<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
MARK ONE
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
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 NO. 1-14416
---------------------------
BIGMAR, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 31-1445779
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9711 SPORTSMAN CLUB ROAD 43031
JOHNSTOWN, OHIO (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (740) 966-5800
Indicate by checkmark 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 11, 1999, 8,617,307 shares of common stock of the registrant were
outstanding.
1
<PAGE>
BIGMAR, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<S> <C> <C>
Part I FINANCIAL INFORMATION:
Item 1 Financial Statements
Consolidated Balance Sheets as of March 31, 1999 and
December 31, 1998 (Unaudited) 3
Consolidated Condensed Statements of Operations for the
quarters ended March 31, 1999 and 1998 (Unaudited) 4
Consolidated Condensed Statements of Cash Flows for the
quarters ended March 31, 1999 and 1998 (Unaudited) 5
Consolidated Statements of Comprehensive Loss for the
quarters ended March 31, 1999 and 1998 (Unaudited) 6
Notes to the Consolidated Condensed Financial Statements
(Unaudited) 7
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
Item 3 Quantitative and Qualitative Disclosures About Market Risk 15
Part II OTHER INFORMATION:
Item 2 (c) Changes in Securities - Recent Sales of Unregistered 16
Securities
Item 6 Exhibits and Reports on Form 8-K 16
Signatures 17
</TABLE>
2
<PAGE>
BIGMAR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31 December 31
1999 1998
------------------- -------------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ - $ 140,445
Accounts receivable 876,940 927,200
Inventories 1,729,336 1,611,588
Prepaid expenses and other current assets 269,868 244,320
------------------- -------------------
Total current assets 2,876,143 2,923,553
Property, plant and equipment, net 16,235,000 17,350,004
Intangible and other assets, net 403,626 435,625
------------------- -------------------
Total $ 19,514,769 $ 20,709,182
------------------- -------------------
------------------- -------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 1,696,578 1,761,903
Notes payable 1,770,010 1,769,285
Current portion of long-term debt 476,990 1,288,040
Due to related parties - 321,149
Accrued expenses and other current liabilities 798,442 848,394
------------------- -------------------
Total current liabilities 4,742,020 5,988,771
Long-term debt 9,948,109 9,487,445
------------------- -------------------
Total liabilities 14,690,129 15,476,216
------------------- -------------------
Stockholders' equity:
Preferred stock ($.001 par value; 5,000,000 shares authorized;
none issued)
Common stock ($.001 par value; 20,000,000 shares authorized; 8,513,974
shares and 8,027,308 issued and outstanding at
March 31, 1999 and December 31, 1998 respectively) 8,514 8,027
Additional paid-in capital 23,766,797 22,317,324
Retained deficit (18,009,388) (16,234,332)
Foreign currency translation adjustments (941,283) (858,053)
------------------- -------------------
Total stockholders' equity 4,824,640 5,232,966
------------------- -------------------
Total $ 19,514,769 $ 20,709,182
------------------- -------------------
------------------- -------------------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
BIGMAR, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31
--------------------------------------------
1999 1998
------------------ ------------------
<S> <C> <C>
Net sales $ 1,735,311 $ 1,436,167
Cost of goods sold 1,242,128 1,078,442
------------------ ------------------
Gross margin 493,183 357,725
------------------ ------------------
Operating expenses:
Research and development 634,075 743,525
Selling, general and administrative 1,038,733 1,199,458
------------------ ------------------
Total operating expenses 1,672,808 1,942,983
------------------ ------------------
Operating income (loss) (1,179,625) (1,585,258)
Other expense, net (6,244) (12,616)
Interest expense (187,466) (236,396)
Loss on foreign currency transactions (401,721) (281,033)
------------------ ------------------
Loss before income taxes (1,775,056) (2,115,303)
Income taxes (benefit): - -
------------------ ------------------
Net loss $(1,775,056) $(2,115,303)
------------------ ------------------
------------------ ------------------
Basic and diluted loss per share $ (0.22) $ (0.51)
------------------ ------------------
------------------ ------------------
Weighted average shares outstanding 8,175,000 4,185,000
------------------ ------------------
------------------ ------------------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
BIGMAR, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31
----------------------------------------
1999 1998
------------------- ------------------
<S> <C> <C>
Net cash used in operating activites: $(1,370,763) $(1,274,368)
