<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

/X/  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999.

                                       OR

/ /  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934.

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
 incorporation or organization)                              Identification No.)

       9711 SPORTSMAN CLUB ROAD
           JOHNSTOWN, OHIO                                       43031
(Address of principal executive offices)                       (Zip Code)

       Registrant's telephone number, including area code: (740) 966-5800

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

                     Common Stock, par value $.001 per share
                              (Title of each class)

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                     Common Stock, par value $.001 per share
                                (Title of class)

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.                         Yes X         No

The aggregate market value of Common Stock held by non-affiliates is $3,853,000
based on a closing sale price of $3.00 per share on March 23, 2000. As of March
23, 2000, 8,993,973 shares of $.001 par value Common Stock were issued and
outstanding.

Issuer's revenues for its most recent fiscal year were $7,725,362.

                       DOCUMENTS INCORPORATED BY REFERENCE

Information required by Part III of Form 10-K is incorporated herein by
reference to the registrant's definitive Proxy Statement relating to its 2000
annual meeting of stockholders to be held in May, 2000.

<PAGE>

                                     PART I

ITEM 1. BUSINESS

GENERAL

BIGMAR. Bigmar, Inc. ("the Company") was incorporated in Delaware in September
1995. It has three wholly owned subsidiaries: Bioren SA ("Bioren"), Bigmar
Pharmaceuticals SA ("Pharmaceuticals"), and Bigmar Therapeutics
("Therapeutics"). Bioren, a Swiss corporation, was formed in July 1986.
Pharmaceuticals, also a Swiss corporation, was formed in January 1992 under the
name BVI, SA. Therapeutics, a Delaware corporation, was formed in September 1995
under the name Bioren, Inc.; the name was changed in November 1995. The Company
consumated its initial public offering in June 1996.

The Company's corporate headquarters located in Johnstown, Ohio, include
research and development laboratories used for testing of generic oncology
pharmaceuticals and related products ("Oncology Products") to be marketed in the
United States.

The Company manufactures generic pharmaceutical oncology products and
intravenous infusion solutions through its Swiss subsidiaries and markets these
products in Europe, the United States and other countries primarily through
pharmaceutical distributors. Currently, the Company has distribution rights for
more than 20 generic oncology products. At December 31, 1999, the Company
employed 71 full-time and 8 part-time associates in the following functional
areas: manufacturing and quality control-56; marketing and sales-9; research and
development, including regulatory affairs-9; and administration-5. All but three
of the Company's employees are located in Switzerland and none of the employees
is a party to any collective bargaining agreements. Financial information
relating to Bigmar Inc. business segments and operations in various geographic
areas of the world is provided in the accompanying Notes to the Consolidated
Financial Statements

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 the United States, Italy, Germany, Switzerland 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. The
products were marketed in the United States since end of October 1999.
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, 1999.

PRODUCTS

IV SOLUTIONS. Bioren's Facility manufactures and markets IV Solutions. The IV
Solutions generally consist of different chemical entities, such as sodium
chloride, electrolytes, carbohydrates and other nutrients and antibiotic
solutions such as Metronidazole, which are administered to patients
intravenously. The Company markets IV Solutions through its own sales force to
hospitals, clinics, retirement homes, nursing homes, managed health care
organizations, home infusion providers and other health care


                                       2
<PAGE>

providers in Switzerland. The Company intends to continue manufacturing and
marketing IV Solutions and is seeking to penetrate additional markets in
Switzerland and the United Kingdom.

In March 1995, Bioren and PLM Langeskov A/S ("PLM") entered into an agreement,
which grants Bioren the exclusive right to distribute its IV Solutions
throughout Switzerland and Liechtenstein in PLM's collapsible containers. The
agreement expires in the year 2005, unless it is earlier terminated. Under the
terms of the agreement, PLM is entitled to terminate the exclusive right
contained in the agreement if, among other things, Bioren does not purchase a
minimum number of intravenous solution containers each year. In addition, either
party may terminate the agreement upon the occurrence of certain specified
conditions. The termination of the agreement would have a material adverse
effect on the Company.

ONCOLOGY PRODUCTS. The Company currently markets various generic oncology
products in United States and Europe. In 1999, the Company received a total
of seven Abbreviated New Drug Application ("ANDAs" or "ANDA") approvals from
the FDA for:

     -    Methotrexate for Injection USP, 1g vial (Preservative-free)

     -    Methotrexate Injection USP, 50 mg and 250 mg vial (Preserved)

     -    Methotrexate Injection USP, 50 mg, 100 mg, 200 mg and 250 mg vial
          (Preservative-free)

     -    Leucovorin Calcium for Injection USP, 200 mg vial (Preservative-free)

     -    Leucovorin Calcium for Injection USP, 500 mg vial (Preservative-free)

     -    Fluorouracil Injection USP, 250 mg and 500 mg vial

     -    Daunorubicin Hydrochloride for Injection USP, 20mg vial

The Methotrexate products are indicated in the treatment of various neoplastic
diseases. The Leucovorin products are used to diminish toxicity and counteract
the effects of impaired methotrexate elimination and of inadvertent overdosages
of folic acid antagonists. Leucovorin Calcium for Injection, 500mg is also
indicated in combination with 5-Fluorouracil in the palliative treatment of
patients with advanced colorectal cancer,carcinoma of colon, rectum, breast,
stomach and pancreas. The approval of Leucovorin Calcium for Injection USP, 500
mg provides a unique proprietary position, as the Company is the first to offer
this configuration in the United States. Approval of this product represents an
important step in adressing the specific dosage needs of the patient population
who depend on them. The estimed combined total 1998 domestic market for all
seven approved products was approximately $170 million. Competition in generic
oncology drugs for the U.S. market is limited to only one or two suppliers. The
strong demand for Daunorubicin Hydrochloride for Injection should enable the
Company to establish a strong market presence for this product and result in an
increase in overall Company sales.

The Company has already received a total of three registrations in Switzerland
for the following products:

     -    Methotrexate Injection USP, 50 mg and 200 mg vial

     -    Calcium Folinate for Injection USP, 50 mg vial

     -    Doxorubicin for Injection 10 mg, 20 mg and 50 mg vial

With its strong experience on the Swiss marketplace and close relationships with
Swiss hospitals, Bioren began to launch its first oncology pharmaceuticals
during 1999.

PROPOSED PRODUCTS. Most of the off-patent multi-source drugs (meaning all drugs
for which the patent has expired and which are available from more than one
supplier in one country) are cytotoxic drugs, which are exclusively sold to the
hospital market in the form of injectables. The Company has identified


                                       3
<PAGE>

approximately 30 oncological drugs that are currently off-patent and sold in
generic form and 15 additional oncological drugs that the Company believes will
become generic by the year 2000. Generic drugs are the chemical and therapeutic
equivalents of brand name drugs and generally are marketed once the patent on
the proprietary drug has expired.

There can be no assurance that the Company will manufacture or market any of the
foregoing products. The commercialization of these products will depend on a
number of factors including, but not limited to, the successful results of the
Company's clinical toxicity studies and obtaining regulatory approval. Although
the Company believes that these proposed products have commercial value, the
Company may choose not to manufacture or market some or all of these products.

COMPETITION

The pharmaceutical industry is subject to intense competition and rapid and
significant technological change. Competitors of the Company are numerous and
include United States and international companies. In the intravenous infusion
market, the Company faces competition from Braun and Fresenius and in the
oncological markets, the Company faces competition from Bedford Laboratories,
Bristol-Myers Squibb Co., Pharmachemie, BV, Pharmacia & Upjohn, Inc., and
Gensia-Sicor. Furthermore, in oncological markets the Company may face
competition from alternative methods of treatment such as surgical procedures,
radiation treatments and other treatments.

Many of the Company's competitors, including all of the companies referred to
above, have substantially greater financial technical resources, production and
marketing capabilities than the Company. The Company believes that the principal
competitive factors affecting its products and proposed products are timing of
product introduction, price, quality, and service. The Company believes that
quality and service continue to be an advantage in the sale of IV Solutions. It
also believes that the price, timing, quality, customer service and breadth of
its product line are all important competitive factors for its oncological
products and proposed oncological products. However, the competitor's ability to
introduce generic versions of products promptly after a drug's patent expires
and the breadth of their product lines may give them a competitive advantage
over the Company.

MARKETING AND SALES

Pharmaceutical products are generally sold directly to distributors,
wholesalers, health care facilities, and government agencies. Primary marketing
efforts for pharmaceutical products are directed toward securing the
prescription or recommendation of a product by physicians or other health care
professionals. For example, in the United States health maintenance
organizations (HMOs) and pharmacy benefit managers are becoming increasingly
important marketing channels for distributing pharmaceutical products. The
increasing pressures to contain health care costs have accelerated the use of
lower priced generic pharmaceutical products. The substitution of generic drugs
for the brand prescribed has increased competitive pressures on pharmaceutical
products.

Recently, the Company finalized a five year distribution and marketing
agreement with American Pharmaceutical Partners ("APP") as the exclusive
distributor of certain generic oncology products, manufactured by the
Company, in North America and Canada. The agreement includes three
market-ready generic oncology products on an exclusive basis -Methotrexate
for Injection, 1gr -Calcium Leucovorin for Injection, 200mg and 500mg
-Daunorubicin Hydrochloride for Injection, 20mg along with several oncology
products on a non-exclusive basis. On August 5, 1999, the Company received
its initial order, valued at $1.0 million, under this arrangement. APP has
also indicated its plans to order additional generic oncology products
produced by the Company and used for remission in various types of cancer.

The Company has given other companies the exclusive right to market and
distribute, in various territories, its oncological products as well as the
right of first refusal to market and distribute other products in such areas. As
a result Bigmar:


                                       4
<PAGE>

-    Cannot independently market products that are covered under these
     agreements;

-    Does not have control of marketing abilities or strategies; and

-    Cannot make any other strategic alliances or collaborative arrangements
     regarding a product which is covered by an exclusive deal or right of first
     refusal.

The acceptance of the Company's product in the marketplace is dependent upon
these exclusive disributors' ability to demonstrate the benefits of our products
to the medical and health care communities and to sell commercial quantities of
our products at acceptable costs.

The Company recently signed a licensing and supply agreement with Graminex,
L.L.C. to develop a new prostatitis therapy, BGM-24, and plans to file an
Investigational New Drug Application with the FDA for this therapy. Cynthia R.
May, a director and officer of the Company, is currently President of Graminex,
L.L.C., a manufacturer and supplier of botanical raw materials containing
proprietary active pharmaceutical substances. Jericho II, L.L.C., an investment
entity controlled by Ms. May, is a principal shareholder of Bigmar, Inc.

Bioren markets IV Solutions through its own sales force to health care providers
and third-party payors in Switzerland. Bioren has entered into exclusive
arrangements with non-affiliated pharmaceutical companies to market certain IV
Solution products in Switzerland and the United Kingdom.

Pharmaceuticals markets its registered products to pharmaceutical companies.
Pharmaceuticals does not market its other products directly to the public.
Pharmaceuticals has entered into exclusive arrangements with various
non-affiliated pharmaceutical companies to market certain Oncology Products,
manufactured or licensed by the Company in the United States, Germany, Italy,
Spain and Brazil. The amount of resources and time that any of these
collaborators devote towards marketing and sales of the Company's products are
not within the Company's control. The termination of any of these agreements
would have a material adverse effect on the Company.

The Company's sales are not subject to significant variations due to seasonal
changes.

