.


            Net Loss per Share


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


                                                                               2008                  2009                  2010


         Stock options                                                         323,870                585,370             1,129,465
         Warrants                                                            1,292,167                788,278             1,559,688
         Convertible debentures                                              8,333,333              6,666,667                    —


            Property and Equipment


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


            Revenue Recognition


            Hardware sales consist of our smart grid communications nodes as well as system software embedded in the
         communications nodes. System software embedded in our communications nodes is used solely in connection with the
         operation of the product. Upon the sale and shipment of our products, we are not required to update the embedded software
         for newer versions that are subsequently developed. In addition, we do not offer or provide any free post-contract customer
         support. There is an original warranty period, which may run for a period of up to 12 months from sale of product, in which
         we will provide fixes for the communications nodes when and if appropriate. As such, we recognize revenue from the sales
         of the Nodes upon delivery to the customer.


            Our proprietary software consists of the AmbientNMS ® , a network management system that may be sold on a
         stand-alone basis. A purchaser of our communications nodes is not required to purchase this system as our communications
         nodes could be managed with independently developed management software. The sale of the AmbientNMS ® does not
         include post-contract customer support, unless the customer enters into a maintenance agreement with us. As such, we
         recognize revenue from the sale of this software when shipped. We classify amounts billed to customers before software is
         shipped as deferred revenue.


            We offer maintenance service on a fee basis that entitles the purchasers of our communications nodes and Ambient NMS
         ® software to benefits including telephone support, as well as updates and upgrades to our products. We amortize such
         revenue, when received over the appropriate period based on the terms of individual agreements.


            Accounts Receivable


           We record accounts receivable net of an allowance for doubtful accounts based upon management‟s analysis of the
         collectability of the balances. At December 31, 2009 and 2010, management believed that no allowance was necessary.
At December 31, 2009 and 2010, one customer accounted for 100% of accounts receivable. See Note 10.


                                                       F-8
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                                                         AMBIENT CORPORATION

                         NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


            Inventory


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


            Research and Development and Patent Costs


            We expense both research and development costs and patent costs to operations as incurred.


            Software Development Costs


           We have historically expensed as incurred costs incurred in the research and development of new software products and
         enhancements to existing software products. After technological feasibility is established, we capitalize additional
         development costs. We have not capitalized any software development costs as of December 31, 2009 and 2010.


            Employees


            We have a contract with Insperity (formerly known as Administaff), which is a professional employer organization.
         Pursuant to this contract, we and Insperity are co-employers of our personnel. Insperity is responsible for paying the salaries
         and wages of our personnel and providing our personnel with health, dental and various other types of insurance and benefits
         at favorable rates for which we would not otherwise qualify. Insperity pays salaries and wages of our personnel directly from
         our bank accounts, and we pay Insperity a fee for its services.


            We record these payments using the same classifications as if we made all payments directly to our personnel.


            Income Taxes


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


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


            Warranties


            We account for our warranties under the FASB ASC 450 “Contingencies.” We generally warrant that our products are
         free from defects in material and workmanship for a period of one year from the date of initial acceptance by our customers.
         The warranty does not cover any losses or damage that occurs as a result of improper installation, misuse
F-9
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                                                          AMBIENT CORPORATION

                         NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


         or neglect or repair or modification by anyone other than the Company or our authorized repair agent. Our policy is to accrue
         anticipated warranty costs based upon historical percentages of items returned for repair within one year of the initial sale.
         Our repair rate of products under warranty has been minimal so that we have not established an historical percentage. We
         have not provided for any reserves for such warranty liability.


           Our software license agreements generally include certain provisions for indemnifying customers against liabilities if our
         software products infringe upon a third party‟s intellectual property rights. We have not provided for any reserves for such
         warranty liabilities.


            Our software license agreements also generally include a warranty that our software products will substantially operate as
         described in the applicable program documentation. We also warrant that we will perform services in a manner consistent
         with industry standards. To date, we have not incurred any material costs associated with these product and service
         performance warranties, and as such we have not provided for any reserves for any such warranty liabilities in our operating
         results.


            Impairment of Long-Lived Assets


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


            Fair Value Measurements


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


               Level 1 — Quoted prices in active markets for identical assets or liabilities.


               Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted
            prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data
            for substantially the full term of the assets or liabilities.


               Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value
            of the assets or liabilities.


            Recently Issued Accounting Pronouncements


           The Financial Accounting Standards Board (FASB) ratified Accounting Statement Update (ASU) 2009-13 (ASU
         2009-13), “Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements,” which eliminates the residual
         method of allocation, and instead requires companies to use the relative selling price method when allocating revenue in a
         multiple deliverable arrangement. When applying the relative selling price method, the selling price for each deliverable
         shall be determined using vendor specific objective evidence of selling price, if it exists and otherwise using third-party
evidence of selling price. If neither vendor specific objective evidence nor third-party evidence of selling price exists for a
deliverable, companies shall use their best estimate of the selling


                                                              F-10
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                                                        AMBIENT CORPORATION

                        NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


         price for that deliverable when applying the relative selling price method. ASU 2009-13 shall be effective in fiscal years
         beginning on or after June 15, 2010, with earlier application permitted. Companies may elect to adopt this guidance
         prospectively for all revenue arrangements entered into or materially modified after the date of adoption, or retrospectively
         for all periods presented. We adopted this standard effective January 1, 2011. We do not expect the provisions of ASU
         2009-13 to have a material effect on our financial position, results of operations or cash flows.


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


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


         NOTE 3 — INVENTORY


            Inventory consisted of the following:


                                                                                                                         December 31,
                                                                                                                       2009         2010
                                                                                                                        (In thousands)


         Raw material                                                                                                 $ 137        $ 139
         Finished goods                                                                                                 224          695
                                                                                                                      $ 361        $ 834



         NOTE 4 — PROPERTY AND EQUIPMENT


                                                                                                                      December 31,
                                                                                                                   2009           2010
                                                                                                                     (In thousands)


         Computers                                                                                             $     163       $     309
         Software                                                                                                    368             505
         Software (capital lease)                                                                                     30              30
         Machinery and equipment                                                                                     539             627
         Furniture and office equipment                                                                              161             196
                                                                                                                   1,261           1,667
         Less — accumulated depreciation                                                                             658             922
                                                                                                               $     603       $     745



            Depreciation expense was $307,476, $302,871 and $380,256 for the years ended December 31, 2008, 2009 and 2010,
         respectively.
F-11
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                                                         AMBIENT CORPORATION

                        NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


         NOTE 5 — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES


                                                                                                                          December 31,
                                                                                                                        2009         2010
                                                                                                                         (In thousands)


         Accrued interest                                                                                               $ 690      $ 244
         Accrued payroll and payroll taxes                                                                                 83        139
         Accrued professional fees                                                                                         33         32
         Accrued liabilities                                                                                               23        218
                                                                                                                        $ 829      $ 633



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


         NOTE 6 — CAPITAL LEASE OBLIGATION


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


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


                                                                                                                              Amount
                                                                                                                           (In thousands)


         Net minimum lease payments — 2011                                                                                $            11
         Amount representing interest                                                                                                  (1 )
         Present value of net minimum lease payments                                                                      $            10



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


         NOTE 7 — CONVERTIBLE DEBT


                                                                                                                 2009               2010


         Secured Convertible Promissory Note payable — interest at 8%, due July 31, 2010(i)                 $     7,500,000        $ —
         Secured Convertible Promissory Note payable — interest at 8%, due November 1, 2010(ii)                   2,500,000          —
         Secured Convertible Promissory Note payable — interest at 8%, due January 15, 2011 (iii)                        —
            Total                                                                                               10,000,000             —
            Less: Discount                                                                                        (183,609 )           —
                                                                                                                  9,816,391            —
            Less Current Portion                                                                                  9,816,391            —
Total          $   —   $ —



        F-12
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                                                        AMBIENT CORPORATION

                        NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


            Securities Purchase Agreements


            (i) On July 31, 2007, we entered into the Securities Purchase Agreement (the “July 07 Purchase Agreement”) with Vicis,
         pursuant to which Vicis purchased our Secured Convertible Promissory Note in aggregate principal amount of $7,500,000
         (the “July 07 Note”). The July 07 Note had a term of three years and was scheduled to become due on July 31, 2010. The
         outstanding principal amount of the July 07 Note was convertible at the option of the holder into shares of our common stock
         at an initial conversion price of $7.50 per share, subject to certain adjustments. The conversion price was adjusted to $1.50 in
         connection with the various Agreements discussed below. Amounts owing under the July 07 Note were secured by
         substantially all of our assets. In January 2010, the July 07 Note was converted into 5,000,000 shares of common stock.


           Pursuant to the July 07 Purchase Agreement, we issued common stock purchase warrants (the “July 07 Warrants”) to
         Vicis, exercisable through July 31, 2012, to purchase up to 1,500,000 shares of common stock at original exercise prices
         between of $6.00 and $7.50 per share. The exercise prices were adjusted to $0.10 in connection with the April 08 Purchase
         Agreement discussed below. All of the July 07 Warrants were exercised on November 24, 2008.


           In connection with this financing, we paid fees to a registered broker dealer of $570,000 and issued warrants to purchase
         up to 173,500 shares of our common stock at a per share exercise price of $3.50 for 166,000 shares and $7.50 for
         7,500 shares.


            For financial reporting purposes, we recorded a discount of $3,959,362 to reflect the value of the warrants and an
         additional discount of $2,310,886 to reflect the beneficial conversion feature of the July 07 Note. The estimated value of the
         warrants was determined using the Black-Scholes option pricing model under the following weighted average assumptions:
         life of 5 years, risk free interest rate of 4.88%, a dividend yield of 0% and volatility of 130.22%. The discounts were being
         amortized to the date of maturity unless converted earlier. As discussed below, we and Vicis entered into a Debenture
         Amendment Agreement. As a result, all of the remaining unamortized discounts were expensed in 2008.


            (ii) On November 1, 2007, we entered into a Securities Purchase Agreement (the “November 07 Purchase Agreement”)
         with Vicis pursuant to which Vicis purchased our Secured Convertible Promissory Note in the principal amount of
         $2,500,000 (the “November 07 Note”). The November 07 Note had a term of three years and was scheduled to become due
         on November 1, 2010. The outstanding principal amount of the November 07 Note was convertible at the option of the
         holder into shares of common stock at an initial conversion price of $4.50 per share. In connection with the Debenture
         Amendment Agreement discussed below, the conversion price was adjusted to $1.50 per share. Amounts owing under the
         November 07 Note were secured by substantially all of our assets. In January 2010, the November 07 Note was converted
         into 1,666,667 shares of common stock.


           In connection with the issuance of the November 07 Note, we issued common stock purchase warrants (the “November 07
         Warrants”) to Vicis, exercisable through October 31, 2012, to purchase up to 833,333 shares of common stock at original
         exercise prices between $4.50 per share and $5.00. The exercise prices were adjusted to $0.10 in connection with the April
         08 Purchase Agreement discussed below. All of the November 07 Warrants were exercised on November 24, 2008.


           For financial reporting purposes, we recorded a discount of $1,127,634 to reflect the value of the November 07 Warrants
         and an additional discount of $294,301 to reflect the beneficial conversion feature of November 07 Note. The estimated
         value of the warrants was determined using the Black-Scholes option pricing model under the following weighted average
         assumptions: life of 5 years, risk free interest rate of 3.67%, a dividend yield of 0% and volatility of 127.4%. The discounts
         were being amortized to the date of maturity unless converted earlier. As


                                                                      F-13
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                                                        AMBIENT CORPORATION

                        NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


         discussed below, we and Vicis entered into a Debenture Amendment Agreement. As a result, all of the remaining
         unamortized discounts were expensed in 2008.


            (iii) On January 15, 2008, we entered into a Securities Purchase Agreement (the “January 2008 Purchase Agreement”)
         with Vicis pursuant to which Vicis purchased our Secured Convertible Promissory Note in the principal amount of
         $2,500,000 (the “January 08 Note”; together with the November 07 Note and the July 07 Note, the “Notes”). The January 08
         Note had a term of three years and was scheduled to become due on January 15, 2011. The outstanding principal amount of
         the January 08 Note was convertible at the option of the holder into shares of common stock at an initial conversion price of
         $3.50 per share. In connection with the Debenture Amendment Agreement discussed below, the conversion price was
         adjusted to $1.50 per share. Amounts owing under the January 08 Note were secured by substantially all of our assets. In
         August 2009, the January 08 Note was converted into 1,666,667 shares of common stock.


            In connection with the issuance of the January 08 Note, we issued common stock purchase warrants (the “January 08
         Warrants”) to Vicis, exercisable through January 15, 2013, to purchase up to 1,071,429 shares of common stock at an
         original exercise price of $3.50 per share. The exercise price was adjusted to $0.10 in connection with the April 08 Purchase
         Agreement discussed below. All of the January 08 Warrants were exercised on November 24, 2008.


           In connection with the financing, we issued, as compensation to a registered broker dealer, warrants to purchase up to
         149,999 shares of our common stock at a per share exercise price of $3.50.


            For financial reporting purposes, we recorded a discount of $1,459,189 to reflect the value of the warrants and an
         additional discount of $1,040,811 to reflect the beneficial conversion feature of January 08 Note. The estimated value of the
         warrants was determined using the Black-Scholes option pricing model under the following weighted average assumptions:
         life of 5 years, risk free interest rate of 3%, a dividend yield of 0% and volatility of 127.4%. The discounts were being
         amortized to the date of maturity unless converted earlier. As discussed below, we and Vicis entered into a Debenture
         Amendment Agreement. As a result, all of the remaining unamortized discounts were expensed in 2008.


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


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


            Debt Modification


            On November 21, 2008, we and Vicis entered into a Debenture Amendment Agreement (the “Debenture Amendment
         Agreement”), pursuant to which Vicis invested in us an additional $8 million. In consideration of the investment, we reduced
         the conversion price on the Notes referred to above to $1.50 per share. We and Vicis also agreed that in the event that on the
         trading day immediately preceding June 1, 2009, the closing per share price of the common stock was less than $10.00, then
         the per share conversion price with respect to any amount then outstanding under the Notes would automatically be further
         adjusted to $1.00. The price of the common stock was greater than $10.00 on the trading day immediately preceding June 1,
         2009, and therefore no further adjustment of the conversion price was effected.


           We accounted for the modification of the Convertible Promissory Notes, as described above, as an extinguishment of
         debt. We deemed the terms of the amendment to be substantially different and treated the


                                                                     F-14
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                                                        AMBIENT CORPORATION

                        NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


         Convertible Promissory Notes as extinguished and exchanged for new notes. As such, it was necessary to reflect the
         Convertible Promissory Notes at fair market value and record a loss on extinguishment of debt of approximately
         $2.8 million.


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


            For financial reporting purposes, we recorded an initial discount of $12,500,000, based upon a conversion price of $1.00
         to reflect the beneficial conversion feature related to the Debenture Modification Agreement. The discount was being
         amortized to the date of maturity of the various Notes unless converted earlier. On June 1, 2009, the beneficial conversion
         feature was re-measured based on the final conversion price being set at $1.50. This resulted in a reduction in the initial
         value of the beneficial conversion feature of $8,333,333 and a like reduction to additional paid-in capital.


           Interest incurred on the Notes amounted to $671,461, $614,827 and $28,296 for the years ended December 31, 2008, 2009
         and 2010, respectively.


            On June 30, 2009, we agreed to modify the terms of the expiring Class A warrants. Under the new terms the warrants
         were exercisable through August 31, 2009 and the exercise prices were reduced from $20.00 to $15.00 per share. The
         resulting charge due to the modification was $1,147,167 and is reflected as additional interest expense in the year ended
         December 31, 2009. As a result of the debt conversions of the July 07 Note and the January 08 Note in January 2010, the
         unamortized debt discounts totaling $183,609 were charged to interest expense in fiscal 2010. Amortization of the discounts
         related to the Notes totaled $2,482,288, $3,228,600 and $183,609 for the years ended December 31, 2008, 2009 and 2010.


         NOTE 8 — STOCKHOLDERS’ EQUITY

            Security Purchase Agreement


            On November 16, 2009, we and Vicis entered into an agreement, which was subsequently amended in January 2010,
         pursuant to which Vicis furnished to us access to a $8,000,000 equity based credit line. Pursuant to the arrangement, Vicis
         deposited into an escrow account $8,000,000. From time to time as our cash resources fell below $1,500,000 (the „„Cash
         Balance Condition Precedent”), we were entitled to receive $500,000 from the account in consideration of which we would
         issue to Vicis 50,000 shares of common stock and warrants for a corresponding number of shares of common stock. Between
         January 19 and December 29, 2010, we effected six draw-downs in the amount of the $3,000,000 and issued 300,000 shares
         of our common stock.


            On December 30, 2010, we and Vicis further amended the arrangement described above (“2nd amendment”) pursuant to
         which Vicis applied the $5 million then remaining in the escrow account to the purchase of Company securities (the
         “Investment”). Vicis made the Investment despite the fact that the Cash Balance Condition Precedent had not been met. In
         consideration of the Investment, we issued to Vicis 500,000 shares of our common stock as well as Series G Warrants to
         purchase, over a two year period from the date of issuance, an additional 500,000 share of common stock. Under the terms of
         the 2nd Amendment, the per share exercise price of the Series G Warrants issuable in connection with the Investment was
         set at $20.00 (rather than the $25.00 per share exercise price provided under the original terms of the agreement).


                                                                      F-15
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                                                         AMBIENT CORPORATION

                        NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


            Stock Option Plans


            In November 2000, we adopted the 2000 Equity Incentive Plan. The 2000 Equity Incentive Plan provides for the grant of
         incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, bonus stock, awards in lieu of
         cash obligations, other stock-based awards and performance units. The 2000 Equity Incentive Plan also permits cash
         payments under certain conditions. As of December 31, 2007, the number of shares of common stock reserved for issuance
         under the 2000 Incentive Plan was 250,000. On June 27, 2008, the number of shares reserved for issuance was further
         increased to 500,000 shares. On February 4, 2010, the number of shares reserved for issuance was further increased to
         1,100,000 shares.


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


           In December 2002, we adopted the 2002 Non-Employee Directors Stock Option Plan (the “2002 Directors Plan”)
         providing for the issuance of shares of common stock to non-employee directors. Under the 2002 Directors Plan, only
         non-qualified options may be issued, and they will be exercisable for a period of six years from the date of grant. As of
         December 31, 2007, the number of shares of common stock reserved for issuance under the 2002 Directors Plan was
         60,000 shares. On June 27, 2008, the number of shares reserved for issuance was increased to 120,000 shares. On
         February 4, 2010, the number of shares of common stock reserved for issuance was further increased to 250,000 shares.


            Employee Options


            In January and February 2010, we issued options to employees from the 2000 Equity Incentive Plan to purchase up to a
         total of 2,000 shares of our common stock at an exercise price of $15.00. The options will be fully vested as of December 1,
         2011.


           In February and March 2010, we issued a total of 2,250 shares of common stock upon the exercise of stock options
         previously issued to employees from the 2000 Equity Incentive Plan.


           In February, 2011, we issued options to employees from the 2000 Equity Incentive Plan to purchase up to a total of
         3,000 shares of our common stock at an exercise price of $10.00 per share. The options will be fully vested as of
         February 15, 2013.


            Other Option Grants (2008)


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


                                                                       F-16
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                                                       AMBIENT CORPORATION

                         NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


            Option activity for 2008, 2009 and 2010 is summarized as follows:


                                                                                                                           Weighted
                                                                                                                           Average
                                                                                                                           Exercise
                                                                         Plan           Non-plan          Total             Price


         Options outstanding, January 1, 2008                             285,870          37,220            32,307       $ 25.00
           Granted                                                         17,000           2,000            19,000          3.00
           Exercised                                                           —               —                 —             —
           Forfeited                                                      (16,750 )        (1,450 )          18,200         16.00
         Options outstanding, December 31, 2008                           286,120          37,750           323,870            17.00
           Granted                                                        274,500              —            274,500             4.00
           Exercised                                                       (7,500 )            —             (7,500 )           6.00
           Forfeited                                                       (4,000 )        (1,500 )          (5,500 )          13.00
         Options outstanding, December 31, 2009                           549,120          36,250           585,370            11.00
           Granted                                                        581,450          15,000           596,450            10.40
           Exercised                                                       (8,110 )            —             (8,110 )           4.00
           Forfeited                                                      (44,245 )            —            (44,245 )          13.00
         Options outstanding, December 31, 2010                          1,078,215         51,250         1,129,465       $ 11.40

         Shares of Common Stock available for future grant
           under the plans                                                240,166

         Aggregate intrinsic value                                   $   2,268,461



            The aggregate intrinsic value was calculated based on the positive difference between the closing market price of common
         stock and the exercise price of the underlying options.


