<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
MARK ONE
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
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 small business issuer as specified in its charter)
<TABLE>
<S> <C>
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)
</TABLE>
Issuer's telephone number, including area code: (740) 966-5800
Indicate by checkmark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 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 October 23, 2000, 10,168,973 shares of common stock of the issuer were
outstanding.
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BIGMAR, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<S> <C>
Part I FINANCIAL INFORMATION:
Item 1 Financial Statements
Consolidated Condensed Balance Sheets as of September 30, 2000 (Unaudited) and
December 31, 1999 3
Consolidated Condensed Statements of Operations for the quarters and nine month
periods ended September 30, 2000 and 1999 (Unaudited) 4
Consolidated Statements of Comprehensive Loss for the quarters and nine month
periods ended September 30, 2000 and 1999 (Unaudited) 5
Consolidated Condensed Statements of Cash Flows for the nine months ended September
30, 2000 and 1999 (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
11
Part II OTHER INFORMATION:
Item 2 (c) Changes in Securities - Recent Sales of Unregistered Securities 18
Item 4 Submission of Matters to a Vote of Security Holders 18
Item 6 Exhibits and Reports on Form 8-K 19
Signatures 20
</TABLE>
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BIGMAR, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION> September 30 December 31
2000 1999
------------ -----------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 105,737 $ 155,854
Accounts receivable 1,796,061 2,138,115
Accounts receivable related party 852 0
Inventories 2,270,754 2,470,234
Prepaid expenses and other current assets 306,751 248,504
------------ -------------
Total current assets 4,480,155 5,012,707
Property, plant and equipment, net 12,507,924 14,380,877
Intangible and other assets, net 306,467 405,168
----------- ------------
Total $ 17,294,546 $ 19,798,752
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 2,246,118 2,320,411
Notes payable 2,513,732 3,362,038
Current portion of long-term debt 582,804 632,436
Due to related party 1,010,868 0
Accrued expenses and other current liabilities 1,089,716 985,386
------------ ------------
Total current liabilities 7,443,238 7,300,271
Long-term debt 9,683,785 10,762,680
------------ ------------
Total liabilities 17,127,023 18,062,951
------------ ------------
Stockholders' equity:
Preferred stock ($.001 par value; 5,000,000
shares authorized; none issued)
Common stock ($.001 par value; 30,000,000
shares authorized; 10,168,973 shares
and 8,993,973 issued and outstanding at
September 30, 2000 and December 31, 1999
respectively) 10,169 8,994
Additional paid-in capital 28,073,792 25,312,467
Accumulated deficit (26,192,628) (22,558,611)
Foreign currency translation adjustments (1,723,810) (1,027,049)
------------ ------------
Total stockholders' equity 167,523 1,735,801
------------ ------------
Total $ 17,294,546 $ 19,798,752
============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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BIGMAR, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THIRD QUARTER NINE MONTHS
---------------------------- ---------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales.................................. $ 1,927,885 $ 1,330,887 $ 5,823,345 $ 4,617,234
Cost of goods sold......................... 1,553,540 964,064 4,721,822 3,409,101
----------- ----------- ----------- -----------
Gross margin............................... 374,345 366,823 1,101,523 1,208,133
----------- ----------- ----------- -----------
Operating expenses:
Research and development................. 899,860 1,031,998 2,336,806 2,232,167
Selling, general and administrative...... 716,381 904,188 2,296,913 2,767,283
----------- ----------- ----------- -----------
Total operating expenses............... 1,616,241 1,936,186 4,633,719 4,999,450
----------- ----------- ----------- -----------
Operating Loss............................. (1,241,896) (1,569,363) (3,532,196) (3,791,317)
Other income (expense), net................ 8,283 (3,391) 121,489 (15,510)
Interest expense........................... (264,665) (274,054) (706,974) (642,174)
Gain (loss) on foreign currency
transactions............................. 109,869 242,192 121,827 (444,007)
