EXHIBIT 99.1
BIGMAR, INC. AND SUBSIDIARIES
INDEX
Part I FINANCIAL INFORMATION:
Item 1 Financial Statements
Consolidated Balance Sheets as of October 31, 1998 and
December 31, 1997 (Unaudited) 2
Consolidated Condensed Statement of Operations for the
ten month period ended October 31, 1998 (Unaudited) 3
Consolidated Condensed Statement of Cash Flows for the
ten months ended October 31, 1998 (Unaudited) 4
Consolidated Statement of Comprehensive Income (Loss) for
the ten months ended October 31, 1998 (Unaudited) 5
Consolidated Statement of Changes in Stockholders' Equity
for the ten months ended October 31, 1998 (Unaudited) 6
Notes to the Consolidated Condensed Financial Statements
(Unaudited) 7
BIGMAR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
October 31 December 31
1998 1997
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 521,505 $ 643,232
Accounts receivable, net of allowance of $0 at
October 31, 1998 and December 31, 1997 849,329 847,899
Inventories 1,449,496 890,249
Prepaid expenses and other current assets 271,763 432,234
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Total current assets 3,092,093 2,813,614
Property, plant and equipment, net 18,700,293 17,164,158
Intangible and other assets, net 462,386 539,318
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Total $ 22,254,772 $ 20,517,090
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 1,101,944 1,766,992
Notes payable 1,700,172 2,318,644
Current portion of long-term debt 635,954 581,674
Due to related parties 68,614 -
Accrued expenses and other current liabilities 966,632 630,713
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Total current liabilities 4,473,316 5,298,023
Long-term debt 10,776,425 10,090,467
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Total liabilities 15,249,741 15,388,490
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Stockholders' equity:
Preferred stock ($.001 par value; 5,000,000 shares authorized;
none issued)
Commonstock ($.001 par value; 20,000,000 shares authorized and 8,027,308
shares issued and outstanding at October 31, 1998 and 15,000,000
shares authorized and 4,185,000 shares
issued and outstanding at December 31, 1997) 8,027 4,185
Additional paid-in capital 22,317,324 15,063,166
Retained earnings (deficit) (14,526,294) (9,012,630)
Accumulated other comprehensive income:
Foreign currency translation adjustments (794,026) (926,121)
------------ ------------
Total stockholders' equity 7,005,031 5,128,600
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Total $ 22,254,772 $ 20,517,090
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See accompanying notes to consolidated financial statements.
2
BIGMAR, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE TEN MONTH PERIOD ENDING OCTOBER 31, 1998
(Unaudited)
Net sales $ 5,337,744
Cost of goods sold 3,850,582
-----------
Gross margin 1,487,162
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Operating expenses:
Research and development 2,473,684
Selling, general and administrative 3,474,977
-----------
Total operating expenses 5,948,661
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Operating income (loss) (4,461,499)
Other income (expense) 122,159
Interest income (expense) (908,300)
Issuance of preferred stock warrants for loan guarantee (958,000)
Gain (loss) on foreign currency transactions 691,976
-----------
Income (loss) before income taxes (5,513,664)
Income taxes (benefit): -
-----------
Net income (loss) $(5,513,664)
-----------
-----------
Basic earnings (loss) per share $ (1.27)
-----------
-----------
Weighted average shares outstanding 4,326,384
-----------
-----------
See accompanying notes to consolidated financial statements.
