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<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                             ----------------------

                                    FORM 10-K

Mark One

           [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED
           DECEMBER 31, 1996.

                                       OR

           [ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
              SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION
           PERIOD FROM ________ TO _______________.

                           Commission File No. 1-14416

                             -----------------------

                                  BIGMAR, INC.
             (Exact name of registrant as specified in its charter)


<TABLE>
<S>                                                                   <C>
               DELAWARE                                                     31-1445779
(State or other jurisdiction of incorporation or organization    (I.R.S. Employer Identification No.)

6660 DOUBLETREE AVENUE, COLUMBUS, OHIO                                      43229
   (Address of principal executive offices)                           (Zip Code)

</TABLE>

Registrant's telephone number, including area code:  (614) 848-8380

        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. [X]

The aggregate market value of Common Stock held by non-affiliates is $6,238,750
based on a closing sale price of $3.875 per share on April 11, 1997. As of April
11 , 1997, 3,985,000 shares of $.001 par value Common Stock were issued and
outstanding.



 
<PAGE>

<PAGE>



                                  INTRODUCTION

        Bigmar,  Inc. (the "Company") is currently  engaged in manufacturing and
marketing  16  types of  intravenous  infusion  solutions  ("IV  Solutions")  in
Switzerland  and  marketing  in  Germany  raw  materials  used   to  manufacture
medications for the treatment of prostate enlargement ("Prostate Materials") and
calcium leucovorin, a   generic   oncological   product.   Unless  the   context
indicates otherwise,  the term  "Company" as used herein  refers to the  Company
and its subsidiaries as a whole.

        In June 1996, the Company  consummated  an initial public  offering (the
"IPO") of 1,610,000 shares (including 210,000 shares for over-allotments granted
to LT Lawrence & Co., Inc. (the  "Representative"))  of common stock,  par value
$.001 per share ("Common  Stock") at an initial public  offering price of $7.50,
and issued to the  Representative  warrants to purchase 140,000 shares of Common
Stock  at  an  exercise  price  per  share  of  $9.75.   The  Company   realized
approximately $9,400,000 from the  proceeds  of the IPO,  after  deductions   of
commissions and expenses related thereto.

        Certain  statements  in  this  Form  10-K  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
form 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.

                                     PART I

ITEM 1.  BUSINESS.

        The Company  markets IV Solutions  through its own sales force to health
care providers and third-party payors. In addition, the Company has entered into
contracts with Laevosan  International  AG ("Laevosan")  and Merk,  Sharp & Dohm
("MSD") for the distribution of IV Solutions in Switzerland. The Company markets
Prostate  Materials and calcium  leucovorin  to  pharmaceutical  companies.  The
Company does not intend to market its other products directly to the public.

        The Company has received  provisional approval for the  manufacturing in
Switzerland  of  two  generic  oncological  products,  calcium  leucovorin   and
methotrexate. The Company anticipates that all regulatory approvals for the sale
of these products in Germany, Switzerland, Italy  and  Spain  will  be  obtained
during the second half of 1997. There can be no assurance,  however,  that  such
regulatory approvals will be obtained  during  these time periods,  or that such
approvals  will ever be obtained.  In addition the Company has received approval
to market  doxorubicin, methotrexate and calcium leucovorian in Germany.

        In  the  second  half  of  1996,   Cerbios-Pharma   SA  ("Cerbios"),   a
wholly-owned subsidiary of Chemholding SA ("Chemholding"), a beneficial owner of
approximately  25.4% of the  Company's  Common Stock,  rendered  invoices to the
Company, in the amount of approximately  $681,000 for expenses and fees to which
Cerbios  claimed to be entitled in  connection  with services it provided to the
Company in 1996.  In December  1996,  Cerbios  submitted a letter to the Company
requesting reimbursement of approximately $1,118,000 to which Cerbios claimed to
be entitled in  connection  with services it provided to the Company in 1995. In
March 1997, Cerbios submitted a letter to a

                                      - 2 -




 
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representative  of the Company  claiming  that  Cerbios  was owed an  additional
$2,243,000 for various "services" and "values of lost contracts" (the foregoing,
collectively, the "Claims").

        The Company maintains that no substantial services were provided in 1995
by Cerbios to the Company  and that the amounts  claimed for 1996 by Cerbios far
exceeded the actual expenses incurred by Cerbios on behalf of the Company.  Such
actual  expenses  were  accrued  in  the  Company's  1996  quarterly   financial
statements.   On  March  27,  1997,  the  Company   reached  a  settlement  (the
"Settlement")  with  Cerbios  of the Claims for  approximately  $300,000  and in
connection therewith Cerbios delivered to the Company a release.

        Pursuant to the Settlement, the  Company  and  each  of its wholly-owned
subsidiaries,   Bioren  SA  ("Bioren"),   Bigmar  Pharmaceuticals  SA   ("Bigmar
Pharmaceuticals"),  and Bigmar Therapeutics,  Inc.  ("Bigmar  Therapeutics"  and
collectively,  the "Company's Entities")  and Cerbios,  Chemholding,   Sapec  SA
("Sapec"),  and  Bioferment SA  ("Bioferment"  and  collectively,  the  "Cerbios
Entities") have mutually agreed to the cancellation of the following agreements;
the  Sapec  Exclusive  Distribution  Agreement  (the  "Sapec  Agreement"),   the
Bioferment   Exclusive   Distribution  and  Supply  Agreement  (the  "Bioferment
Agreement"),  and the Bioferment  License and Supply Agreement (the  "Bioferment
License  Agreement").  In addition the Company has determined to  terminate  all
relationships   and  transactions  with  the  Cerbios  Entities,  including  the
purchases of raw materials for resale, which purchases aggregated  approximately
$501,000 and generated sales of approximately $833,000 in 1996.

        The Sapec  Agreement  provided for,  among other  things,  the supply of
Sodium Leucovorin "Sodium Leucovorin" and five generic oncological products. The
Company has yet to identify  another   supplier  for  Sodium   Leucovorin.   The
Company has  identified alternative  suppliers  for the five generic oncological
products and has already obtained  two of the generic  oncological products from
other  suppliers.  The  Company   believes   it  can  acquire  the  other  three
products  from  alternative  suppliers.   The  Company has paid Sapec a one-time
fee of $100,000 for the grant of the exclusive rights  and  licenses  that  were
part of the Sapec Agreement. This fee has been forfeited  and  no refund will be
granted.  The Company  believes the cancellation of  the  Sapec  Agreement  will
not have a material  adverse effect on its operations.

        The Bioferment  Agreement  provided  exclusive  worldwide rights to use,
manufacture and market recombinant urokinase  ("Urokinase"),  a biotechnological
product.  The Company has not obtained another supplier for Urokinase.  Pursuant
to the Bioferment Agreement,  the Company has paid Bioferment a fee of $100,000.
This fee has been  forfeited  and no refund  will be granted.  The Company  will
attempt to locate an alternative  supplier for Urokinase.  However,  there is no
guarantee  the  Company  will be  successful  in finding  another  supplier  for
Urokinase.  The Company  believes the  cancellation of the Bioferment  Agreement
will not have a material adverse effect on its operations.

        The  Bioferment   License   Agreement   provided  the  license  to  use,
manufacture and market a recombinant  human growth hormone,  a  biotechnological
product.  The  Company  believes  the  cancellation  of the  Bioferment  License
Agreement will not have a material adverse effect on its operations.

        In November 1995, Bigmar Pharmaceuticals and AB Cernelle ("Cernelle"), a
privately-held  Swedish pharmaceutical  company.  entered into an agreement (the
"Cernelle  Agreement")  pursuant to which  Bigmar  Pharmaceuticals  obtained the
exclusive worldwide  distribution rights to approximately 20 generic oncological
products  including calcium  leucovorin,  methotrexate and  mercaptopurine  (the
"Cernelle Products")  manufactured by Cernelle.  At the time the Company entered
into the Cernelle Agreement,  Cernelle was a wholly-owned subsidiary of Cerbios.
In July 1996, Cernelle was sold to

                                      - 3 -




 
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an unrelated  third party.  John G.  Tramontana,  the Company's  Chairman of the
Board, President and Chief Executive Officer,  currently serves as a director of
Cernelle.

        The Company has entered into exclusive  arrangements  with the following
non-affiliated  pharmaceutical  companies to market certain generic  oncological
products, manufactured or licensed by the Company, in various territories: Medac
GmbH ("Medac") in Germany and the United Kingdom; Boehringer Mannheim Italia Spa
("Boehringer") in Italy; Laevosan in Switzerland;  Laboratories Vita SA ("Vita")
in Spain; and Protyde  Pharmaceuticals,  Inc. ("Protyde") worldwide,  except for
certain  major  European  countries.  Medac,  Boehringer,  Laevosan and Vita are
established pharmaceutical companies. Protyde is a development stage company.

HISTORY

        The Company was incorporated in Delaware in September 1995 and has three
wholly-owned  subsidiaries,  Bigmar  Pharmaceuticals,  Bigmar  Therapeutics  and
Bioren. Bigmar Pharmaceuticals is a Swiss corporation that was formed in January
1992 under the name BVI, SA. Bigmar Therapeutics is a Delaware  corporation that
was formed in  September  1995  under the name  Bioren,  Inc.  Bioren is a Swiss
corporation that was formed in July 1986.

        In June  1995,  all of the  outstanding  capital  stock  of  Bioren  was
purchased by Bigmar Pharmaceuticals (the "Bioren Acquisition"), for an aggregate
purchase price of approximately  $9.4 million,  consisting of approximately $5.2
million in cash and the assumption  of  certain  of  Bioren's liabilities in the
aggregate principal amount of $4.2 million. In addition,  in connection with the
Bioren Acquisition,  Bigmar Pharmaceuticals became a guarantor on a bank loan to
Bioren in the principal amount of $2.6 million,  which 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
on the Bioren Facility.  In addition,  simultaneous with the Bioren Acquisition,
in June 1995,  Bigmar  Pharmaceuticals  sold one-half of its equity  interest in
Bioren to certain Bigmar  Pharmaceuticals'  stockholders  ("Bioren Holders") for
approximately  $2.6  million.  This sale  included  500 shares  (10% of Bioren's
outstanding  stock) to John G. Tramontana,  the Company's Chairman of the Board,
President and Chief Executive Officer, 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 IPO and on April 8, 1996 such
existing  stockholders  contributed  99% of these  shares of Common Stock 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 Common  Stock of the Company  with an
approximate  fair market value (based on the initial  public  offering  price of
$7.50 per share) of $2,627,340 and the  stockholders  of Bigmar  Pharmaceuticals
exchanged  all of the  capital  stock of Bigmar  Pharmaceuticals  for  2,000,938
shares of Common  Stock of the Company  with an  approximate  fair market  value
(based on the initial  public  offering price of $7.50 per share) of $15,007,035
(the "Exchange").

        In June 1996, the Company consummated the IPO.

MARKET OVERVIEW

        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

                                      - 4 -




 
<PAGE>

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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  healthcare  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.

BUSINESS STRATEGY

        The Company's business strategy over the next 18 months is to:

               manufacture and market approximately seven injectable and
                      lyophilized oncological products;

               manufacture and market additional oncological products as the
                      patents relating to such products expire;

               increase the number of pharmaceutical companies in Europe through
                      which the Company's oncological products are marketed and
                      the territories in which they are distributed;

               expand the marketing of IV Solutions in Switzerland through the
                      Company's own sales force and third party distributors;
                      and

               identify partners in the pursuit of new supply agreements and
                      collaborative relationships.

PRODUCTS

IV SOLUTIONS

        The Company manufactures,  at the Bioren Facility,  and markets 16 types
of IV  Solutions.  The  Company's  IV Solutions  generally  consist of different
chemical  entities,  such as sodium chloride,  electrolytes,  carbohydrates  and
other nutrients,  which are intravenously administered to a patient. 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.  In addition,
the  Company  has  entered  into   contracts  with  Laevosan  and  MSD  for  the
distribution  of IV Solutions 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  in  PLM's  collapsible
containers.  The PLM  Agreement  expires in the year 2005,  unless it is earlier
terminated.  Under the terms of the PLM 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,  the PLM Agreement  may be  terminated  by either  party,  upon the
occurrence  of certain  specified  conditions,  including if the products or the
production infringe, or are alleged to infringe,  upon any intellectual property
right of any third party.  The  termination  of the PLM  Agreement  would have a
material adverse effect on the Company.

                                      - 5 -




 
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PROSTATE MATERIALS


        The  Company  markets  natural  medications  used for the  treatment  of
non-infectious  prostate  enlargement.  The Prostate  Materials  are composed of
natural  pollen  derived from plant  extracts.  For the year ended  December 31,
1995,  the  Company's  sales of Prostate  Materials  to Pharma  Stroschein  GmbH
("Stroschein")  were  approximately  $1,000,000  as  compared  to  approximately
$650,000 for the year ended December 31, 1996. The decrease was due primarily to
lower sales  volumes and the higher  foreign  currency rate of the United States
Dollar versus Swiss Franc.

        In October 1994, Bigmar  Pharmaceuticals  entered into an agreement (the
"Stroschein   Agreement")   with   Stroschein,    pursuant   to   which   Bigmar
Pharmaceuticals  acts  as  the  exclusive  supplier  of  Cernilton,  a  Prostate
Material,  and  Stroschein  distributes  the Prostate  Material in Germany.  The
Stroschein Agreement provides for annual minimum quantity  requirements in order
to maintain  exclusivity.  The Stroschein  Agreement expires in October 1999 and
will  be  automatically  renewed  for  consecutive  two  year  periods,   unless
terminated by the parties. In the event that Stroschein terminates the agreement
as a result of Bigmar  Pharmaceuticals'  breach or  default  thereunder,  Bigmar
Pharmaceuticals  is required to transfer to  Stroschein  the  Cernilton  product
registration and the necessary  know-how and authorizations to enable Stroschein
to manufacture Cernilton. The termination of the Stroschein Agreement would have
a material adverse effect on the Company.

ONCOLOGICAL PRODUCTS

        The Company currently markets calcium leucovorin,  a generic oncological
product,  in Germany.  In November  1995,  Bigmar  Pharmaceuticals  and Cernelle
entered into the  Cernelle  Agreement  pursuant to which Bigmar  Pharmaceuticals
obtained the exclusive  worldwide  distribution rights to the Cernelle Products.
The Cernelle Agreement provides for a one time payment of $100,000 for the grant
of such  exclusive  rights and licenses  which is payable upon  notification  by
Cernelle  that the Cernelle  Products  are ready for initial  shipment to Bigmar
Pharmaceuticals.  In addition,  Bigmar  Pharmaceuticals  will be responsible for
ongoing  fees  based  upon the size of its orders  for  Cernelle  Products.  The
initial term of the Cernelle  Agreement is 15 years,  commencing  on the date of
the first commercial sale by Bigmar  Pharmaceuticals  of the Cernelle  Products.
Upon termination of the Cernelle Agreement, Bigmar Pharmaceuticals will retain a
non-exclusive  worldwide  right to  distribute  the Cernelle  Products for three
additional   years,  at  prices  and  on  terms  no  less  favorable  to  Bigmar
Pharmaceuticals  than the prices and terms  extended  by  Cernelle  to any other
person or entity for the  Cernelle  Products.  Either  party may  terminate  the
Cernelle  Agreement upon the  occurrence of certain  specified  conditions.

        In November 1995,  Bigmar  Pharmaceuticals  and Cernelle entered into an
exclusive  technical services agreement (the "Cernelle TSA"),  pursuant to which
Cernelle  will  develop  drug  products  to be  filed  as  abbreviated  new drug
application ("ANDA") submissions for Bigmar Pharmaceuticals to submit to the FDA
or other appropriate  authority with  jurisdiction  over the Cernelle  Products.
Generally,  Bigmar Pharmaceuticals is obligated to pay Cernelle a fee of $20,000
for each ANDA submitted to and accepted by Bigmar  Pharmaceuticals  with respect
to a Cernelle Product.  Cernelle will assign to Bigmar  Pharmaceuticals the sole
and  exclusive  right,  title and interest in and to each ANDA.  The term of the
Cernelle TSA is 15 years and is renewable upon the mutual  written  agreement of
the parties.  Either party may terminate the Cernelle TSA upon the occurrence of
certain specified  conditions.

          At the time the Company  entered into the Cernelle  Agreement  and the
Cernelle TSA, Cernelle was a wholly-owned  subsidiary of Cerbios. In  July  1996
Cernelle was sold to an unrelated third party. John G. Tramontana, the Company's
Chairman of the Board,  President and Chief Executive Officer,  currently serves
as a director of Cernelle.


          The Company has received provisional approval for the manufacturing in
Switzerland of  two  generic  oncological  products,  calcium   leucovorin   and
methotrexate. The Company anticipates that all regulatory approvals for the sale
of these products in Germany, Switzerland, Italy  and  Spain  will  be  obtained
during the second half of 1997. There can be no assurance,  however,  that  such
regulatory approvals will be obtained during these time periods,  or  that  such
approvals will ever be obtained. In addition, the Company has received  approval
to market doxorubicin, methotrexate and calcium leucovorin in Germany.





         The  Company  marketed   mercaptopurine  in  1995,   however,   due  to
disappointing  bioequivalancy  testing  results the Company has  suspended  such
marketing and has no current plans to recommence such marketing at this

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time.

PROPOSED PRODUCTS

GENERIC ONCOLOGICAL PRODUCTS

        The Company has identified  approximately 30 oncological drugs which 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.

        The  following  table lists the generic  oncological  products  that the
Company intends to manufacture and market to pharmaceutical companies for resale
in  Switzerland,  Germany and the United  States over the next 18 months and the
estimated time periods for each product.

<TABLE>
<CAPTION>
                                                                    ESTIMATED YEAR OF INTRODUCTION
--------------------- ------------------ ---------------------  --------------------------------------
Product Name          Dosage Form        Prescribed Use         Switzerland   Germany            USA
<S>                   <C>                <C>                    <C>           <C>               <C>
Calcium Leucovorin    Injection/Liquid   Rescue Therapy             1997         1995*          1998
Methotrexate          Injection/Liquid   Neoplastic Conditions      1997          1997          1998
Daunorubicin          Injection          Neoplastic Conditions      1997          1997          1998
Doxorubicin           Injection          Neoplastic Conditions      1997          1997          1998
Mitomycin             Injection          Neoplastic Conditions      1997          1997          1998
5-Flurouracil         Injection          Carcinomas                 1997          1997          1998
Vinblastine Sulfate   Injection          Neoplastic Conditions        -             -           1999
--------------------- ------------------ ---------------------  ------------- ------------ --------------

</TABLE>

* Introduced

        The Company  believes  that it will be able to obtain  approval of these
products in Germany,  as  indicated  above,  because it intends to transfer  the
manufacturing  site from Germany to the Bigmar Facility.  Although this transfer
of manufacturing site requires the approval of the German regulatory  authority,
the time for such  approval  is much  faster  than the  three to five  year time
period for approval of full marketing applications in Germany.

