<PAGE> 1
UNITED STATES 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 September 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 X NO__.
As of November 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> <C>
Part I FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1996
(Unaudited) and December 31, 1995..................................3
Consolidated Condensed Statements of Income for the three and
nine month periods ended September 30, 1996 and
1995 (Unaudited)...................................................4
Consolidated Condensed Statements of Cash Flows for the nine
months ended September 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 6. Exhibits and reports on Form 8-K..........................................13
SIGNATURES................................................................14
</TABLE>
2
<PAGE> 3
BIGMAR INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30 December 31
1996 1995
------------ -----------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash......................................................... $ 6,103,356 $ 1,425,603
Accounts receivable, net of allowances of $47,847
and $47,885 at December 31, 1995 and September 30,
1996, respectively ......................................... 1,324,366 1,588,345
Due from related party ....................................... 162,037 170,648
Inventory .................................................... 1,021,451 1,051,948
Prepaid expenses and other current assets .................... 397,291 112,668
------------ -----------
Total current assets ......................... 9,008,501 4,349,212
Property, plant and equipment, at cost, less
accumulated depreciation and amortization ............................ 15,290,549 10,717,834
Goodwill ............................................................... 276,081 328,564
Deferred charges and other assets ...................................... 1,032,912 97,516
------------ -----------
Total........................................ $ 25,608,043 $15,493,126
============ ===========
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Notes Payable ................................................ $ 863,577 $ 1,960,385
Accounts Payable ............................................. 183,993 826,532
Accounts Payable-equipment ................................... 582,513 -
Due to related parties ....................................... 668,580 -
Advances on reimbursable expenses ............................ 750,000 -
Accrued expenses and other current liabilities ............... 466,470 357,834
------------ -----------
Total current liabilities .................... 3,515,133 3,144,751
Long term debt ......................................................... 10,008,812 6,627,447
Related party loan ..................................................... - 1,809,524
------------ -----------
Total liabilities ............................ 13,523,945 11,581,722
Stockholders' equity
Preferred Stock ($.001 par value; 5,000,000 shares
authorized; none issued)
Common stock ($.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 September 30, 1996) ............................ 3,985 2,375
Additional paid-in capital ................................... 13,253,262 3,900,875
Cumulative translation adjustment ............................ (290,240) 3,216
Retained earnings ............................................ (882,909) 4,938
------------ -----------
Total stockholders' equity ................... 12,084,098 3,911,404
Total........................................ $ 25,608,043 $15,493,126
============ ===========
</TABLE>
See accompanying notes to Consolidated Financial Statements
3
<PAGE> 4
BIGMAR INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three month period Nine month period
ended September 30 ended September 30
---------------------------- -----------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 1,743,824 $ 1,654,071 $ 5,581,888 $ 3,431,020
Cost of Sales 1,377,342 1,142,176 3,740,535 2,552,886
----------- ----------- ----------- -----------
Gross Profit 366,482 511,895 1,841,353 878,134
Operating Expenses:
Research & Development 583,402 118,308 769,087 118,308
Selling, General & Administrative 665,272 522,460 1,698,961 580,509
----------- ----------- ----------- -----------
Total Operating Expenses 1,248,674 640,768 2,468,048 698,817
----------- ----------- ----------- -----------
Operating Income/(Loss) (882,192) (128,873) (626,695) 179,317
Interest Income (Expense) (70,752) (83,591) (267,195) (84,096)
Other Income (Expenses) 6,604 (318) 6,626 (318)
----------- ----------- ----------- -----------
Income/(Loss) Before Taxes (946,340) (212,782) (887,264) 94,903
Provision for taxes 392 (25,759) 583 36,059
----------- ----------- ----------- -----------
Net Income/(Loss) $ (946,732) $ (187,023) $ (887,847) $ 58,844
=========== =========== =========== ===========
Earnings/(Loss) per share: $ (0.24) $ (0.09) $ (0.30) $ 0.06
----------- ----------- ----------- -----------
Average number of shares of
common stock outstanding: 3,985,000 2,143,231 2,988,333 987,587
----------- ----------- ----------- -----------
</TABLE>
See accompanying notes to Consolidated Financial Statements
