UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-KSB-A
            Annual Report for the fiscal year ended December 31, 1999

                               Ambient Corporation
             (Exact name of registrant as specified in its chapter)

Delaware                          0-23723                98-0166007
(State or Other Jurisdiction      (Commission File      (IRS Employer
of Incorporation)                 Number)               Identification No.)

                    22 Beit Hadafus, Jerusalem , 95483 Israel
                    (Address of Principal Executive Offices)

                                  888-861-0205
              (Registrant's Telephone Number, including Area Code)

[Mark One]

|X| Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the fiscal year ended December 31, 1999

|_| Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934

      Securities registered pursuant to Section 12(b) of the Exchange Act:
                                      None

      Securities registered pursuant to Section 12(g) of the Exchange Act:
                          $.001 Par Value Common Stock

      Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Company was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes |X| No|_|

      Check if there is no disclosure contained herein of delinquent filers in
response to Item 405 of Regulation S-B, and will not be contained, to the best
of the Company's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. |_|

      The Issuer did not report any revenues for the year ended December 31,
1999.

      As of April 14, 2000, there were 9,656,611 outstanding shares of the
issuer's Common Stock. The aggregate market value of the shares of the issuer's
Common Stock on April 11, 2000 held by non-affiliates was approximately
$34,631,375.

      *We are amending the annual report on Form 10-KSB/A for the year ended
      December 31, 1999 and such year-end financial statements to disclose the
      following transactions recorded in the March 31, 2000 financial
      statements: (i) a non-cash extraordinary loss in the amount of
      approximately $9.8 million and a corresponding credit to additional
      paid-in-capital to reflect the fair value of shares of the Company's
      common stock issued in February 2000 in extinguishment of outstanding
      debtand (ii) $285,417 in interest expenses and a corresponding credit to
      additional paid-in- capital to reflect the beneficial conversion feature
      of certain debentures issued in February 2000.

<PAGE>

      ITEM 1. BUSINESS

Introduction

      Ambient Corporation ("Ambient" or the "Company") is engaged in the design
and development of products and services in the fields of electronic commerce,
Internet access and advanced telephony applications. All of the Company's design
and development activities are conducted within the State of Israel.

      Ambient's activities are currently centered in two distinct areas: (i) the
marketing and implementation of complete solution which includes Company
proprietary technology, designed to facilitate the provision of rapid power line
telecommunication services to homes, businesses and power utilities initially in
North America and Japan and (ii) the establishment, initially in Israel, of a
nationwide screen phone network that is designed to enable e-commerce and
Internet browsing for consumers who do not have access to, or are unable or
unwilling to use, personal computers.

      Since its founding in June 1996, the Company has been engaged primarily in
the design and development of smart card based technologies and products. Owing
to a fundamental reassessment of general market developments in the field of
smart card based technologies, the Company elected to leverage its experience
and expertise acquired in the area of smart card based technologies to the
design, development and commercialization of the Company's proprietary
technologies in the field of power-line-telecommunications (PLT) and screen
phones. The Company has ceased all design and development efforts in the smart
card area.

      The Company has established a subsidiary, PLT Solutions, Inc., in which it
holds a 90.1% interest, to promote a unique technology designed to facilitate
the use of existing electricity power lines and grids in the United States and
Japan for rapid Internet, telephone and data transfer to ordinary business and
personal users. Existing electrical power grids are not currently in use for
high speed data transmission due to certain power utility infrastructure
limitations. The Company has designed and developed proprietary technology that
overcomes these infrastructure limitations. Ambient believes that its technology
will be especially attractive to Internet providers/integrators.

      The Company established a wholly owned subsidiary in Israel, ICC, which
carries out research and development for PLT Solutions, Inc.

      The Company has a 40% interest in a newly established Israeli company,
Kliks, which is engaged in attempting to establish a nationwide screen phone
network in Israel. Kliks is currently marketing a third party's screen phone in
Israel and also designing and establishing a services delivery platform to which
users of the screen phone will have access. Users may log on to such platform to
gain access to services such as e-mail, home shopping and advanced telephony.
The network screen phone will enable Internet access for a wide segment of the
population which is less familiar with the use of personal computers (PC's), or
belongs to the large segment of populace which does not have a PC. Ambient's
Vice-President, Mr. Bernie Wolff, holds the remaining 60% interest in Kliks.

      A discussion of each of power line transmission and the screen phone
network follows:

                       Electrical Power-Line Transmission

General Background Relating To Internet Access

      Worldwide Internet communications can be divided into the "backbone"
network and the "access" network. The backbone network is carried over optical
fibers between cities and continents, and we believe, provides essentially
unlimited capacity for sending relatively large amounts of data over long
distances. However, the optical fiber technology used for the backbone network
is too expensive to extend to each individual user. Accordingly,


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distributing the data from the backbone network to homes and business is done
via an "access" network, also referred to as the "last mile" network.

      To date, traditional Access networks have included modems connected to
conventional telephone lines, higher speed digital subscriber telephone lines
(ADSL), cable TV with data modems in set-top boxes and, more recently, wireless
networks. However, the Company believes that the traditional access methods have
certain drawbacks. The ADSL method typically requires high implementation costs.
Cable TV modems are characterized by loss of rapidity of service when the number
of subscribers reaches a critical mass and wireless networks are unreliable, as
is generally the case in the use of cell phones.

      One of the more rapid and affordable methods of access utilizes
conventional electrical power grids, also known as power-line communication, to
transmit data to individual users. The use of electrical power grids as an
access method is, in the Company's view, an especially attractive proposition
given the widespread infrastructure "wiring" already in place. The same
electrical wiring that carries electrical power to individual homes and business
can also transmit high speed data. However, there are certain infra-structural
limitations that have, until recently, effectively precluded the use of
conventional electrical power grids as an affordable access method.

      Electrical power is generated at a power station and furnished to an urban
or rural substation which services a neighborhood, typically extending over
several square miles. The electrical power generated at the power station is
sent over relatively high voltage lines and needs to be reduced to a lower
voltage for further distribution within the neighborhood. At the neighborhood
substation level, a "stepdown transformer" reduces the high voltage electrical
power generated to "medium" voltage for further distribution within the
neighborhood. The medium voltage needs to be further reduced to familiar 120
volts by "distribution transformers" located near the neighborhood homes and
businesses.

      However, the distribution transformers were designed for 60 Hz power, and
completely fail to transmit the high frequency, data-carrying signals arriving
over the grid from the substation. Therefore, to ensure that data can get from
the neighborhood lines to the 120 volt outlets, a "bypass coupler" is needed as
a bridge around the distribution transformer. These couplers need to be
physically (and therefore electrically) connected directly to the high voltage
lines. To achieve the electrical connection the coupler needs to withstand high
voltage, and is therefore very expensive to manufacture.

      Ambient's proprietary technology enables coupling the data to and from the
neighborhood distribution lines without the need to establish an electrical
connection. The Company's proprietary coupler, a prototype of which is ready for
feasibility demonstration, either uses the existing insulation of underground
cables or is easily insulated to slip around overhead medium voltage
distribution wires. Accordingly, the manufacturing costs are significantly
reduced in comparison to the conventional bypass coupler.

      Advantages of Utilizing Existing Power lines for High Speed Data
Transmission

      The use of electricity power lines to connect homes and businesses to the
Internet, for telephony or for any other form of data transmission provides both
consumers and suppliers with a range of compelling economic and practical
benefits.

      The advantages in employing power line communication include:

      o Coverage - the power grid is the most extensive "wire" network in the
      world. More individuals and businesses have access to the electrical grid
      than any other "wire"


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      network, including telephone lines. The low voltage wiring extends to
      every room in the business and home, and obviates expensive and disruptive
      wiring.

      o Modernity - the electric grid in most areas of the world is more modern
      and better maintained than any other wired communication network.

      o Simplicity - power line communications are not burdened by telephony's
      conventional technologies, including outdated routers, bridges, gateways,
      legacy switches and software, which slow down traditional communications.

      Fueled by recognition of the overwhelming financial and practical
benefits, interest in high speed power-line telecommunication has expanded.
Technical conferences on the subject are frequent, and attended by power
companies, as well those from other relevant fields including telecommunications
and networking companies such as 3COM, Cisco, Cinergy and others. PLT chips and
modems for in-house networking are maturing, and a large number of companies are
vying for this market. Network speeds of data transmission are rapidly
increasing. To realize maximum benefit from the in-home network, users are
looking to connect it to a high speed Internet feed. So an initial group of
users who already use low voltage, in-premises PLT and trust the technology is
emerging, with a built-in demand for access connectivity to the Internet
backbone.

      Europe's 230 volt line voltage allows a large number of customers to be
fed by each distribution transformer. Most of the trials of neighborhood PLT
have taken place in Europe, but have usually limited themselves to sending data
over the 230 volt feed lines, and have not attempted to establish
substation-to-home neighborhood Access networks.

      Comparison of Power-Line Communication with other High Speed Access
Solutions

      o Digital Subscriber Line (DSL) - subscribers need to be within
approximately 5.5 km of the telephone company's central office. It is a
point-to-point connection, so the one time installation cost to the end user is
high. Users report that installation times are long, and availability is sparse.
Phone companies need to invest considerably to beef up their networks, which
were never designed for high speed data and very long session times.

      In contrast, the Company's networks can be deployed in entire
neighborhoods in a matter of days, and their direct connection to the backbone
means no bottlenecks or heavy investments. Also, telephone outlets typically
exist in only one to three locations within a premise, while power outlets are
already installed in every room.

      o T1 Trunks - T1 (1.544 Mbps) is a digital telephony trunk, typically used
by phone companies to provide telephone service to large organizations. It
provides high speed in both directions, the equivalent of 24 telephone
conversations. But, its $250 monthly tariff prices it out of the market for most
home and small business users.

      o Satellite - Some satellites serve as data relay stations, and some of
these are connected to the Internet backbone to provide high speed data to
users. The user needs to buy, mount and aim a fairly large dish, he needs a
microwave transmitter/receiver, and a special modem. Since the ground-based
antennae cannot beam a strong signal back to the satellite, only low speeds of
56 kilobits per second can be sent from the user to the Web, the same data speed
as is available over dialup modems.

      o Cable Modems - TV cable networks have been designed and constructed as
one-way feed systems, providing a large number of channels to a large user base.
Subscribers to cable companies share their cable lines with other subscribers,
sometimes a very large number of them, so even the high promised data speeds (up
to 36Mbps) may not guarantee good service


                                       4
<PAGE>

during peak usage. Sending data back from the user to the network is problematic
over cable TV lines, due to the accumulation of noise generated by the
television sets and other devices, from all of the connected customers, reaching
the TV cable. Cable companies must invest substantially in upgrading their
equipment to be able to send data upstream, and in laying cables outside of
urban areas. Data service is available to only a small percentage of Internet
users.

      In contrast, PLT exploits the natural segmentation of the neighborhood
power grid, to keep the number of users sharing the data stream within
reasonable limits. Typically, only 50 - 200 premises share a common phase line
in the US, and the number of users demanding simultaneous downloads of large
files is likely to be very small. PLT Solutions expects the typical user to
enjoy data rates from 1 - 10 megabits per second, usually enough to pass the
maximum data rate available from the Web site being accessed, for the
foreseeable future.

      In addition, cable TV outlets typically exist in only one or two locations
within a premise, while power outlets are already installed in every room. This
saves expensive and disruptive rewiring, when data users include PCs, Internet
telephones, and eventually many intelligent appliances.

      o Wireless Local Loop - Similar to cellular telephone network deployment,
microwave relay stations may be deployed in neighborhoods to provide last mile
Access for Internet data to homes and businesses. The same problems of
communications reliability that beset cellular telephones are likely to affect
wireless local loop systems. These include need for near line of sight between
hub and user, multiple reflections of signals in dense residential areas, the
blocking effects of the metal building materials, and seasonal variation of
foliage and effects of precipitation on radio transmission quality.

      Another inherent limitation is the frequency bandwidth available in the
shared domain of radio frequencies, and the difficulty of providing significant
future upgrades in data speeds without regulatory permission and massive
retrofitting of equipment.

The Solution

      PLT Solutions proposes utilization of conventional electrical power lines
as its access channel. The data path is as follows: (i) high speed data arrives
over the optical fiber backbone cable, routed to the neighborhood utility
substation, (ii) the specific data intended for the subscribers of a particular
neighborhood is selected from the general data stream by a standard network
device called a router, (iii) the digital data is turned into a high frequency
signal using a modem, and (iv) the high frequency, data-carrying signal is
carried onto the neighborhood power distribution line using our proprietary
coupler.

      At each distribution transformer, serving typically two to six premises,
the data is received, as follows: (i) the high frequency, data-carrying signal
is coupled from the neighborhood power distribution line onto the customers' 120
volt feed lines using our proprietary coupler, (ii) the high frequency signal is
converted back to data using a modem, and (iii) the PC or other user device
listens to the neighborhood data, and accepts that data which is addressed to
itself.

      The process of sending data from the user device to its destination uses
the above pathway in the reverse direction.

Integrating the Company's Coupler into a Complete Access Network

      In order to provide a comprehensive power line access solution to the end
user, the Company's coupler is required to be integrated with the following
technologies:


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o     a spread spectrum modem
o     a media access control processor
o     a network control system
o     user interface devices

      The spread spectrum modem is the device which turns the digital data into
a high frequency signal, and its spread spectrum character both minimizes radio
interference and provides tolerance for the noise interference to be found on
power lines. The media access control processor is the "traffic cop" which
coordinates packaging of data into "packets," and who sends the signal. The
network control system provides overall control of traffic. And the user
interface devices translate the high frequency signals coming over the power
line into useable data for their computers and other devices.

      In order to provide a comprehensive solution in an expeditious manner, the
Company needs to coordinate its efforts with companies experienced in the modem
and networking fields. The Company is currently examining options respecting
alliances with such companies. The Company cannot provide any assurance that it
will be successful in concluding such alliances.

      The Company's solution seeks to provide an initial system data rate of 10
megabits per second, and it believes that this can be upgraded to several times
this speed, with future developments in hardware and software. For example,
current modems use relatively simple "modulation" techniques that turn data bits
into high frequency energy. Future modems are expected to use more sophisticated
modulation techniques which allow the same frequency band to carry at least
three times more data.

The Company's Coupler Product

      The Company believes that it has completed the design and development of a
unique coupling method with very low projected manufacturing costs and that does
not materially impact on power grid reliability. The Company's prototype product
has passed high voltage testing at a lab in the US and has been field tested for
communications between two transformers at a power company site.

      Ambient's coupler features:

o     Low cost (25% cost of an existing solution)
o     Capacity for very high data rates, exceeding 10 megabits per second, which
      is 200 times faster than dialup modems can provide.
o     Installation without interruption of service to customers
o     No material impact on reliability of electrical grid
o     Works even during power outage
o     Installation without exposure to high voltages
o     Virtually unlimited life of service

      The Company is currently in the process of arranging for the pilot testing
of our proposed product with potential commercial partners. Further
productization steps will include Standards testing and certification,
mechanical package design and tooling for mass production.