RESEARCH AND DEVELOPMENT

The Company's research and development activities focus on three areas:

-    Formulating raw materials into finished products

-    Scaling up the development from the laboratory phase to the production
     phase

-    Conducting stability and bio-equivalency testing of the finished products

During 1999, the Company received approvals for seven ANDA's from the FDA. The
approved ANDA's are for certain oncology products manufactured by
Pharmaceuticals (see "Manufacturing and Suppliers" below). The Company also
received approval from Switzerland's IKS to utilize IV bags as a drug delivery
system for Metronidazole, an antibiotic used in the treatment of serious
infections caused by anaerobic bacteria. This approval allows the Company to
manufacture and market IV bags within Switzerland.

The Company also filed for approval from the IKS for the formulation of
Nitroglycerin and Bupivacaine in IV bags. Nitroglycerin is used in treating
patients with heart disease; Bupivacaine in used in conjunction with
patient-controlled pumps. Bupivacaine is a local anesthetic used in pain
management.

By leveraging Pharmaceuticals' expertise in using Isolator Technology along with
Bioren's infusion production capabilities, the Company seek to become the first
company offering generic oncology drugs in IV bags, which have been
traditionally delivered in vials. Because oncology drugs are very toxic and


                                       5
<PAGE>

dangerous to handle, formulating various dosages in IV bags would be an
advantage for hospital staff administering the drugs.

The Company's research and development expenditures totaled $2,741,809 and
$2,375,034 for the years ending December 31, 1998 and 1999, respectively.

To the Company's knowledge, there are no claims against it for infringement of
any third party intellectual property. However, the Company's ability to sell
its products and proposed products depends on not infringing the proprietary
rights of competitors. Patents concerning pharmaceutical products are often
uncertain and involve complex legal, scientific and factual questions. Laws
regarding the enforceability of that intellectual property also vary from
country to country. The Company has no assurance that such intellectual property
issues will be uniformly resolved or that local laws will provide consistent
rights and benefits.

MANUFACTURING AND SUPPLIERS

The Company has two production facilities, the Bioren facility and
Pharmaceutical's facility. The Bioren facility is a 57,000 square foot facility
in Couvet, Switzerland where the Company manufactures and markets IV Solutions
and will manufacture non-toxic pharmaceutical products. The Company has
dedicated approximately 25,000 square feet of the Bioren facility to test and
manufacture certain oncological products such as calcium leucovorin.
Pharmaceuticals facility is a 25,000 square foot, state-of-the-art facility in
Barbengo, Switzerland where the Company manufactures Oncology Products.

The capital costs associated with equipping a facility and manufacturing
oncology products are substantial and the manufacturing process is complex. The
FDA and foreign regulatory authorities regulate facilities in which oncology
products are manufactured and the method of manufacture, as well as the
employees' working conditions. Because the manufacturing of cytotoxic oncology
products is expensive and complex, only a few companies throughout the world
engage in their manufacture.

The majority of raw materials needed to manufacture the Company's products and
proposed products generally are not readily available and must be purchased from
limited sources. In addition, the Company obtains containers for IV Solutions
from a sole supplier. The Company's reliance on a sole or a limited number of
suppliers involves several risks, including the inability to obtain an adequate
supply of required raw materials and components, increased raw material or
component costs and reduced control over quality and timely delivery.

GOVERNMENTAL REGULATIONS

UNITED STATES. The Company's research and development activities and the
production and marketing of the Company's licensed and owned products and
proposed products are subject to compliance with a wide range of regulatory
requirements by numerous governmental authorities in the United States and in
other countries. In the United States, drugs are subject to rigorous review by
the FDA. The Federal Food, Drug, and Cosmetic Act and other Federal statutes and
regulations govern or influence the research, testing, manufacture, safety,
labeling, storage, record keeping, approval, distribution, reporting,
advertising and promotion of such products.

Non-compliance with applicable requirements can result in recall, injunction or
seizure of products; imposition of import restrictions; refusal of the
government to approve new product applications; prevention from entering into
government supply contracts; withdrawal of previously approved applications and,
in certain circumstances, criminal prosecution.

In order to obtain FDA approval of a drug, companies must generally submit proof
of safety and efficacy. In some cases such proof entails extensive clinical and
pre-clinical laboratory tests. The testing, preparation of necessary
applications and processing of those applications by the FDA is expensive and
may take several years to complete. There is no assurance that the FDA will act
favorably or in a timely


                                       6
<PAGE>

manner in reviewing submitted applications, and the Company may encounter
significant difficulties or costs in its efforts to obtain FDA approvals, which
could delay or preclude the Company from marketing any products it may develop.
The FDA may also require post-marketing testing and surveillance of approved
products, or place other conditions on the approvals. These requirements could
make it more difficult or expensive to sell the products, and therefore could
restrict the commercial applications of such products. Product approvals may be
withdrawn if compliance with regulatory standards is not maintained or if
problems occur following initial marketing. For patented products or
technologies, delays imposed by the governmental approval process may materially
reduce the period during which the Company will have the exclusive right to
exploit such technologies; however, an additional period of up to five years may
be added to the term of the patent in such circumstance.

Generally, with respect to drugs with active ingredients not previously approved
by FDA, a prospective manufacturer must conduct and submit to FDA adequate and
well-controlled clinical studies to prove that drug's safety and efficacy.
Currently, FDA approval of a New Drug Application ("NDA") takes approximately
two to three years on average after its initial submission to FDA, based on
information published by FDA.

Following drug discovery, the steps required before a new pharmaceutical product
may be marketed in the United States include:

-    Pre-clinical laboratory and animal tests

-    Submission to the FDA of an application for an Investigational New Drug
     ("IND")

-    Clinical and other studies to assess safety and parameters of use

-    Adequate and well-controlled clinical trials to establish the safety and
     effectiveness of the drug

-    Submission of a NDA to the FDA

-    FDA approval of the NDA prior to any commercial sale or shipment of the
     drug.

Typically, pre-clinical studies are conducted in the laboratory and in animal
model systems to gain preliminary information on the drug's pharmacology and
toxicology and to identify any potential safety problems that would preclude
testing in humans. The results of these studies are submitted to the FDA as part
of the IND application. Testing in humans may commence 30 days after submission
of the IND unless the FDA places the IND on "clinical hold." A three-phase
clinical trial program is usually required for FDA approval of a pharmaceutical
product. Phase I clinical trials are designed to determine the metabolism and
pharmacological effects of the drug in humans, the side effects associated with
increasing doses, and, possibly, to obtain early indications of efficacy. These
studies generally involve a small number of healthy volunteer subjects, but may
be conducted in people with the disease the drug is intended to treat. Phase II
studies are conducted to evaluate the effectiveness of the drug for a particular
indication and thus involve patients with the disease under study. These studies
also provide evidence of the short-term side effects and risks associated with
the drug. Phase III studies are generally designed to provide the substantial
evidence of safety and effectiveness of a drug required to obtain FDA approval.
They often involve a substantial number of patients in multiple study centers
and may include chronic administration of the drug in order to assess the
overall benefit-risk relationship of the drug. Upon completion of clinical
testing that demonstrates that the product is safe and effective for a specific
indication, a NDA may be submitted to the FDA. This application includes details
of the manufacturing and testing processes, pre-clinical studies and clinical
trials. The FDA closely monitors the progress of each of the three phases of
clinical testing and may, at its discretion, re-evaluate, alter, suspend or
terminate the testing based on the data that has been accumulated to that point
and its assessment of the risk/benefit ratio to the patient. Typical estimates
of the total time required for completing such clinical testing vary between
four and ten years. The clinical testing and FDA review process for new drugs
are


                                       7
<PAGE>

likely to require substantial time, effort and expense. The Company anticipates
that all its proprietary oncological products will be required to be approved
through the NDA process.

There can be no assurance that any approval will be granted to the Company on a
timely basis, if at all. The FDA may refuse to approve a NDA if applicable
statutory and/or regulatory criteria are not satisfied, or may require
additional testing or information. There can be no assurance that such
additional testing or the provision of such information, if required, will not
have a material adverse effect on the Company. Congress or the FDA can modify
the regulatory process in specific situations.

The Drug Price Competition and Patent Term Restoration Act of 1984 ("Drug Price
Act") established a new abbreviated procedure for obtaining FDA approval for
those generic drugs that are equivalents of brand name drugs. For drugs that
contain the same active ingredient as drugs already approved for use in the
United States, FDA ordinarily requires bioequivalence data illustrating that the
generic drug formulation is, within an acceptable range, equivalent to a
previously approved drug. A generic drug manufacturer is not required to submit
the clinical data to establish the safety and effectiveness of the product.
Instead, the Drug Price Act allows the FDA to rely on bioequivalence data to
approve Abbreviated New Drug Applications ("ANDAs"). "Bioequivalence" compares
the bioavailability of one drug product with another and, when established,
indicates that the rate of absorption and the levels of concentration of a
generic drug in the body are substantially equivalent to those of the previously
approved drug. The Company anticipates that it will submit ANDAs to the FDA for
approval of those generic oncological products that are intended to be marketed
in the United States. According to information published by FDA, it currently
takes approximately one to three years on average to obtain FDA approval of an
ANDA following the date of its first submission to FDA. Due to the experience of
its senior management in submitting ANDAs to the FDA, the Company believes that
it will be able to obtain FDA approval for each of its proposed oncological
products well below the industry average of approximately 27 months.

The Drug Price Act, in addition to establishing a new ANDA procedure, created
new statutory protection for approved brand name drugs. Prior to enactment of
the Drug Price Act, the FDA gave no consideration to the patent status of a
previously approved drug in deciding whether to approve an ANDA. Under the Drug
Price Act, however, the effective date of approval of an ANDA can depend, under
certain circumstances, on the patent status of the brand name drug.
Additionally, the Drug Price Act, in certain circumstances, provides for
extension of the term of certain patents to cover a drug by up to an additional
five years to compensate the patent holder for the reduction of the effective
market life of a patent due to the time involved in federal regulatory review.

The Company will be subject to the FDA's Good Manufacturing Practices ("GMPs"),
Good Laboratory Practices ("GLPs") and extensive record keeping and reporting
requirements for manufacturing products for sale in the United States. As a
result, the Company's manufacturing facilities will be subject to periodic
inspections by the FDA and other United States federal agencies when the
Company's products are offered for sale in the United States. The Company has
retained independent consultants to assist it in complying with FDA standards
including the GMP requirements. Failure to comply with applicable regulatory
requirements can result in, among other things, import detentions, fines, civil
penalties, suspensions or losses of approvals, recalls or seizures of products,
operating restrictions and criminal prosecutions.

GERMANY. In Germany, drugs for human use can be marketed only if they are
approved in advance either by the Federal Institute for Medicinal Products and
Medical Devices ("BfArM") in Berlin or by the European Union ("EU") Commission
after a substantive review of all safety, quality and efficacy data. The
application for a marketing authorization requires the preparation and
submission of extensive data and files. The applicant must produce the results
of analytical, pharmacological/toxicological and clinical studies and related
experts' opinions. The production of these data usually requires a long-term
pre-clinical examination phase. The details of the requirements are prescribed
in administrative regulations such as the Medicinal Products Guidelines.
Clinical trials in Germany are monitored by the state


                                       8
<PAGE>

authorities. In theory, once a complete application has been submitted to the
BfArM, a decision must be issued within four months, in exceptional cases within
seven months. In practice, however, a term of review by the BfArM generally
takes three to five years. The marketing authorization of a new substance
triggers fees to the BfArM, the amount of which can vary, depending on the
amount of work required of the authority, the kind of procedure and the result
of such procedure.

