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                                 UNITED STATES
 
                       SECURITIES AND EXCHANGE COMMISSION
 
                             WASHINGTON, D.C. 20549
 
                            ------------------------
 
                                   FORM 10-K
 
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MARK ONE
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         /X/     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998.
                                                        OR
 
         / /     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                 OF 1934 FOR THE TRANSITION PERIOD FROM              TO              .
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                          COMMISSION FILE NO. 1-14416
 
                            ------------------------
 
                                  BIGMAR, INC.
 
             (Exact name of registrant as specified in its charter)
 
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             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       (Zip Code)
             offices)
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       Registrant's telephone number, including area code: (740) 966-5800
 
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          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
$7,472,500 based on a closing sale price of $3.8125 per share on March 15, 1999.
As of March 15, 1999, 8,263,974 shares of $.001 par value Common Stock were
issued and outstanding.
 
                      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 1999
annual meeting of stockholders to be held in May, 1999.
 
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                                     PART I
 
ITEM 1. BUSINESS
 
OVERVIEW AND RECENT DEVELOPMENTS
 
    Bigmar, Inc. (the "Company") was incorporated in Delaware in September 1995
and has three wholly-owned subsidiaries--Bioren SA ("Bioren"), Bigmar
Pharmaceuticals SA ("Pharmaceuticals"), and Bigmar Therapeutics
("Therapeutics"). Bioren is a Swiss corporation formed in July 1986.
Pharmaceuticals is a Swiss corporation that was formed in January 1992 under the
name BVI, SA. Therapeutics is a Delaware corporation formed in September 1995
under the name Bioren, Inc.; the name was changed in November 1995.
 
    The Company manages its business segments primarily on a geographic basis
with each location representing a distinct segment.
 
THE COMPANY
 
    The Company's corporate headquarters ("Corporate Headquarters"), located in
Johnstown, Ohio, includes a research and development laboratory used for the
testing of generic oncology and related products ("Oncology Products") to be
marketed in the U.S.
 
BIOREN
 
    Bioren is engaged in manufacturing and marketing various pharmaceutical
products in Switzerland. Current products include 18 types of intravenous
infusion solutions and other related products ("IV Solutions"). Bioren's
strategy is to expand its current IV Solutions product line and its market
penetration. Bioren's manufacturing facility (the "Bioren Facility") is located
in Couvet, Switzerland.
 
PHARMACEUTICALS
 
    Pharmceuticals manufactures and markets Oncology Products, such as calcium
leucovorin, methotrexate, and cisplatin. The Oncology Products are currently
marketed in Germany and Spain. Pharmaceuticals' primary strategy is to supply
world markets with a full line of high-quality, affordably priced generic
pharmaceutical products focusing on oncology. The products are manufactured in
its state-of-the-art facilities in Switzerland and marketed through
pharmaceutical company partners in Europe and shortly in the United States.
Pharmaceuticals has received regulatory approval to manufacture and market
certain Oncology Products from the United States Food and Drug Administration
("FDA") and Switzerland's Intercantonal Office for the Control of Medications
("IKS"). Pharmaceuticals' manufacturing facility (the "Bigmar Facility") is
located in Barbengo, Switzerland.
 
THERAPEUTICS
 
    Therapeutics is essentially a shell company and has had no significant
business operations as of December 31, 1998.
 
    In June 1995, all of the outstanding capital stock of Bioren was purchased
by Pharmaceuticals (the "Bioren Acquisition") for an aggregate purchase price of
approximately $5.2 million. In connection with the Bioren Acquisition,
Pharmaceuticals became a guarantor on a bank loan to Bioren in the principal
amount of $2.6 million. This loan was collateralized by a facility used by
Bioren (the "Bioren Facility") and provided a guarantee on a second mortgage in
the aggregate principal amount of approximately $1.7 million--also on the Bioren
Facility. In addition, simultaneous with the Bioren acquisition in June 1995,
Pharmaceuticals sold one-half of its equity interest in Bioren to certain
Pharmaceuticals stockholders (the "Bioren Holders") for approximately $2.6
million. This sale included 500 shares (10% of Bioren's
 
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outstanding stock) to John G. Tramontana, the Company's Chairman of the Board,
President and Chief Executive Officer ("CEO"), for approximately $500,000.
 
    In September 1995, the Company sold an aggregate of 2,375,000 shares of
common stock to stockholders existing prior to the initial public offering (see
below) and on April 8, 1996 such existing stockholders contributed 99% of these
shares to the Company (the "Contribution"). On April 9, 1996, the Bioren Holders
exchanged their capital stock in Bioren (representing 50% of the outstanding
Bioren capital stock) for 350,312 shares of the Company's common stock
(approximate fair market value $2,627,340 based on the initial public offering
price of $7.50 per share). At the same time, the stockholders of Pharmaceuticals
exchanged all of the capital stock of Bigmar Pharmaceuticals for 2,000,938
shares of the Company's common stock (approximate fair market value $15,007,035
based upon the initial public offering price of $7.50 per share) (the
"Exchange").
 
    In June 1996, the Company consummated an initial public offering (the "IPO")
of 1,610,000 shares of common stock, par value $.001 per share at an initial
public offering price of $7.50. The Company realized approximately $9.4 million
from the proceeds of the IPO, after deductions of commissions and expenses.
 
    In May 1997, Mr. Tramontana, pursuant to privately negotiated transactions,
acquired 1,293,663 additional shares of the Company's common stock from certain
stockholders.
 
    In August 1997, the Company completed an Offshore Securities Subscription
Agreement (the "Subscription Agreement") and 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 Subscription Agreement,
the Company issued 200,000 shares of its common stock at a price of $5.00 per
share. Net proceeds after commissions amounted to $930,000. Under the Note
Agreement, the Company issued $4 million in 8% notes, due August 29, 2002, with
interest payable semi-annually in February and August. The notes are convertible
into shares of the Company's common stock at an initial conversion price of
$5.25. Net proceeds from the notes were $3,670,000 after deductions of
commissions and related expenses.
 
    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 warrants to Jericho II, L.L.C. ("Jericho")--a related
party, 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 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 convertible. 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 statement of operations for the
year ended December 31, 1998. 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.
 
    In August 1998, the Company issued 150,000 shares of common stock to Banca
del Gottardo for $2.00 per share via a private placement. The Company filed a
Form S-3 with the United States Securities and Exchange Commission ("SEC") which
was declared effective on November 4, 1998, pursuant to its request to the
resale of said stock. The proceeds were used for working capital and other
general corporate purposes.
 
                                       3
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    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 $6.0 million, and were used to
repay debt and for working capital.
 
    In January 1999, pursuant to the terms of a Debt Repayment Agreement dated
November 20, 1998, 1,231,231 shares of the Company's Common Stock were
transferred to Jericho from the Company's CEO in satisfaction of a $2,536,336
(principal plus accrued interest) debt incurred by the CEO to a third-party.
 
    The Company employs 75 full-time and 5 part-time associates in the following
functional areas: manufacturing and quality control--45; marketing and sales--9;
research and development, including regulatory affairs--13; and
administration--13. All but nine of the Company's employees are located in
Switzerland and none of the employees are party to any collective bargaining
agreements.
 
PRODUCTS
 
    IV SOLUTIONS
 
    The Company's Bioren Facility manufactures and markets IV Solutions. The IV
Solutions generally consist of different chemical entities, such as sodium
chloride, electrolytes, carbohydrates and other nutrients, which are
intravenously administered to patients. 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
providers in Switzerland. The Company intends to continue manufacturing and
marketing IV Solutions and is seeking to penetrate additional markets in
Switzerland.
 
    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. The PLM 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 upon the occurrence of certain specified
conditions may terminate the agreement. The termination of the agreement would
have a material adverse effect on the Company.
 
    ONCOLOGY PRODUCTS
 
    The Company currently markets leucovorin calcium, methotrexate, and
cisplatin, generic oncology products, in Europe. In February 1999, the Company
received approval of five Abbreviated New Drug Applications ("ANDAs" or "ANDA")
from the FDA for certain injectable formulations of methotrexate, a chemotherapy
agent, and leucovorin calcium, a rescue therapy agent used in conjunction with
methotrexate. Both of these drugs have indications for treating various forms of
cancer. These approvals permit the Company to sell these products in the United
States.
 
    PROPOSED PRODUCTS
 
    The Company has identified approximately 30 oncological drugs that are
currently generic 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 (proprietary) 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.
 
                                       4
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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 and technical resources and
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 price, timing, quality, customer
service and breadth of its product line are all-important competitive factors
for its oncological products and proposed oncological products. The ability to
introduce generic versions of products promptly after a proprietary drug's
patent expires and the breadth of the product line may give companies 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.
 
IV SOLUTIONS
 
    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, manufactured by Bioren in Switzerland and the
United Kingdom.
 
ONCOLOGY PRODUCTS
 
    Pharmaceuticals markets calcium leucovorin, methotrexate, and cisplatin to
pharmaceutical companies. Pharmaceuticals does not intend to 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, and Spain. 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 product
 
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    - Scaling up the development from the laboratory phase to the production
      phase
 
    - Conducting stability and bio-equivalency testing of the finished product
 
    During 1999, the Company received approvals for six ANDA's from the FDA. The
approved ANDA's are for Oncology Products manufactured at the Bigmar Facility.
(see "Manufacturing and Suppliers" below).
 
MANUFACTURING AND SUPPLIERS
 
    The Company has two production facilities, the Bioren Facility and the
Bigmar 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. The Bigmar 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 the facility in which oncology
products are manufactured and the method of manufacture, as well as the
employees' working conditions. As 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, in
states thereof and in other countries. In the United States, drugs are subject
to rigorous FDA review. 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 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 cause it to be 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
 
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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 likely to require substantial time, effort and expense. The Company
anticipates that proprietary oncological products will 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
 
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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 ANDAs will
be submitted 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, currently it 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, 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 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, these terms are not met and a term of review by the BfArM is
expected to take generally 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 as they are bound by the Intercantonal
Treaty for the Control of Medications.
 
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    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
("WHO") or the Pharmaceutical Inspection Convention ("PIC"). 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 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"). This is known as the centralized procedure. 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.
 
    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, as a result its results of operations, may be adversely affected.
 
    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
 
                                       9
<PAGE>
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 and currently 13 states mandate generic substitution in Medicaid
programs.
 