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<PAGE>

      To provide a end to end data distribution network, the Company needs to
collaborate with a modem and media access control processor chip manufacturer,
and a data network equipment manufacturer.

      It will be necessary for the Company to obtain the cooperation of a
utility company in order to progress with full pilot testing and
commercialization.

Production & Supplies

      The Company's proprietary couplers utilize special magnetic materials and
high voltage weatherproof plastics, as well as standard components that are
obtainable from local sources. The Company has identified potential suppliers
who can supply the special magnetic materials and high voltage weatherproof
plastics. The Company has held meetings with these suppliers, and initial
estimates have been made for one time tooling costs. The Company does not regard
any one supplier as essential to its operations since equivalent replacements
for the components are either available from one or more sources at competitive
prices. The Company believes that the approximate cost to the Company of the
components for the couplers should not exceed $20 per unit. The Company
currently does not have a written contract with any supplier for any of the
components.

      Subject to successful completion of pilot testing, the Company intends to
initially assemble the couplers at its facilities. The Company anticipates that
it will need to retain appropriate professionals to assemble and test the
couplers. The Company estimates that with 5 assemblers and 3 testers it can fill
orders of up to eight thousand units per month. As quantities grow, offshore
assembly facilities may be selected to increase production capabilities and
reduce cost.

      The Company anticipates that all future suppliers and assemblers will be
certified to recognized international quality assurance standards.

Competition

      The Internet Access market is highly competitive. The Company faces
competition from many Internet access and service providers with significantly
greater financial resources, well-established brand names and large, existing
customer bases. Moreover, the Company expects the level of competition to
intensify in the future. The Company expects significant competition from:

      I. (ISPs) Internet Service Providers.

      ISPs provide Internet access to residential and business customers. These
companies provide Internet access over existing networks. They have nationwide
marketing presences and strategic or commercial alliances with telecom carriers.
Significant ISPs include Concentric Network Corporation, Mindspring Enterprises,
Inc., PSINet Inc. and Verio, Inc. Incumbent Local Exchange Carriers, ILECs, such
as SBC Communications, Inc., GTE Corp., Ameritech Corp. and US WEST, Inc.

      II. Wireless and Satellite Service Providers.

      The Company also faces competition from other fixed-wireless services,
such as Teligent, Inc., NEXTLINK Communications, Inc. and Winstar
Communications, Inc. AT&T has also announced plans to expand its fixed-wireless
network to compete for voice and high-speed data customers in businesses and
residences. The Comapny also may face competition from satellite-based systems.
Motorola Satellite Systems, Inc., Hughes Communications, Inc. (a subsidiary of
General Motors Corporation), Teledesic LLC and others have filed


                                       7
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applications with the FCC for global satellite networks that can be used to
provide ubiquitous two-way broadband voice and data services to fixed locations.
Many of these competitors are offering, or may soon offer, technologies and
services that will directly compete with some or all of the Company's service
offerings.

      III. Other Telephony Services.

      The Company also faces intense competition from other providers of
telephony transmission services. Many of the existing providers of telephony
services, such as regional Bell operating companies and other local exchange
carriers, have significantly greater financial and other resources than the
Company and better established brand awareness in their service areas.

      IV. Subscription Television Competition Hardwire Cable.

      The Company's principal subscription television competitors are
traditional hardwire cable operators such as AT&T Broadband & Internet Services
(formerly TeleCommunications, Inc.), and Time Warner Entertainment. Hardwire
cable companies generally are well established and known to our potential
customers and have significantly greater financial and other resources than the
Company has. In addition, these competitors are also bundling additional
services with their cable TV services, such as high-speed Internet access, to
enhance their products. Direct Broadcast Satellite ("DBS") service is available
from DirecTV, Inc., which is a subsidiary of the Hughes Electronic unit of
General Motors Corporation and Echostar Communications Corporation. The Company
competes with many retail distributors of DirecTV and other DBS service.

      V. Competing PLT Technology.

      Media Fusion Inc. has claimed that it can transmit ultrahigh speed data
over power lines, using a patented technique which uses the power line's own
pulsating magnetic field as a microwave waveguide. This technique would require
the deployment of expensive MASER amplifiers at each data reception point, and
would not be cost effective for neighborhood "last mile" applications requiring
a large quantity of such reception points. The Company views this technology,
should it be successfully demonstrated and deployed, as relevant to ultrahigh
speed transmission over the high voltage backbone network, where it would
compete with optical fiber technology.

                                  Screen Phones

      Through Kliks, an Israeli company, the Company intends to serve as the
vehicle in Israel to offer the screen phone as an effective tool for offering a
full range of Internet and e-commerce services to the business (B-to-B) and
public consumers. Kliks has developed a concept that offers all the elements
essential for capitalizing on current consumer interest in the Internet and e-
commerce, while overcoming most of the shortcomings of a PC-based market
approach by the on-line services industry.

      The means to deliver services to the end-user will be through
screen-enhanced telephones supporting enhanced telephony services that are now
commercially available. The screen phones are Internet enabled with an
integrated alphanumeric keyboard, and a reader capable of handling smart cards
for electronic payments. The model relies on using Internet enhanced screen
phones instead of the personal computer (PC) as the conduit for electronic
commerce.

      Kliks is proposing a staged approach for this opportunity by which
consumers will initially be offered standard applications (e-mail, advanced
telephony, and Internet


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browsing/access) through the screen phone with the opportunity at a second stage
to expand the services to include a full suite of e-commerce activities. The
user being able to order consumer items/services at home via the screen phone in
the comfort of the home creates a very attractive and friendly environment for
enhancing e-commerce activities.

      Kliks success will be dependant on its ability to obtain the exclusive
distribution rights in Israel for a screen phone and its ability to design and
establish a services delivery platform. Kliks is currently negotiating such
rights for a screen phone which it believes to be a superior product. Kliks has
entered into an agreement with a software design company to develop and maintain
a services platform, pursuant to which users of the screen phone may log on to
gain access to services such as e-mail, home shopping and advanced telephony. In
addition, Kliks will need to enter into strategic relationships with
well-established providers, such as the national telecommunication carrier
(Bezeq), and a platform operator, who together will launch a portfolio of screen
telephony and electronic services to both business and the consumer.

Customer Profile

      The screen phone which Kliks intends to offer in the Israeli market, is a
conventional telephone. For the implementation plan, the screen phone deployment
will start in upscale communities with a high percentage of families with
children, business seniors and professional people. Once the business is
established, deployment can proceed to the wider community, with a goal of
achieving high penetration in the minimum period of time.

      In addition to revenues from home-based services, the Company believes
that Kliks will be able to generate revenues from large organizations whose
business depends on establishing and maintaining long-term account relationships
with customers. This will include banks and other financial service companies,
telephone and utility companies, consumer orientated services (supermarkets,
travel agencies, etc.) and leisure organizations (cable, pay per view, lottery
etc.). Within a community, sponsors will use this channel to deliver local
content services, thereby developing sustainable long-term relationships.
Community services organizations (schools, local authorities, libraries etc.)
will have a direct electronic link into the homes in their community, in order
to promote local services. This will be achieved through conventional e-mail
messaging through the server.

Competition

      Kliks will face competition primarily from two different avenues.

      Alternative screen phones - there are other Internet screen phones
available on the market, but so far none are being marketed in Israel. Kliks
believes that the screen phone for which it is currently negotiating the
exclusive Israeli distributions rights is a superior product in the market and
that it will provide a high entry barrier for potential competitors.

      Other Communication Media - there are several media which do, or are
expected, to provide services which overlap with the Kliks portal:

      ISPs (Internet Service Providers) - offer online portals. However, the
screen phone is well positioned against the PC, since it is a more user-friendly
device, always switched on and is more cost-effective. Moreover the US and UK
experience has shown widespread acceptance of screen phones in communities with
higher than average PC penetration.

      Web TV is expected to enter the market with similar services using the TV
as interface. The TV is currently seen primarily as an entertainment device,
while the screen phone will be easier and quicker to access.


                                       9
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      Cellular - operators in Israel are establishing portals that will enable
their subscribers to access the web and information services. Wireless Access
Protocol (WAP) services are under development which will be delivered to mobile
phones. Although these services will also be suited to screen phones, they are
primarily for mobile use. They do not, in the Company's view, represent a threat
to the screen phone in the home due to differences in communication costs and
size of the screen among other factors.

      Online Banking Services - Existing commerce systems (telephone/home
banking services) are being offered by financial institutions. Most Israeli
banks offer this service to their customers, and the current number of
subscribers per bank is approaching 150,000. Apart from cash withdrawals and
cash deposits, all teller services can be activated. Similar services exist for
commercial banking, with additional services in wholesale banking such as L/C,
Foreign Exchange, etc. Citigroup has announced that within the next few months,
it will enter the local market, and concentrate on offering electronic banking
services to high net-worth customers.

                            Patents and Trade Secrets

      Two provisional patent applications, with 1999 and 2000 priority dates,
and an assignment to PLT Solutions, Inc., have been submitted to the United
States Patent & Trademark Office. The Company's Israeli subsidiary, Ambient
Ltd., has two smart card patent applications pending in Israel which were filed
in 1996, for one of which a corresponding application was filed in the United
States in 1997. The United States Patent and Trademark Office ("PTO") has
allowed one patent application, which was filed in the United States in 1996,
for which a corresponding application was filed under the international Patent
Cooperation Treaty in 1997. There is currently one US patent pending in the
field of contactless smart cards. The smart card technology is not currently
being exploited nor does the Company foresee that it will be exploited in the
near future.

      There can be no assurance that any of the Company's future patent
applications will be granted, that any current or future patent or patent
application will provide significant protection for the Company's products or
technology or be of commercial benefit to the Company, or that the validity of
such patents or patent applications will not be challenged. Furthermore, there
can be no assurance that any patent underlying licensed technology will not be
challenged. Moreover, there can be no assurance that foreign patent, trade
secret or copyright laws will protect our technologies or that the Company will
not be vulnerable to competitors who attempt to copy or use our Smart Card
products or processes.

                             Research & Development

      A wholly owned subsidiary of the Company in Israel, Insulated Connection
Corporation, Ltd., provides research and development work for PLT Solutions Inc.
Neither the Company nor Ambient Ltd, its Israeli subsidiary engaged in smart
card based technologies, undertakes any research and development activities.

                                    Employees

      As of March 31, 2000, the Company, together with all of its subsidiaries,
had six employees. Mr. Michael Braunold, the Company's Chairman and Chief
Executive Officer, also serves as Chief Executive Officer of Ambient's
subsidiary PLT Solutions, Inc., and the Company's Chief Financial Officer, Mr.
Aryeh Weinberg, serves as Chief Financial Officer of PLT Solutions, Inc., Kliks,
ICC and Ambient Ltd. PLT Solutions, Inc. employs an additional employee, Mark
Isaacson, as Chief Operating Officer. Mr. Bernie Wolff, the Company's Vice
President, also serves as Chief Executive Officer of the Company's 40%


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<PAGE>

owned subsidiary, Kliks. Kliks also employs as a second employee the spouse of
the Company's Chairman and Chief Executive Officer, Mr. Michael Braunold. Dr.
Yehuda Cern serves as the Chief Technical Officer of ICC.

ITEM 2. PROPERTIES

      The Company's Israeli subsidiary, ICC, leases 250 square meters of office
space in Jerusalem, Israel.

            The Company's corporate offices are located at 22 Beit Hadafus,
Jerusalem 95483 Israel and its telephone number is 972-2-651-4330. Kliks'
corporate offices are located at 3 Gavish St., Kfar Saba, Israel. PLT Solutions
Inc.'s corporate offices are located at 60 Kendrick Street, Brookline,
Massachusetts. The Company's telephone number in the United States is (888)
861-0205. The Company also maintains a mailing address in the United States at
1285 Avenue of the Americas, New York, New York 10019.

ITEM 3. LEGAL PROCEEDINGS

      We are not involved in any pending legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

            The Company held our Annual Meeting of Shareholders on December 29,
1999 and the shareholders voted as to the following: (a) election of Michael
Braunold and Aryeh Weinberg as directors to serve for a term of one (i) year or
until their respective successors are elected and (b) the approval of Brightman
Almagor & Co. (a member of Deloitte Touche Tohmatsu), as independent public
accountants of the Company for the year ending December 31, 1999. All of these
matters were approved.

Voting Results were as follows:

                       FOR              AGAINST                ABSTAIN
1.    Directors        1,691,152        20,500                 0

2.    Auditors         1,689,152        22,500                 0

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      The Company's Common Stock is quoted on OTCBB under the symbol "ABTG". The
following table sets forth, for the periods indicated the range of high and low
sales prices per share of the Company's Common Stock, as reported on OTCBB.

                                      HIGH             LOW
     By Quarter End
     1999
     First Quarter                     1.375          2.625
     Second Quarter                    5.5            0.8125
     Third Quarter                     1.1875         0.625
     Fourth Quarter                    2.5            0.75
     1998
     First Quarter                    10.75           3.25
     Second Quarter                    9.5            4


                                       11
<PAGE>

     Third Quarter                    10.5            4
     Fourth Quarter                    8              3.5

      As of March 31, 2000, there were approximately 68 holders of record of the
Company's common stock. The Company believes that a significant number of shares
of its common stock are held in either nominee name or street name brokerage
accounts and, consequently, it is unable to determine the number of beneficial
owners of its stock.

      The Company has not declared or paid dividends on the Common Stock since
its formation, and it does not anticipate paying dividends in the foreseeable
future. Declaration or payment of dividends, if any, in the future, will be at
the discretion of the Board of Directors and will depend on the Company's then
current financial condition, results of operations, capital requirements and
other factors deemed relevant by the Board of Directors.

ITEM 6. PLAN OF OPERATIONS

      The following discussion and expositions should be read in conjunction
with the Financial Statements and related Notes contained elsewhere in this Form
10-KSB/A. Certain statements made in this discussion are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements can be identified by terminology such as
"may", "will", "should", "expects", "intends", "anticipates", "believes",
"estimates", "predicts", or "continue" or the negative of these terms or other
comparable terminology and include, without limitation, statements below
regarding: the Company's intended business plans; expectations as to product
performance; intentions to acquire or develop other technologies; and belief as
to the sufficiency of cash reserves. Because forward-looking statements involve
risks and uncertainties, there are important factors that could cause actual
results to differ materially from those expressed or implied by these
forward-looking statements. These factors include, but are not limited to, the
competitive environment generally and in the Company's specific market areas;
changes in technology; the availability of and the terms of financing,
inflation, changes in costs and availability of goods and services, economic
conditions in general and in the Company's specific market areas, demographic
changes, changes in federal, state and /or local government law and regulations;
changes in operating strategy or development plans; the ability to attract and
retain qualified personnel; and changes in the Company's acquisitions and
capital expenditure plans. Although the Company believes that expectations
reflected in the forward-looking statements are reasonable, it cannot guarantee
future results, performance or achievements. Moreover, neither the Company nor
any other person assumes responsibility for the accuracy and completeness of
these forward-looking statements. The Company is under no duty to update any
forward-looking statements after the date of this Report to conform such
statements to actual results.

