<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
10-Q
For Quarter Ended: December 31, 1996
Commission File Number 001-12106
AMBI INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 11-2653613
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation of organization)
771 Old Saw Mill River Road, Tarrytown, New York 10591
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(914) 347-5767
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
APPLIED MICROBIOLOGY, INC.
- --------------------------------------------------------------------------------
(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 [X] NO [_]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, Par Value $.005 18,425,374 shares as of December 31, 1996
- ----------------------------- -----------------------------------------
<PAGE>
AMBI INC.
INDEX
PART I FINANCIAL INFORMATION PAGE
- ------ --------------------- ----
Item 1 Financial Statements (Unaudited)
Condensed Consolidated Balance
Sheets at December 31, 1996
and June 30, 1996 3 - 4
Condensed Consolidated Statements of
Operations for the three months and
six months ended December 31, 1996
and December 31, 1995 5
Condensed Consolidated Statement of
Changes in Stockholders' Equity
for the six months ended
December 31, 1996 6
Condensed Consolidated Statements of
Cash Flows for the six months
ended December 31, 1996 and
December 31, 1995 7
Notes to Condensed Consolidated
Financial Statements 8 - 10
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11-12
PART II OTHER INFORMATION
Item 2 Changes in Securities 13
Item 6 Exhibits and Reports on Form 8-K 13
SIGNATURES 14
2
<PAGE>
AMBI INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31 June 30
1996 1996
(Unaudited) (Note)
$'000 $'000
----- -----
ASSETS
Current assets:
Cash and cash equivalents 8,917 8,431
Trade accounts receivable less allowance for
doubtful accounts of $81,000 at December 31, 1996
and at June 30, 1996 2,345 5,356
Inventories 977 3,088
Prepayments and other current assets 5,900 874
------ ------
Total current assets 18,139 17,749
Property and equipment at cost less accumulated
depreciation of $268,000 at December 31, 1996 and
$4,493,000 at June 30, 1996 1,162 3,881
Patent costs and licensed technology at cost less
accumulated amortization of $884,000 at December
31, 1996 and $717,000 at June 30, 1996 1,582 1,624
Other assets 95 113
------ ------
TOTAL ASSETS 20,978 23,367
====== ======
3
<PAGE>
AMBI INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(CONTINUED)
December 31 June 30
1996 1996
(Unaudited) (Note)
$'000 $'000
----- -----
LIABILITIES, REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of note payable and lease obligation 129 195
Accounts payable and accrued expenses 5,199 1,889
Other liabilities - 368
Dividends payable 425 231
Taxes payable - 254
------- -------
Total current liabilities 5,753 2,937
Note payable and lease obligation, less
current portion 226 935
Long term loan 2,000 2,000
Deferred taxes payable - 349
------- -------
TOTAL LIABILITIES 7,979 6,221
------- -------
REDEEMABLE PREFERRED STOCK
$0.01 par value. Issued and outstanding
1,500 shares at December 31, 1996 and
June 30, 1996 (aggregate involuntary
liquidation value $1,500,000) 1,500 1,500
------- -------
STOCKHOLDERS' EQUITY
Convertible preferred stock, $0.01 par
value, issued and outstanding 280
shares at December 31, 1996 and 370 shares at
June 30, 1996 * *
Common stock, $0.005 par value,
authorized 40,000,000 shares.
Issued and outstanding 18,425,374
at December 31, 1996 and 20,469,776
at June 30, 1996 92 102
Additional paid-in capital 45,341 51,389
Accumulated deficit (33,934) (35,179)
Currency translation adjustment - (666)
------- -------
TOTAL STOCKHOLDERS' EQUITY 11,499 15,646
------- -------
TOTAL LIABILITIES, REDEEMABLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY 20,978 23,367
======= =======
*Value less than $500.00
Note: The Condensed Consolidated Balance Sheet as of June 30, 1996 has been
derived from the audited consolidated financial statements at that date.
