<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, 2003

     |_| 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)



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

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

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

               1033 BEACON STREET, BROOKLINE, MASSACHUSETTS, 02446
              (Former name, former address and former fiscal year,
                          if changed since last report)

     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 14, 2003 Ambient Corporation had outstanding 76,288,772 shares
of common stock, par value $.001 per share.

     Transitional Small Business Disclosure Format (Check one) Yes |_| No |X|

<PAGE>

     Index Page

                         PART I -- FINANCIAL INFORMATION



Forward Looking Statements                                                 (ii)

Item 1 - Financial Statements*

     Consolidated Balance Sheet
      June 30, 2003 (Unaudited) and December 31, 2002                        1

     Unaudited Consolidated Statements of Operations                         2
      for the six and three months ended June 30, 2003 and 2002

     Unaudited Consolidated Statements of Cash Flows for the six and three   3
      months ended June 30, 2003 and 2002

     Notes to Consolidated Financial Statements                              4

Item 2 - Plan of Operations                                                  7

Item 3 - Controls and Procedures                                             9



                           PART II--OTHER INFORMATION


Item 1-- Legal Proceedings                                                   9

Item 2-- Changes in Securities and Use of Proceeds                          10

Item 3-- Defaults upon Senior Securities                                    10

Item 4-- Submission of Matters to a vote of Security Holders                10

Item 5-- Other Information                                                  10

Item 6-- Exhibits and Reports on Form 8-K                                   10

Signatures                                                                  11




     *The Balance Sheet at December 31, 2002 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 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>
<TABLE>
<CAPTION>

                                      AMBIENT CORPORATION
                                 (A Development Stage Company)
                                  CONSOLIDATED BALANCE SHEETS

                                                                      June 30,    December 31,
                                                                        2003          2002
                                                                        ----          ----
ASSETS                                                               (Unaudited)
CURRENT ASSETS
<S>                                                                 <C>          <C>
     Cash and  cash equivalents                                     $   226,234  $      75,251
     Receivables and prepaid expenses                                    43,340         28,540
                                                                     -----------  -------------

               Total current assets                                     269,574        103,791

Property and equipment, net                                              70,765         81,583
                                                                     -----------  -------------

               Total assets                                         $   340,339  $     185,374
                                                                     ===========  =============

LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
     Accounts payable                                               $   570,039  $     654,460
     Accrued expenses and other current liabilities                     278,104        126,500
     Advances                                                           325,000        325,000
                                                                     -----------  -------------

               Total current liabilities                              1,173,143      1,105,960
                                                                     -----------  -------------



STOCKHOLDERS' DEFICIT
     Convertible Preferred Stock, $.001 par value;
       5,000,000 shares authorized; none issued and outstanding               -              -
    Common stock, $.001 par value;
      200,000,000 shares authorized; 77,288,772 and 63,718,384
        issued; 76,288,772 and 63,718,384 outstanding, respectively      77,289         63,719
     Additional paid-in capital                                      62,585,532     61,497,304
     Deficit accumulated during the development stage               (63,269,563)   (62,229,370)
      Less: Note receivable - stockholder                                     -       (200,000)
      Less: Deferred compensation                                       (26,062)       (52,239)
      Less: Treasury stock; 1,000,000 shares at cost                   (200,000)             -
                                                                     -----------  -------------

               Total stockholders' deficit                             (832,804)      (920,586)
                                                                     -----------  -------------

               Total liabilities and stockholders' deficit          $   340,339  $     185,374
                                                                     ===========  =============
</TABLE>


                  See Notes to Unaudited Consolidated Financial Statements.