      The Company is engaged in the design and development of products and
services in the fields of electronic commerce, Internet access and advanced
telephony applications. All of the Company's design and development activities
are conducted within the State of Israel.

      Ambient's activities are currently centered in two distinct areas: (i) the
marketing and implementation of a unique solution which includes Company
proprietary technology designed to facilitate the provision of rapid power line
telecommunication services to ordinary business and personal consumers and (ii)
the establishment, initially in Israel, of a nationwide screen phone network
that is designed to enable e-commerce and Internet browsing for consumers who do
not have access to, or are unable or unwilling to use, personal computers.

      Since its founding in June 1996, the Company has been engaged primarily in
the design and development of smart card based technologies and products. Owing
to a fundamental reassessment of general market developments in the field of
smart card based technologies,


                                       12
<PAGE>

the Company elected to leverage its experience and expertise acquired in the
area of smart card based technologies to the design, development and
commercialization of proprietary technologies in the field of
power-line-telecommunications (PLT) and screen phones. The Company has
effectively ceased all research and design efforts in the smart card area.

      The Company has established a subsidiary, PLT Solutions, Inc., in which it
hold a 90.1% interest, to promote a unique technology designed to facilitate the
use of existing electricity power lines and grids in the United States and Japan
for rapid Internet, telephone and data transfer to ordinary business and
personal users. Existing electrical power grids are not currently in use for
high speed data transmission due to certain power utility infrastructure
limitations. The Company has designed and developed proprietary technology that
overcomes these infrastructure limitations. The Company believes that our
technology will be especially attractive to Internet providers/integrators.

      The Company has a 40% interest in a newly established Israeli company,
Kliks which is engaged in attempting to establish a nationwide screen phone
network in Israel. The remaining 60% interest in Kliks is held by the Company's
Vice-President, Mr. Bernie Wolff. The network will enable Internet access for a
wide segment of the population which is less familiar with the use of PCs, or
belongs to the large segment of populace which does not have a PC.

      The Company established a wholly owned subsidiary in Israel, ICC, which
carries out research and development for PLT Solutions, Inc.

      As a development stage company, the Company has a limited operating
history upon which an evaluation of its prospects can be made. The Company's
prospects must therefore be evaluated in light of the problems, expenses, delays
and complications associated with a new business.

      As of December 31, 1999, the Company expended $1,721,837 on research and
development activities (net of $558,195 received by Ambient Ltd. as government
participation in its smart card development, from the Office of Chief Scientist
of the Israeli Ministry of Industry and Trade).

      As of December 31, 1999, the Company has incurred net losses aggregating
$6,078,528, reflecting principally net general and administrative expenses and
net research and development expenses. The Company expects to incur significant
up-front expenditures in connection with the new focus of its operations, and
operating losses are expected to continue for the foreseeable future. There can
be no assurance that the Company can be operated profitably in the future. The
Company's continuation as a going-concern is dependent upon, among other things,
its ability to obtain additional financing when and as needed, and to generate
sufficient cash flow to meet its obligations on a timely basis. Ambient may also
explore other business options including strategic joint ventures and business
combinations, including investments in other companies, or mergers. The report
of the independent auditors on the Company financial statements for the year
ended December 31, 1999 includes an explanatory paragraph relating to the
uncertainty of the Company's ability to continue as a going concern, which may
make it more difficult for it to raise additional capital.

      The Company issued to an independent consultant warrants, exercisable
through February 2002, to purchase up to 1.5 million shares of our common stock,
at an exercise price per share of $0.01. As a result of the issuance of these
warrants, the Company recognized a significant non-cash cost, and recorded
approximately $1.5 million as deferred financing expenses and charged
approximately $88,000 to operations.

      In February 2000, the Company issued $1,000,000 of its 10% convertible
debentures to private investors. The debentures were issued pursuant to the
terms of an agreement which further provides that, subject to certain
conditions, certain of these investors will purchase an additional $1,000,000 of
debentures no later than five days after the effective date of a


                                       13
<PAGE>

registration statement covering the common stock into which the debentures may
be converted. The debentures mature on the second anniversary of issuance. The
debentures are convertible into shares of the Company's common stock at a
conversion rate $0.40 per share, subject to adjustment under certain conditions.

      In connection with the issuance of the 10% convertible debentures, the
Company issued to the debenture holders warrants to purchase, in the aggregate,
625,000 shares of the Company's common stock at an exercise price per share of
$1.00. The warrants expire approximately on the third anniversary of the date of
issuance. The debentures and the warrants are currently convertible and
exercisable, subject to certain restrictions. Upon issuance of the remaining
$500,000 of the debentures, the Company will issue warrants to purchase in the
aggregate an additional 312,500 shares of its common stock at an exercise price
per share of $1.

      In February 2000 the Company converted outstanding debt of approximately
$700,000 in principal and accrued interest into 3,490,000 shares of its common
stock. The price of such shares on the date of issuance was $3.00 per share. The
Company recorded a non-cash extraordinary loss in the amount of approximately
$9.8 million and a corresponding increase of additional paid-in capital to
reflect the fair value of shares issued in connection with this transaction.

      The Company anticipates that cash on hand, as well as the $1,000,000 due
to be invested upon purchase of the additional convertible debentures, will
allow the Company to maintain operations as presently conducted at least through
December 31, 2000. Thereafter, we will need additional financing to maintain
operations. The Company is currently reviewing possible private sales of equity
or debt with equity features. The Company has no commitments for any such
financing and there can be no assurance that it will obtain additional capital
when needed or that any such additional capital will not have a dilutive effect
on current stockholders.

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      Our financial statements, which are included in this report on pages F-1
through F-25, are incorporated herein by reference.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT

Directors, Executive Officers, Promoters And Control Persons

      The names, ages and positions of the Company's directors, executive
officers and key employees of certain of its subsidiaries are as follows:

     Name               Age     Position
     ----               ---     --------

     Michael Braunold   40      Chairman of the Board, Chief Executive
                                Officer and Director; Chief Executive
                                Officer and Director of PLT Solutions,


                                       14
<PAGE>

                                Inc., Director of Kliks.com Ltd.; Director
                                of Insulated Connection Corporation, Ltd.

     Aryeh Weinberg     42      Chief Financial Officer and Director; Chief
                                Financial Officer of Kliks.com Ltd.; Chief
                                Financial officer of PLT Solutions Inc.;
                                Chief Financial Officer of Insulated
                                Connection Corporation, Ltd.

     Bernie Wolff       54      Vice-President; Chief Executive Officer and
                                Director of Kliks.com Ltd.

     Dr. Yehuda Cern    56      Chief Technology Officer of Insulated
                                Connection Corporation, Ltd.

     Mark Isaacson      40      Chief Operating Officer of PLT Solutions,
                                Inc.

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

      Michael Braunold has been the Chairman of the Company's Board and a
director since November 1999, Chief Executive Officer of the Company and Chief
Executive Officer and Director of PLT Solutions, Inc. since March, 2000 and
Director of Kliks.com Ltd. since January, 2000. Mr. Braunold concurrently serves
as Chief Executive Officer and Chairman of the Board of SPO Medical Equipment
Ltd., an Israeli company that specializes in medical technology related to pulse
oximetry techniques, a position which he has held since March, 1998. From 1986
to February 1998, Mr. Braunold was Senior Director of Business Development at
Scitex Corporation Ltd., a multinational corporation specializing in visual
information communication. As part of his corporate role, Mr. Braunold played a
strategic role in managing a team of professionals assigned to M&A activities.
During his 12-year tenure at Scitex, he held various positions within the
worldwide organization including a period in the US as Vice President of a
Scitex US subsidiary company specializing in medical imaging. Mr. Braunold
originates from the UK where he obtained a B.Sc. in Management Sciences and a
Master of Business Administration from Imperial College Business School, London.

      Aryeh Weinberg has been a director since November 1999 and the Company's
Chief Financial Officer and of Ambient Ltd. since January 1997. Mr. Weinberg
acted as the Company's Chief Executive Officer from September 1999 to March
2000. Concurrently from January 1997 through January 1998, Mr. Weinberg served
as Chief Financial Officer of Delta Three.Com., Inc., a global Internet
telecommunications company. From 1980 to 1996, Mr. Weinberg, a certified public
accountant, worked at Schiller Holinsky & Garolyn P.A., a public accounting firm
in the United States, becoming the audit and accounting partner there in 1991.
Mr. Weinberg earned a Bachelor's degree in business administration from Towson
State University in Baltimore, Maryland.

      Bernie Wolff has been the Company's Vice President since March, 2000 and
Chief Executive Officer and Director of our subsidiary Kliks.com Ltd. since
January 2000. From 1998 to 1999 he held the post of Executive Vice President of
Strategic Alliances and Business Development for PFS Ltd., a software
development company in Israel, specializing in wholesale banking FX and MM
trading systems for financial institutions. From November 1997 until January
1998 Mr. Wolff served as a Vice President of Surecomp Ltd., a software
development company in Israel. From 1982 to October 1997, he held senior
international


                                       15
<PAGE>

corporate positions in 5 countries for Philips Electronics in a career spanning
almost 25 years. Prior to moving to Israel in 1997, he served for seven years as
Senior Vice President of Sales and Marketing for Philips Home Services in the
US. In this capacity he was responsible for the invsestigation of the on-line
services industry in the US.

      All directors hold office until the next annual meeting of stockholders
and the election and qualification of their successors. Except for Michael
Braunold who receives $7,500 annually for serving on the Company's Board,
directors currently do not receive cash compensation for serving on the Board of
Directors. Officers are elected annually by the Board of Directors and serve at
the discretion of the Board. Roan Capital Partners, L.P., the underwriter of the
Company's initial public offering, is entitled to designate one director to the
Board during the three (3) year period ending February 12, 2001. Roan Capital
Partners, L.P. has not identified any director designee.

Key Employees of Certain of the Subsidiaries

      Below is certain information relating to two key employees of the
Company's wholly-owned research and development subsidiary, ICC and its majority
owned subsidiary, PLT Solutions, Inc.:

      Dr. Yehuda Cern has been Chief Technology Officer of Insulated Connection
Corporation, Ltd. since February 2000 and was the Chief Technology Officer of
our subsidiary Ambient Ltd. from September 1997 to January 2000. Dr. Cern worked
at AirOptics, Inc., an infrared communications company located in Lancaster,
Pennsylvania and a subsidiary of JOLT, Ltd. in Jerusalem, as Chief Operating
Officer and Senior Vice President from 1996 to 1997 and as Chief Technical
Officer from 1993 to 1996. From 1991 to 1993, Dr. Cern served as R&D Manager and
then Chief Operating Officer of News Datacom Research Ltd., a subsidiary of News
Corp. located in Israel. Dr. Cern received a B.S. degree and an M.Sc. degree in
electrical engineering from Wayne State University in Detroit and a Ph.D. in
medical electronics from the Weizmann Institute in Israel.

      Mark Isaacson has been the acting Chief Operating Officer of PLT
Solutions, Inc. since April 2000. From 1998 until April 2000 Mr. Isaacson served
as an independent consultant to various companies in the high technology
industry. From 1995 to 1998 he held the post of President of The Marlin Group,
Inc., a marketing and business development consultancy specializing in brand
marketing. In this capacity he was responsible for company operations and
business development. From 1983 through 1994, as President of Prestige
International, a specialist company in implementing consumer brand marketing and
merchandising projects for Fortune 1000 companies, he was responsible for
company operations and worldwide business development. Mr. Isaacson has over 16
years of senior management experience.

Section 16(a) Beneficial Ownership Reporting Compliance

      Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's executive officers, directors and persons
who beneficially own more than 10% of a registered class of the Company's equity
securities (collectively, the "Reporting Persons") to file certain reports
regarding ownership of, and transactions in, the Company's securities with the
Securities and Exchange Commission (the "SEC"). These officers, directors and
stockholders are also required by SEC rules to furnish the Company with copies
of all Section 16(a) reports that they file with the SEC. Based solely on a
review of Section 16 reports received by the Company from Reporting Persons, the
Company believes that for the year ended December 31, 1999 each of Aryeh
Weinberg and Michael Braunold failed to file a Form 3 in connection with their
appointment as an officer and election as a director of the Company and Aryeh
Weinberg failed to file a Form 4 or 5 with


                                       16
<PAGE>

respect to options granted to him in May 1999. The Company has been advised that
such Reporting Persons intend to file such forms in the near future.

ITEM 10. EXECUTIVE COMPENSATION

      The following table sets forth all compensation awarded to, earned by, or
paid for all services rendered to the Company during the Company's fiscal years
ended December 31, 1999, 1998 and 1997 by the Company's former Chief Executive
Officer and other "named executive officers," as defined under the rules and
regulations of the Securities Act of 1933, as amended (the "Securities Act").

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
Name and
Principal Position            Year          Annual Compensation                                Long-Term Compensation

                                                     Other Annual
                                   Salary   Bonus    Compensation                 Awards                       Pay-outs
                                   ------   -----    ------------
                                   ($)      ($)      ($)               Restricted          Securities
                                                                       Stock               Underlying
                                                                       Award(s)            Options      LTIP           All Other
                                                                       ($)                 (#)          Pay-outs($)    Compensations
                                                                       ----------          ----------   -----------    -------------
<S>                          <C>   <C>      <C>          <C>           <C>                    <C>         <C>    <C>       <C>
Arych Weinberg,              1999  65,666   --           --                                   51,000(2)   --     --        --
Chief Financial              1998  52,484   --           --            --                     --          --     --        --
Officer and Former           1997  16,250   --           80,000(3)                            --          --     --        --
Acting Chief Executive
Officer (1)

Yehuda Corn                  1999  115,139   --           --           --                     --          --     --        --
Former Chief                 1998  120,017   --           --           --                     --          --     --        --
Technology                   1997  29,537    --           --           336,000(5)             --          --     --        --
Officer (4)

Jacob Davidson,              1999  23,991    --           --           --                     119,000(7)  --     --        --
Former Chief                 1998  83,244    --           --           --                     --          --     --        --
Executive Officer (6)        1997  61,085    --           --           --                     --          --     --        --
</TABLE>

(1) Mr. Weinberg acted as the Company's Chief Executive Officer from September
1999 to March 2000.

(2) Represents 51,000 vested options issued in May 1999 under the Company's 1998
Stock Option Plan at an exercise price per share of $0.81. See "Certain
Relationships and Related Transactions."

(3) Represents the value of 20,000 shares of the Company's common stock issued
in February 1997 (based on August 1997 valuation).