Cash flows from investing activities:
Purchase of property, plant and equipment (133,747) (1,005,975)
------------------- ------------------
Net cash used in investing activities (133,747) (1,005,975)
------------------- ------------------
Cash flows from financing activities:
Proceeds from short-term borrowings 93,000 1,680,000
Repayment of short and long-term debt (2,645) -
Repayment of long-term borrowings (7,013) (182,702)
Proceeds from issuance of common stock 1,449,961 -
------------------- ------------------
Net cash provided by financing activities (1,533,303) 1,862,702
------------------- ------------------
Effect of exchange rates on cash (169,238) 6,444
------------------- ------------------
Net increase (decrease) in cash and cash equivalents (140,445) (411,197)
Cash and cash equivalents, beginning of period 140,445 643,232
------------------- ------------------
Cash and cash equivalents, end of period $ - $ 232,035
------------------- ------------------
------------------- ------------------
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 287,884 $ 304,508
Income taxes $ - $ -
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
BIGMAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME LOSS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------------------------
1999 1998
-------------------- ------------------
<S> <C> <C>
Net loss $(1,775,056) $(2,115,303)
Other comprehensive income, net of tax:
Foreign currency translation adjustments, net of
income taxes of $ 0 in both
1999 and 1998, respectively (83,230) (106,732)
-------------------- ------------------
Comprehensive loss $(1,903,286) $(2,222,035)
-------------------- ------------------
-------------------- ------------------
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
BIGMAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
Bigmar, Inc. is a Delaware Corporation that owns 100% of the capital stock of
two Swiss Corporations, Bioren, SA and Bigmar Pharmaceuticals, SA, and 100%
of the capital stock of a Delaware corporation, Bigmar Therapeutics, Inc.
In the opinion of management, the accompanying unaudited financial statements
include all adjustments necessary to present fairly the Company's financial
position at March 31, 1999 and 1998, and the results of operations and the
cash flows and the comprehensive income for all periods presented. Certain
amounts in the accompanying financial statements have been restated to
conform to the March 31, 1999 presentation. The results of 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, 1998) and additional financial information, see Bigmar, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 1998. The 10-K
should be read in conjunction with these financial statements.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The construction of the Company's
pharmaceutical manufacturing plant in Barbengo, Switzerland and the process
of obtaining regulatory approvals has consumed a substantial amount of the
Company's resources. The manufacturing plant recently received regulatory
approval, from the United States Food and Drug Administration ("FDA") and the
Intercantonal Office for the Control of Medications ("IKS") in Switzerland,
to manufacture and sell certain injectible pharmaceutical products in the
U.S. and Switzerland. As a result, the Company anticipates that these
operations will begin to generate cash to help fund its expansion and further
planned research and development activities. During 1999, the Company has
received $1,760,000 in proceeds from the private placements of common stock.
In addition, the Company anticipates raising additional funds during 1999
through other private stock offerings and through additional bank borrowings.
However, there can be no assurance that the Company will be successful in
these efforts. These factors raise substantial doubt about the Company's
ability to continue as a going concern. No adjustments have been made to
reflect the recoverability or classification of recorded asset amounts or the
classification of liabilities should the Company be unable to continue as a
going concern.
7
<PAGE>
(2) INVENTORIES
The components of inventory at March 31, 1999 and December 31, 1998 are as
follows:
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
------------------- ----------------------
<S> <C> <C>
Raw Materials $ 995,602 $ 710,517
Finished Goods 733,734 901,071
-------------- --------------
Total $1,729,336 $1,611,588
-------------- --------------
</TABLE>
(3) COMMON STOCK ISSUED
In February 1999, the Company issued 236,666 shares of common stock to
accredited investors for prices ranging from $2.00 to $3.00 per share via
private placement offerings. Proceeds from the sale of shares totaled
$700,000 and was applied to working capital and general corporate purposes.
In March 1999, the Company issued 250,000 shares of common stock to
accredited investors for $3.00 per share via private placement offerings.
