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AMBI Inc.                                             Confidential
Summary Income Statement                                              
($ 000 except per share amounts)                                              
      Historical   Projections  
Fiscal year end June 30th           1997   1998   1999   2000   2001   2002   2003          
                                               
Revenues           $11,280   $20,758   $28,000   $37,800   $51,030   $68,891   $93,002          
Implied growth (yr/yr)               84.0%   34.9%   35.0%   35.0%   35.0%   35.0%          
Cost of goods sold           $4,998   $2,956   $5,880   $11,340   $15,309   $20,667   $27,901          
Gross profit           $6,282   $17,802   $22,120   $26,460   $35,721   $48,223   $65,102          
                                               
Less SG&A expense           17,312   12,100   12,600   13,230   14,033   15,156   17,205          
Less R&D expense           4,833   2,660   3,080   3,780   5,103   6,889   9,300          
Less other operating expenses           0   0   500   600   700   700   700          
EBITDA           (15,863)   3,042   5,940   8,850   15,885   25,478   37,896          
Less depreciation and amortization           772   1,575   1,850   2,100   2,100   2,100   2,100          
Operating income           ($16,635)   $1,467   $4,090   $6,750   $13,785   $23,378   $35,796          
Implied growth (yr/yr)               -108.8%   178.8%   65.0%   104.2%   69.6%   53.1%          
Plus non-operating income (net)           291   (299)   420   567   765   1,033   1,395          
Less taxes           152   116   1,579   2,561   5,093   8,544   13,017          
Net income           ($16,496) 1 $1,052   $2,932   $4,756   $9,458   $15,868   $24,174          
Implied growth (yr/yr)             -106.4%   178.7%   62.2%   98.9%   67.8%   52.3%          
Weighted average shares outstanding           19,454   20,163   27,500   28,500   30,000   31,500   33,000          
Earnings per share (EPS)           (0.85)   (0.04) 2 0.11   0.17   0.32   0.50   0.73          
Notes: (1) Excludes $9.7 million gain on sale of Aplin & Barrett in 2Q97. (2) 1998 EPS is negative, despite positive net income, due to accounting treatment for amortization of convertible preferred stock discount and dividend.  
AMBI Margins:                                              
Gross margin           55.7%   85.8%   79.0%   70.0%   70.0%   70.0%   70.0%          
SG&A as a % of revenues           153.5%   58.3%   45.0%   35.0%   27.5%   22.0%   18.5%          
R&D as a % of revenues           42.8%   12.8%   11.0%   10.0%   10.0%   10.0%   10.0%          
Other operating expenses as a % of revenues           NM   NM   1.8%   1.6%   1.4%   1.0%   0.8%          
Operating margin           -147.5%   7.1%   14.6%   17.9%   27.0%   33.9%   38.5%          
Pre-tax margin           -150.1%   8.5%   13.1%   16.4%   25.5%   32.4%   37.0%          
Net margin           -146.2%   5.1%   10.5%   12.6%   18.5%   23.0%   26.0%          
Tax rate (conservative fully-taxed estimate)                   35.0%   35.0%   35.0%   35.0%   35.0%          
                                               
COMPARABLE COMPANY INFORMATION      
                                               
Trading data:   NATR   RXSD   TWLB   WNI   Valuation analysis:   NATR   RXSD   TWLB   WNI      
Last price (10.12.98)   $14.25   $17.44   $21.75   $5.38   P/E Ratio (LTM)       12.5   24.9   29.2   15.9      
52-week high   $28.63   $39.00   $47.87   $17.50   P/E High (Last 5 years)       41.1   65.4   NA   NA      
52-week low   $13.63   $14.75   $17.37   $3.81   P/E Low (Last 5 years)       15.9   16.3   NA   NA      
Shares outstanding (mil)   18.4   72.4   31.6   24.7   Price to Sales       0.9   3.2   3.1   0.9      
Market capitalization (mil)   $262.2   $1,262.7   $687.3   $132.8                            
Margin analysis:                   Consensus earnings estimates:                  
Gross margin (LTM)   81.9%   58.8%   47.1%   35.2%   FY 1998 EPS Estimate       $1.25   $0.95   $1.31   $0.79      
Operating margin (LTM)   11.5%   19.4%   21.1%   4.9%   FY 1999 EPS Estimate       $1.48   $1.28   $1.64   $1.08      
Pre-tax margin (LTM)   12.2%   20.3%   17.2%   2.9%   P/E to 1998 Est.       11.4   18.4   16.6   6.8      
Net income margin (LTM)   7.4%   13.1%   10.6%   5.6%   P/E to 1999 Est.       9.6   13.6   13.3   5.0      
Effective tax rate (LTM)   39.2%   35.8%   38.5%   36.7%                              
                                               
NATR: Nature's Sunshine Products; RXSD: Rexall Sundown, Inc.; TWLB: Twinlab Corporate; WNI: Weider Nutritional International      
 
 
 
AMBI Inc.                                             Confidential
Valuation Analyses                                              
($ 000s except per share amounts)           Historical Projections          
            1997   1998 1999   2000   2001   2002   2003          
  Revenues         11,280   20,758   28,000   37,800   51,030   68,891   93,002          
  Operating Income         (16,635)   1,467   4,090   6,750   13,785   23,378   35,796          
  Net Income         (16,496)   1,052   2,932   4,756   9,458   15,868   24,174          
  Earnings Per Share         (0.85)   (0.04)   0.11   0.17   0.32   0.50   0.73          
  Shares outstanding         19,454   20,163   27,500   28,500   30,000   31,500   33,000          
                                               
P/E Multiple Method (per share)                                          
                                               
Comparable average 1998 P/E applied to annualized AMBI 1999:             $1.82                          
Comparable average 1999 P/E applied to annualized AMBI 2000:                 $2.50                      
                                               
Revenue Multiple Method (per share)                              
          Based on 20.2 million shares outstanding                  
            1999 2000 2001 2002 2003                
        2.00   2.78   3.75   5.06   6.83   9.23                  
        2.25   3.12   4.22   5.69   7.69   10.38                  
  Revenue multiple:     2.50   3.47   4.69   6.33   8.54   11.53                  
        2.75   3.82   5.16   6.96   9.40   12.68                  
        3.00   4.17   5.62   7.59   10.25   13.84                  
            Average (per share) of shaded area=   $6.52                      
                                         
Terminal P/E Multiple Method                                      
          Discount Rate                  
            16%   18%   20%   22%   24%                  
        12.00   138,115   126,801   116,580   107,333   98,952                  
        13.00   149,625   137,367   126,295   116,277   107,198                  
  Terminal P/E multiple:   14.00   161,135   147,934   136,010   125,222   115,444                  
        15.00   172,644   158,501   145,725   134,166   123,690                  
        16.00   184,154   169,068   155,441   143,110   131,936                  
            Average of boxed area=       136,389                      
            Per share average of boxed area=   $6.76                      
                                               
Terminal Operating Income Multiple Method                                              
          Discount Rate                  
            16%   18%   20%   22%   24%                  
        6.00   102,257   93,880   86,313   79,467   73,262                  
        7.00   119,300   109,527   100,699   92,711   85,472                  
  Terminal operating     8.00   136,343   125,174   115,085   105,956   97,682                  
  income multiple:     9.00   153,386   140,820   129,470   119,200   109,892                  
        10.00   170,429   156,467   143,856   132,445   122,103                  
            Average of boxed area=   115,405                      
            Per share average of boxed area=   $5.72