    GERMANY.  About 90% of the population 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 amount will usually be an average of the lowest and the highest price.
Typically, the maximum reimbursement is fixed on the basis of the lowest price
plus 1/3 of the price range to the most expensive product. About 70% of drugs
sold in Germany are subject to maximum reimbursement. So far, no oncological
products have been affected by a maximum reimbursement cap. This may, however,
change at any time. A manufacturer is legally free to continue to sell its
products at higher than the maximum reimbursement rate, but patients must then
pay the difference. So far, the Company believes no manufacturer has tried to
sell its products at prices exceeding the maximum reimbursement. If the products
of the Company become subject to a maximum reimbursement rate, this may
adversely affect the prices the company will be able to charge.
 
                                       10
<PAGE>
    In addition to maximum reimbursement caps, pharmaceutical prices are subject
to statutory limitations on the amounts that can be spent on drugs by the
statutory health insurance providers. As a consequence, pharmaceutical prices
decreased in the last several years and may decrease further in the future.
 
    SWITZERLAND.  In Switzerland, reimbursement for pharmaceuticals is regulated
on a federal level. There are two categories of drugs subject to reimbursement.
The first category consists of medications which are required to be reimbursed
by private health insurers. The second category contains specialty medications
for which reimbursement is recommended. In practice, private health insurers
grant reimbursement for the specialty products on the recommended list.
 
ENVIRONMENTAL REGULATIONS
 
    In Switzerland, Pharmaceuticals and Bioren are subject to applicable
environmental laws such as the Environment Protection Act of 1983, the Water
Protection Act of 1991 and the Toxic Substance Act of 1969, as well as all
applicable regulations. Swiss environmental protection laws govern, among other
things, all emissions to the air, soil and water, waste-water discharge and
solid and hazardous waste disposal. Pharmaceuticals and Bioren are subject
periodically to environmental compliance reviews by various Swiss regulatory
offices.
 
    The Company believes all of its facilities are in compliance with applicable
environmental laws. However, environmental laws have changed in recent years and
the Company may become subject to increasingly stringent environmental standards
in the future. While the Company anticipates that it may from time to time incur
expenditures in connection with environmental matters, it does not anticipate
making substantial expenditures for those matters within the next twelve months.
Beyond that, the Company is unable to predict the extent or timing of future
expenditures that may be required in connection with complying with
environmental laws.
 
PRODUCT LIABILITY AND INSURANCE
 
    The testing, clinical trials, manufacturing, and marketing of the Company's
products involve inherent risks of product liability claims against the Company.
The Company currently maintains product liability insurance coverage on IV
Solutions in the amount of approximately $14 million but such insurance is
expensive, subject to various exclusions and may not be obtainable or
maintainable by the Company in the future on terms acceptable to the Company.
There can be no assurance that the amount and scope of any coverage will be
adequate to protect the Company in the event that a product liability claim is
successfully asserted against the Company. Products, such as those sold or
proposed to be sold by the Company, may be subject to recall for unforeseen
reasons. A recall of the Company's products could have a material adverse effect
on the Company and its reputation.
 
ITEM 2. PROPERTIES
 
BIOREN FACILITY
 
    The Bioren Facility is a 57,000 square foot facility in Couvet, Switzerland
that houses manufacturing operations, laboratory facilities for quality
assurance and quality control activities, including batch testing and
multiple-batch stability testing operations, labeling and packaging operations,
warehousing and storage operations, administrative and record-keeping areas. A
25,000 square foot area in the Bioren Facility will be used as a dedicated area
for scaling up the development and manufacturing supporting non-toxic products,
such as leucovorin calcium (rescue therapy). A 21,000 square foot area in the
Bioren Facility is used for manufacturing and marketing IV Solutions. A portion
of the Bioren Facility was leased to an unaffiliated third party until April 15,
1998, this portion of the Bioren Facility is now vacant. The Company believes
that its facilities are sufficient for its current and reasonably anticipated
operations.
 
                                       11
<PAGE>
BIGMAR FACILITY
 
    The Bigmar Facility, a 25,000 square foot facility in Barbengo, Switzerland,
is used for developing and manufacturing oncological products. The Bigmar
Facility also houses warehousing and storage, manufacturing, labeling and
packaging, and administrative and record-keeping areas.
 
CORPORATE HEADQUARTERS
 
    On December 31, 1996, the Company entered into a lease with JTech
Laboratories, Inc. ("JTech") relating to approximately 8,600 square feet of
space located at 9711 Sportsman Club Road, Johnstown, Ohio 43031. This space is
being utilized by the Company as its principle corporate headquarters and
research and development laboratory for Oncology Products marketed in the U.S.
The lease for this space expires in June 2002, five years from the occupancy
date, and provides for a first year fixed annual rent payment of $120,000
(discounted at 8.25% and paid during 1997). In years two through five, the lease
calls for monthly rent payments of $10,000 per month, adjusted to the consumer
price index (CPI) for inflation. These amounts do not include the Company's
proportionate cost of utilities, repairs, cleaning, taxes and insurance. John G.
Tramontana is the President, and a director of JTech. Mr. Tramontana shares
ownership in JTech with a company owned by certain stockholders of the Company.
Management believes that its corporate headquarters will meet its operational
needs for the foreseeable future.
 
ITEM 3. LEGAL PROCEEDINGS
 
    There are no pending legal proceedings to which the Company or any of is
subsidiaries is a party or to which any of their respective properties are
subject, except routine legal proceedings to which they are parties incident to
their respective business. None of such proceeding are considered by the Company
to be material.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
    No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 1998.
 
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
MARKET INFORMATION
 
    The shares of common stock of the Company commenced trading on the Nasdaq
SmallCap-SM- Market under the symbol "BGMR" and Boston Stock Exchange under the
symbol "BGM" on June 20, 1996. The range by calendar quarter of high and low
reported closing sales prices for the common stock as reported by the Nasdaq
SmallCap-SM- Market since the commencement of trading were as follows:
 
<TABLE>
<CAPTION>
QUARTER ENDED:                              HIGH         LOW
----------------------------------------  ---------   ---------
<S>                                       <C>         <C>
June 30, 1996...........................   11 1/2       8
September 30, 1996......................   10 1/8       6
December 31, 1996.......................    7 1/4       4 3/8
March 31, 1997..........................    7 7/8       5
June 30, 1997...........................    5 7/8       2 7/8
September 30, 1997......................    6 1/8       4 1/8
December 31, 1997.......................    5 1/2       3 1/4
March 31, 1998..........................    3 11/16     3 7/16
June 30, 1998...........................    2 5/8       2 5/8
September 30, 1998......................    2 1/32      2
December 31, 1998.......................    1 1/2       1 13/32
</TABLE>
 
                                       12
<PAGE>
HOLDERS
 
    As of March 15, 1999, as reported by the Company's transfer agent, shares of
common stock were held by 58 persons. The Company believes that over 400
beneficial owners hold such shares in depository or nominee form.
 
RECENT SALES OF UNREGISTERED SECURITIES
 
SECURITIES SOLD
 
    - 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 Company filed a Form S-3 with the United States Securities and
      Exchange Commission which was declared effective on November 4, 1998,
      pursuant to its request to the resale of said stock.
 
    - 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.
 
    - In February 1999, the Company issued 236,666 shares of common stock to
      accredited investors, including 166,666 shares to a company owned by
      certain stockholders of the Company, for prices ranging from $2.00 to
      $3.00 per share via private placement offerings.
 
    - In March 1999, the Company issued 250,000 shares of common stock to
      accredited investors for $3.00 per share via private placement offerings.
 
    All of the share transactions summarized above were made directly by the
Company without use of an underwriter or placement agent and without payment of
commissions or other renumeration. Except as otherwise stated, in each case the
aggregate sales proceeds, after payment of offering expenses in immaterial
amounts, were applied to the working capital of the Company and other general
corporate purposes.
 
    With respect to the exemption from registration of issuance of securities
claimed under Rule 506 and/or Section 4(2) of the Securities Act, neither the
Company nor any person acting on behalf offered or sold the securities by means
of any form of general solicitation or advertising. Prior to making any offer or
sale, the Company had reasonable grounds to believe and believed that each
prospective investor was capable of evaluating the merits and risks of the
investment and was able to bear the economic risk of the investment. Each
purchaser represented in writing that such purchaser was an accredited investor
and that the securities were being acquired for investment for such purchaser's
own account, and agreed that the securities would not be sold without
registration under the Securities Act or exemption therefrom. A legend was
placed on each certificate evidencing the securities stating the securities have
not been registered under the Securities Act and setting forth restrictions on
their transferability.
 
DIVIDENDS
 
    The Company has never paid dividends on its common stock and does not
anticipate paying dividends in the foreseeable future. The payment of future
cash dividends by the Company will be at the discretion of the Board of
Directors and will depend on the Company's earnings, if any, financial
condition, cash flows, capital requirements, any contractual prohibitions with
respect to the payment of dividends and other considerations as the Board may
consider relevant. In addition, the Swiss Federal Code of Obligations provides
further restrictions on the Company's ability to pay dividends to its
stockholders.
 
                                       13
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
 
    The following table presents selected historical financial information for
Bigmar, Inc. and subsidiaries for the years ended December 31, 1994 through
December 31, 1998, derived from the Company's consolidated financial statements.
 