Proceeds from the sale of shares totaled $750,000 and was applied to working
capital and general corporate purposes.
In April 1999, the Company issued 103,333 shares of common stock to
accredited investors for $3.00 per share via private placements, with the
proceeds applied to working capital and general corporate purposes.
(4) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, Statement of Financial Accounting Standards No. 133 ("SFAS No.
133"), "Accounting for Derivative Instruments and Hedging Activities" was
issued. This statement revises the accounting for derivative financial
instruments. The Company has analyzed the impacts of this statement which is
required to be adopted in the year ending December 31, 2000, and does not
expect this statement to have a material impact on the Company's financial
position nor results of operations. As of and for the three months ended
March 31, 1999, the Company was not engaged in hedge or forward exchange
contracts.
In April 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-5 ("SOP 98-5"), "Reporting on the
Costs of Start-up Activities", which revises the accounting for start-up
costs and requires the expensing of certain costs which the Company has
historically capitalized. The adoption of this statement in the year ending
December 31, 1999 had an immaterial impact on the Company's financial
position and results of operations.
8
<PAGE>
(5) SEGMENT DATA
The Company manages its business segments primarily on a geographic basis
with each location representing a distinct segment. The Company's reportable
segments are comprised of Bioren, located in Couvet, Switzerland,
Pharmaceuticals, located in Barbengo, Switzerland, and the Company's
Corporate Headquarters, located in Johnstown, Ohio, U.S.A.
The Company evaluates the performance of its Bioren and Pharmaceuticals
segments based on segment profit/(loss). Segment profit/(loss) for these
segments includes sales and marketing, certain research and development, and
overhead charges directly attributable to the segment and excludes certain
expenses which are managed outside the reportable segments. Costs excluded
from these segments' profit primarily consist of corporate expenses, as well
as other research and development charges for testing of products targeted
for U.S. markets, and other general and administrative expenses which are
separately managed. The Company does not include intercompany transfers
between segments for management reporting purposes.
Summary information by segment as of and for the quarters ended March 31,
1999 and March 31, 1998 is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1999
BIOREN PHARMACEUTICALS CORPORATE TOTAL
------ --------------- --------- -----
<S> <C> <C> <C> <C>
Sales - International $1,573,720 161,591 - 1,735,311
Gross Margin 376,526 116,656 - 493,183
Operating expenses and other
income (expense) (402,850) (518,527) (1,346,861) (2,268,239)
---------- -------- ---------- ----------
Segment Income (Loss) (26,324) (401,871) (1,346,861) (1,775,056)
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
BIOREN PHARMACEUTICALS CORPORATE TOTAL
------ --------------- --------- -----
<S> <C> <C> <C> <C>
Sales - International $1,331,473 104,694 - 1,436,167
Gross Margin 333,684 24,041 - 357,725
Operating expenses and other
income (expense) (532,307) (938,053) (1,002,668) (2,473,028)
---------- -------- ---------- ----------
Segment Income (Loss) (198,623) (914,012) (1,002,668) (2,115,303)
</TABLE>
9
<PAGE>
BIGMAR, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Bigmar, Inc. (the "Company") was incorporated in Delaware in September 1995
and has three wholly-owned subsidiaries--Bioren SA ("Bioren"), Bigmar
Pharmaceuticals SA ("Pharmaceuticals"), and Bigmar Therapeutics
("Therapeutics"). Bioren is a Swiss corporation formed in July 1986.
Pharmaceuticals is a Swiss corporation that was formed in January 1992 under
the name BVI, SA. Therapeutics is a Delaware corporation formed in September
1995 under the name Bioren, Inc.; the name was changed in November 1995.
The Company manages its business segments primarily on a geographic basis
with each location representing a distinct segment.
THE COMPANY
The Company's corporate headquarters ("Corporate Headquarters"), located in
Johnstown, Ohio, includes a research and development laboratory used for the
testing of generic oncology and related products ("Oncology Products") to be
marketed in the U.S.