----------- ----------- ----------- -----------
Loss before income taxes and
extraordinary item....................... (1,388,409) (1,604,616) (3,995,854) (4,893,008)
Income taxes (benefit)..................... -- -- -- --
----------- ----------- ----------- -----------
Loss before extraordinary item............. (1,388,409) (1,604,616) (3,995,854) (4,893,008)
Extraordinary item-Gain on extinguishment
of debt, net of income taxes of $0....... -- -- 361,837 --
----------- ----------- ----------- -----------
Net loss................................... $(1,388,409) $(1,604,616) $(3,634,017) $(4,893,008)
=========== =========== =========== ===========
Basic and diluted loss per share from
continuing operations.................... $ (0.14) $ (0.18) $ (0.42) $ (0.57)
=========== =========== =========== ===========
Basic and diluted extraordinary gain
per share................................ $ -- $ -- $ 0.04 $ --
=========== =========== =========== ===========
Basic and diluted net loss per share....... $ (0.14) $ (0.18) $ (0.38) $ (0.57)
=========== =========== =========== ===========
Weighted average shares outstanding........ $10,010,640 $ 8,853,719 $ 9,528,788 $ 8,546,648
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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BIGMAR, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Loss
(Unaudited)
<TABLE>
<CAPTION>
Third Quarter Nine Months
------------------------ ------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net loss $(1,388,409) $(1,604,616) $(3,634,017) $(4,893,008)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net
of income taxes of $0 in both 2000 and
1999, respectively (481,146) 20,678 (696,761) (104,171)
----------- ----------- ----------- -----------
Comprehensive loss $(1,869,555) $(1,583,938) $(4,330,778) $(4,997,179)
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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BIGMAR, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Sept. 30
----------------------------------
2000 1999
----------- -----------
<S> <C> <C>
Net cash used in operating activities (1,904,405) (3,546,842)
----------- -----------
Cash flows from investing activities:
Purchase of property, plant and equipment (305,099) (210,767)
----------- -----------
Net cash used in investing activities (305,099) (210,767)
----------- -----------
Cash flows from financing activities:
Short-term borrowings - 1,043,065
Long-term borrowings 2,428,605 -
Proceeds from borrowing from related party 1,017,964 -
Repayment of short term debt (215,950) (283,385)
Repayment of long term borrowings (3,802,895) -
Proceeds from issuance of common stock and warrants 2,761,325 2,889,961
----------- -----------
Net cash provided by financing activities 2,189,049 3,649,641
----------- -----------
Effect of exchange rates on cash (29,663) (5,899)
----------- -----------
Net increase (decrease) in cash and cash equivalents (50,118) (113,867)
Cash and cash equivalents, beginning of period 155,855 140,445
----------- -----------
Cash and cash equivalents, end of period $ 105,737 $ 26,578
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 832,985 $ 668,780
Income taxes $ - $ -
</TABLE>
See accompanying notes to consolidated condensed financial statements.
6
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BIGMAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
Bigmar, Inc. (the "Company") is a Delaware corporation that owns 100% of the
outstanding common stock of two Swiss corporations, Bioren, SA and Bigmar
Pharmaceuticals, SA, and 100% of the outstanding common 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 September 30, 2000 and December 31, 1999, and the results of
operations, cash flows and comprehensive loss for all periods presented. The
results of the interim periods are not necessarily indicative of the results to
be obtained for the entire fiscal year.
For a summary of significant accounting policies (which have not changed from
December 31, 1999) and additional financial information, see Bigmar, Inc.'s
Annual Report on Form 10-KSB, as amended, for the year ended December 31, 1999.
The 10-KSB should be read in conjunction with these financial statements.
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly owned. The three wholly-owned
subsidiaries are as follows: Bioren S.A. ("Bioren"), Bigmar Pharmaceuticals S.A.
("Pharmaceuticals") and Bigmar Therapeutics Inc. ("Therapeutics"). All
significant intercompany accounts and transactions have been eliminated.