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


                                                                             Weighted Average               Options Exercisable
                                                                                  Remaining                 Weighted Average
                                                        Number            Contractual       Exercise      Number            Exercise
         Exercise Price Range                          Outstanding           Life            Price       Exercisable         Price


         $ 3.00 — $ 5.00                                     350,815             6.92      $    3.80        350,815       $     3.80
         $ 6.00 — $ 9.50                                       3,000             8.64           8.30          1,000             6.00
         $10.00 — $12.00                                     581,900             8.77          12.00         68,454            11.90
         $15.00 — $20.00                                     160,750             2.95          19.80        158,500            19.80
         $25.00 — $30.00                                      10,750             4.51          27.90         10,750            27.90
         $50.00                                               22,250             1.54          50.00         22,250            50.00

         $ 3.00 — $50.00                                  1,129,465              7.18      $ 11.40          611,769       $ 10.90



           Share based compensation — The fair values of stock options granted were estimated using the Black-Scholes
         option-pricing model with the following assumptions:
                                                    2008                 2009                 2010


Risk free interest rate                          1.45%-1.87%          1.07%-2.66%          0.85%-2.38%
Expected life                                        1.5-5.75             3.5-5.75             3.5-5.75
Expected volatility                               133%-162%            162%-169%            155%-168%
Dividend yield                                             —                    —                    —
Weighted-average grant date fair value per
  share                                      $             1.90   $             3.50   $         10.40


                                                           F-17
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                                                        AMBIENT CORPORATION

                        NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


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


            Warrants


           On April 23, 2008, we entered into a Securities Purchase Agreement (the “April 08 Purchase Agreement”) with Vicis
         pursuant to which we issued, in consideration of an investment of $3,000,000, warrants (the “April 2008 Warrants”),
         exercisable through April 2013, to purchase up to 1,350,000 shares of our common stock, at a per share exercise price of
         $0.10.


           In connection with the financing, a registered broker dealer received $45,000 as compensation payment and was issued
         warrants to purchase up to 10,000 shares of our common stock at a per share exercise price of $3.50.


            On November 24, 2008, we issued 4,643,651 shares of our common stock to Vicis upon its exercise of all outstanding
         Investor Warrants through a combination of “cashless exercises” as well as for “cash exercises.” We received cash proceeds
         of $242,143 from the cash exercises.


           In March 2010, we issued 21,440 shares of common stock upon the exercise of finder warrants previously issued in
         connection with the July 2007 financing.


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


                                                                                                         Exercise         Expiration
         Warrants                                                                                         Price             Date


         384,522                                                                                        $ 3.50           2012 - 2013
         7,500                                                                                          $ 7.50              2012
         500,000                                                                                        $ 20.00             2012
         667,667                                                                                        $ 25.00          2011 - 2012


           In February 2011, we issued 4,500 shares of common stock upon the exercise of finder warrants previously issued from an
         April 2008 funding.


            Warrant Modification


           In May 2006, we raised net proceeds of $8.986 million in a private placement of $10,000,000 in principal amount of our
         two-year 8% Convertible Debentures (the “2006 Debentures”). We repaid the balance in its entirety by January 2008.
         Investors in the private placement also received Class A warrants, exercisable through June 30, 2009, to purchase up to
         333,333 shares of our common stock at a per share exercise price of $20.00 and Class B warrants, exercisable through
         June 30, 2011, to purchase up to 333,333 shares of our common stock at a per share exercise price of $25.00.


           In connection with the placement of the 2006 Debentures, we issued to a registered broker dealer that acted as placement
         agent warrants consisting of (x) warrants to purchase an aggregate of 66,667 shares of common stock having an initial
         exercise price equal to $15.00, (y) warrants to purchase an aggregate of 33,333 shares of common stock having an initial
         exercise price equal to $20.00, and (z) warrants to purchase an aggregate of 33,333 shares of common stock having an initial
         exercise price equal to $25.00. Except as specifically noted, these warrants otherwise are on substantially the same terms and
         conditions as the investor warrants.
F-18
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                                                         AMBIENT CORPORATION

                        NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


            On June 30, 2009, we modified the terms of the expiring Class A warrants. Under the new terms, the warrants were
         exercisable though August 31, 2009 and the exercise prices were reduced from $20.00 to $15.00 per share. We valued the
         warrant modification at $1,147,167 using the Black-Scholes pricing model and the following assumptions: contractual term
         of 0.167 years, an average risk-free interest rate of 0.19% a dividend yield of 0% and volatility of 93%. The resulting of
         $1,147,167 is reflected in the Statement of Operations for 2009 as interest expense.


            Following the modification, Class A warrants for an aggregate of 62,833 shares of our common stock were exercised for
         total net cash exercise proceeds of $848,250 through August 31, 2009, and 303,833 Class A warrants expired.


         NOTE 9 — INCOME TAXES


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


           Due to the uncertainty of their realization, we have not recorded any income tax benefit for these loss carryforwards as
         valuation allowances have been established for any such benefits.


            Significant components of our deferred tax assets for U.S. income taxes are as follows:


                                                                                                               December 31,
                                                                                                2008                2009                2010
                                                                                                              (In thousands)


         Net operating loss carryforwards                                                   $    2,735          $     6,568         $    6,828
         Stock-based compensation                                                                  356                  735              1,025
         Other                                                                                     555                  584                615
         Total deferred tax assets                                                               3,646                 7,887             8,468
         Valuation allowance                                                                    (3,646 )              (7,887 )          (8,468 )
         Net deferred tax assets                                                            $          —        $         —         $          —



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


            The following is a reconciliation of the federal statutory tax rate of 35% for 2008, 2009 and 2010, with the provision for
         income taxes:


                                                                                                                    December 31,
                                                                                                       2008             2009            2010


                                                                                                               )              )               )
         Statutory tax rate                                                                                (35 %          (35 %           (35 %
         Valuation allowance                                                                                35 %           35 %            35 %
         Effective federal tax rate                                                                         0%                 0%              0%
  At December 31, 2008, 2009 and 2010, we had no material unrecognized tax benefits, and no adjustments to liabilities or
operations were required. We do not expect that our unrecognized tax benefits will materially increase within the next
12 months. We did not recognize any interest or penalties related to uncertain tax positions at December 31, 2008, 2009 and
2010.


                                                           F-19
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                                                         AMBIENT CORPORATION

                        NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


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


         NOTE 10 — CONCENTRATIONS

            Cash


           Cash is maintained with major financial institutions in the United States. At December 31, 2008, 2009 and 2010, no
         amounts were in excess of insured amounts.


            Sales and Major Customers


            Revenue for the years ended December 31, 2008, 2009 and 2010 were as follows:


                                                                                  December 31,         December 31,       December 31,
                                                                                      2008                 2009               2010
                                                                                                     (In thousands)


         Hardware                                                                $      12,136       $        2,128      $      20,283
         Software and services                                                             486                   65                 75
                                                                                 $      12,622       $        2,193      $      20,358



           Duke Energy accounted for 100% of hardware, software and services revenue for the years ended December 31, 2008,
         2009 and 2010, respectively.


            Major Supplier


            In 2008, 2009 and 2010, we used one contract manufacturer to produce our communications nodes. Should our
         relationship with the manufacturer deteriorate or terminate or should this supplier lose some or all of its access to the
         products or components that comprise all or part of the communications nodes that we purchase from it, our performance
         could be adversely affected. Under such circumstances, we would be required to seek alternative sources of supply for these
         products, and there can be no assurance that we would be able to obtain such products from alternative sources on the same
         terms. A failure to obtain such products on as favorable terms would have an adverse effect on our revenue and/or gross
         margin.


         NOTE 11 — OPERATING LEASES


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


            The lease provides for an initial period of the lease to be rent free and includes scheduled rent escalations. Accounting
         principles generally accepted in the United States of America require that the total rent expense to be incurred over the term
         of the lease be recognized on a straight-line basis. Deferred rent represents the cumulative excess of the straight-line expense
         over the payments made. The average annual rent expense over the term of the lease is approximately $304,000.
Rent expense for 2008, 2009 and 2010 was $233,315, $290,430 and $304,000, respectively.


                                                      F-20
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                                                       AMBIENT CORPORATION

                        NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


            Future minimum annual rentals through 2012 are as follows:


         Years Ended December 31,                                                      (In thousands)


         2011                                                                          $         390
         2012                                                                                    404
         Total                                                                         $         794



         NOTE 12 — SUBSEQUENT EVENTS


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


                                                                    F-21
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                                                            AMBIENT CORPORATION

                                                    CONSOLIDATED BALANCE SHEETS


                                                                                                    December 31,              June 30,
                                                                                                        2010                   2011
                                                                                                                            (Unaudited)
                                                                                                    (In thousands, except share and per
                                                                                                                share data)


         Assets
         Current assets
           Cash and cash equivalents                                                                $       6,987        $      12,545
           Accounts receivable                                                                              1,731                  478
           Inventory                                                                                          834                2,452
           Prepaid expenses and other current assets                                                          276                  274
             Total current assets                                                                           9,828               15,749
         Fixed assets, net                                                                                    745                1,049
         Total assets                                                                               $      10,573        $      16,798

         Liabilities and stockholders‟ equity
         Current liabilities
           Accounts payable                                                                         $       3,608        $        4,630
           Accrued expenses and other current liabilities (including related party interest of $0
              and $244,262 respectively)                                                                       633                  696
           Deferred revenue                                                                                     —                   107
           Income taxes payable                                                                                 —                   109
           Capital lease obligations, current portion                                                           10                    4
             Total current liabilities                                                                      4,251                 5,546
         Non-current Liabilities
           Deferred rent                                                                                       186                  143
         Total liabilities                                                                          $       4,437        $        5,689
         Stockholders‟ equity
           Common stock, $.001 par value; 20,000,000 and 100,000,000 shares authorized;
             16,493,764 and 16,532,228 issued; 16,483,764 and 16,522,228 outstanding,
             respectively                                                                                      16                   16
           Additional paid-in capital                                                                     149,748              151,190
           Accumulated deficit                                                                           (143,428 )           (139,897 )
           Less: treasury stock; 10,000 shares at cost                                                       (200 )               (200 )
               Total stockholders‟ equity                                                           $       6,136        $      11,109
               Total liabilities and stockholders‟ equity                                           $      10,573        $      16,798


                                            See Notes to Unaudited Consolidated Financial Statements.


                                                                      F-22
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                                                       AMBIENT CORPORATION

                                          CONSOLIDATED STATEMENTS OF OPERATIONS


                                                                                                              Six Months Ended
                                                                                                                   June 30,
                                                                                                            2010              2011
                                                                                                                 (Unaudited)
                                                                                                          (In thousands, except per
                                                                                                                  share data)


         Total revenue                                                                                $      6,258        $ 27,993
         Cost of goods sold                                                                                  3,782          15,963
            Gross profit                                                                                     2,476            12,030
         Operating expenses:
           Research and development expenses                                                                 2,975             4,893
           Selling, general and administrative expenses                                                      2,305             3,507
         Total operating expenses                                                                            5,280             8,400
         Operating (loss) income                                                                            (2,804 )           3,630
         Interest and finance expense                                                                         (213 )              (1 )
         Interest income                                                                                         0                13
         (Loss) income before income taxes                                                                  (3,017 )           3,642
         Provision for income taxes                                                                             —                109
         Net (loss) income                                                                            $ (3,017 )          $    3,533

         Net (loss) income per share (basic)                                                          $      (0.20 )      $      0.21

         Net (loss) income per share (diluted)                                                        $      (0.20 )      $      0.21

         Weighted average shares used in computing basic net (loss) income per share                        15,022            16,496

         Weighted average shares used in computing diluted net (loss) income per share                      15,022            16,936


                                          See Notes to Unaudited Consolidated Financial Statements.


                                                                    F-23
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                                                         AMBIENT CORPORATION

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                                                            Six Months Ended
                                                                                                                 June 30,
                                                                                                          2010               2011
                                                                                                               (Unaudited)
                                                                                                              (In thousands)


         Cash flows from operating activities
           Net (loss) income                                                                          $ (3,017 )        $     3,533
           Adjustments to reconcile net (loss) income to net cash provided by (used in) operating
             activities:
             Depreciation and amortization                                                                    182               206
             Amortization of beneficial conversion feature of convertible debt                                184                —
             Stock-based compensation                                                                          35             1,306
             Changes in operating assets and liabilities:
                Accounts receivables                                                                          748             1,253
                Inventory                                                                                    (271 )          (1,618 )
                Prepaid expenses and other current assets                                                       3                 2
                Accounts payable                                                                              117             1,022
                Deferred rent                                                                                  75               (43 )
                Accrued expenses and other current liabilities                                                 96                63
                Income taxes payable                                                                           —                109
                Deferred revenue                                                                             (121 )             107
         Net cash (used in) provided by operating activities                                              (1,969 )            5,940
         Cash flows from investing activities
             Purchases of property and equipment                                                             (264 )            (511 )
         Net cash used in investing activities                                                               (264 )            (511 )
         Cash flows from financing activities
             Proceeds from issuance of common stock                                                        2,500                 —
             Proceeds from exercise of warrants                                                              100                106
             Proceeds from exercise of options                                                                26                 30
             Payments of capitalized lease obligations                                                        (6 )               (7 )
         Net cash provided by financing activities                                                         2,620                129
         Net increase in cash and cash equivalents                                                            387             5,558
         Cash and cash equivalents — beginning of period                                                      987             6,987
         Cash and cash equivalents — end of period                                                    $    1,374        $ 12,545

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

         Supplemental cash flow information:
               Interest paid                                                                          $         1       $       246


                                          See Notes to Unaudited Consolidated Financial Statements.


                                                                    F-24
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                                                         AMBIENT CORPORATION

                               NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


         NOTE 1 — BASIS OF PRESENTATION


            The accompanying unaudited consolidated financial statements of Ambient Corporation and its subsidiary (collectively,
         the “Company,” “we” or “our”) have been prepared in accordance with accounting principles generally accepted in the
         United States of America (“GAAP”) for interim financial information and with Article 8-03 of Regulation S-X. Accordingly,
         they do not include all of the information and notes required by GAAP for complete financial statements. In our opinion, all
         adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.
         Operating results for the six months ended June 30, 2011 are not necessarily indicative of the results that may be expected
         for the year ending December 31, 2011. These unaudited consolidated financial statements should be read in conjunction
         with the audited consolidated financial statements and notes thereto included elsewhere in this prospectus.


            We are a leading provider of a smart grid communications platform that enables utilities to effectively deploy, integrate
         and communicate with multiple smart grid applications within the electrical power distribution grid. The Ambient Smart
         Grid ® communications platform, which includes hardware, software and firmware, today enables the simultaneous
         integration and parallel communication of multiple smart grid applications provided by a variety of vendors, including smart
         metering, demand response and distribution automation.


            Our long-standing relationship with Duke Energy, which has one of the most forward-looking smart grid investment
         initiatives in North America, has led to rapid growth in our business. We entered into a long-term agreement in September
         2009 with Duke Energy, currently our sole customer, to supply Duke Energy our Ambient Smart Grid ® communications
         nodes and license our AmbientNMS ® through 2015.


            On July 18, 2011, we effected a reverse stock split of our outstanding shares of common stock at a ratio of
         1-for-100 shares and reduced the number of authorized shares of common stock that the we are authorized to issue from time
         to time to 100,000,000 shares.


         NOTE 2 — RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS


           On January 1, 2011, we adopted Accounting Statement Update (ASU) 2009-13 (ASU 2009-13), „„Revenue Recognition
         (Topic 605): Multiple-Deliverable Revenue Arrangements,” which eliminates the residual method of allocation, and instead
         requires companies to use the relative selling price method when allocating revenue in a multiple deliverable arrangement.
         When applying the relative selling price method, the selling price for each deliverable shall be determined using vendor
         specific objective evidence of selling price, if it exists and otherwise using third-party evidence of selling price. If neither
         vendor specific objective evidence nor third-party evidence of selling price exists for a deliverable, companies shall use their
         best estimate of the selling price for that deliverable when applying the relative selling price method. We have elected to
         adopt this guidance prospectively for all revenue arrangements entered into or materially modified after the date of adoption.
         Our adoption of ASU 2009-13 did not have a material effect on our financial position, results of operations or cash flows.


            On January 1, 2011, we adopted ASU 2010-17 (ASU 2010-17), “Revenue Recognition-Milestone Method (Topic 605):
         Milestone Method of Revenue Recognition.” The amendments in this update are effective on a prospective basis for
         milestones achieved in fiscal 2011 and thereafter. Our adoption of ASU 2010-17 did not have a material effect on our
         financial position, results of operations or cash flows.


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


                                                                      F-25
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                                                         AMBIENT CORPORATION

                      NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


         NOTE 3 — FAIR VALUE OF FINANCIAL INSTRUMENTS


           Substantially all of our financial instruments, consisting primarily of cash and cash equivalents, accounts receivable,
         accounts payable, accrued expenses and other current liabilities, are carried at, or approximate, fair value because of their
         short-term nature.


         NOTE 4 — STOCK-BASED COMPENSATION


            The following table presents stock-based compensation expense included in our consolidated statements of operations for
         the six months ended June 30, 2010 and 2011:


                                                                                                                  Six Months Ended
                                                                                                                June 30,        June 30,
                                                                                                                 2010             2011
                                                                                                                    (In thousands)
                                                                                                                      (Unaudited)


         Cost of goods sold                                                                                    $       —       $      56
         Research and development expenses                                                                             17            439
         Selling, general and administrative expenses                                                          $       18      $     811
         Total stock-based compensation                                                                        $       35      $ 1,306



         NOTE 5 — NET INCOME (LOSS) PER SHARE


           Basic earnings per share are computed based on the weighted-average number of shares of our common stock outstanding.
         Diluted earnings per share are computed based on the weighted-average number of shares of our common stock, including
         common stock equivalents outstanding. Certain common shares consisting of stock options and warrants that would have an
         anti-dilutive effect were not included in the diluted earnings per share attributable to common stockholders for the six
         months ended June 30, 2010 and 2011.


            The following is a reconciliation of the denominators of the basic and diluted earnings per share computations:


                                                                                                                 Six Months Ended
                                                                                                              June 30,         June 30,
                                                                                                               2010               2011
                                                                                                                   (In thousands)
                                                                                                                    (Unaudited)


         Denominators:
         Weighted-average shares outstanding used to compute basic earnings per share                              15,022          16,496
         Effect of dilutive stock options and warrants                                                                 —              440
         Weighted-average shares outstanding and dilutive securities used to compute dilutive earnings
          per share                                                                                                15,022          16,936



           For the six months ended June 30, 2010 and 2011, there were approximately 1.6 million shares of outstanding potential
         common stock equivalents, respectively, which were excluded from the computation of diluted earnings per share because
the effect would have been anti-dilutive. These potential dilutive common stock equivalents may be dilutive to future diluted
earnings per share.


                                                            F-26
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                                                       AMBIENT CORPORATION

                      NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


         NOTE 6 — SALES AND MAJOR CUSTOMER


            Total revenue for the six months ended June 30, 2010 and 2011 was as follows:


                                                                                                                 Six Months Ended
                                                                                                              June 30,         June 30,
                                                                                                               2010              2011
                                                                                                                   (In thousands)
                                                                                                                    (Unaudited)


         Products                                                                                            $ 6,220          $ 27,911
         Software maintenance                                                                                     38                82
            Total revenue                                                                                    $ 6,258          $ 27,993



           Duke Energy accounted for 100% of the product and software maintenance revenue for the 2010 and 2011 periods and
         100% of the accounts receivable balance at December 31, 2010 and June 30, 2011.


         NOTE 7 — INVENTORY


            Inventory is valued at the lower of cost or market and is determined on first-in-first-out method (FIFO) basis. Market is
         determined as replacement cost for direct materials and the net realizable value for finished goods. Finished primarily
         consists of shipments in transit which represent the cost of finished goods inventory shipped for which title has not yet
         passed to our customer. We adjust the value of our inventory for estimated obsolescence or unmarketable inventory equal to
         the difference between the cost of inventory and the estimated market value based upon assumptions about future demand
         and market conditions. Inventory consisted of the following:


                                                                                                          December 31,          June 30,
                                                                                                              2010               2011
                                                                                                                 (In thousands)
                                                                                                                  (Unaudited)


         Raw materials                                                                                $             139        $     322
         Finished goods                                                                                             695            2,130
                                                                                                      $             834        $ 2,452



         NOTE 8 — INCOME TAXES


            The provision for income taxes at June 30, 2011 was comprised of federal alternative minimum tax.


            Significant components of deferred tax assets include net operating loss carryforwards and stock-based compensation.
         Due to the uncertainty of their realization, we have not recorded any income tax benefit as we have established valuation
         allowances for any such benefits.


         NOTE 9 — STOCKHOLDERS’ EQUITY

            Employee Stock Options
  For the six months ended June 30, 2011, we issued a total of 46,500 stock options from our 2000 Equity Incentive Plan at
exercise prices between $8.50 and $10.00 per share, and we issued a total of 8,250 shares of our common stock upon the
exercise of stock options for total proceeds of $30,375.


  Additionally, in July and August 2011, we issued a total of 33,250 stock options from our 2000 Equity Incentive Plan at
exercise prices between $10.40 and $11.75 per share.


                                                           F-27
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                                                      AMBIENT CORPORATION

                      NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


            Warrant Exercises


            For the six months ended June 30, 2011, we issued 30,214 shares of common stock upon the exercise of warrants for total
         proceeds of $105,750. Additionally, in July 2011, we issued 10,000 shares of common stock upon the exercise of warrants
         for total proceeds of $35,000.


           As of June 30, 2011, we had 1,161,807 warrants outstanding with a weighted average exercise price of approximately
         $16.18 per share, of which approximately 955,033 are held by Vicis with a weighted average exercise price of approximately
         $18.89 per share.


