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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                  FORM 10-KSB/A
                                 Amendment No. 2
                                   (Restated)

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

                                       OR

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

                           COMMISSION FILE NO. 1-14416

                                  BIGMAR, INC.
                 (Name of Small Business Issuer in its Charter)

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

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

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

              SECURITIES REGISTERED UNDER SECTION 12(b) OF THE ACT:
                                      None.

              SECURITIES REGISTERED UNDER SECTION 12(g) OF THE ACT:

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

Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.    Yes X       No

Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B, and no disclosure will 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-KSB or any amendment.
 Yes X        No

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

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

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                                     PART I
ITEM 1. BUSINESS

GENERAL

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

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

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

BIOREN. Bioren is engaged in manufacturing and marketing various
pharmaceutical products in Switzerland. Current products include 18 types of
intravenous infusion solutions and other related products ("IV Solutions").
Bioren's strategy is to expand its current IV Solutions product line and its
market penetration. Bioren's manufacturing facility (the "Bioren Facility") is
located in Couvet, Switzerland.

PHARMACEUTICALS. Pharmaceuticals manufactures and markets Oncology Products,
such as calcium leucovorin, methotrexate, and cisplatin. The Oncology Products
are currently marketed in the United States, Italy, Germany, Switzerland and
Spain. Pharmaceuticals' primary strategy is to supply world markets with a
full line of high-quality, affordably priced generic pharmaceutical products
focusing on oncology. The products are manufactured in its state-of-the-art
facilities in Switzerland and marketed through pharmaceutical company partners
in Europe. The products were marketed in the United States since end of
October 1999. Pharmaceuticals has received regulatory approval to manufacture
and market certain Oncology Products from the United States Food and Drug
Administration ("FDA") and Switzerland's Intercantonal Office for the Control
of Medications ("IKS"). Pharmaceuticals' manufacturing facility (the "Bigmar
Facility") is located in Barbengo, Switzerland.

THERAPEUTICS. Therapeutics is essentially a shell company and has had no
significant business operations as of December 31, 1999.

PRODUCTS

IV SOLUTIONS. Bioren's Facility manufactures and markets IV Solutions. The IV
Solutions generally consist of different chemical entities, such as sodium
chloride, electrolytes, carbohydrates and other nutrients and antibiotic
solutions such as Metronidazole, which are administered to patients
intravenously.

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The Company markets IV Solutions through its own sales force to hospitals,
clinics, retirement homes, nursing homes, managed health care organizations,
home infusion providers and other health care providers in Switzerland. The
Company intends to continue manufacturing and marketing IV Solutions and is
seeking to penetrate additional markets in Switzerland and the United Kingdom.

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

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

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

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

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

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

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

Fluorouracil Injection USP, 250 mg and 500 mg vial

Daunorubicin Hydrochloride for Injection USP, 20mg vial

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

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

Methotrexate Injection USP, 50 mg and 200 mg vial

Calcium Folinate for Injection USP, 50 mg vial

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

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

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PROPOSED PRODUCTS. Most of the off-patent multi-source drugs (meaning all
drugs for which the patent has expired and which are available from more than
one supplier in one country) are cytotoxic drugs, which are exclusively sold
to the hospital market in the form of injectables. The Company has identified
approximately 30 oncological drugs that are currently off-patent and sold in
generic form and 15 additional oncological drugs that the Company believes
will become generic by the year 2000. Generic drugs are the chemical and
therapeutic equivalents of brand name drugs and generally are marketed once
the patent on the proprietary drug has expired.

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

COMPETITION

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

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

MARKETING AND SALES

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

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

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

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

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

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

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

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

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

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

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

RESEARCH AND DEVELOPMENT

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

-    Formulating raw materials into finished products

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

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

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

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

By leveraging Pharmaceuticals' expertise in using Isolator Technology along
with Bioren's infusion production capabilities, the Company seek to become the
first company offering generic oncology drugs in IV bags, which have been
traditionally delivered in vials. Because oncology drugs are very toxic and
dangerous to handle, formulating various dosages in IV bags would be an
advantage for hospital staff administering the drugs.

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

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

MANUFACTURING AND SUPPLIERS

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

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

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

GOVERNMENTAL REGULATIONS

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

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

In order to obtain FDA approval of a drug, companies must generally submit
proof of safety and efficacy. In some cases such proof entails extensive
clinical and pre-clinical laboratory tests. The testing, preparation of
necessary applications and processing of those applications by the FDA is
expensive and may take several years to complete. There is no assurance that
the FDA will act favorably or in a timely manner in reviewing submitted
applications, and the Company may encounter significant difficulties or costs
in its efforts to obtain FDA approvals, which could delay or preclude the
Company from marketing any products it may develop. The FDA may also require
post-marketing testing and surveillance of approved products, or place other
conditions on the approvals. These requirements could make it more difficult
or expensive to sell the products, and therefore could restrict the commercial
applications of such products. Product approvals may be withdrawn if
compliance with regulatory standards is not maintained or if problems occur
following initial marketing. For patented products or technologies, delays
imposed by the governmental approval process may materially reduce the period
during which the Company will have the exclusive right to exploit such
technologies; however, an additional period of up to five years may be added
to the term of the patent in such circumstance.

