<PAGE>
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 SEPTEMBER 30, 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.)
9711 SPORTSMAN CLUB ROAD, JOHNSTOWN, OHIO 43031
- ----------------------------------------- -----
(Address of principal executive offices) (Zip code)
(614) 966-5800
--------------
(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 14, 1997, 4,185,000 shares of common stock of the Registrant
were outstanding.
<PAGE>
BIGMAR, INC. AND SUBSIDIARIES
INDEX
Page no.
Part I FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1997, and
December 31, 1996 (Unaudited) . . . . . . . . . . . . . . . . . . 3
Consolidated Condensed Statements of Operations for the quarters
and nine month periods ended September 30, 1997 and
1996 (Unaudited). . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Condensed Statement of Cash Flows for the nine
months ended September 30, 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 . . . . . . . . . . . . . . . 9
Part II OTHER INFORMATION:
Item 5. Other information . . . . . . . . . . . . . . . . . . . . . . . . .14
Item 6. Exhibits and reports on Form 8-K. . . . . . . . . . . . . . . . . .14
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
2
<PAGE>
BIGMAR INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
September 30 December 31
1997 1996
---------------- -------------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . $ 1,657,141 $ 4,362,938
Investments, at market . . . . . . . . . . . . . . . 8,739 9,444
Accounts receivable, net of allowances of $41,310
and $44,703 at September 30, 1997 and December 31,
1996, respectively. . . . . . . . . . . . . . . . . 684,176 772,491
Inventory. . . . . . . . . . . . . . . . . . . . . . 1,072,495 950,471
Prepaid expenses and other current assets. . . . . . 293,018 470,584
---------------- -------------
Total current assets. . . . . . . . . . . 3,715,569 6,565,928
Property, plant and equipment, at cost, less
accumulated depreciation and amortization . . . . . . . . . . 17,219,434 17,407,140
Intangible Assets. . . . . . . . . . . . . . . . . . . . . . . . 473,218 297,101
---------------- -------------
Total . . . . . . . . . . . . . . . . . . $21,408,221 $24,270,169
---------------- -------------
---------------- -------------
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Accounts Payable. . . . . . . . . . . . . . . . . . $ 1,196,897 $ 1,721,846
Notes Payable . . . . . . . . . . . . . . . . . . . 1,929,627 1,529,993
Current portion of long-term debt . . . . . . . . . 86,356 466,594
Due to related parties. . . . . . . . . . . . . . . - 983,490
Advances on reimbursable expenses . . . . . . . . . - 750,000
Accrued expenses and other current liabilities. . . 509,943 568,903
---------------- -------------
Total current liabilities . . . . . . . . 3,722,823 6,020,826
Long term debt . . . . . . . . . . . . . . . . . . . . . . . . . 10,804,836 7,353,490
---------------- -------------
Total liabilities . . . . . . . . . . . . 14,527,659 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; 4,185,000 and 3,985,000 shares issued
and outstanding at September 30, 1997 and
December 31, 1996, respectively). . . . . . . . . . 4,185 3,985
Additional paid-in capital. . . . . . . . . . . . . 15,063,166 13,333,366
Cumulative translation adjustment . . . . . . . . . (1,168,606) (806,892)
Retained earnings (deficit) . . . . . . . . . . . . (7,018,783) (1,634,606)
---------------- -------------
Total stockholders' equity. . . . . . . . 6,880,562 10,895,853
---------------- -------------
Total . . . . . . . . . . . . . . . . . . $21,408,221 $24,270,169
---------------- -------------
---------------- -------------
</TABLE>
See accompanying notes to Consolidated Financial Statements
3
<PAGE>
BIGMAR INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
Third Quarter Ending September 30
(Unaudited)
<TABLE>
<CAPTION>
Third Quarter Nine Months
----------------------------- ---------------------------------
1997 1996 1997 1996
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Sales $ 1,452,976 $ 1,743,824 $ 4,669,748 $ 5,581,888
Cost of Sales $ 913,810 1,377,342 3,276,417 3,740,535
------------- ------------- ------------- --------------
Gross Profit 539,166 366,482 1,393,331 1,841,353
37.1% 21.0% 29.8% 33.0%
Operating Expenses:
Research & Development $ 527,347 583,402 966,960 769,087
Selling, General & Administrative $ 3,837,434 665,272 5,826,039 1,698,961
------------- ------------- ------------- --------------
Total Operating Expenses 4,364,781 1,248,674 6,792,999 2,468,048
------------- ------------- ------------- --------------
