<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

MARK ONE

[X]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934 for the Quarterly Period ended June 30, 2005; or

[ ]  Transition Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934 for the transition period from ___________ to
     ___________

                        COMMISSION FILE NUMBER: 0-23723

                               AMBIENT CORPORATION
        (Exact name of small business issuer as specified in its charter)

<TABLE>
<S>                                         <C>
            Delaware                                     98-0166007
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>

                 79 CHAPEL STREET, NEWTON, MASSACHUSETTS, 02458
          (Address of principal executive offices, including zip code)

                                 617- 332-0004
                (Issuer's telephone number, including area code)

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

     As of August 12, 2005, Ambient Corporation had outstanding 163,658,502
shares of common stock, par value $.001 per share.

     Transitional Small Business Disclosure Format (Check one) Yes [ ] No [X]
<PAGE>
                                   INDEX PAGE

<TABLE>
<S>                                                                         <C>
                         PART I -- FINANCIAL INFORMATION

Forward Looking Statements                                                  (ii)

Item 1 - Financial Statements*
         Consolidated Balance Sheet June 30, 2005 (Unaudited) and
            December 31, 2004                                                 1
         Unaudited Consolidated Statements of Operations for the six and
            three months ended June 30, 2005 and 2004                         2
         Unaudited Consolidated Statements of Cash Flows for the six and
            three months ended June 30, 2005 and 2004                         3
         Notes to Consolidated Financial Statements                           5

Item 2 - Plan of Operation                                                    8

Item 3 - Controls and Procedures                                             11

                          PART II -- OTHER INFORMATION

Item 1 - Legal Proceedings                                                   12

Item 2 - Changes in Securities and Use of Proceeds                           12

Item 3 - Defaults upon Senior Securities                                     12

Item 4 - Submission of Matters to a Vote of Security Holders                 12

Item 5 - Other Information                                                   13

Item 6 - Exhibits and Reports on Form 8-K                                    13
</TABLE>

Signatures

*    The Balance Sheet at December 31, 2004 has been derived from audited
     financial statements at that date but does not include all of the
     information and footnotes required by generally accepted accounting
     principles for complete financial statements. All other financial
     statements are unaudited.
<PAGE>
                           FORWARD LOOKING STATEMENTS

The following discussion and explanations should be read in conjunction with the
financial statements and related notes contained elsewhere in this quarterly
report on Form 10-QSB. 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.


                                      (ii)
<PAGE>
                               AMBIENT CORPORATION
                          (A Development Stage Company)
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                        June 30,     December 31,
                                                          2005           2004
                                                      ------------   ------------
                                                       (Unaudited)
<S>                                                   <C>            <C>
ASSETS
CURRENT ASSETS
   Cash and cash equivalents                          $  3,284,599   $  6,954,512
   Accounts receivable                                      12,513         12,487
   Inventory                                               678,581        354,497
   Prepaid expenses and other current assets               127,120        198,639
                                                      ------------   ------------
      Total current assets                               4,102,813      7,520,135
Property and equipment, net                                658,501        343,407
Prepaid licensing fees                                     277,207        316,808
                                                      ------------   ------------
      Total assets                                    $  5,038,521   $  8,180,350
                                                      ============   ============
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT
   LIABILITIES
   Accounts payable                                   $    576,970   $    654,223
   Accrued expenses and other current liabilities          304,033        242,752
   Advance from stockholder                                325,000        325,000
                                                      ------------   ------------
      Total current liabilities                          1,206,003      1,221,975

NON-CURRENT LIABILITIES
   Convertible debentures (net of discount of
      $1,172,074 and $5,459,813)                           257,126         40,187
                                                      ------------   ------------
      Total  liabilities                                 1,463,129      1,262,162
                                                      ------------   ------------
STOCKHOLDERS' EQUITY
   Common stock, $.001 par value;
      300,000,000 shares authorized; 162,348,352
         and 146,639,766 issued; 162,347,652 and
         145,639,766 outstanding, respectively             163,348        146,640
   Additional paid-in capital                           86,171,781     82,031,660
   Deficit accumulated during the development stage    (82,503,896)   (74,979,445)
   Less: deferred compensation                             (55,841)       (80,667)
   Less: treasury stock; 1,000,000 shares at cost         (200,000)      (200,000)
                                                      ------------   ------------
      Total stockholders' equity                         3,575,392      6,918,188
                                                      ------------   ------------
      Total liabilities and stockholders' equity      $  5,038,521   $  8,180,350
                                                      ============   ============
</TABLE>