BIOREN
Bioren is engaged in manufacturing and marketing various pharmaceutical
products in Switzerland. Current products include 18 types of intravenous
infusion solutions and other related products ("IV Solutions"). Bioren's
strategy is to expand its current IV Solutions product line and its market
penetration. Bioren's manufacturing facility (the "Bioren Facility") is
located in Couvet, Switzerland.
PHARMACEUTICALS
Pharmaceuticals manufactures and markets Oncology Products, such as calcium
leucovorin, methotrexate, and cisplatin. The Oncology Products are currently
marketed in Germany and Spain. Pharmaceuticals' primary strategy is to supply
world markets with a full line of high-quality, affordably priced generic
pharmaceutical products focusing on oncology. The products are manufactured
in its state-of-the-art facilities in Switzerland and marketed through
pharmaceutical company partners in Europe and shortly in the United States.
Pharmaceuticals has received regulatory approval to manufacture and market
certain Oncology Products from the United States Food and Drug Administration
("FDA") and Switzerland's Intercantonal Office for the Control of Medications
("IKS"). Pharmaceuticals' manufacturing facility (the "Bigmar Facility") is
located in Barbengo, Switzerland.
THERAPEUTICS
Therapeutics is essentially a shell company and has had no significant
business operations as of December 31, 1998.
10
<PAGE>
Certain statements under this caption 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 in such forward-looking statements. Examples of these
risks include: delays in product development, problems with clinical testing,
failure to receive regulatory approvals, lack of proprietary rights, or
changes in business strategy.
RESULTS OF OPERATIONS
First quarter 1999 net sales amounted to approximately $1.7 million,
representing a increase of $299,000 or 21% over first quarter 1998 sales.
This increase was primarily the result of sales to new customers in the first
quarter of 1999.
Sales at Bioren SA increased by 18% over first quarter 1998 sales from
$1,331,000 to $1,574,000. Sales levels were maintained for existing customers
and two new customers were added in the first quarter of 1999.
Sales at Pharmaceuticals remained comparable with first quarter of 1998. Sales
were $162,000 in 1999 and were $105,000 in 1998.
Cost of goods sold increased by $164,000 from the three months ended March
31, 1998 to the same period in 1999. The increase can be attributed to the
increase in cost of raw materials at Bioren.
Pharmaceuticals cost of goods sold was materially comparable with the first
quarter of 1998 with sales of $45,000 in 1999 and $81,000 respectively.
Gross margin amounted to $493,000 for the first quarter of 1999, compared
with $358,000 from the prior year. Gross margin percent amounted to
approximately 28% for the first quarter of 1999, compared to approximately
25% for the prior year. The increase in the gross margin percent was due to
improved sales for the facilities.
Operating expenses decreased from first quarter 1998 to first quarter 1999,
by $270,000. Research and development expenses decreased by $109,000, due to
personnel costs and activities surrounding the Company's efforts in the prior
year to prepare for the February 1999 inspection of its Swiss manufacturing
facility by the FDA and development of new drug product formulations.
Selling, general and administrative expenses decreased by $161,000, primarily
due to a decrease in the number of personnel from first quarter 1998 to first
quarter 1999.
11
<PAGE>
Interest expense decreased $49,000 from 1998 to 1999, due to reduction of
total debt by $350,000 in the first quarter of 1999 as compared to the first
quarter of 1998.
Foreign exchange losses amounted to $402,000 in the first quarter of this
year compared to $281,000 in the prior year. The expense represents losses
due to exchange rate fluctuations on certain intercompany accounts receivable
denominated in Swiss francs.
As a result of all of the foregoing, the Company's net loss for the first
quarter 1999 amounted to $1.8 million versus $2.1 million during the first
quarter of 1998.
Net loss at Bioren SA improved from a net loss of $198,623 in the first
quarter of 1998 to a net loss of $26,324 in the first quarter of 1999 due to
improved sales and cost efficiencies.
Net loss at Pharmaceuticals improved from a net loss of $914,012 in the first
quarter of 1998 to a net loss of $401,871 in the first quarter of 1999 due to
improved sales and cost efficiencies.
