<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A3
AMENDMENT No. 3 TO APPLICATION OR REPORT
FILED PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) August 11, 1997
AMBI Inc.
---------
(Exact Name of Registrant as Specified in its Charter)
New York 1-12106 11-2653613
- -------- ------- ----------
(State or other jurisdiction of (Commission File Number) (I.R.S.Employer
incorporation or organization) Identification
Number)
771 Old Saw Mill River Road, Tarrytown, New York 10591
- ------------------------------------------------ -----
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including Area Code: (914) 347-5767
--------------
<PAGE>
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions included in its Current Report on Form
8-K dated August 25, 1997 as set forth in the pages attached hereto:
Item 7(a). Financial Statements of Nutrition 21.
Independent Auditors' Report (previously filed)
Balance Sheets as of December 31, 1996 and 1995
(previously filed)
Statements of Operations for three years ended December 31, 1996
(previously filed)
Statement of Partners' Capital for three years ended December
31, 1996 (previously filed)
Statement of Cash Flows for three years ended December 31, 1996
(previously filed)
Notes to Financial Statements (previously filed)
Financial Statements June 30, 1997 and 1996
Balance Sheets as of June 30, 1997 and December 31, 1996
Statements of Operations for six months ended June 30, 1997 and
June 30, 1996
Statement of Partners' Capital for the years ended December
31, 1996, 1995 and the six months ended June 30, 1997
Statement of Cash Flows for the six months ended June 30, 1997
and 1996
Notes to Financial Statements
Item 7(b). Pro forma condensed financial information.
AMBI Inc. Pro Forma Combined Income Statement for the year
ended June 30, 1997
AMBI Inc. Pro Forma Combined Balance Sheet as of June 30, 1997
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereto duly authorized.
AMBI Inc.
Date: February 20, 1998
By: /s/ Fredric D. Price
-------------------------------------
Fredric D. Price
President and Chief Executive Officer
<PAGE>
ITEM 7(A) FINANCIAL STATEMENTS JUNE 30, 1997 AND 1996
<PAGE>
NUTRITION 21
(a California limited partnership)
Balance Sheets
June 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
June 30 December 31
Assets 1997 1996
(Unaudited)
------------------ ------------------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 2,961,003 1,452,601
Trade accounts receivable 2,912,605 2,927,777
Inventory 574,470 108,908
Other current assets 135,481 43,344
------------------ ------------------
Total current assets 6,583,559 4,532,630
Property and equipment, net (note 2) 31,336 32,536
Patents, licenses and trademarks (note 4) 19,306 19,752
Other assets 12,033
------------------ ------------------
Total assets $ 6,634,201 4,596,951
================== ==================
Liabilities and Partners' Capital
Current liabilities:
Bank overdraft $ 371,521
Accounts payable 566,186 235,070
Accrued royalties (note 4) 271,846 466,199
Accrued litigation (note 5) 281,250 408,750
Other accrued liabilities 5,881 84,751
Accrued consulting fees 224,232
------------------ ------------------
Total current liabilities 1,349,395 1,566,291
Deferred rent 4,234 6,542
------------------ ------------------
Total liabilities 1,353,629 1,572,833
------------------ ------------------
Partners' capital:
General partner 2,421,594 1,442,773
Limited partners 2,858,978 1,581,345
------------------ ------------------
Total partners' capital 5,280,572 3,024,118
------------------ ------------------
Commitments and contingencies (notes 4, 5, 6, 7 and 8)
Total liabilities and partners' capital $ 6,634,201 4,596,951
================== ==================
</TABLE>
<PAGE>
NUTRITION 21
(a California limited partnership)
Statements of Operations
For the six months ended June 30, 1997 and June 30, 1996
<TABLE>
<CAPTION>
1997 1996
(Unaudited) (Unaudited)
-------------------- -------------------
<S> <C> <C>
Sales $ 10,760,275 8,185,974
Cost of sales (note 4) 2,314,360 1,698,543
-------------------- -------------------
Gross profit 8,445,915 6,487,431
-------------------- -------------------
Operating expenses:
Selling, general and administrative 3,498,707 3,385,493
Research and development 354,560 384,773
-------------------- -------------------
Total operating expenses 3,853,267 3,770,266
-------------------- -------------------
Operating income 4,592,648 2,717,165
-------------------- -------------------
