<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT No. 1 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) January 21, 1999
AMBI Inc.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<CAPTION>
New York 1-12106 11-2653613
- ------------------------------- ----------------------- ----------------------
<S> <C> <C>
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
4 Manhattanville Road Purchase, New York 10577
- ----------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including Area Code: (914) 701-4500
--------------
================================================================================
<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 February 3, 1999 as set forth in the pages attached hereto:
Item 7(a) Financial Statements of Optimum Lifestyle, Inc.
Independent Auditors' Report
Balance Sheets as of October 31, 1998 and December 31, 1997
Statements of Operations for the ten months ended October 31,
1998 and the year ended December 31, 1997
Statements of Shareholders' Equity for the ten months ended
October 31, 1998 and the year ended December 31, 1997
Statements of Cash Flows for the ten months ended October 31,
1998 and the year ended December 31, 1997
Notes to Financial Statements
Item 7(b) Unaudited pro forma financial information
AMBI Inc. Unaudited Pro Forma Balance Sheet as of December
31, 1998
AMBI Inc. Unaudited Pro Forma Statements of Operations for
the six months ended December 31, 1998 and the year ended
June 30, 1998
Item 7(c) Exhibits
23.1 Consent of KPMG LLP
<PAGE>
SIGNATURE
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.
Date: March 15, 1999
By: /s/ Fredric D. Price
--------------------------------------
Fredric D. Price
President and Chief
Executive Officer
<PAGE>
ITEM 7(a) FINANCIAL STATEMENTS OF OPTIMUM LIFESTYLE, INC.
<PAGE>
Independent Auditors' Report
The Board of Directors
Optimum Lifestyle, Inc.:
We have audited the accompanying balance sheets of Optimum Lifestyle, Inc. (the
"Company"), as of October 31, 1998 and December 31, 1997, and the related
statements of operations, shareholders' equity, and cash flows for the ten-month
period ended October 31, 1998 and the year ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Optimum Lifestyle, Inc., as of
October 31, 1998 and December 31, 1997, and the results of its operations and
its cash flows for the ten-month period ended October 31, 1998 and the year
ended December 31, 1997 in conformity with generally accepted accounting
principles.
KPMG LLP
November 24, 1998
San Francisco, California
<PAGE>
OPTIMUM LIFESTYLE, INC.
Balance Sheets
October 31, 1998 and December 31, 1997
<TABLE>
<CAPTION>
October 31, December 31,
Assets 1998 1997
----------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 61,981 173,772
Accounts receivable, net 455,786 842,256
Inventory, net 169,047 84,609
---------- ----------
Total current assets 686,814 1,100,637
Property and equipment, net 31,925 25,333
Other assets 18,352 2,650
---------- ----------
$ 737,091 1,128,620
========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 120,594 321,093
Accrued liabilities 42,242 139,338
---------- ----------
Total current liabilities 162,836 460,431
---------- ----------
Shareholders' equity:
Common stock, $0.001 par value, 5,000 shares
authorized, 1,000 shares issued and outstanding 1 1
Paid-in capital 5,807 5,807
Retained earnings 568,447 662,381
---------- ----------
Total shareholders' equity 574,255 668,189
---------- ----------
$ 737,091 1,128,620
========== ==========
</TABLE>
See accompanying notes to financial statements
<PAGE>
OPTIMUM LIFESTYLE, INC.
Statements of Operations
For the ten months ended October 31, 1998 and the year ended December 31, 1997
<TABLE>
<CAPTION>
Ten Months Year
Ended Ended
October 31, December 31,
1998 1997
----------- ------------
<S> <C> <C>
Revenue $ 4,798,366 7,525,945
Cost of revenue 2,099,453 3,075,240
----------- -----------
Gross profit 2,698,913 4,450,705
Selling, general and administrative expense 1,121,722 1,441,556
----------- -----------
Operating income 1,577,191 3,009,149
Interest and dividends 9,130 26,502
Interest expense (47) (1,355)
----------- -----------
Net income before taxes 1,586,274 3,034,296
Income tax expense 26,093 47,136
----------- -----------
Net income $ 1,560,181 2,987,160
=========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE>
OPTIMUM LIFESTYLE, INC.
