<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
Commission file number 1-14416
BIGMAR, INC.
(Exact name of registrant as specified in its charter)
Delaware 31-1445779
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6660 Doubletree Avenue, Columbus, Ohio 43229
(Address of principal executive offices) (Zip code)
(614) 848-8380
(Registrant's telephone number, including area code)
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 NO X .
----- -----
As of August 12, 1996, 3,985,000 shares of common stock of Bigmar, Inc. were
outstanding.
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BIGMAR INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page no.
<S> <C>
Part I FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1996
(Unaudited) and December 31, 1995................................................3
Consolidated Condensed Statements of Income for the quarters
and six month periods ended June 30, 1996 and
1995 (Unaudited)................................................................4
Consolidated Condensed Statement of Cash Flows for the six
months ended June 30, 1996 and 1995 (Unaudited).................................5
Notes to Consolidated Financial Statements (Unaudited)............................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................................8
Part II OTHER INFORMATION:
Item 4. Other information................................................................13
Item 6. Exhibits and reports on Form 8-K.................................................13
SIGNATURES.......................................................................14
</TABLE>
2
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BIGMAR INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
30-Jun-96 31-Dec-95
(unaudited)
----------- -----------
<S> <C> <C>
Current assets:
Cash ................................................ 9,128,763 1,425,603
Accounts receivable, net of allowances of $51,948
and $47,885 at December 31, 1995 and June 30,
1996, respectively ................................ 1,728,186 1,588,345
Due from related party .............................. -- 170,648
Inventory ........................................... 1,304,974 1,051,948
Prepaid expenses and other current assets ........... 130,208 112,668
----------- -----------
Total current assets ....................... 12,292,131 4,349,212
Property, plant and equipment, at cost, less
accumulated depreciation and amortization ............... 13,484,753 10,717,834
Deposits on equipment ..................................... 920,007 --
Goodwill .................................................. 285,156 328,564
Deferred charges and other assets ......................... 571,134 97,516
----------- -----------
Total ...................................... 27,553,181 15,493,126
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long term debt ................ 85,277
Notes Payable ....................................... 1,960,385
Accounts Payable .................................... 979,528 826,532
Accounts Payable-equipment .......................... 836,354 --
Due to related parties .............................. 1,062,438 --
Advances on reimbursable expenses ................... 750,000 --
Accrued expenses and other current liablities ....... 630,148 357,834
----------- -----------
Total current liabilities .................. 4,343,745 3,144,751
Long term debt ............................................ 8,593,216 6,627,447
Related party loan ........................................ 1,597,405 1,809,524
----------- -----------
Total liabilities .......................... 14,534,367 11,581,722
Stockholders' equity
Preferred Stock ($.001par value; 5,000,000 shares
authorized; none issued)
Common stock ($.001 par value; 15,000,000 shares
authorized; 2,375,000 shares issued and outstanding
December 31, 1995; 3,985,000 shares issued and
outstanding June 30, 1996) ........................ 3,985 2,375
Additional paid-in capital .......................... 13,267,638 3,900,875
Cummulative translation adjustment .................. (316,632) 3,216
Retained earnings ................................... 63,823 4,938
----------- -----------
Total stockholders' equity ................. 13,018,814 3,911,404
Total ...................................... 27,553,181 15,493,126
=========== ===========
</TABLE>
See accompanying notes to Consolidated Condensed Financial Statements
3
<PAGE> 4
BIGMAR INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
Second Quarter Ending June 30
(Unaudited)
<TABLE>
<CAPTION>
Second Quarter Six Months
---------------------------- ----------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales 1,940,062 591,239 3,838,064 1,776,949
Cost of Sales 1,212,094 350,755 2,363,193 1,410,710