<TABLE>
<CAPTION>
                                                                         BIGMAR, INC. (1)
                                                                     YEARS ENDED DECEMBER 31,
                                                -------------------------------------------------------------------
<S>                                             <C>            <C>           <C>           <C>           <C>
                                                    1998           1997          1996          1995         1994
                                                -------------  ------------  ------------  ------------  ----------
Operating Data:
  Net sales...................................  $   6,377,822     6,483,444     7,931,149     5,600,362     707,627
  Cost of goods sold..........................      4,812,290     5,485,648     5,312,193     4,001,891     611,040
                                                -------------  ------------  ------------  ------------  ----------
  Gross margin................................      1,565,532       997,796     2,618,956     1,598,471      96,587
                                                -------------  ------------  ------------  ------------  ----------
Operating expenses:
  Research and development....................      2,741,809     1,690,053       801,560        23,144
  Selling, general and administrative.........      4,377,842     3,800,627     3,006,546     1,493,055      16,269
  Re-acquisition of U.S. marketing rights.....                    2,050,000
  Settlement and write-off licensing fees.....                                    511,777
                                                -------------  ------------  ------------  ------------  ----------
  Total operating expenses....................      7,119,651     7,540,680     4,319,883     1,516,199      16,269
                                                -------------  ------------  ------------  ------------  ----------
Operating income (loss).......................     (5,554,119)   (6,542,884)   (1,700,927)       82,272      80,318
                                                -------------  ------------  ------------  ------------  ----------
Other income (expense):
  Other, net..................................         15,440       127,200        28,666                     7,927
  Interest income.............................          4,871        69,984       152,705        13,911         966
  Interest expense............................     (1,062,271)     (616,453)     (206,469)     (196,387)
  Issuance of preferred stock warrants for
    loan guarantee............................       (958,000)
  Gain (loss) on foreign currency
    transactions..............................        332,377      (415,871)       86,481
                                                -------------  ------------  ------------  ------------  ----------
  Other income (expense) net..................     (1,667,583)     (835,140)       61,383      (182,476)      8,893
                                                -------------  ------------  ------------  ------------  ----------
Income (loss) before taxes....................     (7,221,702)   (7,378,024)   (1,639,544)     (100,204)     89,211
                                                -------------  ------------  ------------  ------------  ----------
Income taxes (benefit)........................                                                   (3,000)     10,553
                                                -------------  ------------  ------------  ------------  ----------
      Net income (loss).......................  $  (7,221,702)   (7,378,024)   (1,639,544)      (97,204)     78,658
                                                -------------  ------------  ------------  ------------  ----------
                                                -------------  ------------  ------------  ------------  ----------
Basic and Diluted Per Share Data:
  Net income (loss)...........................  $       (1.46)        (1.82)        (0.51)        (0.07)        .20
                                                -------------  ------------  ------------  ------------  ----------
                                                -------------  ------------  ------------  ------------  ----------
  Weighted average number of shares
    outstanding (2)...........................      4,944,895     4,052,945     3,235,137     1,337,292     400,188
                                                -------------  ------------  ------------  ------------  ----------
                                                -------------  ------------  ------------  ------------  ----------
Balance Sheet Data:
  Working capital (deficit)...................  $  (3,065,218)   (2,484,409)      545,102     1,204,461      98,526
  Total assets................................     20,709,182    20,517,090    24,270,169    15,493,126   2,173,621
  Long-term obligations.......................      9,487,445    10,090,467     7,353,490     8,436,971   1,500,767
  Retained earnings (deficit).................    (16,234,332)   (9,012,630)   (1,634,606)        4,938     102,142
  Stockholders' equity........................      5,232,966     5,128,600    10,895,853     3,911,404     192,492
</TABLE>
 
------------------------
 
(1) On April 9, 1996, a reorganization of companies under common control took
    place whereby the Company acquired 100% of Bigmar Pharmaceuticals and 50% of
    Bioren. Accordingly, the financial statements of the Company include the
    results of operations of Bigmar Pharmaceuticals for all periods presented
    and the results of operations of Bioren from July 1, 1995 (the date of
    acquisition).
 
                                       14
<PAGE>
(2) Net loss per share is based on the weighted average number of shares
    outstanding during each period after giving retroactive effect to the
    reorganization, the capital contribution and the reverse stock split.
    Securities when anti-dilutive have not been included in the weighted average
    number of shares outstanding. Securities when anti-dilutive have not been
    included in the weighted average number of shares outstanding.
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS
 
    Certain statements under this caption "Management's Discussion and Analysis
of Financial Condition and Results of Operations" constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, including, without limitation, statements regarding future cash
requirements. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: delays in product development; problems or delays in clinical
testing; failure or delays in receiving regulatory approvals; lack of
proprietary rights; or, change in business strategy or development plans.
 
OVERVIEW
 
    The Company's first ANDA approvals from the FDA for injectable forms of
methotrexate and leucovorin calcium were received in February 1999. The Company
is now positioned to begin introducing its Oncology Products into the U.S.
market. The approved ANDA's enhance the Company's business model, which focuses
on achieving a global marketing presence, as U.S. distribution efforts
complement sales activities already realized throughout Europe.
 
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
 
    Net sales decreased by $0.1 million to approximately $6.4 million for the
year ended December 31, 1998 as compared to $6.5 million for the comparable
period in 1997. This decrease was primarily the result of lower sales of
non-core products, such as raw materials and prostate products, offset by an
increase in sales of IV Solutions.
 
    Sales of Bioren's IV Solutions for 1998 increased approximately $0.5 million
or 9.9% over the prior year as compared with a decrease of approximately $.4
million or 6.4% during 1997. Bioren's IV Solutions sales represented 93.7%,
83.9%, and 73.3% of total sales in 1998, 1997, and 1996, respectively. IV
Solution sales growth in 1998 related to increased penetration of the Swiss
hospital market.
 
    Sales of Pharmaceutical's Oncology Products for 1998 decreased approximately
$0.6 million or 61.4% over the prior year as compared with an decrease of $0.9
million or 50.7% during 1997. Sales of Oncology Products represented 6.3%,
16.1%, and 26.7% of total sales in 1998, 1997, and 1996 respectively. The
decline in Oncology Product sales related to the aggressive validation
activities implemented in 1998, to prepare the Bigmar Facility for regulatory
inspections by the FDA. As a result, commercial batch production time was
reduced. The Bigmar Facility was inspected by the FDA in February 1999, and
subsequently the Company received approvals from the FDA for five ANDA's. With
the approved ANDA's the Company is positioned to begin introducing Oncology
Products to the U.S. market in 1999. In 1998, the Company entered into an
agreement with Ivax Corporation which gives them exclusive distribution rights
within the United States for selected pharmaceutical products.
 
    Gross Margin as a percentage of sales was 24.5% in 1998, up from 15.4% in
1997, and down from 33.0% in 1996.
 
                                       15
<PAGE>
    Bioren's gross margin on IV Solutions as a percentage of IV Solution sales
was 26.0%, 23.6%, and 31.4% in 1998, 1997, and 1996 respectively. The increase
in 1998 IV Solution margins was primarily due to larger quantity discounts on
raw materials and increased production efficiencies.
 
    Pharmaceuticals gross margin on Oncology Products as a percentage of
Oncology Products sales was 2.6%, -27.5%, and 37.4% in 1998, 1997, and 1996
respectively. The increase in 1998 Oncology Product margins was the result of
discontinued sales of raw materials, which carry lower margins, and the first
commercial batches of oncology products being manufactured at the Bigmar
Facility.
 
    Total operating expenses decreased by 5.6%, from $7.5 million in 1997 to
$7.1 million in 1998. Research and development expenses increased by $1.1
million or 62.2% as a result of the Company's commitment to maintaining a
significant level of research and development investment in support of its line
of pharmaceutical products focusing in oncology products. The Company expects
research and development expenditures to continue to be significant during the
next several years. Selling, general and administrative expenses increased 15.2%
from $3.8 million in 1997 to $4.4 million in 1998. The increase is primarily due
to an increase of $0.5 million in depreciation expense related to the Bigmar
Facility. The decrease in total operating expenses is due to approximately $2.1
million of expenses recognized to reacquire U.S. marketing rights in 1997 versus
no such expense being incurred in 1998.
 
    Operating (loss), as a result of the foregoing, was $5.6 million and $6.5
million in 1998 and 1997 respectively.
 
    Other expense (net) amounted to a net expense of $1.7 million for 1998 as
compared to a net expense of $0.8 million for 1997. Interest expense amounted to
$1.1 million for 1998, an increase of $0.4 million over 1997, reflecting two
factors--an increase in the Company's debt during 1998, and no capitalized
interest in 1998 as compared to $119,000 in 1997. Other expense increased $0.9
million from 1997 to 1998, primarily as a result of approximately $1.0 million
of expense recognized to issue preferred stock warrants in consideration to
obtain a guarantee to renew and increase a line of credit from $3.5 million to
$6.0 million from a commercial institution. The Company recorded foreign
currency transaction gains of $0.3 million during 1998 versus losses of $0.4
million in 1997. The majority of this activity is related to 1998 intercompany
funds transfers denominated in Swiss Francs.
 
    Income tax expense was zero for both 1998 and 1997, due to sustained losses
and carryovers from prior years.
 
    Net loss for 1998 was $7.2 million versus the 1997 loss of $7.4 million. The
corresponding basic loss per share was $1.46 in 1998 versus $1.82 in 1997.
 
    Bioren recorded a net loss of $0.3 million for 1998 versus a net profit of
$0.2 million in 1997. This decrease reflects additional depreciation expenses
for machinery and equipment of $0.3 million and approximately $0.2 million for
research and development expenses related to expansion of the IV Solution
product lines.
 
    Pharmaceuticals recorded a net loss of $0.8 million for 1998 versus a net
loss of $1.0 million in 1997. The net loss for 1998 represents a decrease in
loss of $0.2. The 1998 loss was due primarily to time spent preparing the Bigmar
Facility for both commercial production and inspections by regulatory agencies
such as the FDA and IKS. In February 1999, the Company received approvals from
the FDA for five ANDA's to be marketed in the U.S.
 
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
 
    Net sales decreased by $1.4 million to approximately $6.5 million for the
year ended December 31, 1997, compared to $7.9 million for the comparable period
in 1996. Approximately $1.1 million of the decrease relates to year-to-year
exchange rate differences.
 
                                       16
<PAGE>
    Sales of Bioren's IV solutions decreased 6.4% or $0.4 million in 1997 versus
1996, but were offset by foreign currency effects of $0.9 million. The increase
in IV Solution sales was due to expanded penetration of the Swiss market.
 
    Sales of Pharmaceutical's Oncology Products for 1997 declined by $1.1
million. The decline was attributed to lower sales of non-core oncology products
and negative foreign currency effects.
 
    Cost of goods sold increased from the prior year by approximately $0.2
million. Without the effect of year-to-year changes in the foreign exchange
rate, cost of goods sold would have increased by $1.1 million. Gross margin
decreased by $1.6 million to $1.0 million or 61.9% for the year ended December
31, 1997, compared to $2.6 million or 33.0% for the year ended December 31,
1996.
 
    Bioren's gross margin on IV Solutions as a percentage of IV Solution sales
was 23.6% in 1997 compared to 31.4% in 1996. Bioren's cost of sales decreased
$0.1 million, after taking into account exchange impacts of $0.7 million. The
primary reason for the decrease in gross margin was the effect of increased
costs for raw materials and fierce competition in the Swiss marketplace.
Exchange rate impacts on sales essentially offset the exchange rate impact on
cost of sales.
 
    Pharmaceuticals gross margin on Oncology Products as a percentage of
Oncology Products sales was (27.5%). Pharmaceuticals' cost of goods sold
increased $0.3 million, net of foreign exchange effects of $0.3 million. The
primary reason for the Pharmaceuticals increase is the absorption of costs
related to validation activities subsequent to May 1997, when the plant obtained
provisional approval to manufacture product from the IKS. In 1996, a portion of
these costs associated with completion of the production facilities were
capitalized.
 