SWITZERLAND. In Switzerland, approval of the production and sale of drugs for
human use is regulated on a cantonal level rather than a federal level. The
cantons of Switzerland have organized the Intercantonal Office for the Control
of Medications (the "IKS") as an authority for the approval of pharmaceuticals.
Based on approval by the IKS, the cantons then grant permission for the
production and sale of such approved pharmaceuticals. Theoretically, each canton
is still entitled to deny approval of a particular medication. However, cantons
generally follow the decision of the IKS.

The IKS reviews all applicable safety, quality and effectiveness data, as well
as data relating to the cost effectiveness of the product. To obtain approval
from the IKS, the manufacturer must submit analytical, chemical, pharmacological
and toxicological data based on animal trials and human clinical studies. The
IKS approves the manufacturing of products only after having checked the
conformity to applicable standards of the World Health Organization or the
Pharmaceutical Inspection Convention. The IKS also will inspect the
manufacturing facility to determine if the manufacturer is complying with good
manufacturing practices before approval is granted to produce the drug product.
For generic products, pharmacological and toxicological data are not required to
be submitted to the IKS. To date, all of the Company's pharmaceutical products
that have been approved by the IKS are generic products.

EUROPEAN UNION. On January 1, 1995, the European Union ("EU") established new
procedures for the approval of pharmaceuticals and created a new coordinating
body, the EMEA. Germany is a member of the EU; Switzerland is not. Under the new
procedures, which are optional for certain other pharmaceutical products, in
particular those with new chemical agents, applications are filed with the EMEA
and are evaluated scientifically by the Committee for Proprietary Medicinal
Products ("CPMP"). The CPMP consists of representatives of the national
registration authorities. For each application, a Rapporteur, (i.e. one of the
national authorities) is appointed and has the overall responsibility for the
review of the application. The Rapporteur prepares an assessment report for the
CPMP. The EU Commission will generally follow the CPMP's scientific evaluation.
If one or more member states objects, the EU Council will decide the matter;
otherwise, the decision is rendered by the EU Commission on the basis of the
CPMP evaluation. This is known as the centralized procedure.

A decentralized approval procedure is used for most other marketing
authorization applications. The applicant submits the application to one member
state where the application is reviewed. Once the first marketing authorization
is obtained, the company files identical applications in the other EU member
states. The marketing authorities of such other member states are supposed to
acknowledge the first decision within 90 days. If there is disagreement between
the authorities that cannot be resolved, the CPMP will be involved and will
issue a scientific evaluation. If this scientific evaluation is not further
disputed, the EU Commission will render a decision on this basis. If the
disagreement continues, the EU Council will vote to decide the matter.

Because the EMEA guidelines have been in effect for a limited period of time,
the Company is unable to reliably predict how long it will take on average for
drugs to be approved under these new procedures.

THIRD-PARTY REIMBURSEMENT

UNITED STATES. The Company's revenues and profitability may be affected by the
ongoing efforts of third-party payors to contain or reduce the costs of
healthcare by lowering reimbursement payment rates, increasing case management
review of services and negotiating reduced contract pricing and reimbursement
caps. In the event any of the Company's products become subject to a maximum
reimbursement rate, the prices the Company will be able to charge its customers
and, its results of operations may be adversely affected.


                                       9
<PAGE>

Successful commercialization of the Company's owned or licensed products may
depend in part on the availability of adequate reimbursement from third-party
health care payors such as Medicare, Medicaid, and private insurance plans.
Reimbursement rules vary from payor to payor, and reimbursement also may depend
upon the setting in which a particular item or service is furnished.

In general, payors exclude payment for items and services that are deemed to be
not medically "reasonable and necessary," or which are considered to be not safe
and effective, experimental or investigative, or not medically appropriate for
the patient. In making these determinations, payors typically rely on studies
published in peer-reviewed medical journals, the opinions of recognized medical
specialty societies, and the practices of physicians in the local medical
community. Some payors are also beginning to consider the cost of a new item or
service in comparison to existing alternatives in determining whether and how
much they will reimburse for a new technology. FDA clearance or approval to
begin marketing a drug generally is required by payors as a condition of
coverage, but such clearance or approval alone does not assure that the payor
will reimburse for the drug treatment.

Most medical procedures involve payment for the physician service and, in cases
where the service is provided outside of the physician's office, payment for the
facility costs, including supplies furnished in connection with the procedure.
Medicare, which is a federal government program that primarily reimburses health
care furnished to the elderly and disabled, pays for physician services based on
a physician fee schedule, which assigns a payment weight for each covered
physician procedure.

The trend towards managed health care and the concurrent growth of HMOs which
could control or significantly influence the purchase of health care services
and products, as well as legislative proposals to reform health care, may all
result in lower prices for the Company's products. There can be no assurance
that the Company's products will be considered cost-effective by third-party
payors, that reimbursement will be available or, if currently available, will
continue to be available, or that payors' reimbursement policies will not
adversely affect the Company's ability to sell products on a profitable basis,
if at all. The cost containment measures that health care providers are
instituting in the face of the uncertainty and the ultimate effect of any health
care reform could have an adverse effect on the Company's ability to sell its
products and may have a material adverse effect on the Company.

Virtually every state as well as the District of Columbia has enacted
legislation permitting the substitution of equivalent generic prescription drugs
for brand name drugs where authorized or not prohibited by the prescribing
physician. Currently 13 states mandate generic substitution in Medicaid
programs.

GERMANY. About 90% of Germans are members of statutory health insurance
programs. These health insurance providers are public bodies independent from
the government and are funded equally by employers and employees. Their
catalogue of services for which they will provide reimbursement is widely
influenced by government regulations. Managed Care and HMO's are still unknown
in Germany although various elements of these systems will probably be adopted
in the future. The economic success of a drug product in Germany is widely
dependent upon acceptance of the drug by the statutory health insurance
providers.

Certain drugs are generally excluded from reimbursement, however. These include
medications to treat minor diseases like colds and influenza and drugs which
have been determined by the Federal Ministry of Health to be "uneconomical,"
(e.g., medicinal products with more than three active ingredients). The Federal
Ministry of Health is authorized to amend this "negative list" at any time.
Health insurance providers generally deny reimbursement for drugs used in
clinical trials. Although drugs can generally be prescribed by a doctor "off
label" (i.e., beyond their approved indication) and still be reimbursed, there
are cases where the reimbursement of oncological drugs off-label was denied on
the basis that the treatment was experimental.

The health insurance providers are also authorized to set maximum reimbursement
levels for generic drugs. As soon as two products with identical or chemically
similar ingredients or similar therapeutic effects are on the market, the health
insurance providers may set a maximum reimbursement amount. This


                                       10
<PAGE>

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. Effective January 1, 2000, $7.6 million of the
intercompany debt outstanding will no longer be considered short-term as
repayment is not expected in the foreseeable future. Accordingly, the gain or
loss on translating such debt will be included in the cumulative translation
adjustment as a separate component of stockholders' equity.

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
      Long-Term Debt:
Fixed Rate ($US).................             $    --           --         4,000,000          --           --             --
Average interest rate............                  --           --               8.0%         --           --             --
Fixed Rate (Sfr).................             $ 156,544         --              --       1,878,522         --             --
Average interest rate............                   4.4%        --              --             4.0%        --             --
Variable Rate (Sfr)..............             $ 475,892      632,436         569,818       381,966    381,966      2,917,971
Average interest rate............                   5.5%         4.2%            4.4%          4.6%       4.7%           3.3%
</TABLE>


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None applicable.


                                       22
<PAGE>

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE
        WITH SECTION 16(a)

The information required under Item 9 will be contained in the definitive Proxy
Statement (the "Proxy Statement") of the Company for its 2000 Annual Meeting of
Stockholders to be held in May 2000 under the headings "Election of Directors"
and "Executive Compensation and Other Information" and is incorporated herein by
reference. The Proxy Statement will be filed pursuant to Regulation 14A with the
Securities and Exchange Commission no later than 120 days after December 31,
1999.

ITEM 10. EXECUTIVE COMPENSATION

The information required under Item 10 will be contained in the Proxy Statement
under the heading "Executive Compensation and Other Information" and is
incorporated herein by reference.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL, OWNERS AND MANAGEMENT

The information required under Item 11 will be contained in the Proxy Statement
under the heading "Security Ownership of Certain Beneficial Owners and
Management" and is incorporated herein by reference.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required under Item 12 will be contained in the Proxy Statement
under the headings "Certain Transactions" and "Executive Compensation and Other
Information - Compensation Committee Interlocks and Insider Participation" and
is incorporated herein by reference.


                                       23
<PAGE>

                                     PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:

    -  Independent Auditors' Report

    -  Consolidated Balance Sheets

        -  December 31, 1999 and 1998

    -  Consolidated Statements of Operations

        -  Years ended December 31, 1999, 1998 and 1997

    -  Consolidated Statements of  Stockholders' Equity

        -  Years ended December 31, 1999, 1998 and 1997

    -  Consolidated Statements of Cash Flows

        -  Years ended December 31, 1999, 1998 and 1997

    -  Consolidated Statements of  Comprehensive Income (Loss)

        -  Years ended December 31, 1999, 1998 and 1997

    -  Notes to Consolidated Financial Statements


                                       24
<PAGE>

(b)  EXHIBITS:

<TABLE>
<CAPTION>
NUMBER                         DESCRIPTION OF EXHIBIT                                                           FILING STATUS
------          ---------------------------------------------------------------------------------              --------------
<S>             <C>                                                                                            <C>
3.1             Restated and Amended Certificate of Incorporation                                                     a

3.1(a)          Certificate of Correction to Restated and Amended Certificate of Incorporation of                     a
                the Registrant

3.1(b)          Certificate of Amendment of Amended and Restated Certificate of  Incorporation of                     l
                Bigmar, Inc.

3.2             Restated By-Laws of  the Registrant                                                                   a

3.2(a)          Amendment to Restated By-Laws of the Registrant                                                       a

4.1             Specimen Stock Certificate                                                                            a

4.2             Form of Representatives Warrant                                                                       a

10.1            Intentionally Omitted                                                                                 a

10.2            Partnership Agreement, dated as of October 1995, between Bigmar Therapeutics, Inc.                    a
                and Protyde Oncology Therapeutics, Inc.

10.3            Sales and Marketing Agreement, dated as of October 1995, between Protyde-Bigmar                       a
                Therapeutics and Protyde Corporation

10.4            Manufacturing Agreement, dated as of October 1995, between Protyde-Bigmar                             a
                Therapeutics and the Registrant

10.5            Sublease Agreement, dated as of March 1, 1996, between the Registrant and Cernitin                    a
                America, Inc.

10.6            Form of Indemnification Agreement                                                                     a

10.7            Employment Agreement, dated as of April 15, 1996, between the Registrant and John G.                  a
                Tramontana

10.8            Form of Medical Advisory Agreement                                                                    a

10.9            Form of Scientific Advisory Agreement                                                                 a

10.10           Exclusive Distribution and Supply Agreement, dated November 5, 1995, between                          a
                Bigmar Pharmaceuticals SA and AB Cernelle

10.11           Technical Services Agreement, dated November 5, 1995, between Bigmar                                  a
                Pharmaceuticals SA and AB Cernelle

10.12           License and Supply Agreement, dated November 14, 1995, between Bigmar                                 a
                Pharmaceuticals SA and Bioferment division of Cerbios-Pharma SA

10.13           Exclusive Distribution and Supply Agreement, dated as of December 14, 1995,                           a
                between Bigmar Pharmaceuticals SA and Bioferment division of Cerbios-Pharma SA

10.14           Exclusive Distribution Agreement, dated November 14, 1995, between Bioren SA and                      a
                SAPEC division of Cerbios-Pharma SA

10.15           Stock for Stock Exchange Agreement, dated April 9, 1996, between the Registrant and                   a
                its stockholders

10.16           Contribution Agreement, dated April 8, 1996, between the Registrant and its                           a
                stockholders

10.17           Exclusive Distribution Agreement, dated December 22, 1995, between Bigmar                             a
                Pharmaceuticals SA and Boehringer Mannheim Italia S.p.A.