4
<PAGE>
AMBI INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales 3,863 3,042 8,098 5,243
Other Operating Revenues 336 55 467 105
------- ------- ------- -------
TOTAL REVENUES 4,199 3,097 8,565 5,348
Cost of Sales (1,164) (1,341) (3,653) (2,490)
------- ------- ------- -------
GROSS PROFIT 3,035 1,756 4,912 2,858
Selling, General & Administrative
Expenses (4,402) (1,733) (9,007) (3,256)
Research Costs (1,112) (626) (2,512) (1,098)
Depreciation and Amortization (241) (172) (483) (358)
------- ------- ------- -------
OPERATING LOSS (2,720) (775) (7,090) (1,854)
Interest Income 42 98 109 118
Interest Expense (50) (23) (87) (49)
Gain on Sale of Aplin & Barrett 8,648 - 8,648 -
------- ------- ------- -------
INCOME/(LOSS) BEFORE TAX EXPENSE 5,920 (700) 1,580 (1,785)
Tax Expense (96) (48) (141) (59)
------- ------- ------- -------
NET INCOME/(LOSS) 5,824 (748) 1,439 (1,844)
======= ======= ======= =======
EARNINGS/(LOSS) PER SHARE
- -Primary $0.28 ($0.05) $0.06 ($0.11)
- -Fully Diluted $0.27 ($0.05) $0.06 ($0.11)
</TABLE>
5
<PAGE>
AMBI INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Common Additional Accumulated Currency Total Common
Stock Paid In Deficit Translation Shares
Capital Adjustment Outstanding
$'000 $'000 $'000 $'000 $'000
-------- -------- ------- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1996 102 51,389 (35,179) (666) 15,646 20,469,776
Common stock issued on
exercise of options and
warrants 1 293 - - 294 91,212
Conversion of preferred
stock to common stock 1 - - 1 284,386
Common shares returned
by Burns Philp as part of
Aplin & Barrett transaction (12) (6,341) - - (6,353) (2,420,000)
Net income for the period - - 1,439 - 1,439 -
Redeemable preferred stock
dividend - - (64) - (64) -
Convertible preferred stock
dividend - - (130) - (130) -
Arising on translation during
the period - - - 538 538 -
Currency translation adjustment
written-off in connection with
Aplin & Barrett transaction - - - 128 128 -
------ ------- ------ ------- ------- ----------
Balance at December 31, 1996 92 45,341 (33,934) - 11,499 18,425,374
------ ------- ------ ------- ------- ----------
</TABLE>
6
<PAGE>
AMBI INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
December 31
1996 1995
$'000 $'000
----- -----
<S> <C> <C>
Cash flows from operating activities:
Net income/(loss) 1,439 (1,844)
Adjustments to reconcile net income/(loss)
to net cash used in operating activities:
Depreciation and amortization 483 358
Gain on Sale of Aplin & Barrett (8,648) --
Other non-cash items 65 96
Changes in assets and liabilities, net of effects from sale of subsidiary:
(Increase)/decrease in trade accounts receivable (635) 41
Decrease(increase) in inventories 275 (172)
(Increase) in other assets (209) (372)
(Increase) in amounts due from
affiliated companies -- (155)
(Decrease)/increase in taxes payable (254) 54
Increase(decrease) in accounts payable and
accrued expenses 1,147 (513)
Increase in amounts due to
affiliated companies -- 13
Increase in other liabilities 189 3
------ ------
Net cash (used in) operating activities (6,148) (2,491)
------ ------
Cash flows from investing activities:
Acquisitions of property and equipment (754) (744)
Patent costs and licensed technology (121) (395)
Cash received upon sale of subsidiary 8,000 --
------ ------
Net cash provided by/(used in) investing activities 7,125 (1,139)
------ ------
Cash flows from financing activities:
Dividends paid on redeemable preferred stock -- (69)
Note payable proceeds -- 35
Capital lease proceeds 328 389
Note payable repayments -- (4)
Capital lease obligation repayments (1,103) (79)
Proceeds from issuance of convertible
preferred stock -- 8,213
Proceeds from issuance of common stock 294 375
------ ------
Net cash (used in)/provided by financing activities (481) 8,860
------ ------
Effect of exchange rate movement (10) (19)
Net increase in cash and cash equivalents 486 5,211
Cash and cash equivalents at beginning of period 8,431 3,337
------ ------
Cash and cash equivalents at end of period 8,917 8,548
====== ======
Supplementary disclosure of cash flow information:
Interest paid 62 4
Tax paid 0 4
</TABLE>
7
<PAGE>
AMBI INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 1996
Note A Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial statement reporting and in accordance
with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all 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
month period ended December 31, 1996 are not necessarily indicative of
the results that may be expected for the year ending June 30, 1997.
