<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: March 31, 1997
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)
- -------------------------------------------------------------------------------
(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 _______
--------
xxx
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 18,649,073 shares as of March 31, 1997
<PAGE>
AMBI INC.
INDEX
PART I FINANCIAL INFORMATION PAGE
- ------ --------------------- ----
Item 1 Financial Statements (Unaudited)
Condensed Consolidated Balance
Sheets at March 31, 1997
and June 30, 1996 3 - 4
Condensed Consolidated Statements of
Operations for the three months and
nine months ended March 31, 1997
and March 31, 1996 5
Condensed Consolidated Statement of
Stockholders' Equity for the nine
months ended March 31, 1997 6
Condensed Consolidated Statements of
Cash Flows for the nine months
ended March 31, 1997 and
March 31, 1996 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 6 Exhibits and Reports on Form 8-K 13
SIGNATURES 14
- ----------
2
<PAGE>
AMBI INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31 June 30
1997 1996
(Unaudited) (Note)
$'000 $'000
----- -----
ASSETS
Current assets:
Cash and cash equivalents 4,966 8,431
Trade accounts receivable less allowance for
doubtful accounts of $67,000 at March 31, 1997
and $81,000 at June 30, 1996 1,255 5,356
Inventories 965 3,088
Prepayments and other current assets 6,179 874
------ ------
Total current assets 13,365 17,749
Property and equipment at cost less accumulated
depreciation of $328,000 at March 31, 1997 and
$4,493,000 at June 30, 1996 1,162 3,881
Patent costs and licensed technology at cost less
accumulated amortization of $971,000 at March 31,
1997 and $717,000 at June 30, 1996 1,699 1,624
Other assets 93 113
------ ------
TOTAL ASSETS 16,319 23,367
====== ======
See notes to condensed consolidated financial statements
3
<PAGE>
AMBI INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(CONTINUED)
March 31 June 30
1997 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 4,961 1,889
Other liabilities -- 368
Dividends payable 403 231
Taxes payable -- 254
------- -------
Total current liabilities 5,493 2,937
Note payable and lease obligation, less
current portion 165 935
Long term loan 2,000 2,000
Deferred taxes payable -- 349
------- -------
TOTAL LIABILITIES 7,658 6,221
------- -------
REDEEMABLE PREFERRED STOCK
$0.01 par value. Issued and outstanding
1,500 shares at March 31, 1997 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 238 shares at March 31,
1997 and 370 shares at June 30, 1996 * *
Common stock, $0.005 par value, authorized
40,000,000 shares. Issued and outstanding
18,649,073 at March 31, 1997 and 20,469,776
at June 30, 1996 92 102
Additional paid-in capital 45,593 51,389
Accumulated deficit (38,524) (35,179)
Currency translation adjustment -- (666)
------- -------
TOTAL STOCKHOLDERS' EQUITY 7,161 15,646
------ -------
TOTAL LIABILITIES, REDEEMABLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY 16,319 23,367
====== ======
*Value less than $500.00
See notes to condensed consolidated financial statements
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)
Three Months Ended Nine Months Ended
March 31 March 31
1997 1996 1997 1996
---- ---- ---- ----
Net Sales 1,614 3,760 9,712 9,003
Other Operating Revenues 244 1,157 711 1,262
------- ------- ------- -------
TOTAL REVENUES 1,858 4,917 10,423 10,265
Cost of Sales (449) (1,518) (4,102) (4,008)
------- ------- ------- -------
GROSS PROFIT 1,409 3,399 6,321 6,257
Selling, General & Administrative
Expenses (5,109) (3,155) (14,116) (6,411)
Research Costs (832) (505) (3,344) (1,603)
Depreciation and Amortization (147) (184) (630) (542)
------- ------- ------- -------
OPERATING LOSS (4,679) (445) (11,769) (2,299)
Interest Income 210 86 319 204
Interest Expense (25) (30) (112) (79)
Gain on Sale of Aplin & Barrett - - 8,648 -
------- ------- ------- -------
LOSS BEFORE TAX EXPENSE (4,494) (389) (2,914) (2,174)
Tax Expense (9) (76) (150) (135)
------- ------- ------- -------
NET LOSS (4,503) (465) (3,064) (2,309)
======= ======= ======= =======
LOSS PER SHARE ($0.25) ($0.03) ($0.17) ($0.14)
See notes to condensed consolidated financial statements
5
<PAGE>
AMBI INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Additional Currency
Common Paid In Accumulated Translation Common
Stock Capital Deficit Adjustment Total Shares
$'000 $'000 $'000 $'000 $'000 Outstanding
------- ----------- ------------ ----------- ----- -----------
<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 1 435 - - 436 157,626
Conversion of preferred stock to common stock 1 110 - - 111 441,671
Common shares returned by Burns Philp as part of
Aplin & Barrett transaction (12) (6,341) - - (6,353) (2,420,000)
Net loss for the period - - (3,064) - (3,064) -
Redeemable preferred stock dividend - - (96) - (96) -
Convertible preferred stock dividend - - (185) - (185) -
Arising on translation during the period - - - 538 538 -
Currency translation adjustment written-off in
connection with Aplin & Barrett transaction - - - 128 128 -
---- ------ ------- ---- ------ ----------
Balance at March 31, 1997 92 45,593 (38,524) - 7,161 18,649,073
---- ------ ------- ---- ------ ----------
