<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
X FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
- ---
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---- EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO .
----------- ---------
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 May 19, 1997, 3,985,000 shares of common stock of the Registrant were
outstanding.
<PAGE> 2
BIGMAR, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page no.
<S> <C> <C>
Part I FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheet as of March 31, 1997, and
December 31, 1996 (Unaudited)....................................3
Consolidated Condensed Statements of Income for the three months
ended March 31, 1997 and 1996 (Unaudited).........................4
Consolidated Condensed Statement of Cash Flows for the three
months ended March 31, 1997 and 1996 (Unaudited)..................5
Notes to Consolidated Condensed Financial
Statements (Unaudited)..............................................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...............................7
Part II OTHER INFORMATION:
Item 5. Other information..................................................13
Item 6. Exhibits and reports on Form 8-K...................................13
SIGNATURES.........................................................14
</TABLE>
2
<PAGE> 3
BIGMAR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31 December 31
1997 1996
-------------- ---------------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash.................................................................. $ 1,805,738 $ 4,362,938
Investments, at market................................................ 8,736 9,444
Accounts receivable, net of allowances of $41,436
and $44,703 at March 31, 1997 and December 31,
1996, respectively.................................................. 982,569 772,491
Inventory............................................................. 1,024,387 950,471
Prepaid expenses and other current assets............................. 299,611 470,584
----------- -----------
Total current assets....................................... 4,121,041 6,565,928
Property, plant and equipment, at cost, less
accumulated depreciation and amortization....................................... 16,773,708 17,407,140
Intangible Assets 266,179 297,101
----------- -----------
Total...................................................... 21,160,928 24,270,169
=========== ===========
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Accounts Payable...................................................... 1,592,125 1,721,846
Notes Payable......................................................... 1,381,215 1,529,993
Current portion of long-term debt..................................... 86,326 466,594
Due to related parties................................................ 208,648 983,490
Advances on reimbursable expenses..................................... 750,000 750,000
Accrued expenses and other current liabilities........................ 503,479 568,903
----------- -----------
Total current liabilities.................................. 4,521,793 6,020,826
Long term debt.................................................................... 6,802,486 7,353,490
----------- -----------
Total liabilities.......................................... 11,324,279 13,374,316
Stockholders' equity
Preferred Stock ($.001par value; 5,000,000 shares
authorized; none issued)............................................
Common stock ($.001 par value; 15,000,000 shares
authorized; 3,985,000 shares issued and outstanding
in 1997 and 1996)................................................... 3,985 3,985
Additional paid-in capital............................................ 13,333,366 13,333,366
Cumulative translation adjustment..................................... (1,106,428) (806,892)
Retained earnings (deficit)........................................... (2,394,274) (1,634,606)
----------- -----------
Total stockholders' equity................................. 9,836,649 10,895,853
Total...................................................... 21,160,928 24,270,169
=========== ===========
</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
ended March 31
-------------------------------------
1997 1996
---------- ----------
<S> <C> <C>
Net Sales 1,730,099 1,898,002
Cost of Sales 1,373,292 1,151,099
---------- ----------
Gross Profit 356,807 746,903
Operating Expenses:
Research & Development 218,174 88,394
Selling, General & Administrative 932,272 547,463
---------- ----------
Total Operating Expenses 1,150,446 635,857
---------- ----------
Operating Income (Loss) (793,639) 111,046
Interest Income (Expense) (91,352) (83,460)
Other Income (Expenses) 140,171 24,095
---------- ----------
Income (Loss) Before Taxes (744,820) 51,681
Taxes - -
---------- ----------
Net Income (Loss) (744,820) 51,681
========== ==========
Net income (Loss) per share: $ ( 0.19) $ 0.02
---------- ----------
Average number of common
shares outstanding: 3,985,000 2,375,000
---------- ----------
</TABLE>
See accompanying notes to Consolidated Financial Statements
4
<PAGE> 5
BIGMAR, INC. AND SUBSIDIARIES
Consolidated Condensed Statements Of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three month period
ended March 31
---------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net Income................................................................. $ (744,820) $ 51,681
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization..................................... 142,162 48,743
Change in operating assets & liabilities:
(Increase)/decrease in accounts receivable....................... (322,602) (425,615)
(Increase)/decrease in related party receivable.................. 163,975
(Increase)/decrease in inventory................................. (213,552) (111,439)
(Increase)/decrease in other current assets...................... 107,412 95,522
Increase due to related party.................................... 68,013
Increase/(decrease) in accounts and other payable................ (552,212) 793,198
Increase in advances on reimbursable expenses.................... 750,000
Increase/(decrease) in accruals and other current liabilities.... 3,623 (105,729)
----------- -----------