---------- ---------- ---------- ----------
Gross Profit 727,968 240,484 1,474,871 366,239
Operating Expenses:
Research & Development 97,291 -- 185,685 --
Selling, General & Administrative 510,321 36,597 1,033,689 58,049
---------- ---------- ---------- ----------
Total Operating Expenses 607,612 36,597 1,219,374 58,049
---------- ---------- ---------- ----------
Operating Income 120,356 203,887 255,497 308,190
Interest Income (Expense) (112,983) (9,673) (196,443) (505)
Other Income (Expenses) 22 -- 22 --
---------- ---------- ---------- ----------
Income Before Taxes 7,395 194,214 59,076 307,685
Taxes 191 39,118 191 61,818
---------- ---------- ---------- ----------
Net Income 7,204 155,096 58,885 245,867
========== ========== ========== ==========
Earnings per share:
Primary -- $ 0.39 $ 0.02 $ 0.61
---------- ---------- ---------- ----------
Fully dilluted -- $ 0.39 $ 0.02 $ 0.61
---------- ---------- ---------- ----------
Average number of common
shares outstanding
Primary 2,585,000 400,188 2,481,154 400,188
---------- ---------- ---------- ----------
Fully dilluted 2,585,000 400,188 2,481,154 400,188
---------- ---------- ---------- ----------
</TABLE>
4
<PAGE> 5
BIGMAR INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Six Month Period Ending June 30
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net Income ....................................................... 58,886 245,868
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization .............................. 115,106 --
Change in operating assets & liabilities:
(Increase)/decrease in Accounts Receivable ................ (109,119) 287,856
(Increase)/decrease in inventory .......................... (342,686) 2,231
(Increase)/decrease in other current assets ............... 74,211 (7,435)
Increase/(decrease) in Accounts Payable ................... 1,020,503 (316,729)
Increase/(decrease) in accruals & other current liabilities 306,597 31,146
----------- -----------
Net cash provided by operations ....................... 1,123,498 242,937
----------- -----------
Cash flows from investing activities:
Purchase of property, plant & equipment ........................... (2,732,724) (1,162,241)
Deposits on equipment ............................................. (940,268) --
Increase in other assets .......................................... (495,886) --
----------- -----------
Net cash (used in) investing activities ............... (4,168,878) (1,162,241)
----------- -----------
Cash flows from financing activities:
Short term borrowing .............................................. (975,361) --
Net proceeds from issuance of equity securities ................... 9,371,146 --
Long term borrowing ............................................... 2,510,907 1,782,255
----------- -----------
Net cash provided by financing activities ............. 10,906,692 1,782,255
----------- -----------
Effect of exchange rate changes on cash ............................. (158,152) 39,618
----------- -----------
Net increase/(decrease) in cash ..................................... 7,703,160 902,569
Cash - beginning of period .......................................... 1,425,603 117,475
----------- -----------
Cash - end of period ................................................ 9,128,763 1,020,044
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for
Interest .............................................. 284,074 215,582
Income and related taxes .............................. 9,318 263
Equipment purchases included in accounts payable ........... 836,354 --
</TABLE>
5
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BIGMAR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Bigmar, Inc. ("Bigmar") is a Delaware corporation which owns 100% of the capital
stock of two Swiss corporations (Bioren SA (Bioren) and Bigmar Pharmaceuticals
SA (Bigmar Pharmaceuticals)) and 100% of the stock of a Delaware corporation
(Bigmar Therapeutics, Inc.).
In the opinion of management, the accompanying unaudited consolidated condensed
financial statements include all adjustments (consisting of normal recurring
accruals or adjustments only) necessary to present fairly the financial position
at June 30, 1996, and the results of operations and the cash flows for all
periods presented. The results of operations for the interim period periods are
not necessarily indicative of the results to be obtained for the entire year.
For a summary of significant accounting policies (which have not changed from
December 31, 1995) and additional financial information, see Bigmar's prospectus
dated June 19, 1996, including the consolidated financial statements and notes
thereto which should be read in conjunction with these financial statements.