(4) Dr. Cern resigned from the position of Chief Technology Officer of the
Company's subsidiary Ambient Ltd., in January 2000. Dr. Cern has held the
position of Chief Technology Officer of the Company's affiliate Insulated
Connection Corporation, Ltd. since March 2000.

(5) Represents the value of 84,167 restricted shares of the Company's common
stock issued in August 1997. Such shares vested in August 1998.


                                       17
<PAGE>

(6) Jacob Davidson resigned from the Company's employ in September 1999.

(7) Represents 119,000 vested options issued in May 1999 under the Company's
1998 Stock Option Plan at an exercise price per share of $0.81. See "Certain
Relationships and Related Transactions."

                             OPTIONS GRANTED IN 1999

      The following table sets forth certain information concerning options
granted during 1999 to the executive officers named in the Summary Compensation
Table:

<TABLE>
<CAPTION>
                    Number of            Percentage of
                    Securities           Total Options       Exercise
                    Underlying           Granted to          Price        Expiration
Name                Options granted (#)  Employees in 1999   ($/share)    Date
----                -------------------  -----------------   ---------    ----------
<S>                            <C>                <C>          <C>           <C>
Jacob Davidson                  119,000           70%          0.81(1)       2009
Arych Weinberg                   51,000           30%          0.81(1)       2009
</TABLE>

(1) Based on the closing price of the common stock ($0.81) on May 24, 1999, as
reported on the OTC Electronic Bulletin Board.

       AGGREGATED OPTION EXERCISES IN 1999 AND 1999 YEAR END OPTION VALUES

<TABLE>
<CAPTION>

                                                    Number of Securities
               Number of                           Underlying Unexercised          Value of Unexercised
               Shares                                    Options at                in-the-Money Options
               Acquired on      Value               December 31, 1999(#)          at December 31, 1999($)
Name           Exercise (#)     Realized ($)    ---------------------------   ------------------------------
----           ------------     ------------    Exercisable / Unexercisable   Exercisable(1) / Unexercisable
<S>                  <C>             <C>         <C>       <C>    <C>          <C>          <C>   <C>
Jacob Davidson       0               0            119,000   /     0            $134,470     /     0
Arych Weinberg       0               0             51,000   /     0            $ 57,630     /     0
</TABLE>

(1) Based on the difference between the exercise price of such options ($0.81)
and the closing price of the common stock on December 31, 1999 ($1.94), as
reported on the OTC Electronic Bulletin Board.

1998 Incentive Stock Option Plan

      The Company has adopted the 1998 Incentive and Non-Qualified Stock Option
Plan (the "1998 Option Plan"). The 1998 Option Plan provides for the grant of
options to purchase shares of common stock to eligible employees, officers,
directors, consultants and service providers of the Company. A total of 250,000
shares of our common stock has been reserved for issuance under the 1998 Option
Plan.

      The Company's current policy is that all full time key employees be
considered annually for the possible grant of stock options, depending upon
employee performance. The criteria for the awards are experience, uniqueness of
contribution and level of performance shown during the year. Stock options are
intended to improve loyalty to the company and help make each employee aware of
the importance of our business success.


                                       18
<PAGE>

      The 1998 Option Plan is administered by the Board of Directors. The Board
has discretion to select the optionee and to establish the terms and conditions
of each option, subject to the provisions of the 1998 Option Plan. Options
granted under the 1998 Option Plan may be non-qualified stock options or
Incentive Stock Options (an option which is intended to meet the requirements of
Section 422 of the Internal Revenue Code) but in any case the exercise price of
options granted may not be less than 100% of the fair market value of the common
stock as of the date of grant (110% of the fair market value if the grant is to
an employee who owns more than 10% of the outstanding common stock.) Options may
not be exercised more than 10 years after the grant (five years if the grant is
an Incentive Stock Option to any employee who owns more than 10% of the
outstanding common stock). The Board may, in its discretion and subject to the
terms of the 1998 Option Plan (i) accelerate the date or dates on which all or
any particular option or options granted under the 1998 Option Plan may be
exercised, or (ii) extend the dates during which all, or any particular, option
or options granted under the 1998 Option Plan may be exercised, provided, that
no such extension will be permitted if it would cause the 1998 Option Plan, or
any option granted thereunder, to fail to comply with Rule 16b-3 of the
Securities and Exchange Act of 1934, as amended, or if it would cause any
incentive stock option granted under the 1998 Option Plan to fail to qualify as
an incentive stock option. Except as described below or as otherwise determined
by the Board at the date of the grant of the option, and subject to the
provisions of the 1998 Option Plan, an optionee may exercise an option at any
time within three months (or within such lesser period as may be specified in
the applicable option agreement) following termination of the optionee's
employment or other relationship with the Company (one year if such termination
was due to the death or Disability (as defined) of the optionee) but in no event
later than the expiration date of the Option. Except as otherwise determined by
the Board at the date of the grant of an Option, if the termination of the
optionee's employment or other relationship is for cause, the Option will expire
immediately upon such termination. Options granted under the 1998 Option Plan
are not transferable and may be exercised only by the respective grantees during
their lifetimes or by their heirs, executors or administrators in the event of
death. Under the 1998 Option Plan, shares subject to unexercised canceled or
terminated options are reserved for subsequently granted options. The number of
shares of our common stock reserved for issuance under the 1998 Option Plan, the
number of options outstanding and the exercise price thereof are subject to
adjustment in the case of certain transactions such as mergers,
recapitalizations, stock splits or stock dividends.

      As of March 30, 2000, 210,000 options to purchase shares of common stock
were outstanding under the 1998 Option Plan, leaving a balance of 40,000 shares
of our common stock available for issuance.

Employment Agreements

      The Company entered into an employment agreement in March 2000 with Aryeh
Weinberg pursuant to which Mr. Weinberg is employed as the Company's Chief
Financial Officer for a one year term which is automatically renewable from year
to year unless either party gives notice of termination at least 90 days prior
to the expiration date. Mr. Weinberg currently receives an annual salary of
$72,000 and, subject to (and upon) the adoption of a new Company stock option
plan by the Company's stockholders at the 2000 annual stockholders meeting, will
be granted 50,000 options under such plan to purchase, at a nominal price,
shares of common stock of the Company. Mr. Weinberg has agreed to certain
customary confidentiality and non-compete provisions that prohibit him from
competing with the Company for one year, or soliciting employees for one year,
following the termination of his employment.

      Michael Braunold entered into an employment contract with the Company's
subsidiary, PLT Solutions, Inc. He receives $3000 per month in salary and,
subject to (and upon) the adoption of a new Company stock option plan by the
Company's stockholders at the 2000


                                       19
<PAGE>

annual stockholders meeting, will be granted 100,000 options under such plan to
purchase, at a nominal price, shares of common stock of the Company, such
options to vest over 3 years, beginning March 2000, except that if all (or
substantially all) of the assets of PLT Solutions, Inc. are sold, then all of
these options immediately vest. The employment agreement is for one year
beginning March 2000 and will renew automatically for additional one year terms
unless terminated by either party upon three months prior written notice. Mr.
Braunold has agreed to certain customary confidentiality and non-compete
provisions that prohibit him from competing with the Company for one year, or
soliciting employees for one year, following the termination of his employment.

      Bernie Wolff serves as the Company's Vice President pursuant to a letter
appointment between us. Mr. Wolf is employed by Kliks.com Ltd. as Chief
Executive Officer pursuant to an employment agreement entered into in February
2000. Mr. Wolff receives $5,000 per month and owns 60% of the outstanding
capital of Kliks. The Company issued to Mr. Wolff, 10,000 options from the 1998
Option Plan, at an exercise price per share of $1.94, to vest as follows: (i)
5,000 options following 12 months of employment with Kliks and (ii) an
additional 5,000 options following 24 months of employment with Kliks. Mr. Wolff
has agreed to certain customary confidentiality and non-compete provisions that
prohibit him from competing with the Company for one year, or soliciting
employees for one year, following the termination of his employment.

      Key Employees

      Mark Isaacson has been acting Chief Operating Officer of PLT Solutions,
Inc. since April 2000. To date he has received $15,000 in salary per month. The
terms of his employment agreement are currently being negotiated. The Company
expects the changes in compensation to include an increase in monthly salary to
$17,500 and options to acquire shares of the Company, exercisable at a nominal
price. The Company anticipates, upon the adoption by its stockholders at the
2000 annual stockholders meeting of a new Company stock option plan, Mr.
Isaacson will receive fully vested options for 100,000 shares of common stock on
signing of the employment agreement, 50,000 options vesting twelve months
thereafter and 200,000 options to vest upon achieving certain milestones,
except, that, upon the sale of all (or substantially all) of the assets of PLT
Solutions, Inc., then all of these options will immediately vest. The employment
agreement will contain customer confidentiality and non-competition provisions.

      Yehuda Cern is the Chief Technical Officer of Insulated Connection
Corporation, Ltd. Dr. Cern entered into an employment agreement with ICC in
February 2000. He receives a base salary of $5,785 per month, which may be
increased to up to $11,570 according to the number of hours he works per month.
In addition, he was issued shares of the Company's common stock in an amount
equal to 9.9% of the issued and outstanding equity of the Company's subsidiary,
PLT Solutions, Inc. Upon and subject to the adoption of a new Company stock
option plan at the Company's annual stockholders meeting to be held in 2000, Dr.
Cern will be granted by the Company 100,000 options to acquire our common stock,
at an exercise price per share of $2.50, of which 50,000 will vest upon the
first anniversary, and an additional 50,000 options which will vest upon the
second anniversary, of his employment with the Company. The employment agreement
is for a term of one year and will renew automatically for additional one year
terms unless terminated by either party upon three months prior written notice.
Dr. Cern has agreed to certain customary confidentiality and non-compete
provisions that prohibit him from competing with the Company or soliciting
employees of the Company for one year following the termination of his
employment.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


                                       20
<PAGE>

     The following table sets forth, as of March 30, 2000, certain information
with respect to the beneficial ownership of common stock by (i) each person
known by the Company to be the owner of more than 5% of the outstanding common
stock, (ii) each director, (iii) each executive officer named in the Summary
Compensation Table and (iv) all directors and executive officers as a group:

                                           Shares of common stock     Percent of
Name and Address of Beneficial Owner       Beneficially Owned         Class(1)

Inglewood Holding Ltd.                     1,500,000                  13.4%
Grove Industries Ltd. (2)                    700,000                   7.24%
Clearview International
Investment (3)                               625,000(4)                6.08%
Ashfield Investment (3)                      625,000(4)                6.08%
Econor Investment
Corporation (3)                              625,000(4)                6.08%
Mantle International
Investment (3)                               625,000(4)                6.08%
Trax Investments Ltd. (5)                    537,250                   5.56%
Howard Weiss                                 500,000                   5.18%
Arych Weinberg (6)                            71,000(7)                *
Michael Braunold (6)                               0                   *
Directors and executive officers
     as a group (3 persons)                   71,000(7)                *

* Less than 1%

(1) Based on a 9,656,611 shares outstanding as of March 30, 2000. Unless
otherwise noted, the Company believes that all persons named in the table have
sole voting and investment power with respect to all shares of common stock
beneficially owned by them. A person is deemed to be the beneficial owner of
securities that can be acquired by such person within 60 days from August 30,
2000 upon the exercise of warrants or options. Each beneficial owner's
percentage ownership is determined by assuming that options or warrants that are
held by such person (but not those held by any other person) and which are
exercisable within 60 days from August 30, 2000 have been exercised.

(2) The business address of such beneficial owner is 11 The Shrubberies, George
Lane, South Woodford, London E181BD.

(3) The business address of such person is c/o Advisor Associates Inc. 1575 45th
Street, Brooklyn, NY 11219.

(4) Represents (i) shares issuable upon conversion of the entire $200,000 in
aggregate principal amount of 10% Convertible Debentures due February 28, 2002,
based on an assumed conversion price of $0.40, and (ii) 125,000 shares issuable
upon exercise of outstanding warrants, which warrants are exercisable at an
exercise price per share of $1.00

(5) The business address of such beneficial owner is the Grand Pavillion,
Commercial Centre, West Bay Road, POB 2428 GI, Cayman Islands.

(6) The business address of each such person is c/o Ambient, 22 Beit Hadafus,
Jerusalem 95483 Israel.

(7) Includes 51,000 fully vested options issued under our 1998 Option Plan.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


                                       21
<PAGE>

      In June 1999, the Company granted to Aryeh Weinberg, the Company's Chief
Financial Officer, 51,000 vested options under the Company's 1998 Option Plan
with a per share exercise price of $0.81. In April 2000, Mr. Weinberg was
granted an additional 30,000 options under the 1998 Option Plan at a nominal
exercise price per share, which options vest over 12 months. Subject to (and
upon) the adoption of a new Company stock option plan at the Company's annual
stockholders meeting to be held in 2000, the Company undertook to issue to Mr.
Weinberg, from any such newly adopted plan, 50,000 options at an exercise price
of $0.01 per share, such options to vest over 18 months.

      Michael Braunold, a director, the Company's Chief Executive Officer and
Chairman of the Board, is paid $7,500 annually for serving on the Company's
Board. Subject to (and upon) the adoption of a new Company stock option plan at
the Company's annual stockholders meeting to be held in 2000, the Company
undertook to issue to Mr. Braunold, from any such newly adopted plan, 100,000
options at an exercise price of $0.01 per share, such options to vest over 3
years, beginning March 2000. If all (or substantially all) of the assets of PLT
Solutions, Inc. are sold, then all of these options immediately vest.

      In March 2000 the Company undertook to issue to Dr. Yehuda Cern, Chief
Technology Officer of ICC, subject to (and upon) the adoption of a new Company
stock option plan at the Company's annual stockholders meeting to be held in
2000, (i) 50,000 options from such any newly adopted plan, such options to vest
following 12 months of continuous employment with ICC and (ii) an additional
50,000 options vesting following 24 months of continuous employment with ICC, in
each case at an exercise price per share of $2.50.

      Pursuant to the letter appointment, dated March 28, 2000, of Bernie Wolff
as Vice President, the Company issued to Mr. Wolff, 10,000 options from the
Company's 1998 Option Plan, at an exercise price per share of $1.94, as follows:
(i) 5,000 options to vest following 12 months of employment with the Company as
Vice President, and (ii) an additional 5,000 options to vest following 24 months
of employment with the Company as Vice President.

      Mr. Wolff, the Company's Vice-President, currently owns 60% of the issued
capital of our affiliate Kliks.com Ltd. The Company and Mr. Wolff entered into a
shareholders agreement dated December 31, 1999 respecting the operations of
Kliks. The Company holds an option to acquire an additional 10% of the equity of
Kliks, exercisable until the second anniversary of the shareholders agreement,
upon payment to Kliks of $250,000. The members of the board of Kliks are Mr.
Wolff and Michael Braunold.