    Total operating expenses increased by 74.6%, from $4.3 million in 1996 to
$7.5 million in 1997. Research and development expenses increased by $0.9
million as a result of the Company's continuing effort to develop its line of
oncological products and obtain required regulatory approvals to manufacture and
market those products. Selling, general and administrative expenses also
increased from 1996 to 1997. The $0.8 million increase primarily reflects an
increase in the number of employees and related expenses both in the U.S. and
Switzerland. Also, in 1997, approximately $2.1 million of expenses were
recognized to reacquire marketing rights previously assigned to Protyde under a
collaborative agreement, which was terminated during the year.
 
    Operating (loss), as a result of the foregoing, increased by $4.8 million,
from $1.7 million in 1996 to $6.5 million in 1997.
 
    Other income (net) amounted to a net expense of $.8 million for 1997 as
compared to income of $0.1 million for 1996. Interest expense amounted to $0.6
million for 1997, an increase of $.4 million over 1996, reflecting two
factors--an increase in the Company's debt during 1997 and less capitalized
interest during 1997. Other income increased $0.1 million from 1996 to 1997,
primarily as a result of gains on disposals of property, plant, and equipment,
including land sold by Bioren to a related party. Finally, the Company recorded
foreign currency transaction losses of $0.4 million during 1997 versus gains in
1996 of $0.1 million. The majority of this activity is related to 1997
inter-company funds transfers denominated in Swiss Francs.
 
    Income tax expense was zero for both 1997 and 1996, due to losses sustained
and loss carryovers from prior years.
 
    Net loss for 1997 was $7.4 million versus the 1996 loss of $1.6 million. The
corresponding loss per share was $1.82 in 1997 versus $0.51 in 1996. If the
effects of the Protyde transaction and the Cerbios-Pharma settlement were
omitted, the net losses would have been $5.3 million and $1.1 million for 1997
and 1996 respectively and the loss per share would have been $1.31 and $0.35 for
1997 and 1996, respectively.
 
    Bioren recorded net income of approximately $0.2 million in 1997, the same
amount as 1996.
 
                                       17
<PAGE>
    Pharmaceuticals recorded a net loss of $1.0 million in 1997 versus a net
loss of $0.7 million in 1996
 
LIQUIDITY AND CAPITAL RESOURCES
 
    As of December 31, 1998 and December 31, 1997, the Company had cash and cash
equivalents of $0.1 million and $0.6 million, respectively. The Company's
working capital at December 31, 1998 was a $3.1 million deficit and at December
31, 1997 was $2.5 million deficit. In addition to the decrease in cash, the
biggest impacts on working capital were the increase in inventories of $0.7
million and an increase in related party payables of $0.3 million. Accrued
expenses increased $0.2 million. Notes payable decreased by approximately $1.0
million.
 
    Net cash used in operating activities during 1998 was $4.6 million, down
from the previous year's cash provided of $5.9 million. The decrease was largely
a result of the $7.2 million net loss incurred during the year. However, this
was partially offset by approximately $2.0 million of depreciation and
amortization and $0.3 million for foreign exchange gains.
 
    Capital expenditures for 1998 were $1.5 million, a $0.6 million decrease
from the 1997 level. The lower expenditures reflect the fact that the Bigmar
Facility was completed at the end of May 1997 and most of the property, plant
and equipment related to this facility had already been acquired during 1997.
 
    In May 1998, the company, in consideration of a guarantee to obtain a $6.0
million line of credit from Citizens Bank in Saginaw, Michigan, delivered
warrants to Jericho--a related party, to purchase 1,000,000 shares of
convertible preferred stock at a price equal to $2.5625per share and having a
term of 10 years. The company borrowed up to approximately $5.7 million on the
line of credit before it was fully paid in October 1998. The Company
renegotiated the terms of the credit line in December 1998, and reduced the line
of credit to $0.5 million, which is subject to renegotiation in June 1999. In
August 1998, the Company received proceeds of $0.3 million from the issuance of
common stock to Banca del Gottardo. In October 1998, the Company received
proceeds of $6,000,000 from the issuance of common stock to Jericho. The
proceeds were used to repay debt and for working capital.
 
    In January and February 1999, the Company received commitments from
accredited investors to invest in the Company via private offerings. As of March
19, 1999, those commitments totaled over $1.9 million and the Company has
received proceeds of approximately $1.5 million.
 
    The Company has incurred, and will continue to incur, substantial
expenditures for research and development activities related to bringing its
products to the commercial market. The Company intends to devote significant
additional funds to product development, formulation, clinical testing, product
registration, and other activities required for regulatory review of generic
oncological products. The amount required to complete such activities depends
upon the outcome of regulatory reviews. The regulatory bodies may require more
testing than is currently planned by the Company. There can be no assurance that
the Company's generic oncological products will be approved for marketing by the
FDA or any foreign government agency or that any such products will be
successfully introduced or achieve market acceptance.
 
    The Company anticipates that additional capital funding together with cash
from operations will be required to sustain operations through March 2000.
However, there can be no assurance that events affecting the Company's
operations will not result in the Company depleting its funds before that time.
Management is currently discussing additional financing with a number of
financial institutions and investors, but there are no assurances that the
Company will be able to obtain additional financing or that such financing, if
available, will be on acceptable terms.
 
YEAR 2000 COMPLIANCE
 
    Many computer systems currently record years in a two-digit format. Such
systems, if not modified, will be unable to recognize and properly process
information with dates beyond the year 1999. The potential problems arising out
of this inability are commonly referred to as the "Year 2000 Issue" and will
affect virtually all companies, government agencies and other organizations to
some degree.
 
                                       18
<PAGE>
INTERNAL SYSTEMS
 
    The efficient operation of the Company's business is dependent in part on
its computer software programs and operating systems (collectively, "Programs
and Systems"). These Programs and Systems are used in several areas of the
Company's business, including research and development, purchasing, inventory
management, sales, shipping, and financial reporting, as well as in various
administrative functions. The Company has performed an assessment of its
computer systems to determine whether or not they were in compliance with Year
2000 requirements. As of December 31, 1998, Bioren and Pharmaceuticals Programs
and Systems, including manufacturing and operations, were found to be in
compliance with such requirements. The Company's Headquarters Programs and
Systems include an accounting package and a document management system. Although
these Programs and Systems do not yet comply with Year 2000 requirements, an
assessment has been made and it has been determined that, based on present
information, the Company believes that these Programs and Systems will be
upgraded by June 30, 1999, and the costs to bring them into compliance will be
less than $10,000. However, there can be no assurance that the required
expenditures will not exceed that amount.
 
READINESS OF THIRD PARTIES
 
    The Company is also working with its processing banks, network providers and
vendors to ensure their systems are Year 2000 compliant. All of these costs will
be borne by the processors, network and software companies and vendors.
Currently the Company's processing banks and vendors are in the process of
completing their Year 2000 compliance programs. However, there can be no
assurance that the systems of other companies on which the Company relies will
be timely converted or that any such failure to convert by another company would
not have an adverse effect on the Company's Programs and Systems.
 
RISKS ASSOCIATED WITH THE YEAR 2000
 
    The Company is not aware, at this time, of any Year 2000 non-compliance that
will not be fixed by the Year 2000. However, some risks that the Company faces
include: the failure of internal information systems, defects in its work
environment, a slow down in its customers' ability to make payments, and the
availability of raw materials for manufacturing.
 
CONTINGENCY PLANS
 
    The Company is in the process of developing contingency plans to address a
worst case year 2000 scenario. This contingency plan is expected to be completed
by May 31, 1999. Furthermore, no assurance can be given that any or all of the
Company's systems are or will be Year 2000 compliant, or that the ultimate costs
required to address the Year 2000 issue or the impact of any failure to achieve
substantial Year 2000 compliance will not have a material adverse effect on the
Company's financial condition.
 
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 
    In June 1998, Statement of Financial Accounting Standards No. 133 ("SFAS No.
133"), "Accounting for Derivative Instruments and Hedging Activities" was
issued. This statement revises the accounting for derivative financial
instruments. The Company is currently analyzing the impacts of this statement
which is required to be adopted in the year ending December 31, 2000, and does
not expect this statement to have a material impact on the Company's financial
position nor results of operations.
 
    In April 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-5 ("SOP 98-5"), "Reporting on the
Costs of Start-up Activities", which revises the accounting for start-up costs
and will require the expensing of certain costs which the Company has
historically capitalized. The Company does not expect the adoption of this
statement in the year ending December 31, 2000 to have a material impact on the
Company's financial position or results of operations.
 
                                       19
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
    In the normal course of business, operations of the Company are exposed to
fluctuations in currency values. These fluctuations can vary the costs of
financing, investing, and operating activities. The Company does not have any
programs in place to control these risks.
 
    The Company's foreign currency risk exposure results from fluctuating
currency exchange rates, primarily the fluctuation of the U.S. dollar against
the Swiss franc ("Sfr"). The Company faces transactional currency exposures that
arise when its foreign subsidiaries (or the Company itself) enter into
transactions, generally on an intercompany basis, denominated in currencies
other than their local currency. The Company also faces currency exposure that
arises from translating the results of its Swiss operations to the U.S. dollar
at exchange rates that have fluctuated from the beginning of the period. The
Company does not have any programs in place to control these risks. However,
historically the exchange rate between the U.S. dollar and the Swiss franc has
not fluctuated significantly.
 
    The table below provides information about the Company's financial
instruments by functional currency and presents such information in U.S. dollar
equivalents:
 
<TABLE>
<CAPTION>
                                                                     EXPECTED MATURITY DATE
                                                -----------------------------------------------------------------
                                                  1999       2000       2001       2002       2003     THEREAFTER
                                                ---------  ---------  ---------  ---------  ---------  ----------
<S>                                             <C>        <C>        <C>        <C>        <C>        <C>
(US$ Equivalent)
except average interest rate
  Liabilities
  Long-Term Debt:
    Fixed Rate (Sfr)..........................    368,012    360,934    360,934    360,934    360,934   3,991,509
    Average interest rate.....................       5.4%       5.5%       5.5%       6.1%       5.6%        6.0%
    Variable Rate (Sfr).......................    920,028         --         --         --         --   2,047,955
    Average interest rate.....................       4.5%         --         --         --         --        5.0%
</TABLE>
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
    The Consolidated Financial Statements of the Company, together with the
reports thereon of KPMG LLP ("KPMG"), dated March 5, 1999, are set forth on
pages F-1 through F-24 hereof (see Item 14 of this Annual Report for the Index).
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURE
 
    During 1997, the Company's Board of Directors approved the selection of
KPMG, a major international accounting firm, to report on the three-year period
ended December 31, 1997. KPMG's size, international experience, and familiarity
with the pharmaceutical industry were all important factors in this decision.
There were no disagreements with KPMG regarding accounting and financial
disclosure matters.
 