         NOTE 10 — SUBSEQUENT EVENTS


            On August 3, 2011, our common stock was listed on the NASDAQ Capital Market under the symbol “AMBT.”


                                                                    F-28
Table of Contents




                               Shares
                          Common Stock


                          PROSPECTUS
                               , 2011


                       Stifel Nicolaus Weisel
                    Needham & Company, LLC
                        ThinkEquity LLC
Table of Contents




                                    PART II — INFORMATION NOT REQUIRED IN PROSPECTUS


         ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION



            The following table sets forth the costs and expenses, other than the underwriting discount, payable by the Company in
         connection with the sale of the shares offered hereby. All amounts shown are estimates except for the SEC and FINRA filing
         fees.


         SEC filing fee                                                                                                   $   6,675.75
         FINRA filing fee                                                                                                     6,250.00
         Legal fees and expenses                                                                                                         *
         Accounting fees and expenses                                                                                                    *
         Printing and engraving expenses                                                                                                 *
         Miscellaneous expenses                                                                                                          *
            Total                                                                                                         $              *




         * To be completed by amendment.


         ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS



            Section 145 of the General Corporation Law of the State of Delaware (the “Delaware Corporation Law”) empowers a
         Delaware corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened,
         pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action
         by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of
         the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another
         corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys‟ fees), judgments,
         fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or
         proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the
         best interests of the corporation, and with respect to any criminal action or proceeding had no reasonable cause to believe the
         person‟s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction,
         or upon plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person did not act in good
         faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with
         respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was lawful.


            In the case of an action by or in the right of the corporation, Section 145 of the Delaware Corporation Law empowers a
         corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or
         complete action in any of the capacities set forth above against expenses (including attorneys‟ fees) actually and reasonably
         incurred by the person in connection with the defense or settlement of such action or suit if he or she acted in good faith and
         in a manner the person reasonably believed to be in and not opposed to the best interests of the corporation, except that
         indemnification is not permitted in respect of any claim, issue or matter as to which such person is adjudged to be liable to
         the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought
         determines upon application that, despite the adjudication of liability, but in view of all of the circumstances of the case,
         such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such court
         deems proper.


            Section 145 of the Delaware Corporation Law further provides that a Delaware corporation is required to indemnify a
         director, officer, employee or agent against expenses (including attorneys‟ fees) actually and reasonably incurred by such
         person in connection with any action, suit or proceeding or in defense of any claim, issue or matter therein as to which such
         person has been successful on the merits or otherwise; that indemnification provided for by Section 145 not be deemed
exclusive of any other rights to which the indemnified party may be entitled; that indemnification provided for by
Section 145 shall, unless otherwise provided when


                                                             II-1
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         authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to
         the benefit of such person‟s heirs, executors and administrators; and empowers the corporation to purchase and maintain
         insurance on behalf of a director or officer against any such liability asserted against such person in any such capacity or
         arising out of the person‟s status as such whether or not the corporation would have the power to indemnify such person
         against liability under Section 145. A Delaware corporation may provide indemnification only as authorized in the specific
         case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances
         because the person has met the applicable standard of conduct. Such determination is to be made (i) by a majority vote of the
         directors who are not parties to such action, suit or proceeding, even through less than a quorum (ii) by a committee of such
         directors designated by a majority vote of such directors, even though less than a quorum (iii) if there are no such directors,
         or if such directors so direct, by independent legal counsel in a written opinion or (iv) by the stockholders. As permitted by
         Section 145(g) of the Delaware Corporation Law, we have secured and maintain, on behalf of our directors and officers, a
         directors‟ and officers‟ insurance policy for liability arising out of his or her actions in connection with their services to us.


            Section 102(b)(7) of the Delaware Corporation Law provides that the certificate of incorporation of a Delaware
         corporation may contain a provision eliminating or limiting the personal liability of a director to the corporation or its
         stockholders for monetary damages for breach of fiduciary duty as a director, provided that such provision shall not
         eliminate or limit the liability of a director for (i) any breach of the director‟s duty of loyalty to the corporation or its
         stockholders, (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law,
         (iii) the payment of unlawful dividends or the making of unlawful stock purchases or redemptions or (iv) any transaction
         from which the director derived an improper personal benefit.


            The company‟s restated certificate of incorporation, as amended, provides that its directors will not be personally liable to
         the company or its stockholders for monetary damages resulting from breaches of the directors‟ fiduciary duties.
         Article NINTH of the company‟s restated certificate of incorporation, as amended, provides that:


            “To the fullest extent permitted by the Delaware General Corporation Law, a director of the Corporation shall not be
         liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Any repeal or
         modification of the foregoing provisions of this Article NINTH by the stockholders of the Corporation shall not adversely
         affect any right or protection of a director of the Corporation existing at the time of such repeal or modification.”


         ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES



           The following paragraphs set forth certain information with respect to all securities sold by us within the past three years
         without registration under the Securities Act of 1933, as amended (share numbers and per share exercise prices are stated
         giving effect to our 1-for-100 reverse stock split of our common stock which become effective on July 18, 2011):


           1. In January 2008, the Company issued Senior Secured Convertible Notes in the original principal amount of $2.5 million
         and common stock purchase warrants to Vicis Capital Master Fund, or Vicis, receiving net proceeds of approximately
         $2.5 million after the payment of offering related fees. In connection therewith, the Company issued to such investor
         warrants to purchase up to 1,071,429 shares of common stock at an exercise price of $3.50 per share.


           2. In January 2008, in connection with the sale of the senior secured convertible notes described in paragraph 1 above, the
         Company issued to a placement agent, as compensation, warrants to purchase up to 149,999 shares of the Company‟s
         common stock at an exercise price of $3.50 per share.


           3. In April 2008, the Company sold warrants to purchase up to 1,350,000 shares of common stock at an exercise price of
         $0.10 to Vicis, receiving net proceeds of approximately $2.95 million.


           4. In April 2008, in connection with the sale of the senior secured convertible notes described in paragraph 1 above, the
         Company issued to a placement agent, as compensation, warrants to purchase up to 10,000 shares of the Company‟s
         common stock at an exercise price of $3.50 per share.
II-2
Table of Contents



            5. In November 2008, the Company agreed to reduce the conversion price of the senior secured convertible notes referred
         to in paragraph 1 to $1.50, in consideration of which it received $8.0 million.


            6. In November 2008, the Company issued 2,421,429 shares of common stock to Vicis upon the exercise of the warrants
         referred to in paragraphs 1 and 3 above, receiving $242,193 in gross proceeds.


           7. In November 2008, the Company issued 2,222,222 shares of common stock to Vicis upon cashless exercise of warrants
         held by Vicis.


            8. In April 2009, the Company issued 15,646 shares of common stock to Brasshorn Limited and 8,388 shares of common
         stock to Double U Master Fund, in each case, upon the cashless exercise of warrants held by Brasshorn Limited and Double
         U Master Fund.


            9. In July 2009, the Company issued 8,333 shares of common stock to Marvin Mermelstein and 850 shares of common
         stock to Ellis International, in each case upon the exercise of warrants held by Mr. Mermelstein and Ellis International,
         receiving $137,750 in gross proceeds.


            10. In August 2009, the Company issued 1,666,667 shares of common stock to Vicis upon its conversion of $2.5 million
         in principal amount of outstanding notes.


           11. In August 2009, the Company issued 50,000 shares of common stock to Double U Master Fund, 3,333 shares of
         common stock to Bursteine and Lindsay Securities Corporation and 317 shares of common stock to Ellis International, in
         each case upon the exercise of warrants held by Double U Master Fund, Bursteine and Lindsay Securities Corporation and
         Ellis International, receiving $804,750 in gross proceeds.


           12. In October 2009, the Company issued 18,260 shares of common stock to Kuhns Brothers Inc., 6,730 shares of
         common stock to John Kuhns and 4,565 shares of common stock to Mary Fellows, in each case upon the exercise of
         warrants held by Kuhns Brothers Inc., Mr. Kuhns and Ms. Fellows, receiving $103,443 in gross proceeds.


            13. In January 2010, the Company issued 6,666,667 shares of common stock to Vicis upon its conversion of $10.0 million
         in principal amount of outstanding notes.


           14. In January 2010, the Company issued to Vicis 50,000 shares of common stock and warrants, exercisable through the
         second anniversary of issuance, to purchase an additional 50,000 shares of common stock at an exercise price of $25.00 per
         share, upon draw-down in the amount of the $500,000 from the escrowed amounts in the holdback account set up by the
         Company and Vicis.


           15. In February 2010, the Company issued 14,290 shares of common stock to Kuhns Brothers Inc. upon the exercise of
         warrants held by Kuhns Brothers Inc., receiving $50,015 in gross proceeds.


           16. In March 2010, the Company issued to Vicis 100,000 shares of common stock and warrants, exercisable through the
         second anniversary of issuance, to purchase an additional 100,000 shares of common stock at an exercise price of $25.00 per
         share, upon draw-down in the amount of the $1.0 million from the escrowed amounts in the holdback account set up by the
         Company and Vicis.


           17. In March 2010, the Company issued 7,150 shares of common stock to John Kuhns upon the exercise of warrants held
         by Mr. Kuhns, receiving $25,025 in gross proceeds.


           18. In April 2010, the Company issued to Vicis 50,000 shares of common stock and warrants, exercisable through the
         second anniversary of issuance, to purchase an additional 50,000 shares of common stock at an exercise price of $25.00 per
         share, upon draw-down in the amount of the $500,000 from the escrowed amounts in the holdback account set up by the
         Company and Vicis.
II-3
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           19. In April 2010, the Company issued 7,150 shares of common stock to John Kuhns upon the exercise of warrants held
         by Mr. Kuhns, receiving $25,025 in gross proceeds.


           20. In June 2010, the Company issued to Vicis 50,000 shares of common stock and warrants, exercisable through the
         second anniversary of issuance, to purchase an additional 50,000 shares of common stock at an exercise price of $25.00 per
         share, upon draw-down in the amount of the $500,000 from the escrowed amounts in the holdback account set up by the
         Company and Vicis.


            21. In September 2010, the Company issued to Vicis 50,000 shares of common stock and warrants, exercisable through
         the second anniversary of issuance, to purchase an additional 50,000 shares of common stock at an exercise price of $25.00
         per share, upon draw-down in the amount of the $500,000 from the escrowed amounts in the holdback account set up by the
         Company and Vicis.


            22. In December 2010, the Company issued to Vicis 500,000 shares of common stock and warrants, exercisable through
         the second anniversary of issuance, to purchase an additional 500,000 shares of common stock at an exercise price of $20.00
         per share, upon draw-down in the amount of the $5.0 million from the escrowed amounts in the holdback account set up by
         the Company and Vicis.


           23. In February 2011, the Company issued 4,500 shares of common stock to Gregory Dryer upon the exercise of warrants
         held by Mr. Dryer, receiving $15,750 in gross proceeds.


           24. In April 2011, the Company issued 5,714 shares of common stock to Gregory Dryer upon the exercise of warrants
         held by Mr. Dryer, receiving $20,000 in gross proceeds.


           25. In May 2011, the Company issued 10,000 shares of common stock to Gregory Dryer upon the exercise of warrants
         held by Mr. Dryer, receiving $35,000 in gross proceeds.


           26. In June 2011, the Company issued 10,000 shares of common stock to Gregory Dryer upon the exercise of warrants
         held by Mr. Dryer, receiving $35,000 in gross proceeds.


           27. In July 2011, the Company issued 10,000 shares of common stock to Gregory Dryer upon the exercise of warrants
         held by Mr. Dryer, receiving $35,000 in gross proceeds.


            All of the securities issued in the transactions described above were issued without registration under the Securities Act in
         reliance upon the exemption provided in Section 4(2) of the Securities Act or Regulation D under Securities Act. The
         recipients of securities in each such transaction acquired the securities for investment only and not with a view to or for sale
         in connection with any distribution thereof. Appropriate legends were affixed to the share certificates issued in all of the
         above transactions. The Company believes the recipients were all “accredited investors” within the meaning of Rule 501(a)
         of Regulation D under the Securities Act, or had such knowledge and experience in financial and business matters as to be
         able to evaluate the merits and risks of an investment in its common stock. All recipients had adequate access to information
         about the Company. None of the transactions described above involved any underwriters, underwriting discounts or
         commissions, any general solicitation, advertising or public offering.


                                                                       II-4
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         ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES



            (a) Exhibits. The following exhibits are included herein or are incorporated herein by reference:


              Exhibit
              Number                                                         Description


                     1 .1*   Form of Underwriting Agreement
                     3 .1    Restated Certificate of Incorporation of Ambient Corporation, as amended
                     3 .2    Bylaws of Ambient Corporation
                     4 .1    Specimen Stock Certificate
                     4 .2    Common Stock Purchase Warrant (Series A) (filed as Exhibit 4.2 to the Current Report of Ambient
                             Corporation on Form 8-K, filed July 31, 2007).(1)
                     4 .3    Common Stock Purchase Warrant (Series B) (filed as Exhibit 4.3 to the Current Report of Ambient
                             Corporation on Form 8-K, filed July 31, 2007).(1)
                     4 .4    Common Stock Purchase Warrant (Series C) (filed as Exhibit 4.2 to the Current Report of Ambient
                             Corporation on Form 8-K, filed July 31, 2007).(1)
                     4 .5    Common Stock Purchase Warrant (Series D) (filed as Exhibit 4.3 to the Current Report of Ambient
                             Corporation on Form 8-K, filed November 5, 2007).(1)
                     4 .6    Common Stock Purchase Warrant (Series E) (filed as Exhibit 4.2 to the Current Report of Ambient
                             Corporation on Form 8-K, filed January 17, 2008).(1)
                     4 .7    Warrant issued as of April 23, 2008 (filed as Exhibit 4.1 to the Quarterly Report of Ambient Corporation
                             on Form 10-Q for the three month period ended June 30, 2008, filed August 14, 2008).(1)
                     4 .8    Common Stock Purchase Warrant (Series G) (filed as Exhibit 4.1 to the Quarterly Report of Ambient
                             Corporation on Form 10-Q for the three month period ended September 30, 2009, filed November 16,
                             2009).(1)
                     5 .1*   Opinion of Shipman & Goodwin LLP
                    10 .1    Ambient Corporation 2000 Equity Incentive Plan (filed as Appendix A to the Definitive Information
                             Statement of Ambient Corporation on Schedule 14C, filed December 24, 2009).(1)+
                    10 .2    Ambient Corporation 2002 Non-Employee Directors Stock Option Plan (filed as Appendix B to the
                             Definitive Information Statement of Ambient Corporation on Schedule 14C, filed December 24, 2009).(1)
                    10 .3    Amended and Restated Employment Agreement effective as of December 30, 2008 between Ambient
                             Corporation and John Joyce (filed as Exhibit 10.4 to the Quarterly Report of Ambient Corporation on
                             Form 10-Q for the three month period ended March 31, 2008, filed May 15, 2008).(1)+
                    10 .4    Amended and Restated Employment Agreement effective as of June 2, 2008 between Ambient
                             Corporation and Ramdas Rao (filed as Exhibit 10.5 to the Quarterly Report of Ambient Corporation on
                             Form 10-Q for the three month period ended March 31, 2008, filed May 15, 2008).(1)+
                    10 .5    Employment Agreement effective as of August 4, 2011 between Ambient Corporation and Mark L. Fidler
                             (filed as Exhibit 10.1 to the Current Report of Ambient Corporation on Form 8-K, filed on August 8,
                             2011).(1)+
                    10 .6    Securities Purchase Agreement dated as of May 26, 2006 among Ambient Corporation and certain
                             investors (filed as Exhibit 10.8 to the Registration Statement of Ambient Corporation on Form SB-2, filed
                             June 8, 2006, as File No. 333-134872).(1)
                    10 .7    Registration Rights Agreement dated as of May 26, 2006 among Ambient Corporation and certain
                             investors (filed as Exhibit 10.9 to the Registration Statement of Ambient Corporation on Form SB-2, filed
                             June 8, 2006, as File No. 333-134872).(1)
                    10 .8    Registration Rights Agreement, dated as of July 31, 2007, between Ambient Corporation and Vicis
                             Capital Master Fund (filed as Exhibit 10.1 to the Current Report of Ambient Corporation on Form 8-K,
                             filed on July 31, 2007).(1)
                    10 .9    Securities Purchase Agreement, dated as of July 31, 2007 between Ambient Corporation and Vicis Capital
                             Master Fund (filed as Exhibit 10.2 to the Current Report of Ambient Corporation on Form 8-K, filed on
                             July 31, 2007).(1)
                    10 .10   Security Agreement, dated as of July 31, 2007 between Ambient Corporation and Vicis Capital Master
                             Fund (filed as Exhibit 10.3 to the Current Report of Ambient Corporation on Form 8-K, filed on July 31,
                             2007).(1)


                                                                      II-5
Table of Contents




              Exhibit
              Number                                                          Description


                    10 .11   Securities Purchase Agreement dated as of November 1, 2007, between Ambient Corporation and Vicis
                             Capital Master Fund (filed as Exhibit 10.1 to the Current Report of Ambient Corporation on Form 8-K,
                             filed on November 5, 2007).(1)
                    10 .12   First Amendment dated as of November 1, 2007 to Registration Rights Agreement, dated as of July 31,
                             2007, between Ambient and Vicis Capital Master Fund (filed as Exhibit 10.2 to the Current Report of
                             Ambient Corporation on Form 8-K, filed on November 5, 2007).(1)
                    10 .13   First Amendment dated as of November 1, 2007 to Securities Purchase Agreement, dated as of July 31,
                             2007 between Ambient Corporation and Vicis Capital Master Fund (filed as Exhibit 10.3 to the Current
                             Report of Ambient Corporation on Form 8-K, filed on November 5, 2007).(1)
                    10 .14   Securities Purchase Agreement dated as of January 15, 2008, between Ambient Corporation and Vicis
                             Capital Master Fund (filed as Exhibit 10.1 to the Current Report of Ambient Corporation on Form 8-K,
                             filed on January 17, 2008).(1)
                    10 .15   Second Amendment dated as of January 15, 2008 to Registration Rights Agreement, dated as of July 31,
                             2007, between Ambient Corporation and Vicis Capital Master Fund (filed as Exhibit 10.2 to the Current
                             Report of Ambient Corporation on Form 8-K, filed on January 17, 2008).(1)
                    10 .16   First Amendment dated as of January 15, 2008 to Securities Purchase Agreement, dated as of
                             November 1, 2007 between Ambient Corporation and Vicis Capital Master Fund (filed as Exhibit 10.3 to
                             the Current Report of Ambient Corporation on Form 8-K, filed on January 17, 2008).(1)
                    10 .17   Second Amendment dated as of January 15, 2008 to Securities Purchase Agreement, dated as of July 31,
                             2007 between Ambient Corporation and Vicis Capital Master Fund (filed as Exhibit 10.4 to the Current
                             Report of Ambient Corporation on Form 8-K, filed on January 17, 2008).(1)
                    10 .18   Securities Purchase Agreement dated as of April 23, 2008 between Ambient Corporation and Vicis
                             Capital Master Fund (filed as Exhibit 10.1 to the Quarterly Report of Ambient Corporation on Form 10-Q
                             for the three month period ended June 30, 2008, filed August 14, 2008).(1)
                    10 .19   Amendment and Waiver dated as of April 23, 2008 between Ambient Corporation and Vicis Capital
                             Master Fund (filed as Exhibit 10.2 to the Quarterly Report of Ambient Corporation on Form 10-Q for the
                             three month period ended June 30, 2008, filed August 14, 2008).(1)
                    10 .20   Debenture Amendment Agreement dated as of November 21, 2008 between Ambient Corporation and
                             Vicis Capital Master Fund (filed as Exhibit 10.1 to the Current Report of Ambient Corporation on
                             Form 8-K, filed November 24, 2008).(1)
                    10 .21   Securities Purchase Agreement, dated as of November 16, 2009 between Ambient Corporation and Vicis
                             Capital Master Fund (filed as Exhibit 10.2 to the Quarterly Report of Ambient Corporation on Form 10-Q
                             for the three month period ended September 30, 2009, filed November 16, 2009).(1)
                    10 .22   Registration Rights Agreement, dated as of November 16, 2009 between Ambient Corporation and Vicis
                             Capital Master Fund (filed as Exhibit 10.3 to the Quarterly Report of Ambient Corporation on Form 10-Q
                             for the three month period ended September 30, 2009, filed November 16, 2009).(1)
                    10 .23   Amendment to Securities Purchase Agreement dated as of January 15, 2010, between Ambient and Vicis
                             Capital Master Fund (filed as Exhibit 10.26 to the Annual Report of Ambient Corporation on Form 10-K
                             for the year ended December 31, 2009, filed March 31, 2010).(1)
                    10 .24   Commercial Deployment Agreement dated as of March 31, 2008 between Ambient Corporation and Duke
                             Energy Carolinas, LLC (filed as Exhibit 10.1 to the Quarterly Report of Ambient Corporation on
                             Form 10-Q for the three month period ended March 31, 2008, filed May 15, 2008). (Pursuant to
                             Rule 24b-2 under the Securities Exchange Act of 1934, the registrant has requested confidential treatment
                             of the portion of this exhibit deleted from the filed copy).(1)
                    10 .25   Master Supply and Alliance Agreement dated as of February 17, 2009 between Ambient Corporation and
                             Bel Fuse Inc. (Pursuant to Rule 406 under the Securities Act of 1933, the registrant has requested
                             confidential treatment of the portion of this exhibit deleted from the filed copy).
                    10 .26   Product Sales, Services & Software Agreement between Ambient Corporation and Duke Energy business
                             Services LLC on its own behalf and as agent for and on behalf of Duke Energy Carolinas, LLC, Duke
                             Energy Indiana, Inc, Duke Energy Ohio, Inc., Duke Energy Kentucky, Inc., and certain after acquired
                             affiliates (filed as Exhibit 10.1 to the Quarterly Report of Ambient Corporation on Form 10-Q for the
                             three month period ended September 30, 2009, filed November 16, 2009). (Pursuant to Rule 24b-2 under
                             the Securities Exchange Act of 1934, the registrant has requested confidential treatment of portions of this
                             exhibit deleted from the filed copy.)(1)

                                                                       II-6
Table of Contents




               Exhibit
               Number                                                         Description


                     10 .27    Office Lease Agreement dated as of May 21, 2009, between Ambient Corporation and NS 7/57
                               Acquisition LLC (filed as Exhibit 10.1 to the Quarterly Report of Ambient Corporation on Form 10-Q
                               for the three month period ended June 30, 2009, filed August 7, 2009).(1)
                     21        Subsidiaries
                     23 .1     Consent of Rotenberg Meril Solomon Bertiger & Guttilla, P.C.
                     23 .2*    Consent of Shipman & Goodwin LLP, included in opinion filed as Exhibit 5.1
                     24 .1     Power of Attorney (See Signatures to this Form S-1)
                    101 .INS   XBRL Instance Document
                        †*
                    101 .SCH   XBRL Taxonomy Extension Schema
                        †*
                    101 .CAL   XBRL Taxonomy Extension Calculation Linkbase
                        †*
                    101 .DEF   XBRL Taxonomy Extension Definition Linkbase
                        †*
                    101 .LAB   XBRL Taxonomy Extension Label Linkbase
                        †*
                    101 .PRE   XBRL Taxonomy Extension Presentation Linkbase
                        †*



         *      To be filed by amendment

         +      Management Agreement

         †      Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration
                statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities
                Exchange Act of 1934 and otherwise are not subject to liability.