                 See Notes to Consolidated Financial Statements


                                        1
<PAGE>
                               AMBIENT CORPORATION
                          (A Development Stage Company)
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                            Six Months Ended          Cumulative         Three months Ended
                                                                 June 30,               From to               June 30,
                                                       ---------------------------     June 30,     ---------------------------
                                                           2005           2004           2005           2005           2004
                                                       ------------   ------------   ------------   ------------   ------------
                                                        (Unaudited)    (Unaudited)    (Unaudited)    (Unaudited)    (Unaudited)
<S>                                                    <C>            <C>            <C>            <C>            <C>
Revenues                                               $     12,513   $         --   $    135,513   $     12,513   $
Less Cost of goods sold                                     (12,513)                      (12,513)       (12,513)
                                                       ------------   ------------   ------------   ------------   ------------
Gross profit                                                     --             --        123,000             --             --
Expenses
   Research and Development (1)                           1,305,386        875,390     10,800,052        577,993        448,011
   Less - Participation by the Office of the
      Chief Scientist of the State of Israel                     --             --        558,195             --             --
                                                       ------------   ------------   ------------   ------------   ------------
                                                          1,305,386        875,390     10,241,857        577,993        448,011
Operating, general and administrative expenses (1)        1,909,367      1,089,104     18,617,544      1,151,331        541,068
Stock based compensation - net                               24,826         56,237     17,550,463         12,481          5,970
                                                       ------------   ------------   ------------   ------------   ------------
Total expenses                                            3,239,579      2,020,731     46,409,864      1,741,805        995,049
                                                       ------------   ------------   ------------   ------------   ------------
Operating loss                                           (3,239,579)    (2,020,731)   (46,286,864)    (1,741,805)      (995,049)
Interest expense                                            (67,446)       (23,238)      (803,979)       (21,415)        (1,905)
Amortization of beneficial conversion
   feature of convertible debt                           (2,173,840)            --     (6,289,326)      (133,526)            --
Amortization of deferred financing costs                 (2,113,899)    (2,504,923)   (13,044,391)       (15,727)      (211,260)
Interest income                                              70,314         22,578        449,398         35,899         15,162
Legal settlement                                                 --             --     (1,512,500)            --             --
Noncash financing expense                                        --             --     (1,600,000)            --             --
Write-off of convertible note receivable                         --             --       (490,000)            --             --
Company's share in net losses of affiliate                       --             --     (1,352,207)            --             --
                                                       ------------   ------------   ------------   ------------   ------------
Loss before minority interest and extraordinary item     (7,524,451)    (4,526,314)   (70,929,869)    (1,876,575)    (1,193,052)
Minority interest in subsidiary loss                             --             --         25,000             --             --
                                                       ------------   ------------   ------------   ------------   ------------
Loss before extraordinary item                           (7,524,451)    (4,526,314)   (70,904,869)    (1,876,575)    (1,193,052)
Extraordinary item - loss on extinguishment of debt              --             --     (9,778,167)            --             --
                                                       ------------   ------------   ------------   ------------   ------------
Net loss                                                 (7,524,451)    (4,526,314)   (80,683,036)    (1,876,575)    (1,193,052)
Deemed dividends on convertible preferred stock                  --             --     (1,820,859)            --             --
                                                       ------------   ------------   ------------   ------------   ------------
Net loss attributable to common stockholders           $ (7,524,451)  $ (4,526,314)  $(82,503,895)  $ (1,876,575)  $ (1,193,052)
                                                       ============   ============   ============   ============   ============
Basic and diluted loss per share:
      Net loss before extraordinary item               $      (0.05)  $      (0.04)                 $      (0.01)  $      (0.01)
      Extraordinary loss from extinguishment of debt             --             --                            --             --
                                                       ------------   ------------                  ------------   ------------
   Net loss                                            $      (0.05)  $      (0.04)                 $      (0.01)  $      (0.01)
                                                       ============   ============                  ============   ============
Weighted average number of shares outstanding           158,641,580    126,335,926                   161,978,039    141,820,841
                                                       ============   ============                  ============   ============
(1)Excludes non-cash, stock based compensation
   expense as follows:
   Research and development, net                       $         --   $         --   $  1,454,192   $         --   $         --
   Operating, general and administrative, net                24,826         56,237     16,096,271         12,481          5,970
                                                       ------------   ------------   ------------   ------------   ------------
                                                       $     24,826   $     56,237   $ 17,550,463   $     12,481   $      5,970
                                                       ============   ============   ============   ============   ============
</TABLE>