      PLT Solutions, Inc. and Mark Isaacson are currently finalizing the terms
of Mr. Isaacson's employment as PLT Solutions' Chief Operating Officer. The
Company anticipates, upon approval by its stockholders at the 2000 annual
stockholders meeting of the 2000 Incentive Plan, Mr. Isaacson will receive fully
vested options for 100,000 shares of common stock on signing of the employment
agreement, 50,000 options vesting twelve months thereafter and 200,000 options
to vest upon achieving certain milestones, all such options being exercisable at
a nominal price per share. Upon the sale of all (or substantially all) of the
assets of PLT Solutions, Inc., then all of these options will immediately vest.

      Mr. Jacob Davidson received 119,000 vested options in June 1999 under the
Company's 1998 Stock Option Plan, at an exercise price per share of $0.81. Mr.
Davidson, the Company's former Chief Executive Officer resigned from the Company
in June 1999.


                                       22
<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

3.1 Certificate of Incorporation of the Company, as amended (1)
3.2 By-Laws of the Company, as amended (1)
3.3 Memorandum of Association of Ambient Israel (1)
3.4 Articles of Association of Ambient Ltd. (1)
3.5 Certificate of Incorporation of PLT Solutions, Inc. (2)
3.6 By-Laws of PLT Solutions, Inc. (2)
3.7 Memorandum of Kliks.com Ltd. (2)
3.8 Articles of Association of Kliks.com Ltd. (2)
3.9 Memorandum of Insulated Connections Corporation Ltd.(2)
3.10 Articles of Association of Insulated Connections Corporation Ltd.(2)
4.1 Specimen Stock Certificate (1)
4.2 Form of 10% Promissory Note due January 20, 2000 (2)
4.2.1 Form of 10% Convertible Debenture due February 28, 2002 (2)
4.2.2 Form of Common Stock Purchase Warrant (2)
4.2.3 Warrant Agreement dated as of February 17, 2000 between Ambient and
Inglewood Holding Inc. (2)
4.2.4 Form of Convertible Preferred Stock Warrant (3)
10.1 Form of the Company's 1998 Stock Option Plan. (1)
10.2 Form of Employment Agreement between the Company and Jacob Davidson(1)
10.3 Employment Agreement between Ambient Ltd. and Dr. Yehuda Cern (1)
10.4 Summary (in English) of principal terms of lease between Ambient Israel and
Jerusalem Technological Park (1)
10.5 Employment Agreement dated March 27, 2000 between PLT solutions, Inc. and
Michael Braunold (2)
10.6 Employment Agreement dated April 10, 2000 between Ambient Corporation and
Aryeh Weinberg (2)
10.7 Employment Agreement dated December 31, 1999 between Kliks.com Ltd. and
Bernie Wolff (2)
10.8 Marketing Agreement dated as of February 25, 2000 between Ambient
Corporation and Hamilton Trading Ltd. (2)
10.9 Consulting Agreement dated as of March 29, 2000 between Ambient Corporation
and Cabus Ltd. (2)
10.10 Consulting Agreement dated as of March 27, 2000 between Ambient
Corporation and Rivermill Ltd. (2)
10.11 Consulting Agreement dated as of February 15, 2000 between Ambient
Corporation and Limekiln Ltd. (2)
10.12 Consulting Agreement dated as of February 17, 2000 between Ambient
Corporation and Gershon Tokayer (2)
10.13 Consulting Agreement dated as of February 14, 2000 between Ambient
Corporation and Grove Industries Ltd. (2)
10.14 Amendment Agreement dated as of March 19, 2000 between Grove Industries
Ltd. and Ambient Corporation. (2)
10.15 Consulting Agreement dated as of March 27, 2000 between Lingfield Ltd. and
Ambient Corporation.(2)
10.16 Consulting Agreement dated as of February 19, 2000 between Trax
Investments Ltd. and Ambient Corporation.(2)
10.17 Consulting Agreement dated as of March 20, 2000 between Nina Fischman and
Ambient Corporation.(2)
10.18 Shareholders Agreement dated as of December 31, 1999 between Bernie Wolff
and Ambient Corporation concerning Kliks.com Ltd.(2)
10.19 Form of Securities Purchase Agreement between Ambient and certain
securityholders dated as of February 15, 2000 (2)


                                       23
<PAGE>

10.20 Form of Registration Rights Agreement dated as of February 15, 2000
between Ambient and certain investors (2)

21.1 Subsidiaries of the Company (2)
23.1 The consent of Brightman Alamgor & Co., a member of Deloitte Touche
Tohmatsu, certified public accountants *
23.2 The consent of Luboshitz Kasierer, a member of Arthur Andersen, certified
public accountants.
27.1 Financial Data Schedule (2)

*     Filed Herewith

(1) Filed as an Exhibit to Ambient's Registration Statement on Form SB-2, No.
33-40045, and incorporated herein by reference

(2) Filed as an Exhibit to Ambient's Annual Report on Form 10-KSB for the year
ended December 31, 1999 and incorporated herein by reference.

(3) Filed as an Exhibit to Ambient's Registration Statement on Form SB-2, No.
333-43054, and incorporated herein by reference

(b)   Reports on Form 8-K

(i) Report on Form 8-K filed on November 15, 1999


                                       24
<PAGE>
                                   SIGNATURES

      In accordance with the requirements of the Exchange Act the registrant
caused this report to be signed by the undersigned thereunto duly authorized.

Date: September 11, 2000                s/ Michael Braunold


                                        Michael Braunold
                                        Chief Executive Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following person on behalf of the Company and in
the capacities and on the date indicated.

Signature                   Title                              Date


/s/ Michael Braunold        Chairman of the Board,            September 11, 2000
                              Chief Executive Officer
                              and Director
                              (Principal Executive Officer)

/s/ Mark Isaacson           Vice President                    September 11, 2000
                              and Director


                                       25
<PAGE>

                               AMBIENT CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)

                        CONSOLIDATED FINANCIAL STATEMENTS
                             AS OF DECEMBER 31, 1999

<PAGE>

                               AMBIENT CORPORATION

                          (A DEVELOPMENT STAGE COMPANY)

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                            Page
                                                                            ----

INDEPENDENT AUDITORS' REPORTS                                          F-1 - F-3

CONSOLIDATED FINANCIAL STATEMENTS:

   Balance Sheets                                                            F-4

   Statements of Operations                                                  F-5

   Statement of Changes in Shareholders Deficiency                           F-6

   Statements of Cash Flows                                                  F-7

   Notes to Financial Statements                                      F-8 - F-25

<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Shareholders of
Ambient Corporation

We have audited the accompanying consolidated balance sheets of Ambient
Corporation (a development stage company) and subsidiary (collectively, "the
Company") as of December 31, 1999 and 1998, and the related consolidated
statements of operations, changes in shareholders' deficiency and cash flows for
the years then ended and for the period from inception (June 1996) to December
31, 1999. These 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 did not audit the financial statements of the Company for the period from
June 1996 (date of inception) through December 31, 1997, which statements
reflect a net loss of $ 2,126,810, representing 35% of the total deficit
accumulated during the development stage from inception to December 31, 1999.
Those statements were audited by other auditors whose report (which expressed an
unqualified opinion and included an explanatory paragraph with respect to the
Company's continuing existence as a going concern) has been furnished to us, and
our opinion, insofar as it relates to the amounts included for such prior
period, is based solely on the report of such other auditors.

We conducted our audits in accordance with auditing standards generally accepted
in the 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. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes 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 and the report of other auditors
provide a reasonable basis for our opinion.

In our opinion, based, on our audits and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Ambient Corporation
and subsidiary as of December 31, 1999 and 1998, and the results of their
operations, changes in shareholders' deficiency and cash flows for the years
then ended and for the period from inception (June 1996) to December 31, 1999 in
conformity with accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company incurred a net loss in 1999 of
approximately $1.1 million (and approximately $6.1 million since inception) and
anticipates that it will continue to incur losses for some time. In addition,
the Company had a working capital deficit of approximately $0.7 million and a
shareholders' deficiency of approximately $ 1million as of December 31, 1999.
Although the Company raised net proceeds of approximately $ 3.4 million from an
initial public offering in February 1998, it has substantially utilized all of
such proceeds, primarily for product development. The Company's continued
existence as a going concern is dependent on obtaining additional financing for
product development and commercialization. After the balance sheet date, the
Company raised debt financing, through convertible debentures in the amount of
$1 million.


                                      F-1
<PAGE>

The Company continues to seek out other potential sources of equity capital, but
there can be no assurance that it will be able to do so in the foreseeable
future. These matters raise substantial doubt about the Company's ability to
continue as a going concern. Management plans in regard to these matters are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

Brightman Almagor & Co.
Certified Public Accountants (Israel)
A member of Deloitte Touche Tohmatsu

Tel Aviv, Israel
April 13, 2000


                                      F-2
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To The Shareholders of
AMBIENT CORPORATION

We have audited the accompanying consolidated balance sheets of Ambient
Corporation (a development stage company) and subsidiary as of December 31, 1996
and 1997, and the related consolidated statements of operations, changes in
shareholders' deficiency and cash flows for the two years in the period ended
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards
in the 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. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Ambient
Corporation and subsidiary as of December 31, 1996 and 1997, and the results of
their operations and their cash flows for each of the two years in the period
ended December 31, 1997, in conformity with accounting principles generally
accepted in the United States.

As discussed in Note 1 to the consolidated finical statements, the Company is in
the development stage and its continued existence is dependent on obtaining
additional financing for product development and commercialization. The Company
incurred a net loss in 1996 and 1997 and anticipates that it will continue to
incur losses for some time. These matters raise substantial doubt about the
Company's ability to continue as a going concern. The accompanying financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and classification of
liabilities that might be necessary should the Company be unable to continue as
a going concern.

                                           Luboshitz, Kasierer & Co.
                                           Member Firm of Arthur Andersen

Tel-Aviv, May 19, 1998


                                      F-3
<PAGE>

                               AMBIENT CORPORATION
                          (A Development Stage Company)
                           CONSOLIDATED BALANCE SHEETS
                      (in U.S. dollars, except share data)

<TABLE>
<CAPTION>
                                                                                               As of December 31,
                                                                                               ------------------
                                                                              Note         1 9 9 9             1 9 9 8
                                                                              ----        ----------         ----------
<S>                                                                           <C>              <C>               <C>
ASSETS
CURRENT ASSETS
   Cash and cash equivalents                                                                   8,071             16,138
   Restricted cash                                                              3             84,820            131,259
   Receivables and prepaid expenses                                                           34,628            334,983
                                                                                          ----------         ----------
       Total current assets                                                                  127,519            482,380
                                                                                          ----------         ----------
LONG TERM INVESTMENT                                                            4            170,000            350,000
                                                                                          ----------         ----------
PROPERTY AND EQUIPMENT                                                          5
   Cost                                                                                      264,928            328,320
   Less - accumulated depreciation                                                           129,630             92,057
                                                                                          ----------         ----------
       Property and equipment, net                                                           135,298            236,263
                                                                                          ----------         ----------
DEPOSITS FOR SEVERANCE PAY                                                      9                193              6,587
                                                                                          ----------         ----------
       Total assets                                                                          433,010          1,075,230
                                                                                          ==========         ==========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES
   Bank loan                                                                   6A            140,903            144,006
   Accounts payable                                                                          212,967            337,105
   Notes payable                                                                7                 --            585,900
   Other current liabilities                                                    8            491,713            175,264
                                                                                          ----------         ----------
       Total current liabilities                                                             845,583          1,242,275
                                                                                          ----------         ----------
LONG-TERM LIABILITIES
   Long-term bank loan                                                         6B              9,958             37,886
   Liability for severance pay                                                  9             15,334             37,613
                                                                                          ----------         ----------
       Total long-term liabilities                                                            25,292             75,499
                                                                                          ----------         ----------
       Total liabilities                                                                     870,875          1,317,774
                                                                                          ----------         ----------
CONTINGENT LIABILITIES AND COMMITMENTS                                          10

NOTES PAYABLE                                                                   7            600,000                 --
                                                                                          ----------         ----------

SHAREHOLDERS' DEFICIENCY                                                        11

   Common stock $0.001 par value; authorized - 20,000,000 shares; issued and
      outstanding - 3,130,833 and 3,074,333 shares, respectively                               3,131              3,074
   Additional paid-in capital                                                              5,041,595          4,941,189
   Deferred stock-based compensation                                                          (4,063)          (239,683)
   Deficit accumulated during the development stage                                       (6,078,528)        (4,947,124)
                                                                                          ----------         ----------
       Total shareholders' deficiency                                                     (1,037,865)          (242,544)
                                                                                          ----------         ----------
       Total liabilities and shareholders' deficiency                                        433,010          1,075,230
                                                                                          ==========         ==========
</TABLE>

The accompanying notes are an integral part of the financial statements.


                                      F-4
<PAGE>

                               AMBIENT CORPORATION
                          (A Development Stage Company)
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in U.S. dollars, except share data)

<TABLE>
<CAPTION>
                                                                                           Cumulative from
                                                                   Year ended                inception to
                                                                   December 31,              December 31,
                                                          ----------------------------     ---------------
                                                   Note       1999             1998              1999
                                                   ----       ----             ----              ----
<S>                                                <C>    <C>               <C>               <C>
Research and development expenses                            340,287           726,479         1,721,837
Less - participation by the Office of the Chief
Scientist of the State of Israel                   10A       231,767           230,452           558,195
                                                          ----------        ----------        ----------
                                                             108,520           496,027         1,163,642

Operating, general and administrative expenses      13       684,234         1,904,273         3,635,625
                                                          ----------        ----------        ----------

       Operating loss                                       (792,754)       (2,400,300)       (4,799,267)

Financing expenses, net                                      332,546           416,427         1,269,570
Other expenses, net                                            6,104             3,587             9,691
                                                          ----------        ----------        ----------

       Net loss                                           (1,131,404)       (2,820,314)       (6,078,528)
                                                          ==========        ==========        ==========
Basic and diluted loss per share                               (0.36)            (0.95)
                                                          ==========        ==========

Weighted average number of shares outstanding              3,121,479         2,979,541
                                                          ==========        ==========
</TABLE>

The accompanying notes are an integral part of the financial statements.