         (1)    Incorporated by reference


            (b) Financial Statement Schedules. All financial statement schedules have been omitted because they are not required by
         Regulation S-X or are not applicable or the required information is included in the registrant‟s financial statements or notes
         thereto.


         ITEM 17. UNDERTAKINGS



            Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers
         and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised
         that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in
         the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the
         payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the
         successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection
         with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by
         controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against
         public policy as expressed in the Act and will be governed by the final adjudication of such issue.


             The undersigned registrant hereby undertakes that:


           (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of
         prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed
by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.


  (2) For the purposes determining any liability under the Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

                                                              II-7
Table of Contents



                                                                 SIGNATURES

            Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be
         signed on its behalf by the undersigned, thereunto duly authorized, in the City of Newton, State of Massachusetts, on
         August 19, 2011.



                                                                        AMBIENT CORPORATION


                                                                       By: /s/ John J. Joyce
                                                                           JOHN J. JOYCE
                                                                           PRESIDENT and
                                                                           CHIEF EXECUTIVE OFFICER


                                                          POWER OF ATTORNEY


            Each person whose signature appears below hereby constitutes and appoints John J. Joyce and Mark L. Fidler, and each of
         them, as his or her attorney-in-fact and agent, with full power of substitution and resubstitution for him/her in any and all
         capacities, to sign any or all amendments or post-effective amendments to this registration statement, or any registration
         statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
         and to file the same, with exhibits thereto and other documents in connection therewith or in connection with the registration
         of the shares of common stock under the Securities Exchange Act of 1934, as amended, with the Securities and Exchange
         Commission, granting unto such attorney-in-fact and agent full power and authority to do and perform each and every act
         and thing requisite and necessary in connection with such matters and hereby ratifying and confirming all that such
         attorney-in-fact and agent or his substitutes may do or cause to be done by virtue hereof.


           Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following
         persons in the capacities and on the dates indicated.


                               SIGNATURE                                                  TITLE                               DATE



                             /s/ John J. Joyce                            PRESIDENT, CHIEF EXECUTIVE                    August 19, 2011
                               John J. Joyce                               OFFICER, CHAIRMAN OF THE
                                                                              BOARD and DIRECTOR
                                                                             (Principal Executive Officer)

                            /s/ Mark L. Fidler                         VICE PRESIDENT, CHIEF FINANCIAL                  August 19, 2011
                              Mark L. Fidler                                 OFFICER and TREASURER
                                                                       (Principal Financial Officer and Principal
                                                                                  Accounting Officer)

                         /s/ Michael L. Widland                                        DIRECTOR                         August 19, 2011
                           Michael L. Widland

                          /s/ D. Howard Pierce                                         DIRECTOR                         August 19, 2011
                             D. Howard Pierce

                       /s/ Thomas Michael Higgins                                      DIRECTOR                         August 19, 2011
                         Thomas Michael Higgins

                           /s/ Shad L. Stastney                                        DIRECTOR                         August 19, 2011
                             Shad L. Stastney

                         /s/ Francesca E. Scarito                                      DIRECTOR                         August 19, 2011
Francesca E. Scarito


                       S-1
Table of Contents

                                                              EXHIBIT INDEX


              Exhibit
              Number                                                        Description


                     1 .1*   Form of Underwriting Agreement
                     3 .1    Restated Certificate of Incorporation of Ambient Corporation, as amended
                     3 .2    Bylaws of Ambient Corporation
                     4 .1    Specimen Stock Certificate
                     4 .2    Common Stock Purchase Warrant (Series A) (filed as Exhibit 4.2 to the Current Report of Ambient
                             Corporation on Form 8-K, filed July 31, 2007).(1)
                     4 .3    Common Stock Purchase Warrant (Series B) (filed as Exhibit 4.3 to the Current Report of Ambient
                             Corporation on Form 8-K, filed July 31, 2007).(1)
                     4 .4    Common Stock Purchase Warrant (Series C) (filed as Exhibit 4.2 to the Current Report of Ambient
                             Corporation on Form 8-K, filed July 31, 2007).(1)
                     4 .5    Common Stock Purchase Warrant (Series D) (filed as Exhibit 4.3 to the Current Report of Ambient
                             Corporation on Form 8-K, filed November 5, 2007).(1)
                     4 .6    Common Stock Purchase Warrant (Series E) (filed as Exhibit 4.2 to the Current Report of Ambient
                             Corporation on Form 8-K, filed January 17, 2008).(1)
                     4 .7    Warrant issued as of April 23, 2008 (filed as Exhibit 4.1 to the Quarterly Report of Ambient Corporation
                             on Form 10-Q for the three month period ended June 30, 2008, filed August 14, 2008).(1)
                     4 .8    Common Stock Purchase Warrant (Series G) (filed as Exhibit 4.1 to the Quarterly Report of Ambient
                             Corporation on Form 10-Q for the three month period ended September 30, 2009, filed November 16,
                             2009).(1)
                     5 .1*   Opinion of Shipman & Goodwin LLP
                    10 .1    Ambient Corporation 2000 Equity Incentive Plan (filed as Appendix A to the Definitive Information
                             Statement of Ambient Corporation on Schedule 14C, filed December 24, 2009).(1)+
                    10 .2    Ambient Corporation 2002 Non-Employee Directors Stock Option Plan (filed as Appendix B to the
                             Definitive Information Statement of Ambient Corporation on Schedule 14C, filed December 24, 2009).(1)
                    10 .3    Amended and Restated Employment Agreement effective as of December 30, 2008 between Ambient
                             Corporation and John Joyce (filed as Exhibit 10.4 to the Quarterly Report of Ambient Corporation on
                             Form 10-Q for the three month period ended March 31, 2008, filed May 15, 2008).(1)+
                    10 .4    Amended and Restated Employment Agreement effective as of June 2, 2008 between Ambient
                             Corporation and Ramdas Rao (filed as Exhibit 10.5 to the Quarterly Report of Ambient Corporation on
                             Form 10-Q for the three month period ended March 31, 2008, filed May 15, 2008).(1)+
                    10 .5    Employment Agreement effective as of August 4, 2011 between Ambient Corporation and Mark L. Fidler
                             (filed as Exhibit 10.1 to the Current Report of Ambient Corporation on Form 8-K, filed on August 8,
                             2011).(1)+
                    10 .6    Securities Purchase Agreement dated as of May 26, 2006 among Ambient Corporation and certain
                             investors (filed as Exhibit 10.8 to the Registration Statement of Ambient Corporation on Form SB-2, filed
                             June 8, 2006, as File No. 333-134872).(1)
                    10 .7    Registration Rights Agreement dated as of May 26, 2006 among Ambient Corporation and certain
                             investors (filed as Exhibit 10.9 to the Registration Statement of Ambient Corporation on Form SB-2, filed
                             June 8, 2006, as File No. 333-134872).(1)
                    10 .8    Registration Rights Agreement, dated as of July 31, 2007, between Ambient Corporation and Vicis
                             Capital Master Fund (filed as Exhibit 10.1 to the Current Report of Ambient Corporation on Form 8-K,
                             filed on July 31, 2007).(1)
                    10 .9    Securities Purchase Agreement, dated as of July 31, 2007 between Ambient Corporation and Vicis Capital
                             Master Fund (filed as Exhibit 10.2 to the Current Report of Ambient Corporation on Form 8-K, filed on
                             July 31, 2007).(1)
                    10 .10   Security Agreement, dated as of July 31, 2007 between Ambient Corporation and Vicis Capital Master
                             Fund (filed as Exhibit 10.3 to the Current Report of Ambient Corporation on Form 8-K, filed on July 31,
                             2007).(1)
Table of Contents


              Exhibit
              Number                                                        Description


                    10 .11   Securities Purchase Agreement dated as of November 1, 2007, between Ambient Corporation and Vicis
                             Capital Master Fund (filed as Exhibit 10.1 to the Current Report of Ambient Corporation on Form 8-K,
                             filed on November 5, 2007).(1)
                    10 .12   First Amendment dated as of November 1, 2007 to Registration Rights Agreement, dated as of July 31,
                             2007, between Ambient and Vicis Capital Master Fund (filed as Exhibit 10.2 to the Current Report of
                             Ambient Corporation on Form 8-K, filed on November 5, 2007).(1)
                    10 .13   First Amendment dated as of November 1, 2007 to Securities Purchase Agreement, dated as of July 31,
                             2007 between Ambient Corporation and Vicis Capital Master Fund (filed as Exhibit 10.3 to the Current
                             Report of Ambient Corporation on Form 8-K, filed on November 5, 2007).(1)
                    10 .14   Securities Purchase Agreement dated as of January 15, 2008, between Ambient Corporation and Vicis
                             Capital Master Fund (filed as Exhibit 10.1 to the Current Report of Ambient Corporation on Form 8-K,
                             filed on January 17, 2008).(1)
                    10 .15   Second Amendment dated as of January 15, 2008 to Registration Rights Agreement, dated as of July 31,
                             2007, between Ambient Corporation and Vicis Capital Master Fund (filed as Exhibit 10.2 to the Current
                             Report of Ambient Corporation on Form 8-K, filed on January 17, 2008).(1)
                    10 .16   First Amendment dated as of January 15, 2008 to Securities Purchase Agreement, dated as of
                             November 1, 2007, between Ambient Corporation and Vicis Capital Master Fund (filed as Exhibit 10.3 to
                             the Current Report of Ambient Corporation on Form 8-K, filed on January 17, 2008).(1)
                    10 .17   Second Amendment dated as of January 15, 2008 to Securities Purchase Agreement, dated as of July 31,
                             2007, between Ambient Corporation and Vicis Capital Master Fund (filed as Exhibit 10.4 to the Current
                             Report of Ambient Corporation on Form 8-K, filed on January 17, 2008).(1)
                    10 .18   Securities Purchase Agreement dated as of April 23, 2008 between Ambient Corporation and Vicis
                             Capital Master Fund (filed as Exhibit 10.1 to the Quarterly Report of Ambient Corporation on Form 10-Q
                             for the three month period ended June 30, 2008, filed August 14, 2008).(1)
                    10 .19   Amendment and Waiver dated as of April 23, 2008 between Ambient Corporation and Vicis Capital
                             Master Fund (filed as Exhibit 10.2 to the Quarterly Report of Ambient Corporation on Form 10-Q for the
                             three month period ended June 30, 2008, filed August 14, 2008).(1)
                    10 .20   Debenture Amendment Agreement dated as of November 21, 2008 between Ambient Corporation and
                             Vicis Capital Master Fund (filed as Exhibit 10.1 to the Current Report of Ambient Corporation on
                             Form 8-K, filed November 24, 2008).(1)
                    10 .21   Securities Purchase Agreement, dated as of November 16, 2009 between Ambient Corporation and Vicis
                             Capital Master Fund (filed as Exhibit 10.2 to the Quarterly Report of Ambient Corporation on Form 10-Q
                             for the three month period ended September 30, 2009, filed November 16, 2009).(1)
                    10 .22   Registration Rights Agreement, dated as of November 16, 2009 between Ambient Corporation and Vicis
                             Capital Master Fund (filed as Exhibit 10.3 to the Quarterly Report of Ambient Corporation on Form 10-Q
                             for the three month period ended September 30, 2009, filed November 16, 2009).(1)
                    10 .23   Amendment to Securities Purchase Agreement dated as of January 15, 2010, between Ambient and Vicis
                             Capital Master Fund (filed as Exhibit 10.26 to the Annual Report of Ambient Corporation on Form 10-K
                             for the year ended December 31, 2009, filed March 31, 2010).(1)
                    10 .24   Commercial Deployment Agreement dated as of March 31, 2008 between Ambient Corporation and Duke
                             Energy Carolinas, LLC (filed as Exhibit 10.1 to the Quarterly Report of Ambient Corporation on
                             Form 10-Q for the three month period ended March 31, 2008, filed May 15, 2008). (Pursuant to
                             Rule 24b-2 under the Securities Exchange Act of 1934, the registrant has requested confidential treatment
                             of the portion of this exhibit deleted from the filed copy).(1)
                    10 .25   Master Supply and Alliance Agreement dated as of February 17, 2009 between Ambient Corporation and
                             Bel Fuse Inc. (Pursuant to Rule 406 under the Securities Act of 1933, the registrant has requested
                             confidential treatment of the portion of this exhibit deleted from the filed copy).
Table of Contents




                Exhibit
                Number                                                         Description


                     10 .26      Product Sales, Services & Software Agreement between Ambient Corporation and Duke Energy
                                 business Services LLC on its own behalf and as agent for and on behalf of Duke Energy Carolinas,
                                 LLC, Duke Energy Indiana, Inc, Duke Energy Ohio, Inc., Duke Energy Kentucky, Inc., and certain
                                 after acquired affiliates (filed as Exhibit 10.1 to the Quarterly Report of Ambient Corporation on
                                 Form 10-Q for the three month period ended September 30, 2009, filed November 16, 2009).
                                 (Pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, the registrant has requested
                                 confidential treatment of portions of this exhibit deleted from the filed copy.)(1)
                     10 .27      Office Lease Agreement dated as of May 21, 2009, between Ambient Corporation and NS 7/57
                                 Acquisition LLC (filed as Exhibit 10.1 to the Quarterly Report of Ambient Corporation on Form 10-Q
                                 for the three month period ended June 30, 2009, filed August 7, 2009).(1)
                     21          Subsidiaries
                     23 .1       Consent of Rotenberg Meril Solomon Bertiger & Guttilla, P.C.
                     23 .2*      Consent of Shipman & Goodwin LLP, included in opinion filed as Exhibit 5.1
                     24 .1       Power of Attorney (see Signatures to this Form S-1)
                    101 .INS†*   XBRL Instance Document
                    101 .SCH†*   XBRL Taxonomy Extension Schema
                    101 .CAL†*   XBRL Taxonomy Extension Calculation Linkbase
                    101 .DEF†*   XBRL Taxonomy Extension Definition Linkbase
                    101 .LAB†*   XBRL Taxonomy Extension Label Linkbase
                    101 .PRE†*   XBRL Taxonomy Extension Presentation Linkbase


         *      To be filed by amendment

         +      Management Agreement

         †      Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration
                statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities
                Exchange Act of 1934 and otherwise are not subject to liability.

         (1)    Incorporated by reference
                                                                                                                                  Exhibit 3.1


       STATE OF DELAWARE
       SECRETARY OF STATE
    DIVISION OF CORPORATIONS
     FILED 09:00 AM 11/06/1996
        960323451 — 2638252


                                          RESTATED CERTIFICATE OF INCORPORATION
                                                                     OF
                                                       AMBIENT CORPORATION

   AMBIENT CORPORATION, a corporation organized under the General Corporation Law of the State of Delaware (the “Corporation”) on
June 26, 1996 under its current name, certifies as follows:
   That the Corporation has not received any payment for any of its stock, and the Corporation‟s Certificate of Incorporation has been amended
and restated in its entirety to read as follows in accordance with sections 241 and 245 of the General Corporation Law:
     “ FIRST : The name of this corporation is Ambient Corporation.
      SECOND : The registered agent and the address of the registered office in the State of Delaware are:
                     CorpAmerica, Inc.
                     1050 S. State Street
                     Dover, Delaware 19901
                     County of Kent
     THIRD : The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the
  Delaware General Corporation Law.
      FOURTH : The Corporation is authorized to issue two classes of stock to be designated respectively as “Common Stock” and “Preferred
  Stock.” The total number of shares which the Corporation is authorized to issue consists of twenty million (20,000,000) shares of Common
  Stock and five million (5,000,000) shares of Preferred Stock. Each share of Common Stock and Preferred Stock shall have a par value of
  $.001.
      FIFTH : The name and mailing address of the incorporator is as follows:
                     Adam T. Ettinger
                     Pillsbury Madison & Sutro LLP
                     2700 Sand Hill Road
                     Menlo Park, CA 94025-7020

                                                                      -1-
      SIXTH : The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In addition to
  the powers and authority expressly conferred upon them by Statute or by this Certificate of Incorporation or the Bylaws of the Corporation,
  the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the
  Corporation. Election of directors need not be by written ballot unless the Bylaws so provide.
      SEVENTH : The Board of Directors is authorized to make, adopt, amend, alter or repeal the Bylaws of the Corporation. The
  stockholders shall also have power to make, adopt, amend, alter or repeal the Bylaws of the Corporation.
      EIGHTH : The Corporation reserves the right to amend or repeal any of the provisions contained in this Certificate of Incorporation in
  any manner now or hereafter permitted by law, and the rights of the stockholders of this Corporation are granted subject to this reservation.
      NINTH : To the fullest extent permitted by the Delaware General Corporation Law, a director of the Corporation shall not be liable to
  the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Any repeal or modification of the
  foregoing provisions of this Article NINTH by the stockholders of the Corporation shall not adversely affect any right or protection of a
  director of the Corporation existing at the time of such repeal or modification.”
   I, THE UNDERSIGNED, being the sole incorporator, do make, file and record this Restated Certificate of Incorporation, do certify that the
facts herein stated are true, and accordingly, have hereto set my hand this 5th day of November, 1996.


                                                               /s/ Adam T. Ettinger
                                                               Adam T. Ettinger
                                                               Incorporator


                                                                       -2-
                                                CERTIFICATE OF AMENDMENT
                                                         OF THE
                                              CERTIFICATE OF INCORPORATION
                                                            OF
                                          AMBIENT CORPORATION (Pursuant to section 242)

The undersigned, being the chief financial officer of Ambient Corporation, does hereby certify the following:
1.    The name of the Corporation is Ambient Corporation.
2.    The Certificate of Incorporation was filed by the Secretary of State of Delaware on June 26, 1996.
3.    Paragraph FOURTH of the Certificate of Incorporation is hereby amended to read in its entirety as follows:
         “The aggregate number of shares of stock which the corporation shall have the authority to issue is 105,000,000, 100,000,000 of
         which are shares of Common Stock, each with a par value of $0.001, each entitled to one vote per share, and 5,000,000 of which are
         Preferred Stock each with a par value of $0.001.”
IN WITNESS WHEREOF , this certificate of Amendment has been signed this 1 st day of December 2000.