                                              1
<PAGE>
<TABLE>
<CAPTION>

                                                       AMBIENT CORPORATION
                                                  (A Development Stage Company)
                                              CONSOLIDATED STATEMENTS OF OPERATIONS


                                                                                      Cumulative
                                                               Six Months           From Inception         Three Months
                                                                  Ended                   to                   Ended
                                                                June 30,               June 30,               June 30,
                                                            2003         2002            2003            2003          2002
                                                            ----         ----            ----            ----          ----
                                                         (Unaudited)  (Unaudited)     (Unaudited)     (Unaudited)   (Unaudited)
<S>                                                   <C>           <C>            <C>             <C>             <C>
Revenues                                                $   100,000   $         -    $     100,000   $      20,000   $        -

Expenses
     Research and Development (1)                           459,856       587,008        6,477,082         259,407      304,475
     Less - Participation by the Office of the
       Chief Scientist of the State of Israel                     -             -          558,195               -            -
                                                          ----------   -----------    -------------   -------------   ----------
                                                            459,856       587,008        5,918,887         259,407      304,475

Operating, general and administrative expenses (1)          587,857       830,869       13,528,937         278,844      120,357
Stock based compensation - net                               92,663       805,900       17,359,327          41,334      232,888
                                                          ----------   -----------    -------------   -------------   ----------

Total expenses                                            1,140,376     2,223,777       36,807,151         579,585      657,720
                                                          ----------   -----------    -------------   -------------   ----------

Operating loss                                           (1,040,376)   (2,223,777)     (36,707,151)       (559,585)    (657,720)

Legal settlement                                                  -             -       (1,512,500)              -            -
Interest expense                                                  -             -         (675,513)              -            -
Noncash financing expense                                         -             -       (1,600,000)              -            -
Beneficial conversion feature of convertible debt                 -             -       (3,878,260)              -            -
Amortization of deferred financing costs                          -       (27,890)      (5,801,333)              -      (27,890)
Interest income                                                 183           136          321,427             105           47
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     (1,040,193)   (2,251,531)     (51,695,537)       (559,480)    (685,563)

Minority interest in subsidiary loss                              -             -           25,000               -            -
                                                          ----------   -----------    -------------   -------------   ----------

Loss before extraordinary item                           (1,040,193)   (2,251,531)     (51,670,537)       (559,480)    (685,563)

Extraordinary item - loss on extinguishment of debt               -             -       (9,778,167)              -            -
                                                          ----------   -----------    -------------   -------------   ----------

Net loss                                                 (1,040,193)   (2,251,531)     (61,448,704)       (559,480)    (685,563)

Deemed dividends on convertible preferred stock                   -             -       (1,820,859)              -            -
                                                          ----------   -----------    -------------   -------------   ----------

Net loss attributable to common stockholders            $(1,040,193)  $(2,251,531)   $ (63,269,563)  $    (559,480)  $  (685,563)
                                                          ==========   ===========    =============   =============   ==========

Basic and diluted loss per share:
         Net loss before  extraordinary item            $     (0.01)        (0.09)                   $       (0.01)       (0.03)
         Extraordinary loss from extinguishment of debt           -             -                                -            -
                                                          ----------   -----------                    -------------   ----------

      Net loss                                          $     (0.01)        (0.09)                   $       (0.01)       (0.03)
                                                          ==========   ===========                    =============   ==========

Weighted average number of shares outstanding             70,915,284   26,321,376                       73,507,009    26,463,785
                                                          ==========   ===========                    =============   ==========

(1) Excludes non-cash, stock based compensation
    expense as follows:
     Research and development, net                      $    23,855   $   435,233    $   1,454,192   $           -   $  175,736
     Operating, general and administrative, net              68,808       370,667       15,905,135          41,334       57,152
                                                          ----------   -----------    -------------   -------------   ----------

                                                        $    92,663   $   805,900    $  17,359,327   $      41,334   $  232,888
                                                          ==========   ===========    =============   =============   ==========


                                    See Notes to Unaudited Consolidated Financial Statements.
</TABLE>
                                                                2

<PAGE>
<TABLE>
<CAPTION>

                                                   AMBIENT CORPORATION
                                              (A Development Stage Company)
                                          CONSOLIDATED STATEMENT OF CASH FLOWS