                 See Notes to Consolidated Financial Statements


                                        2
<PAGE>
                               AMBIENT CORPORATION
                          (A Development Stage Company)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                           Cumulative
                                                              Six months                      From
                                                                Ended                          to
                                                               June 30,                     June 30,
                                                                 2005          2004           2005
                                                             -----------   ------------   ------------
                                                             (Unaudited)    (Unaudited)    (Unaudited)
<S>                                                          <C>           <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                                  $(7,524,451)  $(4,526,314)   $(82,503,896)
   Adjustments to reconcile net loss to net cash used in
      operating activities:
      Depreciation and amortization                               99,362        26,446         656,249
      Amortization of note discount                            2,113,899     2,504,923      12,399,520
      Beneficial conversion feature of convertible debt        2,173,840                     6,289,326
      Financing, consulting and other expenses paid via
         the issuance of common stock and warrants                69,229        99,172      30,986,865
      Cancellation of officer loans in settlement of
         employment contract                                                                   724,447
      Loss on sale of fixed assets                                                              20,135
      Deemed dividends on convertible preferred stock                                        1,820,859
      Increase in net liability for severance pay                                               15,141
      Accrued interest on loans and notes payable                                              210,016
      Company's share in net losses of affiliates                                            1,352,207
      Minority interest in subsidiary loss                                                     (25,000)
      Write-off of convertible note receivable                                                 400,000
      Write-down of long term investment                                                       835,000
      Write-off of fixed assets                                                                136,066
      Increase (decrease) in cash attributable to changes
         in assets and liabilities
         Accounts receivables                                        (26)       22,747           8,012
         Inventory                                              (324,084)     (240,161)       (678,581)
         Prepaid expenses and other current assets                71,519       (15,837)        (18,815)
         Prepaid licensing fees                                   39,601      (221,408)       (181,808)
         Accounts payable                                        (77,253)       60,530         874,568
         Accrued expenses and other current liabilities           61,281       (38,219)        452,697
                                                              ----------   -----------    ------------
Net cash used in operating activities                         (3,289,810)   (2,328,121)    (26,226,992)
                                                              ----------   -----------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES
      Loan provided to another company                                                        (835,000)
      Purchase of convertible promissory note                                                 (400,000)
      Investment in affiliated company                                                        (375,000)
      Additions to property and equipment                       (421,728)     (115,852)     (1,512,186)
      Proceeds from disposal of fixed assets                                                    42,100
      Loans to Officers                                                                     (2,137,677)
      Repayment of loans to Officer                                                          1,431,226
                                                                --------   -----------    ------------
Net cash used in investing activities                           (421,728)     (115,852)     (3,786,537)
                                                                --------   -----------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES
      Net proceeds from issuance of share capital                 41,625     4,425,703      11,204,878
</TABLE>

                 See Notes to Consolidated Financial Statements


                                       3
<PAGE>
                               AMBIENT CORPORATION
                          (A Development Stage Company)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<S>                                                          <C>           <C>            <C>
      Proceeds from loans and advances                                                         690,000
      Proceeds from issuance of notes payable                                                1,360,000
      Net proceeds from issuance of convertible debentures                     250,000      18,455,133
      Repayment of notes payable                                                              (800,000)
      Proceeds of loans from shareholders, net                                                 919,600
      Repayment of loans from shareholders                                                    (968,000)
      Proceeds from long-term bank credit                                                       95,969
      Repayment of long-term bank credit                                                       (87,996)
      Increase (decrease) in short term bank credit                                            (32,004)
      Public offering of common stock                                                        3,433,027
      Repayment of short-term debt                                     0                      (269,311)
      Proceeds from short-term debt                                                            274,038
      Loans to affiliate                                                                      (977,207)
                                                             -----------   -----------    ------------
Net cash provided by financing activities                         22,314     4,675,703      33,298,127
                                                             -----------   -----------    ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS              (3,669,914)    2,231,730       3,284,598
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR                  6,954,512     2,621,643              --
                                                             -----------   -----------    ------------
CASH AND CASH EQUIVALENTS - END OF PERIOD                    $ 3,284,598   $ 4,853,373    $  3,284,598
                                                             ===========   ===========    ============
Noncash financing and investing activities:
      Issuance of common stock and warrants in respect of
         amounts payable                                     $             $   150,000
                                                             ===========   ===========
      Issuance of common stock upon conversion of
         debentures and interest                             $ 4,101,677   $
                                                             ===========   ===========
Supplemental disclosures of cash flow information:
   Cash paid during the period of:
      Interest Expense                                       $    30,716
                                                             ===========
      Income Taxes                                           $
                                                             ===========
</TABLE>

