UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q/A

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þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2009

or

 ̈

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from: _____________ to _____________



AMBIENT CORPORATION

(Exact name of registrant as specified in its charter)

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

7 WELLS AVENUE, NEWTON, MASSACHUSETTS     02459

(Address of Principal Executive Office)     (Zip Code)

617-332-0004

(Registrants telephone number, including area code)



(Former name, former address and former fiscal year, if changed since last report)



Indicate by check mark whether the registrant (1) has 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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  þ  No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.



|                           |  |                             
|-------------------------- |  | ----------------------------
|                           |  |                             
|Large accelerated filer   ̈ |  | Accelerated filer   ̈        
|Non-accelerated filer   ̈   |  | Smaller reporting company  þ



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes   ̈  No  þ

As of August 13, 2009, there were 889,300,854 shares of the issuer's common stock, par value $0.001 per share, outstanding.







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EXPLANATORY NOTE

This Amendment No. 1 to Form 10-Q/A (this Amendment No. 1) amends the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009, originally filed with the U.S. Securities and Exchange Commission (the SEC) on August 14, 2009 (the Original Report) of Ambient Corporation (the Company, our, we, or we). We are filing this Amendment No. 1 to amend (1) Part I  Item 1 Financial Statements; (2) Part I - Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations; and (3) Part I - Item 4T Control and Procedures.

BACKGROUND

Subsequent to the issuance of the Companys Original Report, the Company identified certain adjustments that were not recorded in its previously issued interim unaudited financial statements included in the Original Report. Specifically, the Company did not adjust the beneficial conversion feature ("BCF") for the change in the most preferable conversion price of its convertible debt that should have been effected as of June 1, 2009.

Under the terms of the Debenture Modification Agreement (the Agreement) entered into by the Company and its principal stockholder on November 21, 2008, the Company reduced the conversion price on the convertible promissory notes held by such stockholder to $0.015 per share. The Agreement provided, however, that, in the event that on the trading day immediately preceding June 1, 2009, the closing per share price of the Companys common stock, par value $0.01 per share (the Common Stock) was less than $0.10, then the conversion per share price would be adjusted to $0.01. In accordance with EITF No. 00-27, the BCF was valued at the time based on the most favorable conversion price for the investor assuming there were no changes to the then current circumstances except for the passage of time. The most favorable per share conversion price at the time was $0.01 because the closing per share stock price on the date that the Agreement was entered into was $0.02, resulting in an intrinsic value for the beneficial conversion feature of $0.01. This resulted in a total for the BCF of $12,500,000, which was recorded in November 2008. The Company started amortizing the BCF in November 2008.

The closing per share price of the Common Stock was greater than $0.10 on the trading day immediately preceding June 1, 2009, and therefore, no further adjustment was warranted to the per share conversion price. However, the Company should have recalculated the BCF as of June 1, 2009 based on a conversion price of $0.015. Amendment No. 1 is being filed hereunder to reflect the adjustment of the BCF as of June 1, 2009.

EFFECTS OF RESTATEMENT

The aggregate net effect of the restatement was to decrease both non-cash interest expense and net loss for the six and three months ended June 30, 2009 by $533,670 and to decrease the discount on convertible debt and stockholders deficit by $7,799,663 as of June 30, 2009. The net loss per common share (basic and diluted) for the six and three months ended June 30, 2009 remains unchanged. The restatement had no effect on operating loss nor on cash flow for the six months ended June 30, 2009. See Note 10  Restatement. These adjustments had no impact on the Companys cash flows from operating, investing or financing activities.

Other than the revisions referred to above and related certifications, all other information included in the Original Report remains unchanged. This Amendment No. 1 is not intended to, nor does it, reflect events that have occurred since the filing of the Original Report, and does not modify or update the disclosures therein in any way other than as required to reflect the changes described above.







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AMBIENT CORPORATION

INDEX PAGE

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|PAGE
PART I  FINANCIAL INFORMATION
ITEM 1.   FINANCIAL STATEMENTS
1
CONSOLIDATED BALANCE SHEETS
1
CONSOLIDATED STATEMENTS OF OPERATIONS
2
CONSOLIDATED STATEMENTS OF CASH FLOWS
3
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
4
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
11
ITEM 4T.CONTROLS AND PROCEDURES
13
PART II - OTHER INFORMATION
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
14
ITEM 5.OTHER INFORMATION
14
ITEM 6.EXHIBITS
15
SIGNATURES
16





*

The Balance Sheet at December 31, 2008 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.



i



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FORWARD LOOKING STATEMENTS

The following discussion should be read in conjunction with the financial statements and related notes contained elsewhere in this quarterly report on Form 10-Q. We make forward-looking statements in this report, in other materials we file with the Securities and Exchange Commission (the SEC) or that we otherwise release to the public, and on our website. In addition, our senior management might make forward-looking statements orally to analysts, investors, the media, and others. Statements concerning our future operations, prospects, strategies, financial condition, future economic performance (including growth and earnings) and demand for our products and services, and other statements of our plans, beliefs, or expectations, including the statements contained in Item 2, Managements Discussion and Analysis of financial condition and results of operations, regarding our future plans, strategies and expectations are forward-looking statements. In some cases these statements are identifiable through the use of words such as anticipate, believe, estimate, predict, expect, intend, plan, project, target, continue, can, could, may, should, will, would, and similar expressions. You are cautioned not to place undue reliance on these forward-looking statements because these forward-looking statements we make are not guarantees of future performance and are subject to various assumptions, risks, and other factors that could cause actual results to differ materially from those suggested by these forward-looking statements. Thus, our ability to predict results or the actual effect of our future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to, our inability to continue operations; our inability to obtain necessary financing; the effect of a going concern statement by our auditors; changes in: economic conditions generally and our specific market areas, changes in technology, legislative or regulatory changes that affect us, the availability of working capital, changes in costs and the availability of goods and services, the introduction of competing products, changes in our operating strategy or development plans, our ability to attract and retain qualified personnel, and changes in our acquisition and capital expenditure plans. These risks and uncertainties, together with the other risks described from time to time in reports and documents that we file with the SEC, should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance or achievements. Indeed, it is likely that some of our assumptions will prove to be incorrect. Our actual results and financial position will vary from those projected or implied in the forward-looking statements and the variances may be material. Moreover, we do not assume the responsibility for the accuracy and completeness of these forward-looking statements. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.



ii



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PART I  FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