                                                                                                            Cumulative
                                                                                Six Months                From Inception
                                                                                   Ended                        to
                                                                                  June 30,                   June 30,
                                                                           2003              2002              2003
                                                                           ----              ----              ----
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                        (Unaudited)       (Unaudited)       (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                    <C>               <C>               <C>
     Net loss                                                          $ (1,040,193)     $ (2,251,531)     $(63,269,563)
     Adjustments to reconcile net loss to net cash used by
      operating activities:
         Depreciation and amortization                                       31,178            45,907           445,623
         Amortization of note discount                                         --                --           5,156,462
         Cancellation of Officer loans in settlement of employment
          contract                                                             --              70,000           724,447
         Loss on sale of fixed assets                                          --                --              20,135
         Beneficial conversion feature of convertible debt                     --                --           3,878,260
         Deemed dividends on convertible preferred stock                       --                --           1,820,859
         Financing,  consulting and other expenses paid via the
                  issuance of common stock and warrants                      92,663           833,790        30,703,205
         Increase (decrease) 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
              Receivables and prepaid expenses                              (14,800)           15,713            45,890
              Accounts payable                                               35,579           464,319           831,333
              Other current liabilities                                     151,604           149,637           428,760
                                                                       ------------      ------------      ------------

Net cash used in operating activities                                      (743,969)         (672,165)      (16,291,159)
                                                                       ------------      ------------      ------------

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                                (20,360)          (11,950)         (713,824)
         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                                       (20,360)          (11,950)       (2,988,175)
                                                                       ------------      ------------      ------------

CASH FLOWS FROM FINANCING ACTIVITIES
         Net proceeds from issuance of share capital                        915,312             8,750         6,659,879
         Proceeds from loans and advances                                      --             515,000           690,000
         Proceeds from issuance of notes payable                               --                --           1,000,000
         Net proceeds from issuance of convertible debentures                  --                --           9,148,262
         Repayment of notes payable                                            --                --            (400,000)
         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                                          --                --            (250,000)
         Proceeds from short-term debt                                         --                --             274,038
         Loans to affiliate                                                    --                --            (977,207)
                                                                       ------------      ------------      ------------

Net cash provided by financing activities                                   915,312           523,750        19,505,568
                                                                       ------------      ------------      ------------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                            150,983          (160,365)          226,234

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR                                75,251           177,340              --
                                                                       ------------      ------------      ------------

CASH AND CASH EQUIVALENTS - END OF PERIOD                              $    226,234      $     16,975      $     226,234
                                                                       ============      ============      ============

Noncash financing and investing activities for the six months ended
        June 30, 2003 Issuance of common stock warrants in respect
        of outstanding accounts payable in the amount of $120,000.


                                See Notes to Unaudited Consolidated Financial Statements.
</TABLE>
                                                            3

<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, 2003, are not necessarily indicative
of the results that may be expected for the year ending December 31, 2003. 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, 2002, as filed with
the Securities and Exchange Commission.

Going Concern

The accompanying financial statements have been prepared assuming that the
Company will continue as a going-concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. The
Company has a limited operating history and has sustained losses since its
inception. As shown in the accompanying financial statements, the Company
incurred a net loss of $1.04 million for the six months ended June 30, 2003 and
has a working capital deficit of approximately $.9 million as of June 30, 2003.
The future of the Company is dependent upon future profitable operations from
the commercial success of its proposed comprehensive communication
infrastructure utilizing electrical power distribution systems as a high-speed
communication medium. The Company anticipates that it will continue to incur
significant operating costs and losses in connection with the development of its
products.