                 See Notes to Consolidated Financial Statements


                                       4
<PAGE>
                              AMBIENT CORPORATION
                         (A Development Stage Company)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Ambient
Corporation and its subsidiaries (collectively the "Company") have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with Item 310(b) of Regulation S-B. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the six months ended June 30, 2005, are not necessarily indicative
of the results that may be expected for the year ending December 31, 2005. These
unaudited consolidated financial statements should be read in conjunction with
the audited consolidated financial statements and footnotes thereto included in
the Company's Form 10-KSB for the year ended December 31, 2004, as filed with
the Securities and Exchange Commission.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company is in the development
stage, has a limited operating history and has sustained losses since its
inception. The Company's ability to continue operating as a going concern is
substantially dependent on its ability to generate operating cash flow through
the execution of its business plan or to secure funding sufficient to provide
for working capital needs of its business. There is no assurance that the
Company will generate revenue or raise funds that it needs to realize its
business plan or maintain its operations. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

While the Company is actively seeking to raise additional capital, at the
present time, it has no commitments for any such financing, and there can be no
assurance that additional capital will be available to us on commercially
acceptable terms or at all.

NOTE 2 - NET LOSS PER SHARE

Basic earnings (loss) per share is computed by dividing net income (loss)
applicable to common shares by the weighted-average of shares of common stock,
par value $0.001 per share (the "Common Stock") outstanding during the period.
Diluted earnings (loss) per share adjusts basic earnings (loss) per share for
the effects of convertible securities, stock options and other potentially
dilutive instruments, only in the periods in which such effect is dilutive. The
following securities have been excluded from the calculation of net loss per
share, as their effect would be antidilutive.

<TABLE>
<CAPTION>
                            2005         2004
                         ----------   ----------
<S>                      <C>          <C>
Stock options            21,976,375   15,970,250
Warrants                 37,508,505   22,872,662
Convertible debentures    5,716,800
</TABLE>


                                       5
<PAGE>
                              AMBIENT CORPORATION
                         (A Development Stage Company)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

NOTE 3 - STOCK BASED COMPENSATION PLANS

     The Company accounts for stock-based employee and outside director
compensation under Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees", and related interpretations. The
Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation"
and SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure", which was released in December 2002 as an amendment of SFAS No.
123.

The following table illustrates the effect on net income and earnings per share
if the fair value based method had been applied to all awards:

<TABLE>
<CAPTION>
                                                     Six Months Ended           Three Months Ended
                                                         June 30,                    June 30,
                                                -------------------------   -------------------------
                                                    2005          2004          2005          2004
                                                -----------   -----------   -----------   -----------
<S>                                             <C>           <C>           <C>           <C>
Net loss, as reported                           ($7,524,451)  ($4,526,314)  ($1,876,575)  ($1,193,052)
Add: Stock based compensation
   expense, as reported                                  --            --            --            --
Deduct: Total stock-based compensation
   expense determined under the fair
   value based method for all awards               (655,901)     (328,200)     (326,709)     (164,100)
                                                -----------   -----------   -----------   -----------
Pro forma net loss                              ($8,180,352)  ($4,854,514)  ($2,203,284)  ($1,357,152)
                                                ===========   ===========   ===========   ===========
Basic and diluted loss per share, as reported        ($0.05)       ($0.04)       ($0.01)       ($0.01)
                                                ===========   ===========   ===========   ===========
Basic and diluted loss per share, pro forma          ($0.05)       ($0.04)       ($0.01)       ($0.01)
                                                ===========   ===========   ===========   ===========
</TABLE>

The weighted average per share fair value of options granted during the three
months ended June 30, 2005 and 2004 was $.359 and $.147, respectively. The fair
value of each option granted in 2005 and 2004 was estimated using the
Black-Scholes option-pricing model with a volatility of 159% and 168%, expected
life of options of 8 and 8 years, risk free interest rate of 4.05% and 3.65% and
a dividend yield of 0% and 0%, respectively.