AMBIENT CORPORATION

CONSOLIDATED BALANCE SHEETS

|                                                                                                                                                          |  |                           |              |   |  |                   |              |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | ------------ | - |  | ----------------- | ------------ | -
|                                                                                                                                                          |  | June 30
2009              |              |   |  | December 31,
2008 |             
|                                                                                                                                                          |  | (Unaudited)
(as Restated) |              |   |  |                   |             
|ASSETS                                                                                                                                                    |  |                           |              |   |  |                   |             
|CURRENT ASSETS                                                                                                                                            |  |                           |              |   |  |                   |              |  
|Cash and  cash equivalents                                                                                                                                |  | $                         | 4,877,075    |   |  | $                 | 8,011,764    |  
|Marketable securities                                                                                                                                     |  |                           |             |   |  |                   | 125,000      |  
|Accounts receivable                                                                                                                                       |  |                           | 20,997       |   |  |                   | 1,668,887    |  
|Inventory                                                                                                                                                 |  |                           | 463,696      |   |  |                   | 98,044       |  
|Prepaid expenses and other current assets                                                                                                                 |  |                           | 152,794      |   |  |                   | 174,425      |  
|Total current assets                                                                                                                                      |  |                           | 5,514,562    |   |  |                   | 10,078,120   |  
|Property and equipment, net                                                                                                                               |  |                           | 492,704      |   |  |                   | 543,904      |  
|Total assets                                                                                                                                              |  | $                         | 6,007,266    |   |  | $                 | 10,622,024   |  
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                      |  |                           |              |   |  |                   |              |  
|CURRENT LIABILITIES                                                                                                                                       |  |                           |              |   |  |                   |              |  
|Accounts payable                                                                                                                                          |  | $                         | 1,005,906    |   |  | $                 | 1,333,778    |  
|Accrued expenses and other current liabilities                                                                                                            |  |                           | 1,051,296    |   |  |                   | 936,961      |  
|Deferred revenue                                                                                                                                          |  |                           | 74,137       |   |  |                   | 108,067      |  
|Capital lease obligations, current portion                                                                                                                |  |                           | 11,462       |   |  |                   | 11,462       |  
|Total current liabilities                                                                                                                                 |  |                           | 2,142,801    |   |  |                   | 2,390,268    |  
|NON-CURRENT LIABILITIES                                                                                                                                   |  |                           |              |   |  |                   |              |  
|Convertible debt, less current portion (net of discount of $531,960 and $11,745,542)                                                                      |  |                           | 11,968,040   |   |  |                   | 754,458      |  
|Capital lease obligations, less current portion                                                                                                           |  |                           | 17,376       |   |  |                   | 22,967       |  
|Total liabilities                                                                                                                                         |  |                           | 14,128,217   |   |  |                   | 3,167,693    |  
|STOCKHOLDERS' EQUITY  (DEFICIT)                                                                                                                           |  |                           |              |   |  |                   |              |  
|Common stock, $.001 par value; 1,250,000,000 shares authorized; 722,684,187 and 255,615,704 issued; 721,684,187 and 254,615,704 outstanding, respectively |  |                           | 722,684      |   |  |                   | 719,981      |  
|Additional paid-in capital                                                                                                                                |  |                           | 126,221,527  |   |  |                   | 132,930,334  |  
|Accumulated deficit                                                                                                                                       |  |                           | (134,865,162 | ) |  |                   | (125,995,984 | )
|Less: treasury stock; 1,000,000 shares at cost                                                                                                            |  |                           | (200,000     | ) |  |                   | (200,000     | )
|Total stockholders' equity (deficit)                                                                                                                      |  |                           | (8,120,951   | ) |  |                   | 7,454,331    |  
|Total liabilities and stockholders' equity (deficit)                                                                                                      |  | $                         | 6,007,266    |   |  | $                 | 10,622,024   |  











See Notes to Consolidated Financial Statements.



1



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AMBIENT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                                 |  |                            |             |   |                             |   |             |                           |  |   |             |   |  |   |             |  
|---------------------------------------------------------------- |  | -------------------------- | ----------- | - | --------------------------- | - | ----------- | ------------------------- |  | - | ----------- | - |  | - | ----------- | -
|                                                                 |  | Six  Months
Ended
June 30, |             |   | Three Months
Ended
June 30, |  
|                                                                 |  |                            |             |  
|                                                                 |  | 2009                       |             |   | 2008                        |   |             | 2009                      |  |   | 2008        |  
|                                                                 |  | (Unaudited)
(as Restated)  |             |   | (Unaudited)                 |   |             | (Unaudited)
(as Restated) |  |   | (Unaudited) |  
|Revenues                                                         |  | $                          | 857,183     |   |                             | $ | 810,865     |                           |  | $ | 30,590      |   |  | $ | 747,223     |  
|Less Cost of goods sold                                          |  |                            | 756,854     |   |                             |   | 948,500     |                           |  |   | 25,618      |   |  |   | 605,630     |  
|Gross profit (loss)                                              |  |                            | 100,329     |   |                             |   | (137,635    | )                         |  |   | 4,972       |   |  |   | 141,593     |  
|Expenses                                                         |  |                            |             |   |                             |   |             |                           |  |   |             |   |  |   |             |  
|Research and Development                                         |  |                            | 2,017,105   |   |                             |   | 1,786,067   |                           |  |   | 1,015,396   |   |  |   | 926,822     |  
|Operating, general and administrative expenses                   |  |                            | 2,136,900   |   |                             |   | 1,697,311   |                           |  |   | 1,071,316   |   |  |   | 951,754     |  
|Stock based compensation - operating, general and administrative |  |                            | 471,062     |   |                             |   | 299,599     |                           |  |   | 248,388     |   |  |   | 184,731     |  
|Total expenses                                                   |  |                            | 4,625,067   |   |                             |   | 3,782,977   |                           |  |   | 2,335,100   |   |  |   | 2,063,307   |  
|Loss on sale and disposal of property and equipment              |  |                            | (8,935      | ) |                             |   |            |                           |  |   |            |   |  |   |            |  
|Operating loss                                                   |  |                            | (4,533,673  | ) |                             |   | (3,920,612  | )                         |  |   | (2,330,128  | ) |  |   | (1,921,714  | )
|Interest and finance expenses                                    |  |                            | (4,361,631  | ) |                             |   | (1,122,399  | )                         |  |   | (2,496,582  | ) |  |   | (592,102    | )
|Interest income                                                  |  |                            | 26,126      |   |                             |   | 27,534      |                           |  |   | 3,951       |   |  |   | 11,729      |  
|Net loss                                                         |  | $                          | (8,869,178  | ) |                             | $ | (5,015,477  | )                         |  | $ | (4,822,759  | ) |  | $ | (2,502,087  | )
|Basic and diluted loss per share:                                |  |                            |             |   |                             |   |             |                           |  |   |             |   |  |   |             |  
|Net loss                                                         |  | $                          | (0.01       | ) |                             | $ | (0.02       | )                         |  | $ | (0.01       | ) |  | $ | (0.01       | )
|Weighted average number of shares outstanding                    |  |                            | 719,968,607 |   |                             |   | 254,615,704 |                           |  |   | 720,945,575 |   |  |   | 254,615,704 |  









See Notes to Consolidated Financial Statements.