        Over the next 18 months the Company's strategy is to manufacture, in its
state-of-the-art  facilities,  in Switzerland and market additional  oncological
products as their patents expire.

        There can be no assurance  that the Company will  manufacture  or market
any of the foregoing  products during the time periods  indicated if at all. 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 each of these proposed  products has commercial value, the Company
may choose not to manufacture or market some or all of these products.

COLLABORATIVE AGREEMENTS

        The Company has entered into exclusive  arrangements  with the following
non-affiliated   companies  to  market  certain  generic  oncological  products,
proposed  oncological  products,  manufactured  or licensed by the  Company,  in
various  territories.  Restrictions  regarding  exclusivity  and  right of first
refusal  limit the  Company's  ability  to pursue  and  negotiate  collaborative
arrangements  with other  entities on terms which may be more  favorable  to the
Company.

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<PAGE>




 Medac

        In  September  1995,  Bigmar  Pharmaceuticals  and Medac  entered into a
series  of  international   distribution  agreements  (the  "Medac  Agreements")
relating to certain  oncological  products such as alfacalcidol and Doxorubicin.
Pursuant to these  agreements,  Bigmar  Pharmaceuticals  and Medac have divided,
subject  to  future  adjustment,  the  exclusive  right to sell the  oncological
products  covered by the  agreements  in  various  countries  in  Europe,  South
America,  Asia and the United  States.  Pursuant  to the Medac  Agreements,  the
Company anticipates that Medac will market certain of the Company's  oncological
products and proposed products in Germany and the United Kingdom.

 Boehringer

        In December 1995, Bigmar  Pharmaceuticals and Boehringer entered into an
agreement  (the  "Boehringer  Agreement")  for  the  exclusive  distribution  by
Boehringer of certain  oncological  products such as methotrexate,  Doxorubicin,
calcium  leucovorin and  mercaptopurine  (the  "Boehringer  Products") in Italy,
Vatican City and the San Marino Republic (the "Boehringer Territory").  Pursuant
to the  Boehringer  Agreement,  the  Company  will  supply  Boehringer  with the
products  on an  exclusive  basis  and  has  granted  Boehringer  an  option  to
distribute  new  products in the  Boehringer  Territory.  Under the terms of the
Boehringer  Agreement,  the Company will receive a flat payment from  Boehringer
for  each  product  distributed  in the  Boehringer  Territory.  The  Boehringer
Agreement  terminates  in December  2005,  but is subject to automatic  one year
extensions unless earlier terminated by the parties.  Either party may terminate
the Boehringer Agreement upon the occurrence of certain specified conditions.

 Laevosan

        In December 1995,  Bigmar  Pharmaceuticals  and Laevosan entered into an
exclusive  distribution  agreement (the "Laevosan  Agreement") pursuant to which
Bigmar   Pharmaceuticals  will  supply  certain  oncological  products  such  as
Doxorubicin  and  methotrexate  to Laevosan for sale in  Switzerland.  Under the
Laevosan  Agreement,  Laevosan is required to sell minimum  quantities each year
and, if Laevosan fails to sell such amounts,  Bigmar Pharmaceuticals can convert
the Laevosan Agreement to a non-exclusive distribution arrangement. The Laevosan
Agreement  terminates  in December  1998,  but is subject to automatic  one year
extensions, unless earlier terminated by the parties. Either party may terminate
the Laevosan Agreement upon the occurrence of certain specified conditions.

 Vita

        In  July  1995,   Bigmar   Pharmaceuticals   and  Vita  entered  into  a
distribution  agreement (the "Vita  Agreement")  pursuant to which Vita will buy
certain oncological  products  exclusively from Bigmar  Pharmaceuticals and will
commercialize  such products in Spain. In the event Vita ceases to commercialize
any product, the marketing authorization for that product will be transferred to
Bigmar  Pharmaceuticals  at a nominal  fee.  The Vita  Agreement  terminates  in
September  2005 but may be extended  automatically  for an  additional  one year
period.  Either party may terminate the Vita  Agreement  upon the  occurrence of
certain specified conditions.

 Protyde

        In  October  1995,  Bigmar  Therapeutics  and  Protyde  Therapeutics,  a
wholly-owned   subsidiary  of  Protyde,  a  development  stage  company,  formed
Protyde-Bigmar   Therapeutics  (the   "Partnership"),  for   the    purpose   of
manufacturing  and marketing  certain pharmaceutical  products (the "Partnership
Products").  The business of the Partnership is to obtain FDA approval to market
the Partnership Products, and to commence the manufacturing and marketing of

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the Partnership  Products.  Each of the partners initially has a 50% interest in
the Partnership and neither may sell,  assign,  pledge or otherwise transfer any
portion of their respective  interests,  except to affiliates of the Company and
Protyde,  without the other  partner's  prior  consent.  As its initial  capital
contribution to the  Partnership,  Protyde  Therapeutics  will contribute to the
Partnership  up to $3,075,000 in cash,  the first  $750,000 of which was paid to
the Company on March 29, 1996,  with the balance to be contributed at such times
and in such  amounts  so as to enable  the  Partnership  to timely  satisfy  its
obligations,  and to make its  payments  under  the  terms of its  manufacturing
agreement . As Bigmar  Therapeutics'  capital  contribution to the  Partnership,
Bigmar  Therapeutics will cause the Company to make its  manufacturing  capacity
available to the Partnership under the terms of the Manufacturing  Agreement (as
defined  below).  Under the Partnership  Agreement,  the Partnership is the sole
owner of all  right,  title  and  interest  in all  FDA-approved  ANDAs  for the
Partnership  Products.  Unless terminated by either party upon the occurrence of
certain specified  conditions,  the Partnership will continue until December 31,
2005.

        In October  1995,  the  Partnership  entered into a sales and  marketing
agreement  (the  "Marketing   Agreement")  pursuant  to  which  the  Partnership
appointed  Protyde,  on an exclusive  basis, to market,  sell and distribute the
Partnership Products worldwide,  except for certain designated countries, and to
assist the Partnership in certain  pre-manufacturing  activities relating to the
Partnership  Products.  Unless terminated by either party upon the occurrence of
certain  specified  conditions,  the Marketing  Agreement  will remain in effect
until the earlier of the dissolution of the Partnership or December 31, 2005.

        In  October  1995,  the  Partnership  and  the  Company  entered  into a
manufacturing  agreement (the "Manufacturing  Agreement")  pursuant to which the
Partnership  engaged the Company to,  among other things (i) acquire and perform
stability testing on all raw materials and packaging materials necessary for the
manufacture  of the  Partnership  Products,  (ii) make its  production  capacity
available to the Partnership in order to meet production obligations,  and (iii)
undertake all measures for quality  control which are either required by the FDA
or requested by the  Partnership.  The  Manufacturing  Agreement  sets forth the
minimum  production  capacity  which the  Company  must make  available  to fill
Partnership  orders and the minimum annual orders of Partnership  Products which
the Partnership  must place.  If, with respect to any Partnership  Product,  the
Partnership  fails to  satisfy  the  minimum  annual  orders,  the  Company  may
terminate the  Manufacturing  Agreement with respect to that product on 180 days
prior notice.  Unless  terminated by either party upon the occurrence of certain
specified conditions,  the Manufacturing  Agreement shall remain in effect until
the earlier of the dissolution of the Partnership or December 31, 2005.

        The exclusive right to distribute certain of the Partnership Products in
certain territories,  including Greece,  Ireland,  Scandinavia,  Austria,  South
America,  Thailand, Korea and Eastern Europe, had previously been granted by the
Company to Medac.  Subsequently,  the Company inadvertently  included certain of
such rights as part of its contribution to the Partnership. As a result, Protyde
Therapeutics  may have a breach of  contract  claim  against  the  Company.  The
Company does not believe  that the  ultimate  outcome of this matter will have a
material adverse effect on its operations.

MARKETING AND SALES

        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
addition,  the Company has entered into  contracts with Laevosan and MSD for the
distribution of IV Solutions in Switzerland.,  In addition,  the Company markets
Prostate  Materials and calcium  leucovorin,  to pharmaceutical  companies.  The
Company  does not intend to market its other  oncological  products  or proposed
products  directly to the public.  During  1995,  the  Company  granted  certain
companies such as Medac,  Boehringer,  Laevosan,  Vita and Protyde the exclusive
marketing  and  distribution  rights to  certain  of the  Company's  oncological
products and future oncological products in certain  territories.  The amount of
resources and the time that any of these

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collaborators  devote towards marketing and sales of the Company's  products and
proposed  products  are  not  within  the  control  of the  Company.  All of the
agreements  terminate  under certain  circumstances.  The  termination of any of
these agreements would have a material adverse effect on the Company.

RESEARCH AND DEVELOPMENT

        The Company's  research and development  activities  focus on purchasing
and  formulating  raw  materials  into  a  finished  product,   scaling  up  the
development  of the product from the laboratory  phase to the production  phase,
and conducting stability and bioequivalance testing of the finished product.

        The research and development  department initiates the Company's quality
process through its  development of standard  operating  procedures.  By working
closely  with  the  manufacturing  department,  the  Company  believes  the same
standards  can be  imposed to insure  consistently  high-quality  products.  The
Company  estimates  that  it  takes  approximately  12 to  18  months  from  the
conceptualization of a product to its marketing.

MANUFACTURING AND SUPPLIERS

        The  Company  has two  facilities,  the Bioren  Facility  and the Bigmar
Facility.  The  Bioren  Facility  is a  57,000  square  foot,  state-of-the-art,
facility in Couvet,  Switzerland  where the Company  manufactures and markets IV
Solutions and will develop and manufacture  non-cytotoxic  oncological 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 has  developed and begun
manufacturing calcium leucovorin for injection.

        The  Company's  manufacturing  facilities  will be subject  to  periodic
inspections by the FDA and other United States federal  agencies and the FDA may
choose to inspect  the  Company's  facilities  before  approving  the  Company's
products for sale in the United States.  The Company's  facilities  have not yet
been  inspected  by the FDA,  however,  the  Company  has  retained  independent
consultants  to  assist  in  this  process  of  ensuring   compliance  with  GMP
requirements.  Although  the  Company   obtained   a  provisional   approval  to
manufacture products from the IKS in February 1997, the Company anticipates that
it will require additional financing in order to complete the validation process
and to fund its financing in order to complete the  validation  process  and  to
fund its operation prior to the plant becoming fully operational.

        Quality  monitoring  and  testing  programs  and  procedures  have  been
established  by the Company to assure that all  critical  activities  associated
with the production,  control and distribution of its products will be carefully
controlled and evaluated.  The Company's strategy is to seek to meet the highest
quality  standards,  with the goal of assuring  the purity and safety of each of
its products.

        The capital costs associated with equipping a facility and manufacturing
oncological  products are substantial and the manufacturing  process is complex.
Further,  because some  oncological  products are highly toxic,  the facility in
which  they  are  manufactured,  the  method  of  manufacture,  as  well  as the
employees' working  conditions,  are regulated by the FDA and foreign regulatory
authorities. As the manufacturing of cytotoxic oncological 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,  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.

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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 Prostate  Material market,  the Company faces  competition from Allergon,  a
division of Pharmacia & Upjohn,  Inc ("P&U").  In addition,  in the  oncological
markets,  the Company faces  competition from  Bristol-Myers  Squibb Co., Chiron
Inc.,  Pharmachemie,  BV and P&U, Inc.  Furthermore,  in oncological markets the
Company may face competition  from alternative  methods of treatment such as, in
the case of its oncological products, 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 and Prostate  Materials.  The Company  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.

PATENTS AND PROPRIETARY RIGHTS

        The Company  relies on a combination of patent  applications,  licenses,
trademarks,  trade  secrets  and  non-  disclosure  agreements  to  protect  its
proprietary  technology,  rights and  know-how  and the  technology,  rights and
know-how  licensed  from  others.  There can be no  assurance  that such  patent
applications or any resulting  patents or any licenses or trademarks will not be
infringed upon, that the Company's trade secrets will not otherwise become known
to or independently  developed by competitors,  that  non-disclosure  agreements
will not be breached,  or that the Company would have adequate  remedies for any
such  infringement  or breach.  Litigation  may be necessary to enforce  patents
issued to the Company, to protect the Company's proprietary rights, or to defend
the Company against  third-party claims of infringement of proprietary rights of
others.  Such litigation  could result in substantial  cost to the Company and a
diversion  of effort  of the  Company  and its  management.  Patents  concerning
pharmaceutical  products generally are highly uncertain,  involve complex legal,
scientific  and factual  questions  and have  recently  been the subject of much
litigation.  To date, no consistent  policy has emerged regarding the breadth of
claims  allowed  or the  degree of  protection  afforded  under  these  patents.
Accordingly,  there can be no assurance that patent  applications which underlie
the Company's  licenses will result in patents being issued, or that, if issued,
the patents will afford protection against  competitors with similar technology.
Because of the extensive time required for  development,  testing and regulatory
review of a potential  product,  it is possible that before any of the Company's
potential  products can be  commercialized,  any related  patent may expire,  or
remain in existence for only a short period  following  commercialization,  thus
reducing any  advantage of the patent.  Although the Company is not aware of any
claim against it of patent infringement,  the Company's ability to commercialize
its products  will depend on not  infringing  the patents of others.  Litigation
concerning patents and proprietary technologies can be protracted and expensive.
Laws regarding the enforceability of intellectual  property vary from country to
country.  Therefore, there can be no assurance that intellectual property issues
will be  uniformly  resolved,  or that local laws will  provide the Company with
consistent  rights and  benefits.  In addition,  there can be no assurance  that
others will not be issued  patents  which may prevent the sale of the  Company's
products  or  require  licensing  and the  payment of fees or  royalties  by the
Company in order for the Company to be able to market certain products.

        The Company may in the future be required or may desire to obtain  other
licenses to develop,

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manufacture  and market  other  products  or to market  products  in  additional
territories, the rights to which may be held by additional parties. There can be
no assurance that licenses will be obtainable on commercially  reasonable terms,
if at all, or that any licensed patents or proprietary  rights will be valid and
enforceable.

        To the extent that  consultants,  key  employees or other third  parties
apply technological  information independently developed by them or by others to
the Company's  projects,  third  parties may own all or part of the  proprietary
rights to such  information,  and disputes may arise as to the  ownership of the
proprietary rights to such information which may not be resolved in favor of the
Company.  To the  extent  that the  Company  requires  rights  to any  resulting
technologies,  it may be necessary to negotiate additional license agreements or
the Company may be unable to utilize such technologies.

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 regulation for safety,  efficacy and 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.  Noncompliance  with  applicable  requirements  can  result in recall,
injunction  or seizure of  products,  refusal to permit  products to be imported
into the United  States,  refusal of the  government to approve or clear product
approval  applications or to allow the Company to enter into  government  supply
contracts,   withdrawal  of  previously   approved   applications  and  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 preclinical 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 could  therefore  restrict the  commercial  applications  of such
products.  Product  approvals  may be withdrawn if  compliance  with  regulatory
standards is not maintained or if problems occur  following  initial  marketing.
For  patented  products  or  technologies,  delays  imposed by the  governmental
approval process may materially  reduce the period during which the Company will
have the exclusive right to exploit such  technologies;  however,  an additional
period  of up to five  years  may be  added to the  term of the  patent  in such
circumstance.

        New Drug  Application  ("NDA").  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 an 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 (1) preclinical  laboratory
and animal tests,  (2) the submission to the FDA of an  application  for an IND,
(3)  clinical  and other  studies to assess  safety and  parameters  of use, (4)
adequate  and  well-controlled  clinical  trials to  establish  the  safety  and
effectiveness  of the drug, (5) the submission of an NDA to the FDA, and (6) FDA
approval of the NDA prior to any commercial sale or shipment of the drug.

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        Typically,  preclinical  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
pharmacologic  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 which demonstrates that the product is safe and effective for a specific
indication,  an NDA may be  submitted  to the  FDA.  This  application  includes
details of the  manufacturing  and testing  processes,  preclinical  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 have 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 an 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.  The  regulatory  process can be
modified by Congress or the FDA in specific situations.

        Abbreviated New Drug Application  ("ANDA").  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  bioequivalance  data  illustrating  that the generic  drug
formulation is, within an acceptable range,  equivalent to a previously approved
drug. A generic drug manufacturer is not required to submit the clinical data to
establish the safety and effectiveness of the product.  Instead,  the Drug Price
Act  allows  the  FDA  to  rely  on   bioequivalance   data  to  approve  ANDAs.
"Bioequivalance"  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 which
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.

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        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.

        Good Manufacturing Practices ("GMP"). The Company will be subject to the
FDA's GMP, GLP 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's  operations have not yet been inspected
by the FDA and there can be no assurance  they will pass any  inspections by the
FDA. 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.

        The BfArM can reject the  application  if the data are  incomplete,  the
drug product has not been  sufficiently  examined,  the product does not conform
with the acknowledged  pharmaceutical quality rules,  effectiveness has not been
established,  or there is a suspicion of unacceptable  side effects.  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 of over $66,000.  The exact amount of
fees can vary,  depending on the amount of work required of the  authority,  the
kind of procedure and the result of such procedure.

        For safety reasons,  drug products are also subject to close  monitoring
after approval is granted. There are a variety of restrictions which the federal
agencies  and the state  authorities  may impose  including  the  withdrawal  of
marketing authorizations and the recall of products.

        The  importation  of drug products into Germany from other EU ("European
Union") and E.E.A.  (European  Economic Area) countries does not require special
permission.  However,  the product must be approved in Germany.  Approval of the
drug product in other EU member  states does not replace  German  approval.  The
importer  must obtain a separate  approval for the  repackaging  and labeling of
imported products.

        Sales  of  high-price  pharmaceuticals  (such  as  oncology  drugs)  are
affected by parallel  imports and re- imports.  Independent  importers  purchase
products in the  producing EU country,  ship them to Germany and, in most cases,
offer  them  at  far  lower  prices  than  the  manufacturers  of  the  original
preparations and/or their official importers.  The European Court of Justice has
ruled that the importing member state may not prohibit parallel imports.

        Where a drug product has not been  produced in an EU country or imported
through  another EU member country (such as from  Switzerland or the U.S.),  the
importer must obtain special permission to import the

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product.  To do so, the importer must produce a certificate  from the regulatory
authority of the country where the drug was  manufactured  showing,  among other
things,  that the product is  approved  in that  country and that it conforms to
applicable  standards  of  the  World  Health  Organization  ("WHO")  or of  the
Pharmaceutical Inspection Convention ("PIC").

        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 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.

        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 WHO or the 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  which have been approved by the IKS to
date are generic products.

RECENT EU PROCEDURES

        On January 1, 1995, the EU  established  new procedures for the approval
of pharmaceuticals,  and a new coordinating body, the EMEA was created.  Germany
is a  member  of the  EU;  Switzerland  is  not  an EU  member.  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

        Successful  commercialization  of the Company's own 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

                                     - 15 -




 
<PAGE>

<PAGE>



upon the setting in which a particular item or service is furnished.