Statements of Shareholders' Equity
For the year ended December 31, 1997 and the ten months ended October 31, 1998
<TABLE>
<CAPTION>
Common stock
------------------------------ Paid-in Retained
Shares Amount Capital earnings Total
------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance December 31, 1996 100 $ 1 $ 5,807 $ 650,753 $ 656,561
Distributions paid to shareholders -- -- -- (2,975,532) (2,975,532)
Net income -- -- -- 2,987,160 2,987,160
----------- ----------- ----------- ----------- -----------
Balance December 31, 1997 100 $ 1 $ 5,807 $ 662,381 $ 668,189
----------- ----------- ----------- ----------- -----------
Distributions paid to shareholders -- -- -- (1,654,115) (1,654,115)
Net income -- -- -- 1,560,181 1,560,181
----------- ----------- ----------- ----------- -----------
Balance October 31, 1998 100 $ 1 $ 5,807 $ 568,447 $ 574,255
=========== =========== =========== =========== ===========
</TABLE>
See accompanying footnotes to financial statements
<PAGE>
OPTIMUM LIFESTYLE, INC
Statements of Cash Flows
For the ten months ended October 31, 1998 and the year ended December 31, 1997
<TABLE>
<CAPTION>
Ten Months Year
Ended Ended
October 31, December 31,
1998 1997
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,560,181 2,987,160
Adjustment to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 7,149 5,497
Changes in operating assets and liabilities:
Accounts receivable 386,475 (453,383)
Inventory (84,438) (10,651)
Other assets (15,702) 70,469
Accounts payable (200,499) 197,092
Accrued liabilities (97,096) 93,401
----------- -----------
Net cash provided by operating activities 1,556,070 2,889,585
----------- -----------
Cash flow from investing activities:
Purchases of property, plant and equipment (13,746) (10,029)
----------- -----------
Net cash used in investing activities (13,746) (10,029)
----------- -----------
Cash flow from financing activities:
Long-term debt repayment -- (27,721)
Proceeds from line of credit 35,000 87,288
Principal payments on line of credit (35,000) (87,288)
Distributions to shareholders (1,654,115) (2,975,532)
----------- -----------
Net cash used in financing activities (1,654,115) (3,003,253)
----------- -----------
Net decrease in cash and cash equivalents (111,791) (123,697)
Cash and cash equivalents at beginning of period 173,772 297,469
----------- -----------
Cash and cash equivalents at end of period $ 61,981 173,772
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid:
Income taxes $ 25,940 46,878
=========== ===========
</TABLE>
See accompanying footnotes to financial statements
<PAGE>
Optimum Lifestyle, Inc.
Notes to Financial Statements
October 31, 1998 and December 31, 1997
(1) The Company
Optimum Lifestyle, Inc. (the "Company") was incorporated on September 29,
1992 as an "S" Corporation in Mill Valley, California. The Company
develops and markets wellness and nutriceutical products for healthy
living.
On October 15, 1998, the Company signed a letter of intent with AMBI Inc.
("AMBI"), whereby AMBI intends to purchase substantially all of the
assets and assume substantially all of the liabilities, excluding
contingent liabilities, of the Company, in exchange for cash, common
stock of AMBI and contingent payments. The acquisition is subject to the
terms of the definitive agreement, which is subject to approval by the
Company's stockholders. The acquisition is expected to close in the first
quarter of 1999.
(2) Summary of Significant Accounting Policies
(a) Cash Equivalents
Cash equivalents consists of money market funds. For purposes of
the accompanying statement of cash flows, the Company considers
all highly liquid debt instruments with original maturities of
three months or less at the time of acquisition to be cash
equivalents.
(b) Inventory
Inventory primarily consists of packaging materials and is carried
at the lower of cost (on a first-in, first-out basis) or estimated
net realizable value.
(c) Property and Equipment
Property and equipment are stated at cost less accumulated
depreciation. Depreciation is provided using the straight-line
method over the estimated useful lives of the assets, generally
three to seven years.
(d) Revenue Recognition
Sales of product are recognized upon shipment to customers. The
Company establishes an allowance for doubtful accounts receivable
based upon factors surrounding the credit risk of specific
customers, historical trends and other information.
