June 21, 1999

AMBI Inc. (NASDAQ: AMBI) RECOMMENDATION: BUY

e-Commerce Strategy Well Suited for AMBI’s Nutraceutical Products; Leveraging QVC, the Internet through CardiaNutrition.COM, and Direct Marketing Efforts; Reiterate BUY

Exchange Symbol.....................AMBI (NASDAQ)
Price of Common Stock (06/18/99)............$2.25
30-Day Average Trading Volume.............196,681
Shares Outstanding.........................27.6mm
52-Week High/Low.....................$2.96 /$0.63

Address.....................4 Manhattanville Road
..............................Purchase, NY  10577
Telephone............................914-701-4500
President & CEO..................Fredric D. Price
VP Finance & Admin., CFO........Gerald A. Shapiro

Comments From Recent Management Meeting

We met recently with senior management at AMBI and reviewed the upcoming launch of new products and product configurations (or nutritional product kits addressing specific therapeutic needs), and, most interestingly, AMBI’s plans to leverage direct response channels of the Internet, QVC and its Heart’s Content catalog. We are extremely optimistic about their "e-commerce" operations, which currently represent roughly 25% of AMBI’s business (and is profitable and growing), and anticipate further corporate announcements as this channel opportunity develops for the company. We reiterate our BUY recommendation.

Channel Strategy: As we have discussed in earlier research reports, AMBI is executing a three-pronged distribution strategy, encompassing "Direct Sales," "Retail Shelf," and "Ingredients." With respect to the last two prongs of the strategy, AMBI has teamed with American Home Products, which will drive the marketing efforts in the Retail Shelf channel, and Cultor Food Science, which is assisting the effort in the Ingredients channel. We believe these two corporate partnerships are critical in that they validate AMBI’s strategy and reflect the quality of AMBI’s products and product development efforts. We continue to expect announcements of product launches and sales to occur later this year in both of these channels, and that these marketing efforts will significantly develop and broaden brand awareness for the "Cardia" and "CardiaNutrition" brands.

e-Commerce and Direct Sales: However, we believe the most exciting marketing opportunity for AMBI, and the most rewarding for shareholders, will be the "Direct Sales" efforts and its current focus on e-commerce channels. Specifically, AMBI is positioning itself as a leading e-marketer of proprietary nutritional products, and is well positioned to leverage the powerful marketing opportunity arising from the convergence of the broadband cable TV infrastructure and the Internet. We also believe that the direct mail/catalog channel (a component of Direct Sales) will be important for AMBI’s products, and feel there are opportunities in this area for further expansion through potential acquisitions.

The Importance of e-Commerce: The Internet and broadband cable TV platforms are converging. This "Convergence" of the broadband cable TV infrastructure and the Internet backbone will provide an extremely robust conduit through which a broad range of producers of products and services will dramatically change the way consumers shop, among other things. We believe the Internet (and e-commerce generally) is a sales channel of tremendous importance, which lends itself well to companies with products and strategies like AMBI. As discussed in earlier reports, AMBI’s proprietary products have been put through pharmaceutical-like clinical trials, the results of which have been published in prominent, peer-reviewed journals and presented at leading scientific meetings. The Internet, specifically AMBI’s websites, provide the medium from which consumers can do research on its products and make informed purchases. For example, AMBI has made certain of its clinical trials results available on its website, and offers links to other sites that provide additional relevant scientific reports and data (something that can not be easily accomplished in the traditional nutritional product store, or drugstore, sales — Retail Shelf — channel).

We believe an effective e-commerce strategy needs all three components of the sales channel — cable TV, the Internet, and direct mail — not just one. AMBI is well positioned today in all three components of the channel (cable TV via QVC, the Internet and direct mail), and is ready to capitalize on the explosive growth in these e-commerce channels:

• Broadband cable television: As a result of the recent acquisition of Lite Bites, AMBI has a relationship with QVC, the premier television shopping channel. AMBI currently sells Lite Bites on QVC and is poised for additional growth in this channel. AMBI is evaluating a special "Heart Healthy" programming segment whereby its products would be showcased within a program dedicated to nutritional well-being.
• Website: AMBI will launch its interactive, e-commerce website (www.CardiaNutrition.com) in late summer or early fall. Like most retailing concerns, AMBI is currently considering alternative websites and co-branding opportunities on the Internet to expand its reach and attract the broadest possible consumer base.
• Direct mail: AMBI will launch its novel catalog, Heart’s Content, also this summer. The catalog (we had the opportunity to review an impressive early draft) is filled with important consumer information about AMBI’s products and the health conditions they address.

AMBI’s established e-commerce strategy offers tremendous marketing and sales channel leverage; as AMBI develops additional proprietary products, it can offer them simultaneously through all three channels (cable TV, the Internet and direct mail) without incurring additional cost. Unlike many competing nutritional product companies, AMBI is already participating in these three e-commerce channels. And unlike many companies executing an e-commerce strategy, AMBI’s are profitable and positioned for growth.