                                       25
<PAGE>

NUMBER                         DESCRIPTION OF EXHIBIT                                                           FILING STATUS
------          ---------------------------------------------------------------------------------              --------------
<S>             <C>                                                                                            <C>
10.18           International Activities Agreements, dated March 3, 1994, between Bigmar                              a
                Pharmaceuticals SA and Medac GmbH

10.19           Distribution Agreement, dated October 10, 1994 between Bigmar Pharmaceuticals SA and                  a
                Pharma Stroschein GmbH

10.20           Distribution Agreement, dated July 31, 1995, between Bigmar Pharmaceuticals SA and                    a
                Laboratorios Vita S.A.

10.21           Supply and Collaboration Agreement, dated March 8, 1995, between Bioren SA and PLM                    a
                Langeskov A/S

10.22           Agreement, dated December 21, 1995, between Laevosan international AG and Bigmar                      a
                Pharmaceuticals SA

10.23          Loan documentation between Bioren SA and Union Bank of Switzerland                                     a

10.24          Loan documentation between Bigmar Pharmaceuticals SA and Union Bank of Switzerland                     a

10.25          Registrant's 1996 Stock Option Plan                                                                    a

10.26          Form of Non-qualified Stock Option Agreement under the 1996 Stock Option Plan                          a

10.27          Form of Incentive Stock Option Agreement under the 1996 Stock Option Plan                              a

10.28          Form of Registrant's Director Option Plan                                                              a

10.29          Acquisition Agreement, dated June 22, 1995, between Galenica Holding AG and the                        a
               Registrant

10.30          Extension of Licensing Agreement, dated October 27, 1995, between Dr. F. Messi Cell                    a
               Culture Technologies and Bigmar Pharmaceuticals SA

10.31          Agreements between Bigmar Pharmaceuticals SA and Unione Farmaceutica SA                                a

10.40          Lease Agreement, dated as of December 31, 1996, between the Registrant and JTech                       c
               Laboratories, Inc.

10.41          Cancellation Agreement, dated as of March 27, 1997                                                     c

10.42          Release dated March 27, 1997 issued by Cerbios-Pharma in favor of the Registrant                       c

10.43          Cancellation Agreement, dated as of March 27, 1997, between the registrant and                         c
               Cerbios-Pharma

10.44          Cancellation Agreement, dated as of March 27, 1997, between the Registrant and                         c
               Cerbios-Pharma

10.45          Libor Mortgage Loan Agreement, dated February 26, 1997, between the Union Bank of                      c
               Switzerland, and the Registrant

10.46          Credit Contract and Libor Loan Contract, dated December 13, 1996, between Union Bank                   c
               of Switzerland and the Registrant

10.47*         Employment Agreement, dated as of July 1, 1996, between the Registrant and Albert Z.                   c
               Hodge

10.48*         Employment Agreement, dated as of April 15, 1996, between the Registrant and Peter                     c
               P. Stoelzle


                                       26
<PAGE>

NUMBER                         DESCRIPTION OF EXHIBIT                                                           FILING STATUS
------          ---------------------------------------------------------------------------------              --------------
<S>             <C>                                                                                            <C>
10.49          Letter of Line of Credit, dated May 15, 1997, between Citizens Bank and the                            e
               Registrant

10.50          Assignment and Assumption of Partnership Interest and Termination of Contracts dated                   e
               July 24, 1997

10.51          Transaction of Change in Control of Registrant dated May 2, 1997                                       b

10.52          Sales of Equity Securities Pursuant to Regulation S, dated as of August 28, 1997,                      f
               between the Registrant and Banca del Gottardo

10.53*         Employment Agreement, dated as of November 3, 1997, between the Registrant and                         i
               William R. Ash, III

10.54          Registrant's 1997 Stock Option Plan                                                                    i

10.55*         Form of Non-qualified Stock Option Agreement under the 1997 Stock Option Plan                          i

10.56*         Form of Incentive Stock Option Agreement under the 1997 Stock Option Plan                              i

10.57          Issuance of Warrants to Purchase Convertible Preferred Stock to obtain a $6.0                          j
               million Credit Line Guarantee

10.58          [Intentionally left blank]

10.59          Possible NASDAQ Delisting                                                                              k

10.60          Note Purchase, Paying and Conversion Agency Agreement and Related Documents                            m
               for Banca del Gottardo Financing, dated October 26, 1999

10.61          Promissory Note for Revolving Line of Credit with Citizens Bank dated July26, 1999                     m

16.01          Letter re: Change in Registrants Certifying Accountant, dated as of August 28, 1997                    g

16.02          Letter re: Change in Registrants Certifying Accountant as Amended, dated as of                         h
               September 30, 1997

21.10          Subsidiaries of the Registrant                                                                         a

23.01          Consent of KPMG LLP                                                                               Filed herewith

27.00          Financial Data Schedule                                                                           Filed herewith
</TABLE>

*Includes compensatory plan or arrangements required to be filed pursuant to
Item 13 of this Form 10-KSB.

(a) Incorporated by reference to the Company's Registration Statement No.
    333-3830, declared effective by the Securities and Exchange Commission on
    June 19, 1996.

(b) Incorporated by reference to the Company's Form 8-K dated May 2, 1997.

(c) Previously filed with reports on Form 10-K 1996.

(d) Incorporated by reference to the Company's Form 10-Q for the quarter ending
    March 31, 1997.


                                       27
<PAGE>

(e) Previously filed with reports on Form 10-Q for the quarter ending June 30,
    1997.

(f) Incorporated by reference to the Company's Form 8-K dated August 29, 1997.

(g) Incorporated by reference to the Company's Form 8-K dated August 22, 1997.

(h) Incorporated by reference to the Company's Form 8-K/A Amendment No.1, dated
    September 29, 1997.

(i) Previously filed with reports on Form 10-K 1997.

(j) Incorporated by reference to the Company's Form 8-K dated May 28, 1998.

(k) Incorporated by reference to the Company's Form 8-K dated December 10, 1998.

(l) Incorporated by reference to the Company's Form 10-K for year ending
    December 31, 1998.

(m) Incorporated by reference to the Company's Form 10-Q for the quarter ending
    September 30, 1999.

(b) REPORTS ON FORM 8-K.

None.


                                       28
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 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.

Date: March 30, 2000              BIGMAR, INC.

By:                          /s/ JOHN G. TRAMONTANA
                            -----------------------------------------
                                    John G. Tramontana
                            CHAIRMAN OF THE BOARD OF DIRECTORS AND
                                  CHIEF EXECUTIVE OFFICER
                              (PRINCIPAL EXECUTIVE OFFICER)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
           SIGNATURE                                       CAPACITY                                 DATE
   -------------------------------------         --------------------------                     -------------------
<S>                                              <C>                                            <C>

                                                 Chairman of the Board of
    /s/ JOHN G. TRAMONTANA                       Director and Chief
   --------------------------------------        Executive Officer                              March 30, 2000
             John G. Tramontana                  (Principal Executive Officer)

    /s/ CYNTHIA R. MAY                           Vice President-Administration
   --------------------------------------        and Director                                   March 30, 2000
           Cynthia R. May

    /s/ PHILIPPE ROHRER
   --------------------------------------        Treasurer, Secretary, and                      March 30, 2000
            Philippe Rohrer                      Director (Principal Financial Officer)

    /s/ BERNARD KRAMER
   --------------------------------------        Director                                       March 30, 2000
             Bernard Kramer

    /s/ MASSIMO PEDRANI
   --------------------------------------        Director                                       March 30, 2000
            Massimo Pedrani
</TABLE>


                                       29
<PAGE>

                                           BIGMAR, INC. AND SUBSIDIARIES
                                    INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
                                                                             PAGE
                                                                           -------
<S>                                                                        <C>
 Independent Auditors' Report............................................     F-2

Consolidated Balance Sheets..............................................     F-3
     December 31, 1999 and 1998

Consolidated Statements of Operations....................................     F-4
     Years ended December 31, 1999, 1998 and 1997

Consolidated Statements of Stockholders' Equity..........................     F-5
     Years ended December 31, 1999, 1998 and 1997

 Consolidated Statements of Cash Flows...................................     F-6
     Years ended December 31, 1999, 1998 and 1997

 Consolidated Statements of Comprehensive Income (Loss)..................     F-7
     Years ended December 31, 1999, 1998 and 1997

 Notes to Consolidated Financial Statements..............................     F-8
</TABLE>


                                       F-1
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders

Bigmar, Inc.:

We have audited the accompanying consolidated financial statements of Bigmar,
Inc. and subsidiaries as listed in the accompanying index. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Bigmar, Inc. and subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999, in conformity with generally
accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1(c) to
the consolidated financial statements, the Company has suffered recurring losses
from operations, and anticipates it will require additional financing in order
to fund its operations during 2001. These factors raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1(c). The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

KPMG LLP

Columbus, Ohio
March 16, 2000


                                       F-2
<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
                                                           1999           1998
                                                      -------------  ------------
<S>                                                   <C>                 <C>
                                 ASSETS

CURRENT ASSETS:
Cash and cash equivalents...........................  $     155,854       140,445
Accounts receivable.................................      2,138,115       927,200
Inventories (Note 2)................................      2,470,234     1,611,588
Prepaid expenses and other current assets...........        248,504       244,320
                                                      -------------  ------------
Total current assets................................      5,012,707     2,923,553
Property, plant and equipment, net (Note 3).........     14,380,877    17,350,004
Intangible and other assets, net....................        405,168       435,625
                                                      -------------  ------------
Total...............................................  $  19,798,752    20,709,182
                                                      -------------  ------------
                                                      -------------  ------------

                     LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable... ................................      2,320,411     1,761,903
Notes payable (Note 4)..............................      3,362,038     1,769,285
Current portion of long-term debt (Note 5)..........        632,436     1,288,040
Due to related parties (Note 13)....................             --       321,149
Accrued expenses and other current liabilities......        985,386       848,394
                                                      -------------  ------------
Total current liabilities...........................      7,300,271     5,988,771
Long-term debt, excluding current portion (Note 5)..     10,762,680     9,487,445
                                                      -------------  ------------
Total liabilities...................................     18,062,951    15,476,216
                                                      -------------  ------------
STOCKHOLDERS' EQUITY (Notes 7, 9 and 10):
Preferred stock ($.001 par value; 5,000,000 shares

Authorized; none issued) ...........................            --             --
Common stock ($.001 par value; 20,000,000 shares
Authorized; 8,993,973 and 8,027,308 shares issued
and outstanding at December 31, 1999 and 1998,
respectively).......................................         8,994         8,027
Additional paid-in capital..........................    25,312,467    22,317,324
Retained earnings (deficit).........................   (22,558,611)  (16,234,332)
Cumulative translation adjustment...................    (1,027,049)     (858,053)
                                                      -------------  ------------
Total stockholders' equity..........................     1,735,801     5,232,966
                                                      -------------  ------------
Commitments (Note 13)

Total............................................... $  19,798,752    20,709,182
                                                      -------------  ------------
                                                      -------------  ------------
</TABLE>