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

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

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

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

        In 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.  This
includes  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

                                     - 16 -




 
<PAGE>

<PAGE>



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.

        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.

        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,  Bigmar  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.  Bigmar  Pharmaceuticals  and Bioren are
subject  periodically  to  environmental  compliance  reviews by  various  Swiss
regulatory offices.

        The Company  believes its  facilities in  Switzerland  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 and beyond that is unable to predict the extent or timing
of future  expenditures  which 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 and proposed  products involve the 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
$15,000,000,  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.

        Rules on strict liability of drugs are in effect in Germany.  The person
responsible for placing the product on the market (who can, but need not be, the
manufacturer) is liable. Only personal injuries are recoverable, and

                                     - 17 -




 
<PAGE>

<PAGE>



there is no mandated  compensation  for pain or  suffering.  The maximum  amount
recoverable by an individual is DM 1 million (approximately US $649,000).

        The  manufacturer  or the person  responsible for placing the product on
the  market  is  obliged  to  obtain  insurance   coverage   against   potential
liabilities. This obligation can be fulfilled either by entering into a contract
with a German insurance company, or by obtaining a confirmation of coverage from
a credit  institution in Germany or within the EU. The German insurance industry
has created a so-called  "pharma  pool." This working  relationship  enables all
major German  insurance  companies to pool the risks from the  statutory  strict
liability and therefore provide affordable insurance.

        Compensation  for pain and suffering or for personal  damages  exceeding
the  amounts  set forth above can only be demanded on the basis of tort rules as
laid  down in the  Civil  Code.  If a claim  is  sustained  there  is  unlimited
liability.   No  compulsory   insurance   coverage  is  prescribed  by  statute.
Compensation  for pain and  suffering  can be assessed by the courts but usually
remains below the levels under United States law.

        In  Switzerland,   there  is  no  special  product   liability  law  for
pharmaceuticals.  The Swiss federal  product  liability  law,  which covers drug
products,  provides  that  manufacturers  are  subject to strict  liability  for
injuries caused by defective products.

HUMAN RESOURCES

        The Company and its  subsidiaries  employ 47 full-time  employees,  four
employees in development,  34 employees in  manufacturing  and quality  control,
three   employees  in   marketing,   and  six   employees  in   management   and
administration.  All  but  seven  of the  Company's  employees  are  located  in
Switzerland.  In addition the Company  relies upon  advisors  with  expertise in
various scientific disciplines.

        The  Company's  employees are not a party to any  collective  bargaining
agreements. The Company believes that it has good relations with its employees.

ITEM 2.  PROPERTIES.

        On December 31,  1996,  the Company  entered into a lease (the  "Lease")
with JTech  Laboratories,  Inc. ("JTech") relating to approximately 8,600 square
feet of space located at 9511  Sportsman Club Road,  Johnstown,  Ohio 43031 (the
"JTech  facility").  The JTech  facility is to be utilized by the Company as its
principal executive offices and research and development  laboratory.  The Lease
expires five years from the occupancy  date, and provides for a first year fixed
annual rent payment of $120,000  discounted at 9%, with monthly rent payments of
$10,000  per  month  for years two  through  five of the lease  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. The Company's obligation to lease the premises is contingent upon the
lessor's substantial completion of  construction  in  accordance  with  approved
plans and specifications. The Company  anticipates that its occupancy at the new
facility will commence in late May 1997. John G. Tramontana was  the  President,
a director and stockholder  of JTech and Michael K. Medors was  the Treasurer, a
director  and stockholder of JTech at the time of the  negotiation and execution
of the lease. Mr.Tramontana and Mr. Medors continue to hold such positions  with
JTech.

        The Company's  current  principal  executive offices are located at 6660
Doubletree Avenue,  Columbus, Ohio 43229. The sublease on this space is month to
month,  terminates  effective  February 28, 1998,  and provides for monthly rent
payments of $1,925.  This amount  includes the Company's  proportionate  cost of
utilities, repairs, cleaning, and taxes and does not include insurance.

        The Company owns two pharmaceutical  plants, the Bigmar Facility and the
Bioren Facility.

                                     - 18 -




 
<PAGE>

<PAGE>




        During 1995,  Bigmar  Pharmaceuticals  purchased the Bigmar Facility,  a
25,000  square foot  facility  in  Barbengo,  Switzerland,  for  developing  and
manufacturing  oncological products. The Bigmar Facility also houses warehousing
and storage,  manufacturing,  labeling and  packaging,  and  administrative  and
record-keeping areas. The Bigmar Facility and the equipment contained therein is
subject to two bank loans in the principal  amounts of approximately  $1,493,100
and  $2,594,234  respectively.  The loans are secured by mortgages on the Bigmar
Facility and certain machinery. Interest on the loans is payable at rates  of up
to 6.5% and 5.0%per annum  respectively  until  December 31, 1998. The principal
amounts of such loans are due on $93,319 in 1997,  $261,293 in 1988, $375,275 in
1999,  $373,275 in 2000,  $1,866,375 in 2001 and  $1,119,796 in 2002. The Bigmar
Facility is currently  being  validated and the Company will not begin marketing
products  manufactured  at the Bigmar  Facility  until  regulatory  approval  is
obtained, which the Company believes will occur in the second quarter of 1997.

        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  (rescue  therapy)
oncological products,  such as calcium leucovorin.  A 21,000 square foot area in
the Bioren  Facility is used for  manufacturing  and marketing IV  Solutions.  A
portion of the Bioren  Facility  is leased to an  unaffiliated  third party on a
year-to-year  basis.  The  Bioren  Facility  is  subject  to a  mortgage  in the
approximate  principal amount of $2,240,000 which is due on May 16, 1999 and may
be extended by an agreement between the parties.  Interest until May 16, 1999 is
5% per annum.  The Bioren Facility is also subject to a second mortgage  payable
to  Galenica  in the  amount of  $1,493,100.  This  second  mortgage  is payable
$373,275 in 1997,  $373,275  in 1998,  and  $746,550  in 1999.  Interest on this
second  mortgage is at a variable rate which is currently 5.5% and is subject to
adjustment based upon commercial mortgage rates.

        The  Company  also  leases  warehouse  space  in  Switzerland  under  an
operating lease expiring through 1999. Rental expenses amounted  to  $56,215  in
1996, and $19,250 in 1995.

        The Company believes that its facilities  (including the JTech Facility)
are,  or  will  be,  sufficient  for  its  current  and  reasonably  anticipated
operations. The Company owns all of its manufacturing equipment,  subject to the
mortgage  referred to above,  and believes that its equipment is well maintained
and suitable for its requirements.  Additionally, the Company maintains property
and casualty insurance in amounts it believes are sufficient and consistent with
practices for firms of its size in the prescription drug industry.

ITEM 3.  LEGAL PROCEEDINGS.

        The Company is not a party to any material legal proceedings.

        On March 27, 1997, the Company  reached the Settlement  with the Cerbios
Entities in connection with the Claims.  A release has been signed by Cerbios in
favor of the Company. See - Item 1 Business.

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, 1996.

                                     PART II

                                     - 19 -




 
<PAGE>

<PAGE>




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  SmallCapSM 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
SmallCapSM Market since the commencement of trading were as follows:

<TABLE>
<CAPTION>
        Year Ended December 31,                           1996
        Quarter ended:                      High                      Low
        --------------------------------------------------------------------
        <S>                                 <C>                        <C>
        June 30                             11 1/2                     8
        September 30                        10 1/8                     6
        December 31                          7 1/4                     4 3/8

</TABLE>

HOLDERS

        On April 10, 1997, as reported by the Company's  transfer agent,  shares
of Common Stock were held by 40 persons. The Company believes that the number of
beneficial holders of its Common Stock on such date was in excess of 400.

DIVIDENDS

        The Company has never paid cash  dividends  on its Common Stock and does
not anticipate paying dividends in the foreseeable future. The Company currently
intends to retain future  earnings,  if any, to finance its expansion  strategy.
The payment of future cash  dividends by the Company on its Common Stock 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  of   dividends   and  other
considerations as the Board of Directors may consider relevant. In addition, the
Swiss Federal Code of Obligation provides further  restrictions on the Company's
ability to pay dividends to its stockholders.

ITEM 6.   SELECTED FINANCIAL DATA.

                                       SELECTED FINANCIAL DATA

        The following selected financial data presents historical financial data
for Bigmar,  Inc. and  subsidiaries for the years ended December 31, 1992, 1993,
1994,  1995 and 1996.  The data has been derived from the  financial  statements
(and notes thereto),  which financial statements have been audited by Richard A.
Eisner & Company,  LLP,  independent  auditors,  included elsewhere in this Form
10K.  The  selected  financial  data  should  be read in  conjunction  with  the
financial  statements (and notes thereto) of Bigmar,  Inc. and  subsidiaries and
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" included elsewhere in this Form 10K.


                                     - 20 -




 
<PAGE>

<PAGE>


<TABLE>
<CAPTION>

                                                                                BIGMAR, INC.(1)
                                                -----------------------------------------------------------------------------
                                                                             YEARS ENDED DECEMBER 31,
                                                -----------------------------------------------------------------------------
                                                      1992            1993            1994            1995           1996
                                                -----------------------------------------------------------------------------
<S>                                             <C>             <C>             <C>             <C>             <C>         
Operating Data:
Net Sales ...................................   $          0    $    264,077    $    707,627    $  5,600,362    $  7,931,149
Cost of sales ...............................                        182,075         611,040       4,011,891       5,312,193
                                                ------------    ------------    ------------    ------------    ------------
Gross profit ................................              0          82,002          96,587       1,598,471       2,618,956
                                                ------------    ------------    ------------    ------------    ------------

Operating expenses:
   Research and development expense .........                                                         23,144         801,560
   Selling, general and administrative
   expense ..................................         10,012          50,810          16,269       1,493,055       3,006,546
   Settlement fees paid to Cerbios
     and write-off of licensing
     fees ...................................                                                                        511,777
                                                ------------    ------------    ------------    ------------    ------------
Total operating expenses ....................         10,012          50,810          16,269       1,516,199       4,319,883
                                                ------------    ------------    ------------    ------------    ------------

Operating income (loss) .....................        (10,012)         31,192          80,318          82,272      (1,700,927)
Other income (expenses) .....................         10,212          (7,909)         (1,660)       (179,476)         61,383
                                                ------------    ------------    ------------    ------------    ------------
Net income ..................................   $        200    $     23,283    $     78,658    ($    97,204)   ($ 1,639,544)
                                                ------------    ------------    ------------    ------------    ------------
                                                ------------    ------------    ------------    ------------    ------------
Per Share Data:
Net income (loss) ...........................   $       0.00    $       0.06    $       0.02    ($      0.07)   ($      0.51)
                                                ------------    ------------    ------------    ------------    ------------
                                                ------------    ------------    ------------    ------------    ------------
Weighted average number of shares
outstanding .................................        400,188         400,188         400,188       1,337,392       3,235,137
                                                ------------    ------------    ------------    ------------    ------------
                                                ------------    ------------    ------------    ------------    ------------

Balance Sheet Data:
Working capital .............................   $     82,074    $    113,573    $     98,526    $  1,204,461    $    545,102
Total assets ................................         84,560         152,022       2,173,621      15,493,126      24,270,169
Long-term obligations .......................                                      1,500,767       8,436,971       7,353,490
Retained earnings (deficit) .................            200          23,483         102,142           4,938      (1,634,606)
Stockholders' equity ........................         90,290         113,573         192,492       3,911,404      10,895,853

</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
        includes 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).


                                     - 21 -




 
<PAGE>

<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.



OVERVIEW

        The Company is currently engaged in manufacturing and marketing
16 types of IV Solutions in Switzerland and marketing in Germany Prostate
Materials and a generic oncological product, calcium leucovorin to
pharmaceutical companies. In addition, the Company has entered into
contracts with Laevosan, and MSD for the distribution of IV Solutions in
Switzerland.

        The Company's business strategy over the next 18 months is to:


               manufacture and market approximately seven injectable
               and lyophilized oncological products;


               manufacture and market additional oncological products
               as the patents relating to the products expire;

               increase the number of pharmaceutical companies in
               Europe through which the Company's oncological products
               are marketed and the territories in which they are
               distributed;

               expand the marketing of IV Solutions in Switzerland
               through the Company's own sales force and third party
               distributors; and

               identify partners in the pursuit of new supply
               agreements and collaborative relationships.


         For the year ended December 31, 1996, the Company's sales of IV
Solutions and antibiotics were approximately $5.8 million, sales of medical
products, including Prostate Materials were approximately $1.5 million, and
sales of generic oncological products were approximately $.5 million. For the
year ended December 31, 1995, on a pro forma basis after giving effect to the
Bioren Acquisition as if the transaction had occurred on January 1, 1995, sales
of these products aggregated approximately $6.5 million, $1.4 million, and $.7
million respectively. For the year ended December 31, 1995, approximately $1.0
million or approximately 12% of the Company's sales on a pro forma basis were 
attributable to sales of antibiotics. For the year ended December 31, 1996,
approximately $.4 million or approximately 5% of the Company's sales were
attributable to such products. Sales of antibiotics have been progressively
abandoned by the Company in Europe.

        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 reimubursement 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.

                                      -22-

<PAGE>

<PAGE>

RESULTS OF OPERATIONS

BIGMAR, INC.


        Bigmar, Inc. was incorporated in September 1995. On April 9, 1996, in
the Exchange, Bigmar, Inc. acquired 100% of Bigmar Pharmaceuticals and 50% of
the Bioren capital stock owned by the Bioren Holders. Accordingly, both Bigmar
Pharmaceuticals and Bioren are 100% owned subsidiaries of Bigmar, Inc. The
acquisition was accounted for as a reorganization of companies under common
control. Accordingly, the financial statements of Bigmar, Inc. were restated to
include the results of Bigmar Pharmaceuticals for all periods presented and
Bioren from July 1, 1995 (the date of acquisition).

BIGMAR THERAPEUTICS

                                      -23-


<PAGE>

<PAGE>

       Bigmar Therapeutics was incorporated in September 1995 and its
only activity since inception has been the execution and delivery of an
agreement with Protyde Therapeutics to form the Partnership for the purpose
of coordinating the manufacturing and marketing of certain pharmaceutical
products for the treatment of cancer, such as mercaptopurine, calcium
leucovorin, methotrexate and doxorubicin, worldwide, except for certain major
European countries.

BIGMAR PHARMACEUTICALS AND BIOREN

       Bigmar Pharmaceuticals commenced operations in January  1992. The
following discussion and analysis describes the results of operations of
the Company for the years ended December 31, 1994, 1995 and 1996 and
Bioren from July 1, 1995. Effective June 30, 1995, Bigmar Pharmaceuticals
acquired 100% of the outstanding capital stock of Bioren in the Bioren
Acquisition, and immediately sold 50% of the stock to the Bioren Holders.
The Company's financial statements include the results of Bigmar Pharmaceuticals
for all periods presented and Bioren from July 1, 1995.

      Bioren currently manufactures IV Solutions and other hospital-based
products. Since the Bioren Acquisition, sales of IV Solutions have increased
while sales of antibiotics (the other market in which Bioren historically
operated) have been progressively abandoned. In the near future, Bioren intends
to continue to manufacture and market IV Solutions and has added a
non-cytotoxic product, calcium leucovorin, used in the treatment of cancer.

       The following sets forth, in tabular form, a comparison of the results of
operations of the Company as a percentage of the Company's sales for the years
ended December 31, 1994, 1995, and 1996.  The fiscal year of the Company ends
on December 31 of each year. The financial information included in this
1O-K Report is not necessarily indicative of the Company's future operating
results or financial condition.



<TABLE>
<CAPTION>

                                                         Year Ended December 31,

                                                          1994     1995     1996
                                                          ----     ----     ----
<S>                                                      <C>       <C>      <C>
Sales                                                      100%     100%     100%
Cost of goods sold                                        86.4%    71.5%    63.5%
Research and development                                     0%      .4%    10.1%
Selling, general and administrative expenses               2.3%    24.4%    37.9%
Depreciation and Amortization                              -        2.3%     3.5%
Interest expense                                          (0.1%)    3.3%    (2.6%)
Income taxes                                               1.5%    (0.1%)      0%
Net income                                                11.1%    (1.7%)  (20.7%)

</TABLE>


 YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

       Net Sales. Net sales increased by $2,330,787 to $7,931,149 for the year
ended December 31, 1996 as compared to $5,600,362 for the comparable period in
1995. This increase was attributable to a full year of Bioren sales of
$5,811,162 in 1996 as compared to the inclusion of only the last six months
sales in 1995 as Bioren had not yet been acquired. Bioren full year 1995 sales
were $6,480,955. The decrease from 1995 to 1996 was due to an exchange rate
difference of approximately $400,000 and a reduction in antibiotic sales
of approximately $400,000. Excluding Bioren sales, the increase in net sales was
$61,615, from $2,058,270 in 1995 to $2,119,987 in 1996. This increase was due
primarily to additional sales of approximately $464,000 of pharmaceutical
products, offset by a reduction of approximately $247,000 and $122,000 in
Prostate Materials

                                      -24-



<PAGE>

<PAGE>


and generic oncological products, respectively, and an adverse change of
approximately 4% in  exchange rates between the U.S. dollar and the Swiss franc.
The Company expects sales of generic oncological products to improve once new
products are added to the oncology line.

      Cost of Goods Sold. Cost of goods sold increased by $1,310,302
to $5,312,193 for the year ended December 31, 1996 as compared to
$4,001,891 for the comparable period in 1995. This increase was primarily
due to increased sales.

      Gross Profit. Gross profit increased by $1,020,485 to $2,618,956 for
the year ended December 31, 1996 over the comparable period in 1995.
This increase was attributable to the addition of Bioren gross profit in
1996 of $1,825,230. Without the addition of Bioren, gross profit for the
period ended December 31, 1996 increased $354,185 to $793,720 as
compared to $439,535 for the comparable period in 1995. This increase
was due to both higher net sales and an improvement in margin due to
favorable product mix.

      As a percentage of sales, gross profit for the year ended
December 31, 1996 was 33%, an increase from 28.5% for the comparable
period in 1995. Bigmar Pharmaceuticals gross profit as a percentage of
sales increased to 37.4% from 21.4% for the comparable period in l995.
This improvement reflects a change in the mix of products sold from
period to period as Prostate Materials were sold in 1995 at materially
lower margins than other products. Bioren gross profit as a percentage
of sales for the year ended December 31, 1996 decreased to 31.4% from
32.7% for the comparable period in 1995. This decrease resulted
primarily from competitive pricing tactics in the IV Solution  product
line. The Company expects that the tight margins in the IV Solution product
line will continue but also anticipates that the Company's overall gross
margin will improve once new products are added to the oncology line.