For further information, refer to the consolidated financial
statements and notes thereto, included in the Company's annual report
on Form 10-K for the year ended June 30, 1996.
Note B Inventories
The components of inventories consist of the following:
December 31 June 30
1996 1996
$'000 $'000
----- -----
Raw materials - 240
Work in progress 270 960
Finished products 707 1,888
-------- --------
977 3,088
-------- --------
Note C Preferred Stock Dividends
Dividends payable are approximately $64,000 on the Redeemable
Preferred Stock and $361,000 on the Convertible Preferred Stock as of
December 31, 1996.
8
<PAGE>
AMBI INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 1996
Note D Earnings per share
Primary earnings per share for the three months and the six months ended
December 31, 1996 are computed based on the weighted average number of shares
actually outstanding plus the shares that would be outstanding assuming the
exercise of stock options and warrants. The number of shares that would be
issued from the exercise of stock options and warrants has been reduced by the
number of shares that could have been purchased from the proceeds at the average
market price of the Company's stock. Earnings per share for the three months and
six months ended December 31, 1995 do not include the exercise of stock options
and warrants because the effect of such inclusion would be to increase earnings
per share.
<TABLE>
<CAPTION>
3 months ended 6 months ended
December 31 December 31
1996 1995 1996 1995
No. of Shares No. of Shares
------------- -------------
<S> <C> <C> <C> <C>
Average shares outstanding 20,243,174 18,276,455 20,387,206 18,228,975
Stock options and warrants 192,323 - 448,302 -
---------- ---------- ---------- ----------
Total Average shares 20,435,497 18,276,455 20,835,508 18,228,975
---------- ---------- ---------- ----------
$'000 $'000 $'000 $'000
---------- ---------- ---------- ----------
Net income/(loss) 5,824 (748) 1,439 (1,844)
Preferred stock dividend (100) (168) (194) (201)
---------- ---------- ---------- ----------
Net income/(loss) attributable to
common stockholders 5,724 (916) 1,245 (2,045)
========== ========== ========== ==========
Primary earnings/(loss) per share
of common stock $0.28 ($0.05) $0.06 ($0.11)
</TABLE>
Fully diluted earnings per share for the three months and the six months ended
December 31, 1996 are computed based on the weighted average number of shares
actually outstanding plus the shares that would be outstanding assuming the
exercise of stock options and warrants and the conversion of convertible
preferred stock to common stock. The number of shares that would be issued from
the exercise of stock options and warrants has been reduced by the number of
shares that could have been purchased from the proceeds at the average market
price of the Company's stock. Earnings per share for the three months and six
months ended December 31, 1995 do not include the exercise of stock options,
warrants and the conversion of the convertible preferred stock to common stock
because the effect of such inclusion would be to increase earnings per share.