Net cash provided by operations....................... (1,579,989) 1,328,349
----------- -----------
Cash flows from investing activities:
Purchase of property, plant & equipment..................................... (1,264,882) (988,633)
Deposits on equipment....................................................... (682) (1,553,315)
Increase in other assets.................................................... (6,630) (240,566)
----------- -----------
Net cash (used in) investing activities............... (1,272,194) (2,782,514)
----------- -----------
Cash flows from financing activities:
Short term borrowing........................................................ (311,116) -
Net proceeds from issuance of equity securities............................. - -
Long term borrowing......................................................... 530,936 1,559,731
Deferred offering costs..................................................... (141,515)
----------- -----------
Net cash provided by financing activities............. 219,820 1,418,216
----------- -----------
Effect of exchange rate changes on cash....................................... 75,163 (132,099)
----------- -----------
Net increase/(decrease) in cash............................................... (2,557,200) (168,048)
Cash - beginning of period.................................................... 4,362,938 1,425,603
----------- -----------
Cash - end of period.......................................................... $ 1,805,738 $ 1,257,555
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for
Interest............................................... $ 13,284 $ 13,284
Income taxes........................................... $ 8,673 $ 8,673
Equipment purchases included in accounts payable.................. $ 420,489 $ 1,071,821
</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 March 31, 1997, 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, 1996) and additional financial information, see Bigmar's Annual
report on form 10-K for the year ended December 31, 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 an initial public offering of 1,610,000
shares, inclusive of the over-allotment option for 210,000 shares, of common
stock, par value $.001 per share ("Common Stock") at $7.50 per share ("IPO").
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
designated to be used for the acquisition, testing and manufacturing of
oncological products and for general corporate purposes, including working
capital.
6
<PAGE> 7
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
oncological 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 has
received provisional approval for the manufacturing in Switzerland of two
generic oncological products, calcium leucovorin and methotrexate. The Company
anticipates that all regulatory approvals for the sale of these products in
Germany, Switzerland, Italy and Spain will be obtained during the second half
of 1997. There can be no assurance, however, that such approvals will ever be
obtained. In addition the Company has received approval to market doxorubicin,
methotrexate and calcium leucovorin in Germany.
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.
Certain statements under this "Management Discussion and Analysis of Financial
Condition and Results of Operations" constitute "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.
7
<PAGE> 8
RESULTS OF OPERATIONS
First quarter 1997 net sales amounted to $1,730,099, representing a decrease of
$167,903 or 9% over first quarter 1996 net sales of $1,898,002. This decrease
was due to a reduction of approximately $65,000, $25,000 and $77,000 in sales
of prostate materials, generic oncological products, and pharmaceutical
products respectively. Net sales in the quarter were also adversely affected by
a fluctuation in average rate of approximately 18% in the exchange rate between
the U.S. dollar and the Swiss franc.
Cost of goods sold increased by $222,193 to $1,373,292 for the three months
ended March 31, 1997 as compared to $1,151,099 for the comparable period in
1996. This increase was primarily due to higher raw material product costs.
Gross profit for the quarter was $356,807, a decrease of $390,096 over gross
profit of $746,903 for the same quarter last year. This decrease primarily
reflects the effect of lower sales of Prostate Materials, pharmaceutical
products and higher costs offset by an unfavorable foreign exchange conversion.
Through March 31, 1997, the Company has not sold any pharmaceutical products.
Gross profit margin as a percentage of net sales for the first quarter 1997 was
21%, a decline from first quarter 1996 margin of 39%. The decline primarily
reflects competitive pricing tactics in the IV Solution product line. The
Company expects that the tight margins in the IV Solution 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.
Research and development expenses for the three months ended March 31, 1997
were $218,174 compared to $88,394 for the comparable period in 1996. The
increase reflects expenditures related to the formulation and development of
oncology products and expanded research and development activities in order to
obtain regulatory approval for manufacturing and marketing oncology products.
The Company also incurred additional expenditures of approximately $198,263
during the three months ended March 31, 1997 related to equipment and facility
validation, and expanded research and development activities in order to obtain
regulatory approval for manufacturing and marketing oncological products. These
expenditures were deferred and will be expensed upon commencement of operations
at the Bigmar manufacturing facility ("Bigmar Facility"). While the Company has
capitalized certain expenditures related to the validation of the new
8
<PAGE> 9
Bigmar Facility, expenditures related to individual products have 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 research and development expenses will continue to be significant.
On February 12, 1997 the Company received provisional approval by the
Intercatonal Office for the Control of Medications ("IKS") to manufacture
calcium leucovorin for injection. IKS, the Swiss counterpart to the U.S. Food
and Drug Administration ("FDA"), completed its initial inspection of Bigmar's
Barbengo facility on January 14, 1997.