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
    The information required by this Item is included in the Company's Proxy
Statement (the "Proxy Statement") relating to the Company's 1999 Annual Meeting
of Stockholders to be held in May 1999, and is incorporated herein by reference.
The Company anticipates filing the Proxy Statement with the Securities and
Exchange Commission in April 1999.
 
ITEM 11. EXECUTIVE COMPENSATION
 
    The information required by this Item is included in the Proxy Statement and
is incorporated herein by reference.
 
                                       20
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL, OWNERS AND MANAGEMENT
 
    The information required by this Item is included in the Proxy Statement and
is incorporated herein by reference.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
    The information required by this Item is included in the Proxy Statement and
is incorporated herein by reference.
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 
(a) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:
 
(1) Financial Statements
 
    - Independent Auditors' Report
 
    - Consolidated Balance Sheets
 
       - December 31, 1998
 
       - December 31, 1997
 
    - Consolidated Statements of Operations
 
       - Year ended December 31, 1998
 
       - Year ended December 31, 1997
 
       - Year ended December 31, 1996
 
    - Consolidated Statements of Stockholders' Equity
 
       - For the years ended December 31, 1998
 
       - For the years ended December 31, 1997
 
       - For the years ended December 31, 1996
 
    - Consolidated Statements of Cash Flows
 
       - Year ended December 31, 1998
 
       - Year ended December 31, 1997
 
       - Year ended December 31, 1996
 
    - Consolidated Statements of Comprehensive Income (Loss)
 
       - Year ended December 31, 1998
 
       - Year ended December 31, 1997
 
       - Year ended December 31, 1996
 
    - Notes to Consolidated Financial Statements
 
(2) Financial Statement Schedules
 
    See Exhibit 99(a)--Schedule II--Valuation and Qualifying Accounts.
 
    All other schedules are omitted because of the absence of the conditions
under which they are required or because the required information is included in
financial statements or the notes thereto.
 
                                       21
<PAGE>
(3) Exhibits:
 
<TABLE>
<CAPTION>
 EXHIBIT
 NUMBER                                   DESCRIPTION OF EXHIBIT                                  FILING STATUS
---------  ------------------------------------------------------------------------------------  ----------------
<C>        <S>                                                                                   <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
 
   3.2     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 Bigmar          a
           Pharmaceuticals SA and AB Cernelle
 
  10.11    Technical Services Agreement, dated November 5, 1995, between Bigmar Pharmaceuticals         a
           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, between          a
           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.
</TABLE>
 
                                       22
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT
 NUMBER                                   DESCRIPTION OF EXHIBIT                                  FILING STATUS
---------  ------------------------------------------------------------------------------------  ----------------
<C>        <S>                                                                                   <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
</TABLE>
 
                                       23
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT
 NUMBER                                   DESCRIPTION OF EXHIBIT                                  FILING STATUS
---------  ------------------------------------------------------------------------------------  ----------------
<C>        <S>                                                                                   <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    Certificate of Amendment of Amended and Restated Certificate of Incorporation of
           Bigmar, Inc. Filed herewith
 
  10.59    Possible NASDAQ Delisting                                                                    k
 
  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
 
  22.01    Matters submitted to a vote of security holders of the Registrant                            d
 
  23.01    Consent of KPMG LLP                                                                    Filed herewith
 
  27.00    Financial Data Schedule                                                                Filed herewith
 
  99(a)    Schedule II--Valuation and Qualifying Accounts                                         Filed herewith
</TABLE>
 
------------------------
 
*   Includes compensatory plan or arrangements required to be filed pursuant to
    Item 14c of this Form 10-K.
 
(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, file
    number 001-14416.
 
(c) Previously filed with reports on Form 10-K 1996, file number 001-14416.
 
(d) Previously filed with the Proxy Statement July 28, 1997, file number
    001-14416.
 
(e) Previously filed with reports on Form 10-Q 1997, file number 001-14416.
 
(f) Incorporated by reference to the Company's Form 8-K dated August 29, 1997,
    file number 001-14416.
 
(g) Incorporated by reference to the Company's Form 8-K dated August 22, 1997,
    file number 001-14416.
 
                                       24
<PAGE>
(h) Incorporated by reference to the Company's Form 8-K/A Amendment No. 1, dated
    September 29, 1997, file number 001-14416.
 
(i) Previously filed with reports on Form 10-K 1997, file number 001-14416.
 
(j) Incorporated by reference to the Company's Form 8-K dated May 28, 1998, file
    number 001-14416.
 
(k) Incorporated by reference to the Company's Form 8-K dated December 10, 1998,
    file number 001-14416.
 
(b) REPORTS ON FORM 8-K.
 
    a.  10.59 Possible NASDAQ delisting.
 
(c) EXHIBITS
 
    The exhibits to this report begin on page 26.
 
(d) FINANCIAL STATEMENT SCHEDULES
 
    See Exhibit 99(a)--Schedule II--Valuation and Qualifying Accounts
 
NOTE:  ALL OTHER SCHEDULES CALLED FOR UNDER REGULATION S-X NOT INCLUDED HEREIN
HAVE BEEN OMITTED BECAUSE THEY ARE NOT APPLICABLE, THE REQUIRED INFORMATION IS
NOT MATERIAL OR THE REQUIRED INFORMATION IS INCLUDED IN THE FINANCIAL STATEMENTS
OR NOTES THERETO.
 
                                       25
<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.
 
<TABLE>
<S>                             <C>  <C>
Date: March 30, 1999            BIGMAR, INC.
 
                                By:            /s/ JOHN G. TRAMONTANA
                                     -----------------------------------------
                                                 John G. Tramontana
                                       CHAIRMAN OF THE BOARD OF DIRECTORS AND
                                              CHIEF EXECUTIVE OFFICER
                                           (PRINCIPLE EXECUTIVE OFFICER)
</TABLE>
 
    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
------------------------------  --------------------------  -------------------
 
<C>                             <S>                         <C>
                                Chairman of the Board of
    /s/ JOHN G. TRAMONTANA        Directors and Chief
------------------------------    Executive Officer           March 30, 1999
      John G. Tramontana          (Principle Executive
                                  Officer)
 
     /s/ PHILIPPE ROHRER        Treasurer, Secretary, and
------------------------------    Director (Principal         March 30, 1999
       Philippe Rohrer            Financial Officer)
 
        /s/ DINO MENON
------------------------------  Director                      March 30, 1999
          Dino Menon
 
     /s/ MASSIMO PEDRANI
------------------------------  Director                      March 30, 1999
       Massimo Pedrani
 
      /s/ BERNARD KRAMER
------------------------------  Director                      March 30, 1999
        Bernard Kramer
 
      /s/ JOHN R. MORRIS
------------------------------  Director                      March 30, 1999
        John R. Morris
</TABLE>
 
                                       26
<PAGE>
                         BIGMAR, INC. AND SUBSIDIARIES
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
<TABLE>
<S>                                                                                     <C>
Independent Auditors' Report..........................................................        F-2
 
Consolidated Balance Sheets...........................................................        F-3
  December 31, 1998
  December 31, 1997
 
Consolidated Statements of Operations.................................................        F-4
  Year ended December 31, 1998
  Year ended December 31, 1997
  Year ended December 31, 1996
 
Consolidated Statements of Stockholders' Equity.......................................        F-5
  Year ended December 31, 1998
  Year ended December 31, 1997
  Year ended December 31, 1996
 
Consolidated Statements of Cash Flows.................................................        F-6
  Year ended December 31, 1998
  Year ended December 31, 1997
  Year ended December 31, 1996
 
Consolidated Statements of Comprehensive Income (Loss)................................        F-7
  Year ended December 31, 1998
  Year ended December 31, 1997
  Year ended December 31, 1996
 
Notes to Consolidated Financial Statements............................................        F-8
</TABLE>
 
                                      F-1
<PAGE>
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors
Bigmar, Inc.:
 
    We have audited the accompanying consolidated financial statements of
Bigmar, Inc. and subsidiaries as listed in the accompanying index. In connection
with our audits of the consolidated financial statements, we also have audited
the financial statement schedule of valuation and qualifying accounts. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule 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 financial position of Bigmar, Inc.
and subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1998, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
 
    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 1999. 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 5, 1999
 
                                      F-2
<PAGE>
                         BIGMAR, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
 
                           DECEMBER 31, 1998 AND 1997
 
<TABLE>
<CAPTION>
                                                                                           1998           1997
                                                                                       -------------  ------------
<S>                                                                                    <C>            <C>
                                                      ASSETS
 
Current assets:
  Cash and cash equivalents..........................................................  $     140,445       643,232
  Accounts receivable................................................................        927,200       847,899
  Inventories (Note 2)...............................................................      1,611,588       890,249
  Prepaid expenses and other current assets..........................................        244,320       432,234
                                                                                       -------------  ------------
    Total current assets.............................................................      2,923,553     2,813,614
Property, plant and equipment, net (Note 3)..........................................     17,350,004    17,164,158
Intangible and other assets, net.....................................................        435,625       539,318
                                                                                       -------------  ------------
    Total............................................................................  $  20,709,182    20,517,090
                                                                                       -------------  ------------
                                                                                       -------------  ------------
 
                                       LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
  Accounts payable...................................................................      1,761,903     1,766,992
  Notes payable (Note 4).............................................................      1,769,285     2,318,644
  Current portion of long-term debt (Note 5).........................................      1,288,040       581,674
  Due to related parties (Note 13)...................................................        321,149            --
  Accrued expenses and other current liabilities.....................................        848,394       630,713
                                                                                       -------------  ------------
    Total current liabilities........................................................      5,988,771     5,298,023
Long-term debt, excluding current portion (Note 5)...................................      9,487,445    10,090,467
                                                                                       -------------  ------------
    Total liabilities................................................................     15,476,216    15,388,490
                                                                                       -------------  ------------
Stockholders' equity (Notes 8, 10 and 11):
  Preferred stock ($.001 par value; 5,000,000 shares authorized; none issued)........             --            --
  Common stock ($.001 par value; 20,000,000 shares authorized; 8,027,308 and
    4,185,000 shares issued and outstanding at December 31, 1998 and 1997,
    respectively)....................................................................          8,027         4,185
  Additional paid-in capital.........................................................     22,317,324    15,063,166
  Retained earnings (deficit)........................................................    (16,234,332)   (9,012,630)
  Cumulative translation adjustment..................................................       (858,053)     (926,121)
                                                                                       -------------  ------------
    Total stockholders' equity.......................................................      5,232,966     5,128,600
                                                                                       -------------  ------------
Commitments (Note 14)
    Total............................................................................  $  20,709,182    20,517,090
                                                                                       -------------  ------------
                                                                                       -------------  ------------
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                      F-3
<PAGE>
                         BIGMAR, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
 