In June 2003, the Company realized net proceeds of approximately $595,000 from
the private placement of its securities comprised of shares of its common stock,
par value $0.001 (the "Common Stock") and warrants. A substantial part of the
proceeds from such private placement were used to satisfy the Company's then
current obligations. Additionally, pursuant to a stock purchase agreement
entered into by the Company and Consolidated Edison, Inc. ("ConEd"), an
affiliate of Consolidated Edison Company of New York, Inc. ("CECONY"), in
September 2002, ConEd paid into the Company, by way of an equity investment,
$1.4 million (including the $265,000 previously advanced by CECONY) of which
$310,000 was received in January and February 2003.

The Company needs to raise capital on an immediate basis in order to maintain
its operations as presently conducted past September 30, 2003. Management is
continuing to actively seek additional capital that will provide funds needed to
maintain the Company's operations and fund the research and development in order
to fully implement its business plans.

The Company currently has no financing commitments. There is no assurance that
additional capital will be available to the Company on commercially reasonable
terms and the inability to obtain such financing will have a material adverse
effect on the Company. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty and these
adjustments may be material.

                                        4
<PAGE>

NOTE 2 - 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 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.

                                                      2003            2002
Stock options                                   11,242,000       9,537,000
Warrants                                        19,132,283      11,410,802

NOTE 3 - STOCK BASED COMPENSATION PLANS

The Company accounts for stock-based employee and outside directors 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,
                                                    2003            2002           2003           2002
                                                -------------- ------------------------------ -------------
<S>                                              <C>             <C>             <C>            <C>
Net loss, as reported                            ($1,040,193)    ($2,251,531)    ($559, 480)    ($685,563)
Add: Stock based compensation
         expense, as reported                               -               -              -             -
Deduct: Total stock-based compensation
         expense determined under the fair
         value based method for all awards          (273,640)       (418,049)      (114,802)     (195,056)
                                                -------------- ------------------------------ -------------

Pro forma net loss                               ($1,313,833)    ($2,669,580)     ($674,282)    ($880,619)
                                                ============== ============================== =============

Basic and diluted loss per share, as reported         ($0.01)         ($0.09)        ($0.01)       ($0.03)
Basic and diluted loss per share, pro forma           ($0.02)         ($0.10)        ($0.01)       ($0.03)
</TABLE>

The weighted average per share fair value of options granted during the six
months ended June 30, 2003 and 2002 was $.09 and $.34, respectively. The fair
value of each option granted in 2003 and 2002 was estimated using the
Black-Scholes option-pricing model with a volatility of 150% and 133%, expected
life of options of 8 and 7.2 years, risk free interest rate of 3.88% and 3% and
a dividend yield of 0% and 0%, respectively.

NOTE 4 - STOCK ISSUANCES

PRIVATE PLACEMENT

In June 2003, the Company realized net proceeds of approximately $595,000 from
the private placement of shares of its Common Stock and the issuance of
warrants. The private placement resulted in the issuance of approximately 5.19
million shares of Common Stock and the issuance of warrants to purchase up to,
approximately, an additional 2.85 million shares of Common Stock at a per share
exercise price of $0.25. The Warrants are exercisable through May 31, 2005,
subject to a reduced exercise

                                       5
<PAGE>

period under certain conditions.

CONVERTIBLE PROMISSORY NOTE

In March 2003, the Company issued a six month convertible note in the amount of
$10,000, due September 30, 2003. In June 2003, the note was converted at the
rate specified in the note into 100,000 shares of the Company's Common Stock and
two year warrants to purchase up to an additional 100,000 shares of Common Stock
at a per share exercise price of $0.20. The exercise period of the warrants is
subject to reduction upon certain events.

SETTLEMENT OF ACCOUNTS PAYABLE

In June 2003, the Company issued 933,334 warrants to two creditors in conversion
of $120,000 in accounts payable. The warrants have an exercise price of $.17 per
share and expire three years from date of grant, subject to a reduced exercise
period upon certain events.