Other income (expense):
Interest income, net 39,000 38,000
Other non operating income, net 8,000 454,000
-------------------- -------------------
Other income, net 47,000 492,000
Net income $ 4,639,648 3,209,165
==================== ===================
</TABLE>
<PAGE>
NUTRITION 21
(a California limited partnership)
Statements of Partners' Capital
Years ended December 31, 1996, 1995 and the six months ended June
30, 1997 (unaudited)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
----------------- ----------------- -----------------
<S> <C> <C> <C>
Balance at December 31, 1994 $ 1,544,188 1,691,212 3,235,400
Distributions (4,032,000) (4,368,000) (8,400,000)
Allocation of net income 4,518,216 4,894,734 9,412,950
----------------- ----------------- -----------------
Balance at December 31, 1995 2,030,404 2,217,946 4,248,350
Distributions (1,728,000) (1,872,000) (3,600,000)
Allocation of net income 1,540,399 1,668,766 3,209,165
----------------- ----------------- -----------------
Balance at June 30, 1996 1,842,803 2,014,712 3,857,515
Distributions (1,728,000) (1,872,000) (3,600,000)
Allocation of net income 1,327,970 1,438,633 2,766,603
----------------- ----------------- -----------------
Balance at December 31, 1996 1,442,773 1,581,345 3,024,118
Distributions (1,248,212) (1,134,982) (2,383,194)
Allocation of net income 2,227,033 2,412,615 4,639,648
----------------- ----------------- -----------------
Balance at June 30, 1997 $ 2,421,594 2,858,978 5,280,572
================= ================= =================
</TABLE>
<PAGE>
NUTRITION 21
(a California limited partnership)
Statements of Cash Flows
For the six months ended June 30, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
(unaudited) (unaudited)
------------------ ------------------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 4,639,648 3,209,165
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 5,000 5,000
Changes in operating assets and liabilities:
Trade accounts receivable 15,172 413,335
Inventories (465,562) 22,404
Other current assets (92,137) 73,668
Accounts payable 331,116 (1,226)
Accrued royalties (194,353) (599,703)
Accrued consulting fees 224,232 254,859
Accrued litigation (127,230)
Deferred rent (2,308) (2,310)
Other accrued liabilities (27,572)
------------------ ------------------
Net cash provided by operating activities 4,333,578 3,347,620
------------------ ------------------
Cash flows from investing activities:
Purchase of property and equipment (65,907)
Patents, licenses and trademarks costs (4,554) (24,075)
Other assets 29,984
------------------ ------------------
Net cash used/provided by investing activities (70,461) 5,909
------------------ ------------------
Cash flows from financing activities:
Distribution to partners (2,383,194) (3,600,000)
Bank overdraft (371,521)
------------------ ------------------
Net used in financing activities (2,754,715) (3,600,000)
------------------ ------------------
Net increase (decrease) in cash and cash equivalents 1,508,402 (246,471)
Cash and cash equivalents, beginning of period 1,452,601 1,918,596
------------------ ------------------
Cash and cash equivalents, end of period $ 2,961,003 1,672,125
================== ==================
</TABLE>
<PAGE>
NUTRITION 21
Notes to Financial Statements
June 30, 1997 and 1996
(unaudited)
(1) Organization and Summary of Significant Accounting Policies
Description of Business
Nutrition 21, a California limited partnership (the "Partnership"), was
formed in October 1973 and develops, produces, and markets proprietary
nutrition products and dietary supplements. The Partnership's primary
products, chromium picolinate, accounted for 80% and 89% of sales for the
six months ended June 30, 1997 and 1996, respectively. Nutrition products
and dietary supplements are subject to regulation, including certain
regulations of the US Food and Drug Administration, the Federal Trade
Commission, and various state regulatory agencies. The Partnership
maintains several licenses and agreements with suppliers, manufacturers,
founding scientists, and patent holders in connection with the
manufacturing, marketing, and distribution of its products.
Cash and Cash Equivalents
Cash and cash equivalents at June 30, 1997, consist of checking, savings,
and money market funds with an initial term of less than three months.
For purposes of the statements of cash flows, the Partnership considers
all highly liquid debt instruments with original maturities of three
months or less to be cash equivalents.
