<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                   Quarterly Report Under Section 13 or 15 (d)
                     of the Securities Exchange Act of 1934

   
                                     10-Q/A
    

For Quarter Ended:                                               March 31, 1997

Commission File Number 001-12106

                                    AMBI INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

New York                                                             11-2653613
--------------------------------------------------------------------------------
(State or other jurisdiction of            (IRS Employer Identification Number)
incorporation of organization)

771 Old Saw Mill River Road, Tarrytown, New York                          10591
--------------------------------------------------------------------------------
(Address of principal executive offices)                             (Zip Code)

                                 (914) 347-5767
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)


--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last 
report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.

                  YES     X                          NO
                     ---------                         ----------

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Common Stock, Par Value $.005            18,649,073 shares as of March 31, 1997
-----------------------------            --------------------------------------

<PAGE>

                                    AMBI INC.

                                      INDEX

PART I       FINANCIAL INFORMATION                                        PAGE
------       ---------------------                                        ----

Item 1       Financial Statements (Unaudited)

             Condensed Consolidated Balance
                      Sheets at March 31, 1997
                      and June 30, 1996                                   3 - 4


             Condensed Consolidated Statements of Operations for
                      the three months and nine months ended March
                      31, 1997
                      and March 31, 1996                                      5


             Condensed Consolidated Statement of
                      Stockholders' Equity for the nine
                      months ended March 31, 1997                             6


             Condensed Consolidated Statements of
                      Cash Flows for the nine months
                      ended March 31, 1997 and
                      March 31, 1996                                          7


             Notes to Condensed Consolidated
                      Financial Statements                               8 - 10


Item 2       Management's Discussion and Analysis of
                      Financial Condition and Results of
                      Operations                                        11 - 12


PART II      OTHER INFORMATION

Item 6       Exhibits and Reports on Form 8-K                                13


SIGNATURES                                                                   14

                                        2

<PAGE>

                                    AMBI INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                March 31           June 30
                                                                                  1997               1996
                                                                               (Unaudited)          (Note)
                                                                                 $'000              $'000
                                                                                 -----              -----

ASSETS

<S>                                                                              <C>                <C>  
Current assets:

Cash and cash equivalents                                                           4,966              8,431
Trade accounts receivable less allowance for
  doubtful accounts of $67,000 at March 31, 1997
  and $81,000 at June 30, 1996                                                      1,255              5,356
Inventories                                                                           965              3,088
Prepayments and other current assets                                                6,179                874
                                                                                 --------           --------

Total current assets                                                               13,365             17,749

Property and equipment at cost less accumulated
  depreciation of $328,000 at March 31, 1997 and
  $4,493,000 at June 30, 1996                                                       1,162              3,881
Patent costs and licensed technology at cost less
  accumulated amortization of $971,000 at March 31,
  1997 and $717,000 at June 30, 1996                                                1,699              1,624

Other assets                                                                           93                113
                                                                                 --------           --------

TOTAL ASSETS                                                                       16,319             23,367
                                                                                 ========           ========
</TABLE>




See notes to condensed consolidated financial statements

                                        3

<PAGE>

                                    AMBI INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                   (CONTINUED)
   
<TABLE>
<CAPTION>

                                                                          March 31              June 30
                                                                            1997                 1996

                                                                         (Unaudited)            (Note)
                                                                            $'000                $'000
                                                                            -----                -----
<S>                                                                       <C>                <C>
LIABILITIES, REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY

Current liabilities:

Current portion of note payable and lease obligation                           129                195
Accounts payable and accrued expenses                                        4,444              1,889
Other liabilities                                                              -                  368
Dividends payable                                                              403                231
Taxes payable                                                                  -                  254
                                                                          --------           --------

Total current liabilities                                                    4,976              2,937

Note payable and lease obligation, less current portion                        165                935
Long term loan                                                               2,000              2,000
Deferred taxes payable                                                         -                  349
                                                                          --------           --------

