Ambient Corporation (the "Company") anticipates revenues of approximately $10.0 million and $23.2 million, respectively, for the three and six months ended June 30, 2012 as compared to approximately $15.9 million and $27.9 million, respectively, for the corresponding periods in 2011. The Company also anticipates a loss from operations of approximately $1.5 million for the three and six month periods ending June 30, 2012 as compared to income from operations of approximately $2.8 million and $4.1 million, respectively, for the corresponding periods in 2011 (as restated). The increase in loss from operations is mainly attributable to lower sales volumes and increased investment in sales and marketing and research and development. The Company also anticipates net loss of approximately $1.2 million and $1.4 million, respectively, for the three and six month periods ending June 30, 2012 as compared to net income of approximately $3.6 million and $6.0 million, respectively, for the corresponding periods in 2011 (as restated). The summary information relating to results of the three and six month periods ending June 30, 2012 and 2011 are estimates and preliminary and are subject to change pending the Company's final reviews.

In connection with the preparation of the quarterly report on Form 10-Q for the three months ended June 30, 2012, management of the Company concluded that certain previously filed financial statements did not properly account for embedded derivative features of certain historical debt and equity securities issued by the Company, which are described in detail below.

Convertible Debt: Certain historical convertible notes (the "Notes") issued by the Company were previously recorded at their discounted face value. The discounts were comprised of both beneficial conversion features associated with the Notes and the fair value of warrants issued in connection with the Notes. However, the Notes contained certain features, including anti-dilution price protection and others that, in accordance with ASC-815, Derivatives and Hedging ("ASC 815"), should have been bifurcated from the host contract and accounted for as a derivative instrument (the "Embedded Derivatives"). Such Embedded Derivatives are recorded as a separate liability at their fair value on the date of issuance, and as a corresponding discount to the Notes which is amortized to interest expense over the expected term of the Notes. Changes in the fair values of these instruments require adjustments to the amount of the liabilities recorded on the Company's balance sheet, and the corresponding gain or loss is required to be recorded in the Company's statement of operations, as long as the Notes are outstanding.

Warrants: In connection with issuing the aforementioned Notes, as well as in connection with other financing transactions, the Company issued warrants to purchase common stock (collectively, the "Warrants"). The Company had previously classified the value of Warrants as equity. After further review, the Company determined that these instruments should have been classified as liabilities in accordance with ASC 815, due primarily to an anti-dilution price protection feature contained in such warrants. Changes in the fair values of these instruments require adjustments to the amount of the liabilities recorded on the Company's balance sheet, and the corresponding gain or loss is required to be recorded in the Company's statement of operations.

Stock-based Compensation: The Company had previously used volatility assumptions based on the historical volatility of the Company's common stock, which, based on the historical trading activity of the stock, resulted in inflated volatilities that were not necessarily indicative of the expected volatility and substantially higher than other peer-industry companies. Upon further review of the volatility assumption, the Company determined that an expected volatility based on the volatilities of its industry peer group is a more appropriate sustainable volatility. Such an approach was used to determine appropriate volatility assumptions for valuation purposes of the Embedded Derivatives and Warrants. As a result, volatility assumptions are lower than those previously used which reduced stock-based compensation.

Based on the recommendation of management, on August 14, 2012, our audit committee and board of directors determined, after discussions with our current independent accountants, PricewaterhouseCoopers LLP, and our prior independent accountants, Rotenberg, Meril Solomon Bertiger & Guttilla, P.C., that our audited financial statements for the years ended December 31, 2003 through 2011 and unaudited interim financial statements for the quarters ended March 31, June 30, and September 30 for such years, and our unaudited interim financial statements for the quarter ended March 31, 2012 should not be relied upon. In addition, any press releases containing financial information for such periods should not be relied upon.

The Company expects to restate its financial results for the fiscal years ended December 31, 2007 through 2011, as well as the quarters in the fiscal years ended December 31, 2010 and 2011 and the first quarter of fiscal 2012. The Company will include its restated audited annual financial statements in a Form 10-K/A for the fiscal year ended December 31, 2011 and its restated unaudited interim financial statements in a Form 10-Q/A for the quarterly period ended March 31, 2012. The Form 10-K/A will also include restated quarterly financial information for each of the quarterly periods in the fiscal years ended December 31, 2010 and 2011. The Company believes that these amended and restated filings will contain disclosures that are adequate and appropriate to restate the relevant financial information for the accounting adjustments noted with respect to previous reporting periods. The board of directors and audit committee unanimously approved, authorized and directed such restatements to be filed as soon as practicable. The Company anticipates filing the restated 10-K/A for the fiscal year ended December 31, 2011 and the 10-Q/A for the quarterly period ended March 31, 2012 prior to September 30, 2012. The Company also expects to file its quarterly report on Form 10-Q for the three and six month periods ending June 30, 2012 prior to September 30, 2012.