                                      F-5
<PAGE>

                               AMBIENT CORPORATION
                          (A Development Stage Company)
          CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIENCY
                      (in U.S. dollars, except share data)

<TABLE>
<CAPTION>
                                                                                                     Deficit
                                                                                                   accumulated
                                                                      Additional   Deferred stock  during the
                                            Number        Share        paid-in       - based       development
                                          of shares      capital       capital      Compensation      stage          Total
                                          ---------      -------       -------      ------------      -----          -----
<S>                                        <C>               <C>         <C>          <C>          <C>            <C>
   Balance - December 31, 1997             2,419,333         2,419       730,582      (241,112)    (2,126,810)    (1,634,921)
Stock issued pursuant to consulting
   agreement                                  75,000            75       654,925      (655,000)            --             --
Initial public offering in February
   1998                                      525,000           525     3,432,502            --             --      3,433,027
Stock issued in connection with
   short-term debt financing                  20,000            20        99,980            --             --        100,000
Additional stock pursuant to founders
   agreement for nominal consideration        35,000            35            --            --             --             35
Warrants issued pursuant to private
   placement of units                             --            --        21,600            --             --         21,600
Options granted pursuant to
   consulting agreement                           --            --         1,600        (1,600)            --             --
Amortization of unearned compensation             --            --            --       658,029             --        658,029

Net loss                                          --            --            --            --     (2,820,314)    (2,820,314)
                                          ----------    ----------    ----------    ----------     ----------     ----------

   Balance - December 31, 1998             3,074,333         3,074     4,941,189      (239,683)    (4,947,124)      (242,544)
Stock issued pursuant to consulting
   agreement - January 1999                    4,000             4         7,996        (8,000)            --             --
Stock issued pursuant to consulting
   agreement - February 1999                  15,000            15            --            --             --             15
Stock issued pursuant to consulting
   agreement - February 1999                  22,500            23        69,977       (70,000)            --             --
Stock issued pursuant to consulting
   agreement - April 1999                     15,000            15        12,173       (12,188)            --             --
Warrants issued pursuant to
   consulting agreement - April 1999              --            --        10,260            --             --         10,260
Amortization of deferred stock -
   based compensation                             --            --            --       325,808             --        325,808

Net loss                                          --            --            --            --     (1,131,404)    (1,131,404)
                                          ----------    ----------    ----------    ----------     ----------     ----------

   Balance - December 31, 1999             3,130,833         3,131     5,041,595        (4,063)    (6,078,528)    (1,037,865)
                                          ==========    ==========    ==========    ==========     ==========     ==========
</TABLE>

The accompanying notes are an integral part of the financial statements.


                                      F-6
<PAGE>

                               AMBIENT CORPORATION
                          (A Development Stage Company)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (in U.S. dollars)

<TABLE>
<CAPTION>
                                                                                              Cumulative from
                                                                          Year ended            inception to
                                                                         December 31,           December 31,
                                                                   -------------------------    ------------
CASH FLOWS - OPERATING ACTIVITIES
                                                                      1999           1998           1999
                                                                   ----------     ----------     ----------
<S>                                                                <C>            <C>            <C>
Net loss                                                           (1,131,404)    (2,820,314)    (6,078,528)
Adjustments to reconcile net loss to net cash used in operating
   activities -
Items not involving cash flows:
  Depreciation and amortization                                       397,058        950,009      1,884,672
  Loss on sale of fixed assets                                         13,817             --         13,817
  Financing expenses paid via the issuance of common stock                 --        100,000        100,000
  Consulting expenses paid via the issuance of common stock
  and warrants                                                         10,275             --         10,275
  Increase (decrease) in net liability for severance pay              (15,885)        11,026         15,141
  Accrued interest on loans and notes payable                              --             --        210,016
  Write-down of long term investment                                  180,000        485,000        665,000
  Write-off of leasehold improvements                                      --         20,453         20,453
  Changes in operating assets and liabilities:
  Decrease (increase) in receivables and prepaid expenses             300,355       (295,061)        (7,866)
  Increase (decrease) in accounts payable                            (124,138)        90,343        (16,280)
  Increase (decrease) in other current liabilities                    316,449        (64,691)       303,158
                                                                   ----------     ----------     ----------
Net cash used in operating activities                                 (53,473)    (1,523,235)    (2,880,142)
                                                                   ----------     ----------     ----------
CASH FLOWS - INVESTING ACTIVITIES
Loan provided to another company                                           --       (835,000)      (835,000)
Additions to property and equipment                                   (12,102)      (112,317)      (371,819)
Proceeds from disposal of fixed assets                                 42,100             --         42,100
Decrease (increase) in restricted cash                                 46,439       (101,259)       (84,820)
                                                                   ----------     ----------     ----------
    Net cash provided by (used in) investing activities                76,437     (1,048,576)    (1,249,539)
                                                                   ----------     ----------     ----------
CASH FLOWS - FINANCING ACTIVITIES
Proceeds from issuance of share capital                                    --             35          2,264
Proceeds from issuance of notes payable                                    --        600,000      1,000,000
Repayment of notes payable                                                 --       (400,000)      (400,000)
Proceeds of loans from shareholders                                        --             --        919,600
Repayment of loans from shareholders                                       --       (968,000)      (968,000)
Repayment of loan from related party                                       --        (13,947)            --
Repayment of long-term loan                                                --       (120,000)            --
Proceeds from long-term bank credit                                        --         58,859         95,969
Repayment of long-term bank credit                                    (40,935)       (37,110)       (78,045)
Increase in bank short term credit                                      9,904         11,047        108,899
Public offering of common stock                                            --      3,433,027      3,433,027
Proceeds from short-term bank loan                                         --         24,038         24,038
                                                                   ----------     ----------     ----------
    Net cash provided by (used in) financing activities               (31,031)     2,587,949      4,137,752
                                                                   ----------     ----------     ----------
    INCREASE (DECREASE) IN CASH AND
       CASH EQUIVALENTS                                                (8,067)        16,138          8,071
CASH AND CASH EQUIVALENTS - BEGINNING
    OF PERIOD                                                          16,138             --             --
                                                                   ----------     ----------     ----------
    CASH AND CASH EQUIVALENTS - END OF PERIOD                           8,071         16,138          8,071
                                                                   ==========     ==========     ==========
</TABLE>

The accompanying notes are an integral part of the financial statements.


                                      F-7
<PAGE>

                               AMBIENT CORPORATION
                          (A Development Stage Company)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                (in U.S. dollars)

NOTE 1 - DESCRIPTION OF BUSINESS AND GENERAL

      A. Description of business

            Ambient Corporation ("Ambient"), a development stage company, was
            founded in June 1996 to design and develop advanced smart card
            interface technology. A smart card is a credit card-sized plastic
            card equipped with an integrated circuit that can store and transfer
            information in electronic form.

            In August 1996, Ambient purchased substantially all of the assets
            and assumed substantially all of the liabilities of Gen
            Technologies, Inc., a smart card research and development company,
            at their approximate book value, including the capital stock of its
            subsidiary, Gen Tec Ltd. (which subsequently changed its name to
            Ambient Ltd.). The results of operations of Gen Technologies, Inc.
            prior to the acquisition were not material. Ambient and its
            subsidiary are collectively referred to herein as "the Company."

            The Company has ceased its research and design efforts in the smart
            card interface technology area.

            The Company has recently commenced the design and development of
            products and services in the field of electronics commerce, internet
            and telephony activities.

            The Company's activities are currently centered in two distinct
            areas; the completion of the design and development of a unique
            technology designed to facilitate the provision of rapid power line
            telecommunication (PLT) services to ordinary business and personal
            consumers and the establishment, initially in Israel, of a
            nationwide screen phone network designed to enable internet access
            for consumers who do not have access to, or are unable, or unwilling
            to use personal computers.

            The Company has not generated any revenues since inception.

      B. Going concern assumption

            The Company incurred a net loss in 1999 of approximately $1.1
            million (and approximately $6.1 million since inception) and
            anticipates that it will continue to incur losses for some time. In
            addition, the Company had a working capital deficit of approximately
            $0.7 million and a shareholders' deficiency of approximately $1.1
            million as of December 31, 1999. Although the Company raised net
            proceeds of approximately $3.4 million from an initial public
            offering in February 1998, it has substantially utilized all of such
            proceeds, primarily for product development. The Company's continued
            existence is dependent on obtaining additional financing for product
            development and commercialization.

            In February 2000, the Company issued $1,000,000, 10% convertible
            debentures to private investors (net proceeds were $857,500). The
            debentures mature on February 28, 2002 (see Note 15).


                                      F-8
<PAGE>

                               AMBIENT CORPORATION
                          (A Development Stage Company)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                (in U.S. dollars)

NOTE 1 - DESCRIPTION OF BUSINESS AND GENERAL (cont.)

      B. Going concern assumption (cont.)

            Management's plans to continue operations in the normal course of
            business include the following: (i) continuing to seek out potential
            sources of equity capital; (ii) seeking out strategic partnerships;
            (iii) negotiating with a number of companies to install pilot
            projects; and (iv) diversification through establishment of new
            subsidiaries in the fields of internet technology and
            communications. In management's estimation, the above measures, if
            substantially realized, should enable the Company to continue
            operating through at least December 31, 2000, although there can be
            no assurance of this.

            In order to reduce its fixed costs until the above measures are
            partially or fully realized, during 1999, the Company terminated the
            employment of most of its employees. The Company has also undertaken
            other cost-cutting measures, such as reducing its lease space. In
            addition, due to the Company's adverse liquidity position, the
            Company did not pay salaries and salary related amounts to its
            remaining employees and to related institutions for several months.

            The above matters raise substantial doubt about the Company's
            ability to continue as a going concern. The financial statements do
            not include any adjustments that might be necessary should the
            Company be unable to continue as a going concern.

      C. Use of estimates in preparation of financial statements

            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 as
            of the date of the financial statements, and the reported amounts of
            revenues and expenses during the reporting periods. Actual results
            could differ from those estimates.

      D. Nature of industry

            The industries in which Company conducts business is characterized
            by rapid changes. Internet and internet related products quickly
            become out of date because of technological and other advances.
            Accordingly, the industry is typified by the constant need to
            develop and introduce new and enhanced products, which may result in
            substantial costs without any guarantee that such new products or
            enhancements will produce significant revenues.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      The consolidated financial statements have been prepared in conformity
      with accounting principles generally accepted in the United States. The
      significant accounting policies followed in the preparation of the
      financial statements, on a basis consistent with prior years, are as
      follows:


                                      F-9
<PAGE>

                               AMBIENT CORPORATION
                          (A Development Stage Company)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                (in U.S. dollars)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

      A. Cash and cash equivalents

            Cash and cash equivalents consist of cash and demand deposits in
            banks and other financial institutions, and other short-term, highly
            liquid investments (primarily interest-bearing time deposits) with
            maturity dates not exceeding three months from the date of deposit.

      B. Functional currency and foreign currency translation

            The currency of the primary economic environment in which the
            operations of the Company are conducted is the U.S. dollar
            ("dollar"). Therefore, the Company uses the dollar as its functional
            and reporting currency. Certain of the dollar amounts in the
            financial statements may represent the dollar equivalent of other
            currencies, and may not necessarily be exchangeable for dollars.

            Transactions and balances denominated in dollars are presented at
            their dollar amounts. Non-dollar transactions and balances are
            remeasured into dollars in accordance with the principles set forth
            in Statement No. 52, "Foreign Currency Translation," of the
            Financial Accounting Standards Board of the United States ("FASB").
            Transaction gains and losses are reflected in net financing
            expenses.

      C. Consolidation

            The consolidated financial statements include those of Ambient and
            its 95%-owned subsidiary. Material intercompany transactions and
            balances have been eliminated in consolidation. The Company has
            recorded 100% of the subsidiary's losses since acquisition. No
            minority interest has been recorded in the financial statements.

      D. Property and equipment

            Property and equipment are presented at cost, less accumulated
            depreciation. Depreciation is calculated based on the straight-line
            method over the estimated useful lives of the assets, as follows:

                                                              Years
                                                              ------
            Computers                                         4 (primarily)
            Motor vehicles                                    7
            Machinery and equipment                           7
            Furniture and office equipment                   14 (primarily)

            Management reviews property and equipment and other long-lived
            assets on a periodic basis to determine whether events or changes in
            circumstances indicate that the carrying amount of such assets may
            not be recoverable.


                                      F-10
<PAGE>

                               AMBIENT CORPORATION
                          (A Development Stage Company)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                (in U.S. dollars)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

      E. Research and development

            Research and development costs, net of participation by the
            Government of Israel through the Ministry of Industry and Trade's
            Office of the Chief Scientist ( "Office of the Chief Scientist"),
            are charged to operations as incurred.

      F. Stock-based compensation

            The Company accounts for employee stock-based compensation in
            accordance with Accounting Principles Board Opinion No. 25,
            "Accounting for Stock Issued to Employees." Pursuant to this
            accounting standard, the Company records compensation for stock and
            stock options granted to employees at the date of grant based on the
            difference, if any, between the cost to the employee of the stock or
            options (including exercise price) and the market value of the
            Company's stock at that date. Deferred compensation is amortized to
            compensation expense over the vesting period of the stock or
            options. Grants to non-employees are accounted for at fair value as
            of the date of grant in accordance with Statement No. 123,
            "Accounting for Stock-Based Compensation," ("SFAS 123") of the FASB.
            The pro forma effects of the application of SFAS 123 with respect to
            grants to employees are presented in Note 16.

      G. Loss per share

            Loss per share is presented in accordance with Statement No. 128
            ("SFAS 128") of the FASB, "Earnings per Share." Pursuant to this
            standard, basic earnings (loss) per share exclude the dilutive
            effects of convertible securities and are computed by dividing
            income (loss) available to common shareholders by the
            weighted-average number of common shares outstanding for the period.
            Diluted earnings (loss) per share reflect the potential dilutive
            effect of all convertible securities and are presented in the
            financial statements with the same prominence as basic earnings per
            share. Due to the anti-dilutive effect, basic loss per share was
            equal to diluted loss per share for each of the years presented. The
            number of potentially dilutive securities excluded from diluted
            earnings per share due to the anti-dilutive effect amounted to
            308,000, 200,000 and 0, in 1999, 1998 and 1997, respectively.

            Retroactive recognition has been given in the calculation of basic
            loss per share to shares issued for nominal consideration prior to
            the Company's initial public offering.

      H. Fair value of financial instruments

            The Company's financial instruments are principally non-derivative
            assets and non-derivative liabilities, such as cash and cash
            equivalents, deposits in banks, receivables, loan receivable,
            short-term and long-term credit, accounts payable and other current
            and non-current liabilities. Because of the nature of these
            financial instruments, fair value generally equals or approximates
            the amounts presented in these financial statements.


                                      F-11
<PAGE>

                               AMBIENT CORPORATION
                          (A Development Stage Company)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                (in U.S. dollars)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

      I. Recently issued standards

            In June 1998, the Financial Accounting Standards Board ("FASB")
            issued SFAS No. 133, "Accounting for Derivative Instruments and
            Hedging Activities". SFAS 133 is effective for all fiscal quarters
            of all fiscal years beginning after June 15, 2000 (as amended by
            SFAS No. 137). SFAS No. 133 requires that all derivative instruments
            be recorded on the balance sheet at their fair value. Changes in the
            fair value of derivatives are recorded each period in current
            earnings or other comprehensive income, depending on whether a
            derivative is designed as part of a hedge transaction, and if it is,
            the type of hedge transaction. The Company does not expect the
            adoption of SFAS No. 133 to have material impact on its consolidated
            financial statements.

NOTE 3 - RESTRICTED CASH

      In connection with a line of credit and short-term loan from a bank (see
      Note 6), the Company is required to maintain a compensating balance which
      is restricted for a period of up to one year. The restricted balance
      amounted to $ 84,820 as of December 31, 1999 (December 31, 1998 -
      $131,259).