4
<PAGE> 5
BIGMAR INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine month period ended September 30
------------------------------------
1996 1995
---------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income/(loss) ................................................. $ (887,847) $ 58,844
Adjustments to reconcile net income/(loss) to
net cash provided by operating activities:
Depreciation and amortization .............................. 184,986 67,097
Change in operating assets & liabilities:
Decrease in Accounts Receivable ............................ 37,185 165,451
(Increase)/decrease in inventory .......................... (53,971) 116,614
(Increase)/decrease in other assets ....................... (211,905) 225,417
Increase in Accounts and Other Payable .................... 92,842 302,505
Increase in accruals & other current liabilities .......... 887,406 45,386
------------ -----------
Net cash provided by operating activities ........... 48,696 981,314
------------ -----------
Cash flows from investing activities:
Purchase of property, plant & equipment ............................ (5,122,063) (2,362,976)
Purchase of Bioren SA (net of cash required) ....................... (4,906,110)
Increase in other assets ........................................... (956,261) 29,314
------------ -----------
Net cash (used in) investing activities ............. (6,078,324) (7,239,772)
------------ -----------
Cash flows from financing activities:
Short term borrowing proceeds/(repayment) .......................... (1,016,641) 19,951
Net proceeds from issuance of equity securities .................... 9,363,997 3,813,160
Long term borrowing ................................................ 2,342,812 4,134,017
------------ -----------
Net cash provided by financing activities ........... 10,690,168 7,967,128
------------ -----------
Effect of exchange rate changes on cash .............................. 17,213 76,768
------------ -----------
Net increase in cash ................................................. 4,677,753 1,785,438
Cash - beginning of period ........................................... 1,425,603 117,475
------------ -----------
Cash - end of period ................................................. $ 6,103,356 $ 1,902,913
============ ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for
Interest ............................................ $ 338,225 $ 305,100
Income and related taxes ............................ $ 9,905 $ 522
Equipment purchases included in accounts payable ........... $ 582,513 -
</TABLE>
See accompanying notes to Consolidated Financial Statements
5
<PAGE> 6
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 September 30, 1996, and the results of operations and the cash flows for all
periods presented. The results of operations for the interim period 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
$1.9 million of the proceeds was used to repay a short term loan. The remaining
net proceeds are being used for the acquisition, testing and manufacturing of
oncological and biotechnological products and for general corporate purposes,
including working capital.
3. PRO-FORMA
The following unaudited pro forma consolidated income statement data presents
the consolidated results of operations of Bigmar and subsidiaries for the nine
6
<PAGE> 7
month period ended September 30, 1995 as if the acquisition of Bioren had
occurred at the beginning of the period.
<TABLE>
<S> <C>
Net Sales $ 6,360,000
Net Income $ 142,000
</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 nine-month period through September 30, 1995 do not
include the first six months of operations of Bioren, as it had not yet been
acquired by the Company. Further, Bigmar Inc. and Bigmar Therapeutics, Inc. were
incorporated in September 1995 and essentially had no activity prior to that
time.
RESULTS OF OPERATIONS
- ---------------------
Net sales for the three month period ended September 30, 1996 amounted to
$1,743,824, representing an increase of $89,753 or 5.4% over net sales of
$1,654,071 for the comparable period in 1995. This increase is a result of
slightly higher IV infusion product sales and higher sales of oncology raw
materials. Net sales in the quarter were adversely affected by a fluctuation of
approximately 5% in the exchange rate between the US dollar and the Swiss franc.
Net sales for the nine month period ended September 30, 1996 were $5,581,888, an
increase of $2,150,868 or 62.7% over net sales for the comparable period in 1995
of $3,431,020. This increase reflects the inclusion of Bioren net sales for the
nine month period ended September 30, 1996 as compared to the inclusion of only
8
<PAGE> 9
third quarter sales in 1995 as Bioren had not yet been acquired. Excluding
Bioren's first six months sales from this year's results, the change in net
sales for the nine month period through September 30 would have been a decline
of $752,026. This primarily reflects the sale of prostate material during the
first quarter of 1995 of which none have been recorded yet this year as well as
an adverse change of approximately 3% in exchange rates between the US dollar
and the Swiss franc.