2



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AMBIENT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                            |  |                            |            |   |             |   |            |  
|------------------------------------------------------------------------------------------- |  | -------------------------- | ---------- | - | ----------- | - | ---------- | -
|                                                                                            |  | Six  Months
Ended
June 30, |           
|                                                                                            |  | 2009                       |            |   | 2008        |  
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                            |  | (Unaudited)                |            |   | (Unaudited) |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                                        |  | (as Restated)              |            |   |             |  
|Net loss                                                                                    |  | $                          | (8,869,178 | ) |             | $ | (5,015,477 | )
|Adjustments to reconcile net loss to net cash used in operating activities:                 |  |                            |            |   |             |   |            |  
|Depreciation and amortization                                                               |  |                            | 138,084    |   |             |   | 152,087    |  
|Amortization of note discount                                                               |  |                            |           |   |             |   | 577,863    |  
|Amortization of beneficial conversion feature of convertible debt                           |  |                            | 2,880,249  |   |             |   | 205,700    |  
|Non-cash interest related to warrant modification                                           |  |                            | 1,147,167  |   |             |   |           |  
|Financing, consulting and other expenses paid via the
issuance of common stock and warrants |  |                            | 471,062    |   |             |   | 299,599    |  
|Loss on sale and disposal of property and equipment                                         |  |                            | 8,935      |   |             |   |           |  
|Increase (decrease) in cash attributable to changes in assets and liabilities               |  |                            |            |   |             |   |            |  
|Accounts receivables                                                                        |  |                            | 1,647,890  |   |             |   | (123,671   | )
|Inventory                                                                                   |  |                            | (365,652   | ) |             |   | 196,385    |  
|Prepaid expenses and other current assets                                                   |  |                            | 21,631     |   |             |   | (1,199,441 | )
|Prepaid licensing fees                                                                      |  |                            |           |   |             |   | 24,254     |  
|Accounts payable                                                                            |  |                            | (327,872   | ) |             |   | 176,225    |  
|Accrued expenses and other current liabilities                                              |  |                            | 114,335    |   |             |   | 246,823    |  
|Deferred revenue                                                                            |  |                            | (33,930    | ) |             |   |           |  
|Net cash used in operating activities                                                       |  |                            | (3,167,279 | ) |             |   | (4,459,653 | )
|CASH FLOWS FROM  INVESTING ACTIVITIES                                                       |  |                            |            |   |             |   |            |  
|Purchases of marketable securities                                                          |  |                            |           |   |             |   | (525,000   | )
|Sale of marketable securities                                                               |  |                            | 125,000    |   |             |   | 400,000    |  
|Additions to property and equipment                                                         |  |                            | (96,279    | ) |             |   | (93,162    | )
|Proceeds from sale of property and equipment                                                |  |                            | 460        |   |             |   |           |  
|Net cash provided by (used in) investing activities                                         |  |                            | 29,181     |   |             |   | (218,162   | )
|CASH FLOWS FROM FINANCING ACTIVITIES                                                        |  |                            |            |   |             |   |            |  
|Proceeds from issuance of warrants and options                                              |  |                            | 9,000      |   |             |   | 3,000,000  |  
|Proceeds from issuance of notes payable                                                     |  |                            |           |   |             |   | 2,500,000  |  
|Finance costs relating to issuance of debts and warrants                                    |  |                            |           |   |             |   | (45,000    | )
|Finance costs relating to issuance of notes payable                                         |  |                            |           |   |             |   | (103,500   | )
|Payments on capitalized lease obligations                                                   |  |                            | (5,591     | ) |             |   |           |  
|Net cash provided by financing activities                                                   |  |                            | 3,409      |   |             |   | 5,351,500  |  
|(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                            |  |                            | (3,134,689 | ) |             |   | 673,685    |  
|CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD                                             |  |                            | 8,011,764  |   |             |   | 546,125    |  
|CASH AND CASH EQUIVALENTS - END OF PERIOD                                                   |  | $                          | 4,877,075  |   |             | $ | 1,219,810  |  
|Noncash financing and investing activities:                                                 |  |                            |            |   |             |   |            |  
|Issuance of warrants in connection with issuance of notes payable                           |  | $                          |            |   |             | $ | 3,146,078  |  
|Supplemental disclosures of cash flow information:                                          |  |                            |            |   |             |   |            |  
|Cash paid during the period for:                                                            |  |                            |            |   |             |   |            |  
|Interest                                                                                    |  | $                          | 425,199    |   |             | $ | 11,761     |  





See Notes to Consolidated Financial Statements.



3



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AMBIENT CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1  BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Ambient Corporation and its subsidiary (collectively the Company") have been prepared in accordance with generally accepted accounting principles accepted in the United States of America (GAAP) for interim financial information and with Article 8-03 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In 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, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Form 10-K for the year ended December 31, 2008, as filed with the Securities and Exchange Commission.

The Company has sustained losses since its inception. These losses have produced operating cash flow deficiencies. The Company expects to incur additional losses in the future.

Management believes that its currently available cash resources, as well as anticipated proceeds from revenues, will be sufficient to meet its operating requirements for the balance of the 2009 fiscal year. However, the Company will likely need to raise funds in order to expand existing commercial deployments and/or satisfy any additional significant purchase orders that it may receive. At the present time, the Company has no commitments for any additional funding that may be needed.

We have evaluated subsequent events, as defined by Statement of Financial Accounting Standards (SFAS) No. 165, "Subsequent Events," through the date that the financial statements were issued on August 14, 2009.

NOTE 2  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Effective January 1, 2009, the Company adopted Financial Accounting Standards Board (FASB) Staff Position 157-2, "Effective Date of FASB Statement No. 157" ("FSP 157-2"). FSP 157-2 delayed the effective date of SFAS 157 for all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), until the beginning of the first quarter of fiscal 2009. The adoption of SFAS 157 to non-financial assets and liabilities did not have a significant impact on the Companys consolidated financial statements.

In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles ("SFAS 168"). SFAS 168 identifies the FASB Accounting Standards Codification as the authoritative source of generally accepted accounting principles in the United States. Rules and interpretive releases of the Securities and Exchange Commission under federal securities laws are also sources of authoritative GAAP for SEC registrants. SFAS 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company does not expect adoption to have a material impact on our consolidated financial statements.