TOTAL LIABILITIES                                                            7,141              6,221
                                                                          --------           --------
REDEEMABLE PREFERRED STOCK
$0.01 par value.  Issued and outstanding 1,500 shares
  at March 31, 1997 and June 30, 1996 (aggregate
  involuntary liquidation value $1,500,000)                                  1,500              1,500
                                                                          --------           --------
STOCKHOLDERS' EQUITY
Convertible preferred stock, $0.01 par value, issued and outstanding 238 shares
  at March 31, 1997 and 370
  shares at June 30, 1996                                                        *                  *
Common stock, $0.005 par value, authorized 40,000,000
  shares.  Issued and outstanding 18,649,073 at March 31,
  1997 and 20,469,776 at June 30, 1996                                          92                102
Additional paid-in capital                                                  45,593             51,389
Accumulated deficit                                                        (38,007)           (35,179)
Currency translation adjustment                                                  -               (666)

                                                                          --------           --------

TOTAL STOCKHOLDERS' EQUITY                                                   7,678             15,646
                                                                          --------           --------

TOTAL LIABILITIES, REDEEMABLE PREFERRED

STOCK AND STOCKHOLDERS' EQUITY                                              16,319             23,367
                                                                           =======           ========
</TABLE>
    

*Value less than $500.00

See notes to condensed consolidated financial statements

Note: The Condensed Consolidated Balance Sheet as of June 30, 1996 has been
derived from the audited consolidated financial statements at that date.


                                        4

<PAGE>

                                    AMBI INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (UNAUDITED)

   
<TABLE>
<CAPTION>

                                                         Three Months Ended                 Nine Months Ended
                                                              March 31                         March 31
                                                          1997          1996              1997          1996
                                                          ----          ----              ----          ----

<S>                                                     <C>           <C>                <C>           <C>  
Net Sales                                                1,614         3,760              9,712         9,003
Other Operating Revenues                                   244         1,157                711         1,262
                                                        -------       -------            -------       -------

TOTAL REVENUES                                           1,858         4,917             10,423        10,265
Cost of Sales                                             (767)       (1,518)            (4,420)       (4,008)
                                                        -------       -------            -------       -------

GROSS PROFIT                                             1,091         3,399              6,003         6,257
Selling, General & Administrative
  Expenses                                              (5,309)       (3,155)           (14,316)       (6,411)
Research Costs                                            (832)         (505)            (3,344)       (1,603)
Depreciation and Amortization                             (147)         (184)              (630)         (542)
                                                        -------       -------            -------       -------

OPERATING LOSS                                          (5,197)         (445)           (12,287)       (2,299)
Interest Income                                            210            86                319           204
Interest Expense                                           (25)          (30)              (112)          (79)
Gain on Sale of Aplin & Barrett                            -             -                9,683           -
                                                        -------       -------            -------       -------


LOSS BEFORE TAX EXPENSE                                 (5,012)         (389)            (2,397)       (2,174)
Tax Expense                                                 (9)          (76)              (150)         (135)
                                                        -------       -------            -------       -------

NET LOSS                                                (5,021)         (465)            (2,547)       (2,309)
                                                        =======       =======            =======       =======



LOSS PER SHARE                                          ($0.28)        ($0.03)           ($0.14)        ($0.14)
</TABLE>
    

See notes to condensed consolidated financial statements


                                        5

<PAGE>

                                    AMBI INC.