(e) Income Taxes
The Company is an "S" Corporation; thus, the Company's earnings
are distributed to the shareholders and taxed at the individual
shareholder level. Minimum state tax of one and one half percent
of net taxable earnings are payable by the Company to the
Franchise Tax Board of the State of California.
<PAGE>
(f) Research and Development, and Advertising
Research and development, and advertising costs are expensed as
incurred. During the ten-month period ended October 31, 1998 and
the year ended December 31, 1997, the Company's research and
development costs were $9,812 and $53,005, respectively, and its
advertising costs were $96,243 and $88,045, respectively.
(g) Fair Value of Financial Instruments
The carrying amounts of the Company's financial instruments, which
include cash, accounts receivable, other assets, accounts payable
and accrued liabilities, approximate fair value because of the
short maturities of the Company's instruments.
(h) Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements. Estimates
also affect the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
(3) Property and Equipment
At October 31, 1998 and December 31, 1997, property and equipment
consisted of the following:
<TABLE>
<CAPTION>
Lives
in years 1998 1997
-------- ---- ----
<S> <C> <C> <C>
Computers and equipment 3 $ 14,371 14,371
Furniture and fixtures 7 32,574 18,833
-------- --------
Total 46,945 33,204
Less accumulated depreciation (15,020) (7,871)
======== ========
Property and equipment, net $ 31,925 25,333
======== ========
</TABLE>
(4) Line of Credit
In January 1994, the Company obtained a $100,000 revolving line of credit
from a financial institution. The line of credit is personally guaranteed
by the shareholders of the Company, and bears interest at 12.25%. As of
October 31, 1998 and December 31, 1997, no borrowings were outstanding
under the line of credit.
<PAGE>
(5) Profit Sharing Plan
In December 1995, the Company established a profit sharing plan (the
Plan). Substantially all employees with at least one year of employment
are eligible to participate. The Company has the option of contributing
to the Plan as determined by the Company in an amount not exceeding that
allowed under the provisions of Section 404 of the Internal Revenue Code.
After completing one year of service, employees share in the allocation
of contributions in proportion to the employees' compensation as it
compares to total compensation of all Plan participants. Such
contributions vest to employees over a five year period.
During the ten-month period ended October 31, 1998 and the year ended
December 31, 1997, the Company contributed $47,025 and $45,000,
respectively, to the Plan.
(6) Business and Credit Concentration
The Company sells its products primarily to one major customer. Revenues
relating to this major customer for the ten months ended October 31, 1998
and the year ended December 31, 1997 were $4,788,759 and $7,167,793,
respectively.
The Company contracts with certain single suppliers to manufacture its
inventory. Management believes that other suppliers could provide similar
products at comparable terms. As a result, management believes a change
in suppliers would not disrupt on-going operations and would not effect
operating results adversely.
<PAGE>
ITEM 7(b). UNAUDITED PRO FORMA FINANCIAL INFORMATION
The accompanying unaudited pro forma financial information is presented to show
the pro forma effects of the acquisition of certain assets and liabilities
herein referred to as the "OLI Business" of Optimum Lifestyle, Inc. (OLI) on
AMBI Inc. ("AMBI") historical financial position and results of operations under
the purchase method of accounting. The purchase price for the acquisition of the
OLI Business was $7.5 million which was funded by: (1) A portion of the proceeds
from a new loan from State Street Bank as well as cash on hand totaling $6.07
million and; (2) 1,304,347 shares of AMBI common stock issued to the seller
valued at $1.44 million. The intangibles arising out of this transaction were
valued at $7.45 million and are being amortized over periods ranging from 3 to
15 years.
Additional contingent payments will be made to the seller depending primarily on
sales levels of the OLI Business achieved during the five year period following
closing. The accompanying unaudited pro forma statements of operations exclude
the effect of these contingent payments of up to: $1.5 million in cash payable
30 days from March 31, l999; a maximum of $3.0 million in cash and/or AMBI
common stock, at the option of the previous owners of OLI, payable $1.0 million
on each of the first three anniversaries of the acquisition; $3.0 million in
newly issued AMBI preferred stock, payable $1.5 million on the first and second
anniversaries of the acquisition; and a single payment of $1.0 million in cash,
payable prior to the fifth anniversary of the acquisition.