NOTE 3  FAIR VALUE OF FINANCIAL INSTRUMENTS

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



4



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AMBIENT CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE 4  NET LOSS PER SHARE

Basic earnings (loss) per share (EPS) is computed by dividing net income (loss) applicable to common shares by the weighted-average number of shares of common shares 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.



|                       |  |                                                                         |  |             | 
|---------------------- |  | ----------------------------------------------------------------------- |  | ----------- | 
|                       |  | Shares of Common Stock Issuable upon
Conversion/Exercise of as June 30, | 
|                       |  | 2009                                                                    |  | 2008        | 
|                       |  | (Restated)                                                              |  |             | 
|Stock options          |  | 58,937,000                                                              |  | 31,437,000  | 
|Warrants               |  | 118,549,997                                                             |  | 604,742,855 | 
|Convertible debentures |  | 833,333,333                                                             |  | 357,142,857 | 

NOTE 5  SALES AND MAJOR CUSTOMERS

Revenues for the six and three months ending June 30, 2009 and 2008 were as follows:

|                      |  |                  |             |  |                    |   |             |               |  |   |        |               |  |  |   |         | 
|--------------------- |  | ---------------- | ----------- |  | ------------------ | - | ----------- | ------------- |  | - | ------ | ------------- |  |  | - | ------- | 
|                      |  | Six Months Ended |             |  | Three Months Ended |  
|                      |  | June 30,
2009    |             |  | June 30,
2008      |   |             | June 30,
2009 |  |   |        | June 30,
2008 | 
|                      |  | (Restated)       |             |  |                    |   |             | (Restated)    |  |   |        |               | 
|                      |  |                  | (Unaudited) |  |                    |   | (Unaudited) |              
|Hardware              |  | $                | 823,253     |  |                    | $ | 810,865     |               |  | $ | 30,590 |               |  |  | $ | 747,223 | 
|Software and services |  |                  | 33,930      |  |                    |   |            |               |  |   |       |               |  |  |   |        | 
|                      |  | $                | 857,183     |  |                    | $ | 810,865     |               |  | $ | 30,590 |               |  |  | $ | 747,223 | 

One customer accounted for 100% of the hardware and software revenue for the 2009 and 2008 periods.

NOTE 6  INVENTORY

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



|               |  |               |         |  |               |   |        | 
|-------------- |  | ------------- | ------- |  | ------------- | - | ------ | 
|               |  | June 30,
2009 |         |  | June 30,
2008 |  
|               |  | (Restated)    |         |  |               |  
|               |  | (Unaudited)   |         |  |               |  
|Raw materials  |  | $             | 324,638 |  |               | $ | 30,057 | 
|Finished goods |  |               | 139,058 |  |               |   | 67,987 | 
|               |  | $             | 463,696 |  |               | $ | 98,044 | 





5



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AMBIENT CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE 7  CONVERTIBLE DEBT

|                                                                                         |  |                        |            |   |                   |   |             |  
|---------------------------------------------------------------------------------------- |  | ---------------------- | ---------- | - | ----------------- | - | ----------- | -
|                                                                                         |  | June 30,
2009          |            |   | December 31,
2008 |  
|                                                                                         |  | (Restated)
(Unaudited) |            |   |                   |   |            
|Secured Convertible Promissory note payable - interest at 8%,
due July 31, 2010 (i)      |  | $                      | 7,500,000  |   |                   | $ | 7,500,000   |  
|Secured Convertible Promissory note payable - interest at 8%,
due November 1, 2010 (ii)  |  |                        | 2,500,000  |   |                   |   | 2,500,000   |  
|Secured Convertible Promissory note payable - interest at 8%,
due January 15, 2011 (iii) |  |                        | 2,500,000  |   |                   |   | 2,500,000   |  
|Total                                                                                    |  |                        | 12,500,000 |   |                   |   | 12,500,000  |  
|Less: Discount                                                                           |  |                        | (531,960   | ) |                   |   | (11,745,542 | )
|Total                                                                                    |  | $                      | 11,968,040 |   |                   | $ | 754,458     |  



(i)

On July 31, 2007, the Company entered into the Securities Purchase Agreement (the "July 07 Purchase Agreement") with an institutional investor, Vicis Capital Master Fund (the Investor or "Vicis"), pursuant to which the Investor purchased the Companys Secured Convertible Promissory Note in aggregate principal amount of $7,500,000 (the July 07 Note). The July 07 Note has a term of three years and becomes due on July 31, 2010. The outstanding principal amount of the July 07 Note is convertible at the option of the holder, at any time and from time to time, into shares of the Companys common stock, par value $0.001 per share (the Common Stock) at a conversion price of $0.015 per share, subject to certain adjustments. Amounts owing under the July 07 Note are secured by substantially all of the assets of the Company.

Pursuant to the July 07 Purchase Agreement, the Company issued Common Stock purchase warrants (the July 07 Warrants) to the Investor, exercisable through July 31, 2012, to purchase up to 150,000,000 shares of Common Stock, at an exercise price of $0.001 per share. All of these warrants were exercised on November 24, 2008.

In connection with this financing, the Company paid fees to a registered broker dealer of $570,000 and issued warrants to purchase up to 17,350,000 shares of the Company's Common Stock at a per share exercise price of $0.035 for 16.6 million shares and $0.075 for 750,000 shares.

(ii)

On November 1, 2007, the Company entered into a Securities Purchase Agreement (the "November 07 Purchase Agreement") with the Investor pursuant to which the Investor purchased the Companys Secured Convertible Promissory Note in the principal amount of $2,500,000 (the November 07 Note). The November 07 Note has a term of three years and becomes due on November 1, 2010. The outstanding principal amount of the November 07 Note is convertible at the option of the holder at any time and from time to time into shares of Common Stock at a conversion price of $0.015 per share. Amounts owing under the November 07 Note are secured by substantially all of the assets of the Company.

In connection with the issuance of the November 07 Note, the Company issued Common Stock purchase warrants (the November 07 Warrants) to the Investor, exercisable through October 31, 2012, to purchase up to 83,333,334 shares of Common Stock, of which warrants for 27,777,778 shares at an exercise price of $0.015. All of these warrants were exercised on November 24, 2008.

(iii)

On January 15, 2008, the Company entered into a Securities Purchase Agreement (the "January 2008 Purchase Agreement") with the Investor pursuant to which the Investor purchased the Companys Secured Convertible Promissory Note in the principal amount of $2,500,000 (the January 08 Note; together with the November 07 Note and the July 07 Note, the Notes). The January 08 Note has a term of three years and becomes due on January 15, 2011. The outstanding principal amount of the January 08 Note is convertible at the option of the holder at any time and from time to time into shares of Common Stock at a conversion price of $0.015 per share. Amounts owing under the January 08 Note are secured by substantially all of the assets of the Company.