      Research and Development Expenses. Research and development
expenses for the year ended December 31, 1996 were $801,560 compared to
$23,144 in 1995. The increase reflects expenditures related to the
formulation and development of oncology products and expanded research
and development activities in order to obtain regulatory approval for
manufacturing and marketing oncology products. The Company also incurred
additional expenditures of approximately $1,725,538 during the year
ended December 31, 1996 related to equipment and facility validation,
and expanded research and development activities in order to obtain
regulatory approval for manufacturing and marketing oncological products.
These expenditures were deferred and will be expensed upon commencement
of operations at the Bigmar Facility. While the Company has
capitalized certain expenditures related to the validation of the new
manufacturing plant, expenditures related to individual products have
been expensed as incurred. In view of the anticipated number of products
scheduled for registration in the next several years, the Company
anticipates that the level of research and development expenses will
continue to be significant.

       Selling, General and Administrative Expenses. Selling, general
and administrative expenses increased by $1,513,491 to $3,006,546 for
the year ended December 31, 1996 as compared to $l,493,055 for the
comparable period in 1995. The increase is largely due to the addition of
Bioren's selling, general and administrative expenses of $1,579,283.
Bioren's selling, general and administrative expenses were $2,001,123 in
the comparable period in 1995. Bioren's selling, general and administrative
expenses declined due to a reduction in various costs including antibiotic
marketing salaries, consulting fees, search fees and due to the change in
exchange rates. Selling, general and administrative expenses for 1996, reflect
an increase in the number of employees and related expenses and expansion of
activity in both the U.S. and in Switzerland.

        In 1996 the Company incurred settlement fees of approximately $300,000
payable to Cerbios-Pharma and wrote off licensing fees paid to divisions of
Cerbios-Pharma amounting to $200,000.

                                      -25-


<PAGE>
<PAGE>

        In the second half of 1996, Cerbios-Pharma SA ("Cerbios"), a wholly-
owned subsidiary of Chemholding SA ("Chemholding"), a beneficial owner of
approximately 25.4% of the Company's Common Stock, rendered invoices to
the Company, in the amount of approximately $681,000 for expenses and fees to
which Cerbios claimed to be entitled in connection with services it provided
to the Company in 1996. In December 1996, Cerbios submitted a letter to the
Company requesting reimbursement of approximately $1,118,000 to which Cerbios
claimed to be entitled in connection with services it provided to the Company in
1995. In March 1997, Cerbios submitted a letter to a representative of
the Company claiming that Cerbios was owed an additional $2,243,000 for various
"services" and "values of lost contracts"  (the foregoing, collectively,
the "Claims"). 

      The Company maintains that no substantial services were provided in 1995
by Cerbios to the Company and that the amounts claimed for 1996 by Cerbios far
exceeded the actual expenses incurred by Cerbios on behalf of the Company. Such
actual expenses were accrued in the Company's 1996 quarterly financial
statements. On March 27, 1997, the Company reached a settlement (the
"Settlement") with Cerbios of the Claims for approximately $300,000 and in
connection therewith Cerbios delivered to the Company a release.

      As a result of the Settlement [WAS THE CANCELLATION A RESULT OF THE
SETTLEMENT?], the Company and each of its wholly-owned subsidiaries, Bioren SA
("Bioren"), Bigmar Pharmaceuticals SA ("Bigmar Pharmaceuticals"), and Bigmar
Therapeutics, Inc. ("Bigmar Therapeutics" and collectively, the "Company's
Entities") and Cerbios, Chemholding, Sapec SA ("Sapec"), and Bioferment SA
("Bioferment" and collectively, the "Cerbios Entities") have mutually agreed to
the cancellation of the following agreements: the Sapec Exclusive Distribution
Agreement (the "Sapec Agreement"), the Bioferment Exclusive Distribution and
Supply Agreement (the "Bioferment Agreement"), and the Bioferment
License and Supply Agreement (the "Bioferment License Agreement"). In addition
the Company has determined to terminate all relationships and transactions with
the Cerbios Entities, including the purchases of raw materials for resale, which
purchases aggregated approximately $501,000 and generated sales of approximately
$833,000 in 1996.

      The Sapec Agreement provided for, among other things, the supply of Sodium
Leucovorin and five generic oncological products. The Company has yet to
identify another supplier for Sodium Leucovorin. The Company has identified
alternative suppliers for the five generic oncological products and has already
obtained two of the generic oncological products from other suppliers. The
Company believes it can acquire the other three products from alternative
suppliers. The Company has paid Sapec a one-time fee of $100,000 for the grant
of the exclusive rights and licenses that were part of the Sapec Agreement. This
fee has been forfeited and no refund will be granted. The Company believes the
cancellation of the Sapec Agreement will not have a material adverse effect on
its operations.

      The Bioferment Agreement provided exclusive worldwide rights to use,
manufacture and market recombinant urokinase ("Urokinase"), a biotechnological
product. The Company has not obtained another supplier for Urokinase. Pursuant
to the Bioferment Agreement, the Company has paid Bioferment a fee of $10,000.
This fee has been forfeited and no refund will be granted. The Company will
attempt to locate and alternative supplier for Urokinase. However, there is no
guarantee the Company will be successful in finding another supplier for
Urokinase. The Company believes the cancellation of the Bioferment Agreement
will not have a material adverse effect on its operations.

      The Bioferment License Agreement provided the license to use, manufacture
and market a recombinant human growth hormone, a biotechnological product. The
Company believes the cancellation of the Bioferment License Agreement will not
have a material adverse effect on its operations.

                                      -26-

<PAGE>

<PAGE>
     Interest income of 152,705 was generated from the investment of the
proceeds of the IPO. Interest expense for the period ended December 31, 1996
amounted to $206,469 an increase of $10,082 from the comparable period in 1995
of $196,387. The increase is due to the assumption of debt related to: the
Bioren acquisition; the purchase of production equipment; and, construction of
the manufacturing facility in Switzerland, and was partially offset by
capitalized interest costs of $500,000. In 1995 such capitalized interest was
$235,000. The capitalized interest was incurred in connection with borrowings
used to finance the construction and equipment of the Bigmar facility.
 
     Other income represents $69,162 in payments to Bioren from a company which
leases a portion of the Bioren Facility on a year-to-year basis net of other
expenses. The Company also realized $86,481 in foreign currency exchange gains.
 
     Income Taxes. The tax charge in Switzerland is an accumulation of taxes due
to the city, canton (state) and the federal authorities. While the actual rate
is a function of the percentage of profitability in relation to taxable equity,
the Company believes that 20% and 30% are fair approximations of the effective
accumulative rates for Bigmar Pharmaceuticals and Bioren, respectively. Swiss
law precludes consolidated tax filings and thus the ability to offset taxable
income in one entity by losses of another. The tax liability for the year ended
December 31, 1996 is not significant, particularly because the Company's income
for the period was generated by Bioren which has a significant tax loss
carry-forward.
 
     Net Loss. The Company sustained a net loss of $1,639,544 for the year ended
December 31, 1996 as compared to a net loss of $97,204 for the year ended
December 31, 1995. The net loss for 1996 represents an increase of $1,542,340.
Such loss was due to primarily to the intensification of oncology product
development and registration activities as well as the settlements with Cerbias-
Pharma and staffing and related activities required to support the development
of the oncology business.
 
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
(INCLUDING BIOREN FOR THE PERIOD FROM JULY 1, 1995 TO DECEMBER 31, 1995)
 
     Net Sales. Net sales increased by $4,892,735 to $5,600,362 for the year
ended December 31, 1995 as compared to $707,627 for the year ended December 31,
1994. Excluding Bioren sales, the increase in net sales was $1,350,745 from
$707,627 in 1994 to $2,058,372 in 1995. This increase was primarily due to the
increases in sales of pharmaceutical products by $309,416, Prostate Materials by
$580,619, and oncological products by $460,710 which the Company began selling
in June 1993, November 1994, and August 1994, respectively. For the years ended
December 31, 1995 and 1994, sales of Prostate Materials to Stroschein were
approximately $1.0 million and $470,000, respectively. These sales were pursuant
to the Stroschein Agreement with, pursuant to which Bigmar Pharmaceuticals acts
as the exclusive supplier of Prostate Materials to Stroschein, and Stroschein
distributes the Prostate Materials in Germany and other countries. For the year
ended December 31, 1995, sales of generic oncological products consisting of
mercaptopurine and calcium leucovorin were approximately $670,000. For the
period from July 1, 1995 through December 31, 1995 Bioren sales were $3,541,990.
 
                                      -27-

 
<PAGE>

<PAGE>
     Cost of Goods Sold. Cost of goods sold increased by $3,390,851 to
$4,001,891 for the year ended December 31, 1995 as compared to $611,040 for the
year ended December 31, 1994. This increase was primarily due to the increase in
sales.
 
     Gross Profit. Gross profit increased by $1,501,884 to $1,598,471 for the
year ended December 31, 1995 as compared to $96,587 for the year ended December
31, 1994. Gross profit on Bigmar Pharmaceuticals sales was $439,535 for the year
ended December 31, 1995 as compared to $96,587 for the year ended December 31,
1994. The increase of $342,948 was due primarily to increased sales. Gross
profit as a percentage of net sales increased to 28.5% for the year ended
December 31, 1995 as compared to 13.6% for the year ended December 31, 1994.
Without Bioren sales, gross profit as a percentage of sales in 1995 would have
been 21.3%, an increase of 7.7%, as compared to 13.6% for 1994. This increase
was due primarily to the introduction of a new dosage form of lyophilized
calcium leucovorin in April 1995 which yielded a higher margin.
 
     Gross profit on Bioren sales for the period from July 1, 1995 to December
31, 1995 was $1,158,936 or 32.7% of such sales. Bioren gross profit decreased
from 42.2% of net sales for the six months prior to the Bioren Acquisition as a
result of a shutdown of the Bioren Facility for a four-week period during the
latter half of 1995 for the installation of a new tank in order to increase the
capacity of the Bioren Facility's water system.
 
     Research and Development Expenses. Research and development expenses were
$23,144 for the year ended December 31, 1995 with no such expenses for the year
ended December 31, 1994. The research costs were incurred by Bioren in the
second half of 1995 for the registration of new IV Solutions. Pursuant to its
business strategy, the Company intends to expand its business by manufacturing
and marketing certain oncological and biotechnological products and expects its
research and development expenses to be significant in future years.
 
     Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $1,473,786 to $1,493,055 (26.7% of net
sales) for the year ended December 31, 1995 as compared to $16,269 (2.3% of net
sales) for the year ended December 31, 1994. The increase was primarily due to
the addition of Bioren expenses of $1,091,074 since July 1, 1995 (the date of
the Bioren Acquisition). Bioren expenses include consulting fees of $332,055,
promotional expenses of $223,845, employee benefits and other personnel costs of
$170,631, shipping costs of $92,084 and other administrative costs of $272,459.
Without the Bioren expenses, selling, general and administrative expenses were
$401,981 for the year ended December 31, 1995. The increase of $385,712 as
compared to selling, general and administrative expenses of $16,269 in 1994 was
due to greater marketing costs and expenses associated with efforts to increase
sales.
 
     Interest Expense. Interest expense was $182,476 for the year ended December
31, 1995 as compared to no interest expense in 1994. The interest expense was
primarily due to interest on indebtedness incurred in connection with the Bioren
Acquisition and interest on borrowings owed by Bioren to its former owner,
Galenica. In addition, the Company capitalized interest costs of $235,000 and
$40,000 for the years ended December 31, 1995 and 1994, respectively. The
capitalized interest was incurred in connection with borrowings used to finance
the construction and equipment of the Bigmar Facility.
 
     Income Taxes. The tax charge in Switzerland is an accumulation of the taxes
due to the city, the canton (state) and the federal authorities. 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 taxable equity, the Company believes that 20% is a fair approximation of the
effective cumulative rate. 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. Tax expense for the year ended December 31, 1995 was
not significant due to the amount of the loss and
 
                                      -28-



<PAGE>

<PAGE>

the provision of a full valuation allowance on the deferred tax asset arising
from the benefit of the Company's operating losses. Tax expense for the year
ended December 31, 1994 was $10,553.
 
     Net Loss. The Company sustained a net loss of $97,204 for the year ended
December 31, 1995 as compared to net income of $78,658 for the year ended
December 31, 1994. Such loss was primarily due to higher interest and other
expenses of Bioren.
 
Liquidity and Capital Resources

     In June, 1996, the company completed its IPO through which the Company
received, after deducting all related offering expenses, approximately $9.4
million in net proceeds. As of December 31, 1996 and December 31, 1995, the
Company had cash and cash equivalents of $4,362,938 and $1,425,603,
respectively. The Company's working capital approximated $545,102 and $1,204,461
at December 31, 1996 and December 31, 1995, respectively. The Company has
incurred, and will continue to incur, substantial expenditures for research and
development activities related to bringing its products to the commercial
market. The Company intends to devote significant additional funds to product
development, formulation, clinical testing, manufacturing validation, product
registration, and other activities required for regulatory review of generic
oncological products. The amount required to complete such activities will
depend 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.
 
     At December 31, 1996 accounts receivable decreased $815,854,or 51% while
inventories decreased $101,477, 9.6%, compared to December 31, 1995. The
decrease in receivables stems mainly from favorable agreements with distributors
of Bioren's IV Solution products. The change in inventories reflects improved
turnover and tighter control of stock levels.
 
     Property, plant and equipment at December 31, 1996 totaled $17,407,140
compared to $10,717,834 at December 31, 1995. The major portion of this
$6,689,306 million increase relates to the construction and equipping of the
Bigmar facility.
 
     Trade accounts payable to third parties were $1,721,846 and $826,532 at
December 31, 1996 and December 31, 1995, respectively. The increase is due
mainly to liabilities incurred from construction and plant validation at the
Bigmar Facility of $956,000.
 
     In March 1996, Protyde Therapeutics paid $750,000 to the Company as part of
its required capital contributions to the Partnership.
 
     At December 31, 1996, the Company had an aggregate of $9,350,077 in
outstanding indebtedness, of which $1,996,587 is short term in nature. These
monies were used to partially fund the acquisition of Bioren and to acquire,
construct and equip the oncological manufacturing facility. The long term
portion has various maturities and repayment schedules. No payments on long term
debt are due within the next twelve months.
 
     Included in the outstanding indebtedness is a $1,493,100 loan due to the
former owner of Bioren, collateralized by a second mortgage on the Bioren
facility. The interest rate is based on Swiss industrial mortgage rates.
Repayment of the loan is in installments of $373,275 in 1977, $373,275 in 1998
and $746,550 in 1999.
 
                                      -29-

 
<PAGE>

<PAGE>
     The Company has a bank mortgage on the Bioren Facility in the amount of
$2,239,650. This loan bears interest at the rate of 5% per annum through May 16,
1999. The principle amount of the loan is due upon demand after May 17, 1999 and
may be extended by an agreement between the parties.
 
     The Company has other outstanding bank loans of $2,594,234 and $1,493,100
used for the construction and equipping of the Bigmar Facility. These loans bear
interest at rates of up to 5% and 6.5% per annum and are collateralized by
the building and machinery at the Bigmar Facility. The principle amount of the
loans are $93,319 in 1997, $261,294 in 1998, $373,275 in 1999, $373,275 in 2000,
$1,866,375 in 2001 and $1,119,796 in 2002.
 
     On January 8, 1995, Chemholding agreed to be a surety for Bigmar
Pharmaceuticals in the amount of $1.3 million for the foregoing loans with
respect to the Bigmar Facility.
 
     In 1996 the Company repaid a related party loan of approximately $1,900,000
with the proceeds of a short term bank loan in the same amount the short term
bank loan is due on demand and bears interest at a variable rate not to exceed
6.5%.
 
     The Company anticipates capital expenditures for the next 12 months to be
approximately $1.0 million. Including approximately $.5 million for the purchase
of laboratory equipment to support research and development and stability
testing for the projected onological product pipeline, and approximately $.5
million for equipment validation of the Bigmar Facility.
 
     Since the Company does not anticipate product sales of the Bigmar Facility
to be of sufficient volume to generate positive cash flow for the first half of
1997, the Company will be required to supplement its cash position from time to
time through additional financing (debt or equity) or entering into development,
marketing or other collaborative arrangements. There can be no assurance that
adequate financing will be available when needed or on terms attractive to the
Company
 
     Stockholders' equity at December 31, 1996 amounted to $10,895,853, an
increase of $6,984,449 from stockholders' equity at December 31, 1995. This
increase reflects the infusion of net proceeds from the IPO offset by
year-to-date losses and adjustments to Swiss franc-denominated assets resulting
from fluctuations in the exchange rate between the Swiss franc and U.S. dollar.
 
     The results of the Company's operations are affected by changes in exchange
rates between currencies. Changes in exchange rates may negatively affect the
Company's consolidated net sales and gross profit margins from international
operations. The company is exposed to the risk that the dollar-value equivalent
of anticipated cash flow will be adversely affected by the changes in foreign
currency exchange rates. At such time as the Company determines that this risk
is significant, the Company may attempt to manage the risk by utilizing hedging
techniques, although there can be no assurance that the Company will be
successful in these activities.
 
     The Company anticipates that the net proceeds received from the Offering,
together with cash flow from operations (if any), will be sufficient to fund the
Company's operations, through July 1997. There can be no assurance that events
affecting the Company's operations will not result in the Company depleting its
funds before that time. The Company will be required to raise substantial
additional funds to continue to fund operating expenses or its expansion
strategy. The company is currently discussing the availability of financing with
certain financial institutions. There can be no assurance that the Company will
be able to obtain such additional financing or that such financing, if
available, will be on acceptable terms.
 
     The Swiss Federal Code of Obligation provides that at least 5% of a Swiss
company's net income each year must be appropriated to a legal reserve until
such time as this reserve is equivalent to 20% of the
 
                                      -30-

 
<PAGE>

<PAGE>
company's paid-in share capital. In addition, 10% of any distribution made by a
company in excess of a 5% dividend must also be appropriated to the legal
reserve. The reserve of up to 5% of the share capital is not available for
distribution to stockholders.
 
     Certain statements under this caption "Management 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.
 
                                      -31-



<PAGE>

<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.


                         REPORT OF INDEPENDENT AUDITORS

Board of Directors
Bigmar, Inc.
Columbus, Ohio

      We have audited the accompanying consolidated balance sheets of Bigmar,
Inc. and subsidiaries as at December 31, 1996 and December 31, 1995 and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for each of the years in the three-year period ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

      We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 financial statements enumerated above present fairly,
in all material respects, the consolidated financial position of Bigmar, Inc.
and subsidiaries, as at December 31, 1996 and December 31, 1995, and the
consolidated results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1996, in conformity with
generally accepted accounting principles.