                                                                /s/ Wilfred Kopelowitz
                                                                Wilfred Kopelowitz
                                                                Chief Financial Officer




                                                                                                              STATE OF DELAWARE
                                                                                                              SECRETARY OF STATE
                                                                                                           DIVISION OF CORPORATIONS
                                                                                                            FILED 01:15 PM 02/27/2001
                                                                                                               010097062 — 2638252
                                                                                                            STATE OF DELAWARE
                                                                                                            SECRETARY OF STATE
                                                                                                         DIVISION OF CORPORATIONS
                                                                                                          FILED 01:00 PM 05/29/2001
                                                                                                             010254815 — 2638252


                                            CERTIFICATE OF OWNERSHIP AND MERGER
                                                                   Merging
                                                          PLT SOLUTIONS INC.
                                                                     Into
                                                        AMBIENT CORPORATION

   Ambient Corporation, a corporation organized and existing under the laws of the State of Delaware
DOES HEREBY CERTIFY:
   FIRST: That this corporation was incorporated on the 26 th day of June 1996, pursuant to the General Corporation Law of the State of
Delaware.
    SECOND: That this corporation owns all of the outstanding shares of stock of PLT Solutions Inc., a corporation incorporated on the 27 th
day of March 2000, pursuant to the General Corporation Law of the State of Delaware.
     THIRD: That this corporation, by the following resolutions of its Board of Directors, duly adopted by the unanimous written consent of
the members of its Board of Directors, filed with the minutes of the Board, on the 26 th day of January 2001, determined to and did merge into
itself said PLT Solutions Inc.
     RESOLVED, that Ambient Corporation merge, and it hereby does merge into itself said PLT Solutions Inc. and assumes all of its
  obligations; and
      FURTHER RESOLVED, that the merger shall be effective upon the date of filing with the Secretary of State of Delaware; and
     FURTHER RESOLVED, that the proper officers of this corporation be and he or she is hereby directed to make and execute a Certificate
  of Ownership and Merger setting forth a copy of the resolutions to merge said PLT Solutions Inc. and assume its liabilities and obligations,
  and the date of the adoption thereof, and to cause the same to be filed with the Secretary of State and to do all acts and things whatsoever,
  whether within or without the State of Delaware, which may be in anywise necessary or proper to effect said merger.
    IN WITNESS WHEREOF, said Ambient Corporation has caused the Certificate to be signed by Wilfred Kopelowitz, its Chief Financial
Officer, this 26th day of February, 2001.

                                                       AMBIENT CORPORATION

                                                       By:    /s/ Wilfred Kopelowitz
                                                              Name:       Wilfred Kopelowitz
                                                              Title:      Chief Financial Officer
                                                                                                             STATE OF DELAWARE
                                                                                                             SECRETARY OF STATE
                                                                                                          DIVISION OF CORPORATIONS
                                                                                                           FILED 02:45 PM 01/15/2003
                                                                                                              030030117 — 2638252


                                                           Certificate of Resignation
                                                              Of Registered Agent
                                                                       Of
                                                         AMBIENT CORPORATION


  This is to certify that CorpAmerica, Inc. of 30 Old Rudnick Lane, Dover, Delaware, pursuant to Section 136 of the General Corporation
Law of The State of Delaware:
   (1)   Resigned the office of registered agent of
                                                         AMBIENT CORPORATION
A corporation of the State of Delaware, on January 15, 2003, without appointing any person or corporation as registered agent in its stead.
   (2)   Sent on November 15, 2002 by registered mail, due notice of its resignation to the principal office of the corporation at the following
         address:


                                                             Aryeh Weinberg, CFO
                                                                P.O. Box 46163
                                                               Jerusalem 91460
                                                                     Israel
   (3)   The said notice of resignation has not been returned by the post office.


                                                                  /s/ Kelly McKown
                                                                  Kelly McKown, Assistant Secretary
                                                CERTIFICATE OF AMENDMENT
                                                         OF THE
                                              CERTIFICATE OF INCORPORATION
                                                            OF
                                          AMBIENT CORPORATION (Pursuant to section 242)

The undersigned, being the president of Ambient Corporation, does hereby certify the following:
1.   The name of the Corporation is Ambient Corporation.
2.   The Certificate of Incorporation was filed by the Secretary of State of Delaware on June 26,1996.
3.   Paragraph FOURTH of the Certificate of Incorporation is hereby amended to read in its entirety as follows:
     “The aggregate number of shares of stock which the corporation shall have the authority to issue is 205,000,000, 200,000,000 of which are
     shares of Common Stock, each with a par value of $0.001, each entitled to one vote per share, and 5,000,000 of which are Preferred Stock
     each with a par value of $0.001.”
IN WITNESS WHEREOF, this certificate of Amendment has been signed this 2 nd day of January 2003.


                                                                  /s/ John J. Joyce
                                                                  John J. Joyce
                                                                  President / CEO




   STATE OF DELAWARE
   SECRETARY OF STATE
        DIVISION OF
      CORPORATIONS
 FILED 05:30 PM 01/17/2003
    030037802 — 2638252
                                                                                                           STATE OF DELAWARE
                                                                                                           SECRETARY OF STATE
                                                                                                       DIVISION OF CORPORATIONS
                                                                                                      DELIVERED 04:32 PM 08/23/2004
                                                                                                         FILED 04:32 PM 08/23/2004
                                                                                                       SRV 040615405 — 2638252 FILE


                                                 CERTIFICATE OF AMENDMENT
                                                             OF THE
                                                CERTIFICATE OF INCORPORATION
                                                                 OF
                                                    AMBIENT CORPORATION
                                                      (Pursuant to Section 242)
  The undersigned, being the Chief Executive Officer of Ambient Corporation, does hereby certify the following:
  1.   The name of the Corporation is Ambient Corporation.
  2.   The Certificate of Incorporation was filed by the Secretary of State of Delaware on June 26, 1996.
  3.   Paragraph FOURTH of the Certificate of Incorporation is hereby amended to read in its entirety as follows:
       “The aggregate number of shares of stock which the corporation shall have the authority to issue is 305,000,000, 300,000,000 of which
       are shares of Common Stock, each with a par value of $0.001, each entitled to one vote per share, and 5,000,000 of which are shares of
       Preferred Stock, each with a par value of $0.001.”
IN WITNESS WHEREOF, this Certificate of Amendment has been signed this 23 rd day of August 2004.


                                                                /s/ John J. Joyce
                                                                John J. Joyce,
                                                                Chief Executive Officer
                                                                                                               STATE OF DELAWARE
                                                                                                               SECRETARY OF STATE
                                                                                                           DIVISION OF CORPORATIONS
                                                                                                          DELIVERED 12:22 PM 05/04/2006
                                                                                                             FILED 12:07 PM 05/04/2006
                                                                                                           SRV 060418621 — 2638252 FILE


                                                     CERTIFICATE OF AMENDMENT
                                                                 TO
                                                    CERTIFICATE OF INCORPORATION
                                                                 OF
                                                        AMBIENT CORPORATION

  The undersigned, John J. Joyce, President and Chief Executive Officer of Ambient Corporation, a Delaware corporation (the
“Corporation”), does hereby certify as follows:
   1.     The name of the Corporation is Ambient Corporation.
   2.     The Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on June 26, 1996.
   3.     The first paragraph of Paragraph FOURTH of the Certificate of Incorporation is hereby amended to read in its entirety as follows:
           “FOURTH: The Corporation is authorized to issue two classes of stock to be designated respectively as “Common Stock” and
        “Preferred Stock.” The total number of shares which the Corporation is authorized to issue consists of five hundred million (500,000,000)
        shares of Common Stock and five million (5,000,000) shares of Preferred Stock. Each share of Common Stock and Preferred Stock shall
        have a par value of $.001.”
  4. This amendment of the Certificate of Incorporation was duly adopted in accordance with Section 242 of the Delaware General
Corporation Law.
    IN WITNESS WHEREOF, this certificate of amendment has been executed as of this 3rd day of May, 2006.

                                                               /s/ John J. Joyce
                                                               Name:        John J. Joyce
                                                               Title:       President and Chief Executive Officer
                                                                                                           STATE OF DELAWARE
                                                                                                           SECRETARY OF STATE
                                                                                                       DIVISION OF CORPORATIONS
                                                                                                      DELIVERED 06:10 PM 05/30/2007
                                                                                                         FILED 06:03 PM 05/30/2007
                                                                                                       SRV 070646515 — 2638252 FILE


                                                  CERTIFICATE OF AMENDMENT
                                                              TO
                                                 CERTIFICATE OF INCORPORATION
                                                              OF
                                                     AMBIENT CORPORATION

                                                              *********

   The undersigned, John J. Joyce, President and Chief Executive Officer of Ambient Corporation (the “Corporation”), a corporation
organized and existing under the Delaware General Corporation Law, does hereby certify as follows:
   1. The Certificate of Incorporation of the Corporation was filed with the Delaware Secretary of State on June 26, 1996.
   2. The first paragraph of paragraph FOURTH of the Certificate of Incorporation is hereby amended to read in its entirety as follows:
       “FOURTH: The Corporation is authorized to issue two classes of stock to be designated respectively as “Common Stock” and
  “Preferred Stock.” The total number of shares which the Corporation is authorized to issue consists of seven hundred fifty million
  (750,000,000) shares of Common Stock and five million (5,000,000) shares of Preferred Stock. Each share of Common Stock and Preferred
  Stock shall have a par value of $.001.”
  3. This amendment of the Certificate of Incorporation was duly adopted in accordance with the provisions of Section 242 of the Delaware
General Corporation Law.
    IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed as of this 30 th day of May, 2007.

                                                             AMBIENT CORPORATION

                                                             By:      /s/ John J. Joyce
                                                                      John J. Joyce
                                                                      Its: President and Chief Executive Officer
                                                                                                            STATE OF DELAWARE
                                                                                                            SECRETARY OF STATE
                                                                                                        DIVISION OF CORPORATIONS
                                                                                                       DELIVERED 01:50 PM 10/01/2007
                                                                                                          FILED 01:41 PM 10/01/2007
                                                                                                        SRV 071070489 — 2638252 FILE


                                                  CERTIFICATE OF AMENDMENT
                                                              TO
                                                 CERTIFICATE OF INCORPORATION
                                                              OF
                                                     AMBIENT CORPORATION

  The undersigned, John J. Joyce, President and Chief Executive Officer of Ambient Corporation, a Delaware corporation (the
“Corporation”), a corporation organized and existing under the Delaware General Corporation Law, does hereby certify as follows:
   1.   The Certificate of Incorporation of the Corporation was filed with the Delaware Secretary of State on June 26, 1996.
   2.   The first paragraph of Paragraph FOURTH of the Certificate of Incorporation is hereby amended to read in its entirety as follows:
        “FOURTH: The Corporation is authorized to issue two classes of stock to be designated respectively as “Common Stock” and
  “Preferred Stock.” The total number of shares which the Corporation is authorized to issue consists of One Billion Two Hundred and Fifty
  Million (1,250,000,000) shares of Common Stock and five million (5,000,000) shares of Preferred Stock. Each share of Common Stock and
  Preferred Stock shall have a par value of $.001.
  3. This amendment of the Certificate of Incorporation was duly adopted in accordance with Section 242 of the Delaware General
Corporation Law.
    IN WITNESS WHEREOF, this certificate of amendment has been executed as of this 1st day of October 2007.


                                                            /s/ John J. Joyce
                                                            Name:        John J. Joyce
                                                            Title:       President and Chief Executive Officer
                                                  CERTIFICATE OF AMENDMENT
                                                              TO
                                                 CERTIFICATE OF INCORPORATION
                                                              OF
                                                     AMBIENT CORPORATION

  The undersigned, John J. Joyce, President and Chief Executive Officer of Ambient Corporation, a Delaware corporation (the
“Corporation”), does hereby certify as follows:
   1.   The name of the Corporation is Ambient Corporation.
   2.   The Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on June 26, 1996.
   3.   The first paragraph of Paragraph FOURTH of the Certificate of Incorporation is hereby amended to read in its entirety as follows:
        “FOURTH: The Corporation is authorized to issue two classes of stock to be designated respectively as “Common Stock” and
  “Preferred Stock.” The total number of shares which the Corporation is authorized to issue consists of two billion (2,000,000,000) shares of
  Common Stock and five million (5,000,000) shares of Preferred Stock. Each share of Common Stock and Preferred Stock shall have a par
  value of $.001.”
  4. This amendment of the Certificate of Incorporation was duly adopted in accordance with Section 242 of the Delaware General
Corporation Law.
    IN WITNESS WHEREOF, this certificate of amendment has been executed as of this 30th day of June 2008.


                                                            /s/ John J. Joyce
                                                            Name:        John J. Joyce
                                                            Title:       President and Chief Executive Officer




                                                                                                             STATE OF DELAWARE
                                                                                                             SECRETARY OF STATE
                                                                                                         DIVISION OF CORPORATIONS
                                                                                                        DELIVERED 12:11 PM 06/30/2008
                                                                                                           FILED 11:33 AM 06/30/2008
                                                                                                         SRV 080742157 — 2638252 FILE
                    STATE OF DELAWARE
                    SECRETARY OF STATE
                DIVISION OF CORPORATIONS
               DELIVERED 12:48 PM 07/18/2011
                  FILED 12:11 PM 07/18/2011
                SRV 110830325 — 2638252 FILE


                                                CERTIFICATE OF AMENDMENT
                                                            TO
                                          RESTATED CERTIFICATE OF INCORPORATION
                                                            OF
                                                  AMBIENT CORPORATION
                             (Pursuant to Section 242 of the General Corporation Law of the State of Delaware)
   AMBIENT CORPORATION, a corporation organized and existing under the General Corporation Law of the State of Delaware, hereby
certifies that:
1. The Board of Directors of Ambient Corporation (hereinafter called the “Corporation”), acting at a meeting on February 3, 2011, adopted
resolutions setting forth the proposed amendment to the Restated Certificate of Incorporation of the Corporation (the “Certificate of
Incorporation”) set forth below, (a) declaring said amendment to be advisable and in the best interests of the Corporation and (b)
recommending to the Corporation‟s stockholders that they approve said amendment.
2. The terms and provisions of this Certificate of Amendment have been duly adopted in accordance with the provisions of Section 242 of
the General Corporation Law of the State of Delaware.
3. Effective as of 11:59 p.m., Eastern Time, on July 18, 2011, the Certificate of Incorporation is amended by deleting Article FOURTH of
the Certificate of Incorporation in its entirety and replacing it with the following:
     FOURTH: Effective at 11:59 p.m., Eastern Time, on July 18, 2011 (the “Effective Time”), every one hundred (100) shares of the
     Corporation‟s Common Stock, par value $.001 per share (the “Old Common Stock”), issued and outstanding immediately prior to the
     Effective Time will be automatically and without any action on the part of the respective holders thereof be combined and converted into
     one (1) share of Common Stock, par value $.001, of the Corporation (the “New Common Stock”) (and such combination and conversion,
     the “Reverse Stock Split”).
     Notwithstanding the immediately preceding sentence, no fractional shares of New Common Stock shall be issued to the holders of record
     of Old Common Stock in connection with the foregoing reclassification of shares of Old Common Stock and the Corporation shall not
     recognize on its stock record books any purported transfer of any fractional share of New Common Stock. In lieu thereof, the Corporation
     will pay to the registered stockholder, in cash, the value of any fractional share interest arising from the Reverse Stock Split. The cash
     payment will equal the fraction to which the stockholder would otherwise be entitled multiplied by the closing sales price of the Common
     Stock as reported on the Over the Counter Bulletin Board Market, as of the Effective Time. No transaction costs will be assessed to
     stockholders for the cash payment. Stockholders will not be entitled to receive interest for the period of time between the Effective Time
     and the date payment is made for their fractional shares.
     Immediately after the Effective Time, the Corporation is authorized to issue two classes of stock to be designated respectively as
     “Common Stock” and “Preferred Stock.” The total number of shares which the Corporation is authorized to issue consists of One
     Hundred Million (100,000,000) shares of Common Stock and five million (5,000,000)
     shares of Preferred Stock. Each share of Common Stock and Preferred Stock shall have a par value of $0.001.
4. Holders of at least a majority of the outstanding shares of Common Stock, acting by written consent on February 15, 2011, duly approved
the amendment to the Certificate of Incorporation contained herein.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by the undersigned this 15th day of July,
2011.

                                                            AMBIENT CORPORATION

                                                            By:      /s/ John J. Joyce
                                                                     John J. Joyce
                                                                     President and Chief Executive Officer


                                                                     2
                            Exhibit 3.2

       BYLAWS


           OF


AMBIENT CORPORATION
 (a Delaware corporation)
                                                      TABLE OF CONTENTS

                                                                          Page


ARTICL    Offices                                                          1
E1
    1.1   Principal Office                                                 1
    1.2   Additional Offices                                               1

ARTICL    Meeting of Stockholders                                          1
E2
    2.1   Place of Meeting                                                 1
    2.2   Annual Meeting                                                   1
    2.3   Special Meetings                                                 1
    2.4   Notice of Meetings                                               2
    2.5   Business Matter of a Special Meeting                             2
    2.6   List of Stockholders                                             2
    2.7   Organization and Conduct of Business                             2
    2.8   Quorum and Adjournments                                          3
    2.9   Voting Rights                                                    3
    2.1   Majority Vote                                                    3
  0
    2.1   Record Date for Stockholder Notice and Voting                    3
  1
    2.1   Proxies                                                          4
  2
    2.1   Inspectors of Election                                           4
  3
    2.1   Action Without Meeting by Written Consent                        4
  4

ARTICL    Directors                                                        5
E3
    3.1   Number; Qualifications                                           5
    3.2   Resignation and Vacancies                                        5
    3.3   Removal of Directors                                             5
    3.4   Powers                                                           5
    3.5   Place of Meetings                                                7
    3.6   Annual Meetings                                                  7
    3.7   Regular Meetings                                                 7
    3.8   Special Meetings                                                 7
    3.9   Quorum and Adjournments                                          7
    3.1   Action without Meeting                                           7
  0
    3.1   Telephone Meetings                                               7
  1
    3.1   Waiver of Notice                                                 7
  2
    3.1   Fees and Compensation of Directors                               8
  3
    3.1   Rights of Inspection                                             8
  4

ARTICL    Committees of Directors                                          8
E4
    4.1   Selection                                                        8
    4.2   Power                                                            8
    4.3   Committee Minutes                                                9
ARTICL    Officers                                    9
E5
    5.1   Officers Designated                          9
    5.2   Appointment of Officers                      9
    5.3   Subordinate Officers                         9
    5.4   Removal and Resignation of Officers          9
    5.5   Vacancies in Offices                        10
    5.6   Compensation                                10
    5.7   The Chairman of the Board                   10
    5.8   The President                               10

                                                -i-
                                                                        Page
      5.9   The Vice President                                          10
      5.1   The Secretary                                               11
  0
      5.1   The Assistant Secretary                                     11
  1
      5.1   The Treasurer                                               11
  2
      5.1   The Assistant Treasurer                                     11
  3

ARTICL      Stock Certificates                                          12
E6
    6.1     Certificates for Shares                                     12
    6.2     Signatures on Certificates                                  12
    6.3     Transfer of Stock                                           12
    6.4     Registered Stockholders                                     12
    6.5     Record Date                                                 13
    6.6     Lost, Stolen or Destroyed Certificates                      13

ARTICL      Notices                                                     13
E7
    7.1     Notice                                                      13
    7.2     Waiver                                                      14

ARTICL      General Provisions                                          14
E8
    8.1     Dividends                                                   14
    8.2     Dividend Reserve                                            14
    8.3     Annual Statement                                            14
    8.4     Checks                                                      14
    8.5     Corporate Seal                                              14
    8.6     Execution of Corporate Contracts and Instruments            14

ARTICL      Amendments                                                  15
E9

                                                               - ii -
                                                                     BYLAWS
                                                                         OF
                                                           AMBIENT CORPORATION

                                                             (a Delaware corporation)

                                                                    ARTICLE 1
                                                                      Offices
   1.1 Principal Office . The Board of Directors shall fix the location of the principal executive office of the corporation at any place within or
outside the State of Delaware.
   1.2 Additional Offices . The Board of Directors (the “Board”) may at any time establish branch or subordinate offices at any place or places.