<TABLE>
<CAPTION>
                                                                           1998           1997           1996
                                                                       -------------  -------------  -------------
<S>                                                                    <C>            <C>            <C>
Net sales (Note 12)..................................................  $   6,377,822      6,483,444      7,931,149
Cost of goods sold...................................................      4,812,290      5,485,648      5,312,193
                                                                       -------------  -------------  -------------
  Gross margin.......................................................      1,565,532        997,796      2,618,956
                                                                       -------------  -------------  -------------
Operating expenses:
  Research and development...........................................      2,741,809      1,690,053        801,560
  Selling, general and administrative................................      4,377,842      3,800,627      3,006,546
  Re-acquisition of U.S. marketing rights (Note 9)...................             --      2,050,000             --
  Settlement and write-off licensing fees (Note 13)..................             --             --        511,777
                                                                       -------------  -------------  -------------
      Total operating expenses.......................................      7,119,651      7,540,680      4,319,883
                                                                       -------------  -------------  -------------
Operating loss.......................................................     (5,554,119)    (6,542,884)    (1,700,927)
                                                                       -------------  -------------  -------------
Other income (expense):
    Other, net.......................................................         15,440        127,200         28,666
    Interest income..................................................          4,871         69,984        152,705
    Interest expense.................................................     (1,062,271)      (616,453)      (206,469)
    Issuance of preferred stock warrants for loan guarantee..........       (958,000)            --             --
    Gain (loss) on foreign currency transactions.....................        332,377       (415,871)        86,481
                                                                       -------------  -------------  -------------
      Other income (expense), net....................................     (1,667,583)      (835,140)        61,383
                                                                       -------------  -------------  -------------
Net loss.............................................................  $  (7,221,702)    (7,378,024)    (1,639,544)
                                                                       -------------  -------------  -------------
                                                                       -------------  -------------  -------------
Basic and diluted loss per share.....................................  $       (1.46)         (1.82)         (0.51)
                                                                       -------------  -------------  -------------
                                                                       -------------  -------------  -------------
Weighted-average shares outstanding..................................      4,944,895      4,052,945      3,235,137
                                                                       -------------  -------------  -------------
                                                                       -------------  -------------  -------------
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                      F-4
<PAGE>
                         BIGMAR, INC. AND SUBSIDIARIES
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
 
<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, 1995..........   2,375,000  $   2,375     3,900,875          4,938       3,216      3,911,404
  Issuance of common stock in initial
    public offering...................   1,610,000      1,610     9,432,491                                 9,434,101
  Net loss for the year ended December
    31, 1996..........................                                          (1,639,544)                (1,639,544)
  Translation adjustment..............                                                        (810,108)      (810,108)
                                        ----------  ---------  ------------  -------------  -----------  ------------
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 9 and 10)..........                              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 10).........                              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
                                        ----------  ---------  ------------  -------------  -----------  ------------
                                        ----------  ---------  ------------  -------------  -----------  ------------
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                      F-5
<PAGE>
                         BIGMAR, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
 
<TABLE>
<CAPTION>
                                                                             1998          1997          1996
                                                                         -------------  -----------  ------------
<S>                                                                      <C>            <C>          <C>
Cash flows from operating activities:
  Net loss.............................................................  $  (7,221,702)  (7,378,024)   (1,639,544)
  Adjustments to reconcile net loss to net cash provided by (used in)
    operating activities:
      Depreciation and amortization....................................      2,014,410    1,031,688       273,797
      Issuance of warrants.............................................        958,000      800,000            --
      Unrealized foreign exchange (gains) losses.......................       (333,068)     416,670            --
      (Gain) on sale of property and equipment.........................             --      (26,235)           --
      Changes in operating assets and liabilities:
        (Increase) decrease in accounts receivable.....................        (48,780)    (140,084)      539,308
        (Increase) in inventories......................................       (669,309)     (19,107)      (47,098)
        (Increase) decrease in prepaid expenses and other current
          assets.......................................................        192,252        3,642      (241,607)
        Increase (decrease) in due to related parties..................        319,567     (906,603)      960,102
        Decrease in other assets.......................................                                    24,944
        Increase (decrease) in accounts payable........................        (61,382)     164,064       335,405
        Increase in accrued expenses and other current liabilities.....        200,808      100,797       211,318
                                                                         -------------  -----------  ------------
            Net cash provided by (used in) operating activities........     (4,649,204)  (5,953,192)      416,625
                                                                         -------------  -----------  ------------
Cash flows from investing activities:
  Purchase of property, plant and equipment............................     (1,537,205)  (2,175,511)   (7,983,449)
  Proceeds from sale of property and equipment.........................             --       78,113            --
  Purchase of investments..............................................             --           --       (34,773)
                                                                         -------------  -----------  ------------
            Net cash used in investing activities......................     (1,537,205)  (2,097,398)   (8,018,222)
                                                                         -------------  -----------  ------------
Cash flows from financing activities:
  Proceeds from short-term borrowings..................................      5,707,088     3,065986     1,764,905
  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................................     (5,649,272)  (2,648,933)   (1,867,323)
  Repayment of related party loan......................................             --           --    (1,738,671)
  Long-term borrowings.................................................       (785,849)   4,000,000     2,219,307
  Debt and equity issuance costs.......................................             --     (330,000)           --
  Advances (repayments) of reimbursable expenses.......................             --     (750,000)      750,000
  Proceeds from issuance of common stock...............................      6,300,000      930,000     9,470,160
                                                                         -------------  -----------  ------------
            Net cash provided by financing activities..................      5,571,967    4,267,053    10,598,378
                                                                         -------------  -----------  ------------
Effect of exchange rate changes on cash................................        111,655       63,831       (59,446)
                                                                         -------------  -----------  ------------
Net increase (decrease) in cash and cash equivalents...................       (502,787)  (3,719,706)    2,937,335
Cash and cash equivalents--at beginning of year........................        643,232    4,362,938     1,425,603
                                                                         -------------  -----------  ------------
Cash and cash equivalents--at end of year..............................  $     140,445      643,232     4,362,938
                                                                         -------------  -----------  ------------
                                                                         -------------  -----------  ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the period for:
    Interest (including amounts capitalized)...........................  $     964,216      583,855       698,125
                                                                         -------------  -----------  ------------
                                                                         -------------  -----------  ------------
</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, 1998, 1997 AND 1996
 
<TABLE>
<CAPTION>
                                                                             1998          1997         1996
                                                                         -------------  -----------  -----------
<S>                                                                      <C>            <C>          <C>
Net loss...............................................................  $  (7,221,702)  (7,378,024)  (1,639,544)
Other comprehensive income, net of tax:
  Foreign currency translation adjustments, net of income taxes of $0
    in 1998, 1997, and 1996............................................         68,068     (119,229)    (810,108)
                                                                         -------------  -----------  -----------
Comprehensive loss (Note 1)............................................  $  (7,153,634)  (7,497,253)  (2,449,652)
                                                                         -------------  -----------  -----------
                                                                         -------------  -----------  -----------
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                      F-7
<PAGE>
                         BIGMAR, INC. AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
(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. Accordingly, the financial statements of the Company have been restated
to include the results of operations of Pharmaceuticals for all periods
presented and the results of Bioren from July 1, 1995, the date that
Pharmaceuticals and certain stockholders acquired their interests.
 
    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 April 1996 the stockholders of the Company contributed 99% of their
shares to the Company. Also in April 1996 the Company restated and amended its
certificate of incorporation, increasing its authorized shares of common stock
from 10,000,000 to 15,000,000, authorizing 5,000,000 shares of preferred stock,
and effecting a 2.105263 for one reverse stock split. These transactions are
reflected retroactively in the accompanying financial statements. In June 1996
the Company closed on an initial public offering of its common stock.
 
    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 obtain a $6.0
million line of credit from a commercial institution, delivered warrants to
Jericho II, L.L.C. ("Jericho") 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 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 convertible. 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 as expense when the guarantee was
issued.
 
                                      F-8
<PAGE>
                         BIGMAR, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)
    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
Company filed a Form S-3 with the United States Securities and Exchange
Commission ("SEC") which was declared effective on November 4, 1998, pursuant to
its request to the resale of said stock. 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.
 
    In February 1999, the Company issued 236,666 shares of common stock to
accredited investors, including 166,666 shares to GRQ, L.L.C. for prices ranging
from $2.00 to $3.00 per share via private placement offerings. Proceeds from the
sale of shares totaled $700,000.
 
    In March 1999, the Company issued 250,000 shares of common stock to
accredited investors for $3.00 per share via private placements offerings.
Proceeds from the sale of shares totaled $750,000.
 
(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 financial statements have been prepared in accordance with
United States Generally Accepted Accounting Principles ("US GAAP"). Certain
amounts in the accompanying financial statements have been restated to conform
to the December 31, 1998 presentation.
 
    The accompanying 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 recently received 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 $1,450,000 in proceeds from the sale of shares of
common stock. In addition, the Company anticipates raising additional funds
during 1999 through other private stock offerings and through additional bank
borrowings. However, there can be no assurance that the Company will be
successful in these efforts.
 
(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
 
                                      F-9
<PAGE>
                         BIGMAR, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)
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 $332,377, ($415,871), and $86,481 on intercompany
transactions in 1998, 1997, and 1996, respectively.
 
(f) CASH EQUIVALENTS
 
    All highly liquid investments with original maturities of three months or
less are considered to be cash equivalents. Cash equivalents of $140 and $37,000
at December 31, 1998 and 1997, respectively, consist of various interest-bearing
securities.
 
(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 organization costs,
which are amortized over 5 years, and 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,
1998.
 
                                      F-10
<PAGE>
                         BIGMAR, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
(1) 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, 1998.
 
(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 no major changes have occurred in the applicable interest rates.
 
(l) COMPREHENSIVE INCOME
 
    On January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, REPORTING COMPREHENSIVE INCOME ("SFAS 130"). SFAS 130
establishes standards for reporting and presentation of comprehensive income and
its components in a full set of financial statements. 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.
Prior year financial statements have been reclassified to conform to SFAS 130
requirements.
 