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       F-3
<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
                                                          1999           1998           1997
                                                      -------------  -------------  -------------
<S>                                                 <C>             <C>            <C>
Net sales (Note 11)................................ $   7,725,362      6,377,822      6,483,444
Cost of goods sold.................................     6,453,581      4,812,290      5,485,648
                                                      -------------  -------------  -------------
Gross margin.......................................     1,271,781      1,565,532        997,796
                                                      -------------  -------------  -------------
Operating expenses:

Research and development...........................     2,375,034      2,741,809      1,690,053
Selling, general and administrative................     3,514,003      4,377,842      3,800,627
Re-acquisition of U.S. marketing rights (Note 8)...            --             --      2,050,000
                                                      -------------  -------------  -------------
Total operating expenses..........................      5,889,037      7,119,651      7,540,680
                                                      -------------  -------------  -------------
Operating loss.....................................    (4,617,256)    (5,554,119)    (6,542,884)
                                                      -------------  -------------  -------------
Other income (expense):
Interest income....................................          2,403          4,871        69,984
Interest expense...................................       (892,388)    (1,062,271)     (616,453)
Issuance of preferred stock warrants for loan guarantee         --       (958,000)           --
Gain (loss) on foreign currency transactions.......       (836,601)       332,377      (415,871)
Other, net.........................................         19,563         15,440       127,200
                                                      -------------  -------------  -------------
Other income (expense), net........................     (1,707,023)    (1,667,583)     (835,140)
                                                      -------------  -------------  -------------
Net loss...........................................  $  (6,324,279)    (7,221,702)   (7,378,024)
                                                      -------------  -------------  -------------
                                                      -------------  -------------  -------------
Basic and diluted loss per share...................  $       (0.73)         (1.46)        (1.82)
                                                      -------------  -------------  -------------
                                                      -------------  -------------  -------------
Weighted-average shares outstanding.................     8,659,398      4,944,895     4,052,945
                                                      -------------  -------------  -------------
                                                      -------------  -------------  -------------
</TABLE>


          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       F-4
<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                        COMMON STOCK
                                   --------------------   ADDITIONAL    RETAINED    CUMULATIVE
                                     NUMBER                PAID-IN      EARNINGS    TRANSLATION
                                   OF SHARES    AMOUNT     CAPITAL     (DEFICIT)    ADJUSTMENT    TOTAL
                                   ----------  ---------  ----------   ---------    ----------- ------------
<S>                                <C>         <C>        <C>         <C>          <C>          <C>
Balance at December 31, 1996        3,985,000   $ 3,985   13,333,366   (1,634,606)    (806,892)   10,895,853
 Issuance of common stock to
   Banca del Gottardo..........       200,000       200      929,800                                 930,000
 Issuance of common stock
   warrants to Protyde (Notes
   8 and 9) ...................                              800,000                                 800,000
 Net loss for the year ended
   December 31, 1997...........                                        (7,378,024)                (7,378,024)
 Translation adjustment........                                                       (119,229)     (119,229)
                                   ----------  ---------  ----------   ----------   -----------  -----------
Balance at December 31, 1997        4,185,000   $ 4,185   15,063,166   (9,012,630)    (926,121)    5,128,600
 Issuance of common stock
   warrants to Jericho II, LLC
   (Note 9) ...................                              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, LLC ............     3,692,308     3,692    5,996,308                               6,000,000
 Net loss for the year ended
   December 31, 1998...........                                        (7,221,702)                (7,221,702)
 Translation adjustment........                                                         68,068        68,068
                                   ----------  ---------  ----------   ----------   -----------  -----------
Balance at December 31, 1998        8,027,308   $ 8,027   22,317,324  (16,234,332)    (858,053)    5,232,966
 Issuance of common stock
   warrants for consulting
   contract (Note 9) ..........                              106,149                                 106,149
 Issuance of common stock
   to accredited investors
   (Note 9)....................       729,999       730    2,179,231                               2,179,961
 Issuance of common stock to
   Banca del Gottardo..........        70,000        70      209,930                                 210,000
 Issuance of common stock to
   GRQ, LLC....................       166,666       167      499,833                                 500,000
 Net loss for the year ended
   December 31, 1999...........                                       (6,324,279)                 (6,324,279)
 Translation adjustment........                                                      (168,996)      (168,996)
                                   ----------  ---------  ----------  ----------   -----------   -----------
Balance at December 31, 1999        8,993,973   $ 8,994   25,312,467 (22,558,611)  (1,027,049)     1,735,801
                                   ----------  ---------  ----------  ----------   -----------   -----------
                                   ----------  ---------  ----------  ----------   -----------   -----------
</TABLE>


          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       F-5
<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                              1999          1998          1997
                                                          -------------  -----------  ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                       <C>            <C>          <C>
Net loss................................................  $  (6,324,279)  (7,221,702)  (7,378,024)
Adjustments to reconcile net loss to net cash used in
 operating activities:

Depreciation and amortization...........................      1,737,690    2,014,410    1,031,688
Issuance of warrants....................................        106,149      958,000      800,000
Unrealized foreign exchange (gains) losses..............        995,834     (333,068)     416,670
Gain on sale of property and equipment..................             --           --      (26,235)
Changes in operating assets and liabilities:

Increase in accounts receivable.........................     (1,337,491)     (48,780)    (140,084)
Increase in inventories.................................     (1,110,379)    (669,309)     (19,107)
(Increase) decrease in prepaid expenses and other current
 assets.................................................        (33,806)     192,252        3,642
Increase (decrease) in due to related parties...........       (312,926)     319,567     (906,603)
Increase in accounts payable............................        792,727      (61,382)     164,064
Increase in accrued expenses and other current liabilities      200,878      200,808      100,797
                                                          -------------  -----------  ------------
Net cash used in operating activities...................     (5,285,603)  (4,526,440)  (5,953,192)
                                                          -------------  -----------  ------------
CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property, plant and equipment...............       (530,143)  (1,537,205)  (2,175,511)
Proceeds from sale of property and equipment............             --           --       78,113
                                                          -------------  -----------  ------------
Net cash used in investing activities...................       (530,143)  (1,537,205)  (2,097,398)
                                                          -------------  -----------  ------------
CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from short-term borrowings.....................      1,837,901    5,707,088    3,065,986
Proceeds from short-term borrowing from related party...             --           --      200,000
Repayment of short-term borrowing from related party....             --           --     (200,000)
Repayment of short and long-term debt...................       (552,406)  (5,649,272)  (2,648,933)
Long-term borrowings....................................      1,770,829     (785,849)   4,000,000
Debt and equity issuance costs..........................       (107,670)          --     (330,000)
Advances (repayments) of reimbursable expenses..........             --           --     (750,000)
Proceeds from issuance of common stock..................      2,889,961    6,300,000      930,000
                                                          -------------  -----------  ------------
Net cash provided by financing activities...............      5,838,615    5,571,967    4,267,053
                                                          -------------  -----------  ------------
Effect of exchange rate changes on cash.................         (7,460)     111,655       63,831
                                                          -------------  -----------  ------------
Net increase (decrease) in cash and cash equivalents....         15,409     (502,787)  (3,719,706)
Cash and cash equivalents--at beginning of year..........       140,445      643,232    4,362,938
                                                          -------------  -----------  ------------
Cash and cash equivalents--at end of year................  $    155,854      140,445      643,232
                                                          -------------  -----------  ------------
                                                          -------------  -----------  ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:

Interest (net of amounts capitalized)...................  $     783,822      964,216      583,855
                                                          -------------  -----------  ------------
                                                          -------------  -----------  ------------
</TABLE>


          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       F-6
<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                             1999          1998         1997
                                                         -------------  -----------  -----------
<S>                                                     <C>             <C>          <C>
Net loss..............................................  $  (6,324,279)  (7,221,702)  (7,378,024)
   Other comprehensive income(loss), net of tax:
   Foreign currency translation adjustments, net of
   income taxes of $0 in 1999, 1998, and 1997.........       (168,996)      68,068     (119,229)
                                                         -------------  -----------  -----------
Comprehensive loss (Note 1)...........................  $  (6,493,275)  (7,153,634)  (7,497,253)
                                                         -------------  -----------  -----------
                                                         -------------  -----------  -----------
</TABLE>








          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       F-7
<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        DECEMBER 31, 1999, 1998 AND 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING  POLICIES AND PRACTICES

(a) BUSINESS AND RECENT TRANSACTIONS

Bigmar, Inc. (the "Company"), a Delaware corporation, was formed in September
1995 by Chemholding SA, Chemholding's principal stockholders and John G.
Tramontana for the purpose of manufacturing and distributing various oncological
and biotechnical products. Certain stockholders of the Company owned 100% of
Bigmar Pharmaceuticals SA ("Pharmaceuticals") and 50% of Bioren SA ("Bioren"),
two Swiss corporations. The other 50% is owned by Pharmaceuticals. In April
1996, the Company acquired 100% of Pharmaceuticals and 50% of Bioren in a stock
for stock exchange. Since there was a high degree of common ownership, the
acquisition was accounted for as a reorganization of companies under common
control.

Pharmaceuticals is currently engaged in the development, manufacture, and
distribution of injectible oncological ("Oncology Products") products in various
countries in Europe. In February 1999, Pharmaceuticals received approval from
the United States Food and Drug Administration ("FDA") to market certain
injectible forms of Methotrexate and Leucovorin Calcium. Both are generic
products used for the treatment of various forms of cancer. Bioren is primarily
a manufacturer and distributor of intravenous infusion solutions ("IV
Solutions") in Switzerland. The Company's headquarters, located in Johnstown,
Ohio, include a research and development laboratory used for the testing of
Oncology Products to be marketed in the United States.

In May 1997, Mr. Tramontana, the Company's Chairman of the Board, President and
Chief Executive Officer ("CEO"), pursuant to privately negotiated transactions
in Switzerland, acquired 1,293,663 additional shares of the Company's common
stock from the Chemholding shareholders.

In May 1998, the Company, in consideration of a guarantee to renew and increase
a line of credit from $3.5 million to $6.0 million from a commercial
institution, delivered to Jericho II, L.L.C. ("Jericho"), a related party,
warrants to purchase 1,000,000 shares of convertible preferred stock (the
"Preferred Stock") at a price equal to $2.5625 per share and having a term of 10
years (the "Warrants"). The Company renegotiated the terms of the line of credit
in December 1998, and reduced the line of credit from $6.0 million to $0.5
million. This line was subsequently increased to $2.0 million (see U.S. line of
credit at Note 4).

In August 1998, the Company, issued 150,000 shares of common stock to Banca del
Gottardo, a Swiss bank, for $2.00 per share via a private placement. The
proceeds were used for working capital and other general corporate purposes.

In October 1998, the Company issued 3,692,308 shares of common stock to 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 were used to repay debt
and for working capital.


                                       F-8
<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)

(a)      BUSINESS AND RECENT TRANSACTIONS (CONTINUED)

In February 1999, the Company issued 216,666 shares of common stock to
accredited investors, including 166,666 shares to GRQ, L.L.C. (a company owned
by certain stockholders of the Company) for prices ranging from $2.00 to $3.00
per share via private placement offerings. The proceeds were used for working
capital and other general corporate purposes.

In March 1999, the Company issued 270,000 shares of common stock to accredited
investors for $3.00 per share via private placements offerings. The proceeds
were used for working capital and other general corporate purposes.

In April 1999, the Company issued 70,000 shares of common stock to Banca del
Gottardo for $3.00 per share via private placement offerings. The proceeds were
used for working capital and other general corporate purposes.

In May 1999, the Company issued 66,666 shares of common stock to accredited
investors for $3.00 per share via private placement offerings. The proceeds were
used for working capital and other general corporate purposes.

In August 1999, the Company issued 343,333 shares of common stock to accredited
investors for $3.00 per share via private placement offerings. The proceeds were
used for working capital and other general corporate purposes.