Revenue Recognition
The Partnership recognizes revenue when earned, generally when products
are shipped.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using either the first in, first out method or the average cost method
depending on the product.
Property and Equipment
Property and equipment are recorded at cost, net of accumulated
depreciation. Depreciation is computed using the straight-line method
over the estimated useful lives of the assets which range from 5 to 7
years. Leasehold improvements are amortized over the shorter of their
estimated useful life or related lease term.
Patents, Licenses and Trademarks
The Partnership capitalizes certain legal costs and acquisition costs
related to patents, licenses and trademarks. Accumulated costs are
amortized over the lesser of the legal lives or the estimated economic
lives of the proprietary rights, generally five to ten years, using the
straight-line method and commencing at the time the patents are issued or
the license is acquired. Capitalized costs are written off to expense at
the time the underlying proprietary rights are deemed to have no
continuing value.
<PAGE>
NUTRITION 21
Notes to Financial Statements
June 30, 1997 and 1996
(unaudited)
Research and Development, and Advertising
Research and development, and advertising costs are expensed as incurred.
Advertising costs amounted to $1,907,461 and $1,662,606 for the six
months ended June 30, 1997 and 1996, respectively.
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of
The Partnership adopted the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," on
January 1, 1996. This Statement requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to be held and
used is measured by a comparison of the carrying amount of an asset to
future net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceed
the fair value of the assets. Assets to be disposed of are reported at
the lower of the carrying amount or fair value less costs to sell.
Adoption of this Statement did not have a material impact on the
Partnership's financial position, results of operations, or liquidity.
Income Taxes
For federal and state income tax purposes, partnership tax liability is
that of the individual partners, not the partnership. Since many types of
transactions are susceptible to varying interpretations under federal and
state income tax laws and regulations, the amounts reported by the
Partnership or by the participants in their individual income tax returns
may be subject to change at a later date upon final determination by the
respective taxing authorities. The Partnership uses the cash method of
reporting income and expenses for tax purposes.
Use of Estimates
Management of the Partnership has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period to prepare these financial statements in
conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
<PAGE>
NUTRITION 21
Notes to Financial Statements
June 30, 1997 and 1996
(unaudited)
(2) Property and Equipment
Property and equipment at June 30, 1997 and December 31, 1996 consist of
the following:
<TABLE>
<CAPTION>
June 30 December 31
1997 1996
------------------- ---------------------
<S> <C> <C>
Furniture and equipment $ 88,868 86,883
Leasehold improvements 2,652 2,652
------------------- ---------------------
91,520 91,520
Less accumulated depreciation (60,184) (58,984)
------------------- ---------------------
$ 31,336 32,536
=================== =====================
</TABLE>
(3) Allocations of Income, Losses and Cash Distributions
The partnership agreement requires the allocation of income and losses of
the Partnership among the General Partner and Limited Partners at 48% and
52%, respectively. Cash available for distribution is to be distributed
to the General Partner and Limited Partners at 48% and 52%, respectively.
(4) Royalty and Licensing Agreements
In 1985, the National Technical Information Service (NTIS), a United
States governmental agency, granted Nutrition 21 exclusive licenses under
a US Patent owned by the United States Government (the "Patent") to
manufacture, market, and sell certain metal picolinate complexes and a
non-exclusive licenses to manufacture, market, and sell certain other
picolinate complexes. Under the terms of the licenses, the Partnership is
required to pay an annual non-refundable maintenance fee of $2,500 to
NTIS along with a bi-annual royalty fee based on a percentage of net
sales. The licenses expire on August 8, 2000 in conjunction with the
expiration of the Patent. The Partnership recognized expenses related to
these licenses of $282,307 and $237,385 for the six months ended June 30,
1997 and 1996, respectively.
The Partnership has an agreement with an individual pursuant to which the
Partnership pays a royalty to the individual based on a percentage of net
sales for all products covered by the Patent licensed to Nutrition 21 by
the NTIS. This agreement continues through August 8, 2000. The
Partnership recognized expenses related to this agreement of $387,658 and
$501,579 for the six months ended June 30, 1997 and 1996, respectively.