See notes to condensed consolidated financial statements
6
<PAGE>
AMBI INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
March 31
1997 1996
$'000 $'000
----- -----
Cash flows from operating activities:
Net loss (3,064) (2,309)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 630 542
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:
Decrease/(increase) in trade accounts receivable 455 (843)
Decrease/(increase) in inventories 287 (921)
(Increase) in other assets (486) (651)
(Increase) in amounts due from affiliated
companies - (1,011)
(Decrease) in taxes payable (254) (207)
Increase in accounts payable and
accrued expenses 909 524
(Decrease) in amounts due to affiliated
companies - (32)
Increase in other liabilities 189 69
------- ------
Net cash used in operating activities (9,917) (4,743)
------- ------
Cash flows from investing activities:
Acquisitions of property and equipment (783) (880)
Patent costs and licensed technology (355) (800)
Cash received upon sale of subsidiary 8,000 -
------- ------
Net cash provided by/(used in) investing
activities 6,862 (1,680)
------- ------
Cash flows from financing activities:
Dividends paid on redeemable preferred stock - (102)
Note payable proceeds - 35
Capital lease proceeds 328 389
Note payable repayments - (8)
Capital lease obligation repayments (1,164) (138)
Proceeds from issuance of convertible
preferred stock - 8,213
Proceeds from issuance of common stock 436 707
------- ------
Net cash (used in)/provided by financing activities (400) 9,096
------- ------
Effect of exchange rate movement (10) (51)
Net (decrease)/increase in cash and cash equivalents (3,465) 2,622
Cash and cash equivalents at beginning of period 8,431 3,337
------- ------
Cash and cash equivalents at end of period 4,966 5,959
======= ======
Supplementary disclosure of cash flow information:
Interest paid 87 79
Tax paid 9 337
See notes to condensed consolidated financial statements
7
<PAGE>
AMBI INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1997
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 nine
month period ended March 31, 1997 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:
March 31 June 30
1997 1996
$'000 $'000
----- -----
Raw materials - 240
Work in progress 90 960
Finished products 875 1,888
--- -----
965 3,088
--- -----
Note C Preferred Stock Dividends
Dividends payable are approximately $128,000 on the Redeemable
Preferred Stock and $275,000 on the Convertible Preferred Stock as of
March 31, 1997.
8
<PAGE>
AMBI INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1997
Note D Loss per share
Loss per share for the three months and the nine months ended
March 31, 1997 and March 31, 1996 are computed based on the
weighted average number of shares actually outstanding. No
common stock equivalents are included in the computation of
average shares outstanding because the effect of such inclusion
would be to decrease the loss per share.
</TABLE>
<TABLE>
<CAPTION>
3 months ended 9 months ended
March 31 March 31
1997 1996 1997 1996
No. of Shares No. of Shares
------------- -------------
<S> <C> <C> <C> <C>
Average shares outstanding 18,524,049 18,839,066 19,826,189 18,432,339
$'000 $'000 $'000 $'000
----- ----- ----- -----
Net loss (4,503) (465) (3,064) (2,309)
Preferred stock dividend (87) (182) (281) (383)
---------- ---------- ---------- ----------
Net loss attributable
to common stockholders (4,590) (647) (3,345) (2,692)
========== ========== ========== ==========
Loss per share of common stock ($0.25) ($0.03) ($0.17) ($0.14)
</TABLE>
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.
Note F Subsequent Event
On May 8, 1997, the Company completed a $4.5 million private placement
of Convertible Preferred Stock. After expenses, the Company received
net proceeds of approximately $4.2 million. The conversion rate is
based on a number of factors, including, but not limited to, the date
of conversion and the price of the Common Stock prior to the date of
conversion. Any outstanding shares of Convertible Preferred Stock will
automatically be converted into Common Stock on May 7, 1999. The
Company has agreed to register the Common Stock issuable upon
conversion. In connection with this private placement, the Company
also issued Warrants to purchase 528,937 shares of Common Stock at
$2.72 per share. Upon the satisfaction of certain conditions, the
investors in this private placement will purchase an additional $3.5
million of Preferred Stock from the Company and will receive
additional Warrants.
9
<PAGE>
AMBI INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1997
Note G Recently Issued Accounting Standards
In February 1997, FASB issued SFAS No. 128, "Earnings Per Share" and
SFAS No. 129, "Disclosure of Information about Capital Structure".
SFAS No. 128 specifies the computation, presentation, and disclosure
requirements for earnings per share (EPS) for entities with publicly
held common stock or potential common stock. SFAS No. 128 replaces the
presentation of primary EPS and fully diluted EPS with basic EPS and
diluted EPS. It also requires dual presentation of basic and diluted
EPS on the face of the income statement for all entities with complex
capital structures and requires reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation.