The FASB issued SFAS 123(R) "Share Based Payment" ("SFAS No. 123(R)") that is
effective for public companies qualifying as SEC small business issuers, as of
the first interim period or fiscal year beginning after December 15, 2005.
Accordingly, the adoption of SFAS No. 123(R) requiring the use of the fair value
method could have an impact on our results of operations, although it will have
no impact on our overall financial position. The impact of the adoption of SFAS
No. 123 (R) cannot be predicted at this time because it will depend on levels of
share-based payments granted in the future.


                                       6
<PAGE>
                               AMBIENT CORPORATION
                          (A Development Stage Company)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 4 - CASH EQUIVALENTS

Cash and cash equivalents consist of cash and short-term investments with
insignificant interest rate risk and original maturities of 90 days or less.
Cash and cash equivalents are carried at cost, which approximates market value.

NOTE 5 - INVENTORY

Inventory is valued at the lower of cost or market and is determined on first-in
first-out method. Inventory consists of the following:

<TABLE>
<CAPTION>
                  June 30, 2005   December 31, 2004
                   (Unaudited)        (Audited)
                  -------------   -----------------
<S>               <C>             <C>
Raw materials        $351,722          $159,003
Work in process       126,060                --
Finished goods        200,799           195,494
                     --------          --------
                     $678,581          $354,497
                     ========          ========
</TABLE>

NOTE 6 - STOCKHOLDERS EQUITY

Debenture Conversions

From January through June 30, 2005, $4,070,800 principal amount of the Company's
three year 6% Convertible Debentures issued in December 2004 were converted into
16.3 million shares of Common Stock. In addition, from July 1, 2005 through
August 12, 2005, an additional $279,200 principal amount has been converted into
1,116,800 shares of common stock. By their terms, the Debentures are convertible
into shares of the Common Stock at a per share conversion rate of $0.25.

Shares Issued in Lieu of Cash

From January through June 30, 2005, 177,612 shares of common stock were issued
in lieu of cash for $44,403 interest due pursuant to the Company's convertible
debentures.

Option Exercises

From January though June 2005, options for 150,000 shares of common stock were
exercised resulting in gross proceeds to the Company of $30,000. In addition,
from July 1, 2005 through August 12, 2005, options for 193,750 shares of common
stock were exercised resulting in gross proceeds to the Company of $38,750.

Warrant Exercises

From January through June 2005, warrants for 96,875 shares of common stock were
exercised resulting in gross proceeds to the Company of $11,625.


                                       7
<PAGE>
ITEM 2. PLAN OF OPERATION

     THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL
STATEMENTS AND THE NOTES RELATED TO THOSE STATEMENTS. SOME OF OUR DISCUSSION IS
FORWARD-LOOKING AND INVOLVES RISKS AND UNCERTAINTIES. FOR INFORMATION REGARDING
RISK FACTORS THAT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, REFER TO
THE RISK FACTORS SECTION OF THE ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31,
2004 ON FORM 10-KSB/A.

OVERVIEW

     Ambient Corporation is engaged in the design, development and marketing of
equipment and technologies designed to utilize existing electrical power medium
voltage and low voltage distribution lines as a medium for the delivery of
broadband and other services (collectively, the "PLC Technologies"). We are
currently working with leading electric utilities and technology companies in
the development and testing of the principal equipment, components and
technologies that comprise our PLC Technologies. Prototypes of these components
and technologies are presently being evaluated and deployed in field trials and
pilot programs. Our objective over the next twelve months is to continue our
intensified commercialization efforts, including the build-up of inventory, and
continue the design, development and testing of enhanced versions of the
equipment and components comprising our PLC Technologies.