With this provisional approval, the Company has commenced manufacturing calcium
leucovorin for injection, for which the IKS will evaluate initial batches prior
to commercial distribution. The IKS evaluation is anticipated to take place
during the second quarter of 1997.
Selling, general and administrative expenses ("SG&A") increased by $384,809 or
70% to $932,272 for the first quarter this year as compared to $547,463 for the
first quarter of 1996. First quarter 1997 SG&A expenses reflect an increase in
the number of employees and related expenses and activity in both the U.S. and
in Switzerland.
Loss from operations for the three month period ended March 31, 1997 totaled
$793,639 compared to income from operations of $111,046 for the comparable
period in 1996. This increase in operating losses primarily reflects the
decline in gross profits and higher SG&A and research and development
expenditures.
Net interest expense for the three month period ended March 31, 1997 amounted
to $218,936, an increase of $135,476 from the comparable period in 1996 of
$83,460. Interest expense for the first quarter of 1997 was partially offset
by interest income generated by investing the proceeds of the IPO which
amounted to $127,584. The increase reflects the assumption of debt related to:
the Bioren acquisition; the purchase of production equipment; construction of
the manufacturing facility in Switzerland; and, a $125,000 payment to
Chemholding SA for the guarantee of $1,174,000 towards a $2,417,000 loan with
Union Bank of Switzerland. A portion of the interest expense related to the
Bigmar Facility is being capitalized as a cost of the Bigmar Facility. Such
expenses approximated $80,000 for the three-month period through March 31, 1997
and $62,000 for first quarter of 1996.
9
<PAGE> 10
Net loss for the three month period ended March 31, 1997 was $744,820 as
compared to net income of $51,681 for the three month period ended March 31,
1996. The first quarter net loss this year represents a loss of $796,501 from
the first quarter last year. 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.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1997 and December 31, 1996, the Company had cash and cash
equivalents of $1,805,738 and $4,362,938, respectively. The Company's working
capital approximated $(400,752) and $545,102 at March 31, 1997 and December 31,
1996 respectively. The Company has incurred and will continue to incur,
substantial expenditures for research and development activities related to
bringing its products to the commercial market. The Company intends to devote
significant additional funds to product development, formulation, clinical
testing, manufacturing validation, product registration, and other activities
required for regulatory review of generic oncological products. The amount
required to complete such activities will depend upon the outcome of regulatory
reviews. The regulatory bodies may require more testing than is currently
planned by the company. There can be no assurance that the Company's generic
oncological products will be approved for marketing by the FDA or any foreign
government agency, or that any such products will be successfully introduced or
achieve market acceptance.
Property, plant and equipment at March 31, 1997 totaled $16,773,708 compared to
$17,407,140. This decrease of $633,432 is primarily a result of a fluctuation
of approximately 8% in the exchange rate between the U.S. dollar and the Swiss
franc.
At March 31, 1997, the Company had approximately $8,270,027 in outstanding
third party loans, $1,467,541 of this 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.
On March 27, 1997 the Company agreed to pay a $125,000 fee to Chemholding SA
for service charges to be a surety for Bigmar Pharmaceuticals in the amount of
$1.3 million for the foregoing loans with respect to the Bigmar Facility. The
10
<PAGE> 11
Company does not anticipate any additional service charges to result from
Chemholding being a surety.
The Company anticipates capital expenditures for the next nine months to be
approximately $1.0 million. Including approximately $.5 million for the purchase
of laboratory equipment to support research and development and stability
testing for the projected oncological pipeline, and approximately $.5 million
for equipment validation of the Bigmar Facility.
Since the Company does not anticipate product sales of the Bigmar Facility to
be of sufficient volume to generate positive cash flow for the first half of
1997, the Company will be required to supplement its cash position from time to
time through additional financing (debt or equity) or entering into
development, marketing or other collaborative arrangements.
The results of the Company's operations are affected by changes in exchange
rates between currencies. Changes in exchange rates may negatively affect the
Company's consolidated net sales and gross profit margins from international
operations. The Company is exposed to the risk that the dollar-value equivalent
of anticipated cash flow will be adversely affected by the changes in foreign
currency exchange rates. At such time as the Company determines that this risk
is significant, the Company may attempt to manage that risk by utilizing
hedging techniques, although there can be no assurance that the Company will be
able to obtain such additional financing or that such financing, if available,
will be on acceptable terms.