(b) CONSOLIDATION

The consolidated financial statements include the financial statements of
Bigmar, Inc., its wholly owned Swiss subsidiaries, Pharmaceuticals and Bioren,
and Bigmar Therapeutics, Inc. ("Therapeutics"), a Delaware corporation. All
significant intercompany balances and transactions have been eliminated in
consolidation.

(c) BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared in
accordance with United States Generally Accepted Accounting Principles ("US
GAAP").

The accompanying consolidated financial statements also 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 for obtaining regulatory approvals has consumed a substantial amount
of the Company's resources. The manufacturing plant received, in February 1999,
regulatory approval from the 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 approximately $2.9 million in proceeds from the sale of
shares of common stock. In addition, the Company anticipates raising additional
funds during 2000 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.


                                       F-9
<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)

(d) USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

(e) FOREIGN CURRENCY

Assets and liabilities of foreign operations are translated at the exchange
rates in effect at the balance sheet date and revenues and expenses are
translated at the weighted-average exchange rates for the period. Net gains and
losses arising from translation are accumulated in a separate component of
stockholders' equity. Gains and losses resulting from foreign currency
transactions are included in income or expense. The Company recognized foreign
currency gains (losses) of $(836,601), $332,377, and $(415,871) primarily
related to translation of intercompany balances which are considered short-term
in 1999, 1998, and 1997, respectively. Effective January 1, 2000, $7.6 million
of the intercompany debt will no longer be considered short-term as repayment is
not expected in the forseable future. Accordingly, the gain or loss on
translating such debt will be included in the cumulative translation adjustment
as a separate component of stockholders'equity.

(f) CASH EQUIVALENTS

All highly liquid investments with original maturities of three months or less
are considered to be cash equivalents.

(g) INVENTORY

Inventory is stated at the lower of cost or market using the first-in, first-out
(FIFO) method.

(h) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost. Upon retirement or other
disposition of property, plant and equipment, the cost and related accumulated
depreciation and amortization are removed from the accounts and the resulting
gain or loss is reflected in earnings. Maintenance and repairs are expensed as
incurred. Depreciation and amortization are calculated on a straight-line basis
utilizing the assets' estimated useful lives.

(i) INTANGIBLE AND OTHER ASSETS

Intangible assets consist of goodwill, which represents the excess of purchase
price over fair value of net assets acquired, amortized on a straight-line basis
over 10 years. Other assets consist of debt issuance costs, which are amortized
using the effective interest method over the life of the related debt.

The Company assesses the recoverability of goodwill by determining whether the
amortization of the goodwill balance over its remaining life can be recovered
through undiscounted future operating cash flows of the acquired operation. The
amount of goodwill impairment, if any, is measured based on projected discounted
future operating cash flows using a discount rate reflecting the Company's
average cost of funds. The assessment of the recoverability of goodwill will be
impacted if estimated future operating cash flows are not achieved. No such
losses have been recorded through December 31, 1999.


                                      F-10
<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)

(j) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF

The Company records impairment losses on long-lived assets used in operations,
including intangible assets, when events and circumstances indicate that the
assets might be impaired and the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amounts of those assets. No
such losses have been recorded through December 31, 1999.

(k) FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of cash and cash equivalents, accounts receivable and
accounts payable, accrued expenses and other current liabilities, and due to
related parties, approximates the fair value because of the short maturity of
those instruments. For long-term debt, the carrying value approximates the fair
value because interest are either variable based upon prevailing market rates or
approximate market rates.

(l) COMPREHENSIVE INCOME

Comprehensive income consists of net income and foreign currency translation
adjustments and is presented in the consolidated statements of comprehensive
income. SFAS 130 requires only additional disclosures in the consolidated
financial statements, it does not effect the Company's financial position or
results of operations.

(m) INCOME TAXES

Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.

(n) STOCK-BASED COMPENSATION

The Company continues to follow the intrinsic value method set forth in
Accounting Principles Bulletin Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES ("APB No. 25"), and provides pro forma net income and pro forma
earnings per share disclosures for employee stock option grants as if the fair-
value-based method defined in SFAS No. 123 had been applied.

(o) PER SHARE DATA

Net loss per share is based on the weighted average number of shares outstanding
during each period. Common stock equivalents are anti-dilutive and have not been
included in the weighted average number of shares outstanding.


                                      F-11
<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)

(p) DERIVATIVE FINANCIAL INSTRUMENTS

In 1998, the Company had only limited involvement with derivative financial
instruments and did not use them for trading purposes. They were used to manage
well-defined interest rate risks. An interest rate cap agreement was used to
reduce the potential impact of increases in interest rates on floating-rate
long-term debt. The premium paid for the purchased interest rate cap agreement
was amortized to interest expense over the terms of the cap. The unamortized
premium was included in other assets in the consolidated 1998 balance sheet. Any
amounts receivable under the cap agreement were recorded as a reduction of
interest expense. As of December 31, 1999, the Company has no derivative
financial instruments.

(2) INVENTORIES

The Company's inventory consists of IV Solutions and Oncology Products.
Components of inventory are as follows:

<TABLE>
<CAPTION>
                                                    DECEMBER 31,
                                             -------------------------
                                                 1999         1998
                                             ------------  ------------
<S>                                         <C>            <C>
Raw materials.............................  $  1,362,439      710,517
Finished goods............................     1,107,795      901,071
                                             ------------  ------------
Total ....................................  $  2,470,234    1,611,588
                                           ------------  -------------
                                           ------------  -------------
</TABLE>

(3) PROPERTY, PLANT AND EQUIPMENT, NET

The components of property, plant and equipment, net are as follows:

<TABLE>
<CAPTION>
                                               DECEMBER 31,
                                       --------------------------  ESTIMATED LIFE
                                           1999           1998        IN YEARS
                                       ------------  ------------  ---------------
<S>                                  <C>            <C>            <C>
Land...............................  $   1,196,969     1,352,838             --
Building and building improvements.     11,343,487    12,733,957          10-40
Machinery..........................      4,480,567     4,686,009           3-10
Equipment..........................      1,826,064     1,828,935           3-10
                                       ------------  ------------
                                        18,847,087    20,601,739

Less accumulated depreciation......      4,466,210     3,251,735
                                       ------------  ------------
Total..............................  $  14,380,877    17,350,004
                                       ------------  ------------
                                       ------------  ------------
</TABLE>

For the year ended December 31, 1997 interest of $119,000 was capitalized. Such
interest was incurred in connection with bank and related party borrowings,
which were utilized to finance the construction of the Pharmaceuticals facility.


                                      F-12
<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

(4) NOTES PAYABLE

Notes payable consists of the following:

<TABLE>
<CAPTION>
                                              DECEMBER 31,
                                       ------------------------
                                           1999         1998
                                       ------------  ----------
<S>                                  <C>            <C>
Bank lines of credit...............  $  2,109,689     353,857
Short-term bank loan...............     1,252,349   1,415,428
                                      ------------  ----------
Total..............................  $  3,362,038   1,769,285
                                      ------------  ----------
                                      ------------  ----------
</TABLE>

Under the Swiss bank line of credit, Bioren may borrow up to Sfr 500,000
($313,087) with quarterly interest payments due based on 5% variable interest
plus 1/4% commission paid quarterly on outstanding balances resulting in an
annualized rate of 6%. At December 31, 1999, $271,788 was outstanding.

Under the U.S. bank line of credit, the Company may borrow up to $2,000,000 with
monthly interest payments due based upon the prime rate (8.5% at December 31,
1999). The credit line, which is subject to re-negotiation on June 30, 2000, is
secured by a guaranty of Jericho and certain shareholders and officers of the
Company. At December 31, 1999, $1,837,901 was outstanding.

The short-term bank loan, issued to Pharmaceuticals, is a Sfr 2,000,000
($1,252,348 at December 31, 1999) unsecured line of credit requiring quarterly
interest payments, based on 7.5% variable rate plus 1/4% commission paid
quarterly on outstanding balances resulting in an annualized rate of 8.5%. The
note has no specific principal repayment terms.

Substantially all of the Company's assets are pledged as collateral under its
various debt agreements. The weighed-average interest rate on notes payable was
8.2% and 8.0% at December 31, 1999 and 1998, respectively.


                                      F-13
<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

(5) LONG-TERM DEBT

The Company's long-term debt consists of  the following:

<TABLE>
<CAPTION>
                                                                      December  31,
                                                                -----------------------
                                                                    1999         1998
                                                                -----------  ----------
<S>                                                             <C>           <C>
Bank loan collateralized by mortgage on Bioren building;
interest  at  3.5%  per  annum  through  May 2002, adjustable
thereafter; subject to  certain  restrictive covenants and
subject to renegotiation by the bank after May 2002 ..........   $ 1,784,596  2,047,955

Bank loan collaterized by mortgage on Bioren building;
interest at 4.125% per annum through Dec. 2000,
adjustable thereafter; subject to certain restrictive
covenants and subject to renegotiation by the bank after
December, 2000................................................       688,791     920,028

Bank loan partially secured by the Pharmaceuticals
building and equipment; subject to certain restrictive
covenants; principal and interest payable December 31,
2001, interest rate of 2.77% .................................    1,252,348   1,415,428

Bank loan collateralized by mortgage on Pharmaceuticals
building and equipment, subject to certain restrictive
covenants; principal payable in installments of $313,087
paid annually until full repayment; interest payable at
an adjustable rate not to exceed 5% through March 3,
2002; and partially guaranteed by the CEO of the Company......    1,565,436   2,123,142

Bank loan collateralized by mortgage on Pharmaceuticals
warehouse building; payable in installments of $6,262
per year, for thirty eight years, beginning December 31,
1998 at an interest rate of 4.5% per year.....................      225,423     268,932

Convertible notes issued by the Company, due August 29,
2002; 8% interest payable semi-annually on February 27
and on August 29 of each year; subject to certain
restrictive covenants and repayable in US dollars.............    4,000,000   4,000,000

Convertible notes issued by the Company, due October 22,
2003, 4% interest payable semi-annually on April 29 and
on October 29 of each year, subject to certain
restrictive covenants and repayable in Swiss Francs...........    1,878,522          --
                                                                -----------  -----------
Total long-term debt..........................................   11,395,116  10,775,485
Less current portion..........................................      632,436   1,288,040
                                                                -----------  -----------
Long-term, excluding current portion..........................  $10,762,680   9,487,445
                                                                -----------  -----------
</TABLE>

In August 1997, the Company entered into a Note Purchase, Paying, and Conversion
Agency Agreement (the "Note Agreement") with Banca del Gottardo, a bank
organized under the laws of Switzerland. Under the Note Agreement, the Company
issued 8% notes, due August 29, 2002, with interest payable semi-annually in
February and August. After January 1, 1998, the notes are convertible into
761,905 shares of the Company's common stock at an initial conversion price of
$5.25 per share. Net proceeds from the notes were $3,670,000 after deductions of
commissions and related expenses. The notes can be repaid at the option of the
Company before the due date at 110% of the principal amount due.


                                      F-15
<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

(5) LONG-TERM DEBT (CONTINUED)

In October 1999, the Company entered into a Note Purchase, Paying, and
Conversion Agency Agreement (the "Note Agreement") with Banca del Gottardo, a
bank organized under the laws of Switzerland. Under the Note Agreement, the
Company issued 4% notes, due October 22, 2003, with interest payable
semi-annually in April and October. After March 1, 2000, the notes are
convertible into 528,000 shares of the Company's common stock at an initial
conversion price of $3.75 per share. Net proceeds from the notes were
approximately $1,700,000 after deductions of commissions and related expenses.
The notes can be repaid at the option of the Company before the due date at 110%
of the principal amount due.