2. PUBLIC OFFERING
On June 25, 1996, Bigmar completed a public offering of 1,610,000 shares,
inclusive of the over-allotment option for 210,000 shares, of Common Stock at
$7.50 per share. The net proceeds from this offering, after deducting all
associated offering costs, aggregated approximately $9.4 million. Approximately
$1.8 million of the proceeds was used to repay a short term loan. The remaining
net proceeds are designated to be used for the acquisition, testing and
manufacturing of oncological and biotechnological products and for general
corporate purposes, including working capital.
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3. PRO-FORMA
The following unaudited pro forma consolidated income statement data presents
the consolidated results of operations of Bigmar and subsidiaries for the
quarter and six months ended June 30, 1995 as if the acquisition of Bioren had
occurred at the beginning of the periods presented:
<TABLE>
<CAPTION>
Periods ended June 30, 1995 Quarter Six months
-----------------------------------------------------------------------
<S> <C> <C>
Net Sales $1,944,000 $4,706,000
Net Income $ 263,000 $ 365,000
</TABLE>
The above pro forma information does not purport to be indicative of what would
have occurred had the acquisition been made as of such date or of the results
which may occur in the future.
7
<PAGE> 8
BIGMAR INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Bigmar, Inc. and Subsidiaries ("The Company") is engaged in the marketing of
oncology products and the manufacturing and marketing of intravenous infusion
solutions in Europe. Bigmar has distribution rights to over twenty generic
oncological products and has established a network of companies within Europe
and in the United States to market its products. The Company received approval
to market in Switzerland several oncological products and expects to begin
marketing them this year. The company also has exclusive rights to two
proprietary products which are expected to obtain German regulatory approval,
one by late 1996 and the second by late 1997. The Company is currently involved
in the validation process of the new state-of-the-art facility in Switzerland.
Production is anticipated to commence by the end of this year.
Bigmar was incorporated in Delaware in September 1995 and has three wholly-owned
subsidiaries: Bigmar Pharmaceuticals, a Swiss corporation formed in January
1992; Bigmar Therapeutics, Inc., a Delaware corporation formed in September
1995; and, Bioren, a Swiss corporation formed in July 1986.
Financial results for the second quarter and six month period through June 30,
1995 are reflective of Bigmar SA only. Bioren SA had not yet been acquired and
Bigmar Inc. and Bigmar Therapeutics had not yet been incorporated and
essentially had no activities. The financial statements to be prepared for the
third quarter will reflect the results of operation for the third quarter of
1995 of these entities.
RESULTS OF OPERATIONS
Second quarter 1996 net sales amounted to $1,940,062, representing an increase
of $1,348,823 over second quarter 1995 net sales of $591,239. This increase is
mainly due to the inclusion of Bioren net sales ($1,377,223) in this year's
results and not in last year's. Reported net sales in the quarter were adversely
affected by an 8% fluctuation in the exchange rate between the US dollar and the
Swiss Franc.
8
<PAGE> 9
Net sales for the six month period through June 30, 1996 were $3,838,064, an
increase of $2,061,115 over net sales through June 30 last year of $1,776,949.
As in the second quarter comparison, the increase reflects the inclusion of
Bioren net sales ($2,902,894) in this year's results. Excluding Bioren from this
year's results, the change in net sales would have been a decline of $841,779.
This reflects the sale of prostate material during the first quarter of 1995 of
which none have been generated yet this year as well as a 4% adverse change in
exchange rates between the US dollar and the Swiss franc.
Gross profit for the quarter was $727,968, an increase of $487,484 over gross
profit of $240,484 for the same quarter last year. This increase primarily
reflects the effect of higher net sales offset by unfavorable exchange
conversion. Gross profit margin as a percentage of net sales for the second
quarter 1996 was 37.5%, a slight decline from second quarter 1995 margin of
40.7%. The decline primarily reflects the inclusion of the Bioren sales (lower
margin) in this year's results.