The Partnership has an agreement with another individual pursuant to
which the Partnership pays a royalty based on a percentage of net sales
for certain yeast and picolinate products covered by the Patent. In the
case of the individual's death, the royalties will be paid directly to
the estate for a certain period of time. The Partnership recognized
expenses related to this agreement of $110,652 and $25,270 for the six
months ended June 30, 1997 and 1996, respectively.
<PAGE>
NUTRITION 21
Notes to Financial Statements
June 30, 1997 and 1996
(unaudited)
The Partnership entered into an agreement expiring October 5, 1997 to
share in the costs associated with the promotion of chromium picolinate
used in animal feed. The Partnership recognized expenses related to this
agreement of $27,782 and $25,632 for the six months ended June 30, 1997
and 1996, respectively.
(5) Commitments and Contingencies
Operating Leases
The Partnership leases office facilities and equipment under
noncancelable operating lease agreements expiring at various dates
through August 31, 1998. Future minimum lease payments are as follows:
Year ending December 31,
---------------------------------------
1997 $ 59,886
1998 40,726
------------------
$ 100,612
==================
Rent expense for all leased facilities and equipment was $31,133 and
$28,617 for the six months ended June 30, 1997 and 1996, respectively.
Litigation
At December 31, 1996, the Company was a defendant in a lawsuit that
alleged, among other things, a breach of oral and implied contracts
related to the distribution of chromium picolinate. In January 1997, the
Partnership settled the lawsuit. Settlement costs of $408,750 were
accrued during 1996.
(6) Infringement Settlement
In November 1995, the Partnership was a plaintiff in a lawsuit with a
competitor that alleged, among other things, patent infringements related
to chromium picolinate. In April 1996, the Partnership settled the
lawsuit and recognized income of $449,120 related to the settlement.
(7) Federal Trade Commission (FTC) Decision and Order
In July 1997, the Partnership and the FTC entered into a Consent Order,
which, among other things, requires that claims or representations for
dietary supplements be supported by competent and reliable evidence on
benefits, performance efficacy and safety. The Consent Order requires
that the Partnership advise its customers who resell chromium picolinate
to the public not to make certain claims which the FTC deems not to be
sufficiently supported.
<PAGE>
NUTRITION 21
Notes to Financial Statements
June 30, 1997 and 1996
(unaudited)
(8) Subsequent Event
On August 11, 1997, AMBI Inc. ("AMBI") purchased all General and Limited
partnership interests of the Partnership. The purchase price for the
acquisition was $10 million, subject to an adjustment based on a target
net book value, and 500,000 restricted shares of AMBI common stock. The
purchase also provided for annual contingent future payments for each of
the next four years of $2.5 million adjusted for the achievement of
certain sales levels, and royalties of 2.5% to 5% of net sales of
products recommended for certain patented uses. In addition, if prior to
August 10, 1998, AMBI terminates for other than cause, the employment of
certain individuals, AMBI will be required to make termination payments
to such individuals. Additionally, AMBI entered into a two-year
consulting agreement with the former Chief Executive Officer and general
partner who agreed not to compete with Nutrition 21 for a period of two
years after the termination of the consulting agreement.
<PAGE>
ITEM 7(b). PRO FORMA FINANCIAL INFORMATION
The accompanying unaudited pro forma financial information is presented to show
the pro forma effect of the acquisition of the N21 business on AMBI's historical
financial position and results of operations under the purchase method of
accounting.
The Pro Forma Combined Statement of Operations for the year ended June 30, 1997
assumes the acquisition was consummated on July 1, 1996. The Pro Forma Combined
Balance Sheet as of June 30, 1997 assumes the acquisition was consummated on
that date. N21's fiscal year ends on December 31. The financial information of
N21 has been conformed with AMBI's June 30, 1997 fiscal year end and is derived
from N21's internal accounting records.
The pro forma financial information is not necessarily indicative of the
financial position or results of operations as they may be in the future or as
they would have been had the transactions been effected on the assumed dates.
AMBI expects to achieve cost savings by reducing administrative overhead costs
and the renegotiation of select royalty agreements. (see footnote 4)
The pro forma financial information should be read in conjunction with AMBI's
historical consolidated financial statements and notes thereto included in its
1997 10-K, the enclosed audited historical financial statements for the business
acquired and the description of the transaction under Item 2 in the 8-K filed
August 25, 1997.