NOTE 5 - TREASURY STOCK

In December 2001, in connection with the amendment and restatement of an
employment agreement, the Company issued 1 million shares of its Common Stock to
its Chief Engineer for a $200,000 non-recourse promissory note. The shares were
pledged as collateral for the note which was to become due in three equal
installments in February, March and April 2003. Under the agreement, in lieu of
repaying the principal, the employee is entitled to require the Company to
repurchase the shares at the rate of $.20 per share. In March 2003, the shares
were returned to treasury and the note receivable was cancelled.


                                       6
<PAGE>

ITEM 2. PLAN OF OPERATIONS

OVERVIEW

       Ambient Corporation ("Ambient" or the "Company") is a development stage
company engaged in the architecture, design, development and implementation of a
proposed comprehensive high-speed communication infrastructure that is designed
to utilize existing electrical power distribution lines as a high-speed
communication medium, thereby enabling existing electrical distribution systems
to function as 'broadband pipelines'. The use of an electric utility's
distribution system as a high-speed communication medium is commonly referred to
as "power line communication".

       Although used for low speed data communication, existing electrical power
lines have not historically been used for high-speed data transmission, due to
certain technological and infrastructure limitations. Ambient has designed and
developed proprietary patent protected and patent pending technologies designed
to overcome these limitations and has positioned itself as a systems integrator
for power line communication. The Company's proposed power line communication
technology solution entails partnering arrangements with leading utilities,
their affiliates and other technology companies in order to complete the design,
development, testing and commercialization of its proposed solution. The Company
is currently working with technology and utility companies in the design,
development and testing of its proposed solution and its various
components/technologies.

       As a development stage company, Ambient has a limited operating history
upon which an evaluation of its prospects can be made. The Company has been
engaged in power line communication since March 2000. The Company's prospects
must therefore be evaluated in light of the problems, expenses, delays and
complications associated with a development stage company.

       In June 2003, the Company raised net proceeds of $595,000 from a private
placement of its securities. As of March 31, 2003, ConEd has paid into the
Company $1.4 million (including the $265,000 previously advanced by CECONY) in
respect of which the Company issued 35,000,000 shares of Common Stock. ConEd's
investment was made pursuant to a stock purchase agreement entered into in
September 2002 between ConEd and the Company. In connection with ConEd's
investment, the Company's repayment obligation relating to $265,000 previously
advanced by CECONY to the Company for the purpose of furthering the design,
development and testing of the Company's proposed solution was cancelled.

       As of June 30, 2003, the Company had an accumulated deficit of
approximately $63 million and for the six months ended June 30, 2003, the
Company incurred net losses aggregating $1.04 million (which includes $92,663
of stock based compensation) reflecting principally general and administrative
expenses and research and development expenses. The Company expects to incur
significant additional development expenditures and operating losses are
expected to continue for the foreseeable future. There can be no assurance that
Ambient can be operated profitably in the future. The Company's continuation as
a going-concern is dependent upon, among other things, its ability to obtain
additional financing when and as needed, and to generate sufficient cash flow to
meet its obligations on a timely basis. No assurance can be given that the
Company will be able to obtain such financing on terms acceptable to it.

       A portion of the Company's 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. Unvested
non-employee stock options, which are re-measured periodically, may result in
unpredictable stock-based compensation dependent on fluctuations in quoted
prices for the Company's common stock. Stock-based compensation is non-cash and
will therefore have no impact on the Company's cash flows or liquidity.

                                       7
<PAGE>

       The Company is in the process of designing, developing and testing its
proposed high-speed power line communication solution. In the course of 2001 and
2002, the Company has entered into a series of development and testing
agreements with leading technology companies and utilities for the purpose of
furthering the design, development, testing and commercialization of primary
components and technologies included in its solution. As of July 2002 the
Company concluded successful results and a significant initial phase of the
demonstration of Ambient's proposed powerline communication solution on the
overhead electrical distribution system of CECONY and is currently planning for
the expansion of the demonstration into a small field trial. In addition, in
February 2003 the Company entered into a limited licensing agreement with
Compania Americana de Multiservicios Ltd., a Chile-based provider of electrical
power and an affiliate of Endesa, the largest utility in Spain, to test and
evaluate Ambient's power line communication technology.