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BIGMAR, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
FOR THE TEN MONTH PERIOD ENDING OCTOBER 31, 1998
(Unaudited)
Cash flows from operating activities:
Net loss $(5,513,664)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Issue stock warrants 958,000
Depreciation and amortization 1,464,131
Unrealized foreign exchange gains (692,563)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 61,710
(Increase) decrease in inventories (448,916)
(Increase) decrease in prepaid expenses and other
current assets 181,896
Increase (decrease) in accounts payable (740,650)
Increase (decrease) in due to related parties 67,819
Increase (decrease) in accrued expenses and other
current liabilities 279,912
-----------
Net cash provided by (used in) operating activities (4,382,325)
-----------
Cash flows from investing activities:
Purchase of property, plant and equipment (1,560,890)
Increase in other assets -
-----------
Net cash (used in) investing activities (1,560,890)
-----------
Cash flows from financing activities:
Short-term borrowings 4,909,787
Net proceeds from issuance of equity securities 6,300,000
Long-term borrowings 179,612
Repayment of credit line (5,649,272)
-----------
Net cash provided by financing activities 5,740,127
-----------
Effect of exchange rates on cash 81,361
-----------
Net increase (decrease) in cash and cash equivalents (121,727)
Cash and cash equivalents, beginning of period 643,232
-----------
Cash and cash equivalents, end of period $ 521,505
-----------
-----------
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 882,993
Income taxes $ -
See accompanying notes to consolidated financial statements
4
BIGMAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
FOR THE TEN MONTH PERIOD ENDING OCTOBER 31, 1998
(Unaudited)
Net income (loss) $ (5,513,664)
Other comprehensive income, net of tax:
Foreign currency translation adjustments, net of
income taxes of $0 132,095
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Comprehensive income (loss) $ (5,381,569)
------------
------------
See accompanying notes to consolidated financial statements.
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BIGMAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
COMMON STOCK
------------------------ ADDITIONAL RETAINED CUMULATIVE
NUMBER OF PAID-IN EARNINGS TRANSLATION
SHARES AMOUNT CAPITAL (DEFICIT) ADJUSTMENT TOTAL
------ ------ ------- --------- ---------- -----
Balance--December 31, 1997 4,185,000 $ 4,185 $15,063,166 $ (9,012,630) $ (926,121) $ 5,128,600
Net (loss) through
October 31, 1998 (5,513,664) (5,513,664)
Translation adjustment 132,095 132,095
Issue preferred stock
warrants to Jericho II 958,000 958,000
Issuance of common stock
to Banca del Gottardo 150,000 150 299,850 300,000
Issuance of common stock
to Jericho II 3,692,308 3,692 5,996,308 6,000,000
--------- ------- ----------- ------------- ---------- -----------
Balance--October 31, 1998 8,027,308 $ 8,027 $22,317,324 $ (14,526,294) $ (794,026) $ 7,005,031
--------- ------- ----------- ------------- ---------- -----------
--------- ------- ----------- ------------- ---------- -----------
See accompanying notes to consolidated financial statements
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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 October 31, 1998 and December 31, 1997, and the results of
operations, the cash flows, the comprehensive income and the changes in
stockholders' equity for the ten months ended October 31, 1998. Certain
amounts in the accompanying financial statements have been restated to
conform to the October 31, 1998 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, 1997) and additional financial information, see Bigmar Inc.'s
Annual Report on Form 10-K for the year ended December 31, 1997. 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. In June 1997, the Company completed
construction on a pharmaceutical manufacturing plant in Barbengo, Switzerland.
The Company has obtained a general approval to manufacture and market
pharmaceutical products, with the exception of antibiotics, from the
Intercantonal Office for the Control of Medications ("IKS") in Switzerland and
is still in the process of validating the plant's equipment and processes for
approval by the United States Food and Drug Administration ("FDA"). These
activities have consumed a substantial amount of the Company's resources,
including proceeds from its initial public offering, proceeds from an offshore
placement of equity securities and issuance of convertible notes in August 1997,
proceeds from its line of credit, and from its recent sales of common stock. In
addition, sales of the Company's oncology products are dependent upon the
successful outcome of these compliance activities, which are expected to
continue into at least the first quarter of 1999. Based upon the foregoing, the
Company does not anticipate the Bigmar manufacturing facility in Barbengo,
Switzerland will produce sales in sufficient volume to generate positive cash
flow during 1998. However, the Company anticipates that the terms of the
existing $6.0 million line of credit, together with cash flow from operations,
will be sufficient to fund its operations through the first quarter of 1999. As
a result, the Company anticipates that it will require additional financing in
order to complete the validation process and to continue to fund its operations.