                                                                    ARTICLE 2
                                                             Meeting of Stockholders
   2.1 Place of Meeting . All meetings of the stockholders for the election of directors shall be held at the principal office of the Corporation, at
such place as may be fixed from time to time by the Board or at such other place either within or without the State of Delaware as shall be
designated from time to time by the Board and stated in the notice of the meeting. Meetings of stockholders for any purpose may be held at
such time and place within or without the State of Delaware as the Board may fix from time to time and as shall be stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
  2.2 Annual Meeting . Annual meetings of stockholders shall be held at such date and time as shall be designated from time to time by the
Board and stated in the notice of the meeting. At such annual meetings, the stockholders shall elect a Board and transact such other business as
may properly be brought before the meetings.
    2.3 Special Meetings . Special meetings of the stockholders may be called for any purpose or purposes, unless otherwise prescribed by the
statute or by the Certificate of Incorporation, at the request of the Board, the Chairman of the Board, the President or the holders of shares
entitled to cast not less than ten percent (10%) of the votes at the meeting or such additional persons as may be provided in the certificate of
incorporation or bylaws. Such request shall state the purpose or purposes of the proposed meeting. Upon request in writing that

                                                                         -1-
a special meeting of stockholders be called for any proper purpose, directed to the chairman of the board of directors, the president, the vice
president or the secretary by any person (other than the board of directors) entitled to call a special meeting of stockholders, the person
forthwith shall cause notice to be given to the stockholders entitled to vote that a meeting will be held at a time requested by the person or
persons calling the meeting, such time not to be less than thirty-five (35) nor more than sixty (60) days after receipt of the request. Such request
shall state the purpose or purposes of the proposed meeting.
   2.4 Notice of Meetings . Written notice of stockholders‟ meetings, stating the place, date and time of the meeting and the purpose or
purposes for which the meeting is called, shall be given to each stockholder entitled to vote at such meeting not less than ten (10) nor more than
sixty (60) days prior to the meeting.
   When a meeting is adjourned to another place, date or time, written notice need not be given of the adjourned meeting if the place, date and
time thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the date of any adjourned meeting is
more than thirty (30) days after the date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned
meeting, written notice of the place, date and time of the adjourned meeting shall be given in conformity herewith. At any adjourned meeting,
any business may be transacted which might have been transacted at the original meeting.
    2.5 Business Matter of a Special Meeting . Business transacted at any special meeting of stockholders shall be limited to the purposes stated
in the notice.
    2.6 List of Stockholders . The officer in charge of the stock ledger of the Corporation or the transfer agent shall prepare and make, at least
ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting arranged in alphabetical
order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten
(10) days prior to the meeting, at a place within the city where the meeting is to be held, which place, if other than the place of the meeting,
shall be specified in the notice of the meeting. The list shall also be produced and kept at the place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present in person thereat.
   2.7 Organization and Conduct of Business . The Chairman of the Board or, in his or her absence, the President of the Corporation or, in their
absence, such person as the Board may have

                                                                         -2-
designated or, in the absence of such a person, such person as may be chosen by the holders of a majority of the shares entitled to vote who are
present, in person or by proxy, shall call to order any meeting of the stockholders and act as Chairman of the meeting. In the absence of the
Secretary of the Corporation, the Secretary of the meeting shall be such person as the Chairman appoints.
   The Chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such
regulation of the manner of voting and the conduct of discussion as seems to him or her in order.
   2.8 Quorum and Adjournments . Except where otherwise provided by law or the Certificate of Incorporation or these By-Laws, the holders
of a majority of the stock issued and outstanding and entitled to vote, present in person or represented in proxy, shall constitute a quorum at all
meetings of the stockholders. The stockholders present at a duly called or held meeting at which a quorum is present may continue to do
business until adjournment, notwithstanding the withdrawal of enough stockholders to have less than a quorum if any action taken (other than
adjournment) is approved by at least a majority of the shares required to constitute a quorum. At such adjourned meeting at which a quorum is
present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. If, however, a
quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat who are present in
person or represented by proxy shall have the power to adjourn the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented.
   2.9 Voting Rights . Unless otherwise provided in the Certificate of Incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder.
   2.10 Majority Vote . When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power
present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by
express provision of the statutes or of the Certificate of Incorporation or of these By-Laws, a different vote is required in which case such
express provision shall govern and control the decision of such question.
   2.11 Record Date for Stockholder Notice and Voting . For purposes of determining the stockholders entitled to notice of any meeting or to
vote, or entitled to receive payment of any dividend or other distribution, or entitled to exercise any

                                                                         -3-
right in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a
record date, which shall not be more than sixty (60) days nor less than ten (10) days before the date of any such meeting nor more than sixty
(60) days before any other action.
   If the Board does not so fix a record date, the record date for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the
close of business on the business day next preceding the day on which the meeting is held.
    2.12 Proxies . Every person entitled to vote for directors or on any other matter shall have the right to do so either in person or by one or
more agents authorized by a written proxy signed by the person and filed with the Secretary of the Corporation. A proxy shall be deemed
signed if the stockholder‟s name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by
the stockholder or the stockholder‟s attorney-in-fact. A validly executed proxy which does not state that it is irrevocable shall continue in full
force and effect unless (i) revoked by the person executing it, before the vote pursuant to that proxy, by a writing delivered to the Corporation
stating that the proxy is revoked or by a subsequent proxy executed by, or attendance at the meeting and voting in person by, the person
executing the proxy; or (ii) written notice of the death or incapacity of the maker of that proxy is received by the Corporation before the vote
pursuant to that proxy is counted; provided, however, that no proxy shall be valid after the expiration of eleven months from the date of the
proxy, unless otherwise provided in the proxy.
    2.13 Inspectors of Election . Before any meeting of stockholders the Board may appoint any person other than nominees for office to act as
inspectors of election at the meeting or its adjournment. If no inspectors of election are so appointed, the Chairman of the meeting may, and on
the request of any stockholder or a stockholder‟s proxy shall, appoint inspectors of election at the meeting. The number of inspectors shall be
either one (1) or three (3). If inspectors are appointed at a meeting on the request of one or more stockholders or proxies, the holders of a
majority of shares or their proxies present at the meeting shall determine whether one (1) or three (3) inspectors are to be appointed. If any
person appointed as inspector fails to appear or fails or refuses to act, the Chairman of the meeting may, and upon the request of any
stockholder or a stockholder‟s proxy shall, appoint a person to fill that vacancy.
  2.14 Action Without Meeting by Written Consent . All actions required to be taken at any annual or special meeting may be taken without a
meeting, without prior notice and without

                                                                         -4-
a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted and shall be delivered to the corporation by delivery to its registered office, its principal place of business, or an
officer or agent of the corporation having custody of the book in which proceedings of meetings or stockholders are recorded.


                                                                    ARTICLE 3
                                                                     Directors
   3.1 Number; Qualifications . The number of the directors shall be determined from time to time by resolution of the Board and the initial
Board shall consist of three (3) directors. All directors shall be elected at the annual meeting or any special meeting of the stockholders, except
as provided in Section 3.2, and each director so elected shall hold office until the next annual meeting or any special meeting or until his
successor is elected and qualified or until his earlier resignation or removal. Directors need not be stockholders.
   3.2 Resignation and Vacancies . A vacancy or vacancies in the Board shall be deemed to exist in the case of the death, resignation or
removal of any director, or if the authorized number of directors be increased. Vacancies may be filled by a majority of the remaining directors,
though less than a quorum, or by a sole remaining director, unless otherwise provided in the Certificate of Incorporation. The stockholders may
elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors. If the Board accepts the resignation of a
director tendered to take effect at a future time, the Board shall have power to elect a successor to take office when the resignation is to become
effective. If there are no directors in office, then an election of directors may be held in the manner provided by statute.
   3.3 Removal of Directors . Unless otherwise restricted by statute, the Certificate of Incorporation or these By-Laws, any director or the
entire Board may be removed, with or without cause, by the holders of at least a majority of the shares entitled to vote at an election of
directors.
   3.4 Powers . The business of the Corporation shall be managed by or under the direction of the Board which may exercise all such powers of
the Corporation and do all such lawful acts and things which are not by statute or by the Certificate of Incorporation or by these By-Laws
directed or required to be exercised or done by the stockholders.
   Without prejudice to these general powers, and subject to the same limitations, the directors shall have the power to:

                                                                         -5-
   (a) Select and remove all officers, agents, and employees of the Corporation; prescribe any powers and duties for them that are
consistent with law, with the Certificate of Incorporation, and with these By-Laws; fix their compensation; and require from them security
for faithful service;
   (b)   Confer upon any office the power to appoint, remove and suspend subordinate officers, employees and agents;
    (c) Change the principal executive office or the principal business office in the State of California or any other state from one location
to another; cause the Corporation to be qualified to do business in any other state, territory, dependency or country and conduct business
within or without the State of California; and designate any place within or without the State of California for the holding of any
stockholders meeting, or meetings, including annual meetings;
   (d)   Adopt, make, and use a corporate seal; prescribe the forms of certificates of stock; and alter the form of the seal and certificates;
   (e) Authorize the issuance of shares of stock of the Corporation on any lawful terms, in consideration of money paid, labor done,
services actually rendered, debts or securities canceled, tangible or intangible property actually received;
   (f) Borrow money and incur indebtedness on behalf of the Corporation, and cause to be executed and delivered for the Corporation‟s
purposes, in the corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges, hypothecations and other
evidences of debt and securities;
   (g)   Declare dividends from time to time in accordance with law;
   (h) Adopt from time to time such stock option, stock purchase, bonus or other compensation plans for directors, officers, employees
and agents of the Corporation and its subsidiaries as it may determine; and
   (i) Adopt from time to time regulations not inconsistent with these By-Laws for the management of the Corporation‟s business and
affairs.

                                                                      -6-
   3.5 Place of Meetings . The Board may hold meetings, both regular and special, either within or without the State of Delaware.
   3.6 Annual Meetings . The annual meetings of the Board shall be held immediately following the annual meeting of stockholders, and no
notice of such meeting shall be necessary to the Board, provided a quorum shall be present. The annual meetings shall be for the purposes of
organization, and an election of officers and the transaction of other business.
   3.7 Regular Meetings . Regular meetings of the Board may be held without notice at such time and place as may be determined from time to
time by the Board.
  3.8 Special Meetings . Special meetings of the Board may be called by the Chairman of the Board, the President, a Vice President or a
majority of the Board upon one (1) day‟s notice to each director.
   3.9 Quorum and Adjournments . At all meetings of the Board, a majority of the directors then in office shall constitute a quorum for the
transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board,
except as may otherwise be specifically provided by law or the Certificate of Incorporation. If a quorum is not present at any meeting of the
Board, the directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting at which the
adjournment is taken, until a quorum shall be present. A meeting at which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors, if any action taken is approved of by at least a majority of the required quorum for that meeting.
   3.10 Action Without Meeting . Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or
permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or
committee.
   3.11 Telephone Meetings . Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any member of the Board or
any committee may participate in a meeting by means of conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.
  3.12 Waiver of Notice . Notice of a meeting need not be given to any director who signs a waiver of notice or a consent to holding the
meeting or an approval of the minutes thereof,

                                                                         -7-
whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to
such director. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting.
   3.13 Fees and Compensation of Directors . Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, the Board shall
have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the
Board and may be paid a fixed sum for attendance at each meeting of the Board or a stated salary as director. No such payment shall preclude
any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
   3.14 Rights of Inspection . Every director shall have the absolute right at any reasonable time to inspect and copy all books, records and
documents of every kind and to inspect the physical properties of the Corporation and also of its subsidiary corporations, domestic or foreign.
Such inspection by a director may be made in person or by agent or attorney and includes the right to copy and obtain extracts.


                                                                  ARTICLE 4
                                                            Committees of Directors

   4.1 Selection . The Board may, by resolution passed by a majority of the entire Board, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of the committee.
    In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified
from voting, whether or not he or she or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting
in the place of any such absent or disqualified member.
    4.2 Power . Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all the powers and
authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of
Incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of
stock adopted by the Board as provided in

                                                                       -8-
Section 151(a) of the General Corporation Law of Delaware, fix any of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any
other class or classes or any other series of the same or any other class or classes of stock of the Corporation), adopting an agreement of merger
or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation‟s property and
assets, recommending to the stockholders a dissolution of the Corporation or a revocation of dissolution, removing or indemnifying directors or
amending the By-Laws of the Corporation; and, unless the resolution or the Certificate of Incorporation expressly so provides, no such
committee shall have the power or authority to declare a dividend or to authorize the issuance of stock or to adopt a certificate of ownership
and merger. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by
the Board.
   4.3 Committee Minutes . Each committee shall keep regular minutes of its meetings and report the same to the Board when required.


                                                                   ARTICLE 5
                                                                     Officers
   5.1 Officers Designated . The officers of the Corporation shall be chosen by the Board and shall be a President, a Secretary and a Treasurer.
The Board may also choose a Chairman of the Board, one or more Vice Presidents, and one or more assistant Secretaries and assistant
Treasurers. Any number of offices may be held by the same person, unless the Certificate of Incorporation or these By-Laws otherwise provide.
   5.2 Appointment of Officers . The officers of the Corporation, except such officers as may be appointed in accordance with the provisions of
Section 5.3 or 5.5 of this Article 5, shall be appointed by the Board, and each shall serve at the pleasure of the Board, subject to the rights, if
any, of an officer under any contract of employment.
    5.3 Subordinate Officers . The Board may appoint, and may empower the President to appoint, such other officers and agents as the business
of the Corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in
the By-Laws or as the Board may from time to time determine.
   5.4 Removal and Resignation of Officers . Subject to the rights, if any, of an officer under any contract of employment, any officer may be
removed, either with or without cause, by an affirmative vote of the majority of the Board, at any regular or

                                                                        -9-
special meeting of the Board, or, except in case of an officer chosen by the Board, by any officer upon whom such power of removal may be
conferred by the Board.
   Any officer may resign at any time by giving written notice to the Corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not
be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the
officer is a party.
    5.5 Vacancies in Offices . A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled
in the manner prescribed in these By-Laws for regular appointment to that office.
   5.6 Compensation . The salaries of all officers of the Corporation shall be fixed from time to time by the Board and no officer shall be
prevented from receiving a salary because he is also a director of the Corporation.
   5.7 The Chairman of the Board . The Chairman of the Board, if such an officer be elected, shall, if present, perform such other powers and
duties as may be assigned to him from time to time by the Board. If there is no President, the Chairman of the Board shall also be the Chief
Executive Officer of the Corporation and shall have the powers and duties prescribed in Section 5.8 of this Article 5.
   5.8 The President . Subject to such supervisory powers, if any, as may be given by the Board to the Chairman of the Board, if there be such
an officer, the President shall be the Chief Executive Officer of the Corporation, shall preside at all meetings of the stockholders and in the
absence of the Chairman of the Board, or if there be none, at all meetings of the Board, shall have general and active management of the
business of the Corporation and shall see that all orders and resolutions of the Board are carried into effect. He or she shall execute bonds,
mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise
signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board to some other officer or
agent of the Corporation.
   5.9 The Vice President . The Vice President (or in the event there be more than one, the Vice Presidents in the order designated by the
directors, or in the absence of any designation, in the order of their election), shall, in the absence of the President or in the event of his
disability or refusal to act, perform the duties of the President, and when so acting, shall have the powers of and subject to all the restrictions
upon the President. The Vice President(s) shall perform such

                                                                         -10-
other duties and have such other powers as may from time to time be prescribed for them by the Board, the President, the Chairman of the
Board or these By-Laws.
    5.10 The Secretary . The Secretary shall attend all meetings of the Board and the stockholders and record all votes and the proceedings of
the meetings in a book to be kept for that purpose and shall perform like duties for the standing committees, when required. The Secretary shall
give, or cause to be given, notice of all meetings of stockholders and special meetings of the Board, and shall perform such other duties as may
from time to time be prescribed by the Board, the Chairman of the Board or the President, under whose supervision he or she shall act. The
Secretary shall have custody of the seal of the Corporation, and the Secretary, or an Assistant Secretary, shall have authority to affix the same
to any instrument requiring it, and, when so affixed, the seal may be attested by his or her signature or by the signature of such Assistant
Secretary. The Board may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing thereof by his
or her signature. The Secretary shall keep, or cause to be kept, at the principal executive office or at the office of the Corporation‟s transfer
agent or registrar, as determined by resolution of the Board, a share register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same and the number and
date of cancellation of every certificate surrendered for cancellation.
   5.11 The Assistant Secretary . The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order designated by the
Board (or in the absence of any designation, in the order of their election) shall, in the absence of the Secretary or in the event of his or her
inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other
powers as may from time to time be prescribed by the Board.
   5.12 The Treasurer . The Treasurer shall have the custody of the Corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board. The Treasurer shall disburse the funds of the Corporation as
may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the President and the Board, at its regular
meetings, or when the Board so requires, an account of all his or her transactions as Treasurer and of the financial condition of the Corporation.
   5.13 The Assistant Treasurer . The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the

                                                                        -11-
order designated by the Board (or in the absence of any designation, in the order of their election) shall, in the absence of the Treasurer or in the
event of his or her inability or refusal to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties
and have such other powers as may from time to time be prescribed by the Board.


                                                                    ARTICLE 6
                                                                 Stock Certificates
   6.1 Certificates for Shares . The shares of the Corporation shall be represented by certificates or shall be uncertificated. Certificates shall be
signed by, or in the name of the Corporation by, the Chairman of the Board, or the President or a Vice President and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation.
   Within a reasonable time after the issuance or transfer of uncertified stock, the Corporation shall send to the registered owner thereof a
written notice containing the information required by the General Corporation Law of the State of Delaware or a statement that the Corporation
will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or
other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
   6.2 Signatures on Certificates . Any or all of the signatures on a certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at
the date of issue.
   6.3 Transfer of Stock . Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate of shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the Corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Upon receipt of proper transfer
instructions from the registered owner of uncertificated shares, such uncertificated shares shall be canceled and issuance of new equivalent
uncertificated shares or certificated shares shall be made to the person entitled thereto and the transaction shall be recorded upon the books of
the Corporation.
   6.4 Registered Stockholders . The Corporation shall be entitled to recognize the exclusive right of a person registered

                                                                         -12-
on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a percent
registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of
Delaware.
   6.5 Record Date . In order that the Corporation may determine the stockholders of record who are entitled to receive notice of, or to vote at,
any meeting of stockholders or any adjournment thereof or to express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any change, conversion,
or exchange of stock or for the purpose of any lawful action, the Board may fix, in advance, a record date which shall not be more than sixty
(60) nor less than ten (10) days prior to the date of such meeting, nor more than sixty (60) days prior to the date of any other action. A
determination of stockholders of record entitled to notice or to vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board may fix a new record date for the adjourned meeting.
   6.6 Lost, Stolen or Destroyed Certificates . The Board may direct that a new certificate or certificates be issued to replace any certificate or
certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing the issue of a new certificate or certificates, the
Board may, in its discretion and as a condition precedent to the issuance thereof, require the owner of the lost, stolen or destroyed certificate or
certificates, or his or her legal representative, to advertise the same in such manner as it shall require, and/or to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to
have been lost, stolen or destroyed.


                                                                    ARTICLE 7
                                                                      Notices
   7.1 Notice . Whenever, under the provisions of the statutes or of the Certificate of Incorporation or of these By-Laws, notice is required to
be given to any director or stockholder it shall not be construed to mean personal notice, but such notice may be given in writing, by mail,
addressed to such director or stockholder, at his or her address as it appears on the records of the Corporation, with postage thereon prepaid,
and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also
be given by telegram or telephone.

                                                                        -13-
   7.2 Waiver . Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation or of
these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.


                                                                   ARTICLE 8
                                                               General Provisions
   8.1 Dividends . Dividends upon the capital stock of the Corporation, subject to any restrictions contained in the General Corporation Laws
of Delaware or the provisions of the Certificate of Incorporation, if any, may be declared by the Board at any regular or special meeting.
Dividends may be paid in cash, in property or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation.
   8.2 Dividend Reserve . Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends
such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or
for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think
conducive to the interest of the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created.
   8.3 Annual Statement . The Board shall present at each annual meeting, and at any special meeting of the stockholders when called for by
vote of the stockholders, a full and clear statement of the business and condition of the Corporation.
   8.4 Checks . All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person
or persons as the Board may from time to time designate.
   8.5 Corporate Seal . The Board may provide a suitable seal, containing the name of the Corporation, which seal shall be in charge of the
Secretary. If and when so directed by the Board or a committee thereof, duplicates of the seal may be kept and used by the Treasurer or by an
Assistant Secretary or Assistant Treasurer.
   8.6 Execution of Corporate Contracts and Instruments . The Board, except as otherwise provided in these By-Laws, may authorize any
officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation; such
authority may be general or confined to specific instances. Unless so authorized or ratified by the Board or within the agency power of an
officer, no

                                                                        -14-
officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to
render it liable for any purpose or for any amount.


                                                                   ARTICLE 9
                                                                  Amendments
   In addition to the right of the stockholders of the corporation to make, alter, amend, change, add to or repeal the bylaws of the corporation,
the Board of Directors shall have the power (without the assent or vote of the stockholders) to make, alter, amend, change, add to or repeal the
bylaws of the corporation.