       In February 2002, the Company and CECONY entered into a research and
development agreement whereby Ambient and CECONY have agreed to cooperate in the
further research and development of high-speed communication via electric power
lines. Expanding upon the informal research and development arrangement that has
existed between the Company and CECONY from mid 2000, the agreement contemplates
that CECONY and Ambient will pool their efforts to further develop and test the
feasibility of Ambient's proposed high-speed power line communications
technology with the goal of commercialization of this technology. Under the
Agreement with CECONY, it advanced $325,000 to the Company in February 2002 in
order to commence a demonstration of the Company's proposed solution. The
Company has agreed to grant to CECONY a first priority lien on all of its assets
to secure the repayment of the advance, which advance is to become subsumed into
the royalty discussed below upon (and subject to) the successful completion of
the Small Field Trial Phase (as defined in the agreement). The Company will hold
sole title to all jointly developed technology. CECONY will be entitled to a
2.5% royalty, based on net revenues from power line equipment and related
services for a ninety-nine year period, commencing on the date on which the
agreement was signed. Royalty payments are only due if the Company has positive
cash flow, will be payable quarterly, in arrears, and do not accrue from one
quarter to another during periods of negative cash flow. As of July 2002 the
Company concluded successful results and a significant initial phase of the
demonstration of Ambient's proposed power line communication solution on the
overhead electrical distribution system and is actively planning for the
expansion of the demonstration into a small field trial. The Company's immediate
objective is to expand the scope of the demonstration system to include
additional premises and services and expand the distance achieved from base to
farthest consumer.

       Subject to raising capital in amounts sufficient to realize its business
plans, the Company intends to focus its efforts in the next twelve months to
completing the design, development and testing of its proposed power line
communications solution such that such solution is capable of being commercially
deployed. As the Company's proposed solution approaches commercialization, if
ever, the Company may be required to increase the number of employees.
Management does not, however, anticipate a significant investment in plant or
equipment.

LIQUIDITY

       During the six months ended June 30, 2003, the Company earned fees in the
aggregate amount of $100,000 in connection with the testing and deployment of
its proposed technology and related equipment. In June 2003, the Company raised
net proceeds of $595,000 from a private placement of certain of its securities.
A substantial portion of the proceeds were used to satisfy the Company's then
current obligations. Additionally, ConEd completed in March 2003 its investment
in the Company pursuant to which the Company received net proceeds of
approximately $1.2 million in cash. ConEd's investment included the contribution
into equity of the Company (and the cancellation of the repayment obligation) of
approximately $265,000 owing to CECONY, an affiliate of ConEd.

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<PAGE>

       The Company continues to curtail expenses in many areas in an effort to
control costs. Nonetheless, the Company needs to raise capital on an immediate
basis in order to maintain its operations as presently conducted past September
30, 2003. Management believes that the Company will need to raise an additional
minimum amount of $2.4 million in order to realize its business plan as
contemplated and complete the design, development, and testing of the Company's
proposed power line communication architecture for commercial deployment.

       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 the Company on
commercially acceptable terms. The financial statements accompanying this report
includes an explanatory paragraph relating to the uncertainty of the Company's
ability to continue as a going concern, which may make it more difficult for the
Company to raise additional capital. Additionally, under the terms of the
Investment Agreement with ConEd, so long as ConEd continues to hold, in the
aggregate, 25% of the issued and outstanding shares of the Company's Common
Stock, the Company has undertaken to notify ConEd of the terms of any proposed
equity or debt financing in an amount exceeding $750,000 and to afford ConEd the
opportunity to approve or reject such subsequent investment, provided, that
should ConEd not approve the proposed financing, ConEd has undertaken to
complete such financing on substantially similar terms.