These payments are contingent upon certain milestones for future revenue of the
OLI Business and/or contingent upon the OLI product availability through
certain distribution channels in the future. As of the date of this Form 8-K,
the Company is unable to calculate the amount or impact of these contingent
payments on earnings per share due to future events relating to the OLI Business
which AMBI cannot predict at this time.
The Unaudited Pro forma Statement of Operations for the six months ended
December 31, 1998, and the year ended June 30, 1998, assume that the acquisition
was consummated on July 1, 1997. The Unaudited Pro forma Balance Sheet as of
December 31, 1998 assumes that the acquisition was consummated on that date.
OLI's fiscal year ends on December 31. The financial information of OLI is
derived from OLI's internal accounting records.
The unaudited 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 transaction been consummated on the assumed
dates.
The unaudited pro forma financial information should be read in conjunction with
AMBI's historical consolidated financial statements and notes thereto included
in its June 30, 1998 Form 10-K and its December 31, 1998 Form 10-Q, the enclosed
audited historical financial statements for the business acquired and the
description of the transaction under Item 2 in the Form 8-K filed February 3,
1999.
<PAGE>
AMBI INC
Unaudited Pro forma Balance Sheet
DECEMBER 31,1998
(in thousands)
<TABLE>
<CAPTION>
Pro forma Company
AMBI OLI Adjustment Pro forma
---- --- ---------- ---------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,610 $ 5 $ (2,511)(1,2) $ 3,104
Accounts receivable,net 3,778 560 (537)(1) 3,801
Inventories,net 565 118 -- 683
Prepaid and other current assets 555 112 (112)(1) 555
-------- -------- -------- --------
Total current assets 10,508 795 (3,160) 8,143
-------- -------- -------- --------
Property and equipment, net 993 32 (24)(1) 1,001
Patent costs and licensed technology, net 12,571 -- -- 12,571
Goodwill,net 1,058 -- 1,452 (2) 2,510
Non-compete 250 (2) 250
Trademark 5,750 (2) 5,750
Other assets 601 -- -- 601
-------- -------- -------- --------
TOTAL ASSETS $ 25,731 $ 827 $ 4,268 $ 30,826
-------- -------- -------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term debt, current portion of long-term
debt and lease obligations $ 3,059 $ -- $ -- $ 3,059
Accounts payable and accrued expenses 2,554 680 (588)(1) 2,646
Nutrition 21 payable 1,142 -- -- 1,142
Preferred dividends payable 85 -- -- 85
-------- -------- -------- --------
Total current liabilities 6,840 680 (588) 6,932
-------- -------- -------- --------
Long term debt and lease obligations, less
current portion 1,012 -- -- 1,012
Acquisition bank loan 3,567 (2) 3,567
Other long term obligations 470 -- -- 470
-------- -------- -------- --------
TOTAL LIABILITIES 8,322 680 2,979 11,981
-------- -------- -------- --------
Stockholders' equity
Common stock 137 -- 6 (2) 143
Additional paid in capital 58,590 6 1,424 (2) 60,020
Accumulated deficit (41,318) 141 (141)(2) (41,318)
-------- -------- -------- --------
Total Stockholders' equity 17,409 147 1,289 18,845
-------- -------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 25,731 $ 827 $ 4,268 $ 30,826
======== ======== ======== ========
</TABLE>
See accompanying notes
<PAGE>
Notes to AMBI Inc. Unaudited Pro forma Balance Sheet at December 31, 1998 (in
thousands, except share amounts)
(1) The purchase agreement for the OLI Business allowed the prior owners to
keep tangible assets and liabilities except $50 in net current assets
and $7 in property and equipment.
The net assets acquired were determined as follows:
OLI total assets $ 827
Less assets remaining at OLI:
Cash (5)
Accounts Receivable (537)
Other Current Assets (112)
Property and Equipment (24)
-----
Adjusted assets acquired by AMBI Inc. $ 149
-----
Total liabilities $ 680
Less liabilities remaining at OLI $ 588
-----
Adjusted liabilities acquired by AMBI Inc. $ 92
-----
Net assets acquired by AMBI Inc. $ 57
=====
(2) The net book value of the net assets acquired approximates fair value.