6



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AMBIENT CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



The January 08 Note, as well as the other Notes, contain a contractual restriction on beneficial share ownership that limits Vicis to holding 4.99% of the Companys outstanding shares of Common Stock, except upon providing the Company with not less than 61 days prior notice. On June 8, 2009, Vicis advised the Company that it is waiving all conversion caps with respect to the January 08 Note. Accordingly, as of August 8, 2009 Vicis is entitled (though not obligated) to convert the principal amount outstanding under the January 08 Note into shares of the Companys Common Stock at the fixed conversion rate of $0.015 per share. No such notice has been given with respect to the other Notes. On August 10, 2009, the January 08 Note was converted into 166,666,667 shares of our Common Stock.

In connection with the issuance of the January 08 Note, the Company issued Common Stock purchase warrants (the January 08 Warrants; together with the November 07 Warrants and the July 07 Warrants, the Investor Warrants) to the Investor, exercisable through January 15, 2013, to purchase up to 107,142,857 shares of Common Stock at an exercise price of $0.001 per share. All of the January 08 Warrants were exercised on November 24, 2008.

In connection with the financing, the Company issued, as compensation to a registered broker dealer, warrants to purchase up to 14,999,999 shares of the Company's Common Stock at a per share exercise price of $0.035.

Debt Modification

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

In addition, in consideration for the investment, the parties agreed under the Debenture Amendment Agreement to amend the terms of the Investor Warrants referred to above to remove all conversion caps from the Warrants, which were contractual provisions that prevented the Investor from exercising an amount of such warrants to the extent that the Investor would beneficially own (i) greater than 4.99% of the outstanding Common Stock, and (ii) greater than 9.99% of the outstanding Common Stock.

For financial reporting purposes, the Company recorded an initial discount in accordance with EITF No. 00-27 of $12,500,000, based upon a conversion price of $.01 to reflect the beneficial conversion feature related to the Debenture Modification Agreement. The discount is being amortized to the date of maturity of the various Convertible Promissory Notes unless converted earlier. On June 1, 2009, the beneficial conversion feature was re-measured based on the final conversion price being set at $0.015. This resulted in a reduction in the initial value of the beneficial conversion feature of $8,333,333 and a like reduction to additional paid-in capital.

Interest incurred on convertible debt amounted to $333,334 and $166,667 and $338,129 and $166,667 for the six and three months ended June 30, 2009 and 2008, respectively, of which all relates to Vicis. Amortization of the discounts related to the convertible debentures and notes above totaled $2,880,249 and $1,182,720 and $783,563 and $424,956 for the six and three months ended June 30, 2009 and 2008 respectively.

See Note 10  Restatement.

NOTE 8  STOCKHOLDERS' (DEFICIT) EQUITY

On January 13, 2009, the Company issued options to various employees from the Companys 2000 Equity Incentive Plan to purchase up to 20,700,000 shares of the Companys Common Stock at a share price of $0.035. The options will be fully vested as of December 31, 2009.

On January 16, 2009, the Company issued options to a consultant from the Companys 2000 Equity Incentive Plan to purchase up to 250,000 shares of the Companys Common Stock at a share price of $0.05. The options will be fully vested as of December 31, 2009.



7



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AMBIENT CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



On January 13, 2009, the Company issued options to various directors from the Companys 2002 Non-employee Directors Plan to purchase up to 6,000,000 shares of the Companys Common Stock at a share price of $0.035. The options will be fully vested as of December 31, 2009.

On May 15, 2009, the Company issued 300,000 shares of Common Stock upon the exercise of stock options previously issued.

On June 29, 2009, the Company issued options to various employees from the Companys 2000 Equity Incentive Plan to purchase up to 200,000 shares of the Companys Common Stock at a share price of $0.15. The options will be fully vested as of June 29, 2011.

On August 3, 2009 the Company issued options to an employee from the Companys 2000 Equity Incentive Plan to purchase up to 100,000 shares of the Companys Common Stock at a share price of $0.164. The options will be fully vested as of August 3, 2011.

Warrant Exercises

On April 22, 2009, the Company issued 1,564,626 shares of Common Stock upon the cashless exercise of 6,666,667 Common Stock purchase warrants by a designee of the placement agent who originally received the warrants upon the consummation by the Company of a financing transaction in May 2006.

On April 23, 2009, the Company issued 838,777 shares of Common Stock upon the cashless exercise of 4,000,000 Common Stock purchase warrants by an investor.

Warrant Modification

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

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

On June 30, 2009, the Company modified the terms of the expiring Class A warrants to extend the exercise period thereof through August 31, 2009 and reduced the exercise price during the extended period from $.20 to $0.15 per share .The Company has valued the warrant modification at $1,147,167 using the Black-Scholes pricing model and the following assumptions: contractual term of 0.167 years, an average risk-free interest rate of 0.19% a dividend yield of 0% and volatility of 93%. The resulting expenses of $1,147,167 is reflected in the Statement of Operations as part of interest and finance expense expenses for the six and three months ended June 30, 2009.

Following the modification, Class A warrants for an aggregate 950,000 shares of the Companys Common Stock have been exercised for total gross cash exercise proceeds of $142,500 through August 13, 2009.

NOTE 9  COMMITMENT

On May 21, 2009, the Company entered into an Office Lease Agreement (the Office Lease Agreement) with NS 7/57 Acquisition LLC (NS 7/57) to lease office space (2 floors). The Office Lease Agreement covers 20,242 square feet and is comprised of two floors (the Premises). The Company intends for the Premises to serve as its corporate headquarters. The lease term for the Premises is scheduled to commence on September 1, 2009 and continue through December 31, 2012. At the Companys request, NS 7/57 agreed that the Company could commence the lease earlier and, we completed the move into our headquarters in August 2009.



8



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AMBIENT CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



There will be no base rental payments due for the first floor of the Premises for the period from September 1, 2009 through February 28, 2010. Thereafter, the monthly base rental payment for the Premises are as follows: (i) for the period from March 1, 2010 to December 31, 2010, $19,190, (ii) for the period from January 1, 2011 to December 31, 2011, $19,590, and (iii) for the period from January 1, 2012 to December 31, 2012, $19,991.

There will be no monthly base rental payments due for the lower level of the Premises for the period from September 1, 2009 through October 31, 2010. Thereafter, the monthly base rental payment for the Lower Level Premises are as follows: (i) for the period from November 1, 2010 to December 31, 2010, $11,286, (ii) for the period from January 1, 2011 to December 31, 2011, $12,901, and (iii) for the period from January 1, 2012 to December 31, 2012, $13,634.

At the Companys option, the lease term my be extended for one additional three year term beginning January 1, 2013 and ending December 31, 2015.

NOTE 10  RESTATEMENT

Subsequent to the issuance of the Companys Original Report, the Company identified that it did not adjust the beneficial conversion feature ("BCF") for the change in the most preferable conversion price of its convertible debt on June 1, 2009 under the terms of the Debenture Amendment Agreement entered into on November 21, 2008 by the Company and Vicis.