NOTE 4 - LONG TERM INVESTMENT

      On May 20, 1998, a letter of intent was signed between the Company and
      Ordacard Hi-Tech Industries (1995) Ltd. ("Ordacard"), an Israeli
      manufacturer of plastic ID and bank cards, relating to a proposed merger
      with Ordacard, which was to be consummated by December 31, 1998.

      Pursuant to the letter of intent, the Company was to provide $1,000,000 of
      loans to Ordacard - $350,000 upon execution of the letter of intent and
      $650,000 by July 1, 1998. The loans were to be evidenced by two
      convertible promissory notes, secured by Ordacard's assets and
      subordinated to Ordacard's secured bank loans in existence as of the date
      of payment. The notes were to bear interest at an annual rate of 6%. In
      addition, the Company was to carry out a private or public offering of
      equity securities with minimum net proceeds (after commissions and
      expenses) of $7.5 million by December 31, 1998. Since the merger and the
      equity financing were not consummated by December 31, 1998, the Company
      had the option to demand full payment of the aggregate outstanding
      principal and accrued interest on the notes through the date of payment,
      or convert, at its sole option, the aggregate outstanding principal and
      interest into 50,000 shares of Ordacard.

      The Company provided the $350,000 loan upon execution of the letter of
      intent and provided additional cash advances during the third quarter of
      1998 in the total amount of $485,000, such that the amounts provided to
      Ordacard by the Company aggregated $835,000. During 1999 the Company
      elected to convert the loan into 36,490 shares of Ordacard common stock,
      and has written down the investment to its estimated fair value of
      $170,000 (1998, Long Term Receivable - $350,000). The expense recorded in
      1999 and 1998 with respect to this impairment amounted to $180,000 and
      $485,000, respectively.


                                      F-12
<PAGE>

                               AMBIENT CORPORATION
                          (A Development Stage Company)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                (in U.S. dollars)

NOTE 5 - PROPERTY AND EQUIPMENT

                                                         December 31
                                                     ---------------------
                                                      1999          1998
                                                     -------       -------
      Computers                                      104,437       104,437
      Machinery and equipment                         63,164        63,164
      Furniture and office equipment                  40,346        40,346
      Leasehold improvements                          12,102            --
      Motor vehicles (*)                              44,879       120,373
                                                     -------       -------
                                                     264,928       328,320
      Less - accumulated depreciation                129,630        92,057
                                                     -------       -------
                                                     135,298       236,263
                                                     =======       =======

      (*) The motor vehicles are pledged as collateral for a long-term bank
      loan.

NOTE 6 - BANK LOANS

      A. Short-term credit

<TABLE>
<CAPTION>
                                                   Interest rate      December 31
                                                   -------------   ------------------
                                                    At December     1999       1998
                                                    -----------    -------    -------
                                                     31, 1999
                                                     --------
      <S>                                             <C>            <C>       <C>
      Current maturities of long-term bank credit     14%-16%        7,966     20,973
      Bank overdraft line of credit                     18%        132,937     98,995
      Short-term bank loan                              14%             --     24,038
                                                                   -------    -------
                                                                   140,903    144,006
                                                                   =======    =======
</TABLE>

      B. Long-term bank credit

            Consists of vehicle financing loans in the aggregate amount of
            $17,924, payable in monthly installments through 2002, including
            interest at various market rates. Current maturities in 2000 amount
            to $7,966. Payments due in future years (excluding the current
            portion) are as follows:

                    2001       $7,966
                    2002        1,992
                               ------
                                9,958
                               ======


                                      F-13
<PAGE>

                               AMBIENT CORPORATION
                          (A Development Stage Company)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                (in U.S. dollars)

NOTE 7 - NOTES PAYABLE

      In June 1998, the Company conducted a private placement of units. Each
      unit consisted of: (i) a promissory note in the principal amount of
      $50,000 and (ii) warrants to purchase 10,000 shares of the Company's
      common stock. The Company sold 12 units in the private placement for
      aggregate consideration of $600,000. The relative fair value of the
      consideration allocated to the warrants was $21,600 using the
      Black-Scholes option pricing model, which was credited to additional
      paid-in capital.

      The notes bear interest at an annual rate of 10% and are repayable at the
      earlier of: (i) 12 months from the date of issuance or (ii) consummation
      by the Company of any public or private equity or debt financing in excess
      of $1,500,000 (as well as certain other conditions).

      The purchase price for each share pursuant to the warrants is equal to the
      lower of: (i) $8.00 and (ii) the offering price of the Company's common
      stock in a subsequent public offering with aggregate proceeds to the
      Company of at least $1,500,000. The warrants are exercisable for a period
      of four years from the date of issuance.

      In February 2000 the Company entered into an agreement to convert these
      notes to equity. Principal and interest of approximately $700,000 were
      converted into 3,490,000 shares of the Company's common stock.

NOTE 8 - OTHER CURRENT LIABILITIES

                                                      As of December 31
                                                   -----------------------
                                                     1999            1998
                                                   -------         -------

      Accrued vacation                              23,560          27,125
      Employees and officers                        99,797           1,472
      Accrued liabilities                          190,930          72,312
      Related parties                              177,426          74,355
                                                   -------         -------
                                                   491,713         175,264
                                                   =======         =======


                                      F-14
<PAGE>

                               AMBIENT CORPORATION
                          (A Development Stage Company)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                (in U.S. dollars)

NOTE 9 - LIABILITY FOR SEVERANCE PAY

      Israeli law and labor agreements determine the obligations of the Company
      to make severance payments to dismissed employees and to employees leaving
      employment under certain other circumstances. The obligation for severance
      pay benefits, as determined by Israeli Law, is based upon length of
      service and the employee's most recent salary. This obligation is
      partially funded by the purchase from outside insurance companies of
      managers' insurance policies, which are controlled by the insurance
      companies and are not under the control and management of the Company.

      Expenses relating to severance pay benefits were $22,560 and $23,564 in
      1999 and 1998, respectively.

NOTE 10 - CONTINGENT LIABILITIES AND COMMITMENTS

      A.    In connection with its research and development, the Company
            received participation payments from the Office of the Chief
            Scientist of $231,767, $230,452 and $0 for the years 1999, 1998 and
            1997, respectively. In return for such participation, the Company is
            committed to pay royalties at a rate of 3%-5% of sales of the
            product, up to 100% of the amount of grants received (In 1999 the
            entire amount was received and in 1998 $220,364 was included in
            receivables and prepaid expenses).

      B.    The Company is committed to pay royalties to a shareholder of its
            subsidiary, in connection with technology transferred by him to the
            Company, at rates of between 15% and 20% of the net proceeds from
            all sales, less the cost of components, as defined in an agreement
            with the shareholder.

      C.    The Company is obligated to pay to an affiliated company up to
            $1,000,000 to meet its financing needs (see Note 15).

      D.    The Company's Israeli subsidiary is party to various litigation
            matters, in most cases involving ordinary and routine claims
            incidental to Company's business. The Company's management cannot
            estimate with certainty its ultimate legal and financial liability
            with respect to such pending litigation matters. However, the
            Company believes, based on its examination of such matters, that the
            Company's ultimate liability will not have a material adverse effect
            on its financial position, results of operations or cash flows.


                                      F-15
<PAGE>

                               AMBIENT CORPORATION
                          (A Development Stage Company)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                (in U.S. dollars)

NOTE 11 - SHAREHOLDERS' DEFICIENCY

      A.    General

            As of December 31, 1999 and 1998, Ambient's authorized share capital
            consisted of 20,000,000 shares of common stock and 5,000,000 shares
            of preferred stock of $0.001 par value per share. 3,130,833 and
            3,074,333 shares of common stock were issued and outstanding as of
            December 31, 1999 and 1998, respectively. Holders of common stock
            are entitled to participate equally in the payment of cash dividends
            and in stock dividend distributions and, in the event of the
            liquidation of the Company, in the distribution of assets after
            satisfaction of liabilities to creditors. Each share of common stock
            is entitled to one vote on all matters to be voted on by
            shareholders. As of December 31, 1999 no preferred shares were
            issued.

      B.    Stock option plan

            In February 1998, the Company's shareholders approved a stock option
            plan for the issuance of stock options to employees and consultants
            of the Company. Pursuant to the plan, 250,000 common shares were
            reserved for issuance. Options under the plan may be either
            incentive stock options under the Internal Revenue Code or
            non-qualified options. For incentive stock options, the exercise
            price may not be less than 110% of the fair market value of the
            Company's common stock at the date of grant and are exercisable for
            a period not exceeding five years from the date of grant (110% of
            the fair market value if the grant is an Incentive Stock Option to
            an employee who owns more than 10% of the outstanding common stock).
            For non-qualified options, the exercise may not be less than 100% of
            the fair market value of the Company's common stock at the date of
            grant and are exercisable for a period not exceeding ten years from
            the date of grant.

            During 1998, 80,000 stock options were granted under the plan to a
            consultant of the Company. The exercise price of the options was $6
            and the options were exercisable until August 1, 1999. Compensation
            expense of $1,600 was recorded in respect of this grant. The stock
            options expired on August 1, 1999.

            During 1999, 170,000 stock options were granted to the Chief
            Financial Officer (51,000 stock options) and to the former Chief
            Executive Officer (119,000 stock options) under the "1998 Stock
            Option Plan". In addition, 50,000 stock options were granted to a
            consultant and exercised.

            Since the Company accounts for employee stock-based compensation in
            accordance with Accounting Principles Board Opinion No. 25,
            "Accounting for Stock Issued to Employees" and since the terms were
            fixed and the exercise prices were set at no less than 100% of the
            share's price, no compensation expenses were recorded in respect of
            these grants. For pro - forma effect see Note 16.


                                      F-16
<PAGE>

                               AMBIENT CORPORATION
                          (A Development Stage Company)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                (in U.S. dollars)

NOTE 11 -SHAREHOLDERS' DEFICIENCY (cont.)

      B.    Stock option plan (cont.)

            The total number of stock options outstanding as of December 31,
            1999 is 170,000.

                  A summary of the status of the Company's share option plans as
                  of December 31, 1999 and 1998, as well as changes during each
                  of the years then ended, is presented below:

<TABLE>
<CAPTION>
                                                                      1999                             1998
                                                         ------------------------------    ------------------------------
                                                                        Weighted average                   Weighted average
                                                         Share options   exercise price    Share options   exercise price
                                                         -------------   --------------    -------------   --------------
<S>                                                         <C>               <C>               <C>              <C>
                  Outstanding as of beginning of
                     year (1)                                80,000           6.00                  --             --
                  Granted                                   170,000           0.81              80,000           6.00
                  Exercised                                      --             --                  --             --
                  Forfeited                                 (80,000)            --                  --             --
                                                           --------                           --------           ----
                  Outstanding as of end of year             170,000           0.81              80,000           6.00
                                                           ========           ====            ========           ====

                  Options exercisable as of year
                     end                                    170,000           0.81              80,000           6.00
                                                           ========           ====            ========           ====
</TABLE>

                  The following table summarizes information about share options
                  outstanding as of December 31, 1999:

<TABLE>
<CAPTION>
                                                                                                 Exercisable as of
                                       Outstanding as of December 31, 1999                       December 31, 1999
                      ------------------------------------------------------------------   -----------------------------
                                                         Weighted                                         Weighted
                      Range of                            average           Weighted                       average
                      exercise           Number          remaining           average         Number       exercise
                       prices         outstanding     contractual life    exercise price   exercisable      price
                     ---------       -------------   ------------------  ---------------- -------------  -----------
                        <S>               <C>               <C>            <C>                <C>           <C>
                        $0.81             170,000         9.4 years           $0.81           170,000       $0.81
                                          =======                                             =======
</TABLE>


                                      F-17
<PAGE>

                               AMBIENT CORPORATION
                          (A Development Stage Company)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                (in U.S. dollars)

NOTE 11 - SHAREHOLDERS' DEFICIENCY (cont.)

      C.    Stock issuances to consultants

            During 1999, the Company issued to certain consultants 56,500 shares
            of common stock for their services. The Company recorded deferred
            compensation of $90,188 in respect of these issuances, based on the
            market value of the shares at the date of issuance of $1.6 per
            share. The deferred compensation was amortized over the period of
            the service.

      D.    Warrants issuance to consultant

            During 1999, the Company issued to a certain consultant 18,000
            warrants for past services. The exercise price of the warrants was
            $1.88 and the warrants are exercisable until April 2006. The Company
            recorded an expense of $10,260 in respect of this issuance, based on
            the fair value of the warrants at the date of issuance, based on the
            Black-Scholes model using the following assumptions: expected
            volatility - 50%; expected risk-free rate - 5%; expected dividend
            yield - none, expected life of the warrants - 7 years and share
            price and exercise price of $1.88.

            The total number of warrants outstanding as of December 31, 1999 is
            138,000.With respect to 120,000 of these warrants see Note 7.

            The fair value (in dollars) of the warrants granted during 1999
            amounted to $1.082 per warrant. The Company utilized the
            Black-Scholes option pricing model to estimate fair value, utilizing
            the following assumptions (all in weighted averages):

                                                                         1999
                                                                         ----
                         Risk-free interest rate                          5%
                         Expected life of warrants                      7 years
                         Expected annual volatility                       50%
                         Expected dividend yield                         None


                                      F-18
<PAGE>

                               AMBIENT CORPORATION
                          (A Development Stage Company)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                (in U.S. dollars)

NOTE 11 - SHAREHOLDERS DEFICIENCY (cont.)

      E. Commitments for stock options issuance

        (1) In March 2000 the Company undertook to issue to the Company's
        C.F.O. additional stock options (see Note 14A).

        (2) Pursuant to the letter appointment, dated March 2000, of the
        Vice President, the Company undertook to issue to him upon and subject
        to the adoption of a new Company stock option plan (i) options for 5,000
        shares of common stock of the Company following 12 months of employment
        with the Company as Vice President, and (ii) an additional 5,000 options
        to vest following 24 months of employment with the Company as Vice
        President.

        (3) In March 2000 The Company undertook to issue to the chief
        technology officer of a Company subsidiary, subject to (and upon) the
        adoption of a new Company employee stock option plan at the Company's
        Annual stockholders meeting to be held in 2000, (i) 50,000 options from
        such any newly adopted plan, such options to vest following 12 months of
        continuous employment with PLT Solutions Inc. and (ii) an additional
        50,000 options vesting following 24 months of continuous employment with
        PLT Solutions Inc., (See Notes 15A and 17) in each case at an exercise
        price per share to be agreed upon at a future date.


NOTE 12 - INCOME TAXES

      A.    Tax loss carryforwards

            Due to the uncertainty of realizing the benefit of the Company's tax
            loss carryforwards of approximately $6 million, a valuation
            allowance for the entire amount of related deferred tax asset has
            been recorded.