Gross profit for the first six months ended June 30, 1996 amounted to
$1,474,871, an increase of $1,108,632 over the Company's gross profit for the
same period last year of $366,239. This increase was a result of both higher net
sales and a significant improvement in margin due to favorable product mix. The
six-month gross margin through June 30, 1996 amounted to 38.4% compared to the
six-month margin for the same period a year ago of 20.6%. Last year's margin was
affected by the sale of a relatively large amount of prostate material in the
first quarter at a very low margin. Through June 30, 1996, the Company has not
sold any prostate material. Should sales of this product develop later this
year, the Company's overall margin will be negatively affected.
Research and development expenses in 1996 totaled $97,291 and $185,685 for the
second quarter and the six month period, respectively. Last year, the Company
did not incur any research and development expenses. A substantial portion of
total research and development activities during the quarter as well as during
the first six months of this year was directed at facility validation and
oncology product development.
Selling, general and administrative expenses ("SG&A") increased by $473,724 to
$510,321 for the second quarter this year as compared to $36,597 for the second
quarter a year ago. This increase represents the inclusion this year of expenses
9
<PAGE> 10
incurred by both Bioren and Bigmar, Inc.. SG&A expenses for the six-month period
this year were $1,033,689, an increase of $975,640 over last year's $58,049. As
in the quarter, the increase in SG&A expenses year-to-year represent the
inclusion of Bioren and Bigmar, Inc. operations in 1996.
SG&A as a percent of sales for the second quarter increased to 26.3% from last
year's level of 6.2%, reflecting the inclusion of Bioren and Bigmar, Inc.
expenses in this year's results. Similarly, SG&A as a percent of sales for the
six-month period rose to 26.9% from 3.3% last year.
Income from operations for the quarter was $120,356. This is a decrease of
$83,531 from the $203,887 operating income recorded for same period a year ago.
Operating income for the six-month period through June was $255,497, a decrease
of $52,693 from last year's income of $308,190. The decline in operating income
year-to-year for the quarter and the six-month period through June is mainly
attributable to the inclusion in this year's results of Bioren which, unlike
Bigmar SA, had an ongoing research and development program and a proportionately
larger SG&A base.
Net interest expense in the second quarter amounted to $112,983, an increase of
$103,310 from the same period a year ago of $9,673. Year-to-date June 30, 1996
net interest expense totaled $196,443, an increase of $195,938 from the
year-to-date June 30, 1995 amount of $505. These increases reflect the
assumption of debt related to: the Bioren acquisition; the purchase of
production equipment; and, a portion of the construction of the manufacturing
facility in Switzerland. Most of the interest expense related to the
manufacturing facility is being capitalized as a cost of the facility. Such
expenses approximated $113,000 for the six-month period through June 30, 1995
and $150,000 for the six month period through June 30, 1996.
Net income for the quarter and the six-month period through June 30, 1996 was
$7,204 and $58,885, respectively. This represents declines of $147,892 and
$186,982, respectively compared to last year's net income of $155,096 and
$245,867 for the quarter and six-month period, respectively. The decline in net
income for both periods primarily reflect higher operating expenses and higher
interest expenses associated with the acquisition of Bioren.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company's working capital approximated $7.9 million,
10
<PAGE> 11
reflecting an increase of $6.7 million from working capital of $1.2 million at
December 31, 1995. This increase is primarily a result of the completion in June
1996 of a public offering whereby the Company received, after deducting all
related offering expenses, approximately $9.4 million in net proceeds.
Subsequent to December 31, 1995 but prior to the public offering, the Company
assumed additional liabilities relating primarily to the acquisition and
installation of production equipment. These additional liabilities partially
offset the increase in working capital generated by the public offering .
Capital spending on property, plant and equipment during the six -month period
ended June 30, 1996 approximated $3.7 million. $3.1 million relates to the
construction and equipping of the manufacturing facility for which approximately
$800 thousand has been accrued as payable to equipment vendors.
At June 30, 1996, the Company had approximately $7.0 million in bank loans.