Under the terms of the Debenture Amendment Agreement, the conversion price of the outstanding convertible promissory notes held by Vicis was adjusted to $0.015. However, such agreement provided that, in the event that on the trading day immediately preceding June 1, 2009 the closing per share price of the Companys Common Stock was less than $0.10, then the per share conversion price would be further adjusted to $0.01. In accordance with EITF No. 00-27, the BCF was valued at the time based on the most favorable conversion price for the investor assuming there were no changes to the then current circumstances except for the passage of time. The most favorable conversion price at the time was $0.01 because the stock price on the date on which the Agreement was entered into was $0.02 resulting in an intrinsic value for the beneficial conversion feature of $0.01. This resulted in a total for the BCF of $12,500,000, which was recorded in November 2008. The Company started amortizing the BCF in November 2008.

The price of the Common Stock was greater than $0.10 on the trading day immediately preceding June 1, 2009, and therefore, no adjustment to the ultimate per share conversion price was warranted. However, the Company should have recalculated the BCF as of June 1, 2009 based on a conversion price of $0.015. The restatement adjustments reflect the adjustment of the BCF as of June 1, 2009.

The aggregate net effect of the restatement was to decrease both non-cash interest expense and net loss for the six and three months ended June 30, 2009 by $533,670 and to increase convertible debt and stockholders deficit by $7,799,663 as of June 30, 2009. The net loss per common share (basic and diluted) for the six and three months ended June 30, 2009 was unchanged. The restatement had no effect on operating loss nor on cash flow for the six months ended June 30, 2009.



9



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AMBIENT CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)





The restatement of the consolidated financial statements as of June 30, 2009 and for the six and three months ended June 30, 2009 is as follows:

|                                                 |  |                        |              |   |                         |   |            |             |  |   |              |  
|------------------------------------------------ |  | ---------------------- | ------------ | - | ----------------------- | - | ---------- | ----------- |  | - | ------------ | -
|As of June 30, 2009                              |  | As previously
Reported |              |   | Restatement
Adjustments |   |            | As
Restated | 
|Liabilities                                      |  |                        |              |   |                         |   |            |             |  |   |              |  
|Convertible debt, related party, net of discount |  | $                      | 4,168,377    |   |                         | $ | 7,799,663  | (1)(2)      |  | $ | 11,968,040   |  
|Total liabilities                                |  |                        | 6,328,554    |   |                         |   | 7,799,663  |             |  |   | 14,128,217   |  
|Stockholder' Deficit                             |  |                        |              |   |                         |   |            |             |  |   |              |  
|Additional paid-in capital                       |  |                        | 134,554,860  |   |                         |   | (8,333,333 | )(1)        |  |   | 126,221,527  |  
|Accumulated deficit                              |  |                        | (135,398,832 | ) |                         |   | 533,670    | (2)         |  |   | (134,865,162 | )
|                                                 |  |                        |              |   |                         |   |            |             |  |   |              |  
|Total Stockholders' Deficit                      |  | $                      | (321,288     | ) |                         | $ | (7,799,663 | )           |  | $ | (8,120,951   | )
|                                                 |  |                        |              |   |                         |   |            |             |  |   |              |  
|                                                 |  | As previously
Reported |              |   | Restatement
Adjustments |   |            | As
Restated | 
|For the six months ended June 30, 2009           |  |                        |              |   |                         |  
|Interest and finance expense                     |  | $                      | (4,895,301   | ) |                         | $ | 533,670    | (2)         |  | $ | (4,361,631   | )
|Net loss                                         |  |                        | (9,402,848   | ) |                         |   | 533,670    |             |  |   | (8,869,178   | )
|Net loss per common share  basic and diluted    |  | $                      | (0.01        | ) |                         | $ | 0.00       |             |  | $ | (0.01        | )
|                                                 |  |                        |              |   |                         |   |            |             |  |   |              |  
|                                                 |  | As previously
Reported |              |   | Restatement
Adjustments |   |            | As
Restated | 
|For the three months ended June 30, 2009         |  |                        |              |   |                         |  
|Interest and finance expense                     |  | $                      | (3,030,252   | ) |                         | $ | 533,670    | (2)         |  | $ | (2,496,582   | )
|Net loss                                         |  |                        | (5,356,429   | ) |                         |   | 533,670    |             |  |   | (4,822,759   | )
|Net loss per common share  basic and diluted    |  | $                      | (0.01        | ) |                         | $ | 0.00       |             |  | $ | (0.01        | )







The restatement adjustments are as follows:

(1)

To record the reduction of the initial beneficial conversion feature in the amount of $8,333,333 due to the change in the most favorable conversion price.

(2)

To reduce the amortization of the beneficial conversion feature by $533,670 for the period June 1, 2009 to June 30, 2009.







10



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ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

As discussed in Note 10 to the unaudited consolidated financial statements, the Companys financial statements have been restated. The accompanying managements discussion and analysis gives effect to that restatement. Other than the revisions referred to above and related certifications, all other information included in the Original Report remains unchanged. This Amendment No. 1 is not intended to, nor does it, reflect events that have occurred since the filing of the Original Report, and does not modify or update the disclosures therein in any way other than as required to reflect the changes described above.

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND THE NOTES THERETO. 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 CONTAINED HEREIN AND THE RISK FACTORS SECTION OF OUR ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2008 ON FORM 10-K.

OVERVIEW

Ambient Corporation (Ambient, the Company we or us) is a pioneering integrator of smart grid communications platforms, creating high-speed Internet Protocols (IP) based data communications networks over existing medium and low-voltage distribution grids, thereby enabling smart grid applications. The Ambient smart grid platform, known as Ambient Smart GridTM, facilitates a two-way, real-time communications network to serve the last mile backhaul necessary for utilities to implement smart grid applications such as Advanced Metering Infrastructures (AMI), real-time pricing, Demand Side Management (DSM), Distribution Monitoring and Automation, and direct load control and more. When combined, these applications can offer economic, operational and environmental benefits for utilities, and ultimately utility customers.

We are currently conducting deployments with major electric utilities, developing, demonstrating, and delivering Ambient Smart GridTM utility applications. We continue to develop and extend our network design expertise, our hardware and software technology, and our deployment and network management capabilities, with the goal of generating revenues from all phases of Ambient Smart GridTM communications network deployments. In 2008, Ambient received purchase orders from a major US investor owned utility to purchase its X2000 and X-3000 communications nodes, license it’s AmbientNMSTM, and acquire engineering support in building out an intelligent grid/intelligent-metering platform. These purchase orders have generated revenues of approximately $12.6 million for the year ended December 31, 2008 and $857,183 for the six month period ended June 30, 2009.