Future maturities of long-term debt are as folllows:

<TABLE>
<CAPTION>
                                                                             TOTAL
                                                                           LONG-TERM
YEAR ENDED DECEMBER 31:          PHARMACEUTICALS    BIOREN     COMPANY        DEBT
----------------------------     ---------------  ----------  ----------  ------------
<C>                            <C>                <C>         <C>         <C>
2000........................   $     319,349        313,087          --       632,436
2001........................         319,349        313,087          --       632,436
2002........................         319,349        250,470   4,000,000     4,569,819
2003........................         319,349         62,617   1,878,522     2,260,488
2004........................         319,349         62,617          --       381,966
Thereafter..................       1,446,462      1,471,509          --     2,917,971
                                 ---------------  ----------  ----------  ------------
                               $   3,043,207      2,473,387   5,878,522    11,395,116
                                 ---------------  ----------  ----------  ------------
                                 ---------------  ----------  ----------  ------------
</TABLE>

Substantially all of the Company's assets are pledged as collateral under its
various debt agreements.

In January and March 2000, the Company settled the following outstanding bank
loans and accrued interest to the Union Bank of Switzerland which amounted to
$4.3 million:

-    approximately $1.3 million secured by the Pharmaceuticals building.

-    approximately $1.6 million collaterized by mortgage on Pharmaceuticals
     building and equipment.

-    approximately $1.3 million from the unsecured short-term bank loan.

-    approximately $0.1 million from the bank line of credit and accrued
     interest.

The Company paid $3.9 million and Union Bank of Switzerland
forgave $0.4 million. The amount that was paid was financed by a loan of
$2.7 million from Credit Suisse, a loan of $1.1 million from the CEO of
the Company, and cash of $0.1 million.

The following new loans have been executed:

-    $1.3 million bank loan from Credit Suisse collaterized by mortgage on
     Pharmaceuticals building and certain receivables; variable interest at
     4.25% per annum.


                                      F-16

<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

(5) LONG-TERM DEBT (CONTINUED)

-    $1.1 million bank loan from Credit Suisse collaterized by mortgage on
     Pharmaceuticals building and certain receivables; variable interest at 5.5%
     per annum.

-    Bank line of credit up to $ 0.3 million collaterized by mortgage on
     Pharmaceuticals building with quarterly interest payments due based on
     5.75% variable interest.

-    $1.1 loan from the CEO due December 31, 2000 bearing a 5% interest rate.

Pursuant to this new financing, the current portion of long-term debt will
remain the same, long-term debt exluding current portion will increase from
$10.8 million to $11.7 million and notes payable will decrease from $3.4 million
to $1.3 million.

(6) INCOME TAXES

The sources of income (loss) before income taxes is as follows:

<TABLE>
<CAPTION>
                                             YEAR ENDED DECEMBER 31,
                                      ---------------------------------------
                                          1999          1998         1997
                                      -------------  -----------  -----------
<S>                                  <C>             <C>          <C>
Source of Loss
United States......................  $  (5,299,396)  (6,086,322)  (6,568,342)
Switzerland........................     (1,024,883)  (1,135,380)    (809,682)
                                      -------------  -----------  -----------
                                     $  (6,324,279)  (7,221,702)  (7,378,024)
                                      -------------  -----------  -----------
                                      -------------  -----------  -----------
</TABLE>

Income tax benefit differed from the amounts computed by applying the U.S.
federal income tax rate of 34 percent to pretax loss as a result of the
following:

<TABLE>
<CAPTION>
                                                          1999         1998         1997
                                                      -------------  -----------  ----------
<S>                                                 <C>             <C>          <C>
Computed income taxes benefit at 34% rate.....      $   (2,150,255) (2,455,385)  (2,508,534)
Impact of difference between Swiss effective rate
and U.S. effective tax rate.....................            40,995       45,416      42,536
Increase in valuation allowance on deferred              1,462,668    2,075,595   1,887,301
tax assets
Non-taxable debt forgiveness income in Switzerland              --           --          --
Non-deductible stock warrant expense...........             39,032      325,720     272,000
Non-deductible foreign exchange (gain) loss....            284,436     (113,243)    137,977
Expiration of net operating loss carryforward              113,269           --          --
Other..........................................            209,855      121,897     168,720
                                                      -------------  -----------  ----------
                                                    $           --           --          --
                                                      -------------  -----------  ----------
                                                      -------------  -----------  ----------
</TABLE>


                                      F-17
<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

(6) INCOME TAXES (CONTINUED)

The tax charge in Switzerland is an accumulation of city, canton (state) and
federal taxes. Therefore, the tax burden varies from one entity to another
depending upon its location. While the actual tax rate is a function of the
percentage of profitability in relation to the taxable entity, the Company
believes that 30% is a fair approximation of the effective tax rates for
Pharmaceuticals and Bioren in 1999, 1998 and 1997.

In addition, as Swiss tax laws do not permit consolidated tax filings, possible
tax losses in one entity do not offset taxable income in another entity.

The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are presented below:

<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                                ------------------------------------
                                                   1999         1998         1997
                                                -----------  -----------  ----------
<S>                                            <C>          <C>          <C>
Deferred tax assets:
Benefit of net operating loss carryforwards:
United States................................  $ 5,343,836  $ 4,019,507  $ 2,150,487
Switzerland..................................    2,023,896    2,192,863    2,292,558
Loss on forgiveness of debt due from Swiss         510,000      510,000      510,000
subsidiary
Intangible and other assets..................      307,614      278,820      153,877
Accrued expenses and other current liabilities      88,079       99,025       42,647
                                                -----------  -----------  ----------
Total deferred tax assets. ..................    8,273,425    7,100,215    5,149,569
Valuation allowance..........................   (8,273,425)  (7,100,215)  (5,024,620)
                                                -----------  -----------  ----------
Net deferred tax assets.....................            --           --      124,949
Deferred tax liability:
Capitalized interest.........................           --           --     (124,949)
                                                -----------  -----------  ----------
Net deferred tax liability...................  $        --           --           --
                                                -----------  -----------  ----------
                                                -----------  -----------  ----------
</TABLE>

Bioren and Pharmaceuticals have net operating loss carryforwards of
approximately $6,035,000 and $710,000, respectively, expiring through December
31, 2006. Bigmar, Inc. has net operating loss carryforwards of approximately
$15,714,000 expiring through December 31, 2019. The net change in the total
valuation allowance for the years ended December 31, 1999, 1998, and 1997 was an
increase of $1,173,000 ($1,462,000 impact of 1999 loss net of $289,000 currency
translation adjustment), $2,076,000 and $1,887,000, respectively.

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Based upon the historical
losses of the Company and its subsidiaries, the total deferred tax assets have
been fully reserved.


                                      F-18
<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

(7) STOCK OPTIONS

Effective November 4, 1997, the Board of Directors approved an option plan,
which was approved by Shareholders on June 30, 1998, that provides for the grant
of incentive stock options and nonqualified stock options to directors,
officers, employees, agents and consultants of the Company to purchase up to
600,000 shares of the Company's stock (the 1997 Plan), with exercise terms not
to exceed ten years. All options under the previous 1996 Plan were reissued and
repriced under the 1997 Plan. In addition, the Company adopted a director option
plan providing for awards of up to 50,000 shares of common stock to directors
who are not otherwise affiliated with the Company. Stock options have various
vesting terms and are granted with an exercise price equal to the Company's
stock price at the date of grant.

At December 31, 1999, options for 495,000 shares of common stock were available
for future grant under the 1997 Plan and 50,000 shares of stock were available
for future grant under the director option plan.

The per share weighted-average fair value of stock options granted during 1997
and 1996 was $3.48 and $5.48, respectively, on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions: 1997--expected dividend yield 0%, risk-free interest rate of 5.97%,
expected volatility 79% and an expected life of 5 years; 1996--expected dividend
yield 0%, risk-free interest rate of 6.22%, expected volatility 66% and an
expected life of 5 years. There were no stock options granted in 1999.

The Company applies APB Opinion No. 25 in accounting for options and,
accordingly, no compensation cost has been recognized for its stock options in
the financial statements. Had the Company determined compensation cost based on
the fair value at the grant date for its stock options under SFAS No. 123, the
Company's net loss would have increased the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                              1999           1998           1997
                                          -------------  -------------  -------------
<S>                                      <C>            <C>            <C>
Net Loss          As reported..........  $  (6,324,279) $  (7,221,702) $  (7,378,024)
                  Pro forma............  $  (6,439,079) $  (7,807,202) $  (8,064,273)


Loss per share    As reported..........  $       (0.73) $       (1.46) $       (1.82)
                  Pro forma............  $       (0.74) $       (1.58) $       (1.99)
</TABLE>


                                      F-19
<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES

             NOTES TO CONS OLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

(7) STOCK OPTIONS (CONTINUED)

Stock option activity during the years indicated is as follows:

<TABLE>
<CAPTION>
                                                      NUMBER OF   WEIGHTED-AVERAGE
                                                      SHARES      EXERCISE PRICE
                                                   -----------  -----------------
<S>                                                <C>          <C>
Balance, December 31, 1996......................     283,000       $    8.96
Granted (1).....................................     524,000       $    5.20
Terminated (2)..................................    (280,000)      $    8.96
Exercised.......................................          --              --
Forfeited.......................................     (15,000)      $    8.94
Expired.........................................          --              --
                                                   -----------
Balance, December 31, 1997......................     512,000       $    5.20
Granted.........................................          --              --
Terminated......................................          --              --
Exercised.......................................          --              --
Forfeited.......................................     (97,000)      $    5.09
Expired.........................................          --              --
                                                    -----------
Balance, December 31, 1998......................     415,000       $    5.23
Granted.........................................          --              --
Terminated......................................          --              --
Exercised.......................................          --              --
Forfeited.......................................     (10,000)      $    5.09
Expired.........................................          --              --
                                                    -----------
Balance, December 31, 1999......................     405,000       $    5.22
                                                    -----------
                                                    -----------
</TABLE>

(1)  Includes 265,000 stock options re-priced pursuant to the 1997 stock option
     plan.

(2)  Terminated and re-priced pursuant to the 1997 stock option plan.

At December 31, 1999, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $5.09 - $5.60 and 2.15
years, respectively.

At December 31, 1999, 1998 and 1997, the number of options exercisable was
353,335, 305,003 and 221,334, respectively, and the weighted-average exercise
price of those options was $5.21, $5.21 and $5.12, respectively.


                                      F-20
<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

(8) PROTYDE AGREEMENTS

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 its marketing agreement with Protyde, and Protyde assigned its
partnership interest to Therapeutics. As consideration for the assignment and
termination agreements, the Company paid Protyde $2,000,000 cash, 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 10). The fair value of the total consideration
given to Protyde of $2,050,000 has been recognized in the accompanying 1997
consolidated statement of operations.

(9) WARRANTS

On April 15, 1999, the Company entered into a consulting contract for public
relations and investor relations services. A portion of the consideration paid
for this contract included the Company granting warrants to purchase 45,000
shares of its common stock. These warrants are exercisable for a period of five
years at an exercise price of $3.88 per share. The Company estimated the fair
value of these warrants to be $106,144 (using the Black-Scholes option pricing
model) and has recorded that amount as an expense and an increase to additional
paid-in capital in 1999.