       Furthermore, it is anticipated that any successful financing will have a
significant dilutive effect on existing stockholders. The inability to obtain
such financing will have a material adverse effect on the Company, its
operations and future business prospects.

ITEM 3. CONTROLS AND PROCEDURES

       The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the Company's
Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms, and that such information is accumulated and communicated to the
Company's management, including its Chief Executive Officer and Principal
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and procedures,
management recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and
procedures.

       Within 90 days prior to the filing of this report on Form 10-QSB, the
Company carried out an evaluation, under the supervision and with the
participation of the Company's Chief Executive and Principal Financial Officer,
of the effectiveness of the design and operation of the Company's disclosure
controls and procedures (as defined in Exchange Act Rules 13(a)-15(e)). Based
upon that evaluation, the Chief Executive and Principal Financial Officer
concluded that the Company's disclosure controls and procedures are effective in
timely alerting them to material information relating to the Company required to
be included in the Company's periodic SEC filings. Subsequent to the date of
that evaluation, there have been no significant changes in internal controls or
other factors that could significantly affect internal controls.

                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

       On March 27, 2003, the Company's former Chief Financial Officer and a
former director filed a complaint against the Company in State Court in
Massachusetts. The action alleged, among other things, that the Company breached
the terms of the Settlement

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<PAGE>

Agreement, dated as of April 1, 2002 (the "Settlement Agreement"), entered into
by the Company and Mr. Kopelowitz in connection with Mr. Kopelowitz's
resignation from all offices held in the Company and its affiliates and seeks
damages of $205,000, along with interest, costs and attorney's fees. The Company
filed its answer on April 23, 2003, wherein it denied all allegations. On June
3, 2003, in final settlement of this lawsuit the Company remitted to the former
officer $10,000, which represents the amount contemplated as the final payment
under the original Settlement Agreement.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

SALE OF UNREGISTERED SECURITIES

       Set forth below is certain information concerning sales by the Company of
unregistered securities during the three months ended June 30, 2003. The
issuances by the Company of the securities sold in the transactions referenced
below were not registered under the Securities Act of 1933, as amended, pursuant
to the exemption contemplated by Section 4(2) thereof for transactions not
involving a public offering.

       1. In June 2003, the Company completed a private placement of Common
Stock and warrants to eight "accredited" investors, generating total gross
proceeds of $622,500. This private placement offering resulted in the issuance
of 5,187,500 shares of Common Stock at a price of $0.12 per share and warrants
to purchase an aggregate of 2,852,864 shares of Common Stock at an exercise
price of $0.25 per share. The warrants are exercisable through May 31, 2005 but
are subject to a reduced exercise period upon the occurrence of certain
conditions.

       2. In June 2003, the Company issued to an "accredited" investor 100,000
shares of its Common Stock and issued two year warrants (subject to a reduced
exercise period upon certain conditions) to purchase an additional 100,000
shares of Common Stock, at per share exercise price of $0.20, pursuant to the
conversion of a six month convertible promissory note previously issued by the
Company in March 2003.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

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

None.

ITEM 5. OTHER INFORMATION.

None.

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

(a) Exhibits

       4.1  Form of Warrant issued in June 2003.

       10.1 Form of Stock Purchase Agreement dated as of June 4, 2003, between
the Company and certain investors.

       31.  Rule 13a-14(a) / 15d-14(a) Certification

       32.  Section 1350 Certification


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<PAGE>

(b) Reports on Form 8-K

       (i) Report on Form 8-K filed on June 4, 2003.

       (ii) Report on Form 8-K filed on May 14, 2003.

                                   SIGNATURES

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





DATE: AUGUST 14, 2003                        AMBIENT CORPORATION

                                          /s/ JOHN J. JOYCE
                                          ------------------
                                          JOHN J. JOYCE
                                          CHIEF EXECUTIVE OFFICER
                                          (AND PRINCIPAL FINANCIAL OFFICER)



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