We intend to actively seek new opportunities for commercial deployments and work to bring new and existing networks to full commercialization. In 2009, our principal target customers will continue to be electric utilities in North America that will be deploying smart grid technologies. We will work with our utility customers to drive the development of new utility and consumer applications that create the need for our Ambient Smart GridTM platform.

We were incorporated under the laws of the state of Delaware in June 1996. To date, we have funded operations primarily through the sale of our securities. In addition, we will likely need to raise funds in order to expand existing commercial deployments and otherwise grow our operations to meet the demands associated with any additional significant purchase order, or from any substantial expansion of existing commercial deployments.

Ambient has played a principal role in driving industry standardization efforts through leadership roles in industry associations and standards setting organizations, and continues to expand strategic relationships with leading suppliers of critical smart grid technologies. Our goal is to be the leading designer, developer and systems integrator of turn-key Ambient Smart Grid TM communications networks, incorporating a wide array of communications protocols and smart grid applications such as advanced metering solutions to complement our internally developed energy sensing capabilities.



11



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RESULTS OF OPERATIONS

COMPARISON OF THE SIX AND THREE MONTHS ENDED JUNE 30, 2009 TO THE SIX AND THREE MONTHS ENDED JUNE 30, 2008

REVENUE. Revenues for the six and three months ended June 30, 2009 were $857,183 and $30,590 respectively. Revenues for the corresponding periods in 2008 were $810,865 and $747,223, respectively. Revenues for the 2009 period were attributable to the sales of equipment and software to Duke Energy. Revenues for the 2008 period were attributable to the sales of equipment to Duke Energy. Revenues for the six and three months ended June 30, 2009 related to the sales of equipment totaled $823,253 and $30,590, respectively, as compared to $810,865 and $747,223 for the corresponding periods in 2008.

COST OF GOODS SOLD. Cost of goods sold for the six and three months ended June 30, 2009 were $756,854 and $25,618, respectively, compared to $948,500 and $605,630 during the corresponding periods in 2008. Cost of goods sold included all costs related to manufacturing and selling products and services and consisted primarily of direct material costs. Cost of goods sold for the 2008 period included expenses related to the write down of inventory to the lower of cost or market.

GROSS PROFIT. Gross profit for the six and three months ended June 30, 2009 were $100,329 and $4,972, compared to a loss of $137,635 and a gain of $141,593 for the corresponding periods in 2008.

RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses consisted of expenses incurred primarily in designing, developing and field testing our smart grid solutions. These expenses consisted primarily of salaries and related expenses for personnel, contract design and testing services, supplies used and consulting and license fees paid to third parties. Research and development expenses for the six and three months ended June 30, 2009 were $2,017,105 and $1,015,396, respectively, compared to $1,786,067 and $926,822 during the corresponding periods in 2008.

OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES. Operating, general and administrative expenses primarily consisted of salaries and other related costs for personnel in executive and other administrative functions. Other significant costs included professional fees for legal, accounting and other services. General and administrative expenses for the six and three months ended June 30, 2009 were $2,136,900 and $1,071,316, respectively, compared to $1,697,311 and $951,754 for the corresponding periods in 2008. The increase in general and administrative expenses is due to the increase efforts to market and commercialize our Ambient Smart GridTM communication platforms.

STOCK BASED COMPENSATION. A portion of our operating expenses were attributable to non-cash charges associated with the compensation of consultants and employees through the issuance of stock options and stock grants. Stock-based compensation is a non-cash expense and will therefore have no impact on our cash flows or liquidity. For the six and three months ended June 30, 2009, we incurred non-cash stock-based compensation expense of $471,062 and $248,388, respectively, compared to $299,599 and $184,731 for the corresponding periods in 2008.

INTEREST AND FINANCE EXPENSES. For the six and three months ended June 30, 2009, we incurred interest of $333,334 and $166,667, respectively, compared to $338,129 and $166,667 for the corresponding periods in 2008. The interest related primarily to our Senior Secured 8% Convertible Debentures, which were issued in July 2007 through January 2008 and our 8% Convertible Debentures, which were issued in May 2006 and were retired in their entirety as of January 2, 2008. Additionally, for the six and three months ended June 30, 2009, we incurred non-cash interest of $2,880,249 and $1,182,720, respectively, compared to $783,563 and $424,956 for the corresponding periods in 2008. This interest related to the amortization of the beneficial conversion features, and deferred financing costs were incurred in connection with the placement of our convertible debentures and notes. These costs are amortized to the date of maturity of the debt unless converted earlier. In addition, on June 30, 2009, we agreed to modify the terms of the expiring Class A warrants. Under the new terms the warrants were exercisable through August 31, 2009 and the exercise prices were reduced from $0.20 to $0.15 per share. The resulting charge due to the modification was $1,147,167 and was reflected as additional interest expense.

LIQUIDITY AND CAPITAL RESOURCES

Cash balances totaled $4,877,075 at June 30, 2009 and $8,011,764 at December 31, 2008.



12



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Net cash used in operating activities for the six months ended June 30, 2009 was $3,167,279 and was used primarily to pay ongoing research and development and general and administrative expenses.

Net cash provided by investing activities totaled $29,181 during the six months ended June 30, 2009 and was for the redemption of marketable securities of $125,000, net of purchases and sale of property and equipment of $95,819.

Net cash provided by financing activities totaled $3,409 during the six months ended June 30, 2009 and represents the exercise of options and the payments on capitalized lease obligations.

A discussion of our recent financings follows.

In July 2007, November 2007 and January 2008, the Company entered into Securities Purchase Agreements with an institutional investor, Vicis Capital Master Fund ("Vicis"), and raised gross proceeds of $12.5 million. The notes (the Vicis Notes) issued under the Securities Purchase Agreements have a term of three years are payable between July 2010 and January 2011. The outstanding principal amounts of the notes were convertible at the option of Vicis into shares of Common Stock at an original conversion price of $0.035 per share, subject to certain adjustments. As discussed below, in November 2008, the conversion rate was reduced to the current rate of $0.015 per shares, subject to certain adjustments. On August 10, 2009, Vicis Converted $2.5 million of the Vicis notes into 166,666,667 shares of our common stock (See ITEM 5(i)).

On April 23, 2008, we raised from Vicis $3,000,000 from the issuance of warrants, exercisable through April 2013, to purchase up to 135,000,000 shares of our Common Stock at a per share exercise price of $0.001. On November 21, 2008, we and Vicis entered into a Debenture Amendment Agreement (the Debenture Amendment Agreement), pursuant to which Vicis invested in the Company an additional $8,000,000. In consideration of Vicis investment, we reduced the conversion price on the Vicis Notes from $0.035 per share to $0.015 per share. The parties also agreed under the Debenture Amendment Agreement that, in the event that on the trading day immediately preceding June 1, 2009, the closing per share price of our common stock is less than $0.10, then the per share conversion price with respect to any amount then outstanding under the Notes would automatically be further adjusted to $0.01. The price of the Common Stock was greater than $0.10 on the trading day immediately preceding June 1, 2009 and therefore no adjustment was made.