            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                    FOR THE NINE MONTHS ENDED MARCH 31, 1997

                                   (UNAUDITED)

   
<TABLE>
<CAPTION>

                                  Common     Additional   Accumulated   Currency       Total        Common
                                   Stock       Paid In      Deficit    Translation                  Shares

                                               Capital                 Adjustment                 Outstanding
                                  $'000        $'000        $'000        $'000         $'000
                               --------     --------      -------      -------      --------      -----------

<S>                            <C>          <C>           <C>           <C>         <C>          <C>       
Balance at June 30, 1996            102       51,389      (35,179)         (666)      15,646     20,469,776
Common stock issued on
  exercise of options and

  warrants                            1          435            -             -          436        157,626
Conversion of preferred
  stock to common stock               1          110            -             -          111        441,671
Common shares returned
  by Burns Philp as part of

  Aplin & Barrett transaction       (12)      (6,341)           -             -       (6,353)    (2,420,000)
Net loss for the period               -            -       (2,547)            -       (2,547)             -
Redeemable preferred stock

  dividend                            -            -          (96)            -          (96)             -
Convertible preferred stock
  dividend                            -            -         (185)            -         (185)             -
Arising on translation during
  the period                          -            -            -           538          538              -
Currency translation adjustment
  written-off in connection with
  Aplin & Barrett transaction         -            -            -           128          128              -
                               --------     --------      -------       -------     --------     -----------



Balance at March 31, 1997            92       45,593      (38,007)            -        7,678     18,649,073
                               --------     --------      -------       -------     --------     -----------
</TABLE>
    

See notes to condensed consolidated financial statements


                                        6

<PAGE>

                                    AMBI INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (UNAUDITED)

   
<TABLE>
<CAPTION>

                                                                                 Nine Months Ended
                                                                                     March 31

                                                                              1997               1996
                                                                             $'000              $'000
                                                                             -----              -----
<S>                                                                         <C>                <C>
Cash flows from operating activities:

  Net loss                                                                  (3,582)            (2,309)
Adjustments to reconcile net loss to
  net cash used in operating activities:

     Depreciation and amortization                                             630                542
     Gain on Sale of Aplin & Barrett                                        (9,683)                 -
     Other non-cash items                                                       65                 96
  Changes in assets and liabilities, net of effects
     from sale of subsidiary:

     Decrease/(increase) in trade accounts receivable                          455               (843)
     Decrease/(increase) in inventories                                        287               (921)
     (Increase) in other assets                                               (486)              (651)
     (Increase) in amounts due from
       affiliated companies                                                    -               (1,011)
     (Decrease) in taxes payable                                              (254)              (207)
     Increase in accounts payable and
       accrued expenses                                                      1,427                524
     (Decrease) in amounts due to
       affiliated companies                                                    -                  (32)
     Increase in other liabilities                                             189                 69
                                                                         ---------            -------
Net cash used in operating activities                                       (9,917)            (4,743)

Cash flows from investing activities:

  Acquisitions of property and equipment                                      (783)              (880)
  Patent costs and licensed technology                                        (355)              (800)
  Cash received upon sale of subsidiary                                      8,000                  -
                                                                          ---------           -------
Net cash provided by/(used in) investing activities                          6,862             (1,680)
                                                                          ---------           -------


Cash flows from financing activities:

  Dividends paid on redeemable preferred stock                                 -                 (102)
  Note payable proceeds                                                        -                   35
  Capital lease proceeds                                                       328                389
  Note payable repayments                                                      -                   (8)
  Capital lease obligation repayments                                       (1,164)              (138)
  Proceeds from issuance of convertible preferred stock                        -                8,213
  Proceeds from issuance of common stock                                       436                707
                                                                          ---------           -------
Net cash (used in)/provided by financing activities                           (400)             9,096

Effect of exchange rate movement                                               (10)               (51)

Net (decrease)/increase in cash and cash equivalents                        (3,465)             2,622
Cash and cash equivalents at beginning of period                             8,431              3,337
                                                                          ---------           -------
Cash and cash equivalents at end of period                                   4,966              5,959
                                                                          =========           =======

Supplementary disclosure of cash flow information:

  Interest paid                                                                 87                 79
  Tax paid                                                                       9                337
</TABLE>
    