The allocation of the purchase price of the OLI Business is preliminary
and has not yet been finalized by AMBI due to potential additional
purchase price consideration that may be payable based upon certain
contingencies in the purchase agreement.
To record the allocation of the excess of the purchase price over the
fair value of net assets acquired to trademarks, non compete agreement
and goodwill, the excess purchase price was calculated as follows:
Cash on hand utilized $ 2,506
Cash from bank loan 3,567 (a)
Fair value of common stock issued 1,436 (b)
-------
Purchase price $ 7,509
Net assets acquired 57
-------
Excess purchase price $ 7,452 (c)
-------
(a) Additional borrowing of $3,567 represents the incremental
amount of the term loan from State Street Bank & Trust Co. for
the acquisition of the OLI Business.
(b) Reflects 1,304,347 shares of AMBI common stock, par value
$0.005, valued at $1.1015 per share which represents the
closing market price on January 21, l999, the date of
acquisition, discounted by 25% (based upon an independent
valuation) because the common shares issued were unregistered
on the date of the acquisition.
(c) Excess purchase price was allocated based upon an independent
valuation among trademarks, non-compete agreement and
goodwill.
<PAGE>
AMBI INC
Unaudited Pro forma Statement of Operations
Year Ended June 30, 1998
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Pro forma Company
AMBI OLI (1) Adjustments Pro forma
---- ------- ----------- ---------
<S> <C> <C> <C> <C>
Net Sales $ 20,082 $ 6,781 $ 26,863
Other revenues 676 676
----------- ----------- ---------- -----------
TOTAL REVENUES 20,758 6,781 27,539
----------- ----------- ---------- -----------
COSTS AND EXPENSES
Cost of sales 2,956 3,245 6,201
Selling, general & admin.expenses 12,100 1,036 13,136
Research and development expenses 2,660 2,660
Depreciation and amortization 1,575 563 (4) 2,138
----------- ----------- ---------- -----------
OPERATING INCOME 1,467 2,500 (563) 3,404
----------- ----------- ---------- -----------
Interest income 71 23 (73)(6) 21
Interest expense 370 -- 269 (5) 639
----------- ----------- ---------- -----------
INCOME BEFORE INCOME TAXES 1,168 2,523 (905) 2,786
----------- ----------- ---------- -----------
Income taxes 116 41 (41)(2) 116
----------- ----------- ---------- -----------
NET INCOME $ 1,052 $ 2,482 (864) $ 2,670
=========== =========== ========== ===========
Basic and Diluted (Loss) Earnings
per share (Notes 3,7) ($0.04) $0.04
=========== ==========
Weighted average shares outstanding (Note 8) 20,163,412 1,304,347 (3) 21,467,759
=========== ========= ==========
</TABLE>
See accompanying notes
<PAGE>
Notes to AMBI Inc. Unaudited Pro forma Statement of Operations for the Year
Ended June 30, 1998 (in thousands, except share and per share amounts)
(1) Represents the actual unaudited results of operations of OLI for the
period July 1, 1997 through June 30, 1998.
(2) A pro forma adjustment of $41 has been made to reverse income taxes for
the additional net income attributable to the OLI Business because AMBI
has available $14.3 million in tax loss carryforwards as of June 30,
1998, for which no deferred tax asset had been recognized.
(3) Pro forma weighted average shares of 21,467,759 includes a weighted
average amount of 1,304,347 shares issued to the former owners of OLI.
(4) Represents the amortization of intangibles recognized on the purchase
of the OLI Business, consisting of: $250 non compete agreement
amortized over 3 years; $5,750 trademarks amortized over 15 years and
$1,452 of goodwill amortized over 15 years. The amortization for the
period July 1, l997 to June 30, l998 is $563.
(5) Represents additional interest expense at 8.75% associated with the
incremental bank borrowing of $3,567 obtained in connection with the
acquisition of the OLI Business.
(6) Represents interest income assumed lost (average rate of 3%) on cash
reserves used to pay for the acquisition.
