Excerpts from the report follow:

Summary -- On Friday morning, AMBI Inc. announced that it had acquired Optimum Lifestyle, Inc., a company that develops and sells nutrition bars called Lite Bites®, for $6.0 million in cash and 1.3 million shares of AMBI stock. With 1998 sales of about $5.5 million and an EBITDA of approximately $1.3 million, we believe the purchase of Optimum Lifestyle's assets to be extremely attractive to AMBI. In addition, since Optimum has been marketing Lite Bites® successfully over the QVC television network, we believe this may open up another marketing channel for AMBI's other nutrition products, which we feel are quite synergistic to the nutrition bars. The bars may also provide a new vehicle to incorporate AMBI's current products, which include chromium picolinate, selenium and zinc. We believe that this acquisition is another example of AMBI management's ability to seek out and complete quality acquisitions. We are therefore maintaining our BUY recommendation, and will revisit our earnings model after AMBI reports its second fiscal quarter results in mid-February.

Lite Bites® -- the Lite Bites® products are designed to be used as part of a fat-fighting system for people concerned with weight control and fat intake. The bars contain a custom blend of vitamins and minerals, and according to our in-house taste test, are quite enjoyable as a snack or a meal supplement, similar to a granola bar but with more flavor. According to a recent article in TIME magazine, industry experts predict that energy bar sales are expected to hit $500 million in 1998, up 40% from the year before. The article also indicated that "industry optimists" are hoping that the market will eventually match the $2.0 billion-a-year sports drink market.

The Deal -- AMBI has acquired the assets of Optimum Lifestyle from Cheryl and Dean Radetsky, the creators of the product who will consult with AMBI on the product line into the future, for $5.5 million in cash, 1.3 million in stock, and future undisclosed payments that are contingent upon the achievement of sales milestones. We think this is remarkable, as AMBI only paid a little more than one times current sales in cash.

Comments on Strategy -- We believe that this acquisition follows AMBI's 1997 acquisition of Nutrition 21 very well. As mentioned previously, not only does it open up an additional marketing channel through QVC and provide an additional vehicle to incorporate AMBI's other nutritional products, but it increases AMBI's EBITDA and is added evidence of management's commitment to expansion by acquiring quality, growing, profitable businesses. We believe the QVC channel is an interesting angle for AMBI to pursue. Through AMBI's recent deal with American Home Products, AMBI has access to one of the premier retail marketing organization; through its agreement with Cultor Food, AMBI has gained better access to the food ingredient business; through its catalog, Heart's Content, AMBI reaches individuals and physicians with print media, and at its website www.CardiaNutrition.com, AMBI reaches out to the internet community. Television may provide AMBI with the boost it needs to grow its products to the next level.