      The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
consolidated financial statements, the Company anticipates that it will require
additional financing in order to complete the validation of its plant and
equipment and to fund its operations prior to its plant becoming fully
operational. This factor raises substantial doubt about the Company's ability to
continue as a going concern. Management's plans with regard to this matter are
also discussed in Note A. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

Richard A. Eisner & Company, LLP

New York, New York
March 3, 1997

With respect to Note C
March 27, 1997




                                      F-1


<PAGE>

<PAGE>



                          BIGMAR, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                   December 31,
                                                             ----------------------------
                               A S S E T S                      1996             1995
                               -----------                      ------           -----
<S>                                                          <C>             <C>         
Current assets:
   Cash and cash equivalents (Note B)  ...................   $  4,362,938    $  1,425,603
   Investments, at market ................................          9,444
   Accounts receivable, net of allowance of $44,703 and
     $51,948 at December 31, 1996 and December 31, 1995,
     respectively ........................................        772,491       1,588,345
   Due from related party ................................                        170,648
   Inventories (Notes B and E) ...........................        950,471       1,051,948
   Prepaid expenses and other current assets .............        470,584         112,668
                                                             ------------    ------------

          Total current assets ...........................      6,565,928       4,349,212

Property, plant and equipment, at cost, less accumulated
   depreciation and amortization (Notes B and F) .........     17,407,140      10,717,834
Intangible assets (Notes A and B)  .......................        297,101         328,564
Deferred charges and other assets ........................                         97,516
                                                             ------------    ------------

          T O T A L ......................................   $ 24,270,169    $ 15,493,126
                                                             ============    ============


                  LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable ......................................   $  1,721,846    $    826,532
   Note payable (Note G) .................................      1,529,993       1,960,385
   Current portion of long-term debt (Note H)  ...........        466,594
   Due to related parties (Notes C and P).................        983,490
   Advances on reimbursable expenses (Note L)  ...........        750,000
   Accrued expenses and other current liabilities ........        568,903         357,834
                                                             ------------    ------------
          Total current liabilities ......................      6,020,826       3,144,751

Long-term debt (Note H)  .................................      7,353,490       6,627,447
Related party loan (Note I)  .............................                      1,809,524
                                                             ------------    ------------

          Total liabilities ..............................     13,374,316      11,581,722
                                                             ------------    ------------

Commitments (Notes A, C, L and M)

Stockholders' equity (Notes A, J and Q):
   Preferred stock ($.001 par value; 5,000,000 shares
     authorized; none issued)
   Common stock ($.001 par value; 15,000,000 shares
     authorized; 3,985,000 and 2,375,000 shares issued
     and outstanding in 1996 and 1995, respectively) .....          3,985           2,375
   Additional paid-in capital ............................     13,333,366       3,900,875
   Cumulative translation adjustment .....................       (806,892)          3,216
   Retained earnings (deficit) ...........................     (1,634,606)          4,938
                                                             ------------    ------------

          Total stockholders' equity .....................     10,895,853       3,911,404
                                                             ------------    ------------


          T O T A L ......................................   $ 24,270,169    $ 15,493,126
                                                             ============    ============

</TABLE>






                       The accompanying notes to financial
                     statements are an integral part hereof.


                                      F-2






<PAGE>

<PAGE>



                          BIGMAR, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                    Year Ended December 31,
                                           -----------------------------------------
                                               1996           1995           1994
                                           -----------    -----------    -----------
<S>                                        <C>            <C>            <C>        
Net sales (Note O)  ....................   $ 7,931,149    $ 5,600,362    $   707,627

Cost of goods sold .....................     5,312,193      4,001,891        611,040
                                           -----------    -----------    -----------

Gross margin ...........................     2,618,956      1,598,471         96,587
                                           -----------    -----------    -----------

Operating expenses:
   Research and development ............       801,560         23,144
   Selling, general and
     administrative ....................     3,006,546      1,493,055         16,269
   Settlement fees paid to Cerbios-
     Pharma and write-off of
     licensing fees ....................       511,777
                                           -----------    -----------    -----------

          T o t a l ....................     4,319,883      1,516,199         16,269
                                           -----------    -----------    -----------

Operating income (loss) ................    (1,700,927)        82,272         80,318

Other income ...........................        28,666                         7,927

Interest income ........................       152,705         13,911            966

Interest (expense)  ....................      (206,469)      (196,387)

Gain on foreign currency
   transactions ........................        86,481
                                           -----------    -----------    -----------

Income (loss) before income taxes ......    (1,639,544)      (100,204)        89,211
                                           -----------    -----------    -----------

Income taxes (benefit) (Note K):
   Current .............................                       13,000          1,553
   Deferred ............................                      (16,000)         9,000
                                                          -----------    -----------

          T o t a l ....................                       (3,000)        10,553
                                                          -----------    -----------

NET INCOME (LOSS) ......................   $(1,639,544)   $   (97,204)   $    78,658
                                           ===========    ===========    ===========

Net income (loss) per share ............   ($     0.51)   ($     0.07)   $      0.20
                                           ===========    ===========    ===========

Weighted average shares
   outstanding .........................     3,235,137      1,337,292        400,188
                                           ===========    ===========    ===========

</TABLE>


                       The accompanying notes to financial
                     statements are an integral part hereof.

                                      F-3






<PAGE>

<PAGE>



                          BIGMAR, INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                 Common Stock
                                            -----------------------         Additional     Retained     Cumulative
                                             Number of                       Paid-in       Earnings     Translation
                                               Shares          Amount        Capital       (Deficit)     Adjustment      Total
<S>                                          <C>                <C>        <C>               <C>            <C>        <C>      
Balance - January 1, 1994  .............       400,188    $       400    $    89,690   $    23,484                   $   113,574

Net income for the year ended
   December 31, 1994 ...................                                                    78,658                        78,658

Translation adjustment .................                                                              $       260            260
                                           -----------    -----------    -----------   -----------    -----------    -----------

Balance - December 31, 1994  ...........       400,188            400         89,690       102,142            260        192,492

Purchase of 50% interest in Bioren SA
   for cash ............................       350,312            350      2,599,199                                   2,599,549

Issuance of common stock to Bigmar
   Pharmaceuticals stockholders for
   cash ................................     1,600,750          1,601      1,207,010                                   1,208,611

Issuance of common stock to Bigmar,
   Inc. stockholders ...................        23,750             24          4,976                                       5,000

Net (loss) for the year ended
   December 31, 1995 ...................                                                    (97,204)                     (97,204)

Translation adjustment .................                                                                    2,956          2,956
                                           -----------    -----------    -----------   -----------    -----------    -----------

Balance - 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 - DECEMBER 31, 1996  ...........     3,985,000    $     3,985    $13,333,366   $(1,634,606)   $  (806,892)   $10,895,853
                                           ===========    ===========    ===========   ===========    ===========    ===========

</TABLE>


                       The accompanying notes to financial
                     statements are an integral part hereof.

                                      F-4


<PAGE>

<PAGE>



                          BIGMAR, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                                 Year Ended December 31,
                                                                                        -----------------------------------------
                                                                                            1996            1995            1994
                                                                                        -----------    -----------    -----------
<S>                                                                                     <C>            <C>            <C>        
Cash flows from operating activities:
   Net income (loss) ................................................................   $(1,639,544)   $   (97,204)   $    78,658
   Adjustments to reconcile net income (loss) to net cash provided
     by operating activities:
       Depreciation and amortization ................................................       273,797        174,184
       Loss on sale of equipment ....................................................                       48,693
       Unrealized losses on investments .............................................        24,944
       Changes in operating assets and liabilities:
         (Increase) decrease in accounts receivable .................................       539,308       (424,712)      (421,634)
         (Increase) in due from related party .......................................                     (170,648)
         (Increase) decrease in inventories .........................................       (47,098)       578,755         (1,943)
         (Increase) decrease in prepaid expenses and other current assets ...........      (241,607)       206,671         (1,160)
         Increase in due to related parties .........................................       960,102
         (Increase) in other assets .................................................                      (37,782)
         Increase in accounts payable ...............................................       335,405        492,777        430,073
         Increase (decrease) in accrued expenses and other
           current liabilities ......................................................       211,318         29,634         (7,048)
                                                                                        -----------    -----------    -----------
             Net cash provided by operating activities ..............................       416,625        800,368         76,946
                                                                                        -----------    -----------    -----------

Cash flows from investing activities:
   Purchase of property, plant and equipment ........................................    (7,983,449)    (3,120,133)    (1,560,488)
   Purchase of investments ..........................................................       (34,773)
   Purchase of Bioren SA (net of cash acquired) .....................................                   (4,906,110)
   Increase in other assets .........................................................                      (35,324)
   Proceeds from sale of equipment ..................................................                      255,972
                                                                                        -----------    -----------    -----------
             Net cash (used in) investing activities ................................    (8,018,222)    (7,805,595)    (1,560,488)
                                                                                        -----------    -----------    -----------

Cash flows from financing activities:
   Short-term borrowings ............................................................     1,764,905
   Proceeds from issuance of common stock ...........................................     9,470,160      3,813,160
   Long-term borrowings .............................................................     2,219,307      4,455,955      1,467,711
   Deferred offering costs ..........................................................                      (31,059)
   Repayment of note payable ........................................................    (1,867,323)
   Repayment of related party loan ..................................................    (1,738,671)
   Advances on reimbursable expenses ................................................       750,000
                                                                                        -----------    -----------    -----------
             Net cash provided by financing activities ..............................   10,598,378       8,238,056      1,467,711
                                                                                        -----------    -----------    -----------

Effect of exchange rate change on cash ..............................................       (59,446)        75,299         10,096
                                                                                        -----------    -----------    -----------

Net increase (decrease) in cash and cash equivalents ................................     2,937,335      1,308,128         (5,735)

Cash and cash equivalents - at beginning of period ..................................     1,425,603        117,475        123,210
                                                                                        -----------    -----------    -----------

CASH AND CASH EQUIVALENTS - AT END OF PERIOD ........................................   $ 4,362,938    $ 1,425,603    $   117,475
                                                                                        -----------    -----------    -----------
                                                                                        -----------    -----------    -----------

Supplemental disclosures of cash flow information: 
  Cash paid during the period for:
     Interest .......................................................................   $   698,125    $   427,311    $    36,032
     Income taxes ...................................................................                       12,195

Equipment purchases included in:
   Accounts payable .................................................................       716,593
   Due to related parties ...........................................................       240,000


</TABLE>


                 The accompanying notes to financial statements
                          are an integral part hereof.

                                      F-5





<PAGE>

<PAGE>


                          BIGMAR, INC. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


(NOTE A) - The Company:

        [1]  Business and recent transactions:

               Bigmar, Inc. (the "Company") 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 including six oncological products, the distribution
rights to which were acquired from affiliates of Chemholding SA. A
dispute between the Company and the affiliates (Note C), was settled effective
March 27, 1997 and the licensing and distribution agreements with the affiliates
were cancelled. The Company has identified other sources for certain of the raw
materials required for the products that the Company intends to manufacture in
its newly built facility.

        Certain stockholders of the Company owned 100% of Bigmar Pharmaceuticals
SA ("Pharmaceuticals") and 50% of Bioren SA ("Bioren"), two Swiss corporations.
The other 50% of Bioren is owned by Pharmaceuticals. On April 9, 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 of the Company acquired their interests.

        Pharmaceuticals is currently engaged in the distribution in various
countries in Europe of oncological products, a substantial portion of which were
purchased from the Chemholding affiliates. Bioren is primarily a manufacturer
and distributor of intravenous infusion solutions in Switzerland. In addition,
the Company intends to become a manufacturer and a distributor of pharmaceutical
products.

        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.

(continued)

                                      F-6


<PAGE>

<PAGE>


                          BIGMAR, INC. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS

(NOTE A) - The Company:  (continued)

        [2]  Basis of presentation:

               The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has utilized a
significant portion of the proceeds of its recent initial public offering in the
construction of its property, plant and equipment and in the process of
designing and testing the plant and equipment in order to obtain approval by the
Intercantonal Office for the Control of Medications ("IKS") in Switzerland and
by the United States Food and Drug Administration for the manufacture of
pharmaceutical products ("validation"). Although the Company obtained a
provisional approval to manufacture product from the IKS in February 1997, the
Company anticipates that it will require additional financing in order to
complete the validation process and to fund its operations prior to the plant
becoming fully operational. Also, there is no assurance that the Company will be
able to manufacture its proposed products successfully or that such products
will be accepted by the Company's targeted customers. In addition, as discussed
in Note C, the Company has terminated agreements with a related party which was
a source of raw materials which generated approximately $833,000 in revenue in
1996. Management currently anticipates that its cash resources will be depleted
by July 1997 and that its operations will not begin to generate sufficient cash
to fund its expansion and planned research and development activities by such
time. These factors raise substantial doubt about the Company's ability to
continue as a going concern. Management is discussing additional financing with
financial institutions, however, there is no assurance that such financing will
be available on terms acceptable to the Company, if at all. No adjustments have
been made to reflect the recoverability or classification of recorded assets
amounts or the classification of liabilities should the Company be unable to
continue as a going concern.

(NOTE B) - Significant Accounting Policies:

        [1]    Consolidation:

               The consolidated financial statements include the accounts of
Bigmar, Inc. and its wholly owned subsidiaries, Pharmaceuticals, Bioren and
Bigmar Therapeutics, Inc. ("Therapeutics"), a Delaware corporation formed in
September 1995 to enter into a partnership agreement (see Note L). All
significant intercompany accounts and transactions have been eliminated in the
consolidated financial statements.

(continued)

                                      F-7


<PAGE>

<PAGE>


                          BIGMAR, INC. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS

(NOTE B) - Significant Accounting Policies:  (continued)

        [2]    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 at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

        [3]    Fair Value of Financial Instruments:

               The carrying value of cash, trade receivables and trade payables
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.

        [4]  Cash equivalents:

               All highly liquid investments purchased with a maturity of three
months or less are considered to be cash equivalents.

        [5]    Inventory:

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

        [6]    Property, plant and equipment:

               Property, plant and equipment are stated at cost. Maintenance and
repairs are charged to operations as incurred. Depreciation is calculated on a
straight-line basis utilizing the assets' estimated useful lives of 3 to 25
years.

        [7]    Organization expenses:

               Costs associated with the organization of the Company are
capitalized and amortized over five years.

        [8]    Goodwill:

               Goodwill is amortized over a ten year period. The Company intends
to evaluate the continuing value of goodwill based on undiscounted cash flows.

(continued)

                                      F-8


<PAGE>

<PAGE>


                          BIGMAR, INC. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS

(NOTE B) - Significant Accounting Policies:  (continued)

        [9]    Income taxes:

               Income taxes are accounted for by the asset/liability approach.
Deferred taxes arise from differences between the financial reporting and tax
bases of assets and liabilities.

        [10]   Foreign Currency Transactions:

               Gains and losses resulting from foreign currency transactions and
changes in foreign currency positions are included in income or expense
currently. Such amounts were insignificant in 1995 and 1994.

        [11]   Foreign Currency Translation:

               The Company's operations are located in Switzerland and its net
assets, revenues and expenses are substantially all denominated in Swiss francs,
while the Company presents its consolidated financial statements in US dollars.
Assets and liabilities are translated at the exchange rates in effect at the
balance sheet date. Revenues and expenses are translated at the weighted average
exchange rates for the period. Net gains and losses arising upon translation of
local currency financial statements to US dollars are accumulated in a separate
component of stockholders' equity, the cumulative translation adjustment
account, which may be realized upon the eventual disposition by the Company of
part or all of its investments in its Swiss operations.

        [12]   Per share data:

               Net income (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 A.

        [13]  Long-lived assets:

               In accordance with Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for 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,
1996.

(continued)

                                      F-9


<PAGE>

<PAGE>


                          BIGMAR, INC. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS

(NOTE B) - Significant Accounting Policies:  (continued)

        [14]  Stock-based compensation:

               During 1996, the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
No. 123"). The provisions of SFAS No. 123 allow companies to either expense the
estimated fair value of stock options or to continue to follow the intrinsic
value method set forth in Accounting Principles Bulletin Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB No. 25") but disclose the pro
forma effects on net income (loss) had the fair value of the options been
expensed, The Company has elected to continue to apply APB No. 25 in accounting
for its stock option incentive plans (see Note O).

(NOTE C) - Related Party Dispute:

         In the second half of 1996, Cerbios-Phama SA ("Cerbios"), a
wholly-owned subsidiary of Chemholding SA, a beneficial owner of
approximately 25.4% of the Company's common stock, rendered invoices to the
Company, in the amount of approximately $681,000 for expenses and fees to which
Cerbios claimed to be entitled in connection with services it provided to the
Company in 1996. In December 1996, Cerbios submitted a letter to the Company
requesting reimbursement of approximately $1,118,000 to which Cerbios claimed to
be entitled in connection with services it provided to the Company in 1995. In
March 1997, Cerbios claimed that it was owed an additional $2,243,000 for
various "services" and "values of lost contracts".

         The Company maintains that no substantial services were provided in
1995 by Cerbios to the Company and that the amounts claimed for 1996 by Cerbios
far exceeded the actual expenses incurred by Cerbios on behalf of the Company.
The actual expenses were accrued in the Company's 1996 quarterly financial
statements. On March 27, 1997, the Company reached a settlement with Cerbios of
the claims for approximately $300,000 and in connection therewith Cerbios
delivered to the Company a release.

         Pursuant to the settlement, the Company and each of its wholly-owned
subsidiaries and Cerbios have mutually agreed to the cancellation of the
following agreements: the Sapec Exclusive Distribution Agreement (the "Sapec
Agreement"), the Bioferment Exclusive Distribution and Supply Agreement (the
"Bioferment Agreement"), and the Bioferment License and Supply Agreement (the
"Bioferment License Agreement"). In addition, the Company has determined to
terminate all relationships and transactions with

(continued)

                                     F-10


<PAGE>

<PAGE>


                          BIGMAR, INC. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS

(NOTE C) - Related Party Dispute:  (continued)

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 Sapec Agreement provided for, among other things, the supply of
Sodium Leucovorin and five generic oncological products. The Company has not
obtained another supplier for Sodium Leucovorin. The Company has identified
alternative suppliers for the five generic oncological products and has already
obtained two of the generic oncological products from other suppliers. The
Company believes it can acquire the other three products from alternative
suppliers. The Company has paid Sapec a one-time fee of $100,000 for the grant
of the exclusive rights and licenses that were part of the Sapec Agreement. This
fee has been forfeited and no refund will be granted.

         The Bioferment Agreement provided exclusive worldwide rights to use,
manufacture and market recombinant urokinase ("Urokinase"), a biotechnological
product. The Company has not obtained another supplier for Urokinase. Pursuant
to the Bioferment Agreement, the Company has paid Bioferment a fee of $100,000.
This fee has been forfeited and no refund will be granted. The Company will
attempt to locate an alternative supplier of Urokinase. However, there is no
guarantee the Company will be successful in finding another supplier for
Urokinase. The Bioferment License Agreement  provided the license to use, 
manufacture and market a recombinant human growth hormone, a biotechnological
product.

(NOTE D) - Bioren Acquisition:

         On June 30, 1995, Pharmaceuticals acquired 100% of the outstanding
stock of Bioren for $5,195,000 and immediately sold 50% of the stock to certain
stockholders of Pharmaceuticals and the Company.