On March 15, 1996, the Company was granted a $3.5 million line of credit on an
unsecured basis, with a U.S. Bank. This credit line bears interest at the
Bank's prime commercial lending rate which is currently 8.5%. Support for the
line of credit will be provided by the personal guarantees of Cynthia R. May (a
principal of Protyde Pharmaceuticals, Inc.) & Frederick H. May (husband of
Cynthia R. May), Harold C. & Janet A. Baldauf, Jr. (father and mother of
Cynthia R. May), and John G. Tramontana (Chairman of the Board, President,
and Chief Executive Officer of the Company), and Deborah K. Ruyan Tramontana
(wife of John G. Tramontana). The Company anticipates that the remaining net
proceeds received from the IPO, cash flow from operations (if any), and the
line of credit will be sufficient to fund the Company's operations, through
December 1997. There can
11
<PAGE> 12
be no assurance that events effecting the Company's operations will not result
in the Company depleting its funds before that time.
The Swiss Federal Code of Obligation provides that at least 5% of a Swiss
company's net income each year must be appropriated to a legal reserve until
such time as this reserve is equivalent to 20% of the company's paid-in share
capital. In addition, 10% of any distribution made by a company in excess of a
5% dividend must also be appropriated to the legal reserve. The reserve of up
to 5% of the share capital is not available for distribution to stockholders.
12
<PAGE> 13
BIGMAR INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) 10.49 Letter of Line of Credit, dated May 15, 1997,
between Citizens Bank and the Registrant.
(b) Reports on Form 8-K
As reported pursuant to the report filed on
Form 8-K on May 20, 1997 with the Securities
and Exchange Commission, on May 2, 1997,
Chemholding SA , and four other original
holders of the Common Stock sold their shares
of Common Stock (1,293,662 shares) to Mr.
John G. Tramontana, Chairman of the Board,
President, and Chief Executive Officer of the
Company. The number of shares of Common Stock
purchased and the consideration paid were as
follows:
1,010,563 shares for a price equal to $0.5638 per
share. 283,100 shares for a price equal to
$6.4401 per share.
The shares of Common Stock were sold in a privately
negotiated transaction in Switzerland, and not
through any securities exchange.
With this purchase of common stock, Mr. Tramontana,
beneficially owns 2,392,031 shares, or 58.2%
(includes 125,000 Common Stock options currently
exercisable within the next 60 days) of the total
outstanding.
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
Michael K. Medors
--------------------------------
Date: May 20, 1997 /s/ Michael K. Medors,
Chief Financial Officer,
Treasurer and Secretary
14
<PAGE> 1
Exhibit 10.49
[logo]
Citizens
Bank
May 15, 1997
Mr. Michael Medors
Secretary-Treasurer
Bigmar, Inc.
6660 Doubletree Ave.
Columbus, OH 43229
Dear Mr. Medors:
This letter will confirm that Citizens Bank has approved for Bigmar, Inc., a
Three Million Five Hundred Thousand and no/100 Dollar ($3,500,000.00) line of
credit. Said line of credit will be made available on an unsecured basis,
however, support for the line will be provided by the personal guarantees of
Harold C. & Janet A. Baldauf, Frederick H. May, Jr. & Cynthia R. May, and John
G. Tramontana & Debbie Ruyan Tramontana.
Any borrowings against the line of credit will be at the rate announced from
time to time by Citizens Bank as its prime commercial lending rate. Based on
today's prime rate, the interest rate would be 8.5%. Borrower's primary deposit
relationship is to be maintained at Citizens Bank, and proceeds from any
borrowings will be directly deposited to one of Borrower's deposit accounts.
Other terms and conditions of any borrowings will be specified in the loan
documents which will be prepared for signature.
We are pleased to provide this credit facility to Bigmar, Inc., and look
forward to continued business in the future.
Sincerely,
/s/ PAMELA K. WINTERS
- ---------------------
Pamela K. Winters
Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001012466
<NAME> BIGMAR, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,805,738
<SECURITIES> 0
<RECEIVABLES> 1,024,005
<ALLOWANCES> 41,436
<INVENTORY> 1,024,387
<CURRENT-ASSETS> 4,121,041
<PP&E> 16,826,574
<DEPRECIATION> 52,866
<TOTAL-ASSETS> 21,160,928
<CURRENT-LIABILITIES> 4,512,793
<BONDS> 0
0
0
<COMMON> 3,985
<OTHER-SE> 9,832,664
<TOTAL-LIABILITY-AND-EQUITY> 21,160,928
<SALES> 1,730,099
<TOTAL-REVENUES> 1,730,099
<CGS> 1,373,292
<TOTAL-COSTS> 1,373,292
<OTHER-EXPENSES> 218,174
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 218,936
<INCOME-PRETAX> (744,820)
<INCOME-TAX> 0
<INCOME-CONTINUING> (744,820)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (744,820)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
</TABLE>