The net loss at Corporate increased from a net loss of $1,002,668 in the
first quarter of 1998 to a net loss of $1,346,861 in the first quarter of
1999 due to additional expenses incurred to gain certain regulatory approvals.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1999 and December 31, 1998, the Company had cash and cash
equivalents of $0 and $0.1 million, respectively. The Company's working
capital was a ($1.9) million deficit and ($3.1) million deficit at March 31,
1999 and December 31, 1998, 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, product
registration, and other activities required for regulatory review of generic
oncological products. The amount required to complete such activities depends
upon the outcome of regulatory reviews and the number of new products the
Company plans to add during the year. 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 totaled $16.2 million and $17.4 million at
March 31, 1999 and at December 31, 1998, respectively. Additions of
approximately $125,000 were offset by depreciation expense ($161,000) and
foreign currency translation effects ($1,164,000).
12
<PAGE>
As of March 31, 1999, the Company had various notes, bonds, mortgages and
other borrowings totaling approximately $10.4 million including $477,000 that
is short term in nature. These monies were used to partially fund the
acquisition of Bioren, to acquire, construct, and equip the manufacturing
facility and to fund ongoing research and development and product
registration activities. During April of 1999, the Company renegotiated two
of its debt agreements whereby the maturities of approximately $800,000 were
extended to 2000, and beyond.
During the first four months of 1999, pursuant to private placement transactions
with accredited investors, the Company raised $1,760,000 which was applied to
working capital and general corporate purposes.
The Company anticipates that additional capital funding together with cash
from operations will be required to sustain operations through March 2000.
However, there can be no assurance that events affecting the Company's
operations will not result in the Company depleting its funds before that
time. Management is currently discussing additional financing with a number
of financial institutions and investors, but there are no assurances that the
Company will be able to obtain additional financing or that such financing,
if available, will be open on acceptable terms.
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 equal 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 share capital is not available for distribution to stockholders.
Changes in exchange rates between currencies may negatively impact the
Company's results of operations, specifically, net sales and gross profit
margins from international operations. In addition, the dollar-value
equivalent of anticipated cash flows could also be adversely affected. When
the Company determines that this risk has become significant, the Company may
attempt to manage that risk by using hedging techniques.
YEAR 2000 COMPLIANCE
Many computer systems currently record years in a two-digit format. Such
systems, if not modified, will be unable to recognize and properly process
information with dates beyond the year 1999. The potential problems arising
out of this inability are commonly referred to as the "Year 2000 Issue" and
will affect virtually all companies, government agencies and other
organizations to some degree.
INTERNAL SYSTEMS
The efficient operation of the Company's business is dependent in part on its
computer software programs and operating systems (collectively, "Programs and
Systems"). These Programs and Systems are used in several areas of the
Company's business, including research and development, purchasing, inventory
management, sales, shipping, and
13
<PAGE>
financial reporting, as well as in various administrative functions. The
Company has performed an assessment of its computer systems to determine
whether or not they were in compliance with Year 2000 requirements. As of
March 31, 1999, Bioren and Pharmaceuticals Programs and Systems, including
manufacturing and operations, were found to be in compliance with such
requirements. The Company's Headquarters Programs and Systems include an
accounting package and a document management system. Although these Programs
and Systems do not yet comply with Year 2000 requirements, an assessment has
been made and it has been determined that, based on present information, the
Company believes that these Programs and Systems will be upgraded by June 30,
1999, and the costs to bring them into compliance will be less than $10,000.
However, there can be no assurance that the required expenditures will not
exceed that amount.
READINESS OF THIRD PARTIES
The Company is also working with its processing banks, network providers and
vendors to ensure their systems are Year 2000 compliant. All of these costs
will be borne by the processors, network and software companies and vendors.
Currently the Company's processing banks and vendors are in the process of
completing their Year 2000 compliance programs. However, there can be no
assurance that the systems of other companies on which the Company relies
will be timely converted or that any such failure to convert by another
company would not have an adverse effect on the Company's Programs and
Systems.
RISKS ASSOCIATED WITH THE YEAR 2000
The Company is not aware, at this time, of any Year 2000 non-compliance that
will not be fixed by the Year 2000. However, some risks that the Company
faces include: the failure of internal information systems, defects in its
work environment, a slow down in its customers' ability to make payments, and
the availability of raw materials for manufacturing.