         The consolidated financial statements include the accounts of Bioren
from July 1, 1995, the date of acquisition from a nonaffiliated party. Had the
acquisition of Bioren occurred at the beginning of 1994, the Company's results
would have been as follows:

                                     December 31,
                              --------------------------
                                  1995          1994
                              ----------     -----------
     Sales . . . . . . . . .  $8,529,327     $ 6,587,312
     Gross profit. . . . . .   2,833,146      1,497,029
     Income (loss) before
        extraordinary item .       5,107     (2,905,744)
     Income (loss) before
        extraordinary item
        per share. . . . . .     $.00           $(3.87)
                                 =====          =======

(continued)

                                     F-11


<PAGE>

<PAGE>


                          BIGMAR, INC. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS

(NOTE E) - Inventories:

                                                             December 31,
                                                   -----------------------------
                                                       1996               1995
                                                     ----------       ----------
Raw materials ................................       $  363,114       $  519,414

Finished goods ...............................          587,357          532,534
                                                     ----------       ----------

          T o t a l ..........................       $  950,471       $1,051,948
                                                     ==========       ==========


(NOTE F) - Property, Plant and Equipment:

                                                             December 31,
                                                      --------------------------
                                                          1996          1995
                                                       -----------   -----------
Building and building
   improvements ....................................   $12,341,104   $ 8,455,743
Land ...............................................       104,517       121,212
                                                                     -----------
Machinery ..........................................     4,539,894     2,205,390
Equipment ..........................................       759,128        66,162
                                                       -----------   -----------
                                                        17,744,643    10,848,507
Less accumulated depreciation ......................       337,503       130,673
                                                       -----------   -----------
          T o t a l ................................   $17,407,140   $10,717,834
                                                       ===========   ===========

        For the years ended December 31, 1996, December 31, 1995 and December
31, 1994 interest of $500,000, $235,000 and $40,000, respectively 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. Total interest incurred, including such capitalized
amounts was approximately $706,000, $417,000 and $40,000 in 1996, 1995 and 1994,
respectively.

(NOTE G) - Note Payable:

        The note payable of $1,529,993 including interest of $36,894 at
December 31, 1996 is due to a bank with interest payable quarterly at
a rate based on the interbank rate quoted by the Swiss Bank
Corporation in Lugano, Switzerland (5.75% at December 31, 1996).  The
note has no specific principal repayment terms.

        The note payable of $1,960,385 at December 31, 1995 was due to a company
owned by the seller of Bioren with interest at 6% and was repaid in 1996.

(continued)

                                     F-12


<PAGE>

<PAGE>


                          BIGMAR, INC. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS

(NOTE H) - Long-Term Debt:

        Long-term debt consists of:
<TABLE>
<CAPTION>
                                                                        December 31,
                                                                ---------------------------
                                                                    1996         1995
                                                                ------------   -----------
<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 demand by the
     bank after May 1999 ......................................   $2,239,650   $2,597,405
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, 1996  and December 31,
     1995 was 5.5% per annum; payable in installments of
     $373,275 in 1997,  $373,275 in 1998
     and $746,550 in 1999 .....................................    1,493,100    1,731,602
Bank loan partially secured by the Pharmaceuticals
     building and equipment, subject to certain restrictive
     covenants; principal payable December 31, 2001, interest
     at 3.19% through  June 30, 1997 and not
     to exceed 6.5% through December 31, 1998 .................    1,493,100      211,826
Bank loan collateralized by mortgage on the
     Pharmaceuticals building and equipment; subject to
     certain restrictive  covenants; principal payable in
     installments of $93,319 in 1997, $261,293
     in 1998 and $373,275 paid annually thereafter until
     full repayment;  interest payable at an adjustable rate
     not to exceed 5% through March 3,
     2002; and partially guaranteed by a major
     stockholder of the Company ...............................    2,594,234    1,986,614
Bank loan pursuant to $223,965 line-of-credit;
     principal payable on demand any time on or after
     December 31, 1997; interest at 5.75% per annum and
     subject to certain restrictive covenants .................                   100,000
                                                                  ----------   ----------
             T o t a l ........................................    7,820,084    6,627,447
             Less current portion .............................      466,594        - 0 -
                                                                  ----------   ----------
             Long-term portion ................................   $7,353,490   $6,627,447
                                                                  ==========   ==========
</TABLE>

        Future maturities of long-term debt are as follows:

  Year Ended                                                 Long-Tterm
 December 31,                                                    Debt

   1997. . . . . . . . . . . . .                            $  466,594
   1998. . . . . . . . . . . . .                               634,569
   1999. . . . . . . . . . . . .                             3,359,475
   2000. . . . . . . . . . . . .                               373,275
   2001. . . . . . . . . . . . .                             1,866,375
   Thereafter. . . . . . . . . .                             1,119,796
                                                            ----------
                                                            $7,820,084

(continued)

                                     F-13

<PAGE>

<PAGE>


                          BIGMAR, INC. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS

(NOTE I) - Related Party Loan:

        Pharmaceuticals owed $1,809,524 at December 31, 1995, to a company owned
by certain stockholders of the Company. This 9% interest bearing loan was repaid
in August 1996 with the proceeds of a bank loan (Note G).

(NOTE J) - 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 the 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.

(NOTE K) -  Income Taxes:

        Deferred income tax assets and liabilities are provided for temporary
differences between financial statement amounts and the amounts currently
taxable in the jurisdictions in which the Company operates. Deferred tax assets
are provided for operating loss carryforwards of Bioren which can only be
utilized to offset future taxable income, if any, of Bioren for up to six years
after incurring the losses, depending on the applicable tax legislation and
federal net operating loss carryforwards of Bigmar, Inc. The deferred tax asset
at December 31, 1996 has been fully reserved as the future utilization of such
asset is uncertain.

        The deferred tax asset as of December 31, 1996 was as follows:

Deferred tax assets:
   Benefit of operating loss
     carryforwards:
       Switzerland ..............................       $ 3,100,000
       United States ............................           310,000
                                                        -----------
          Total deferred tax asset ..............         3,410,000
Deferred tax liability:
   Capitalized interest .........................          (160,000)
                                                        -----------
   Net deferred tax asset .......................         3,250,000
   Less valuation allowance .....................         3,250,000
                                                        -----------
            T o t a l ...........................      $   - 0 -
                                                       ============

(continued)


                                     F-14

<PAGE>

<PAGE>


                          BIGMAR, INC. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS

(NOTE K) -  Income Taxes:  (continued)

        Bioren has net operating loss carryforwards of approximately $3,300,000
expiring on December 31, 1997, and net operating loss carryforwards of
approximately $9,100,000 expiring from December 31, 1998 through December 31,
2002. Approximately $1,300,000 of net operating loss carryforwards expired in
1996.

        The tax charge in Switzerland is an accumulation of the taxes due to the
city, the canton (state) and the federal authorities. 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 taxable
equity, the Company believes that 20% and 30% are fair approximations of the
effective cumulative tax rates for Pharmaceuticals and Bioren, respectively. 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.

        On January 1, 1995, a new federal tax law, and for most Swiss cantons, a
new cantonal tax law, came into force in Switzerland. The new laws provide for a
change in the system of assessment from a two-year past assessment period to a
one-year current assessment period. Because these changes may create a gap
during which certain profits made in prior years may not be taxed or may be only
partially taxed, the new laws have provided for a transition period during which
a special method is followed to calculate income taxes. Since the 1995 taxes due
based on the old methods of assessment had been fully accrued for during 1993
and 1994, the 1995 tax charge only relates to the adjustment needed based on the
1995 income. A reconciliation between the actual income tax expense and income
taxes computed by applying the United States federal income tax rate of 34% to
earnings before taxes is as follows:

<TABLE>
<CAPTION>

                                                                    Year Ended December 31,
                                                         ----------------------------------------------
                                                            1996              1995             1994
                                                         ----------        ----------        ----------
<S>                                                      <C>               <C>               <C>      
Computed income taxes (benefit) at
   34% rate .......................................      $(557,445)        $ (34,069)        $  30,332
Impact of difference between Swiss
   effective rate and U.S. tax
   rate ...........................................        105,541            14,029           (12,490)
Increase in valuation reserve on
   deferred tax assets ............................        594,104            14,868
Foreign exchange losses on
   long-term intercompany loans,
   deductible for tax purposes
   in Switzerland .................................        (36,027)
Other .............................................       (106,173)            2,172            (7,289)
                                                         ---------         ---------         ---------
                                                         $ - 0 -           $  (3,000)        $  10,553
                                                         =========         =========         =========
</TABLE>

(continued)


                                     F-15


<PAGE>

<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS

(NOTE L) - Collaborative Agreements With Related Parties:

        [1]  The Cernelle Agreement:

               On November 5, 1995 Pharmaceuticals entered into an exclusive
distribution and supply agreement ("Cernelle Agreement") with AB Cernelle, a
Swedish corporation formerly owned by a principal stockholder of Bigmar
("Cernelle"). The Company's Chief Executive Officer is a director of Cernelle.
The Cernelle Agreement provides that Pharmaceuticals shall be the exclusive
worldwide distributor of certain oral dosage cancer products ("Cernelle
Products") and is for a term of 15 years from the date of the first commercial
sale by Pharmaceuticals of the Cernelle Products. Pharmaceuticals shall pay to
Cernelle a one time amount of $100,000 upon notification by Cernelle that the
Cernelle Products are ready for shipment to Pharmaceuticals and shall purchase
the Cernelle Products at certain prices as defined in the agreement. In the
event the term of the Cernelle Agreement or any renewal thereof is not extended,
Pharmaceuticals shall have, at a minimum, a nonexclusive worldwide right to
distribute the Cernelle Products for three additional years.

               Pharmaceuticals also entered into a technical services agreement,
dated November 5, 1995, with Cernelle ("Cernelle TSA"). The Cernelle TSA
provides that Cernelle will prepare abbreviated new drug applications ("ANDA")
submissions to the United States Food and Drug Administration ("FDA") covering
the Cernelle Products. Pharmaceuticals shall pay Cernelle a fee of $20,000 for
each ANDA submitted to and accepted by Pharmaceuticals. Pursuant to the
agreement, Cernelle assigned to Pharmaceuticals the sole and exclusive right,
title and interest in and to the technical services without further
consideration. The term of this agreement is for 15 years and is renewable on
the mutual written agreement of the parties.

        [2]    The Protyde Agreements:

               Pursuant to an agreement dated as of October 1995 Therapeutics
and a wholly owned subsidiary of Protyde Pharmaceuticals, Inc. ("Protyde") have
formed a partnership, Protyde-Bigmar Therapeutics (the "Partnership"), for the
purpose of coordinating the manufacture and marketing of certain pharmaceutical
products ("products") for the treatment of human cancer.

               The business of the Partnership is to obtain FDA approval to
market certain products, to manufacture the products, and to market the
products. Pursuant to the Partnership Agreement, each of the partners initially
has a 50% interest in the Partnership. The Company will account for its
investment in the Partnership on the equity method. As its initial contribution
to the Partnership, Protyde will contribute to the Partnership up to $3,075,000
in cash, the first $750,000 of which was paid to the Company on March 29, 1996,
with the balance to be contributed at such times and in such amounts

(continued)

                                     F-16
<PAGE>

<PAGE>


                          BIGMAR, INC. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS

(NOTE L) - Collaborative Agreements With Related Parties:  (continued)

        [2]    The Protyde Agreements:  (continued)

so as to enable the Partnership to timely satisfy its obligations, and to make
its payments under the terms of its manufacturing agreement. As Therapeutics'
capital contribution to the Partnership, Therapeutics will cause the Company to
make its manufacturing capacity available to the Partnership under the terms of
the manufacturing agreement.

               Under the Partnership Agreement, the Partnership is the sole
owner of all right, title and interest in all FDA-approved ANDAs for any
products submitted for approval by the Partnership. The Partnership is also the
sole owner of all right, title and interest in and to proprietary information
and marketing information which is developed or acquired by a partner or its
affiliates, using partnership funds, or while performing activities subject to
reimbursement by the Partnership. However, during the term of the Partnership
each of the partners has a royalty free, worldwide right to use and practice any
such proprietary information and marketing information for any purpose outside
the scope of the Partnership's business.

               Pursuant to the Partnership Agreement, the Partnership will
continue until December 31, 2005, unless earlier terminated.

               The Company has entered into a manufacturing agreement with the
Partnership and Protyde has entered into a marketing agreement with the
Partnership. Pursuant to the manufacturing agreement, the Company's
responsibilities include (i) acquiring and performing stability testing on all
raw materials and packaging materials necessary for the manufacture of the
products, (ii) providing production capacity available to the Partnership in
order to meet production obligations, and (iii) undertaking all measures for
quality control which are either required by the FDA or requested by the
Partnership.

               The exclusive right to distribute certain of the Partnership
products in certain territories had previously been granted by the Company to a
third party. Subsequently, the Company included certain of such rights as part
of its contribution to the Partnership. As a result, Protyde may have a breach
of contract claim against the Company. The Company does not believe that the
ultimate outcome of this matter will have a material adverse effect on its
operations.

(continued)

                                     F-17
<PAGE>

<PAGE>


                          BIGMAR, INC. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS

(NOTE M) - Commitments:

        [1]  Employment agreement:

               In April 1996 the Company entered into a five-year employment
agreement with its President and Chief Executive Officer providing for an annual
salary of $200,000, commencing upon consummation of the initial public offering
subject to increases based on the consumer price index, and bonuses of at least
25% of the base salary.

               In addition, the Company has entered into employment contracts
with certain officers and employees pursuant to which the Company has agreed to
pay base compensation aggregating $420,000 per year. These contracts commenced
on various dates between July 1, 1996 and September 30, 1996, and have a term of
two years. The contracts are subject to increases based on the consumer price
index.

        [2]    Leases:

               The Company leases office space in the United States and
Switzerland under various leases.

               In March 1996 the Company entered into an agreement to sublease
executive office space from a company of which the Company's President was
formerly an officer. The sublease is for a term of two years. The Company also
leases warehouse space in Switzerland under an operating lease expiring through
1999. Rent expense amounted to $56,215 in 1996, and $19,250 in 1995.

               Minimum future rental payments are as follows:

                      Year Ended

                      December 31,

                         1997 . . . . . . . . .  $ 59,250
                         1998 . . . . . . . . .    40,650
                         1999 . . . . . . . . .     3,077
                                                 --------
                                                 $102,977

               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 Treasurer. The Company's obligation to lease the
premises is contingent upon the lessor's substantial completion of construction
in accordance with the approved

(continued)


                                     F-18
<PAGE>

<PAGE>


                          BIGMAR, INC. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS

(NOTE M) - Commitments:  (continued)

        [2]    Leases:  (continued)

plans and specifications. The Company will use the premises for its offices and
laboratories. The lease is for a term of five years from commencement date, with
an option to renew for an additional five years, and provides for rent of
$120,000 per annum. A commencement date has not yet been determined.

               Bioren leases part of its Couvet facility to a third party
pursuant to a year to year lease. The rental income for the year ended December
31, 1996 and for the period from July 1, 1995 (date of acquisition of Bioren) to
December 31, 1995 was $93,136 and $49,144, respectively.

(NOTE N) - Concentration of Credit Risk:

        Bioren's main customers for intravenous products are hospitals located
in Switzerland. A significant number of these hospitals are owned by the canton
(state) or the city where they are located and the credit risk traditionally is
not significant. For other pharmaceutical products, the customers are privately
owned and credit risk is greater. The management has recorded its estimate of
credit loss through the allowance for doubtful accounts.

(NOTE O) - Significant Customers and Suppliers:

        Sales to significant customers were as follows:

                                            Year Ended
                                         December 31, 1995
                                    --------------------------
                                      Amount           Percent
                                    ----------         -------
Prostate materials (one
   customer). . . . . .             $1,023,340            18%
Oncological products
   (one customer) . . .                668,511             12


        In 1996 no one customer accounted for more than 10% of net sales. 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.

(continued)

                                     F-19
<PAGE>

<PAGE>


                          BIGMAR, INC. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS

(NOTE P) - Related Party Transactions:

                                                        December 31,
                                                      --------------
                                                       1996    1995
                                                      ------  ------
                                                      (in thousands)

           Freight charges paid to related party                $ 35
           Purchases from related parties ......      $965       206
           Selling, general and administrative
             expenses paid to related party ....        13       134
           Interest paid to related parties ....       102       151
           Research and development ............        22

         (NOTE Q) - Common Stock:

        Stock options:

        The Company applies APB No. 25 in accounting for its stock option
incentive plan and, accordingly, recognizes compensation expense for the
difference between the fair value of the underlying common stock and the grant
price of the option at the date of grant. The effect of applying SFAS No. 123 on
1996 pro forma net loss is not necessarily representative of the effects on
reported net loss for future years due to, among other things, (1) the vesting
period of the stock options and the (2) fair value of additional stock options
in future years. Had compensation cost for the Company's stock option plans been
determined based upon the fair value at the grant date for awards under the
plans consistent with the methodology prescribed under SFAS No. 123, the
Company's net loss in 1996 would have been approximately $2,776,000 or $.85 per
share. The weighted-average fair value of the options granted during 1996 are
estimated as $5.48 per share on the date of grant using the Black-Scholes
option-pricing model with the following assumptions: dividend yield 0%,
volatility of 66%, risk-free interest rate of 6.22% and expected life of five
years.

        The Company adopted an option 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 provides for the grant of
options to purchase up to 300,000 shares 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.

(continued)

                                     F-20
<PAGE>

<PAGE>


                          BIGMAR, INC. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS

(NOTE Q) - Common Stock:  (continued)

        Stock options:  (continued)

               Additional information with respect to the Plan's activity is
summarized as follows:

                                                                Weighted-
                                                                 Average
                                                                Exercise
                                                      Shares     Price
                                                     --------   ---------
         Options granted during 1996 and
            outstanding at December 31, 1996  .      283,000      $8.96
         Options exercisable at December 31,
            1996  .............................      179,668      $8.97
                                                     =======      =====

               The following table summarizes information about stock options
outstanding and exercisable at December 31, 1996:
<TABLE>
<CAPTION>

                                         Options Outstanding
                           -----------------------------------------------
                                              Weighted-                            Options Exercisable
                                              Average                           -------------------------
                                             Remaining         Weighted-                        Weighted-
                                            Contractual         Average                          Average
      Range of                  Number        Life             Exercise         Number          Exercise
   Exercise Price            Outstanding    (in Years)          Price        Exercisable          Price
  --------------             ----------     ----------     --------------   -------------     ------------
<C>      <C>                   <C>           <C>                 <C>            <C>               <C>  
$7.50 to $9.83                 283,000       5.05                $8.96          179,668           $8.97
                              =========      =====               ======         ========          =====
</TABLE>

               At December 31, 1996, options for 20,000 shares of common stock
were available for future grant under the option plan and 47,000 shares of stock
were available for future grant under the director option plan.