Operating Income (Loss) (3,825,615) (882,192) (5,399,668) (626,695)
Interest Income (Expense) $ (139,968) (70,752) (313,868) (267,195)
Other Income (Expenses) $ 136,607 6,604 350,097 6,626
------------- ------------- ------------- --------------
Income (Loss) Before Taxes (3,828,976) (946,340) (5,363,439) (887,264)
Taxes $ 2,956 392 5,288 583
------------- ------------- ------------- --------------
Net Income (Loss) $ (3,831,932) $ (946,732) $ (5,368,727) $ (887,847)
------------- ------------- ------------- --------------
------------- ------------- ------------- --------------
Net income (Loss) per share: $ (0.94) $ (0.24) $ (1.34) $ (0.30)
------------- ------------- ------------- --------------
Average number of common
shares outstanding: 4,056,739 3,985,000 4,009,176 2,988,333
------------- ------------- ------------- --------------
</TABLE>
See accompanying notes to Consolidated Financial Statements
4
<PAGE>
BIGMAR, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Month Period
ended September 30,
----------------------------------
1997 1996
--------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (5,368,727) $ (887,847)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . 617,681 184,986
Issue stock warrants. . . . . . . . . . . . . . . . . . . . . . . . 800,000
Change in operating assets & liabilities:
(Increase)/decrease in accounts receivable . . . . . . . . . . . . 33,081 37,185
(Increase)/decrease in inventory . . . . . . . . . . . . . . . . . (191,143) (53,971)
(Increase)/decrease in other current assets. . . . . . . . . . . . 143,664 (211,905)
Increase/(decrease) due to related party. . . . . . . . . . . . . . (903,909) -
Increase/(decrease) in accounts and other payable . . . . . . . . . (416,032) 92,842
Increase/(decrease) in accruals and other current liabilities . . . (773,905) 887,406
------------- --------------
Net cash provided by/used in operations . . . . . . . . (6,059,290) 48,696
------------- --------------
Cash flows from investing activities:
Purchase of property, plant & equipment. . . . . . . . . . . . . . . . . . . (1,663,467) (5,122,063)
Increase in other assets . . . . . . . . . . . . . . . . . . . . . . . . . (1,646) (956,261)
------------- --------------
Net cash (used in) investing activities. . . . . . . . (1,665,113) (6,078,324)
------------- --------------
Cash flows from financing activities:
Short term borrowing (net). . . . . . . . . . . . . . . . . . . . . . . . . . 166,799 (1,016,641)
Net proceeds from issuance of equity securities . . . . . . . . . . . . . . . 930,340 9,363,997
Long term borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000,000 2,342,812
Deferred offering costs . . . . . . . . . . . . . . . . . . . . . . . . . . . (280,000) -
------------- --------------
Net cash provided by financing activities . . . . . . . 4,817,139 10,690,168
------------- --------------
Effect of exchange rate changes on cash. . . . . . . . . . . . . . . . . . . . 201,467 17,213
------------- --------------
Net increase/(decrease) in cash . . . . . . . . . . . . . . . . . . . . . . . . (2,705,797) 4,677,753
Cash - beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . 4,362,938 1,425,603
------------- --------------
Cash - end of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,657,141 $ 6,103,356
------------- --------------
------------- --------------
Supplemental disclosure of cash flow information:
Cash paid during the period for
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 75,436 $ 338,225
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . $ - $ 9,905
Equipment purchases included in accounts payable. . . . . . . . . . $ 98,527 $ 582,513
</TABLE>
See accompanying notes to Consolidated Financial Statements
5
<PAGE>
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. ("Therapeutics")).
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, 1997, and the results of operations and the cash flows for all
periods presented. The results of operations for the interim 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>
3. INVENTORIES
The components of inventory at September 30, 1997 and December 31, 1996, are as
follows:
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
Raw material $670,659 $363,114
Finished goods 401,836 587,357
---------- ----------
$1,072,495 $950,471
---------- ----------
4. PROTYDE
In October 1995, Therapeutics and a wholly owned subsidiary of Protyde
Pharmaceuticals, Inc. ("Protyde") formed a partnership, Protyde-Bigmar
Therapeutics (the "Partnership"), for the purpose of coordinating the
manufacture and marketing of certain pharmaceutical products for the treatment
of human cancer.