Management is discussing additional financing with a number of third parties,
however, there is no assurance that
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such financing will be available on terms acceptable to the Company, if at all.
In addition, there are no assurances that the Company will be able to
manufacture its proposed products or that the Company's targeted customers will
accept such products. 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) COMMON STOCK ISSUED
On October 22, 1998, the Company issued 3,692,308 shares of common stock to
Jericho II, L.L.C. ("Jericho") for $1.625 per share via a Stock Purchase
Agreement dated October 20, 1998. Proceeds from the sale of shares totaled
$6,000,000, and have been used to repay debt and to provide working capital.
John G. Tramontana, Chairman of the Board, President and Chief Executive Officer
of the Company, has a 50% ownership interest in Jericho.
Jericho owns beneficially 5,192,308 shares of Bigmar Common Stock. These shares
include (i) a Common Stock Warrant for the purchase of 500,000 shares at a price
of $5.00 per share, (ii) a Preferred Stock Warrant for the purchase of 1,000,000
shares at a price of $2.5625 per share, and (iii) 3,692,308 shares of Common
Stock. In the aggregate, assuming exercise of the Warrants, Jericho may thus be
deemed the beneficial owner of approximately 54.5% of the aggregate of (i) the
4,185,000 shares of Bigmar Common Stock outstanding on August 14, 1998 (as
reported on Bigmar's Quarterly Report on Form 10-Q for the quarterly period
ending June 30, 1998) plus (ii) the 150,000 shares issued to Banca del Gottardo,
plus (iii) the 1,500,000 shares issuable on exercise of the Warrants, plus (iv)
the 3,692,308 shares acquired pursuant to the Stock Purchase Agreement dated
October 20, 1998.
(3) RECENTLY ISSUED ACCOUNTING PROUNCEMENTS
The Company has adopted Financial Accounting Standards Board Statement No. 130,
"Reporting Comprehensive Income". FASB Concepts Statement No. 6 defines
comprehensive income as "the change in equity of a business enterprise during a
period from transactions and other events and circumstances from non-owner
sources. It includes all changes in equity during a period except those
resulting from investments by owners and distributions to owners."
Comprehensive income is comprised of net income plus other comprehensive income.
Other comprehensive income includes items previously recorded directly in equity
under FASB Statement No. 52, "Foreign Currency Translation", FASB Statement No.
80, "Accounting for Future Contracts", FASB Statement No. 87, "Employers'
Accounting for Pensions", and FASB Statement No. 115, "Accounting for Certain
Investments in Debt and Equity Securities".
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The Consolidated Balance Sheet has been restated to conform to the requirements
of this Statement by replacing "Cumulative translation adjustment" with
"Accumulated other comprehensive income" in the equity section. In addition,
"Consolidated Statements of Comprehensive Income (Loss)" have been added to this
report for the ten months ended October 31, 1998.
The Company has adopted Financial Accounting Standards Board Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information", issued in
September 1997. Since this is the initial year of application, the Company has
elected not to provide the interim period disclosures, as permitted by the
Statement.
In February 1998, the Financial Accounting Standards Board issued Statement No.
132, "Employers' Disclosures About Pensions and Other Postretirement Benefits".
This Statement, which is effective for fiscal years beginning after December 15,
1997, amends the disclosure requirements of Statements 87, 88, and 106.
Adoption of this standard is not expected to have a material impact on the
Company's financial statements or results of operations.
On September 16, 1998, the FASB issued Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities", which is effective for fiscal
years beginning after September 15, 1999. The Statement establishes accounting
and reporting standards for derivative instruments and hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. Adoption of this Statement is not expected to have a material
impact on the Company's financial statements or results of operations.
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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.
December 10, 1998
BIGMAR, INC.
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REGISTRANT
By: /s/ Michael K. Medors
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Michael K. Medors
TREASURER
(PRINCIPAL ACCOUNTING OFFICER)
By: /s/ William R. Ash, III
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William R. Ash, III
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)
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