      B.    Inflation adjustment for tax purposes

            The Company's Israeli subsidiary is subject to the Income Tax Law
            (Inflationary Adjustments) - 1985, pursuant to which taxable income
            is measured on the basis of changes in the Israeli Consumer Price
            Index.

      C.    Approved investment program

            The Company's Israeli subsidiary received "approved enterprise"
            status for an investment plan of $180,000 under the Israeli Law for
            the Encouragement of Capital Investments - 1959. The Company has
            elected to receive benefits through the "alternative benefits"
            program. The benefits under this program include a tax exemption on
            income derived from the approved enterprise for a period of six
            years and a reduced tax rate for a period of up to four years
            commencing with the date on which taxable income is first earned.

            The benefits are subjected to certain conditions, that some of them
            have not been fulfilled as of the balance sheet date.


                                      F-19
<PAGE>

                               AMBIENT CORPORATION
                          (A Development Stage Company)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                (in U.S. dollars)

NOTE 13 - OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES

            Operating, general and administrative expenses in 1999 include
            approximately $96,000 of marketing advisory and other consulting
            fees (1998 - approximately $518,000), which were primarily paid via
            the issuance of common shares.

NOTE 14 - TRANSACTIONS WITH RELATED PARTIES

                                                        Year ended December 31
                                                        ----------------------
                                                         1999            1998
                                                         ----            ----

            Rent                                            --         $ 62,400
                                                       =======         ========
            Salary                                     $89,657        *$135,728
                                                       =======         ========
            Proceeds from disposal of vehicles         $42,100               --
                                                       =======         ========

            Restricted stock awards                    170,000               --
                                                       =======         ========

            *     Including $52,484 salary to the Chief Finance Officer, who
                  serves as a Director since 1999.

            A.    The Company entered into an employment agreement in March 2000
                  with the Chief Financial Officer ("C.F.O") pursuant to which
                  he is employed as the Company's Chief Financial Officer for a
                  one year term which is automatically renewable from year to
                  year unless either party gives notice of termination at least
                  90 days prior to the expiration date. The C.F.O. currently
                  receives an annual salary of $72,000. Subject to the adoption
                  of a new stock option plan, the C.F.O. will receive from the
                  Company 50,000 options upon the first anniversary of his
                  employment and an additional 50,000 option upon the second
                  anniversary of his employment, to purchase shares of common
                  stock of the Company at an exercise price of $0.01 per share.
                  The C.F.O. has agreed to certain customary confidentiality and
                  non-compete provisions that prohibit him from competing with
                  the Company for one year, or soliciting employees for one
                  year, following the termination of his employment.


                                      F-20
<PAGE>

                               AMBIENT CORPORATION
                          (A Development Stage Company)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                (in U.S. dollars)

NOTE 14 - TRANSACTIONS WITH RELATED PARTIES (cont.)

      B.    During March 2000 the Chairman of the Board of directors of the
            Company ("Chairman") entered into an employment contract with the
            Company's subsidiary, PLT Solutions Inc. (See Note 15A) He receives
            $3,000 per month in salary and $7,500 annually for serving on the
            Company's Board, and subject to the adoption of a new stock option
            plan, the Chairman was granted 100,000 options to purchase, at a
            nominal price, shares of common stock of the Company at an exercise
            price of $0.01 per share. Such options will vest over three years
            except that if all or substantially all of the assets of PLT are
            sold then all of the options immediately vest. The employment
            agreement is for one year beginning March 2000 and will renew
            automatically for additional one year terms unless terminated by
            either party upon three months prior written notice. The Chairman
            has agreed to certain customary confidentiality and non-compete
            provisions that prohibit him from competing with the Company for one
            year, or soliciting employees for one year, following the
            termination of his employment.

      C.    In February 12, 1998, the Company entered into a two-year employment
            agreement with the former President and Chief Executive Officer of
            the Company. Under the agreement, the former President received an
            annual salary of $60,000. As of December 31, 1998, former President
            loaned the Company $53,367, bearing 10% interest. The Company used
            $30,000 from such loans for general working capital purposes. The
            remaining $23,367 was loaned in the form of unpaid accrued salaries.
            The former President resigned from his position with the Company in
            September 1999. In connection with his resignation, the Company
            agreed to (i) remit to the former President, upon the completion of
            public offering of the Company's stock, $20,000, plus interest at a
            per annum rate of 10%, as reimbursement for amounts owed him (ii)
            maintain on the Company's records unpaid salary owed to the former
            President in the amount of $75,329 until such time as the per share
            closing price of the Company's common stock is at least $2.00, for a
            consecutive 10 day period. The former President received 119,000
            vested options in May 1999 under the Company's 1998 Stock Option
            Plan.

NOTE 15 - POST - BALANCE SHEET EVENTS

      A.    The Company has established subsidiaries, PLT Solutions Inc.
            ("PLT"), incorporated in the United States, and Insulated
            Connections Corporation Limited ("ICC"), registered in Israel, to
            promote and develop a technology designed to facilitate the take-off
            of Power Line Telecommunication in the United States and Japan.
            Power Line Telecommunication enables existing electricity power
            lines to be used for Internet, telephone and data transfer to all
            homes and offices. In practice Power Line Telecommunication is not
            currently in use due to power utility infrastructure limitations.


                                      F-21
<PAGE>

                               AMBIENT CORPORATION
                          (A Development Stage Company)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                (in U.S. dollars)

NOTE 15 - POST - BALANCE SHEET EVENTS (cont.)

      B.    The Company acquired a 40% interest in a newly established Israeli
            company, Kliks.com Ltd. ("Kliks"), which is engaged in designing and
            establishing a nationwide Screen Phone network in Israel. The
            network will enable Internet access for a wide spread of the
            population who are less familiar with the use of personal computers
            (PC's).

            Top management has been recruited.

            The Company shall be entitled, but not obligated, to purchase up to
            10% of Kliks' share capital upon the payment of $250,000 to Kliks.

            The Company shall pay (by way of equity investment) to Kliks up to
            $1,000,000 to meet the financing needs of Kliks. The Company shall
            not be issued any additional shares or securities of any kind for
            such payments.

            From the period January 2000 to April 2000, the Company paid
            $150,000 as part of this commitment.

      C.    In February 2000, the Company issued $1,000,000 10% convertible
            debentures to private investors. The debentures were issued pursuant
            to the terms of an agreement which further provides that, subject to
            certain conditions, the investors will purchase an additional
            $1,000,000 of debentures no later than five days after the effective
            date of a registration statement covering the common stock into
            which the debentures may be converted. In January 2000, the
            investors pre-funded $250,000 of this obligation. The debentures
            mature on February 28, 2002. In accordance with EITF 98-5, financing
            expense in the amount of $285,417, representing the beneficial
            conversion feature of this convertible debenture issuance, will be
            reflected in the first quarter of 2000. The debentures are
            convertible into shares of the Company's common stock at a
            conversion rate $0.40 per share, subject to adjustments under
            certain conditions. In connection with the issuance of the 10%
            convertible debentures, the Company issued to debenture holders
            warrants to purchase, in the aggregate, 625,000 of the Company's
            common shares at an exercise price per share of $1. The warrants
            expire in April 2003.

            Under its agreements with the debenture holders, the Company is
            obligated to pay late fees as liquidated damages to the debenture
            holders because it has not filed by a prescribed date a registration
            statement in respect of the resale of shares issuable upon the
            conversion of the debentures and the shares issuable upon exercise
            of the warrants issued in conjunction with the debentures and due to
            the non-effectiveness of a registration statement by a prescribed
            date. However, these amounts are not payable in the event that such
            registration statement is declared effective within sixty days after
            filing. If the Company is obligated to pay these liquidated damages,
            the amount that it must pay to the debenture holders will be equal
            to (A) 2% of the principal amount of all the debentures for the
            period from May 17, 2000 through the 30 day thereafter, and (B) 3%
            of the principal amount thereof for each subsequent 30 day period.

            The Company also issued to a consultant, warrants to purchase 1.5
            million shares of common stock. The warrants are exercisable at a
            price of $0.01 per share and expire in February 2002.

            The related deferred compensation costs of $1.5 million are to be
            amortized over the service period, and was determined based on fair
            value of the service.


                                      F-22
<PAGE>

                               AMBIENT CORPORATION
                          (A Development Stage Company)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                (in U.S. dollars)

NOTE 15 - POST - BALANCE SHEET EVENTS (cont.)

      D.    In February 2000 the Company entered into an agreement with a
            certain lender to extinguish a loan to equity. Principle and
            interest of approximately $700,000 were extinguished in
            consideration of 3,490,000 shares of the Company's common stock. The
            share price at the date of issuance was $3. The warrants that had
            been granted with the issuance of the note payable were cancelled
            concurrently with the February 2000 extinguishment, An extraordinary
            charge of $9,778,167 for the extinguishment of the debt will be
            reflected in the first quarter of 2000.

      E.    The Company entered into various marketing and financial consulting
            agreements in February and March 2000. Accordingly, the Company
            issued 2,761,000 shares of common stock and agreed to pay $8,000 per
            month as compensation. The agreements terminate in or before March
            2001.

            Compensation costs were determined based on market value of shares,
            market value of the service provided and fair value of the options,
            as appropriate. For options, the Black-Scholes model was used with
            the following assumptions:

            Risk-free interest rate                   5%
            Expected life of options                  3 years
            Expected annual volatility                50%
            Expected dividend yield                   None
            Expected exercise price                   $0.812

            The related compensation costs of $12.6 million will, in future
            periods, be charged to the statement of operations over the period
            of the service.

      F.    Certain parties contended that the Company guaranteed, in a prior
            year, the repayment of an outstanding third-party loan obligation,
            which contention the Company denies. In settlement of the dispute,
            the Company, on April 14, 2000, entered into a settlement agreement
            with such parties pursuant to which it undertook to pay to said
            claimants, in the aggregate, $200,000 and issued to them an
            aggregate of 250,000 shares of the Company's common stock.
            Accordingly, the Company will reflect in its operating expenses for
            the three month period ended March 31, 2000, an expense in the
            amount of $1,512,500, representing the market value of the shares
            that were issued and the cash payment which it undertook to pay.


                                      F-23
<PAGE>

                               AMBIENT CORPORATION
                          (A Development Stage Company)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                (in U.S. dollars)

NOTE 16 - PRO FORMA EFFECT OF SFAS 123

            For purposes of estimating fair value at the grant date of employee
            stock options in accordance with SFAS 123, the Company utilized the
            Black-Scholes option pricing model, utilizing the following
            assumptions:

            Risk-free interest rate                   5%
            Expected life of options                  10 years
            Expected annual volatility                50%
            Expected dividend yield                   None
            Expected exercise price                   $0.81

            Had compensation cost for the Company's stock compensation plan been
            determined based on fair value as of the date of grants for awards
            made in 1999 under such plan in accordance with SFAS No. 123,
            instead of APB No. 25, the Company's pro forma net loss and loss per
            share for the year ended December 31, 1999, would have been as
            follows:

                  Pro forma net loss                    (1,223,594)
                                                        ==========
                  Pro forma loss per share              (0.392)
                                                        ==========

            The pro forma effect of the application of SFAS 123 with respect to
            grants to employees for the years ended December 31,1998 and
            December 31, 1997 were not material.

NOTE 17 - EVENTS SUBSEQUENT TO DATE OF AUDITORS' REPORT (Unaudited)

      A.    In July 2000 the Company received $2,000,000 from the private
            placement of one million shares of its common stock. As part of this
            private placement, the Company issued warrants to purchase up to one
            million shares of the Company's convertible preferred stock at an
            exercise price equal to $3.50. The shares of preferred stock issued
            or issuable pursuant to such warrants are automatically convertible
            to shares of the Company's common stock upon (and subject to) the
            approval by the Company's stockholders, at the annual 2000 general
            stockholders meeting, of a proposal to increase the authorized
            shares of common stock that the Company may issue from time to time.
            According to the terms of the agreement 87.5% of the proceeds of
            this private placement must be used solely to finance the activities
            relating to a subsidiary.


                                      F-24
<PAGE>

                               AMBIENT CORPORATION
                          (A Development Stage Company)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                (in U.S. dollars)

NOTE 17 - EVENTS SUBSEQUENT TO DATE OF AUDITORS' REPORT (Unaudited) (cont.)

      B.    On July 19, 2000, the Company's Board of Directors adopted a
            resolution to increase the authorized common stock to 50 million
            shares, which resolution will become effective only upon (and
            subject to) its approval by the Company's stockholders at the 2000
            annual general stockholders meeting.

            On July 21, 2000, the Company's Board of Directors adopted the 2000
            Equity Incentive Plan (the "2000 Incentive Plan"). A total of
            2,000,000 shares of common stock have been reserved for issuance
            under the 2000 Incentive Plan. The 2000 Incentive Plan will go into
            effect only upon approval of the Company's stockholders at the 2000
            annual general stockholders meeting. The 2000 Incentive Plan
            provides for the grant of incentive stock options, nonqualified
            stock options, stock appreciation rights, restricted stock, bonus
            stock, awards in lieu of cash obligations, other stock-based awards
            and performance units. The 2000 Incentive Plan also permits cash
            payments under certain conditions.

      C.    The Chief Operating Officer of PLT Solutions, Inc. (" PLT "),
            appointed in April 2000, receives $15,000 in salary per month. The
            terms of his employment agreement are currently being finalized. The
            Company expects the changes in compensation to include an increase
            in monthly salary to $17,500 and options to acquire shares of the
            Company, exercisable at a nominal price. The Company anticipates
            that the C.O.O. will receive fully vested options for 100,000 shares
            of common stock on signing of the employment agreement, 50,000
            options vesting twelve months thereafter and 200,000 options to vest
            upon achieving certain milestones. The employment agreement will
            contain customer confidentiality and non competition provisions.

      D.    After the balance sheet date the Company issued to the chief
            technology officer of PLT shares equaling 9.9% of the issued and
            outstanding equity of PLT.

      E.    In connection with a planned offering of the Company's stock held by
            certain stockholders, the Company took upon itself a number of
            undertakings.

            The Company has agreed to bear all costs, expenses and fees of
            registration of the shares of common stock offered by the selling
            stockholders for resale other than the legal fees and expenses of
            counsel or other advisors to the selling stockholders. Any brokerage
            commissions, discounts, concessions or other fees, if any, payable
            to broker-dealers in connection with any sale of the shares of
            common stock will be borne by the selling stockholders selling those
            shares or by the purchasers of such shares. In addition the Company
            has agreed to indemnify each debenture holder against certain
            liabilities, including liabilities arising under the Securities Act
            of 1933.

            The Company has also agreed to indemnify certain selling
            stockholders, or their transferees, or assignees against certain
            liabilities, including liabilities under the Securities Act of 1933,
            or to contribute to payments to which such selling stockholders, or
            their respective pledges, donees, transferees or other successors in
            interest, may be required to make in respect thereof.


                                       F-25