The financial statements of subsidiaries outside the United States are stated
using the local currency as the functional currency. Assets and liabilities of
these companies are translated at the rates of exchange at the balance sheet
date. The resulting translation adjustments are included in accumulated and
other comprehensive loss. Income and expenses are translated at average rates of
exchange for the period. Effective January 1, 2000, $7.7 million of intercompany
debt due from Bigmar Pharmaceuticals SA to Bigmar Inc. is no longer considered
short-term as repayment is not expected in the foreseeable future. Accordingly,
the gain or loss on translating such debt has been included in the cumulative
translation adjustment as a separate component of stockholders' equity.
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 received regulatory approval in
February 1999 from the United States Food and Drug Administration ("FDA") and
the Intercantonal Office for the
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Control of Medications ("IKS") in Switzerland to manufacture and sell certain
injectible pharmaceutical products in the United States 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 the nine month period of 2000, the Company received
approximately $2.8 million in proceeds from the private placements of common
stock and warrants. The Company anticipates raising additional funds during 2000
through 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.
(2) INVENTORIES
The components of inventory at September 30, 2000 and December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
------------------- ----------------
<S> <C> <C>
Raw Materials $1,058,127 $ 1,362,439
Finished Goods 1,212,627 1,107,795
------------------- ----------------
Total $ 2,270,754 $ 2,470,234
------------------- ----------------
</TABLE>
(3) LONG-TERM DEBT
As of September 30, 2000, the Company had various notes, bonds, mortgages and
other borrowings totaling approximately $13.8 million, including $4.1 million
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 March 2000, the Company extinguished $4.3 million of its
long-term debt. The Company paid $3.9 million and the bank forgave $0.4 million.
This amount has been recognized as an extraordinary item in the accompanying
statement of operations. The amount that was repaid was financed by variable
rate loans of $2.7 million from Credit Suisse, a $1.1 million 5% loan from a
stockholder and officer and cash of $0.1 million.
(4) COMMON STOCK ISSUED
In March 2000, the Company issued 500,000 shares of common stock to Banca del
Gottardo via private placement offering. The Company also issued 2-year warrants
to purchase 150,000 shares of common stock at $4.00 per share. Proceeds from the
sale of shares and warrants totaled $1,374,500 and were applied to working
capital and general corporate purposes. In June 2000, the Company issued 300,000
shares of common stock to Banca del Gottardo via private placement offering.
Proceeds from the sale of shares totaled $637,200 and were applied to working
capital and general corporate purposes. In August 2000, the Company issued
375,000 shares of common stock to Banca del
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Gottardo via a private placement offering. Proceeds from the sale of shares
totaled $749,625 and were applied to working capital and general corporate
purposes.
(5) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1999, Statement of Financial Accounting Standards No. 137 ("SFAS No.
137"), "Accounting for Derivative Instruments and Hedging Activities - Deferral
of Effective Date of FASB Statement No. 133 was issued. SFAS No. 137 deferred
the effective date of Statement No. 133 to all fiscal quarters of fiscal years
beginning after June 15, 2000. Statement No. 133 requires that all derivatives
be recorded in the balance sheet as either assets or liabilities and be measured
at fair value. Management has evaluated this standard and this statement will
not have a material impact on the Company's financial position or result of
operations.
In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No. 101,
"Revenue Recognition in Financial Statements". SAB 101 was also amended by SAB
101A and 101B. SAB 101, 101A and 101B summarize the staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. The Company will adopt SAB 101 during the fourth quarter of 2000.
The Company anticipates that adoption of this SAB will not have a material
impact on the Company's results of operatons or financial position.
FASB Interpretation No. 44 (FIN 44), "Accounting for Certain Transactions
Involving Stock Compensation: An interpretation of APB Option No. 25" is
effective July 1, 2000. However, certain of the conclusions included in the
interpretation apply to events occurring after December 15, 1998 or January 12,
2000. The Company adopted FIN 44 in the second quarter. FIN 44 did not have an
impact on the Company's results of financial operations or financial position.