CONTINGENCY PLANS
The Company is in the process of developing contingency plans to address a
worst case year 2000 scenario. This contingency plan is expected to be
completed by mid 1999. Furthermore, no assurance can be given that any or
all of the Company's systems are or will be Year 2000 compliant, or that the
ultimate costs required to address the Year 2000 issue or the impact of any
failure to achieve substantial Year 2000 compliance will not have a material
adverse effect on the Company's financial condition.
14
<PAGE>
BIGMAR, INC. AND SUBSIDIARIES
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, operations of the Company are exposed to
fluctuations in currency values. These fluctuations can vary the costs of
financing, investing, and operating activities. At this time, the Company
does not have any programs in place to control these risks.
The Company's foreign currency risk exposure results from fluctuating
currency exchange rates, primarily the fluctuation of the U.S. dollar against
the Swiss franc ("Sfr"). The Company faces transactional currency exposures
that arise when its foreign subsidiaries (or the Company itself) enter into
transactions, generally on an intercompany basis, denominated in currencies
other than their local currency. The Company also faces currency exposure
that arises from translating the results of its Swiss operations to the U.S.
dollar at exchange rates that have fluctuated from the beginning of the
period. At this time, the Company does not have any programs in place to
control these risks. However, historically the exchange rate between the U.S.
dollar and the Swiss franc has not fluctuated significantly.
The table below provides information about the Company's financial
instruments by functional currency and presents such information in U.S.
dollar equivalents:
<TABLE>
<CAPTION>
Expected Maturity Date
----------------------
1999 2000 2001 2002 2003 Thereafter
---- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
(US$ Equivalent)
except average interest rate
Liabilities
Long-Term Debt:
Fixed Rate (Sfr) $208,248 73,894 1,417,438 4,073,894 6,717 211,211
Average interest rate 3.9% 3.8% 3.2% 7.9% 6.8% 6.8%
Variable Rate (Sfr) 335,886 604,595 604,595 537,418 403,063 1,948,140
Average interest rate 5.0% 4.6% 4.6% 4.6% 4.8% 3.8%
</TABLE>
15
<PAGE>
BIGMAR, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 2 (C) CHANGES IN SECURITIES - RECENT SALES OF UNREGISTERED SECURITIES
In February 1999, in private placement transactions exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 of
Regulation D, the Company issued 236,666 shares of common stock to accredited
investors for prices ranging from $2.00 to $3.00 per share.
In March 1999, in private placement transactions pursuant to Section 4(2) and
Rule 506, the Company issued 250,000 shares of common stock to accredited
investors for $3.00 per share.
In April 1999, in private placement transactions pursuant to Section 4(2) and
Rule 506, the Company issued 103,333 shares of common stock to accredited
investors for $3.00 per share.
All of the share transactions summarized above were made directly by the
Company without use of an underwriter or placement agent and without payment
of commissions or other remuneration. Except as otherwise stated, in each
case the aggregate sales proceeds, after payment of offering expenses in
immaterial amounts, were applied to the working capital of the Company and
other general corporate purposes.
With respect to the exemption from registration claimed under Rule 506 and
Section 4(2) of the Securities Act of 11933, neither the Company nor any
person acting on its behalf offered or sold the securities by means of any
form of general solicitation or advertising. Prior to making any offer or
sale, the Company had reasonable grounds to believe and believed that each
prospective investor was capable of evaluating the merits and risks of the
investment and was able to bear the economic risk of the investment. Each
purchaser represented in writing that such purchaser was an accredited
investor and that the securities were being acquired for investment for such
purchaser's own account, and agreed that the securities would not be sold
without registration under the Securities Act or exemption therefrom. A
legend was placed on each certificate evidencing the securities stating that
the securities have not been registered under the Securities Act and setting
forth restrictions on their transferability.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 27.1 Financial Data Schedule
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the first
quarter, 1999.
16
<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.
May 17, 1999
BIGMAR, INC.
------------
REGISTRANT
By: /s/ Philippe Rohrer
---------------------
Philippe Rohrer
CHIEF FINANCIAL OFFICER; SECRETARY AND
TREASURER
17
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