     We are a development stage company that has generated significant losses
since our inception, and we expect to continue to incur substantial losses for
the foreseeable future. To date, we have devoted substantially all of our
efforts towards research and development activities and initial marketing
efforts. As of June 30, 2005, we had an accumulated deficit of approximately
$82.5 million (which includes approximately $40 million in stock based charges
and other non cash charges.) As a development stage company, we have a limited
operating history upon which and evaluation of our prospects can be made.
Ambient's prospects must therefore be evaluated in light of the problems,
expenses, delays and complications associated with a development stage company.

     We are aggressively pursuing our business plan with respect to product
development and enhancement and field testing, as well as initial marketing
efforts. During fiscal 2004 and the first half of fiscal 2005, we have
significantly increased our in-house personnel, primarily in product development
and testing, expanded the scope of our pilots with the participation of
Consolidated Edison of New York and EarthLink, Inc. and entered into
collaborative arrangements with leading companies engaged in the PLC field. We
intend to continue with these efforts over the next twelve months, as well as
expand our internal management and administrative capacities.

     As of June 30, 2005, we had 32 employees, all of whom worked out of our
premises in Newton, Massachusetts. We expect to continue making substantial
investment in equipment and to acquire inventory to facilitate the expansion of
pilots and to prepare for commercialization.

MANAGEMENT DISCUSSION AND ANALYSIS

     REVENUES. The company recorded revenue of approximately $12,000 for the
three months and sixth months ended June 30, 2005. The revenue was generated
from the sale of equipment, at cost, to a development partner.


                                       8
<PAGE>
     If and when the PLC Technologies are commercially deployed in a PLC system,
we anticipate that we will be able to generate revenue principally from one or
more of the following: PLC network design and installation, sale and support of
the underlying components and potential license fees collected from utilities,
property managers, technology companies or Internet service providers. Our
management believes that we will be able to refine our strategy and the
potential sources of revenue as the industry nears significant commercial
deployment.

     RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
consist primarily of expenses incurred in designing, developing and field
testing our PLC Technologies. These expenses consist primarily of salaries and
related expenses for personnel, contract design and testing services, supplies
used and consulting and license fees paid to third parties. Research and
development expenses for the three months ended June 30, 2005 and 2004 were
approximately $573,000 and $448,000, respectively. Research and development
expenses for the six months ended June 30, 2005 and 2004 were approximately $1.3
million and $875,000, respectively. The increase in research and development
expenses is primarily attributable to an increase in the product design and
development efforts. We expect that research and development expenses will
continue to increase during fiscal 2005 as we increase our efforts to market and
commercialize our PLC Technologies.

     GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
primarily consist of salaries and other related costs for personnel in executive
and other administrative functions. Other significant costs include professional
fees for legal, accounting and other services. General and administrative
expenses for the three months ended June 30, 2005 and 2004 were approximately
$1.1 million and $552,000, respectively. General and administrative expenses for
the six months ended June 30, 2005 and 2004 were approximately $1.9 million and
$1.1 million, respectively. The increase in general and administrative expenses
is primarily attributable to an increase in personnel and related costs. We
expect that our general and administrative expenses will continue to increase
during fiscal 2005 as we increase our efforts to market and commercialize our
PLC Technologies.

     OTHER OPERATING EXPENSES. A portion of our operating expenses are
attributable to non-cash charges associated with the compensation of consultants
and senior personnel through the issuance of stock options and stock grants.
Stock-based compensation is non-cash and will therefore have no impact on our
cash flows or liquidity. For the six months ended June 30, 2005, we incurred
non-cash expenses of approximately $4.3 million related to the amortization of
beneficial conversion feature of convertible debt and amortization of deferred
financing costs related to the conversion of approximately 74% of the Company's
convertible debentures during the period.

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

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


                                       9
<PAGE>
     We have identified the accounting policies below as critical to our
business operations and the understanding of our results of operations.

VALUATION OF STOCK-BASED COMPENSATION

     We account for stock-based compensation (see Note 2 of the Notes to the
Consolidated Financial statements) in accordance with APB Opinion No. 25,
"Accounting for Stock Issued to Employees" and FASB Interpretation 44,
"Accounting for Certain Transactions Involving Stock Compensation." Pursuant to
these accounting standards, we record deferred compensation for share options
granted to employees at the date of grant based on the difference between the
exercise price of the options and the market value of the underlying shares at
that date. Deferred compensation is amortized to compensation expense over the
vesting period of the underlying options. No compensation expense is recorded
for fixed stock options that are granted to employees and directors at an
exercise price equal to the fair market value of the Common Stock at the time of
the grant.