(6) 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 segments based on segment
profit/(loss). Segment profit/(loss) for each segment 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 segment 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.
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<PAGE> 10
Summary information by segment for the nine months and three months ended
September 30, 2000 and 1999 is as follows:
NINE MONTHS ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
BIOREN PHARMACEUTICALS CORPORATE TOTAL
------ --------------- --------- -----
<S> <C> <C> <C> <C>
Sales - International $ 4,280,622 1,542,723 -- 5,823,345
Gross Margin 950,646 150,877 -- 1,101,523
Operating expenses and other
expense (1,166,580) (1,811,872) (1,757,088) (4,735,540)
----------- ----------- ----------- -----------
Segment Loss (215,934) (1,660,995) (1,757,088) (3,634,017)
</TABLE>
Pharmaceuticals' loss includes a $361,837 extrordinary gain from extinguishment
of debt.
NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
BIOREN PHARMACEUTICALS CORPORATE TOTAL
------ --------------- --------- -----
<S> <C> <C> <C> <C>
Sales - International $ 4,387,742 229,492 -- 4,617,234
Gross Margin 1,069,129 139,004 -- 1,208,133
Operating expenses and other
expense (1,224,113) (1,542,019) (3,335,009) (6,101,141)
----------- ----------- ----------- -----------
Segment Loss (154,984) (1,403,015) (3,335,009) (4,893,008)
</TABLE>
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THREE MONTHS ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
BIOREN PHARMACEUTICALS CORPORATE TOTAL
------ --------------- --------- -----
<S> <C> <C> <C> <C>
Sales - International $ 1,341,148 586,737 -- 1,927,885
Gross Margin 242,376 131,969 -- 374,345
Operating expenses and other
expense (414,386) (721,784) (626,584) (1,762,754)
----------- ----------- ----------- -----------
Segment Loss (172,010) (589,815) (626,584) (1,388,409)
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
BIOREN PHARMACEUTICALS CORPORATE TOTAL
<S> <C> <C> <C> <C>
Sales - International $ 1,313,004 17,883 -- 1,330,887
Gross Margin 320,912 45,911 -- 366,823
Operating expenses and other
expense (388,294) (541,724) (1,041,421) (1,971,439)
----------- ----------- ----------- -----------
Segment Loss (67,382) (495,813) (1,041,421) (1,604,616)
</TABLE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is management's discussion of significant factors that effected
the Company's interim financial condition and results of operations. This should
be read in conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations included in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1999.
Research and Development
In July 2000, the Company received licenses from the UK Medicines Control Agency
granting authorization to market two dosage strengths of Bupivacaine
Hydrochloride Solution in the United Kingdom. Bupivacaine HCl is a long-acting
local anesthetic used for caudal, epidural or peripheral nerve block. Although
injectable Bupivacaine was approved by the FDA in 1972, Bioren's easy-to-use
pre-mix solution delivered in the IV infusion bag is the first such formulation
of the drug.
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In September 2000, the U.S. Food and Drug Administration received the Company's
filing of an Abbreviated New Drug Application for a generic version of
Taxol(R). Taxol(R) was developed and is marketed by Bristol-Myers Squibb
Co. for the treatment of ovarian and breast cancers, as well as some forms of
leukemia. Sales of the prescription oncology agent are growing rapidly, with
reported 1999 worldwide volume in excess of $2 billion. Bigmar's generic form of
Taxol(R) will address all markets. In April 2000, the Company announced that
it had entered into a five-year distribution and supply agreement with Milan,
Italy-based Indena S.p.A., a world leader in processing pharmaceutical
extracts, to develop, manufacture and distribute a generic version of Taxol(R).