See notes to condensed consolidated financial statements


                                        7


<PAGE>

                                    AMBI INC.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

                                 MARCH 31, 1997

Note A            Basis of Presentation

                  The accompanying unaudited condensed consolidated financial
                  statements have been prepared in accordance with generally
                  accepted accounting principles for interim financial statement
                  reporting and in accordance with the instructions to Form 10-Q
                  and Rule 10-01 of Regulation S-X. Accordingly, they do not
                  include all the information and footnotes required by
                  generally accepted accounting principles for complete
                  financial statements. In the opinion of management, all
                  adjustments (consisting of normal recurring accruals)
                  considered necessary for a fair presentation have been
                  included. Operating results for the nine month period ended
                  March 31, 1997 are not necessarily indicative of the results
                  that may be expected for the year ending June 30, 1997. For
                  further information, refer to the consolidated financial
                  statements and notes thereto, included in the Company's annual
                  report on Form 10-K for the year ended June 30, 1996.

Note B            Inventories

                  The components of inventories consist of the following:

                                                   March 31            June 30
                                                     1997               1996

                                                    $'000              $'000
                                                    -----              -----

                  Raw materials                       -                  240
                  Work in progress                     90                960
                  Finished products                   875              1,888
                                                 --------           --------

                                                      965              3,088
                                                 --------           --------



Note C            Preferred Stock Dividends

                  Dividends payable are approximately $128,000 on the Redeemable
                  Preferred Stock and $275,000 on the Convertible Preferred
                  Stock as of March 31, 1997.



                                        8

<PAGE>

                                    AMBI INC.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

                                 MARCH 31, 1997

Note D            Loss per share

                  Loss per share for the three months and the nine months ended
                  March 31, 1997 and March 31, 1996 are computed based on the
                  weighted average number of shares actually outstanding. No
                  common stock equivalents are included in the computation of
                  average shares outstanding because the effect of such
                  inclusion would be to decrease the loss per share.

   
<TABLE>
<CAPTION>

                                                         3 months ended                  9 months ended
                                                            March 31                        March 31
                                                        1997          1996              1997          1996
                                                          No. of Shares                   No. of Shares
                                                          -------------                   -------------

<S>                                                  <C>           <C>               <C>           <C>       
                  Average shares outstanding         18,524,049    18,839,066        19,826,189    18,432,339

                                                          $'000         $'000             $'000         $'000
                                                          -----         -----             -----         -----

                  Net loss                               (5,021)         (465)           (2,547)       (2,309)
                  Preferred stock dividend                  (87)         (182)             (281)         (383)
                                                     -----------   -----------       -----------   -----------
                  Net loss attributable to
                    common stockholders                  (5,108)         (647)           (2,828)       (2,692)
                                                     ==========    ===========       ===========   ===========
                  Loss per share of
                    common stock                         ($0.28)       ($0.03)           ($0.14)       ($0.14)
</TABLE>
    

Note E            Sale of Aplin & Barrett

                  The Company completed the sale of its UK-based food
                  preservative business, Aplin & Barrett, Ltd., to Burns Philp &
                  Company Ltd. on December 12, 1996. As a result, the operations
                  of Aplin & Barrett are included in the financial statements
                  through that date. Key terms of the transaction included the
                  payment to AMBI of $13.5 million in cash, ($8.0 million paid

                  on December 12, 1996 with the remaining $5.5 million to be
                  paid on June 12, 1997), and the return of 2.42 million shares
                  of AMBI common stock held by Burns Philp. In addition, Burns
                  Philp has provided AMBI with a revolving line of credit of up
                  to $2.5 million that could be forgiven under certain
                  circumstances related to the performance of the food
                  preservative business through June 30, 1999.