On July 24, 1997, the Partnership terminated its manufacturing agreement with
the Company and it marketing agreement with Protyde, and Protyde assigned its
partnership interests to Therapeutics. As consideration for the assignment and
termination agreements, the Company paid Protyde $2,000,000, which included the
return of an advance for reimbursable expenses of $750,000. Additionally, the
Company issued warrants to Protyde to purchase up to 500,000 shares of the
Company's common stock (note 5). The fair value of the total consideration
given to Protyde of $2,050,000 has been recognized in the accompanying 1997
statement of operations and is included in SG&A expense for third quarter 1997.
5. WARRANTS
As described in note 4, July 24, 1997 the Company granted warrants to Protyde
to purchase 500,000 shares of its common stock. These warrants are
exercisable for a period of four years at an exercise price of $5.00 per
share. The Company recorded as SG&A expense and an increase to additional
paid-in capital $800,000 related to such warrants based on the fair value
(using the Black Scholes model) of the warrants at the issuance date.
7
<PAGE>
6. BANCA DEL GOTTARDO FINANCING
On August 28, 1997, the Company entered into two agreements with Banca del
Gottardo, a bank organized under the laws of Switzerland (the "Bank"): a. the
Offshore Securities Subscription Agreement (the "Subscription Agreement");
and b. the Note Purchase, Paying and Conversion Agency Agreement (the "Note
Agreement"). The closing of the subscription under the Subscription
Agreement and the note purchase under the Note Agreement each occurred on
August 29, 1997. The net proceeds of these transactions are to be used to
finance current operations of the Company.
Under the Subscription Agreement, the Bank has been issued 200,000 shares
of common stock of the Company (the "Shares"). The purchase price was five
dollars (US$5.00) per Share. The aggregate subscription price was one
million dollars (US$1,000,000). After paying the Bank a commission of seven
percent (7%) or seventy thousand dollars (US$70,000), the net proceeds of the
subscription to the Company was nine hundred thirty thousand dollars
(US$930,000).
Under the Note Agreement, the Bank purchased a global note in the principal
amount of four million dollars (US$4,000,000). After paying the Bank a
commission of seven percent (7%) or two hundred eighty thousand dollars
(US$280,000), the net proceeds of the note purchase to the Company was three
million six hundred seventy thousand dollars (US$3,670,000). The Note
Agreement contemplates that, from this global note amount, the Bank will
further sell notes in denominations of five thousand dollars (US$5,000) (the
"Notes"). The term of the Notes is five (5) years, and the interest rate on
the Notes is eight percent (8%) per year payable in February and August of
each year. The Notes will be convertible, as early as January 1, 1998, into
shares of common stock of the Company. Under the Note Agreement and the terms
of the Notes, the initial conversion price is five and twenty-five
one-hundredths dollars (US$5.25) of principle amount of the Notes for one
share of common stock of the Company. (The conversion price is variable based
on events such as stock splits and other specified events having an impact on
the number of common shares outstanding.) At least fifty thousand dollars in
principle amount of the Notes must be converted at a time. The Shares and
the Notes are subject to Regulation S ("Reg S") promulgated by the United
States Securities and Exchange Commission under the Securities Act of 1933,
as amended (the "Act"), and, as such, may not be transferred to a U.S.
person, as defined in Reg S during the first forty (40) days after closing.
Thereafter, any such transfer is subject to the registration requirements
under the Act. Prior to January 1, 1998, the Company is required, and
expects, to effect a registration under the Act with respect to shares
necessary in the conversion of the Notes. The Company has reserved
authorized shares necessary for such conversion.
7. EARNINGS PER SHARE
Net income (loss) per share is based on the weighted average number of
shares outstanding during each period.
In February 1997, Statement of Financial Accounting Standards ("SFAS")
No. 128, "Earnings per Share", was issued which established standards for
computing and presenting earnings per share. SFAS No. 128 is effective for
financial statements issued for periods ending after December 15, 1997,
including interim periods.
The Company has evaluated the effect of this new pronouncement on
earnings per share and believes that adoption of SFAS No. 128 would not have
a material impact on reported earnings per share for the periods ended
September 30, 1997 and December 31, 1996.
8. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement
No. 130, "Reporting Comprehensive Income", which is required to be adopted
for fiscal years beginning after December 15, 1997. The Statement establishes
standards for the reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. Adoption
of this standard is not expected to have a material impact on the Company's
financial statements or results of operations.