These monies were used to partially fund the acquisition of Bioren and to
acquire, construct and equip the manufacturing facility. Of this debt,
approximately $200 thousand is short term and $6.8 million is long term. The
long term debt has various maturities and repayment schedules. No payments are
due within the next twelve months. The interest rate cannot exceed 6.5% per
annum through December 31, 1998 for three facilities aggregating $3.8 million
and cannot exceed 6.5% per annum through May 16, 1999 for one facility of $3.0
million.
On June 30, 1996 the Company had approximately $1.6 million due to the former
owner of Bioren, collateralized by a second mortgage on the Bioren building.
The interest rate is based on industrial mortgage rates. Repayment of the loan
is in installments of $400 thousand in 1997, $400 thousand in 1998 and $800
thousand in 1999.
The Company also has certain payables and loans due to related parties totaling
approximately $2.7 million. Of this amount, $2.4 million represents two loans,
one of which is short term in nature ($800 thousand) and the remaining is long
term, with semi-annual payments commencing in June 1997 of approximately
$85,000.
Stockholders' equity at June 30, 1996 amounted to $13 million, a $9.1 million
increase from stockholders' equity at December 31, 1995. This increase reflects
the infusion of net proceeds from the public offering offset by adjustments to
11
<PAGE> 12
Swiss franc denominated assets resulting from fluctuations in exchange rates
between the Swiss franc and the U.S. dollar.
The Company anticipates that the net proceeds from the public offering, together
with cash flow from operations, should be sufficient to fund the Company's
operations for the next twelve months.
The Company believes that it has the product offerings, facilities, personnel,
and competitive and financial resources for continued business success, However,
the Company's future results of operations and other forward looking statements
contained in this document involve a number of risks and uncertainties.
12
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BIGMAR INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 4. In April 1996, the stockholders of Bigmar, Inc., acting by
unanimous written consent in lieu of a meeting, voted to (I) file a
restated and amended certificate of incorporation with the Secretary of
State of Delaware, which among other things provided for a
2.105263-for-1 reverse stock split of the outstanding shares of Bigmar,
Inc., and (ii) approve the 1996 Stock Option Plan of Bigmar, Inc. which
provides for the grant of options to purchase up to 300,000 shares of
Bigmar's Common Stock upon approval of the board of directors, as
provided for therein.
In June 1996, the stockholders of Bigmar, Inc., acting by unanimous
written consent in lieu of a meeting, voted to approve the Director
Option Plan of Bigmar, which provides for the grant of options to
purchase up to 50,000 shares of Bigmar's Common Stock as provided
therein.
ITEM 6. Exhibits and Reports on Form 8-K
(a) 27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter
ended June 30, 1996.
13
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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.
BIGMAR, INC.
------------
Registrant
/s/Gerald T. Sweeney
--------------------
Date: August 13, 1996 Gerald T. Sweeney, Chief Financial Officer
and Vice President-Finance
(Principal Financial and Accounting Officer and
duly authorized officer)
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 9,128,763
<SECURITIES> 0
<RECEIVABLES> 1,776,071
<ALLOWANCES> 47,885
<INVENTORY> 1,304,974
<CURRENT-ASSETS> 12,292,131
<PP&E> 13,684,597
<DEPRECIATION> 199,844
<TOTAL-ASSETS> 27,553,181
<CURRENT-LIABILITIES> 4,343,746
<BONDS> 0
0
0
<COMMON> 3,985
<OTHER-SE> 13,014,829
<TOTAL-LIABILITY-AND-EQUITY> 27,553,181
<SALES> 3,838,064
<TOTAL-REVENUES> 3,838,064
<CGS> 2,363,193
<TOTAL-COSTS> 2,363,193
<OTHER-EXPENSES> 185,685
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 281,094
<INCOME-PRETAX> 59,076
<INCOME-TAX> 191
<INCOME-CONTINUING> 58,885
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58,885
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