(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 provide 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 after giving retroactive effect to the
reorganization, the capital contribution and the reverse stock split, all
described in Note 1(a). 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, 1998, 1997 AND 1996
 
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)
(p) DERIVATIVE FINANCIAL INSTRUMENTS
 
    The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. They are used to manage
well-defined interest rate risks. An interest rate cap agreement is 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
is amortized to interest expense over the terms of the cap. The unamortized
premium is included in other assets in the consolidated balance sheet. Any
amounts receivable under the cap agreement are recorded as a reduction of
interest expense. As of December 31, 1998, the Company has no derivative
financial instruments.
 
(2) INVENTORIES
 
    The Company's inventory is primarily related to IV Solutions and Oncology
Products. Components of inventory are as follows:
 
<TABLE>
<CAPTION>
                                                                            DECEMBER 31,
                                                                       -----------------------
<S>                                                                    <C>           <C>
                                                                           1998        1997
                                                                       ------------  ---------
Raw materials........................................................  $    710,517    572,276
Finished goods.......................................................       901,071    317,973
                                                                       ------------  ---------
  Total..............................................................  $  1,611,588    890,249
                                                                       ------------  ---------
                                                                       ------------  ---------
</TABLE>
 
(3) PROPERTY, PLANT AND EQUIPMENT, NET
 
    The components of property, plant and equipment, net are as follows:
 
<TABLE>
<CAPTION>
                                                          DECEMBER 31,
                                                   ---------------------------  ESTIMATED LIFE
                                                       1998           1997         IN YEARS
                                                   -------------  ------------  ---------------
<S>                                                <C>            <C>           <C>
Land.............................................  $   1,352,838     1,058,687            --
Building and building improvements...............     12,733,957    11,616,058         10-40
Machinery........................................      4,686,009     4,365,736          3-10
Equipment........................................      1,828,935     1,391,193          3-10
                                                   -------------  ------------
                                                      20,601,739    18,431,674
Less accumulated depreciation....................      3,251,735     1,267,516
                                                   -------------  ------------
Total............................................  $  17,350,004    17,164,158
                                                   -------------  ------------
                                                   -------------  ------------
</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, 1998, 1997 AND 1996
 
(4) NOTES PAYABLE
 
    Notes payable consists of the following:
 
<TABLE>
<CAPTION>
                                                                           DECEMBER 31,
                                                                     ------------------------
<S>                                                                  <C>           <C>
                                                                         1998         1997
                                                                     ------------  ----------
U.S. Bank line of credit...........................................  $         --     950,000
Short-term bank loan...............................................     1,415,428   1,368,644
                                                                     ------------  ----------
  Total............................................................  $  1,769,285   2,318,644
                                                                     ------------  ----------
                                                                     ------------  ----------
</TABLE>
 
    Under the Swiss Bank line of credit, Bioren may borrow up to Sfr 500,000
($353,857 at December 31, 1998) with quarterly interest payments due based on 5%
fixed interest plus 1/4% commission paid quarterly on outstanding balances
resulting in an annualized rate of 6%.
 
    Under the U.S. Bank line of credit, the Company may borrow up to $500,000,
with monthly interest payments due based upon the prime rate (7.5% at December
31, 1998). The credit line, which is subject to re-negotiation on June 30, 1999,
is secured by a guaranty of Jericho.
 
    The short-term bank loan, issued to Pharmaceuticals, is a Sfr 2,000,000
($1,415,428 at December 31, 1998) unsecured line of credit requiring quarterly
interest payments, calculated as follows: $707,714 principal with interest rate
fixed at 6.75%, and $707,714 principal with interest rate variable (6.25% at
December 31, 1998 and 5.75% at December 31, 1997). The note has no specific
principal repayment terms.
 
    Substantially all of the Company's assets are pledged as collateral under
its various debt agreements.
 
                                      F-13
<PAGE>
                         BIGMAR, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
(5) LONG-TERM DEBT
 
    The Company's long-term debt consists of the following:
 
<TABLE>
<CAPTION>
                                                                                             DECEMBER 31,
                                                                                     ----------------------------
                                                                                         1998           1997
                                                                                     -------------  -------------
<S>                                                                                  <C>            <C>
Bank loan collateralized by mortgage on the Bioren building; interest at 5% per
  annum through May 1999, adjustable thereafter; subject to certain restrictive
  covenants and subject to renegotiation by the bank after May 1999................  $   2,047,955      2,052,967
 
Installment loan from seller of Bioren collateralized by a second mortgage on the
  Bioren building, interest rate based on market rate on industrial mortgages; rate
  at December 31, 1998 and 1997 was 4.5% payable in full during 1999...............        920,028        958,051
 
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 3.19%.....................................................      1,415,428      1,368,644
 
Bank loan collateralized by mortgage on the Pharmaceuticals building and equipment,
  subject to certain restrictive covenants; principal payable in installments of
  $353,857 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...................................................................      2,123,142      2,292,479
 
Bank loan collateralized by mortgage on the Pharmaceuticals warehouse building,
  payable in installments of $7,077 per year, for thirty eight years, beginning
  December 31, 1998 at an interest rate of 6.75% per year..........................        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............................................................      4,000,000      4,000,000
                                                                                     -------------  -------------
    Total long-term debt...........................................................     10,775,485     10,672,141
    Less current portion...........................................................      1,288,040        581,674
                                                                                     -------------  -------------
    Long-term, excluding current portion...........................................  $   9,487,445  $  10,090,467
                                                                                     -------------  -------------
                                                                                     -------------  -------------
</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-14
<PAGE>
                         BIGMAR, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
(5) LONG-TERM DEBT (CONTINUED)
    Future maturities of long-term debt are as follows:
 
<TABLE>
<CAPTION>
                                                                                   TOTAL
                                                                                 LONG-TERM
YEAR ENDED DECEMBER 31:                PHARMACEUTICALS    BIOREN     COMPANY        DEBT
-------------------------------------  ---------------  ----------  ----------  ------------
<S>                                    <C>              <C>         <C>         <C>
1999.................................   $     368,012      920,028          --     1,288,040
2000.................................         360,934           --          --       360,934
2001.................................         360,934           --          --       360,934
2002.................................         360,934           --   4,000,000     4,360,934
2003.................................         360,934           --          --       360,934
Thereafter...........................       1,995,754    2,047,955          --     4,043,709
                                       ---------------  ----------  ----------  ------------
                                        $   3,807,502    2,967,983   4,000,000    10,775,485
                                       ---------------  ----------  ----------  ------------
                                       ---------------  ----------  ----------  ------------
</TABLE>
 
    Substantially all of the Company's assets are pledged as collateral under
its various debt agreements.
 
(6) RESEARCH AND DEVELOPMENT
 
    The Company records research and development ("R&D") expense when incurred.
R&D expense was $2,741,809, $1,690,053, and $801,560 in 1998, 1997, and 1996
respectively.
 
(7) INCOME TAXES
 
    The sources of income (loss) before income taxes is as follows:
 
<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31,
                                                     ---------------------------------------
<S>                                                  <C>            <C>          <C>
                                                         1998          1997         1996
                                                     -------------  -----------  -----------
  Source of Loss
  United States....................................  $  (6,086,322)  (6,568,342)  (2,524,547)
  Switzerland......................................     (1,135,380)    (809,682)     885,003
                                                     -------------  -----------  -----------
                                                     $  (7,221,702)  (7,378,024)  (1,639,544)
                                                     -------------  -----------  -----------
                                                     -------------  -----------  -----------
</TABLE>
 
                                      F-15
<PAGE>
                         BIGMAR, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
(7) INCOME TAXES (CONTINUED)
    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>
                                                                              1998          1997         1996
                                                                          -------------  -----------  ----------
<S>                                                                       <C>            <C>          <C>
Computed income taxes benefit at 34% rate...............................  $  (2,455,385)  (2,508,534)   (557,445)
Impact of difference between Swiss effective rate and U.S. effective tax
  rate..................................................................         45,416       42,536    (141,578)
Increase in valuation allowance on deferred tax assets..................      2,075,595    1,887,301   1,132,073
Non-taxable debt forgiveness income in Switzerland......................             --           --    (315,000)
Non-deductible stock warrant expense....................................        325,720      272,000          --
Non-deductible foreign exchange (gain) loss.............................       (113,243)     137,977      22,499
Other...................................................................        121,897      168,720    (140,549)
                                                                          -------------  -----------  ----------
                                                                          $          --           --          --
                                                                          -------------  -----------  ----------
                                                                          -------------  -----------  ----------
</TABLE>
 
    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 1998 and 1997 (21% for Pharmaceuticals in 1996).
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,
                                                                  ----------------------------
                                                                      1998           1997
                                                                  -------------  -------------
<S>                                                               <C>            <C>
Deferred tax assets:
  Benefit of net operating loss carryforwards:
    United States...............................................  $   4,019,507  $   2,150,487
    Switzerland.................................................      2,192,863      2,292,558
    Loss on forgiveness of debt due from Swiss subsidiary.......        510,000        510,000
    Intangible and other assets.................................        278,820        153,877
    Accrued expenses and other current liabilities..............         99,025         42,647
                                                                  -------------  -------------
      Total deferred tax assets.................................      7,100,215      5,149,569
Valuation allowance.............................................     (7,100,215)    (5,024,620)
                                                                  -------------  -------------
      Net deferred tax assets...................................             --        124,949
Deferred tax liability:
    Capitalized interest........................................             --       (124,949)
                                                                  -------------  -------------
      Net deferred tax liability................................  $          --             --
                                                                  -------------  -------------
                                                                  -------------  -------------
</TABLE>
 
                                      F-16
<PAGE>
                         BIGMAR, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
(7) INCOME TAXES (CONTINUED)
    Bioren and Pharmaceuticals have net operating loss carryforwards of
approximately $7,119,000 and $191,000, respectively, expiring through December
31, 2003. Bigmar, Inc. has net operating loss carryforwards of approximately
$11,834,000 expiring through December 31, 2019. The net change in the total
valuation allowance for the years ended December 31, 1998, 1997, and 1996 was an
increase of $2,076,000, $1,887,000 and $1,132,000, 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.
 
(8) STOCK OPTIONS
 
    In 1996, the Company adopted an option plan (the 1996 Plan) providing for
the grant of incentive stock options and nonqualified stock options to
directors, officers, employees, agents and consultants of the Company. The plan
provided for the grant of options to purchase up to 300,000 shares of the
Company's stock, with exercise terms not to exceed ten years. 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.
 