Under the terms of the agreement, Indena will supply the Company with
paclitaxel, an extract of the brevifoglia plant, the key ingredient used in
the manufacture of Taxol(R).
Marketing and Sales
In the first quarter of 2000, the Company finalized a distribution arrangement
with American Pharmaceutical Partners ("APP") as the exclusive distributor of
certain generic oncology products in North America and Canada. The five-year
exclusive arrangement covers three of the market-ready generic oncology products
on an exclusive basis along with several generic oncology products on a
non-exclusive basis. The products involved under this arrangement are produced
at Pharmaceuticals' FDA-inspected Barbengo manufacturing facility that utilizes
barrier isolation technology to manufacture FDA-approved parenteral drug
products. By using this technology for the first time in the production of
generic oncology drugs, the Company expects to increase the assurance of the
sterility of oncology drugs resulting in a higher quality product with reduced
manufacturing costs.
In the third quarter of 2000, the Company finalized a distribution agreement
with Baxter Pharmaceutical Products Inc., a wholly owned subsidiary of Baxter
Healthcare Corp., to market Bigmar's generic oncology products in the United
States. Under the agreement, Baxter obtains non-exclusive marketing and
distribution rights for two of Bigmar's products, Methotrexate and
5-Fluorouracil in the U.S. The agreement also contains options for Baxter to
distribute additional Bigmar products that are currently or expected to be under
review by the FDA.
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The Company plans to continue to develop commercial partnerships in other
countries for current registered products and sign significant distribution
agreements with major pharmaceutical companies for new products.
Production
The Company intends to devote additional capital resources, if available, to
increase the production capacity in the next 12 months, especially in the field
of lyophilized products. Bigmar believes its manufacturing concept is attractive
to a number of pharmaceutical companies and hopes to fund some of its
manufacturing growth needs by joint ventures with other pharmaceutical
companies.
Certain statements in this report constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995 including,
without limitation, statements regarding future cash requirements and statements
which include words such as "expect," "anticipate," "hope," "intend," and other
similar words. 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. Such factors and risks include, but are not
limited to, delays in product development, problems with clinical testing,
failure to receive regulatory approvals, lack of proprietary rights, inability
to identify suitable distributors and enter into acceptable distribution
agreements for the Company's products, and lack of necessary capital resources
to operate the business. Many of the factors that will determine results and
values are beyond the Company's ability to control or predict. For those
statements, the Company claims the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995.
RESULTS OF OPERATIONS
Sales
Revenue in the three months ended September 30, 2000 was $ 1,927,900 compared to
$1,330,900 for the corresponding three month period in 1999, an increase of
$597,000. Sales growth for the third quarter of 2000 was driven by higher sales
volume led by the U.S. market. In addition, consolidated revenues were adversely
affected by a weaker U.S. Dollar against the Swiss Franc during the third
quarter of 2000. The average exchange ratio of Swiss Franc to U.S. Dollar during
the third quarter 2000 was .57 as compared to .672 in 1999. This resulted in a
lower revenue calculation in U.S. Dollars.
For the nine month period ended September 30, 2000 net sales increased by
$1,206,000 to $5,823,000 or 26.1% over the same period in 1999. Sales growth for
the nine months of 2000 resulted from new customers and new products. Sales
growth was essentially due to higher sales volume in the U.S. market, the launch
of new products in the Swiss marketplace and new hospital customers in the IV
solution business.
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Gross Margin
Gross margin increased from approximately $367,000 for the third quarter of 1999
to $374,000 for the third quarter of 2000, a 2% increase. For the nine month
period ended September 30, 2000, gross margin amounted to $1,102,000, compared
with $1,208,000 in the prior year. The gross margin was at approximately 18.9%
for the nine month period of 2000, compared to approximately 26.2% for the prior
year. The decrease in the gross margin percent was due to higher production
costs at Pharmaceuticals in the first nine months of 2000.