Note F            Subsequent Event

                  On May 8, 1997, the Company completed a $4.5 million private
                  placement of Convertible Preferred Stock. After expenses, the
                  Company received net proceeds of approximately $4.2 million.
                  The conversion rate is based on a number of factors,
                  including, but not limited to, the date of conversion and the
                  price of the Common Stock prior to the date of conversion. Any
                  outstanding shares of Convertible Preferred Stock will
                  automatically be converted into Common Stock on May 7, 1999.
                  The Company has agreed to register the Common Stock issuable
                  upon conversion. In connection with this private placement,
                  the Company also issued Warrants to purchase 528,937 shares of
                  Common Stock at $2.72 per share. Upon the satisfaction of
                  certain conditions, the investors in this private placement
                  will purchase an additional $3.5 million of Preferred Stock
                  from the Company and will receive additional Warrants.


                                        9

<PAGE>

                                    AMBI INC.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

                                 MARCH 31, 1997

Note G         Recently Issued Accounting Standards

               In February 1997, FASB issued SFAS No. 128, "Earnings Per Share"
               and SFAS No. 129, "Disclosure of Information about Capital
               Structure". SFAS No. 128 specifies the computation, presentation,
               and disclosure requirements for earnings per share (EPS) for
               entities with publicly held common stock or potential common
               stock. SFAS No. 128 replaces the presentation of primary EPS and
               fully diluted EPS with basic EPS and diluted EPS. It also
               requires dual presentation of basic and diluted EPS on the face
               of the income statement for all entities with complex capital
               structures and requires reconciliation of the numerator and
               denominator of the basic EPS computation to the numerator and
               denominator of the diluted EPS computation.

               SFAS No. 129 was issued in connection with SFAS No. 128 and
               specifies the required disclosures about capital structure. Both

               SFAS No. 128 and No. 129 are effective for financial statements
               for both interim and annual periods ending after December 31,
               1997. It is not expected that the adoption of either of these
               statements will have a material impact on the Company's financial
               position or operating results.


                                       10


<PAGE>


Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations

Results of Operations

The financial statements for the quarter excluded results of the Food
Ingredients business that was sold on December 12, 1996

Revenues

Revenues decreased from the corresponding period in 1996 by 62%, to $1.9
million. In the nine months revenues increased by 2% to $10.4 million. Revenues
from the Company's ongoing operations increased by 50% to $1.9 million compared
to $1.2 million for the third quarter of the previous year and by 228% to $5.3
million compared to $1.6 million for the first nine months of the previous year.
These increases for ongoing operations are the result of sales of the new
products Cardia(TM) Salt Alternative and Wipe Out(TM) Dairy Wipes.

The percentage of sales included in the total by product is:
<TABLE>
<CAPTION>

                                                                    % of sales in third quarter      % change
                                                                         1997          1996          97 vs. 96

<S>                                                                     <C>            <C>            <C>    
                  Food preservatives                                       0.0          63.0           (100.0)
                  Dairy ingredients                                        0.0          11.9           (100.0)
                  Cardia(TM)Salt Alternative                              71.9           0.0              *
                  Wipe Out/Animal Health                                  15.0           1.6            248.8
                  Other                                                   13.1          23.5            (78.9)
                                                                        ------         ------          -------

                  Total                                                  100.0         100.0            (62.2)
                                                                        ------         ------          -------
<CAPTION>

                                                                      % of sales in nine months      % change
                                                                         1997          1996          97 vs. 96

<S>                                                                     <C>           <C>             <C>   

                  Food preservatives                                      38.4          64.5            (39.5)
                  Dairy ingredients                                       10.5          19.7            (45.8)
                  Cardia(TM)Salt Alternative                              32.4           0.0              *
                  Wipe Out/Animal Health                                  11.5           3.5            236.5
                  Other                                                    7.2          12.3            (40.9)
                                                                        ------         ------          -------

                  Total                                                  100.0         100.0              1.5
                                                                        ------         ------          -------
</TABLE>

* Product launched April, 1996.

Cost of Sales

   
Cost of sales as a percentage of sales for the third quarter was 47.5%, compared
with 40.4% in 1996 and was 45.5% in the nine month period, compared with 44.5%
for the nine month period in 1996. These increases are due to additional nisin
manufacturing development costs partially offset by the lower proportion of
sales in lower margin Dairy ingredients and an increase in the sales of the
higher margin Cardia(TM) Salt Alternative.
    