<TABLE>
<CAPTION>
3 months ended 6 months ended
December 31 December 31
1996 1995 1996 1995
No. of Shares No. of Shares
------------- -------------
<S> <C> <C> <C> <C>
Average shares outstanding 20,243,174 18,276,455 20,387,206 18,228,975
Stock options, warrants & conv.
preferred 1,286,955 - 1,344,683 -
---------- ---------- ----------- -----------
Total Average shares 21,530,129 18,276,455 21,731,889 18,228,975
---------- ---------- ----------- -----------
$'000 $'000 $'000 $'000
---------- ---------- ----------- -----------
Net income/(loss) 5,824 (748) 1,439 (1,844)
Preferred stock dividend (32) (168) (64) (201)
---------- ---------- ----------- -----------
Net income/(loss) attributable to
common stockholders 5,792 (916) 1,375 (2,045)
========== ========== =========== ===========
Fully diluted earnings/(loss)
per share of common stock $0.27 ($0.05) $0.06 ($0.11)
</TABLE>
9
<PAGE>
AMBI INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 1996
Note E Sale of Aplin & Barrett
The Company completed the sale of its UK-based food preservative
business, Aplin & Barrett, Ltd., to Burns Philp & Company Ltd. on
December 12, 1996. As a result, the operations of Aplin & Barrett are
included in the financial statements through that date. Key terms of
the transaction included the payment to AMBI of $13.5 million in cash,
($8.0 million paid on December 12, 1996 with the remaining $5.5
million to be paid on June 12, 1997), and the return of 2.42 million
shares of AMBI common stock held by Burns Philp. In addition, Burns
Philp has provided AMBI with a revolving line of credit of up to $2.5
million that could be forgiven under certain circumstances related to
the performance of the food preservative business through June 30,
1999.
10
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Sales
Sales in the quarter increased from the corresponding period in 1995 by 27%, to
$3.9 million and in the six months by 55% to $8.1 million. These increases are
largely the result of sales of the new products Cardia(TM) Salt Alternative and
Wipe Out(TM) Dairy Wipes. The Dairy ingredients business was discontinued during
the quarter ended December 31, 1996.
The percentage of sales included in the total by product is:
% of sales in second quarter % change
1996 1995 96 vs. 95
---- ---- ---------
Food preservative 58.8 69.2 7.6
Dairy ingredients 4.2 25.8 (79.3)
Cardia(TM)Salt Alternative 26.3 - *
Wipe Out/Animal Health 10.1 4.4 289.7
Other 0.6 0.6 38.9
------ ----- ------
Total 100.0 100.0 27.0
------ ----- ------
% of sales in first half % change
1996 1995 96 vs. 95
---- ---- ---------
Food preservative 49.6 67.1 14.0
Dairy ingredients 13.5 27.2 (23.8)
Cardia(TM)Salt Alternative 25.1 - *
Wipe Out/Animal Health 11.4 5.3 334.8
Other 0.4 0.4 29.6
------ ----- ------
Total 100.0 100.0 54.5
------ ----- ------
* Product launched April, 1996.
Cost of Sales
Cost of sales as a percentage of sales for the quarter was 30.1%, compared with
44.1% in 1995 and in the six months 45.1%, compared with 47.5% in 1995. These
decreases are due to the lower proportion of sales in lower margin dairy
(Direct-Set) products and an increase in the sales of the higher margin Cardia
Salt Alternative.
Selling, General, and Administrative Expenses ("S,G&A")
S,G&A expenses increased by $2.7 million (254%) for the three month period and
$5.8 million (277%) for the six month period ended December 31, 1996. These
increases are mainly due to the continued marketing investment spending in
support of Cardia(TM) Salt Alternative, which was launched regionally in 1996
and nationally in January, 1997.
11
<PAGE>
Research Costs
Research costs increased in the quarter by $0.5 million (78%), and in the six
month period by $1.4 million (229%) compared to the same periods last year.
These increases are a result of the Company's expansion in spending in support
of pharmaceutical research projects.
Operating Loss
The Company recorded an operating loss of $2.7 million in the quarter ended
December 31, 1996, compared with a loss of $0.8 million in the quarter ended
December 31, 1995. In the six months ended December 31, 1996, the Company
recorded an operating loss of $7.1 million, compared with a loss of $1.9 million
in the six months ended December 31, 1995. The increase in the operating loss is
mainly due to the continued marketing investment spending in support of
Cardia(TM) Salt Alternative, which was launched regionally in 1996 and
nationally in January, 1997.