Operating Expenses
Operating expenses decreased from approximately $1,936,000 for the third quarter
of 1999 to $1,666,000 for the third quarter of 2000, a 14% decrease. For the
nine month period ended September 30, 1999 and September 30, 2000 respectively,
operating expenses declined from approximately $4,999,000 to $4,683,000, a
decrease of 6.3%. Research and development expenses increased by $105,000 from
$2,232,000 for the nine month period of 1999 compared with $2,337,000 in the
same period of 2000 due to activities surrounding the Company's efforts in the
current year to develop new drug product formulations. Selling, general and
administrative expenses decreased by $421,000, primarily due to a decrease in
the number of personnel from 1999 to 2000.
Other Income and Expenses
For the nine month period ended September 30, 2000, other income was $121,000
compared with an expense of $16,000 in the prior year. This increase is
attributable to the sale of fully depreciated equipment to a third party during
the second quarter of 2000.
Interest expense
Interest expense increased $64,000 from the nine month period ending September
30, 1999 to the same period of 2000, due to an increase of total debt of $1.3
million in 2000, as compared 1999.
Gain, Loss on Foreign Currency Transactions
Foreign exchange gains amounted to $122,000 for the nine month period ending
September 30, 2000, compared to a loss of $444,000 in the prior year during the
same time period. Effective January 1, 2000, $7.7 million of intercompany debt
due from Bigmar Pharmaceuticals, SA to Bigmar, Inc. is no longer considered
short-term as repayment is not expected in the foreseeable future. Accordingly,
the gain or loss on translating such debt has been included in the cumulative
translation adjustment as a separate component of stockholders' equity.
The Company recorded an extraordinary gain in the first quarter 2000 due to the
forgiveness of $362,000 in long-term debt from a Swiss bank.
Net Loss
As a result of all of the foregoing, the Company's net loss for the nine month
period ended September 30, 2000 amounted to $3,634,000 versus $4,893,000 during
the same period of 1999 or an improvement of 25.7%. Net loss for the quarter
ended September 30, 2000 was $1,388,000, or ($0.14) per share on a basic and
diluted basis, in comparison to a net
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<PAGE> 15
loss of $1,605,000, or ($0.18) per share on a basic and diluted basis in the
comparable quarter ended September 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000 and December 31, 1999, the Company had cash and cash
equivalents of $106,000 and $156,000, respectively. The Company's working
capital was a $3.0 million deficit, $2.9 million and $1.9 million deficit at
September 30, 2000, September 30, 1999 and December 31, 1999, 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. The Company does not have sufficient
capital resources to fund these expenditures and does not have commitments from
any third party to provide the necessary resources. If the Company is unable to
obtain additional funding through new debt or equity financing, these
development activities will be curtailed or terminated. This would delay or
prevent the Company from bringing its products to market and would have a
material adverse effect on the Company.
Property, plant and equipment totaled $12.5 million and $14.4 million at
September 30, 2000 and at December 31, 1999, respectively. Additions were
approximately $305,000 whereas depreciation expense was $1,286,000.
As of September 30, 2000, the Company had various notes, bonds, mortgages and
other borrowings totaling approximately $13.8 million including $4.1 million
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 the first, second and third quarters of 2000, pursuant to private
placement transactions with Banca del Gottardo, the Company raised $2,761,325
which were applied to working capital and general corporate purposes.
Additional capital funding of not less than $1,500,000 will be required to
sustain operations through March 2001. 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. Although management is currently
discussing additional financing with potential investors, the Company has no
commitments to obtain additional funding and there is no assurance that the
Company will be able to obtain additional financing or that such financing, if
available, will be available on acceptable terms. If the Company cannot obtain
adequate additional funding during the next 90 days, the Company will be forced
to curtail or suspend its research and development activities, manufacturing and
other business operations. If no additional financing is obtained, the Company
may be forced to cease all operations in March 2001 and may seek protection
under the United States bankruptcy laws.