AMBI’s QVC Plans and Recent Experience: With the recent acquisition of Lite Bites, AMBI gained a relationship with QVC, which has an estimated 65% share of the home shopping market. Lite Bites is the leading seller of nutritional bars on QVC and AMBI is working with QVC to expand that relationship into proprietary nutritional products programming, encompassing additional AMBI proprietary products. The Lite Bites acquisition had dual benefits: it brought a profitable product to AMBI that it believes it can grow substantially (both on QVC and in other channels) and it also brought the immense power of the QVC distribution channel to AMBI for some of AMBI’s other products. To give an example of the marketing power of QVC, last year Lite Bites was featured as a "Today’s Special Value" one day and more than $750,000 worth of Lite Bites products was sold on that day alone. We look for increased sales of Lite Bites and new products introduced through this channel this year.

CardiaNutrition.COM: AMBI is preparing to launch its e-commerce site, www.CardiaNutrition.com, which we expect to be up in late summer or early fall. One of the important synergies with the various Direct Sales efforts at AMBI is evident in that the Company’s novel catalog, Heart’s Content (which will be distributed beginning this summer), will be reformatted and will form the basis of the website. Thus, the development costs of the catalog will be amortized over two channels. This is indicative of the channel-building strategy that AMBI is executing, and gives us confidence that management will continue to keep a lid on expenses. We believe that e-commerce will be a significant revenue generator for AMBI. Usage of the Internet, and business generated thereon, is growing at significant rates. It is estimated that approximately 73 million Americans, roughly 35% of the population, are using the Internet. Online business is booming as well. According to market studies, 1998 Internet shopping revenues were approximately $2.4 billion, and are expected to grow to $37.5 billion by the year 2002. We believe that AMBI’s products appeal to the educated, health-conscious consumer, a profile that is likely to use the Internet for purposes of research and purchasing.

Heart’s Content™: Heart’s Content is a print and on-line guide for people interested in maintaining good cardiovascular health. Each issue contains in-depth information on products and services, special interest stories and references and other resources on related topics, as well as AMBI’s proprietary products and several products from other companies. AMBI is developing these products now and will introduce them in the catalog under the CardiaNutrition brand umbrella. We view this direct catalog sales effort as complementary to the Cable TV and Internet strategy, and believe there are opportunities for expansion via acquisition in this channel for AMBI.

Company Description

AMBI is executing an innovative and profitable growth strategy: developing and commercializing nutritional products for cardiovascular, diabetic and other medical conditions. Its products are proprietary, and are put through pharmaceutical-like clinical trials to demonstrate efficacy and safety. The Company has a strategic alliance with American Home Products and a distribution agreement with Cultor Food Science, Inc. that we believe validate AMBI’s strategy, provide the Company with national retail and ingredient distribution (respectively) for its products, strengthen the balance sheet, and position the Company for future growth. In January, AMBI announced the acquisition of Lite Bites® bars, a profitable nutrition bars business with annual sales of approximately $5.5 million. This acquisition enabled the Company to gain access to the QVC network and was accretive to earnings from the outset.

For Additional Information

Contact SmallCaps Online LLC — 212-554-4158

Website: www.SmallCapsOnline.com

Sources for Additional Information

The following are website addresses offering related information, and links to other sources of information.

www.AMBIinc.com AMBI’s corporate website

www.CardiaNutrition.com AMBI’s internet commerce site, currently under construction

www.SmallCapsOnline.com SmallCaps Online’s site for company information and research

www.FDA.gov US Food and Drug Administration homepage

www.WHO.int World Health Organization homepage

www.Diabetes.org American Diabetes Association homepage

www.AmHrt.org American Heart Association National Center homepage

www.AMA-Assn.org American Medical Association homepage

www.ASH-US.org American Society of Hypertension homepage

www.SEC.gov U.S. Securities and Exchange Commission, with links to EDGAR filings

212-327-2038 Chromium Information Bureau, Inc.

The information in this report has been obtained from sources that we believe to be reliable, but we do not guarantee its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation by SmallCaps Online LLC for the purchase or sale of any securities. SmallCaps Online LLC has performed investment banking, consulting or other services for AMBI and may solicit investment banking, consulting or other business from, AMBI Inc. SmallCaps Online LLC or persons associated with SmallCaps Online LLC may at anytime be long or short any of the securities referred to herein and may make purchases or sales thereof while this report is in circulation or posted on the SmallCaps Online LLC website at www.SmallCapsOnline.com. This material, or any portion thereof, may not be reproduced without prior permission from SmallCaps Online LLC. SmallCaps Online LLC is not responsible for the contents of this document that is intended for electronic transmission and could be thus subjected to tampering or alteration. Copyright © 1999 by SmallCaps Online LLC. All rights reserved.