<PAGE>
AMBI Inc.
Pro Forma Combined Statement of Operations
For the Three Months Ended September 30, 1997
In thousands, except per-share amounts
(Unaudited)
<TABLE>
<CAPTION>
Reported N21 (1) Adjustments Pro Forma
-------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Net Sales 3,118 1,927 5,045
Other operating income 125 - 125
--- - ---
TOTAL REVENUE 3,243 1,927 5,170
Cost of sales (655) (195) (850)
----- ----- -----
GROSS PROFIT 2,588 1,732 4,320
Selling, general and
administrative expenses (2,658) (1,097) (112) (4) (3,867)
Research and development (495) (6) (501)
Depreciation and amortization (172) (1) (173)
----- --- -----
OPERATING (LOSS)/INCOME (737) 628 (112) (221)
Interest income 44 19 (42) (6) 21
Interest expense (24) - (36) (5) (60)
---- - ---- --- ----
(LOSS)/INCOME BEFORE
TAX EXPENSE (717) 647 (190) (260)
Tax Expense (2) (7) - - (7)
--- - - ---
NET (LOSS)/INCOME (724) 647 (190) (267)
NET (LOSS)/INCOME PER SHARE ($0.06) ($0.04)
WEIGHTED AVERAGE SHARES (3) 19,055,081 228,000 (3) 19,283,081
</TABLE>
(1) Represents the actual unaudited results of N21 for the period July 1,
1997 through August 11, 1997.
(2) No pro forma adjustment has been made for income taxes because AMBI has
available $17.0 million in tax loss carryforwards as of June 30, 1997
for which no deferred tax asset had been recognized.
(3) Total weighted average shares of 19,055,081 included a weighted average
amount of 288,000 shares which represents the pro rata portion of the
500,000 shares issued to the former partners of N21 on August 11, 1997
attributable to the period July 1, 1997 through August 11, 1997.
(4) Represents amortization of intangibles recognized on the purchase of
N21.
(5) Represents interest at 9.5% associated with the bank loan of $3.3
million obtained to purchase N21.
(6) To record interest income assumed lost (average rate of 5.25%) on
cash reserves used to pay for the acquisition.
<PAGE>
AMBI Inc.
Pro Forma Combined Statement of Operations
For the Year Ended June 30, 1997
In thousands, except per-share amounts
(Unaudited)
<TABLE>
<CAPTION>
Aplin &
Reported Barrett (6) N21 (8) Adjustments Pro Forma
-------- ----------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net Sales 10,356 (5,988) 18,822 23,190
Other operating income 924 0 924
TOTAL REVENUE 11,280 (5,988) 18,822 24,114
Cost of sales (4,998) 3,393 (3,925) (5,530)
GROSS PROFIT 6,282 (2,595) 14,897 18,584
Selling, general and
administrative expenses (17,312) 1,454 (6,671) (22,529)
Research and development (4,833) 406 (510) (4,937)
Depreciation and amortization (772) 100 (11) (984) (1) (1,667)
----- --- ---- ----- --- -------
OPERATING (LOSS)/INCOME (16,635) (635) 7,705 (984) (10,549)
Interest income 433 0 100 (369) (2) 164
Interest expense (142) 17 (314) (3) (439)
Other non-operating income/(expense)
9,683 (399) (9,683) (7) (399)
(LOSS)/INCOME BEFORE
TAX EXPENSE (6,661) (618) 7,406 (11,350) (11,223)
------- ----- ----- -------- --------
Tax Expense (152) 141 - (4) (11)
----- --- - ----
NET (LOSS)/INCOME (6,813) (477) 7,406 (11,350) (11,234)
NET (LOSS) PER SHARE ($0.38) ($0.59)
WEIGHTED AVERAGE SHARES 19,544,526 (593,973) (5) 18,950,553
</TABLE>
(1) To record the estimated amortization of intangible asset values
assigned at acquisition with lives ranging from 3 to 15 years.
(2) To record interest income assumed lost (average rate of 5.25%) on
cash reserves used to pay for the acquisition.
(3) To record interest expense at approximately 9.5% on borrowings used to
pay for the acquisition.
(4) No pro forma adjustment has been made for income taxes because AMBI has
available $17.0 million in tax loss carryforwards as of June 30, 1997
for which no deferred tax asset had been recognized.