Expected Impact of the Restatement

The estimated adjustments to the Company's balance sheets and statements of operations are summarized in the tables below. The Company is still in the process of completing its review, and, therefore, the estimated adjustments described below are preliminary. While the Company expects to report the estimated adjustments described below, there can be no assurance that the final adjustments that are made as part of the restatement will not differ materially from the estimated adjustments.

The adjustments are primarily related to complex accounting requirements of certain characteristics of the Notes and Warrants (and to a lesser extent, stock-based compensation) that require the recording of debt discounts and related amortization, mark-to-market adjustments in the fair value of Warrants and Embedded Derivatives and gains or losses associated with the extinguishment of debt under certain circumstances. As the errors were non-cash in nature, the adjustments did not impact total cash flow from operating, investing or financing activities.

As a result of these cumulative adjustments, as of December 31, 2011, accumulated deficit is expected to increase from $138.7 million to approximately $222.4 million and additional paid in capital is expected to increase from $155.7 million to approximately $238.8 million. However, at December 31, 2011, the net impact of the cumulative adjustments associated with these aforementioned adjustments has a relatively small impact to overall stockholders' equity. Since all of the Notes were either paid down or converted by early 2010 and many of the Warrants were either exercised or expired by the end of 2011, the estimated impact of accounting for these instruments in 2012 and for future periods is expected to be minimal.

The tables below summarize the estimated impact on the Company's balance sheets for the years ended December 31, 2007 through December 31, 2011 and for the quarter ended March 31, 2012:

                                            Year Ended December 31, 2007                      Year Ended December 31, 2008                      Year Ended December 31, 2009
                                                      Total                                             Total                                             Total
                                        As          Estimated       Preliminary           As          Estimated       Preliminary           As          Estimated       Preliminary
(In thousands)                       Reported         Adj.            Restated         Reported         Adj.            Restated         Reported         Adj.            Restated

Deferred financing costs            $      898     $      (369 )   $          529     $        -     $         -     $            -     $        -     $         -     $            -
Total assets                             2,816            (369 )   $        2,447         10,622               -             10,622          3,393               -              3,393

Convertible debt, net of
discounts                                2,672            (794 )            1,878            754             382              1,136          9,816          (3,099 )            6,717
Warrant and derivative
liabilities                                  -           7,190              7,190              -          17,099             17,099              -          95,827             95,827
Total liabilities                        4,281           6,397             10,678          3,168          17,481             20,649         12,928          92,728            105,656

Additional paid-in capital             113,434         (17,991 )           95,444        133,643         (26,839 )          106,804        130,898           2,967            133,865
Accumulated deficit                   (114,702 )        11,225           (103,477 )     (125,996 )         9,358           (116,638 )     (140,242 )       (95,694 )         (235,936 )
Total stockholders' (deficit)
equity                                  (1,465 )        (6,766 )           (8,231 )        7,454         (17,481 )          (10,027 )       (9,535 )       (92,728 )         (102,263 )
 Total liabilities and
stockholders' equity                $    2,816     $      (369 )            2,447     $   10,622     $         -     $       10,622     $    3,393     $         -     $        3,393


(In thousands)                              Year Ended December 31, 2010                      Year Ended December 31, 2011                      Quarter Ended March 31, 2012
                                                      Total                                             Total                                             Total
                                        As          Estimated       Preliminary           As          Estimated       Preliminary           As          Estimated       Preliminary
                                     Reported         Adj.            Restated         Reported         Adj.            Restated         Reported         Adj.            Restated

Deferred financing costs            $        -     $         -     $            -     $      389     $         -     $          389     $        -     $         -     $            -
Total assets                            10,573               -             10,573         21,874               -             21,874         22,512               -             22,512

Convertible debt, net of
discounts                                    -               -                  -              -               -                  -              -               -                  -
Warrant and derivative
liabilities                                  -           4,353              4,353              -             670                670              -             780                780
Total liabilities                        4,437           4,353              8,790          5,008             670              5,678          4,839             780              5,619

Additional paid-in capital             149,748          84,929            234,677        155,707          83,075            238,782        156,647          82,787            239,434
Accumulated deficit                   (143,428 )       (89,282 )         (232,710 )     (138,658 )       (83,744 )         (222,402 )     (138,991 )       (83,567 )         (222,558 )
Total stockholders' equity               6,136          (4,353 )            1,783         16,866            (670 )           16,197         17,673            (780 )           16,893
 Total liabilities and
stockholders' equity                $   10,573     $         -     $       10,573     $   21,874     $         -     $       21,874     $   22,512     $         -     $       22,512

The tables below summarize the estimated impact on the Company's statements of operations for the years ended December 31, 2007 through December 31, 2011 and for the quarter ended March 31, 2012:

                                              Year Ended December 31, 2007                         Year Ended December 31, 2008                          Year Ended December 31, 2009
                                                        Total                                                 Total                                                 Total
                                                      Estimated        Preliminary                          Estimated        Preliminary                          Estimated        Preliminary
(In thousands)                      As Reported          Adj.            Restated         As Reported          Adj.            Restated         As Reported          Adj.            Restated

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