In June 1997, the Financial Accounting Standards Board issued Statement
No. 131, "Disclosures about Segments of an Enterprise and Related
Information", which is required to be adopted for fiscal years beginning
after December 15, 1997. The Statement changes the way public companies
report segment information in annual financial statements and also requires
those companies to report selected segment information in interim financial
reports to shareholders. Adoption of this standard is not expected to have a
material impact on the Company's financial statements or results of operations.
8
<PAGE>
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 manufacturing
and marketing of oncological and 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. On May 30, 1997 the Company announced that
the Intercantonal Office for the Control of Medications ("IKS"), the Swiss
counterpart to the U.S. Food and Drug Administration ("FDA") granted the
Company general approval for the production of all injectible (liquid or
lyophilized) pharmaceutical products at its Barbengo, Switzerland facility
(the "Barbengo Facility"). In addition the IKS granted the Company approval
to manufacture all marketed configurations of calcium leucovorin at the
Barbengo Facility, which in turn will be sold to marketing partners
throughout Europe. Calcium leucovorin is a rescue therapy used in
conjunction with the administration of chemotherapeutic agents.
On July 1, 1997 the Company submitted its first Abbreviated New Drug
Application ("ANDA") to the FDA for its generic version of Leucovorin Calcium
for Injection.
Bigmar was incorporated in Delaware in September 1995 and has three
wholly-owned subsidiaries: Bigmar Pharmaceuticals SA, a Swiss corporation
formed in January 1992; Bigmar Therapeutics, Inc., a Delaware corporation
formed in September 1995; and, Bioren SA, 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.
9
<PAGE>
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.
RESULTS OF OPERATIONS
Third quarter 1997 net sales amounted to $1,452,976, representing a decrease
of $290,848 from third quarter 1996 net sales of $1,743,824. This decrease
was primarily due to temporary suspension of production in the Bioren
facility for plant maintenance.
Net sales for the nine month period through September 30, 1997 were
$4,669,748 compared with net sales through September 30, 1996 of $5,581,888.
The decrease of $912,140 represents flat sales in Swiss currency adversely
impacted by the change in exchange rate between the U.S. Dollar and the Swiss
franc.
Gross profit for the third quarter 1997 was $539,166, an increase of $172,684
from gross profit of $366,482 for the same quarter last year. Gross profit
margin as a percentage of net sales for the third quarter 1997 was 37.1%.
This increase primarily reflects the effect of change in product mix offset
by an unfavorable foreign exchange conversion.
Gross profit for the nine months ended September 30, 1997 amounted to
$1,393,331, a decrease of $448,022 from the Company's gross profit for the
same period last year of $1,841,353. The nine-month gross profit margin
through September 30, 1997 amounted to 29.8% compared to the nine-month
margin for the same period through September 30, 1996 of 33.0%. This
decrease resulted from higher raw material costs and competitive pricing
tactics in the IV Solution product line.
Research and development ("R&D") expenses for the third quarter 1997 were
$527,347, a decrease of $56,055 from the $583,402 in R&D expenses recorded
for the same period a year ago. R&D expenses for the nine-month period this
year were $966,960, an increase of $197,873 over last year's $769,087. The
nine month results represent an increase in R&D expenditures related to the
formulation of oncology products offset by the impact of exchange rate
fluctuations. In
10
<PAGE>
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.
Selling, general and administrative expenses ("SG&A") increased by $3,172,162
to $3,837,434 for the third quarter this year as compared to $665,272 for the
third quarter a year ago. This increase includes a one time charge to
operating expenses regarding the termination and assignment of U.S. marketing
rights from Protyde Pharmaceuticals, Inc. ("Protyde") for total consideration
of $2,050,000 (see notes 4 & 5). In addition, $268,278 related to buildings
and equipment depreciation and facility validation costs was expensed to
operations, and $50,000 in fees relating to the issuance of 500 convertible
notes, through financing instruments issued by Banca del Gottardo, a Swiss
based bank (see note 6). The remaining $803,884 relates to the increase in
the number of employees and related expenses and operational activity in both
the U.S. and in Switzerland. SG&A expenses for the nine-month period this
year were $5,826,039, an increase of $4,127,078 over last year's $1,698,961.
As in the quarter, the increase in SG&A expenses year-to-date represent the
inclusion of the termination and assignment agreements with Protyde, Banca
Del Gottardo financing instruments, and increases in personnel and related
operating expenses in both the U.S. and Switzerland.