Gross profit for the three month period ended September 30, 1996 was $366,482, a
decrease of $145,413 from gross profit of $511,895 for the comparable period in
1995. Gross profit as a percentage of net sales for the quarter was 21.0%, a
decline from the third quarter 1995 margin of 30.9%. The decline in both dollars
and the gross profit margin primarily reflects competitive pricing tactics in
the IV solution line and higher proportion of lower-margin raw material sales
relative to finished product in the oncology business. The Company expects that
the tight margins in the IV product line will continue but also anticipates that
the Company's overall gross margin will improve once new products are added to
the oncology line.
Gross profit for the nine month period ended September 30, 1996 amounted to
$1,841,353, an increase of $963,219 over gross profit for the same period in
1995 of $878,134. This increase was a result of both higher net sales and an
improvement in margin due to favorable product mix in the first six month
period. The nine month gross margin through September 30, 1996 amounted to 33.0%
compared to the nine month margin for the same period in 1995 of 25.6%. The nine
month margin in 1995 was affected by the sale of a relatively large amount of
prostate material in the first quarter at a relatively low margin. Through
September 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 ("R&D") expenses in 1996 totaled $583,402 and $769,087
for the three and nine month periods through September, respectively. In 1995,
the Company incurred $118,308 of R&D expenses through September 30, all of which
was incurred in the third quarter. A substantial portion of total R&D activities
during the third quarter as well as during the first nine months of 1996 was
directed at product development, formulation, clinical testing and product
registration.
While the Company has capitalized certain expenditures related to the validation
of the new manufacturing plant, expenditures related to individual products have
9
<PAGE> 10
been expensed as incurred. In view of the anticipated number of products
scheduled for registration in the next several years, the Company anticipates
that the level of R&D expenses will continue to be significant.
On October 28, 1996 the Company met with the IKS, the Swiss counterpart to the
US's Food & Drug Administration ("FDA"), during which the IKS officials gave a
positive initial assessment of the Company's new manufacturing facility in
Switzerland. Official inspection is scheduled for early January 1997. Approval
will allow the Company to commence selling product throughout Europe and a
number of other countries in the Eastern Hemisphere. In regards to the
manufacturing plant FDA validation, the first production batch is scheduled for
December, with the initial ANDA (Abbreviated New Drug Application) submission
scheduled for the first quarter of 1997. The company continues to receive
purchase orders for oncology products from pharmaceutical distributors in
anticipation of the IKS approval of the manufacturing facility.
Selling, general and administrative expenses ("SG&A") for the three month period
through September 30, 1996 increased by $142,812 or 27.3% to $665,272 over the
$522,460 recorded for same period in 1995. SG&A expenses for the nine month
period through September 30,1996 were $1,698,961, an increase of $1,118,452 over
those recorded for the comparable period in 1995 of $580,509. SG&A as a percent
of sales for the third quarter increased to 38.2% from the comparable period in
1995 of 31.6%. SG&A as a percent of sales for the nine month period rose to
30.4% from 16.9% in 1995. The increase in SG&A expenses for the nine month
period is largely a result of the fact that SG&A for the same period in 1995
does not include six months of Bioren expenses. Third quarter 1996 SG&A expenses
reflect an increase in the number of employees and related expenses and
expansion of activity in both the U.S. and in Switzerland. During the nine
month period ended September 1996, the Company incurred approximately $170,000
in administrative and selling expenses, the services of which were provided by
a related party. The Company is currently performing these services in house.
Loss from operations for the three month period ended September 30, 1996
totaled $882,192 compared to a loss of $128,873 for the comparable period in
1995. This increase in operating losses primarily reflects the decline in gross
profits and higher R&D expenditures. For the nine month period through
September, 1996 a loss from operations of $626,695 was recorded. This compares
to operating income in 1995 of $179,317. In addition to the increase in R&D
expenditures, this year's SG&A includes three quarters of Bioren SG&A while last
year's SG&A includes just the third quarter.