                                                                       -15-
                                                                                                                                                                                                                            Exhibit 4.1




iS^lil *t&l) INCORPORATED UNDER THE LAWS SEE REVERSE FOR (|C^ i»%J Wt$m b^ OF THE STATE OF DELAWARE |iii|i|^S^SiiMtt jyMlii ^H »V^ CUSIP 02318N 20 1 S^|^ fully paid and non-assessable shares of Common Stock, par value
$.001 per share, of > ^ ||Pf‟\1p ll Dated: ,-/ | !p ^^S m y\ CHAIRMAN OF THE BOARD, PRESIDENT < — ^< \ ._.:- m > W4l&$ W // AND CHIEF EXECUTIVE OFFICER ^ \ 1996 / ^ DIRECTOR AND SECRETARY u      P     f r/%&\ ^\ ©
ECURITY COLUMBIAN                    UNITED STATES BAfrKHOTE COMPANY              I960 *^. „" • . ^ AW ^ • ‟"' “^* t^"^^^ ''
The Corporation will furnish without charge to each stockholder who so requests a statement of the designations, powers preferences and relative participating, optional or other special rights of each class of stock or series thereof of the Corporation and the
qualifications, limitations or restrictions of such preferences and/or rights. Such request may be made to the Corporation or the Transfer Agent. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as
though they were written out in full according to applicable laws or regulations: TEN COM — as tenants in common UNIF GIFT MIN ACT- Custodian TENENT — as tenants by the entireties „ : (Cust) (Minor) JT TEN • — as joint tenants with right under
Uniform Gifts to Minors of survivorship and not as tenants Act in common (State) Additional abbreviations may also be used though not in the above list. Q^W siwdue “^ecei^jedj the umclemlanedhewe/yu, tteU&j aMuzmA ana t^w^i^eM‟ ivrdo PLEASE
INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE) o/ the caAUal 6*tacJc vteAvetiewXed 6^ tAe wiwwm,
^ewtiiteatej cma> da hwwyu tm^mxxxuwu (xyms&twfe anda/iAoim^t to foawAiew the 6tdd5<too/-o on me vooJcb o&ihe uxMwri na^ned^oy^u^^aMo^v with uulfoowew oi 6MA^ti/Mcm/ vn< the fa/*ienMAe&. WaU M ATSP C „ THE SIGNATURE TO
THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF IM %J I I %s C . THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER. Signature(s) Guaranteed: THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
                                                                                                                           Exhibit 10.25

[**] indicates that information had been redacted and filed separately pursuant to a confidential treatment request filed with the
Securities and Exchange Commission


                                        MASTER SUPPLY AND ALLIANCE AGREEMENT
                                                              BETWEEN
                                                           BEL FUSE INC.
                                                                 AND
                                                     AMBIENT CORPORATION
                                             CONTENTS


1. DEFINITIONS                                           1
2. SCOPE OF AGREEMENT                                    2
3. FORECAST AND ORDER PROCEDURE                          3
4. MATERIALS                                             3
5. DELIVERY AND RISK                                     4
6. ACCEPTANCE OF PRODUCTS                                4
7. RESCHEDULING OF DELIVERIES                            5
8. CANCELLATION                                          5
9. PRICES                                                6
10. [**]                                                 6
11. TITLE                                                7
12. INTELLECTUAL PROPERTY                                7
13. QUALITY ASSURANCE                                    8
14. CHANGE CONTROL                                       8
15. OBSOLETE AND/OR SURPLUS MATERIAL                     8
16. BEL WARRANTY                                         9
17. CUSTOMER WARRANTY                                   11
18. INDEMNIFICATION                                     11
19. CUSTOMER PROPERTY                                   12
20. CONFIDENTIALITY                                     13
21. EXCLUSIONS AND LIMITATION OF LIABILITY              13
22. TERM AND TERMINATION                                14
23. GENERAL                                             14
THIS MASTER SUPPLY AND ALLIANCE AGREEMENT (this “Agreement”) is made effective the 17 th day of February, 2009 (the “
Effective Date” )

BETWEEN
Bel Fuse Inc. (“ Bel ”) , a New Jersey corporation with an office at 206 Van Vorst Street, Jersey City, NJ 07302 USA

AND
Ambient Corporation ( the “ Customer ”) , a Delaware corporation with an office at 79 Chapel Street, Newton, MA 02458.

WHEREAS
   The Customer is a utility communications solutions provider that develops and markets Smart Grid communications technologies and
services which are designed to facilitate a comprehensive (end-to-end solution) for high speed transmission and reception of Internet Protocol
data traffic for utility applications.
   Bel produces high quality electronic components for the global market and is engaged in the design, manufacture and sale of products used
in networking, telecommunications, high speed data transmission and consumer electronics.
     The Customer and Bel entered into a Mutual Confidentiality and Non-Disclosure Agreement dated as of May 7, 2008 (the “ NDA ”).
  Bel and the Customer desire to enter into a master supply and alliance relationship to support the Customer‟s 2009 business initiatives for its
Smart Grid deployments, with Bel willing to partially fund the 2009 initiative through payments from the Customer on [**] day payment terms.
      Bel is to initially act as a contract manufacturer for the Customer‟s products, including its X3000 node.
   Bel and the Customer intend to expand their relationship with the express purpose of reducing the manufacturing cost of the Customer‟s
products.
       NOW, THEREFORE , in consideration of the terms and conditions set forth herein, the parties hereto agree as follows:
1.     DEFINITONS
     The following words and expressions shall have the following meanings:
1.1      “Affiliate” means, with respect to a party hereto, a corporation that directly or indirectly controls, is controlled by or is under common
         control with that party.
1.2    “Customer Information” shall mean the specification for the relevant Product and all drawings, documentation, data, software,
       information and know-how provided by the Customer to Bel.
1.3    “Customer Tooling” shall mean the tooling, fixtures, appurtenances, test hardware and software and any other items to be provided by
       the Customer to Bel or procured or produced by Bel and paid for by the Customer.
1.4    “Intellectual Property” shall mean any and all of a person‟s trademarks, service marks, tradenames, patents, applications for patents,
       divisional or continuation, in whole or in part, patent applications, issued and unexpired reissues, reexaminations, renewals or extensions
       of any of the foregoing, copyrights, mask works, trade secrets and other intellectual property rights recognized by any jurisdiction.
1.5    “Materials” shall mean any components and other materials comprising or comprised in Products.
1.6    “Order” shall mean any order for Products and/or Services placed by the Customer in accordance with the terms of this Agreement,
       which shall be in the form of Exhibit A attached hereto.
1.7    “Prices” shall mean the prices for the Products and/or Services and/or non recurring expenditure (including without limitation, tooling
       and fixtures and other agreed items) agreed between the parties from time to time. The initial Prices are set forth on Exhibit B attached
       hereto.
1.8    “Products” shall mean the items supplied by Bel to the Customer pursuant to the terms of this Agreement and the relevant Order(s).

1.9    “RMA” shall mean returns material authorization to be provided by Bel to the Customer.
1.10    “Services” shall mean the services provided by Bel to the Customer under this Agreement. The initial Services are set forth on
        Exhibit B attached hereto.
2.     SCOPE OF AGREEMENT
2.1    This Agreement will apply to all Orders for Products and Services placed by the Customer under this Agreement.
2.2    Bel will manufacture and deliver Products and supply Services pursuant to this Agreement, subject to the Customer first having provided
       Bel with the specification for the Product, together with any Customer Tooling, Customer Information and all necessary drawings,
       documentation, data, software, and other information of the Customer.
2.3    The Customer will pay the Prices for accepted Products and Services delivered pursuant to this Agreement.

                                                                         2
3.    FORECAST AND ORDER PROCEDURE
3.1 Each month, the Customer will provide Bel with:
      (a)   a forecast (the “ Forecast ”) of its intended purchases of Products for that month and the following nine to twelve months. The
            Customer will use its best efforts to ensure that the Forecast is accurate, but the Forecast will not constitute an Order;

      (b)   Order(s) for Products for that month and the following two months to maintain a minimum of three months of required Product
            Orders at all times.
3.2    Bel will acknowledge Orders as soon as reasonably practicable but in not more than [**] days after receipt of an Order. The parties agree
       that Bel is expected to accept Orders that comply with the terms of this Agreement and may not reject conforming Orders, except that
       Bel may reject Orders after [**].
3.3    Bel will use its best efforts to accept unplanned Orders subject to the Customer‟s agreement to pay any related premium costs and
       charges incurred by Bel. Such costs and charges must be negotiated and agreed in writing with the Customer before being incurred and
       accepted by the Customer.
3.4    Orders will be in the form of Exhibit A and will include the description and Price per unit of Product, the quantities ordered, Product
       revision details, committed delivery dates and such other information as the parties may agree in writing from time to time. Orders shall
       be delivered to Bel by email and facsimile. The parties agree that only an Order in the form of Exhibit A shall be valid and that an order
       in other form or containing any terms and conditions set forth thereon that are not contained in this Agreement or the form of the Order
       set forth in Exhibit A shall have no force or effect.
4.    MATERIALS
4.1    The Customer hereby authorizes Bel, and Bel shall be entitled, to order Materials as necessary to support Orders including without
       limitation, additional Materials as are reasonably required to take into account supplier minimum requirements and economic order
       quantities. For avoidance of doubt, Bel shall not order Materials based on Forecasts.
4.2    Without limiting Article 4.1 above, where lead times for Materials are at any time longer than the period covered by Orders set out in
       Article 3.1(b) above, Bel shall notify the Customer in writing and shall only be authorized to order such Materials if agreed in advance in
       writing by the Customer.
4.3    Where the Customer so directs, Bel will procure Materials from the Customer‟s approved vendor list or preferred supply chain partners
       listed on Exhibit C attached hereto. To change such vendors or suppliers, Bel must obtain the Customer‟s prior written consent, which
       will not be unreasonably withheld.
4.4    Bel agrees to take initial delivery of Customer inventory related to programs transferring to Bel and ongoing delivery of third party
       products used in support of the Customer‟s programs owned by any of the Customer‟s customers. Bel will be responsible to maintain all
       such

                                                                         3
Customer inventory and third party products in Bel‟s possession and shall bear the risk of loss and shrinkage related thereto while such
inventory and products are in Bel‟s possession. Notwithstanding the foregoing, Bel will only purchase from the Customer and carry on Bel‟s
books such Customer inventory equivalent to Orders received from the Customer. Bel agrees to use its commercially best efforts to consume
the Customer inventory from programs transferring to Bel first before ordering Materials from others. Bel agrees to consume the Customer
inventory of Customer‟s customer-required third party products first before ordering Materials from others. Bel and the Customer jointly agree
to [**]. The Customer agrees to transfer Material[**].
4.5    Bel agrees to report to the Customer within one week after fiscal month-end on-hand and on-order Materials by Customer program
       (including the Customer inventory and third party products described in Section 4.4 which will be separately identified from other
       Materials), including part number, lead time, quantity and value.
5.    DELIVERY AND RISK
5.1    Except as agreed otherwise, all Products sold to the Customer are delivered EXW Bel factory. Packing costs included in price.
5.2    The Customer will arrange transportation and specify carrier and transportation instructions. If the Customer has not done so, Bel shall
       arrange for transportation on the Customer‟s behalf at the Customer‟s cost.
5.3    Bel will use its best efforts to meet agreed delivery dates.
5.4    Risk of loss and damage will pass from Bel to the Customer upon delivery by Bel pursuant to Article 5.1 above.
5.5    All Products will be packed by Bel in secure packaging as directed or approved by the Customer.
5.6    Bel is responsible for obtaining:
      (a)   any necessary export licenses relating to Products and Services; and

      (b)   any government or regulatory approvals relating to the marketing, sale or use of Products and maintaining compliance with all
            applicable laws and regulations in any jurisdiction from which Products are shipped.
6.    ACCEPTANCE OF PRODUCTS
6.1    The Customer may reject Products which (a) have been damaged prior to delivery by Bel or (b) do not meet the relevant specification
       provided by the Customer (“ Rejected Products ”).
6.2    The Customer will notify Bel in writing of Rejected Products within sixty (60) calendar days of original delivery and will return Rejected
       Products at its risk to Bel within a

                                                                         4
        further thirty (30) calendar days. The Customer requires an RMA from Bel prior to returning any Product.

6.3     Bel will then at its election either repair, replace or credit the Customer in respect of Rejected Products. The cost associated with any
        such repair, replacement or credit will be the responsibility of Bel. In the case of replacement or credit, title to the Rejected Product shall
        pass to Bel on delivery to Bel on a not-for-resale basis.
6.4     In the absence of earlier notification of rejection, the Customer will be deemed to have accepted Products sixty (60) calendar days after
        delivery.
7.    RESCHEDULING OF DELIVERIES
7.1     The Customer may reschedule deliveries in advance of agreed delivery dates as follows:

Number of days of notice Customer gives prior to original delivery date      Customer may increase or decrease the units of Products to be delivered by up to:

0-30                                                                         [**]%
31-60                                                                        [**]%
61+                                                                          [**]%
        Article 15 shall govern any Materials held by Bel to complete Orders that are not, as a result of rescheduling permitted by this
        Section 7.1, expected to be consumed in 16 weeks following the date of the Customer‟s notice of rescheduling.

7.2     Notwithstanding the provisions of 7.1 above, upon the Customer‟s request, Bel will use its best efforts to accelerate delivery dates
        subject to the Customer agreeing in writing to meet any increased costs as a result of such acceleration.
8.    CANCELLATION
8.1     If the Customer cancels any Order, or part thereof, provided that Material has been procured and managed in accordance with Article 4
        of this Agreement, the Customer will pay to Bel:
      (a)    the full Product Price for finished Products;

      (b)    all costs of obsolete and/or surplus Materials, including WIP, and related handling charges determined in accordance with Article 15
             of this Agreement together with all amounts due pursuant to Article 4.1; and

      (c)    [**]

      [**]
8.2     Subject to the Customer‟s rights under Article 6, if the Customer refuses or fails to accept any delivery made by Bel pursuant to any
        Order, such Order (or the relevant part thereof) may, at Bel‟s option, be deemed to have been cancelled by the Customer.

                                                                            5
9.     PRICES
9.1    Prices will be subject to review by the parties on a [**] basis (and at such other times as may be agreed) at a Price review meeting to be
       arranged by the authorized representative of the parties.
9.2    Changes to Prices, and the manner and timing of their implementations, will be agreed by the parties on a fair and reasonable basis at
       such review meeting.

9.3    In any event
       (a) the Customer will be responsible for any increased costs of procuring Materials and will review with Bel on a [**] basis the
       opportunity for decreasing cost of procuring materials resulting in cost savings to the Ambient product(s). Said costs savings, if realized,
       will result in a sharing of benefits between the parties as mutually agreed; and

       [**]
9.4    Taxes

       The amount of any present sales, use, excise or other similar tax applicable to the Products not measured by the income of Bel shall be
       paid by the Customer or, in lieu thereof, the Customer shall deliver to Bel a tax exemption certificate acceptable to the taxing authority.
       Any taxes to be paid by the Customer shall be separately stated on Bel‟s invoice.

9.5    Invoicing and Payment

       Bel shall invoice the Customer for each shipment of Products on or after the date that the shipment is delivered to the Customer. Each
       invoice shall contain the following information: the Customer‟s order number, the Customer‟s part number, a description of the Products
       delivered, the revision level of the Products, quantities and unit prices. The total Purchase Price for each shipment shall be due and
       payable within [**] days of shipment, or as provided in Section 10 below.
10.    [**]
11.    TITLE
11.1 Title and interest to Products will pass to the Customer upon delivery.
11.2    Payment of Prices for Services does not confer any rights in or title to the subject matter of the Service which shall remain the absolute
        property of Bel.
12.    INTELLECTUAL PROPERTY
12.1    All existing Intellectual Property owned by or licensed to the Customer by other third parties will continue to be owned by the
        Customer and, accordingly, the Customer hereby grants Bel a non-exclusive, royalty-free license during the term of this Agreement

                                                                          6
       to use such of it as may be necessary for Bel to perform its obligations under this Agreement. With respect to any Intellectual Property
       licensed to the Customer by other third parties, the Customer warrants that such license is in good standing and includes all necessary
       rights of sub-licensing. Notwithstanding the foregoing, nothing contained herein or in any Order shall be construed as transferring to
       Bel (whether directly or by implication, estoppel or otherwise) any ownership under any Intellectual Property of the Customer or any of
       its Affiliates, and Bel shall have no ownership rights in, and the Customer or its Affiliates, as the case may be, shall retain exclusive
       ownership of, all Intellectual Property of the Customer and its Affiliates.

12.2   All existing Intellectual Property owned by or licensed to Bel by third parties (other than the Customer hereunder) will continue to be
       owned by Bel. Nothing contained herein or in any Order shall be construed as transferring to the Customer (whether directly or by
       implication, estoppel or otherwise) any ownership under any Intellectual Property of Bel or any of its Affiliates, and the Customer shall
       have no ownership rights in, and Bel or its Affiliates, as the case may be, shall retain exclusive ownership of, all Intellectual Property of
       Bel and its Affiliates.
12.3   Any Intellectual Property derived from the Customer‟s Intellectual Property arising in the course of Bel‟s performance of the
       Agreement will be owned by the Customer. Any Intellectual Property derived from Bel‟s Intellectual Property arising in the course of
       Bel‟s performance of the Agreement will be owned by Bel. Bel will promptly assign to the Customer Bel‟s entire right, title and interest
       in and to all such developments, improvements and inventions relating to the Customer‟s Intellectual Property, and in and to all
       applications for patents therefor, and patents therefor, and patents issuing thereon, of the United States and of all foreign countries, and
       for this purpose Bel will, at the Customer‟s expense, whenever requested to do so, execute any and all applications for patents,
       assignments or other papers, and do all other things deemed necessary or desirable by the Customer to carry out the intent of the
       foregoing.
12.4   The parties acknowledge that the NDA shall continue in force and effect and apply to this Agreement and the activities contemplated
       herein.
13.    QUALITY ASSURANCE
13.1   Bel will maintain quality assurance systems for the control of Material quality, processing, assembly, testing, packaging and shipping in
       accordance with its usual policies and practices or as otherwise specified on Exhibit B . Bel agrees to meet reporting requirements such
       as process yields, failure description, and corrective action, as specified by the Customer.
13.2   Bel will perform its normal test procedures relating to Products and Services or those otherwise specified on Exhibit B .
13.3   Either party may during normal business hours and following reasonable notice and subject to the other party‟s normal security
       requirements, review the other party‟s facilities and quality control procedures as reasonably necessary for the first party to satisfy itself
       of the other party‟s compliance with its obligations under this Agreement.

                                                                          7
13.4     The parties will endeavor to meet quarterly to discuss and resolve any issues which may have arisen including those relating to quality,
         performance, engineering changes, obsolescence or surpluses.
14.    CHANGE CONTROL
14.1     Bel or the Customer may at any time propose changes to the relevant specification of the Products by a written engineering change
         notice (“ ECN ”).
14.2     The recipient of the ECN will use all reasonable efforts to provide a detailed response within [**] of receipt.
14.3     Bel will advise the Customer of the likely impact of an ECN (including but not limited to scheduling and Prices) on the provisions of
         any relevant Order.
14.4     Neither party will unreasonably withhold or delay agreement to an ECN, and the parties will endeavor to agree and implement at the
         earliest opportunity ECN‟s relating to personal and product safety.
14.5     Any obsolete and/or surplus Materials resulting from an ECN will be dealt with in accordance with Article 15 below.
14.6     All costs of implementing ECN‟s (including without limitation premium costs of Materials, Material handling charges, process and
         tooling charges, administrative charges, engineering charges, and evaluation and testing costs) will be the responsibility of the
         Customer, except for ECN‟s initiated by Bel solely to improve its manufacturing processes.
15.    OBSOLETE AND/OR SURPLUS MATERIAL
15.1     When all Material is for any reason at any time rendered obsolete and/or surplus to Customer requirements and that Material was
         ordered by Bel against an Order pursuant to Article 4 above, Bel will:
       (a)      provide to the Customer as soon as reasonably practicable following the date of the event causing the obsolescence/surplus (the
                “ Obsolescence Date ”) a notice of the potential cost of such obsolescence or surplus including relevant handling charges; and

       (b)      for a period of [**] from the Obsolescence Date, use its best efforts to:

       (i)      Cancel outstanding orders for such Materials; or

       (ii)     Sell such Materials back to the original supplier or to a third party on such terms as Bel may determine at its discretion but not
                for less than [**]% of the cost of the Materials to Bel without the Customer‟s prior written consent; or

       (iii)    Use excess/uncancellable Materials for the manufacture of other Products.

                                                                          8
15.2    After such [**] period:
       (a)   Bel will deliver to the Customer a detailed report of all remaining obsolete and/or surplus Materials then held by Bel; and

       (b)   Following review and agreement with the Customer, Bel shall be entitled to invoice the Customer for the full cost of all remaining
             obsolete and/or surplus Materials then held by Bel and, if the Customer has agreed in writing in advance to Bel‟s resale of such
             Material at less than the percentage of cost specified in Section 15.1(b)(iii), any price variance incurred by Bel in connection with
             the resale of such Material and, if the Customer has agreed in writing in advance to such handling charges, Bel‟s reasonable
             handling charges in respect of all obsolete and/or surplus materials originally made obsolete and/or surplus. Such invoice shall be
             paid by the Customer in US Dollars without set off or deduction within [**] days of the date of invoice.
16.     BEL WARRANTY

16.1    Bel warrants that it will without charge repair or replace, as Bel may elect, any Products which are defective as a result of a failure in
        Materials or Bel‟s workmanship provided that:
       (a)   The Customer notifies Bel in writing within [**] after discovery of the defect; and

       (b)   Such defective Product has been returned prepaid to Bel‟s designated repair location within [**] after original delivery by Bel or
             [**] after original delivery by Bel in cases where the Customer has a [**] warranty obligation with its customers (which applicable
             period shall not be extended by the repair or replacement of Product).
        The Customer requires a return material authorization (RMA) from Bel prior to returning any Products. All returned Products shall
        include documentation describing the nature of the defect, how it was discovered and under what conditions it occurred. Bel shall
        replace or repair rejected Products within [**] of receipt of the rejected Product; provided that Bel shall have an additional [**] if it
        must manufacture the rejected Product to effect a replacement.

16.2    The Customer will pay for the return of Products to Bel‟s designated premises. Bel will pay for the redelivery to the Customer‟s
        premises in Massachusetts of all Products which are defective under Article 16.1 above. In respect of any Products which are found by
        Bel not to be so defective, the Customer will pay to Bel all redelivery costs. In the case of Product replacement, title to replaced Product
        will pass to Bel on delivery, on a not-for-resale basis; and title to replacement Product will pass to the Customer on delivery to the
        Customer.