    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 options to purchase up to 600,000 shares of the Company's stock (the 1997
Plan), including the 300,000 shares originally provided for under the 1996 Plan.
All options granted under the 1996 Plan have been reissued under the 1997 Plan
and the 1996 Plan has been terminated. Options originally granted during 1996
carry the same provisions as under the 1996 Plan, except the exercise price has
been lowered from a weighted-average exercise price of $8.96 at August 20, 1996
to $5.11 at November 4, 1997.
 
    165,000 options granted during 1997 vested in 1998. The total number of
vested options at December 31, 1998, is 415,000.
 
    At December 31, 1998, options for 485,000 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.
 
                                      F-17
<PAGE>
                         BIGMAR, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
(8) STOCK OPTIONS (CONTINUED)
 
    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 been increased to the pro forma amounts indicated
below:
 
<TABLE>
<CAPTION>
                                                      1998           1997           1996
                                                  -------------  -------------  -------------
<S>               <C>                             <C>            <C>            <C>
Net Loss          As reported...................  $  (7,221,702) $  (7,378,024) $  (1,639,544)
                  Pro forma.....................  $  (7,807,202) $  (8,064,273) $  (2,766,000)
Loss per share    As reported...................  $       (1.46) $       (1.82) $       (0.51)
                  Pro forma.....................  $       (1.58) $       (1.99) $       (0.85)
</TABLE>
 
    The 1997 pro forma amounts include the effect of terminating the 1996 Plan
and reissuing the options granted during 1996 under the 1997 Plan, as previously
described.
 
    Stock option activity during the periods indicated is as follows:
 
<TABLE>
<CAPTION>
                                                                   NUMBER OF   WEIGHTED-AVERAGE
                                                                    SHARES      EXERCISE PRICE
                                                                  -----------  -----------------
<S>                                                               <C>          <C>
Balance, December 31, 1995......................................        None
Granted (1)(2)..................................................     283,000       $    8.96
Exercised.......................................................          --              --
Forfeited.......................................................          --              --
Expired.........................................................          --              --
                                                                  -----------
Balance, December 31, 1996......................................     283,000       $    8.96
Granted (3).....................................................     524,000       $    5.20
Terminated (4)..................................................    (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
                                                                  -----------
                                                                  -----------
</TABLE>
 
------------------------
 
(1) Includes 3,000 stock options granted pursuant to the director stock option
    plan.
 
(2) Includes 280,000 stock options granted pursuant to the 1996 stock option
    plan.
 
(3) Includes 265,000 stock options re-priced pursuant to the 1997 stock option
    plan.
 
(4) Terminated and re-priced pursuant to the 1997 stock option plan.
 
                                      F-18
<PAGE>
                         BIGMAR, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
(8) STOCK OPTIONS (CONTINUED)
    At December 31, 1998, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $5.09--$5.60 and 3.36
years, respectively.
 
    At December 31, 1998, 1997 and 1996, the number of options exercisable was
305,003, 221,334 and 179,688, respectively, and the weighted-average exercise
price of those options was $5.21, $5.12 and $8.97, respectively.
 
(9) 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.
 
(10) WARRANTS
 
    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.
 
    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. The warrants are exercisable for a period of four
years from the
 
                                      F-19
<PAGE>
                         BIGMAR, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
(10) WARRANTS (CONTINUED)
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.
 
(11) 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.
 
(12) SIGNIFICANT CUSTOMERS AND SUPPLIERS
 
    Sales to significant customers were as follows:
 
<TABLE>
<CAPTION>
                                                                       YEAR ENDED DECEMBER 31,
                                                                  ----------------------------------
                                                                     1998       1997        1996
                                                                  ----------  ---------     -----
<S>                                                               <C>         <C>        <C>
Oncology Products (one customer)................................  $  412,701    676,751          --
IV Solutions (three customers)
  Customer 1....................................................     751,461    263,435          --
  Customer 2....................................................     602,366    228,773          --
  Customer 3....................................................     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.
 
(13) 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
 
                                      F-20
<PAGE>
                         BIGMAR, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
(13) RELATED PARTY TRANSACTIONS (CONTINUED)
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) RELATED PARTY LOANS
 
    In November 1997, the Company received an advance of $200,000 from a company
of which the Company's President was formerly an officer. The advance was repaid
in December 1997, along with interest computed at 8.75%.
 
    In January 1995, Chemholding agreed to be a surety for Bigmar
Pharmaceuticals in the amount of $1.4 million for a loan with respect to the
Bigmar Facility. In March 1997, the Company paid interest in the amount of
$125,000 related to this guaranty to Chemholding. The guaranty was subsequently
terminated, also in March 1997.
 
    The Company owed $160,000 at December 31, 1998, for working capital, to a
company owned by certain stockholders of the Company. This note bears interest
at the prime rate (7.75% at December 31, 1998) and was fully repaid in February
1999.
 
    The Company owed $25,000 at December 31, 1998, for working capital, to a
company of which the Company's President was formerly an officer. This loan
bears interest at prime rate (7.75% at December 31, 1998), and was fully repaid
in March 1999.
 
    Pharmaceuticals owed $100,000 at December 31, 1998, to a company owned by
certain stockholders of the Company. This 6% interest bearing note is payable on
demand.
 
    Pharmaceuticals owed $41,740 at December 31, 1998, for accounts payable, to
a privately held Swedish Pharmaceutical company of which the Company's President
currently serves as a Director.
 
    Pharmaceuticals owed $209,000 at December 31, 1998 for accounts payable, to
a privately held Swiss pharmaceutical company of which a director of the Company
has an ownership interest.
 
                                      F-21
<PAGE>
                         BIGMAR, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
(13) RELATED PARTY TRANSACTIONS (CONTINUED)
(c) OTHER RELATED PARTY TRANSACTIONS
 
<TABLE>
<CAPTION>
                                                                         DECEMBER 31,
                                                               --------------------------------
<S>                                                            <C>         <C>        <C>
                                                                  1998       1997       1996
                                                               ----------  ---------  ---------
Gain on sale of land to related party........................  $       --     35,000         --
Freight charges paid to related party........................          --      3,000         --
Purchases from related parties...............................     209,000     25,000    965,000
Selling, general and administrative expenses paid to related
  party......................................................      21,648     64,000     13,000
Interest paid to related parties.............................       2,196      1,000    102,000
Research and development.....................................          --         --     22,000
</TABLE>
 
    Also see Note 14 regarding related party lease transactions.
 
(14) COMMITMENTS
 
    The Company leases office space in the United States and Switzerland under
various leases. Rent expense amounted to $143,638 in 1998, $176,000 in 1997, and
$56,000 in 1996. Rent paid to a related party amounted to $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>
1999....................................................................  $  37,000    120,000
2000....................................................................     21,000    120,000
2001....................................................................      3,000    120,000
2002....................................................................         --     50,000
2003....................................................................         --         --
                                                                          ---------  ---------
  Total.................................................................  $  61,000    410,000
                                                                          ---------  ---------
                                                                          ---------  ---------
</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, 1997, and 1996 was $23,281, $79,000, and $93,000,
respectively.
 
(15) 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
 
                                      F-22
<PAGE>
                         BIGMAR, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
(15) SEGMENT DATA (CONTINUED)
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,
1998, 1997, and 1996 is as follows:
<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                    -----------------------------------------
<S>                                                 <C>            <C>           <C>
                                                        1998           1997          1996
                                                    -------------  ------------  ------------
BIOREN:
  Sales:
    IV Solutions..................................  $   5,976,369     5,438,902     5,811,054
  Gross Margin:
    IV Solutions..................................      1,555,138     1,285,328     1,825,062
  Segment Income (Loss)...........................       (315,394)      180,589       177,728
  Interest Expense................................        150,624       157,618       370,035
  Depreciation and Amortization...................        578,694       233,040       213,987
  Segment Assets..................................      7,401,168     7,397,277     8,563,919
 
<CAPTION>
 
                                                                  DECEMBER 31,
                                                    -----------------------------------------
                                                        1998           1997          1996
                                                    -------------  ------------  ------------
<S>                                                 <C>            <C>           <C>
PHARMACEUTICALS:
  Sales:
    Oncology Products.............................  $     401,453     1,044,542     2,120,095
  Gross Margin:
    Oncology Products.............................         10,394      (287,532)      793,894
  Segment Income (Loss)...........................       (819,986)     (990,272)      707,276
  Interest Expense................................        278,736       404,523        91,748
  Depreciation and Amortization...................      1,069,707       610,879        42,647
  Segment Assets..................................     12,407,223    12,637,495     7,634,329
</TABLE>
 
                                      F-23
<PAGE>
                         BIGMAR, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
(15) 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, 1998, 1997, and 1996 is as follows:
 
<TABLE>
<CAPTION>
                                                                                      DECEMBER 31,
                                                                        -----------------------------------------
<S>                                                                     <C>            <C>           <C>
                                                                            1998           1997          1996
                                                                        -------------  ------------  ------------
Segment gross margin..................................................  $   1,565,532       997,796     2,618,956
Non-Segment gross margin..............................................             --            --            --
                                                                        -------------  ------------  ------------
    Total gross margin................................................  $   1,565,532       997,796     2,618,956
                                                                        -------------  ------------  ------------
                                                                        -------------  ------------  ------------
Segment profit (loss).................................................  $  (1,135,380)     (809,683)      885,004
Corporate expenses, net...............................................     (6,086,322)   (6,568,341)   (2,524,548)
                                                                        -------------  ------------  ------------
Profit (loss) before provision for income taxes.......................  $  (7,221,702)   (7,378,024)   (1,639,544)
                                                                        -------------  ------------  ------------
                                                                        -------------  ------------  ------------
Segment assets........................................................  $  19,808,391    20,034,772    19,682,927
Corporate assets......................................................        900,791       482,318     4,587,242
                                                                        -------------  ------------  ------------
    Total assets......................................................  $  20,709,182    20,517,090    24,270,169
                                                                        -------------  ------------  ------------
                                                                        -------------  ------------  ------------
Sales:
  U.S.................................................................  $          --            --            --
  Other foreign countries.............................................      6,377,822     6,483,444     7,931,149
                                                                        -------------  ------------  ------------
    Total revenue.....................................................  $   6,377,822     6,483,444     7,931,149
                                                                        -------------  ------------  ------------
                                                                        -------------  ------------  ------------
Long-lived assets:
  U.S.................................................................  $     608,746       950,917       563,453
  Other foreign countries.............................................     16,741,258    16,213,241    16,843,686
                                                                        -------------  ------------  ------------
    Total long-lived assets...........................................  $  17,350,004    17,164,158    17,407,140
                                                                        -------------  ------------  ------------
                                                                        -------------  ------------  ------------
</TABLE>
 
                                      F-24