SFAS No. 129 was issued in connection with SFAS No. 128 and specifies
the required disclosures about capital structure. Both SFAS No. 128
and No. 129 are effective for financial statements for both interim
and annual periods ending after December 31, 1997. It is not expected
that the adoption of either of these statements will have a material
impact on the Company's financial position or operating results.
10
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
- ---------------------
The financial statements for the quarter excluded results of the Food
Ingredients business that was sold on December 12, 1996
Revenues
- --------
Revenues decreased from the corresponding period in 1996 by 62%, to $1.9
million. In the nine months revenues increased by 2% to $10.4 million. Revenues
from the Company's ongoing operations increased by 50% to $1.9 million compared
to $1.2 million for the third quarter of the previous year and by 228% to $5.3
million compared to $1.6 million for the first nine months of the previous year.
These increases for ongoing operations are the result of sales of the new
products Cardia(Trademark) Salt Alternative and Wipe Out(Trademark) Dairy Wipes.
The percentage of sales included in the total by product is:
% of sales in third quarter % change
1997 1996 97 vs. 96
---- ---- ---------
Food preservatives 0.0 63.0 (100.0)
Dairy ingredients 0.0 11.9 (100.0)
Cardia(Trademark) Salt Alternative 71.9 0.0 *
Wipe Out/Animal Health 15.0 1.6 248.8
Other 13.1 23.5 (78.9)
------ ------ -------
Total 100.0 100.0 (62.2)
------ ------ -------
% of sales in nine months % change
1997 1996 97 vs. 96
---- ---- ---------
Food preservatives 38.4 64.5 (39.5)
Dairy ingredients 10.5 19.7 (45.8)
Cardia(Trademark) Salt Alternative 32.4 0.0 *
Wipe Out/Animal Health 11.5 3.5 236.5
Other 7.2 12.3 (40.9)
------ ------ -------
Total 100.0 100.0 1.5
------ ------ -------
* Product launched April, 1996.
Cost of Sales
- -------------
Cost of sales as a percentage of sales for the third quarter was 27.8%, compared
with 40.4% in 1996 and was 42.2% in the nine month period, compared with 44.5%
for the nine month period in 1996. These decreases are due to the lower
proportion of sales in lower margin Dairy ingredients and an increase in the
sales of the higher margin Cardia(Trademark) Salt Alternative.
11
<PAGE>
Selling, General, and Administrative Expenses ("S,G&A")
- -------------------------------------------------------
S,G&A expenses increased by $2.0 million (62%) for the three month period and
$7.7 million (120%) for the nine month period ended March 31, 1997. These
increases are mainly due to the investment spending in support of Cardia Salt
Alternative, which was introduced regionally in 1996 and nationally in January,
1997.
Research Costs
- --------------
Research costs increased in the quarter by $0.3 million (65%), and in the nine
month period by $1.7 million (109%) 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 $4.7 million in the third quarter
ended March 31, 1997, compared with a loss of $0.4 million in the third quarter
ended March 31, 1996. In the nine months ended March 31, 1997, the Company
recorded an operating loss of $11.8 million, compared with a loss of $2.3
million in the nine months ended March 31, 1996. The increase in the operating
loss is mainly due to the investment spending in support of Cardia(Trademark)
Salt Alternative, which was introduced 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 0% and
49% of the Company's total revenues during the three and nine months ended March
31, 1997, respectively. The Company anticipates that total revenues for the next
three quarters will decrease as compared to the year-earlier quarters as a
result of the sale of Aplin & Barrett Ltd.
Loss Before Tax Expense
- -----------------------
The Company recorded a loss before tax expense of $4.5 million in the quarter
ended March 31, 1997, compared with a loss of $0.4 million in the quarter ended
March 31, 1996. In the nine months ended March 31, 1997, the Company recorded a
loss before tax expense of $2.9 million, which included a gain of $8.6 million
from the sale of Aplin and Barrett, Ltd., compared with a loss of $2.2 million
in the nine months ended March 31, 1996.
Tax Expense
- -----------
The Company's tax expense is largely 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 March 31, 1997, the Company had working capital of $7.9 million, including
a cash balance of $5.0 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 6 - Exhibits and Report on Form 8-K
Exhibit 27 - Financial Data Schedule
No reports were filed on Form 8-K during the three months ended March 31, 1997
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: May 14, 1997 By: /s/ Fredric D. Price
-------------------------------------
Fredric D. Price
President and Chief Executive Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 4966
<SECURITIES> 0
<RECEIVABLES> 1322
<ALLOWANCES> 67
<INVENTORY> 965
<CURRENT-ASSETS> 13365
<PP&E> 1490
<DEPRECIATION> 328
<TOTAL-ASSETS> 16319
<CURRENT-LIABILITIES> 5493
<BONDS> 2165
1500
0
<COMMON> 92
<OTHER-SE> 7069
<TOTAL-LIABILITY-AND-EQUITY> 16319
<SALES> 9712
<TOTAL-REVENUES> 10423
<CGS> 4102
<TOTAL-COSTS> 22192
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 112
<INCOME-PRETAX> (2914)
<INCOME-TAX> 150
<INCOME-CONTINUING> (3064)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3064)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
</TABLE>