(5) Reflects the pro rata portion of 1,093,972 shares received from sale of
A&B for the period July 1, 1996 through December 12, 1996 offset by
500,000 shares issued as part of the payment to the partners of N 21 in
the acquisition.
(6) Represent the results for A&B for period July 1, 1996 to December 12,
1996 the date the A&B was sold.
(7) Represents the nonrecurring gain on the sale of A&B.
(8) N21's fiscal year end is December 31. This column represents the
combination of N21 results for the six month periods ended December 31,
1996 and June 30, 1997 to conform to AMBI's fiscal year.
<PAGE>
AMBI INC.
Pro Forma Combined Balance Sheet
JUNE 30, 1997
In thousands
(Unaudited)
AMBI Inc.
<TABLE>
<CAPTION>
Pro Forma Pro Forma
AMBI Inc. Nutrition 21 Adjustments Combined
--------- ------------ ----------- --------
ASSETS
Current Assets
<S> <C> <C> <C> <C>
Cash and cash equivalents 8,615 2,961 (9,661) (1) 1,915
Trade accounts receivable (less
allowance for doubtful accounts) 390 2,913 3,303
Inventories 606 574 1,180
Prepayments and other current assets 404 132 536
-------- -------- -------- --------
Total current assets 10,015 6,580 (9,661) 6,934
Property, plant and equipment-net 1,082 31 1,113
Patent cost, licensed technology and
other intangible assets-net 1,584 19 7401 (2) 9,004
Goodwill-net 687 (2) 687
Other assets 73 9 82
-------- -------- -------- --------
Total Assets 12,754 6,639 (1,573) 17,820
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of notes and
lease
obligation 156 156
Accounts payable and accrued expenses 2,464 411 2,875
Accrued royalties 496 (496) (3)
Accrued litigation 281 (281) (4)
Other liabilities 161 161
Short term bank loan 3,300 (5) 3,300
Dividends payable 340 340
-------- -------- -------- --------
Total current liabilities 2,960 1,349 2,523 6,832
Notes payable and lease obligation 184 6 0 190
Long term loan 2,000 2,000
-------- -------- -------- --------
TOTAL LIABILITIES 5,144 1,355 2,523 9,022
Stockholders' Equity
Common Stock 94 3 (6) 97
Additional paid-in capital 51,416 1,185 (7) 52,601
Accumulated deficit/retained earnings (43,900) 5,284 (5,284) (8) (43,900)
-------- -------- -------- --------
TOTAL STOCKHOLDER' EQUITY 7,610 5,284 (4,096) 8,798
-------- -------- -------- --------
TOTAL LIABILITIES, AND STOCKHOLDERS' EQUITY
12,754 6,639 (1,573) 17,820
</TABLE>
<PAGE>
(1) The purchase agreement allowed N21 partners to keep cash on hand. Also
reflects AMBI's requirement to use $6,700 of cash reserves.
(2) To record the allocation of the excess of the purchase price over the net
assets acquired to patent cost and licensed technology and goodwill. The
excess purchase price was calculated as follows:
Cash on hand utilized $6,700
Cash from bank loan 3,300
Fair value of common stock issued 1,188
-------
Purchase price 11,188
Adjusted net book value 3,100
Excess Purchase Price $8,088
Excess purchase price was allocated between goodwill and other
intangibles, principal patents, trademarks and customer lists.
The adjusted net book value was determined as follows:
Nutrition 21's total assets $6,639
Less cash on hand 2,961
------
Adjusted assets 3,678
Total liabilities 1,355
Less accrued royalties and
accrued litigation costs 777
------
Adjusted liabilities 578
Adjusted net book value $3,100
(3) Reflects purchase agreement which required N 21 partners to pay accrued
royalties.
(4) Reflects purchase agreement which required N 21 partners to pay accrued
litigation expenses.
(5) Reflects short term bank loan of $3,300, which was required in
addition to the cash reserves used to make the purchase.
(6) Reflects 500,000 shares at par value of $0.005 as part of the
payment to the partners in the acquisition.
(7) Reflects additional paid-in capital on the 500,000 shares, valued at
$2.375, which was the market price on the day of the transaction
(8) Elimination of N 21 net assets.