16.3    The above warranties will not apply to
       (a)   Products which that have been misused, modified, damaged, placed in an unsuitable physical or operating environment or
             maintained improperly or to any Products which have been subjected to any repair not authorized in writing in advance by Bel;

                                                                           9
       (b)   Any defect caused by the Customer or a third party or by an error or omission or design or default in any Customer Information or
             in any other drawings, documentation, data, software, information, know-how or Materials provided or specified by the Customer;

       (c)   Prototypes and pre-production or pilot versions of Products which will be supplied “as is” without warranty of any kind; or

       (d)   Products for which Bel has not performed the standard inspection and test procedure at the request of the Customer.
16.4    Manufacturing defects and Material failures are the responsibility of Bel. Any epidemic failures (representing [**]% of any given
        lot/shipment) identified as originating from the Bel manufacturing process or the Materials (except materials supplied directly by
        Ambient), or Bel‟s handling or packaging, will require an exception-based, escalation response by Bel to include field site inspection
        test and/or rework, and/or highly accelerated Product replacement and shipment at no additional cost to the Customer.

16.5    THIS ARTICLE 16 SETS OUT BEL‟S SOLE OBLIGATION AND LIABILITY, AND THE CUSTOMER‟S EXCLUSIVE
        REMEDIES, FOR CLAIMS BASED ON DEFECTS IN OR FAILURE OF ANY PRODUCT OR SERVICE OR THE SUBJECT
        MATTER OF ANY SERVICE AND REPLACES ALL OTHER WARRANTIES AND CONDITIONS EXPRESS OR IMPLIED,
        INCLUDING BUT NOT LIMITIED TO IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABILITY OR FITNESS
        FOR A PARTICULAR PURPOSE PROVIDED ALWAYS THAT BEL DOES NOT EXCLUDE OR LIMIT ITS LIABILITY FOR
        DEATH OR PERSONAL INJURY RESULTING FROM ITS NEGLIGENCE NOR LIABILITY FOR BREACH OF ANY TERM
        IMPLIED BY STATUTE TO THE EXTENT THAT SUCH LIABILITIES CANNOT BY LAW BE LIMITED OR EXCLUDED.

17.     CUSTOMER WARRANTY

17.1    The Customer warrants the Customer Information and the Customer Tooling and any other items or information supplied by the
        Customer are accurate and contain all items and information of the Customer necessary for Bel to manufacture and deliver the Products
        and Services pursuant to this Agreement.

17.2    Bel will notify the Customer of any manufacturing problems which it encounters and believes are related to the Product design of any
        Customer Information or Customer Tooling. The parties will jointly determine whether such manufacturing problems are attributable to
        the Product design or any Customer Information or Customer Tooling. Where such problems are so attributable, the Customer will be
        responsible for all costs incurred by Bel to correct such problems. Bel will not implement any changes to the Product design or any
        Customer Information or Customer Tooling without the Customer‟s prior written approval. Where any such changes result in the delay
        of any scheduled delivery date for Product, Bel will have no liability for such delay, and Customer may not cancel any orders for
        Products affected thereby.

18.     INDEMNIFICATION

                                                                        10
18.1   (a) If suit is brought against Bel alleging that its use of any Customer Intellectual Property in producing Product in accordance with the
       Customer‟s specifications infringes any United States patent because of such use, the Customer shall, at its own expense, defend and
       control such suit and pay any award of damages against Bel, provided Bel notifies the Customer promptly of the filing of such suit and
       gives the Customer complete control of the same. The Customer shall not be liable in any respect except as aforesaid, including without
       limitation, for any claim of infringement settled by Bel without the Customer‟s prior written consent.

       (b) If suit is brought against the Customer alleging that Product infringes any United States patent other than by reason of use of any
       Customer Intellectual Property in producing Product in accordance with the Customer specifications, Bel shall, at its own expense,
       defend and control such suit and pay any award of damages against the Customer, provided the Customer notifies Bel promptly of the
       filing of such suit and gives Bel complete control of the same. Bel shall not be liable in any respect except as aforesaid, including
       without limitation, for any claim of infringement settled by the Customer without Bel‟s prior written consent. If a final injunction shall
       be obtained against the Customer by reason of such infringement, or if in Bel‟s opinion, upon advice of legal counsel, a Product is
       likely to become the subject of a claim of such infringement, Bel may, at its option and at its expense (i) procure for the Customer the
       right to continue using the Product; or, (ii) replace or modify the same so that it becomes non-infringing.

       (c) Any and all settlements related to matters described in this Section 18.1 shall be subject to the prior written approval of Bel‟s
       President or General Counsel with respect to Bel and the prior written approval of the Customer‟s President with respect to the
       Customer.

       (d) THE FOREGOING STATES THE ENTIRE LIABILITY OF THE PARTIES TO EACH OTHER CONCERNING
       INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS.

18.2   (a) Bel will indemnify, save harmless and defend the Customer, its affiliates and customers from any and all claims, actions, losses,
       expenses, costs or damages (including, reasonable legal fees and expenses) (collectively, “ Losses ”) which the Customer, its affiliates
       and customers may suffer or incur as a result of (i) any negligent act or omission or willful misconduct of Bel, its employees,
       representatives, agents or subcontractors relating to this Agreement; or (ii) any breach of Bel‟s representations, warranties or
       obligations under this Agreement.

       (b) Bel will have no liability pursuant to Section 18.2(a) to the extent the Losses arise solely and directly due to (i) the use of goods by
       the Customer in a manner for which they were not designed (unless such use was agreed to in advance by Bel); or (ii) the negligence of
       the Customer, its employees, agents or subcontractors.

       (c) Customer shall promptly notify Bel of any claim for which the Customer believes it is entitled to indemnification (provided that the
       Customer‟s failure to provide such notice will relieve Bel of its indemnification obligations only if and to the extent that such failure
       actually prejudices Bel‟s ability to defend the claim.) Bel will defend the Customer against any proceeding or claim described and keep
       the Customer apprised of all major

                                                                        11
       developments. The Customer may participate in any such proceedings, at its expense. The Customer will permit Bel to control, in a
       manner not adverse to Customer, the defense of any such claim; provided that any and all settlements or consents to judgment related to
       matters described in this Section 18.2 shall be subject to the prior written approval of Bel‟s President or General Counsel with respect to
       Bel and the prior written approval of the Customer‟s President with respect to the Customer.
19.       CUSTOMER PROPERTY

19.1      All Customer Information and Customer Tooling may be used by Bel during the term of this Agreement as required by Bel for the
          purposes of this Agreement.

19.2      All Customer information and all Customer Tooling will remain the Customer‟s property and will be treated by Bel with the same care
          as it treats its own property of a similar nature.

19.3      The costs of maintenance, calibration and repair of Customer Tooling shall at all times be the responsibility of the Customer.

20.       CONFIDENTIALITY

20.1      Nothing in this Agreement gives either party a right to use the other party‟s name, trade mark(s), or trade name(s) or to refer to, or
          disclose, the existence of this Agreement or any Order or any terms and conditions of this Agreement or any Order, whether directly or
          indirectly in connection with any marketing or other activities without the other party‟s prior written consent. Notwithstanding the
          foregoing, Bel acknowledges that upon execution of this Agreement, the Customer will issue a press release. Additionally the Customer
          shall be required to file a Report on Form 8-K upon the execution of this Agreement and a copy of this Agreement as an exhibit no later
          than its next periodic report, and, in connection with such issuance and filings, shall be permitted to use Bel‟s name and to file a copy of
          this Agreement. The Customer shall seek confidential treatment with respect to the portions of this Agreement containing trade secrets.

21.       EXCLUSIONS AND LIMITATION OF LIABILITY

21.1      Bel does not exclude or limit its liability for death or personal injury resulting from its negligence nor liability for breach of any term
          implied by statute to the extent that such liabilities cannot by law be limited or excluded.

21.2      Subject only to Article 18 and Article 21.1 above, under no circumstances will a party have any liability in respect of this Agreement,
          whether in contract or for negligence or otherwise and whether related to any single event or series of connected events, for any of the
          following:
      (a) any liability in excess of:
            (i)   in case of damage to loss of tangible property, the value of such property; and

                                                                            12
           (ii)     in any event, and in respect of any other liability, the total of [**] (whichever is greater).
       (b) any liability for any incidental, indirect or consequential damages or loss of business, loss of records or data, loss of use, loss of profits,
       revenue or anticipated savings or other economic loss whether or not Bel was informed or was aware of the possibility of such loss.
21.3     Neither party may bring an action under this Agreement more than two (2) years after the cause of action arose; provided such
         limitation shall not apply to third party claims brought against a party for which it is entitled to indemnification under this Agreement.

21.4     Bel shall have no liability to the Customer for any failure to perform any obligation under this Agreement or any Order due to the act or
         omission of the Customer or any supplier designated by the Customer.

22.      TERM AND TERMINATION

22.1     This Agreement is effective from the Effective Date and continues until terminated in accordance with this Article 22.

22.2     Either party may terminate any Order and/or this Agreement after [**] years from the Effective Date or the Customer‟s purchase of a
         minimum of a cumulative [**] units of Products, whichever first occurs, by giving to the other party six months prior written notice at
         any time. In the event of termination pursuant to this Article 22.2:
         (a)      termination of any Order or this Agreement will not prejudice accrued rights and liabilities (including payment of Prices for
                  Product delivered) of either party; and

         (b)      on the termination or other discharge of this Agreement Bel will deliver to the Customer at the Customer‟s expense and risk all
                  Customer information and Customer Tooling on an as is basis.
22.3     Either party may terminate any Order and/or this Agreement:
         (a)      if the other party commits a material breach of any Order or this Agreement and fails to remedy the breach within thirty (30) days
                  of written notice requiring it to do so; or

         (b)      immediately if the other party fails to pay its debts generally as they become due, makes an assignment for the benefit of
                  creditors, seeks relief under any bankruptcy, insolvency or similar law, is involved in any involuntary proceeding under such
                  laws, or if a receiver, manager, liquidator, trustee in bankruptcy or other officer with similar powers is appointed over all or a
                  substantial part of the assets of that party.
           In any such case, on termination, the terminating party shall have no further obligations to the other party except to make payment of
           Prices for Product delivered prior to the date of termination, less any amount owing to the terminating party.

                                                                              13
22.4         The terms of Article 8 will apply to any Orders cancelled as a result of termination pursuant to this Article 22, and the terms of
             Article 15 will apply to any Material rendered obsolete or surplus by such cancellation. In addition, Articles 18 and 21 shall survive
             termination of this Agreement or any Order.

23.          GENERAL

23.1         Resale, import and export . The Customer will comply with all applicable laws and regulations and will obtain all necessary licenses
             and consents for the resale, import or export of Products (except as provided in 5.6 above) under the laws and regulations of any
             relevant jurisdiction.

23.2         Effective terms and precedence.
       (a)      This Agreement, together will all Orders, constitutes the entire agreement between the parties in respect of the subject matter hereof
                and supersedes and excludes all other representations, promises, whether oral or written.

       (b)      Any standard terms and conditions set out in any order form other than the Order form attached as Exhibit A hereto will be without
                effect.

       (c)      Any rights or obligations under this Agreement which by their nature continue after termination will remain in effect until they are
                completed.

       (d)      If there is any conflict or inconsistency between the terms of any Order and the terms of this Agreement, then the terms of this
                Agreement will prevail over the Order. Furthermore, to the extent there is any conflict or inconsistency between the terms set forth
                on Exhibit B hereto and any other provisions of this Agreement, the terms set forth on Exhibit B shall prevail.
23.3         Severability . If any provision or any part thereof contained in this Agreement is, for any reason, held to be invalid or unenforceable in
             any respect under the laws of any jurisdiction where enforcement is sought, such invalidity or unenforceability will not affect any other
             provision of this Agreement, and this Agreement will be construed as if such invalid or unenforceable provision or part thereof had not
             been contained therein.

23.4         Variations . No purported variation or amendment of this Agreement will be valid unless made or confirmed in writing by a duly
             authorized representative of each party.

23.5         Waiver . The waiver of any term, condition or provision of this Agreement must be in writing and signed by an authorized
             representative of the waiving party. Any such waiver will not be construed as a waiver of any other term, condition or provision except
             as provided in writing, nor a waiver of any subsequent breach of the same term, condition or provision.

23.6         Force majeure . Neither party will be liable for any delay in performing or for failing to perform obligations (other than payment
             obligations) resulting from acts of God, catastrophic weather, fire, explosions, floods, strike, work stoppages, slow-downs or

                                                                             14
        other industrial disputes, accidents, riots or civil disturbances, act of government, delays by suppliers or Material shortages or from any
        cause whatsoever beyond its reasonable control.

23.7    Assignment .
        (a)   Neither party may assign this Agreement or any Order or any part thereof without the written consent of the other except that Bel
              may assign this Agreement and/or any Order or any parts(s) of this Agreement to any of its Affiliates or to any person who
              acquires the whole or any part of Bel‟s business.

        (b)   The expressions “Bel” and the “Customer” include their respective successors and permitted assigns where the context admits.
23.8     Relationship of the parties . The relationship of Bel and the Customer as established under this Agreement will be and at all times
         remain one of independent contractors, and neither party will at any time nor in any way represent itself as being a dealer, agent or
         other representative of the other party or as having authority to assume or create obligations or otherwise act in any manner on behalf
         of the other party.

23.9     Headings . The headings in this Agreement are inserted for convenience only and do not constitute a part of this Agreement nor are
         they to be referred to in its interpretation.

23.10    Counterparts . This Agreement may be executed in one or more counterparts (including those delivered by facsimile or other
         electronic means), each of which shall be considered an original, but all of which taken together shall constitute one and the same
         agreement.


                                                             [Signature page follows.]

                                                                         15
THIS MASTER SUPPLY AND ALLIANCE AGREEMENT IS EXECUTED BY THE DULY AUTHORIZED REPRESENTATIVES OF
THE PARTIES AS OF THE DATE FIRST SET FORTH ABOVE:

                                           “CUSTOMER”

                                           AMBIENT CORPORATION

                                           By:
                                                 /s/ John J. Joyce
                                                 Name:
                                                          John J. Joyce
                                                 Title:   President

                                           “BEL”

                                           BEL FUSE INC.

                                           By:
                                                 /s/ Colin W. Dunn
                                                 Name:
                                                          Colin W. Dunn
                                                 Title:   Vice President Finance
                                                       EXHIBIT A

                                           FORM OF PURCHASE ORDER

Ambient Corporation                                                                             PURCHASE ORDER
79 Chapel Street                                [Ambient logo]                                      2703481
Newton, MA 02458
P: 617-614-6718                              AMBIENT®                              ORDER DATE                 VEND NO.
F: 617-332-0024                       communications for a new world                 02/10/09                  BEL001

BEL FUSE                                                         Ship to: Ambient Corporation
206 Van Vorst Street                                                       79 Chapel Street
Jersey City, NJ 07302                                                      Newton, MA 02458

Contact: [**]
Phone: [**]

       DUE DATE                   REQUESTED BY                                                                     TERMS
        02/10/09                 -No Sales Employee-                           SHIP VIA              F.O.B.         [**]



#               ITEM    VENDOR ITEM NO.                 UOM            DEL.          QTY            UNIT         EXTENSION
                NO.                                                    DATE          ORDER          PRICE


REMAR                                                                                               TOTAL            0.00
KS

                                                                                                                     PAGE 1
                                                                    EXHIBIT B
                                                    PRICES, PRODUCTS AND SERVICES
Manufacturing Services
    •      Printed circuit board (PCB) assembly and test

    •      Systems final assembly and test

    •      Materials procurement and management

    •      Fulfillment services (direct customer shipment)

    •      Turnkey based prototyping and new product introductions (NPI)

    •      To be expanded to include full repair depot operations
Metrics:
    •      On time delivery
           •   Committed orders at [**]% On-Time within +/- 2 days

           •   Expedited orders with Best Efforts at [**]% to committed delivery
    •      Quality as measured by actual customer results — manufacturing defects ONLY
           •   Out-of-box failures @ <[**]%

           •   90 day warranty failure/return rate @ <[**]%

           •   12 month warranty failure/return rate @ <[**]%
    •      Commitment to agility & responsiveness in support of the Customer business and its customers‟ needs
           •   Best efforts including use of overtime in response to the Customer‟s customers‟ requests

           •   All efforts basis to recover missed schedules at BEL expense
    •      Timely implementation of ECN/ECO changes based on impact on the Customer
           •   Response, analysis and implementation aligned to the Customer‟s urgency
    •      Cost
           •   Product cost performance in achieving both material & labor savings

           •   All cost not in standard (CNIS) within reasonable expectations
Service Elements
    •      Orders and Forecast
           •   The Customer will use best efforts
               •   To provide 12 month rolling forecast of production requirements

               •   To provide Orders of requirements within [**] day delivery expectation
           •   BEL will only execute materials procurement aligned to the Customer Orders

           •   BEL agrees to build products aligned to the Customer delivery expectations — no build ahead without advanced notice to and
               review and acceptance by the Customer

           •   Order scheduling and rescheduling as outlined within the Agreement
•   Materials and Supply-Chain Management
    •     Procurement following the Customer defined AVL or supply-chain partners — must ensure local, U.S. support to the Customer
          development initiatives

    •     Order policies managed to ABC levels to minimize the Customer‟s exposure and risk

    •     Extend global procurement capabilities to achieve “best-in-class” service & pricing
•   NPI
    •     Collaboratively support quick turn [**] — [**] cycles along with system level build and testing

    •     The Customer to provide direct support of unique materials in conjunction with BEL efforts

    •     BEL to directly support evolving test requirements including [**]

    •     BEL will provide collaborative support with early NPI participation to achieve [**]
•   Manufacturing and Test Engineering
    •     The Customer and BEL agree to develop cost effective solutions to achieve volume, quality and cost targets

    •     The Customer intends to leverage BEL test engineering services in optimizing test for volume production
        •        ICT

        •        Functional testing — both PCB‟s and systems

        •        Thermal and power cycling of both PCB‟s and systems

        •        Fixture design and implementation
•   Quality
    •     [**]

    •     Provide weekly, monthly & quarterly reporting of [**]

    •     Provide [**] support to correct any epidemic failures (those exceeding [**]% of lots shipped) involving manufacturing or
          Materials used in the Products

    •     BEL will implement formal corrective actions to address major quality deficiencies and commit to active, continuous
          improvement program

    •     Ensure materials used in the production of the Products conform to the Customer and OEM provided specifications
•   Cost and Pricing
    •     BEL will manage all materials and labor to agreed upon standard cost

    •     All purchase price variance (PPV) and premium labor cost requires notification to and review and acceptance by the Customer in
          advance

    •     All CNIS, PPV, excess and obsolete materials, exception based cost and non-recurring expenses require notification to and
          review and acceptance by the Customer in advance
•   Transactional Elements
    •     All shipments to include either the Customer provided packing list or BEL packing list with the Customer nomenclature and
          include Product serial and reference numbers

    •     Shipments must include packing list, commercial invoice and all export documentation
    •   All shipping documents to be physically attached to the shipment with electronic copies provided directly to the Customer in a
        timely manner
•   Repair Center Operations
    •   Will require [**], full service repair and upgrade depot capabilities

    •   Details to be addressed as a future initiative

                                                                    2
Project and Program Management
    •      Each party will assign a project manager and identify a project team representing key manufacturing functions, including planning
           and materials, manufacturing and test engineering and quality management
    •      Program management approach aligned toward:
           •   Weekly project level meetings — action and results focused across all disciplines

           •   Monthly program level performance checks — issue resolution

           •   Formalized quarterly business reviews addressing all metrics and program status
    •      Quarterly pricing and cost reviews addressing commodity management — process opportunities and markups aligned to business
           volumes
Pricing:
    •      Agree initially that pricing will be [**], with baseline pricing established at [**]

    •      Will collaborate to achieve on-going cost/pricing reductions aligned to volume

                                                                            3
                                                                EXHIBIT C
                              APPROVED VENDORS AND PREFERRED SUPPLY CHAIN PARTNERS

AMBIENT APPROVED VENDORS:
Approved Vendors are contained within Ambient‟s data and documentation control system, Agile, and incorporated with full revisions and
release control. As a strategic partner, Ambient has extended BEL direct electronic access for all [**].

PREFERRED SUPPLY-CHAIN PARTNERS:
Ambient requires, as part of this Agreement, local, US, access and support from technology companies and has identified [**] as a preferred
distributor partner. [**] should be considered for all franchised components given overall market competitiveness with cost, quality and
availability.
Ambient may, as mutually appropriate, identify additional supply-chain partners and will work with BEL in integrating them within the
program.
                                                                              Exhibit 21


                                                              SUBSIDIARIES

Insulated Connections Corporation Limited was registered in Israel in 1999.
                                                                                                                                 Exhibit 23.1


                              CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
                            FIRM TO THE COMPANY’S REGISTRATION STATEMENT ON FORM S-1
We hereby consent to the inclusion in this Registration Statement on Form S-1 of our report dated February 23, 2011 (except Note 2 relating to
the reverse stock split, which is July 18, 2011) relating to the financial statements of Ambient Corporation for the years ended December 31,
2008, 2009 and 2010. We also consent to the reference to us under the heading “Experts” in such Registration Statement.


 /s/ Rotenberg Meril Solomon Bertiger & Guttilla,
 P.C.


 Rotenberg Meril Solomon Bertiger & Guttilla, P.C.
 Certified Public Accountants
 Saddle Brook, New Jersey
 August 18, 2011