On June 30, 2009, the Company extended the terms of the expiring Class A warrants (See note 8 of the consolidated financial Statements). For the period July 1, 2009 to August 13, 2009, the Company received gross proceeds of $142,500 for the exercise of 950,000 class A warrants.

Management believes that cash on hand, plus anticipated short term revenues, will allow us to meet our operating requirements for the balance of the 2009 fiscal year. However, we will likely need to raise funds in order to expand existing commercial deployments and/or satisfy any additional significant purchase order that we may receive. At the present time, we have no commitments for any additional funding that may be needed.

ITEM 4T.

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 President and Chief Executive Officer (who also serves as our principal executive officer and principal financial and accounting officer) to allow timely decisions regarding required disclosure based closely on the definition of "disclosure controls and procedures" in Rule 13a-15(e).

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 President and Chief Executive Officer (who also serves as our principal executive officer and principal financial and accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our President and Chief Executive Officer concluded that our disclosure controls and procedures were effective.

We routinely review the Companys internal control over financial reporting and from time to time make changes intended to enhance the effectiveness of our internal control over financial reporting. During the quarter ended June 30, 2009, there was no change in internal control over financial reporting that materially affected or is reasonably likely to materially affect the Companys internal control over financial reporting, including any corrective actions with regard to significant deficiencies and material weakness in the design or operation of internal control over financial reporting, subsequent to the evaluation described above..



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PART II - OTHER INFORMATION

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Our Annual Meeting of Stockholders was held on June 19, 2009. The following matters were voted on: (1) election of directors and (2) appointment of auditors. The vote tally was as follows:

(1)

Proposal to Elect Five Directors to Serve until the 2010 Annual Meeting of Stockholders.

|                 |  |     |             |  |          |  |           | 
|---------------- |  | --- | ----------- |  | -------- |  | --------- | 
|                 |  | FOR |             |  | WITHHOLD | 
|John Joyce       |  |     | 597,545,207 |  |          |  | 747,225   | 
|Michael Widland  |  |     | 595,856,314 |  |          |  | 2,436,118 | 
|D. Howard Pierce |  |     | 595,945,089 |  |          |  | 2,347,343 | 
|Thomas Higgins   |  |     | 597,626,932 |  |          |  | 665,500   | 
|Shad S. Stastney |  |     | 595,572,089 |  |          |  | 2,720,343 | 

(2)

Proposal to ratify the appointment of Rotenberg Meril Solomon Bertiger & Guttilla, PC as our auditors for the year ending December 31, 2009.

| |             |  |  |         |  |         | 
| | ----------- |  |  | ------- |  | ------- | 
| | FOR         |  |  | AGAINST |  | ABSTAIN | 
| | 597,731,007 |  |  | 272,325 |  | 125,500 | 

All Proposals received the requisite number of votes and were approved.

ITEM 5.

OTHER INFORMATION

(i) On August 10, 2009, we issued 166,666,667 shares of our Common Stock to Vicis upon its conversion of $2.5 million in principal amount of outstanding notes. Vicis continues to hold all $10 million in principal amount of our outstanding convertible promissory notes. Following the issuance of the shares of the Companys common stock upon conversion of the note, Vicis holds, in the aggregate, 641,031,747 shares, representing 72% of our issued and outstanding shares of Common Stock. The issuance of the Common Stock was exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(2) of the Act for transactions not involving a public offering and Rule 506 promulgated by the United States Securities and Exchange Commission under the Securities Act of 1933, as amended.

(ii) On May 21, 2009, we entered into an Office Lease Agreement (the Office Lease Agreement) with NS 7/57 Acquisition LLC (NS 7/57) to lease office space (2 floors). The Office Lease Agreement covers 20,242 square feet and is comprised of two floors (the Premises). We intend for the Premises to serve as our corporate headquarters. The lease term for the Premises is scheduled to commence on September 1, 2009 and continue through December 31, 2012. At our request, NS 7/57 agreed that we could commence the lease earlier and we completed the move into our new headquarters in August 2009.

There will be no base rental payments due for the first floor of the Premises for the period from September 1, 2009 through February 28, 2010. Thereafter, the monthly base rental payment for the Premises are as follows: (i) for the period from March 1, 2010 to December 31, 2010, $19,190, (ii) for the period from January 1, 2011 to December 31, 2011, $19,590,and (iii) for the period from January 1, 2012 to December 31, 2012, $19,991.

There will be no monthly base rental payments due for the lower level of the Premises for the period from September 1, 2009 through October 31, 2010. Thereafter, the monthly base rental payment for the Lower Level Premises are as follows: (i) for the period from November 1, 2010 to December 31, 2010, $11,286, (ii) for the period from January 1, 2011 to December 31, 2011, $12,901, and (iii) for the period from January 1, 2012 to December 31, 2012, $13,634.

At our option, the lease term my be extended for one additional three year term beginning January 1, 2013 and ending December 31, 2015.

In addition, we expect to spend less that $25,000 for tenant improvements for the Premises.

The foregoing is a summary description of certain terms of the Office Lease Agreement and is qualified in its entirety by the text of the Office Lease Agreement filed as an exhibit to this Quarterly Report for the quarter ended June 30, 2009.



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ITEM 6

EXHIBITS

|            |  |                                                                                                                                                                                                                                                
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
No. |  | Description                                                                                                                                                                                                                                    
|10.1        |  | Office Lease Agreement dated as of May 21, 2009, between Ambient Corporation and NS 7/57 Acquisition LLC                                                                                                                                       
|            |  |                                                                                                                                                                                                                                                
|31          |  | Certification of John J. Joyce, Chief Executive Officer (Principal Executive officer and Principle Financial and Accounting Officer, pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.                            
|            |  |                                                                                                                                                                                                                                                
|32          |  | Certification of John J. Joyce, Chief Executive Officer (Principal Executive officer and Principle Financial and Accounting Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.





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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|                       |                     |                                                                                                     
|---------------------- | ------------------- | ----------------------------------------------------------------------------------------------------
|                       | AMBIENT CORPORATION
|                       |                     |                                                                                                     
|                       |                     |                                                                                                     
|Dated: January 7, 2010 | By:                 | /s/ JOHN J. JOYCE                                                                                   
|                       |                     | John J. Joyce                                                                                       
|                       |                     | Chief Executive Officer (Principal Executive Officer and Principal Financial and Accounting Officer)





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