(7) Basic and diluted (loss) earnings per share are computed as follows:
Company
AMBI Pro forma
---- ---------
Weighted average shares 20,163,412 21,467,759
Net income 1,052 2,670
Preferred stock dividend (374) (374)
Conversion discount on
convertible preferred stock (1,527) (1,527)
---------- ----------
Net (Loss) Income attributable
to common stockholders ($849) $769
========== ==========
Basic and Diluted (loss) earnings
per share ($0.04) $0.04
========== ==========
The weighted average shares of dilutive securities that would have been used to
calculate diluted EPS had their effect not been anti-dilutive are as follows:
Company
AMBI Pro forma
---- ---------
Convertible Preferred Stock 4,222,906 4,222,906
<PAGE>
AMBI INC
Unaudited Pro forma Statement of Operations
Six Months Ended December 31, 1998
( in thousands, except share and per share amounts )
<TABLE>
<CAPTION>
Pro forma Company
AMBI OLI (1) Adjustments Pro forma
---- ------- ----------- ---------
<S> <C> <C> <C> <C>
Net Sales $ 11,779 $ 1,907 $ 13,686
Other revenues 1,000 -- 1,000
----------- ----------- -----------
TOTAL REVENUES 12,779 1,907 14,686
----------- ----------- -----------
COSTS AND EXPENSES
Cost of sales 1,295 874 2,169
Selling, general & admin.expenses 5,474 972 6,446
Research and development expenses 865 -- 865
Depreciation and amortization 1,129 -- 282 (4) 1,411
--
----------- ----------- ---------- -----------
OPERATING INCOME 4,016 61 (282) 3,795
----------- ----------- ---------- -----------
Interest income 101 5 (32)(6) 74
Interest expense 132 -- 103 (5) 235
Other income,net 79 -- 79
----------- ----------- ---------- -----------
INCOME BEFORE INCOME TAXES 4,064 66 (417) 3,713
----------- ----------- ---------- -----------
Income taxes 257 19 (19)(2) 257
----------- ----------- ---------- -----------
NET INCOME $ 3,807 $ 47 (398) $ 3,456
=========== =========== ========== ===========
Basic Earnings per share $ 0.14 $ 0.12
=========== ===========
Weighted average number of common
shares 23,842,943 1,304,347 (3) 25,147,290
=========== ===========
Diluted Earnings per share $ 0.14 $ 0.12
=========== ===========
Weighted average number of common
shares and equivalents 27,642,848 1,304,347 (3) 28,947,195
=========== ===========
</TABLE>
See accompanying notes
<PAGE>
Notes to AMBI Inc. Unaudited Pro forma Statement of Operations for the Six
Months Ended December 31, 1998 (in thousands, except share amounts)
(1) Represents the actual unaudited results of OLI for the period July 1,
1998 through December 31, 1998.
(2) A pro forma adjustment of $19 has been made to reverse income taxes for
the additional net income attributable to the OLI Business because AMBI
has available $14.3 million in tax loss carryforwards as of July 1,
1998 for which no deferred tax asset has been recognized.
(3) Pro forma weighted average shares of 25,147,290 and 28,947,195 include
a weighted average amount of 1,304,347 shares issued to the former
owners of OLI.
(4) Represents amortization of intangibles recognized on the purchase of
the OLI Business consisting of: $250 non-compete agreement amortized
over 3 years; $5,750 trademarks amortized over 15 years and $1,452 of
goodwill amortized over 15 years. The amortization for the period July
1, l998 to December 31, l998 is $282.
(5) Represents additional interest expense at 8.75% associated with the
incremental bank borrowing of $3,567 obtained in connection with the
acquisition of the OLI Business.
(6) Represents interest income assumed lost (average rate of 3%) on cash
reserves used to pay for the acquisition.
Note: Selling, general and administrative expenses included in the OLI
financials and company pro forma financials includes $165 of salaries to the
former owners of OLI and $325 of one-time non-recurring bonuses to other
individuals.
<PAGE>
ITEM 7(c). EXHIBITS
The Board of Directors
AMBI Inc.:
We consent to the inclusion of our report dated November 24, 1998, with respect
to the balance sheets of Optimum Lifestyle, Inc. as of October 31, 1998 and
December 31, 1997, and the related statements of operations, stockholders'
equity, and cash flows for the ten-month period ended October 31, 1998 and the
year ended December 31, 1997, which report appears in the Form 8-K of AMBI Inc.
dated March 15, 1999.
KPMG LLP
March 12, 1999
San Francisco, California