As described in Note 1, on May 28, 1998, the Company, in consideration of a
guarantee to obtain a $6.0 million line of credit from a commercial institution,
delivered warrants to Jericho to purchase 1,000,000 shares of convertible
Preferred Stock at a price equal to $2.5625 per share and having a term of 10
years (the "Warrants"). The Preferred Stock is convertible to Common Stock on a
one-to-one basis, with such conversion rate to adjust to reflect dilutive
issuances of equity securities by the Company and also to adjust for stock
splits, dividends, combinations and similar events. The Preferred Stock votes
together with the common stock and outstanding shares of Preferred Stock carry a
vote equal to five times the number of shares of common stock into which the
Preferred Stock is then converted. The Preferred Stock has a liquidation
preference equal to the purchase price per share. The Warrants include a net
exercise clause and the shares issuable on exercise shall be entitled to
piggyback registration rights, subject to standard underwriter's cutback. The
line of credit is in the form of a demand note payable. Accordingly, the fair
value of the warrants of $958,000, determined using the Black-Scholes model, has
been recognized in the accompanying consolidated statements of operations for
the year ended December 31, 1998.

As described in Note 9, on 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 estimated the fair value of the warrants as of the issuance date to
be approximately $800,000 (using the Black-Scholes option pricing model) and has
recorded that amount as expense and as an increase to additional paid-in capital
in 1997.


                                      F-21
<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

(9) WARRANTS (CONTINUED)

Related to the initial public offering in 1996, the Company issued warrants to
purchase 140,000 shares of its common stock to its underwriter, L. T. Lawrence &
Co., Inc. at an exercise price equal to 130% of the initial public offering
price per share of $7.50. The warrants are exercisable for a period of four
years from the initial public offering date. In addition, holders of these
warrants will have demand registration rights for a period of five years and
piggy-back registration rights for a period of seven years from the initial
public offering date.

(10) LEGAL RESERVE

The Swiss Federal Code of Obligation provides that at least 5% of a company's
net income each year must be appropriated to a legal reserve until such time as
this reserve equals 20% of a company's share capital. In addition, 10% of any
distribution in excess of a 5% dividend also must be appropriated to the legal
reserve. The legal reserve of up to 5% of the share capital is not available for
distribution.

(11) SIGNIFICANT CUSTOMERS AND SUPPLIERS

Sales to significant customers were as follows:
<TABLE>
<CAPTION>
                                                       YEAR ENDED DECEMBER 31,
                                                  --------------------------------
                                                      1999       1998        1997
                                                  ----------  ---------  ---------
<S>                                               <C>           <C>        <C>
Oncology Products (one customer)................  $1,005,514    412,701    676,751
IV Solutions (three customers)
Customer 1......................................     790,368    751,461    263,435
Customer 2......................................     667,854    602,366    228,773
Customer 3......................................     625,858    590,503    201,042
</TABLE>

The Company obtains containers for IV Solutions from a sole supplier. The
Company's reliance on a sole or a limited number of suppliers involves several
risks including, among others, the inability to obtain an adequate supply of
required raw materials and components in order to manufacture or market a
product or proposed product, increased raw material or component costs and
reduced control over pricing, quality and timely delivery.


                                      F-22
<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

(12) RELATED PARTY TRANSACTIONS

(a) DISPUTES WITH RELATED PARTIES

In the second half of 1996, a dispute arose between the Company and
Cerbios-Pharma SA (Cerbios), a wholly owned subsidiary of Chemholding SA, a then
beneficial owner of approximately 25.4% of the Company's common stock. Cerbios
rendered invoices to the Company, in the amount of approximately $4 million for
expenses and fees to which it claimed to be entitled in connection with services
it provided to the Company from 1995 to 1997. The Company maintains that no
services were performed during 1995 and the amounts claimed for 1996 and 1997
far exceeded the actual expenses incurred by Cerbios on behalf of the Company.
On March 27, 1997, the Company reached a settlement with Cerbios, including a
release, for approximately $300,000.

Pursuant to the settlement, the Company and each of its wholly owned
subsidiaries and Cerbios have mutually agreed to the cancellation of the
following agreements: the Sapec Exclusive Distribution Agreement (the Sapec
Agreement), the Bioferment Exclusive Distribution and Supply Agreement (the
Bioferment Agreement), and the Bioferment License and Supply Agreement (the
Bioferment License Agreement). The Company paid a one-time license fee of
$100,000 to Sapec and an additional $100,000 to Bioferment, which were both
non-refundable under the terms of these agreements. In addition, the Company has
terminated all relationships and transactions with Cerbios entities, including
the purchase of raw materials for resale, which purchases aggregated
approximately $501,000 and generated sales of approximately $833,000 in 1996.
The Company believes the cancellation of these agreements will have no adverse
effect on its operations. Furthermore, as discussed at Note 1, in 1997 the CEO
of the Company acquired the stock previously owned by the Chemholding
shareholders.

(b) OTHER RELATED PARTY TRANSACTIONS

<TABLE>
<CAPTION>
                                                       DECEMBER 31,
                                                   ---------------------
                                                     1999       1998
                                                   ----------  ---------
<S>                                                <C>          <C>
Purchases from related parties.................    $     --     209,000
Selling, general and administrative expenses paid
 to related party..............................     300,000      21,648
Interest paid to related parties...............      11,789       2,196
</TABLE>

Also see Note 13 regarding related party lease transactions.


                                      F-23
<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

(13) COMMITMENTS

The Company leases office space in the United States and has various leases in
Switzerland. Rent expense amounted to $173,968 in 1999, $143,638 in 1998, and
$176,000 in 1997. Rent paid to a related party amounted to $120,000 in 1999,
$100,000 in 1998, and $110,000 in 1997.

Minimum future rental payments under the Company's noncancelable operating
leases are as follows:

<TABLE>
<CAPTION>
                                                               THIRD     RELATED
  YEAR ENDED DECEMBER 31:                                     PARTIES    PARTIES
-----------------------------------------------------------  ---------  ---------
<S>                                                          <C>          <C>
  2000.....................................................  $  15,268    120,000
  2001.....................................................      3,999    120,000
  2002.....................................................         --     50,000
                                                             ---------  ---------
  Total....................................................  $  19,267    290,000
                                                             ---------  ---------
                                                             ---------  ---------
</TABLE>

In December 1996 the Company entered into an agreement to lease real property,
including an office/ laboratory building from a company owned by the Company's
President and a company owned by certain stockholders of the Company. The lease
is for a term of five years from commencement date (June 1, 1997), with an
option to renew for an additional five years, and provides for rent of $120,000
per annum.

Bioren leased part of its Couvet facility to a third party pursuant to a year to
year lease which ended April 15, 1998. The rental income for the years ended
December 31, 1998 and 1997 was $23,281 and $79,000, respectively.

In March 1995, Bioren and PLM Langeskov A/S ("PLM") entered into an agreement
(the "PLM Agreement"), which grants Bioren the exclusive right to distribute its
IV Solutions throughout Switzerland and Liechtenstein in PLM's collapsible
containers. Under the terms of the agreement, PLM is entitled to terminate the
exclusive right contained in the agreement if, among other things, Bioren does
not purchase a minimum of 2 million containers each year.

The total purchase commitment is as follows:

<TABLE>
<CAPTION>
                                                              PURCHASE
YEAR ENDED DECEMBER 31:                                        VALUE
-----------------------------------------------------------  ---------
<S>                                                         <C>
2000....................................................... $  891,509
2001.......................................................    891,509
2002.......................................................    891,509
2003.......................................................    891,509
2004.......................................................    891,509
Afterward..................................................    891,509
                                                             ---------
Total...................................................... $5,349,054
                                                             ---------
                                                             ---------
</TABLE>

Bioren purchased 3.3 million containers in 1999, 3.3 million in 1998 and 2.6
million in 1997.


                                      F-24
<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

(14) 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. Bioren, Pharmaceuticals, and the Corporate
Headquarters provide products and services as further described in Note 1.

The accounting policies of the various segments are the same as those described
in the Summary of Significant Accounting Policies and Practices in Note 1. 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. Segment assets exclude corporate assets. Corporate assets include cash
and cash equivalents, short-term investments, laboratory facility, and
intangible assets. Capital expenditures for long-lived assets are not reported
to management by segment and are excluded as presenting such information is not
practical.

Summary information by segment as of and for the years ended December 31, 1999,
1998, and 1997 is as follows:


<TABLE>
<CAPTION>
                                                     DECEMBER 31,
                                       -----------------------------------------
                                           1999           1998          1997
                                       -------------  ------------  ------------
<S>                                   <C>             <C>           <C>
BIOREN:
Sales:
IV Solutions........................  $   6,046,311     5,976,369     5,438,902
Gross Margin:
IV Solutions........................      1,400,034     1,555,138     1,285,328
Segment Income (Loss)...............       (229,617)     (315,394)       180,589
Interest Expense....................        135,528       150,624       157,618
Depreciation and Amortization.......        267,044       578,694       233,040
Segment Assets......................      6,565,840     7,401,168     7,397,277

<CAPTION>

                                                     DECEMBER 31,
                                       -----------------------------------------
                                           1999           1998          1997
                                       -------------  ------------  ------------
<S>                                   <C>             <C>           <C>
PHARMACEUTICALS:
Sales:
Oncology Products...................  $   1,679,051       401,453     1,044,542
Gross Margin:
Oncology Products...................       (128,253)       10,394      (287,532)
Segment Income (Loss)...............     (1,059,606)     (819,986)     (990,272)
Interest Expense....................        262,423       278,736       404,523
Depreciation and Amortization.......      1,089,586     1,069,707       610,879
Segment Assets......................     11,481,742    12,407,223    12,637,495
</TABLE>


                                      F-25
<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

(14) SEGMENT DATA (CONTINUED)

A reconciliation of the Company's segment gross margin, segment profit, and
segment assets to the corresponding consolidated amounts as of and for the years
ended December 31, 1999, 1998, and 1997 is as follows:

<TABLE>
<CAPTION>
                                                          DECEMBER 31,
                                            ---------------------------------------
                                                1999           1998          1997
                                            -------------  ------------  -----------
<S>                                         <C>            <C>            <C>
Segment gross margin......................  $  1,271,780     1,565,532      997,796
Non-Segment gross margin..................            --            --           --
                                            -------------  ------------  -----------
Total gross margin........................  $  1,271,780     1,565,532      997,796
                                            -------------  ------------  -----------
                                            -------------  ------------  -----------
Segment profit (loss).....................  $ (1,289,223)   (1,135,380)    (809,683)
Corporate expenses, net...................    (5,035,056)   (6,086,322)  (6,568,341)
                                            -------------  ------------  -----------
Loss before provision for income taxes....  $ (6,324,279)   (7,221,702)  (7,378,024)
                                            -------------  ------------  -----------
                                            -------------  ------------  -----------
Segment assets............................  $ 18,047,582    19,808,391   20,034,772
Corporate assets..........................     1,751,170       900,791      482,318
                                            -------------  ------------  -----------
Total assets..............................  $ 19,798,752    20,709,182   20,517,090
                                            -------------  ------------  -----------
                                            -------------  ------------  -----------
Sales:
U.S.......................................  $  1,005,514            --           --
Other foreign countries...................     6,719,848     6,377,822    6,483,444
                                            -------------  ------------  -----------
Total revenue.............................  $  7,725,362     6,377,822    6,483,444
                                            -------------  ------------  -----------
                                            -------------  ------------  -----------
Long-lived assets:
U.S.......................................  $    321,631       608,746      950,917
Other foreign countries...................    14,059,246    16,741,258   16,213,241
                                            -------------  ------------  -----------
Total long-lived assets...................  $ 14,380,877    17,350,004   17,164,158
                                            -------------  ------------  -----------
                                            -------------  ------------  -----------
</TABLE>


                                      F-26