                                       11

<PAGE>

Selling, General, and Administrative Expenses ("S,G&A")

   
S,G&A expenses increased by $2.2 million (68%) for the three month period and
$7.9 million (123%) for the nine month period ended March 31, 1997. These
increases are mainly due to the investment spending in support of Cardia(TM)
Salt Alternative, which was introduced regionally in 1996 and nationally in
January, 1997.
    

Research Costs

Research costs increased in the quarter by $0.3 million (65%), and in the nine
month period by $1.7 million (109%) compared to the same periods last year.
These increases are a result of the Company's expansion in spending in support
of pharmaceutical research projects.

Operating Loss

   
The Company recorded an operating loss of $5.2 million in the third quarter
ended March 31, 1997, compared with a loss of $0.4 million in the third quarter
ended March 31, 1996. In the nine months ended March 31, 1997, the Company
recorded an operating loss of $12.3 million, compared with a loss of $2.3
million in the nine months ended March 31, 1996. The increase in the operating

loss is mainly due to the investment spending in support of Cardia(TM) Salt
Alternative, which was introduced regionally in 1996 and nationally in January,
1997.
    

Sale of Aplin & Barrett

The Company completed the sale of its UK-based food preservative business, Aplin
& Barrett, Ltd., to Burns Philp & Company Ltd. on December 12, 1996. Key terms
of the transaction included the payment to AMBI of $13.5 million in cash, ($8.0
million paid on December 12, 1996 with the remaining $5.5 million to be paid on
June 12, 1997), and the return of 2.42 million shares of AMBI common stock held
by Burns Philp. In addition, Burns Philp has provided AMBI with a revolving line
of credit of up to $2.5 million that could be forgiven under certain
circumstances related to the performance of the food preservative business
through June 30, 1999. Aplin & Barrett Ltd. accounted for approximately 0% and
49% of the Company's total revenues during the three and nine months ended March
31, 1997, respectively. The Company anticipates that total revenues for the next
three quarters will decrease as compared to the year-earlier quarters as a
result of the sale of Aplin & Barrett Ltd.

Loss Before Tax Expense

   
The Company recorded a loss before tax expense of $5.0 million in the quarter
ended March 31, 1997, compared with a loss of $0.4 million in the quarter ended
March 31, 1996. In the nine months ended March 31, 1997, the Company recorded a
loss before tax expense of $2.4 million, which included a gain of $9.7 million
from the sale of Aplin and Barrett, Ltd., compared with a loss of $2.2 million
in the nine months ended March 31, 1996.
    

Tax Expense

The Company's tax expense is largely a result of taxes on the profits of Aplin &
Barrett. The Company does not expect to pay taxes on the gain resulting from the
sale of Aplin & Barrett because the taxable gain is expected to be offset by
operating losses for the year.

Financial Condition

   
As of March 31, 1997, the Company had working capital of $8.4 million, including
a cash balance of $5.0 million, compared to June 30, 1996 working capital of
$14.8 million, including a cash balance of $8.4 million. The decrease in working
capital is primarily the result of the operating loss partially offset by the
sale of Aplin & Barrett, which resulted in a payment to the Company of $8.0
million in cash on December 12, 1996 and a $5.5 million receivable from Burns
Philp, which has been included in "Prepayments and other current assets."
    

                                       12

<PAGE>

                           PART II - OTHER INFORMATION

Item 6 - Exhibits and Report on Form 8-K

Exhibit 27 - Financial Data Schedule

No reports were filed on Form 8-K during the three months ended March 31, 1997


                                       13

<PAGE>

                                    AMBI INC.

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                                           AMBI INC.
                                                           Registrant

   
Date: February 20, 1998           By:  /s/ Fredric D. Price
                                      ----------------------------------
                                          Fredric D. Price
    

                                          President and Chief Executive Officer


                                       14