Loss from operations for the third quarter 1997 was ($3,825,615). This is an
increase of $2,943,423 from the ($882,192) operating loss recorded for the
same period a year ago. Operating loss for the nine-month period ended
September 30, 1997 was ($5,399,668), an increase of $4,772,973 from last
year's operating loss of ($626,695). The decline in operating income
year-to-date for the quarter and the nine-month period through September 30,
1997 is mainly attributable to higher SG&A expenditures.
Net interest expense in the third quarter amounted to $139,968, an increase
of $69,216 from the same period a year ago of $70,752. Year-to-date
September 30, 1997 net interest expense totaled $313,868, an increase of
$46,673 from the year-to-date September 30, 1996 amount of $267,195. These
increases reflect debt related interest incurred in 1997 versus 1996,
including $26,667 in interest related to the convertible notes issued to
Banca del Gottardo on August 29, 1997.
Net loss for the quarter and the nine-month period through September 30,
1997 was $3,831,932 and $5,368,727, respectively. This represents increases
in losses of $2,885,200 and $4,480,880, respectively compared to last year's
net loss of $946,732 and $887,847 for the quarter and nine-month period,
respectively.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1997 and December 31, 1996, the Company had cash and cash
equivalents of $1,657,141 and $4,362,938, respectively. The Company's working
capital approximated ($7,254) and $545,102 at September 30, 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 net of accumulated depreciation at September 30,
1997 totaled $17,219,434 compared to $17,407,140 at December 31, 1996. This
decrease of $187,706 is primarily a result of foreign currency translation
adjustments.
At September 30, 1997, the Company had approximately $12,820,819 in outstanding
third party loans, $2,015,983 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.
Since the Company does not anticipate product sales of the Barbengo Facility to
be of sufficient volume to generate positive cash flow for the fourth quarter 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 Company currently has a $3.5
million line of credit on an unsecured basis, with Citizens Bank of Saginaw, MI.
This credit line bears interest at the Bank's prime commercial lending rate
which is currently 8.5%. The Company anticipates that the remaining net proceeds
received from the Banca Del Gottardo financing instruments (see note 6), cash
flow from
12
<PAGE>
operations (if any), and the line of credit will be sufficient to fund the
Company's operations, through December 1998.
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.
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.
13
<PAGE>
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
As reported pursuant to the report filed on Form 8-K on
September 11, 1997 with the Securities and Exchange Commission,
on August 29, 1997, the Company entered into two agreements with
Banca del Gottardo, a bank organized under the laws of
Switzerland (the "Bank"): a. the Offshore Securities
Subscription Agreement (the "Subscription Agreement"); and b. the
Note Purchase, Paying and Conversion Agency Agreement (the "Note
Agreement"). The closing of the subscription under the
Subscription Agreement and the note purchase under the Note
Agreement each occurred on August 29, 1997. The net proceeds of
these transactions are to be used to finance current operations
of the Company (see note 6).
As reported pursuant to the report filed on Form 8-K on
September 30, 1997 with the Securities and Exchange Commission,
on August 22, 1997, KPMG Peat Marwick LLP has been appointed as
the Company's certified public accountants replacing Richard A.
Eisner & Company, LLP who has been dismissed as of August 22,
1997.
14
<PAGE>
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
Date: November 18, 1997 William R. Ash, III
----------------------------
/s/William R. Ash, III
Chief Financial Officer
Date: November 18, 1997 Michael K. Medors
----------------------------
/s/Michael K. Medors,
Treasurer and Secretary
15
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<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,665,880
<SECURITIES> 0
<RECEIVABLES> 725,486
<ALLOWANCES> 41,310
<INVENTORY> 1,072,495
<CURRENT-ASSETS> 3,715,569
<PP&E> 25,896,512
<DEPRECIATION> 8,677,078
<TOTAL-ASSETS> 21,408,221
<CURRENT-LIABILITIES> 3,722,823
<BONDS> 0
0
0
<COMMON> 4,185
<OTHER-SE> 6,876,377
<TOTAL-LIABILITY-AND-EQUITY> 21,408,221
<SALES> 4,669,748
<TOTAL-REVENUES> 4,669,748
<CGS> 3,276,417
<TOTAL-COSTS> 3,276,417
<OTHER-EXPENSES> 966,960
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 372,468
<INCOME-PRETAX> (5,363,439)
<INCOME-TAX> 5,288
<INCOME-CONTINUING> (5,368,727)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,368,727)
<EPS-PRIMARY> (1.34)
<EPS-DILUTED> (1.34)
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