Net interest expense for the three month period ended September 30, 1996
amounted to $70,753, a decline of $12,838 from the comparable period in 1995 of
$83,591. Interest expense for the third quarter of 1996 was partially offset by
10
<PAGE> 11
interest income generated by investing the proceeds of the initial public
offering which amounted to $78,126. Year-to-date net interest expense totaled
$267,196, an increase of $183,100 from last year's expense of $84,096. These
increases reflect the assumption of debt related to: the Bioren acquisition;
the purchase of production equipment; and, construction of the manufacturing
facility in Switzerland. A portion of the interest expense related to the
manufacturing facility is being capitalized as a cost of the facility. Such
expenses approximated $143,104 for the nine-month period through September 30,
1995 and $270,050 for the nine-month period through September 30, 1996.
Net losses for the three and nine month period through September 30, 1996 were
$946,732 and $887,847, respectively. The third quarter net loss this year
represents an increase of $759,709 from the third quarter 1995 net loss of
$187,023. This increase primarily reflects the intensification of oncology
product development and registration activities as well as staffing and related
activities required to support the development of the oncology business. The
nine month net loss in 1996 compares unfavorably to the nine month net income in
1995 of $58,844, reflecting higher operating expenses and higher interest
expenses, the latter associated with the acquisition of Bioren and a portion of
the manufacturing facility construction.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At September 30, 1996, the Company's working capital approximated $5.5 million,
reflecting an increase of $4.3 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 through which 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.
Property, plant and equipment at September 30, 1996 totaled $15.3 million
compared to $10.7 million at December 31, 1995. The major share of this $4.6
million increase relates to the construction and equipping of the oncology
manufacturing facility in Switzerland.
11
<PAGE> 12
At September 30, 1996, the Company had approximately $10.9 million outstanding
in third party loans, $900 thousand of which being short term in nature. These
monies were used to partially fund the acquisition of Bioren and to acquire,
construct and equip the manufacturing facility. The long term portion has
various maturities and repayment schedules. No payments on long term debt are
due within the next twelve months.
Included in the $10.9 million is a $1.6 million loan due to the former owner of
Bioren, collateralized by a third mortgage on the Bioren building. The interest
rate is based on local Swiss 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 due to related parties
totaling approximately $700 thousand and other payables due to equipment
suppliers totaling $600 thousand. Further, the Company has a contractual
obligation with a marketing partner whereby the partner has remitted
approximately $800 thousand to the Company in exchange for the Company's
undertaking of certain actions (which have already commenced) needed to provide
production capabilities for the partnership.
Stockholders' equity at September 30, 1996 amounted to $12.1 million, an $8.2
million increase from stockholders' equity at December 31, 1995. This increase
reflects the infusion of net proceeds from the public offering offset by
year-to-date losses and adjustments to Swiss franc-denominated assets resulting
from fluctuations in the exchange rate 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.
Certain statements under this caption "Management Discussion and Analysis of
Financial Condition and Results of Operations" constitutes "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, including, without limitation, statements regarding future cash
requirements. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: delays in product development; problems or delays in clinical
testing; failure or delays in receiving regulatory approvals; lack of
proprietary rights; or, change in business strategy or development plans.
12
<PAGE> 13
BIGMAR INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
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 September 30, 1996.
13
<PAGE> 14
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: November 12, 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
<CIK> 0001012466
<NAME> BIGMAR, INC.
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 6,103,356
<SECURITIES> 0
<RECEIVABLES> 1,372,251
<ALLOWANCES> 47,885
<INVENTORY> 1,021,451
<CURRENT-ASSETS> 9,008,501
<PP&E> 15,541,309
<DEPRECIATION> 250,760
<TOTAL-ASSETS> 25,608,043
<CURRENT-LIABILITIES> 3,515,133
<BONDS> 0
<COMMON> 3,985
0
0
<OTHER-SE> 12,080,113
<TOTAL-LIABILITY-AND-EQUITY> 25,608,043
<SALES> 5,581,888
<TOTAL-REVENUES> 5,581,888
<CGS> 3,740,535
<TOTAL-COSTS> 3,740,535
<OTHER-EXPENSES> 769,087
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 367,282
<INCOME-PRETAX> (887,264)
<INCOME-TAX> 583
<INCOME-CONTINUING> (887,847)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (887,847)
<EPS-PRIMARY> (.30)
<EPS-DILUTED> (.30)
</TABLE>