Sale of Aplin & Barrett
The Company completed the sale of its UK-based food preservative business, Aplin
& Barrett, Ltd., to Burns Philp & Company Ltd. on December 12, 1996. Key terms
of the transaction included the payment to AMBI of $13.5 million in cash, ($8.0
million paid on December 12, 1996 with the remaining $5.5 million to be paid on
June 12, 1997), and the return of 2.42 million shares of AMBI common stock held
by Burns Philp. In addition, Burns Philp has provided AMBI with a revolving line
of credit of up to $2.5 million that could be forgiven under certain
circumstances related to the performance of the food preservative business
through June 30, 1999. Aplin & Barrett Ltd. accounted for approximately 59% and
50% of the Company's total revenues during the three and six months ended
December 31, 1996, respectively. Although the Company intends to concentrate its
resources on increased marketing of its remaining product lines, the Company
anticipates that total revenues will materially decrease in the near term as a
result of the sale of Aplin & Barrett Ltd.
Income/(Loss) Before Tax Expenses
The Company recorded income before tax expenses of $5.9 million in the quarter
ended December 31, 1996, compared with a loss of $0.7 million in the quarter
ended December 31, 1995. In the six months ended December 31, 1996, the Company
recorded income before tax expense of $1.6 million, compared with a loss of $1.8
million in the six months ended December 31, 1995. This income was due to the
aforementioned gain on the sale of Aplin & Barrett.
Tax Expense
The Company's tax expense in the quarter and in the six months is a result of
taxes on the profits of Aplin & Barrett. The Company does not expect to pay
taxes on the gain resulting from the sale of Aplin & Barrett because the taxable
gain is expected to be offset by operating losses for the year.
Financial Condition
As of December 31, 1996, the Company had working capital of $12.4 million,
including a cash balance of $8.9 million, compared to June 30, 1996, working
capital of $14.8 million, including a cash balance of $8.4 million. The decrease
in working capital is primarily the result of the operating loss partially
offset by the sale of Aplin & Barrett, which resulted in a payment to the
Company of $8.0 million in cash on December 12, 1996 and a $5.5 million
receivable from Burns Philp, which has been included in "Prepayments and other
current assets".
12
<PAGE>
PART II - OTHER INFORMATION
Item 2 - Changes in Securities
On December 10, 1996, the Company issued a Warrant to Preben Daltoft to purchase
12,500 shares of the Company's Common Stock at an exercise price of $2.625 per
share, in exchange for services. The Warrant is immediately exercisable and
expires on December 9, 1999. The Warrant was issued pursuant to the exemption in
Section 4(2) of the Securities Act of 1933.
Item 6 - Exhibits and Report on Form 8-K
Exhibit 27 - Financial Data Schedule
A Form 8-K, dated December 27, 1996, was filed during the three months ended
December 31, 1996. Items reported included Item 2 and Item 7. Item 2 -
Disposition of Assets, reviewed the sale of the Company's UK-based subsidiary,
Aplin & Barrett Limited to Burns Philp & Company Limited. Item 7 - Financial
Statements and Exhibits included pro forma financial information related to the
sale.
13
<PAGE>
AMBI INC.
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.
AMBI INC.
---------
Registrant
Date:__________________________ By: _____________________________________
Fredric D. Price
President and Chief Executive Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 8,917
<SECURITIES> 0
<RECEIVABLES> 2,426
<ALLOWANCES> 81
<INVENTORY> 977
<CURRENT-ASSETS> 18,139
<PP&E> 1,430
<DEPRECIATION> 268
<TOTAL-ASSETS> 20,978
<CURRENT-LIABILITIES> 5,753
<BONDS> 2,226
1,500
0
<COMMON> 92
<OTHER-SE> 11,407
<TOTAL-LIABILITY-AND-EQUITY> 20,978
<SALES> 8,098
<TOTAL-REVENUES> 8,565
<CGS> 3,653
<TOTAL-COSTS> 15,655
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 87
<INCOME-PRETAX> 1,580
<INCOME-TAX> 141
<INCOME-CONTINUING> 1,439
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,439
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