                                     F-21


 
<PAGE>

<PAGE>


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

None.


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

        Set forth  below  are the  principal  occupations  and  certain  related
information of the Company's directors and executive officers:

        John G. Tramontana,  51, has served as Chairman of the Board,  President
and Chief  Executive  Officer of the Company  since its  inception  in September
1995.  From November 1989 to March 1996, Mr.  Tramontana was the chief operating
officer and a director of Chemholding, a holding company for five pharmaceutical
companies involved in the development,  manufacture,  and  commercialization  of
active  pharmaceutical   ingredients  and  finished   pharmaceutical   products.
Chemholding  is a principal  stockholder  of the  Company.  Mr.  Tramontana  had
significant    responsibilities    in   the    development,    manufacture   and
commercialization  of  products of  Chemholding.  Mr.  Tramontana  was the chief
operating  officer and a director of Cerbios,  chairman of the board of Cernelle
and the  president  and a director of Cernitin,  a cosmetic and health  products
distributor.  In March 1996, Mr. Tramontana resigned from all his positions with
Chemholding,  Cerbios,  Cernelle and Cernitin.  In September 1996, following the
sale of Cernelle to an unrelated third-party,  Mr. Tramontana rejoined the board
of directors of Cernelle.  From 1985 to 1989, Mr. Tramontana was chief operating
officer,  vice  president  -- finance and a director of Ben Venue  Laboratories,
Inc., a  pharmaceutical  company  specializing  in the  manufacture  of sterile,
injectable  pharmaceutical products. From 1974 until 1985, Mr. Tramontana worked
at Adria  Laboratories Inc. (now Pharmacia & Upjohn,  Inc.), the U.S.  operating
division of Erbamont NV, a prominent  manufacturer  and marketer of  oncological
products  where from 1978 to 1984 he was treasurer,  vice-president  -- finance.
Mr. Tramontana and Mr. Medors are brothers-in-law.

        Peter P.  Stoelzle,  38, has served as Executive  Vice  President of the
Company since July 1996.  From December 1991 to July 1996, Mr.  Stoelzle  worked
with Bausch & Lomb  Pharmaceuticals,  Inc.  ("BLP"),  most recently as Director,
Regulatory  Affairs where he was responsible for  establishing and directing all
regulatory  aspects of BLP's generic drug  program.  During 1990,  Mr.  Stoelzle
served as Associate  Director,  Product  Development  at Smith & Nephew  Solopak
Laboratories.  From March 1987 to  January  1990,  Mr.  Stoelzle  was  Associate
Director,  Research & Development  at Ben Venue  Laboratories,  Inc., a contract
pharmaceutical  manufacturer.  From  February 1986 to March 1987,  Mr.  Stoelzle
served as Senior Analytical Chemist at Adria Laboratories, Inc. (now Pharmacia &
Upjohn,  Inc.).  From August 1983 to January 1986,  Mr.  Stoelzle was Manager of
Product Development at Invenex Laboratories.

        Albert Z. Hodge,  44, has served as Vice President -- Quality  Assurance
of the Company since May 1996.  From April 1993 to April 1996,  Mr. Hodge served
as Director of Quality Compliance and Manager of Regulatory  Compliance for CIBA
Vision Corp. where he was responsible for the development and  implementation of
ISO/GMP Quality Systems and facility validation programs.  From February 1992 to
March 1993, Mr. Hodge served as Regulatory Compliance Manager at Bausch and Lomb
Pharmaceuticals,  Inc.  From 1989 to 1992,  Mr.  Hodge was  Director  of Quality
Assurance at Life  Technologies,  Inc., a  biotechnology  company.  From 1985 to
1989, Mr. Hodge served as Quality Assurance Manager at Organon Teknika,  Inc., a
pharmaceutical  and medical device  company.  From 1980 to 1985, Mr. Hodge was a
Safety and  Quality  Service  Inspector  for the  United  States  Department  of
Agriculture.

        Michael K. Medors, 38, has served as Treasurer, Secretary and a director
of the Company since its  inception in September  1995.  From 1991 to 1995,  Mr.
Medors was  treasurer  and general  manager of  Cernitin,  a cosmetic and health
products distributor.  From October 20, 1982 to January 31, 1991, Mr. Medors was
tax department  supervisor of Automatic Data  Processing,  a company  offering a
diverse  portfolio  of  employer,  tax,  banking  and  insurance  services.  Mr.
Tramontana and Mr. Medors are brothers-in-law.

                                     - 32 -





 
<PAGE>

<PAGE>



        Bernard  Kramer,  43, has served as Vice  President --  Marketing  and a
director of the Company  since April 1996.  From  January 1988 until April 1996,
Mr.  Kramer  worked at Bioren  where he was a manager,  responsible  for quality
control and business development of pharmaceutical  products. Prior to 1988, Mr.
Kramer held  various  senior  management  positions  in the  technical,  quality
control and regulatory  affairs areas. From 1980 to 1987, Mr. Kramer was manager
of the  biological  quality  control and  validation  department  at Vifor SA in
Geneva.  From  1979 to 1980,  Mr.  Kramer  successfully  completed  postgraduate
practice in research and development at Ciba- Geigy in Basel.

        Eric M. Chen, 26, has been a director since June 1996 and is a member of
the Executive,  Audit, and Compensation and Stock Option Committees. Mr. Chen is
a Senior Vice-President of Fechtor,  Detwiler & Co., Inc., an investment banking
firm.  From April 1996 to August  1996 Mr.  Chen was a Managing  Director  at LT
Lawrence & Co., Inc.  From April 1995 to April 1996 Mr. Chen was  Vice-President
of Fechtor,  Detwiler & Co., Inc.  From June 1994 to April 1995,  Mr. Chen was a
research  associate with Hambrecht & Quist Incorporated where he was responsible
for selected biotechnology  companies.  From October 1992 to June 1994, Mr. Chen
was an analyst with Furman Selz Incorporated,  where he worked with a variety of
companies in the media and entertainment and consumer retailing industries.  Mr.
Chen received a B.A. in Biology from Harvard University in 1992.

        John R. Morris, 66, was elected to the Board of Directors in March 1997,
replacing a vacancy left by the  resignation of Thomas W.  D'Alonzo.  Mr. Morris
has been President of Biotrade Group since 1978, a worldwide  brokerage  company
active in  pharmaceutical  and fine chemical  industries.  From 1967 to 1978 Mr.
Morris was Chief  Executive  Officer for several  operating  companies  of Glaxo
Group.

        Philippe  Rohrer,  39, is Chief  Financial  Officer of Bioren and Bigmar
Pharmaceuticals.  He joined Bioren in August 1991, as Finance and Administration
manager with  responsibility for finance,  computerization and administration of
Bioren.  From July 1988 to August 1990,  Mr.  Rohrer was most  recently  Finance
Director of the group l'AMY SA a company  specializing  in optical  instruments.
From September 1982 to July 1987, Mr. Rohrer worked at Cluett  Peabody,  Inc. as
Product Manager and later as Finance and Administration Director.

        As of April 1997 there is one vacancy on the Board of  Directors  of the
Company. This vacancy is the result of the resignation of Mr. James M. McCormick
in December 1996.

        All directors hold office until the next annual meeting of  stockholders
of the Company and until their  successors  are elected and  qualified  or until
their earlier resignation or removal.  All officers of the Company are appointed
by and serve at the  discretion of the Board of  Directors,  except that John G.
Tramontana has an employment agreement with the Company.

        John G. Tramontana and Michael K. Medors are brothers-in-law.  There are
no other family relationships between any director,  executive officer or person
nominated or chosen to become a director or executive officer and any other such
person.

        Pursuant to an Underwriting Agreement between the Representative and the
Company,  dated June 19, 1996, for a period of five years from the  consummation
of the IPO, the  Representative  may designate one representative to be a member
of  the  Board  of  Directors  of  the  Company.  The  Representative  initially
designated Eric M. Chen, a former managing director of the Representative, to be
a director of the Company.

BOARD COMMITTEES

        The Company has established,  an Executive Committee, a Compensation and
Stock  Option  Committee,  and  an  Audit  Committee.  The  Executive  Committee
exercises all the power and authority of the Board of

                                     - 33 -





 
<PAGE>

<PAGE>



Directors in the management and affairs of the Company  between  meetings of the
Board of Directors, to the extent permitted by law. The members of the Executive
Committee are Eric M. Chen, John R. Morris and John G. Tramontana.

        The Compensation and Stock Option Committee make  recommendations to the
Board of Directors concerning compensation, including incentive arrangements, of
the Company's  officers and key employees and others and  administers the Option
Plan (as defined below) and determines the officers, key employees and others to
be granted  options  under the Option  Plan and the number of shares  subject to
such options.  In addition,  the  Compensation  and Stock Option  Committee will
administer the Director Option Plan. The members of the  Compensation  and Stock
Option Committee are Michael K. Medors, Eric M. Chen, and John R. Morris.

        The Audit  Committee  will review and  evaluate the results and scope of
the audit and other services provided by the Company's independent  accountants,
as well as the Company's accounting principles and system of internal accounting
controls.  The  members of the Audit  Committee  are Eric M.  Chen,  and John R.
Morris.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

        Section  16(a)  of the  Securities  Exchange  Act of  193,  as  amended,
requires the  Company's  officers,  directors  and persons who own more than ten
percent of the  Company's  Common Stock to file  reports of  ownership  with the
Commission and to furnish the Company with copies of these reports. Based solely
upon its review of reports received by it, or upon written  representation  from
certain  reporting  persons that no reports were required,  the Company believes
that during fiscal 1996 all filing requirements were met.

ITEM 11. EXECUTIVE COMPENSATION.

        The following table sets forth information  regarding  compensation paid
by the Company since its inception to its Chief Executive  Officer and the other
most highly compensated  executive officers whose annual  compensation  exceeded
$100,000 for the fiscal year ended December 31, 1996 (the "Named Executives"):

                           SUMMARY COMPENSATION TABLE

Annual Compensation


<TABLE>
<CAPTION>
Name and                           Salary         Bonus          Securities          All Other
principal position      Year          ($)           ($)          Underlying Options  Compensation (1)

<S>                     <C>        <C>            <C>              <C>               <C>   
John G. Tramontana      1996       $102,650       $25,000          125,000           $3,000
Chairman of the Board of
Directors, Chief
Executive Officer

</TABLE>


(1) Amounts relate to annual auto allowance.

                          OPTION GRANTS IN FISCAL 1996

<TABLE>
<CAPTION>

                                                                                                     POTENTIAL REALIZABLE VALUE
                                                                                                       AT ASSUMED ANNUAL RATE
                                                                                                     OF STOCK PRICE APPRECIATION
                                                                                                           FOR OPTION TERM
                                                                                                     --------------------------
                     NUMBER OF SECURITIES    % OF TOTAL OPTIONS
                     UNDERLYING OPTIONS      GRANTED TO EMPLOYEES   EXERCISE PRICE   EXPIRATION 
         NAME            GRANTED(1)             IN FISCAL 1996       ($ PER SHARE)     DATE               5%           10%
------------------   --------------------    --------------------   --------------   ----------      -----------    ---------
<S>                        <C>                      <C>                <C>             <C>  <C>        <C>          <C>     
JOHN G. TRAMONTANA         114,82(2)                40.%               $8.94           8/20/01         $283,623     $626,732
                           10,1(3)                  3.6%               $9.83           8/20/01          $27,623      $61,039


</TABLE>


                                     - 34 -





 
<PAGE>

<PAGE>



---------------
(1)  UNDERLYING OPTION AMOUNTS ARE STATED IN TERMS OF COMMON STOCK.
(2)  NON-QUALIFIED STOCK OPTION.
(3)  INCENTIVE STOCK OPTION.

                          FISCAL 1996 OPTION EXERCISES
                        AND FISCAL YEAR-END OPTION VALUES

        No options  were  exercised  during the fiscal year ended  December  31,
1996. The Company has no outstanding stock appreciation rights.

<TABLE>
<CAPTION>

                                                     NUMBER OF SECURITIES UNDERLYING    VALUE OF UNEXERCISED
                                                        UNDERLYING UNEXERCISED           IN-THE-MONEY
                      SHARES ACQUIRED      VALUE           OPTIONS AT FY-END            OPTIONS AT FY-END
        NAME            ON EXERCISE      REALIZED      EXERCISABLE/UNEXERCISABLE     EXERCISABLE/UNEXERCISABLE
<S>                   <C>                <C>         <C>                             <C>
JOHN G. TRAMONTANA          -               -                125,000/NONE                    $0/$0

</TABLE>

EMPLOYMENT AGREEMENTS

        In April 1996, the Company entered into an employment agreement with Mr.
Tramontana to serve as the Company's President and Chief Executive Officer.  The
employment  agreement  is for a five-year  term  commencing  June __ 1996 and is
subject to automatic annual renewal unless earlier  terminated.  Pursuant to the
terms of this  employment  agreement,  Mr.  Tramontana is required to devote his
full business time and attention to fulfill his duties and  responsibilities  to
the Company. Mr. Tramontana will receive a base salary of $200,000 for the first
year of the term of the  employment  agreement  with  subsequent  annual cost of
living  increases at the  discretion  of the Company's  Board of  Directors.  In
addition to his base  salary,  Mr.  Tramontana  is entitled to receive an annual
bonus, at the discretion of the Board of Directors, provided such bonus is equal
to at least  25% of his  base  salary.  Mr.  Tramontana's  employment  agreement
provides  that the  Company  is  required  to  provide  Mr.  Tramontana  with an
automobile  allowance  of $6,000 per annum and the Company is required to obtain
life insurance  coverage on the life and for the benefit of Mr. Tramontana in an
amount equal to $500,000,  assuming he is insurable.  Mr.  Tramontana  will also
have the right to  participate  in all  benefit  plans  afforded or which may be
afforded to other executive officers during the term of the agreement including,
without limitation,  group insurance,  health, hospital,  dental, major medical,
life and  disability  insurance,  stock  option plans and other  similar  fringe
benefits.  If Mr.  Tramontana dies or is unable to perform his duties on account
of illness or other incapacity and the agreement is terminated,  he or his legal
representative  shall  receive  from the  Company  the base  salary  which would
otherwise  be due to the  end of the  month  during  which  the  termination  of
employment  occurred plus three additional months of base salary in the event of
death and six additional  months of base salary in the event of illness or other
incapacity.  The agreement  further provides that if the Company  terminates Mr.
Tramontana's  employment for cause or if Mr. Tramontana  voluntarily  leaves the
employment of the Company,  Mr.  Tramontana shall receive his salary through the
end  of the  month  in  which  the  termination  occurred.  If Mr.  Tramontana's
employment is terminated by the Company  without  cause,  Mr.  Tramontana  shall
receive from the Company the base salary which would otherwise be due to the end
of the month during  which the  termination  of  employment  occurred  plus four
additional  months.  Mr.  Tramontana's  employment  agreement  contains  certain
confidentiality  and  non-competition   provisions.  The  Company  has  obtained
$2,000,000  of key-person  life  insurance for the benefit of the Company on the
life of Mr. Tramontana. During the second quarter of 1997, Mr.

Tramontana will be paid the minimum bonus of 25% of his base salary.

DIRECTOR COMPENSATION

        Directors who are not employees of the Company  receive $500 per meeting
attended as a director.  Committee  members  receive $500 per committee  meeting
attended.  In addition,  all directors will be reimbursed  for their  reasonable
out-of-pocket expenses in connection with attending meetings of the Board or any
committee thereof.

DIRECTOR OPTION PLAN

                                     - 35 -





 
<PAGE>

<PAGE>



        The  Board of  Directors  has  adopted  a  director  stock  option  plan
("Director  Option  Plan")  pursuant to which  directors  who are not  otherwise
affiliated with the Company (such as employees or consultants of the Company, or
an affiliate thereof) will receive options to purchase Common Stock. The purpose
of the Director  Option Plan is to promote the overall  financial  objectives of
the Company and its  stockholders by motivating  directors to achieve  long-term
growth in  stockholder  equity in the Company,  to further align the interest of
the directors with those of the Company's stockholders and to recruit and retain
the  association of these  directors.  The Director Option Plan provides for the
award of up to an  aggregate  of  50,000  shares  of  Common  Stock  and will be
administered by the Compensation and Stock Option Committee.

        The  Director  Option  Plan  provides  for  (i)  the  grant,   upon  the
consummation  of the IPO, of an option to purchase  3,000 shares of Common Stock
to each  director who was not an employee or  consultant of the Company and (ii)
the grant of an option to purchase  1,500  shares of Common Stock on the date of
each  regular  annual  stockholder  meeting  to each  participant  who either is
continuing  as a director  subsequent  to the  meeting or who is elected at such
meeting to serve as a director.  Options  granted under the Director Option Plan
must provide for the purchase of shares of Common Stock at an exercise  price of
not less than the fair market value of the Common Stock on the date of grant. No
option  under  the plan may be  exercisable  10 years  after  its date of grant.
Options  granted under the Director  Option Plan will not be transferable by the
optionee  other than by will,  by the laws of  descent  and  distribution  or as
required by law.

        During the fiscal year ended December 31, 1996, pursuant to the Director
Option Plan,  Messrs.  Eric Chen, James M. McCormick and Thomas W. D'Alonzo were
each  granted an option to purchase  3,000 shares of Common Stock at an exercise
price of $7.50.

OPTION PLAN

        In April  1996,  the Board of  Directors  adopted  and the  stockholders
approved an option plan (the "Option  Plan").  The Option Plan  provides for the
grant of incentive stock options  ("ISOs") (within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended) and  non-qualified  stock options
("NQSOs") to directors,  officers and employees of the Company.  The Option Plan
further  provides  for the  grant of NQSOs  to  directors  and  agents  of,  and
consultants  to, the  Company,  whether or not  employees  of the  Company.  The
purpose  of the  Option  Plan is to  attract  and  retain  exemplary  directors,
employees,  agents,  and consultants.  All options granted under the Option Plan
are set at an  exercise  price of not less  than  the fair  market  value of the
Common  Stock on the date of grant.  All options  granted  under the Option Plan
will not be  transferable  by the  optionee  other than by will,  by the laws of
descent and distribution or as required by law.

        Options  granted under the Option Plan may not be exercisable  for terms
in excess of 10 years from the date of grant.  In  addition,  no options  may be
granted  under the  Option  Plan later  than 10 years  after the  Option  Plan's
effective date. The total number of shares of Common Stock with respect to which
options will be granted under the Option Plan is 300,000.  The shares subject to
and  available  under  the  Option  Plan may  consist,  in whole or in part,  of
authorized  but  unissued  stock or treasury  stock not  reserved  for any other
purpose. Any shares subject to an option that terminates,  expires or lapses for
any reason,  and any shares  purchased  pursuant  to an option and  subsequently
repurchased by the Company  pursuant to the terms of the option,  shall again be
available for grant under the Option Plan.