     Stock options granted to non-employees are recorded at their fair value, as
determined in accordance with SFAS No. 123 and Emerging Issues Task Force
Consensus No. 96-18, and recognized over the related service period. Deferred
charges for options granted to non-employees are periodically re-measured as the
options vest.

     We use the Black-Scholes option-pricing model to estimate the fair value of
options we have granted for purposes of making the disclosure required by SFAS
123. In order to calculate the fair value of the options, assumptions are made
for certain components of the model, including risk-free interest rate,
volatility, expected dividend yield rate and expected option life. Although we
use available resources and information when setting these assumptions, changes
to the assumptions could cause significant adjustments to the valuation.

     The FASB issued SFAS 123(R) "Share Based Payment" ("SFAS No. 123(R)") that
is effective for public companies qualifying as SEC small business issuers, as
of the first interim period or fiscal year beginning after December 15, 2005.
Accordingly, the adoption of SFAS No. 123(R) requiring the use of the fair value
method could have an impact on our results of operations, although it will have
no impact on our overall financial position. The impact of the adoption of SFAS
No. 123 (R) cannot be predicted at this time because it will depend on levels of
share-based payments granted in the future.

DEFERRED INCOME TAXES.

     Deferred income taxes are recognized for the tax consequences of "temporary
differences" by applying enacted statutory rates applicable to future years to
differences between the financial statement carrying amounts and the tax basis
of existing assets and liabilities. At June 30, 2005, our deferred income tax
assets consisted primarily of net operating loss carry forwards and stock based
compensation charges which have been fully offset with a valuation allowance due
to the uncertainty that a tax benefit will be realized from the assets in the
future.

LIQUIDITY AND CAPITAL RESOURCES

     Since inception, we have funded our operations primarily through the
issuance of our securities. Our recent financings are discussed below.


                                       10
<PAGE>
     In February 2004, EarthLink invested $500,000 in Ambient though the
purchase of (i) a three-year convertible debenture in the aggregate amount of
$250,000 and (ii) 2,083,333 shares of Common Stock. In March 2004, the
outstanding principal amount and accrued interest on EarthLink's debenture were
converted into 2,087,100 shares of Common Stock.

     In December 2004, we sold $5,500,000 aggregate principal amount of our
convertible debentures and warrants, receiving net proceeds of approximately
$4.9 million after the payment of offering related fees and expenses. As of
August 12, 2005, debentures with a principle amount of $4,350,000 have been
converted into 17,400,000 shares of Common Stock at a conversion price of $0.25.

     At June 30, 2005, cash and cash equivalents were approximately $3.3 million
as compared to approximately $7.0 million at December 31, 2004. Our cash and
cash equivalents are held in a variety of interest bearing instruments with
institutions that have a minimum investment grade rating of Moody's A1, Standard
and Poor A, or Fitch A+.

     Net cash used in operating activities for the six months ended June 30,
2005 was approximately $3.7 million and is primarily attributable to ongoing
research and development and general and administrative expenses. To facilitate
the expansion of ongoing pilots and to further prepare for the commercialization
phase of our PLC Technologies, we continued to add inventory. As of June 30,
2005, inventory on hand was approximately $678,000. In addition, we augmented
our technology team and added significant resources to our management team.

     We believe that our existing cash and cash equivalents will be sufficient
to fund our operations through the current fiscal year. However, our existing
cash resources will not be sufficient to support the commercial introduction,
production and delivery of our technologies and we will need to raise additional
capital for such purposes. Management is actively seeking to raise capital that
will provide funds needed to continue our business operations and implement our
business plans. At the present time, we have no commitments for any such
financing, and there can be no assurance that additional capital will be
available to us on commercially acceptable terms or at all. Our auditors have
included a "going concern" qualification in their auditors' report for the year
ended December 31, 2004. Such a "going concern" qualification may make it more
difficult for us to raise funds.

     Additional equity financings may be dilutive to holders of our Common Stock
and debt financing, if available, may involve significant payment obligations
and covenants that restrict how we operate our business.