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
15
<PAGE> 16
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.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
On January 1, 1999, 11 member countries of the European Union (Switzerland
excluded) established fixed conversion rates between their existing sovereign
currencies, and adopted the Euro as their own common legal currency. The Euro is
currently trading on currency exchanges and the legacy currencies will remain
legal tender in the participating countries for a transition period between
January 1, 1999 and December 31, 2001. Between January 1, 2002 and July 1, 2002,
the participating countries will introduce Euro notes and coins and withdraw all
legacy currencies so that they will no longer be available. Based on current
information and management's current assessment, the Company does not expect
that Euro conversion will have a material adverse effect on its business or
financial condition.
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. 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
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. The Company does not have any programs in place to
control these risks.
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<PAGE> 17
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
-------------------------------------------------------------------------
2000 2001 2002 2003 2004 Thereafter
---- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
(US$ Equivalent)
except average interest rate
Liabilities
Long-Term Debt:
Fixed Rate ($US) $ -- -- 4,000,000 -- -- --
Average interest rate -- -- 8.0% -- -- --
Fixed Rate (Sfr) $ 980,958 -- -- 1,731,102 -- --
Average interest rate 5.0% -- -- 4.0% -- --
Variable Rate (Sfr) $ 438,546 582,804 525,101 351,991 236,584 2,400,462
Average interest rate 5.6% 5.6% 5.5% 5.4% 5.1% 4.1%
</TABLE>
17
<PAGE> 18
BIGMAR, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 2 (c) CHANGES IN SECURITIES - RECENT SALES OF UNREGISTERED SECURITIES
On August 9, 2000, the Company issued 375,000 shares of common stock at a price
of $2.00 per share to Banca del Gottardo through a private placement of stock in
reliance on Regulation S of the Securities Act of 1933. Proceeds from the sale
of shares totaled $750,000 and were applied to working capital and general
corporate purposes.
Share transaction summarized above was made directly by the Company without use
of an underwriter or placement agent and without payment of commissions or other
remuneration.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held on July 7, 2000. In
connection with the meeting, proxies were solicited. The results of the voting
were as follows:
Proposal 1: Election of the Board of Directors of the Company for term
expiring in 2001.
<TABLE>
<CAPTION>
Nominee Votes For Votes Withheld Broker Non-Votes
------- --------- -------------- ----------------
<S> <C> <C> <C>
John G. Tramontana 7,860,715 39,764 0
Cynthia R. May 7,860,715 39,764 0
Massimo Pedrani 7,860,615 39,864 0
Bernard Kramer 7,860,715 39,764 0
Philippe J.H. Rohrer 7,860,715 39,764 0
</TABLE>
Proposal 2: Amendment to the Company's Certificate of Incorporation
increasing the number of authorized shares of common stock
from 15 million to 30 million.
<TABLE>
<S> <C>
Votes For: 7,837,679
Votes Against: 60,600
Votes Abstaining: 2,200
Broker Non-Votes 0
</TABLE>
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<PAGE> 19
Proposal 3: Ratification of Appointment of KPMG as the Company's
Independent Accountants.
<TABLE>
<S> <C>
Votes For: 7,884,979
Votes Against: 14,000
Votes Abstaining: 1,500
Broker Non-Votes 0
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Exhibit 27.1 Financial Data Schedule, attached hereto.
(b) Reports on Form 8-K.
On August 21, 2000, the Company filed a Form 8-K announcing under an Item 5
disclosure the possible delisting of the Company's common stock from the
Nasdaq Small Cap Market.
On October 10, 2000, the Company filed a Form 8-K announcing under an Item
5 disclosure the delisting of the Company's common stock from the Nasdaq
Small Cap Market.
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<PAGE> 20
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.
November 14, 2000
BIGMAR, INC.
------------
Registrant
By: /s/ Philippe J.H. Rohrer
-------------------------------
Philippe J.H. Rohrer
Chief Financial Officer;
Secretary and Treasurer
20
<PAGE> 21
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