        The Option Plan is administered by the Board of Directors of the Company
which  determines,  in its  discretion,  among other things,  the  recipients of
grants, whether a grant will consist of ISOs or NQSOs, or a combination thereof,
and the  number of shares of Common  Stock to be subject  to such  options.  The
Board of Directors of the Company  may, in its  discretion,  delegate its power,
duties and  responsibilities  under the Option Plan to a committee consisting of
two or more directors who are "disinterested persons" within the meaning of Rule
16b-3 promulgated under the Securities Act of 1934, as amended. The Compensation
and Stock Option  Committee,  which is responsible for  administering the Option
Plan, will be composed of Michael K. Medors, Eric M. Chen and John R. Morris.

        The Option Plan contains  certain  limitations  applicable  only to ISOs
granted thereunder. To the extent

                                     - 36 -




 
<PAGE>

<PAGE>



that the aggregate fair market value,  as of the date of grant, of the shares to
which  ISOs  become  exercisable  for the first time by an  optionee  during the
calendar year exceeds $100,000,  the ISO will be treated as a NQSO. In addition,
if an optionee  beneficially  owns more than 10% of the Common Stock at the time
the individual is granted an ISO, the option price per share cannot be less than
110% of the fair market value per share and the term of the option cannot exceed
five years.

        During the fiscal year ended  December 31, 1996,  pursuant to the Option
Plan,  John G.  Tramontana was granted an option to purchase  10,171 and 114,829
shares of Common Stock at exercise prices of $9.83 and $8.94 respectively, Peter
P.  Stoelzle was granted an option to purchase  75,000 shares of Common Stock at
an  exercise  price of $8.94,  Bernard  Kramer was granted an option to purchase
25,000 shares of Common Stock at an exercise price of $8.94,  Philippe Roher was
granted an option to purchase 25,000 shares of Common Stock at an exercise price
of $8.94,  Albert Z. Hodge was  granted an option to purchase  15,000  shares of
Common Stock at an exercise price of $8.94,  and certain other  individuals were
granted  options to purchase  15,000 shares of Common Stock at an exercise price
of $8.94.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

        The  Common  Stock is the  Company's  only  outstanding  class of voting
securities.

(A) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.

         The following table sets forth beneficial  ownership of Common Stock as
of April 14, 1997 by each person known by the Company to be the beneficial owner
of more than five percent of the Common Stock.


<TABLE>
<CAPTION>
                        Name and address         Amount and nature of
Title of class          of  beneficial owner     beneficial ownership    Percent of class

<S>                     <C>                      <C>                     <C>
Common Stock            Chemholding SA (1)           1,010,563              25.4%
                        Via Pian Scairolo 6
                        CH-6917 Barbengo
                        Switzerland

</TABLE>

        (1) The principal business of Chemholding,  a Swiss holding company,  is
the manufacture and distribution of pharmaceutical  products.  Maria Pia Melera,
Jan Jacob Van Troostenburg,  Pier Angelo Ghirlanda and Patrizia Melera Kaar (the
"Chem Holders") are each officers,  directors and/or  principal  stockholders of
Chemholding  and  own  in the  aggregate  approximately  80% of its  outstanding
capital stock. Chemholding has the sole power to vote or to direct the vote, and
to dispose or to direct the disposition of, the 1,010,563 shares of Common Stock
held by it,  representing  25.4% of the issued and outstanding  shares of Common
Stock.  Each  individual Chem Holder has the sole power to vote or to direct the
vote,  and to  dispose  or to direct the  disposition  of, the 70,775  shares of
Common  Stock  held  by  such  person,  representing  1.8%  of  the  issued  and
outstanding shares of Common Stock. Each individual Chem Holder may be deemed to
share the power to vote or to direct  the vote,  and to dispose or to direct the
disposition of, the 1,010,563 shares of Common Stock owned by Chemholding. Maria
Pia Melera is the mother of Patrizia  Melera Kaar.  The  foregoing is based upon
information  filed with the  Commission  on Schedule  13D filed on February  28,
1997.

        See (b) below for the beneficial ownership of John G. Tramontana.

(B) SECURITY OWNERSHIP OF MANAGEMENT.

        The following table sets forth  beneficial  ownership of Common Stock as
of  April  14,  1997 by each  (i)  director  of the  Company,  (ii)  each of the
executive  officers  included  in the Summary  Compensation  Table (See Item 11,
Executive  Compensation),  and (iii) all directors and executive officers of the
Company as a group.

                                     - 37 -





 
<PAGE>

<PAGE>



<TABLE>
<CAPTION>

Title of class          Name of beneficial     Amount and nature of
                        owner                  beneficial ownership   Percent of class
<S>                     <C>                    <C>                    <C>
Common Stock            John G. Tramontana      1,098,368(1)          26.7%


Common Stock            Bernard Kramer         8,334 (2)                 *

Common Stock            Michael K. Medors      0                         *

Common Stock            Eric M. Chen           3,000 (3)                 *

Common Stock            John R. Morris         0                         *

Common Stock            All directors      1,153,036                   27.7%
                        andexecutive  officers as
                        a group (seven persons)

</TABLE>

* Less than 1%

        (1) Includes 125,000 shares of Common Stock underlying options currently
exercisable.

        (2) Includes 8,334 shares of Common Stock underlying  options  currently
exercisable.  Does not include 16,666 shares of Common Stock underlying  options
not currently exercisable.

        (3) Includes 3,000 shares of Common Stock underlying  options  currently
exercisable.  Does not include 11,433 shares of Common Stock underlying warrants
not currently exercisable.

(c) Changes in Control

        The Company is not aware of any arrangements, the operation of which may
at a subsequent date result in a change of control of the Company

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

TRANSACTIONS WITH PRINCIPAL STOCKHOLDERS

        In November  1995,  Bioren  entered into the Sapec  Agreement and Bigmar
Pharmaceuticals  entered into the Cernelle  Agreement.  Pursuant to the terms of
the  Sapec  Agreement  Bioren  paid  Sapec  a  one-time  fee  of  $100,000  upon
notification  by Sapec or Cernelle that their  respective  oncological  products
were ready for shipment. In addition,  in November 1995, Bigmar  Pharmaceuticals
entered into the Bioferment  Agreement.  Pursuant to the terms of the Bioferment
Agreement,  Bigmar  Pharmaceuticals  paid Bioferment a $100,000.  At the time of
negotiation and execution of the foregoing agreements,  John G. Tramontana,  the
Company's Chairman of the Board, President, and Chief Executive Officer, was the
Chief  Operating  Officer and a director  of  Cerbios,  Chairman of the Board of
Cernelle and a director of Chemholding,  a principal stockholder of the Company.
Chemholding is the sole stockholder of Cerbios of which Sapec and Bioferment are
divisions.  Until July  1996,  Cerbios  was the sole  stockholder  of  Cernelle.
Certain  stockholders of the Company own in the aggregate  approximately  80% of
the capital stock of  Chemholding.  John G.  Tramontana is not a stockholder  of
Chemholding,  Cerbios or Cernelle.  On March 27, 1997,  the Company  reached the
Settlement,  and as a result of the  Settlement  terminated the contracts it had
entered into with Sapec and Bioferment.  In July  1996,  Cernelle was sold to an
unrelated  third  party.  The  Company's  agreement  with  Cernelle has not been
terminated.  Mr.  Tramontana  joined  the  board of  directors  of  Cernelle  in
September 1996.

        In 1995, Unione Farmaceutica SA, which is owned by certain  stockholders
of the Company, loaned

                                     - 38 -




 
<PAGE>

<PAGE>



$1,809,524  to the Company  bearing  interest  at the rate of 9% per annum.  The
principal  on the loan was  repaid in August  1996.  For the  fiscal  year ended
December 31, 1995, the Company made interest payments to Unione  Farmaceutica SA
in the amount of $151,000.  For the fiscal year ended  December  31,  1996,  the
Company made interest payments to Unione Farmaceutica in the amount of $96,373.

        On  January  8,  1995,  Chemholding  agreed  to be a surety  for  Bigmar
Pharmaceuticals  in the amount of $1.3 million for the loans with respect to the
Bigmar Facility.

        For the fiscal year ended  December  31,  1995,  the  Company  purchased
inventory from Cernelle and Cerbios in the aggregate amount of $206,000 and paid
selling,  general and administrative  expenses and freight charges to Cerbios in
the amount of  $169,000.  For the fiscal  year ended  December  31,  1996,  such
purchases aggregated $965,000 and the fee accrued for Cerbios in connection with
the settlement aggregated approximately $300,000.

        In June  1995,  all of the  outstanding  capital  stock  of  Bioren  was
purchased  by  Bigmar  Pharmaceuticals,  for  an  aggregate  purchase  price  of
approximately $9.4 million, consisting of approximately $5.2 million in cash and
the assumption of certain of the Bioren's liabilities in the aggregate principal
amount of $4.2 million. In addition,  in connection with the Bioren Acquisition,
Bigmar  Pharmaceuticals  became a  guarantor  on a bank  loan to  Bioren  in the
principal  amount  of $2.6  million,  which  was  collateralized  by the  Bioren
Facility,  and  provided  a  guarantee  on a second  mortgage  in the  aggregate
principal  amount of  approximately  $1.7  million  on the Bioren  Facility.  In
addition,  simultaneous  with  the  Bioren  Acquisition,  in June  1995,  Bigmar
Pharmaceuticals  sold  one-half  of its equity  interest in Bioren to the Bioren
Holders for  approximately  $2.6 million.  This sale included 500 shares (10% of
Bioren's outstanding stock) to John G. Tramontana, the Company's Chairman of the
Board, President and Chief Executive Officer, for approximately $500,000.

        In September 1995, the Company sold an aggregate of 2,375,000  shares of
Common Stock to its existing  stockholders prior to the IPO and on April 8, 1996
such existing  stockholders  contributed  99% of these shares of Common Stock to
the Company.  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 Common Stock of the Company with an approximate  fair market value
(based on the initial  public  offering  price of $7.50 per share) of $2,627,340
and the  stockholders  of Bigmar  Pharmaceuticals  exchanged  all of the capital
stock of Bigmar  Pharmaceuticals  for  2,000,938  shares of Common  Stock of the
Company  with an  approximate  fair market  value  (based on the initial  public
offering price of $7.50 per share) of $15,007,035.

TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS

        In March  1996,  the  Company  entered  into a sublease  agreement  with
Cernitin.  The  sublease is month to month and the Company  expects to terminate
the lease on May 31, 1997. The sublease is at a rental of approximately  $22,315
per annum.  Mr  Tramontana  was the  President  and a director of  Cernitin  and
Michael K. Medors was the treasurer and general  manager of Cernitin at the time
of the negotiation and execution of the sublease.

        In April 1996,  John G.  Tramontana  entered into  five-year  employment
agreement  with the Company.  In August 1996,  pursuant to the Option Plan,  Mr.
Tramontana was granted an option to purchase 10,171 and 114,829 shares of Common
Stock at  exercise  prices of $9.83 and $8.94  respectively.  In  addition,  the
Company granted options to certain directors and officers of the Company.  See -
Item 11 Executive Compensation.

        In June 1996,  the Company  granted to the  Representative  an option to
purchase 140,000 shares of

                                     - 39 -





 
<PAGE>

<PAGE>



Common  Stock at an exercise  price per share equal to $9.75.  In _____ 1996 the
Representative assigned to Mr. Eric Chen a warrants to purchase 11,433 shares of
Common Stock at an exercise price equal to $9.75.

        In December  1996,  the Company  entered into the Lease with JTech.  The
Lease  commences on the completion of  construction  of an  approximately  8,600
square foot office and laboratory  facility.  The Lease provides for a rental of
approximately  $120,000  per annum with the first  years rent due in full at the
time of  commencement  of the Lease  discounted  at 9%. Mr.  Tramontana  was the
President  and  director of JTech and Michael K.  Medors was the  Treasurer  and
director of JTech at the time of the negotiation and execution of the Lease. Mr.
Tramontana and Mr. Medors continue to hold such positions with JTech.

        Mr. Tramontana and Chemholding may be deemed to be founders or promoters
of the Company as that term is defined under the Securities Act.

        Certain of the  transactions  set forth above have been  entered into by
the Company with certain  persons who, at the time of such  transactions,  might
have been deemed control  persons or affiliates of the Company.  Notwithstanding
the foregoing,  the Company believes that the terms of these transactions are no
less  favorable to the Company  than it would have  obtained  from  unaffiliated
third parties.  The Company  anticipates that all future  transactions and loans
between the Company and its officers,  directors, 5% stockholders and affiliates
will be on terms no less  favorable  than could be  obtained  from  unaffiliated
third  parties  and that such  transactions  and  loans  will be  approved  by a
majority of the independent disinterested directors of the Company. There can be
no assurance that the company will be able to negotiate future  transactions and
loans on favorable terms to the Company or at all.

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a) (1) and (2) FINANCIAL STATEMENTS AND SCHEDULES.

        All financial statements and schedules required to be filed by Item 8 of
this Form and included in this report have been listed  previously under Item 8.
No  additional  financial  statements  or  schedules  are being  filed since the
requirements of paragraph (d) under Item 14 are not applicable to the Company.

(3) EXHIBITS.

<TABLE>
<CAPTION>
        Exhibit Number         Description of Exhibit                 Filing Status
        --------------         ----------------------                 -------------
        <C>                    <S>                                    <C>
             3.1               Restated and Amended Certificate             a
                               of Incorporation

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

             3.2               Restated By-Laws of the                      a
                               Registrant

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


</TABLE>
                                     - 40 -





 
<PAGE>

<PAGE>


<TABLE>
<CAPTION>
        Exhibit Number         Description of Exhibit                 Filing Status
        --------------         ----------------------                 -------------
        <C>                    <S>                                    <C>
             4.1               Specimen Stock Certificate                   a

             4.2               Form of Representatives Warrant              a

             10.1              Intentionally Omitted                        a

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

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

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

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

             10.6              Form of Indemnification                      a
                               Agreement

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

             10.8              Form of Medical Advisory                     a
                               Agreement

             10.9              Form of Scientific Advisory                  a
                               Agreement

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

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

</TABLE>


                                     - 41 -



 
<PAGE>

<PAGE>


<TABLE>
<CAPTION>
        Exhibit Number         Description of Exhibit                 Filing Status
        --------------         ----------------------                 -------------
        <C>                    <S>                                    <C>
            10.12              License and Supply Agreement,                a
                               dated November 14, 1995,
                               between Bigmar Pharmaceuticals
                               SA and Bioferment division of
                               Cerbios-Pharma SA

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

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

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

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

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

            10.18              International Activities                     a
                               Agreements, dated March 3, 1994,
                               between Bigmar Pharmaceuticals
                               SA and Medac GmbH

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

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

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

</TABLE>

                                     - 42 -





 
<PAGE>

<PAGE>


<TABLE>
<CAPTION>
        Exhibit Number         Description of Exhibit                 Filing Status
        --------------         ----------------------                 -------------
        <C>                    <S>                                    <C>
            10.22              Agreement, dated December 21,                a
                               1995, between Laevosan
                               international AG and Bigmar
                               Pharmaceuticals SA

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

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

            10.25              Registrant's 1996 Stock Option               a
                               Plan

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

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

            10.28              *Form of Registrant's Director               a
                               Option Plan

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

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

            10.31              Agreements between Bigmar                    a
                               Pharmaceuticals SA and Unione
                               Farmaceutica SA

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

            10.41              Cancellation Agreement, dated as      Filed Herewith
                               of March 27, 1997, between the
                               Registrant and Cerbios-Pharma
                               SA

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


</TABLE>

                                     - 43 -





 
<PAGE>

<PAGE>


<TABLE>
<CAPTION>
        Exhibit Number         Description of Exhibit                 Filing Status
        --------------         ----------------------                 -------------
        <C>                    <S>                                    <C>
            10.43              Cancellation Agreement, dated as      Filed Herewith
                               of March 27, 1997, between the
                               Registrant and Cerbios-Pharma
                               SA

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

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

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

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

            10.48              *Employment Agreement, dated as       Filed Herewith
                               of April 15, 1996, between the
                               Registrant and Peter P. Stoelze

              11               Statements re Computation of per      Filed herewith
                               share earnings

             21.1              Subsidiaries of the Company                  a

              27               Financial Data Schedule               Filed herewith


</TABLE>

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

* = Includes compensatory plan and or arrangements required to be filed pursuant
to Item 14(c) of this Form 10K.

(b)     REPORTS ON FORM 8-K.

        No reports on Form 8-K were filed  during the last quarter of the fiscal
year.

(c)     See (a)3

                                     - 44 -





 
<PAGE>

<PAGE>



                                   SIGNATURES

        Pursuant to the  requirements  of Section 13 or 15(d) 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.

                                         BIGMAR, INC.

                                         By:    John G. Tramontana
                                             ___________________________________
Date: April 15, 1997                            John G. Tramontana
                                                Chairman of the Board
                                                of Directors and Chief Executive
                                                Officer (Principal Executive
                                                Officer)

        Pursuant to the  requirements  of the  Securities  Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>

          Signature                       Capacity                         Date
          ---------                       --------                         ----
<S>                            <C>                                    <C>

John G. Tramontana             Chairman of the Board of               April 15, 1997
------------------------       Directors and Chief Executive
John G. Tramontana             Officer (Principal Executive
                               Officer)


Michael K. Medors              Treasurer, Secretary, and              April 15, 1997
------------------------        Director  (Principal
Michael K. Medors              Accounting and Financial
                               Officer)


                                          Director                    April 15, 1997
------------------------
Eric M. Chen


Bernard Kramer                            Director                    April 15, 1997
------------------------
Bernard Kramer


                                          Director                    April 15, 1997
------------------------
John R. Morris

</TABLE>

                                     - 45 -






 
<PAGE>

<PAGE>




                                   SIGNATURES

        Pursuant to the  requirements  of Section 13 or 15(d) 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.

                                                   BIGMAR, INC.

                                                   By:

------------------------------
Date: April 15, 1997                                      John G. Tramontana
                                                          Chairman of the Board
                                                          of Directors and Chief
                                                          Executive Officer
                                                          (Principal Executive
                                                          Officer)

        Pursuant to the  requirements  of the  Securities  Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>

          Signature                       Capacity                         Date
          ---------                       --------                         ----
<S>                            <C>                                    <C>


______________________         Chairman of the Board of               April 15, 1997
John G. Tramontana             Directors and Chief Executive
                               Officer (Principal Executive
                               Officer)


______________________         Treasurer, Secretary, and              April 15, 1997
Michael K. Medors               Director (Principal
                               Accounting and Financial
                               Officer)


______________________                    Director                    April 15, 1997
Eric M. Chen


______________________                    Director                    April 15, 1997
Bernard Kramer

</TABLE>

                                     - 46 -





 
<PAGE>

<PAGE>


<TABLE>
<S>                            <C>                                    <C>


______________________
John R. Morris                            Director                    April 15, 1997

</TABLE>




                                     - 47 -



<PAGE>