ITEM 3. CONTROLS AND PROCEDURES

     EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. We maintain disclosure
controls and procedures that are designed to ensure that information required to
be disclosed in our Exchange Act reports is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms, and
that such information is accumulated and communicated to management, including
our Chief Executive Officer and Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosure based closely on the
definition of "disclosure controls and procedures" in Rule 13a-14(c).

     As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with participation of management,
including our Chief Executive Officer and


                                       11
<PAGE>
     Chief Financial Officer, of the effectiveness of the design and operation
of our disclosure controls and procedures. Based on the foregoing, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective.

     CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING. During the quarter
ended June 30, 2005, there have been no changes in our internal controls over
financial reporting that have materially affected, or are reasonably likely to
materially affect, these controls.

                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

None.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

SALES OF UNREGISTERED SECURITIES

There were no sales of unregistered securities during the three months ended
March 31, 2005.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

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

     The Company's Annual Meeting of Stockholders was held on June 10, 2005. The
following matters were voted on: (1) Election of Directors; (2) increase the
number of authorized shares of Common Stock; and (3) Appointment of Auditors.
The vote tally was as follows:

(1) Proposal to Elect Directors to Serve until the 2005 Annual Meeting of
Stockholders.

<TABLE>
<CAPTION>
                       FOR       WITHHOLD
                   -----------   --------
<S>                <C>           <C>
John Joyce         152,650,615    834,933
Michael Widland    152,494,285    991,263
Henry Seduski      152,735,285    750,263
Howard D. Pierce   152,747,485    738,063
</TABLE>

(2) Proposal to ratify the amendment to the Company's certificate of
incorporation to increase the number of shares of Common Stock that the Company
is authorized to issue from time to time to 350 million shares and authorize the
issuance, from time to time, of up to 5,000,000 of preferred stock, par value
$.001, in one or more series;

<TABLE>
<CAPTION>
    FOR       AGAINST    ABSTAIN   BROKER NON VOTES
----------   ---------   -------   ----------------
<S>          <C>         <C>       <C>
67,115,213   6,390,341   312,141      79,755,465
</TABLE>


                                       12
<PAGE>
(3) Proposal to increase the number of shares of Common Stock, reserved for
issuance under the Company's 2000 Equity Incentive Plan from 15,000,000 to
25,000,000 shares;

<TABLE>
<CAPTION>
    FOR       AGAINST    ABSTAIN   BROKER NON VOTES
----------   ---------   -------   ----------------
<S>          <C>         <C>       <C>
67,114,246   6,303,696   305,293      79,755,465
</TABLE>

(4) Proposal to increase the number of shares of Common Stock, reserved for
issuance under the Company's 2002 Non-Employee Directors Stock Option Plan from
2,000,000 to 4,000,000 shares;

<TABLE>
<CAPTION>
    FOR       AGAINST    ABSTAIN   BROKER NON VOTES
----------   ---------   -------   ----------------
<S>          <C>         <C>       <C>
67,514,114   5,910,676   305,293      79,755,465
</TABLE>

(5) Proposal to ratify the appointment of Rotenberg, Meril Solomon Bertiger &
Guttilla, PC as the Company's auditors for the year ending December 31, 2005.

<TABLE>
<CAPTION>
    FOR        AGAINST    ABSTAIN   BROKER NON VOTES
-----------   ---------   -------   ----------------
<S>           <C>         <C>       <C>
152,840,872    222,302    422,374      79,755,465
</TABLE>

     Except for proposal No. 2, all Proposals received the requisite number of
votes and were carried.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits

31. 1 Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer

31. 2 Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer

32.1 Section 1350 Certification

32.2 Section 1350 Certification

(b) Reports on Form 8-K

     None


                                       13
<PAGE>
                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the small business
issuer has caused this report to be signed by the undersigned thereunto duly
authorized.

DATE: AUGUST 12, 2005                   AMBIENT CORPORATION


                                        /s/ JOHN J. JOYCE
                                        ----------------------------------------
                                        JOHN J. JOYCE
                                        CHIEF EXECUTIVE OFFICER


PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER


DATE: AUGUST 12, 2005                   BY /s/ LAUREN FARRELL
                                           -------------------------------------
                                           LAUREN FARRELL,
                                           CHIEF FINANCIAL OFFICER