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

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

-    Pre-clinical laboratory and animal tests

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

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

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

-    Submission of a NDA to the FDA

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

Typically, pre-clinical studies are conducted in the laboratory and in animal
model systems to gain preliminary information on the drug's pharmacology and
toxicology and to identify any potential safety problems that would preclude
testing in humans. The results of these studies are submitted to the FDA as
part of the IND application. Testing in humans may commence 30 days after
submission of the IND unless the FDA places the IND on "clinical hold." A
three-phase clinical trial program is usually required for FDA approval of a
pharmaceutical product. Phase I clinical trials are designed to determine the
metabolism and pharmacological effects of the drug in humans, the side effects
associated with increasing doses, and, possibly, to obtain early indications
of efficacy. These studies generally involve a small number of healthy
volunteer subjects, but may be conducted in people with the disease the drug
is intended to treat. Phase II studies are conducted to evaluate the
effectiveness of the drug for a particular indication and thus involve
patients with the disease under study. These studies also provide evidence of

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the short-term side effects and risks associated with the drug. Phase III
studies are generally designed to provide the substantial evidence of safety
and effectiveness of a drug required to obtain FDA approval. They often
involve a substantial number of patients in multiple study centers and may
include chronic administration of the drug in order to assess the overall
benefit-risk relationship of the drug. Upon completion of clinical testing
that demonstrates that the product is safe and effective for a specific
indication, a NDA may be submitted to the FDA. This application includes
details of the manufacturing and testing processes, pre-clinical studies and
clinical trials. The FDA closely monitors the progress of each of the three
phases of clinical testing and may, at its discretion, re-evaluate, alter,
suspend or terminate the testing based on the data that has been accumulated
to that point and its assessment of the risk/benefit ratio to the patient.
Typical estimates of the total time required for completing such clinical
testing vary between four and ten years. The clinical testing and FDA review
process for new drugs are likely to require substantial time, effort and
expense. The Company anticipates that all its proprietary oncological products
will be required to be approved through the NDA process.

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

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

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

The Company will be subject to the FDA's Good Manufacturing Practices
("GMPs"), Good Laboratory Practices ("GLPs") and extensive record keeping and
reporting requirements for manufacturing products for sale in the United
States. As a result, the Company's manufacturing facilities will be subject to
periodic inspections by the FDA and other United States federal agencies when
the Company's products are offered for sale in the United States. The Company
has retained independent consultants to assist it in

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complying with FDA standards including the GMP requirements. Failure to comply
with applicable regulatory requirements can result in, among other things,
import detentions, fines, civil penalties, suspensions or losses of approvals,
recalls or seizures of products, operating restrictions and criminal
prosecutions.

GERMANY. In Germany, drugs for human use can be marketed only if they are
approved in advance either by the Federal Institute for Medicinal Products and
Medical Devices ("BfArM") in Berlin or by the European Union ("EU") Commission
after a substantive review of all safety, quality and efficacy data. The
application for a marketing authorization requires the preparation and
submission of extensive data and files. The applicant must produce the results
of analytical, pharmacological/toxicological and clinical studies and related
experts' opinions. The production of these data usually requires a long-term
pre-clinical examination phase. The details of the requirements are prescribed
in administrative regulations such as the Medicinal Products Guidelines.
Clinical trials in Germany are monitored by the state authorities. In theory,
once a complete application has been submitted to the BfArM, a decision must
be issued within four months, in exceptional cases within seven months. In
practice, however, a term of review by the BfArM generally takes three to five
years. The marketing authorization of a new substance triggers fees to the
BfArM, the amount of which can vary, depending on the amount of work required
of the authority, the kind of procedure and the result of such procedure.

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

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

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

A decentralized approval procedure is used for most other marketing
authorization applications. The applicant submits the application to one
member state where the application is reviewed. Once the first marketing
authorization is obtained, the company files identical applications in the
other EU member states. The marketing authorities of such other member states
are supposed to acknowledge the first

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decision within 90 days. If there is disagreement between the authorities that
cannot be resolved, the CPMP will be involved and will issue a scientific
evaluation. If this scientific evaluation is not further disputed, the EU
Commission will render a decision on this basis. If the disagreement
continues, the EU Council will vote to decide the matter.

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

THIRD-PARTY REIMBURSEMENT

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

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

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

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

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

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


                                      10
<PAGE>

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

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

The health insurance providers are also authorized to set maximum
reimbursement levels for generic drugs. As soon as two products with identical
or chemically similar ingredients or similar therapeutic effects are on the
market, the health insurance providers may set a maximum reimbursement amount.
This amount will usually be an average of the lowest and the highest price.
Typically, the maximum reimbursement is fixed on the basis of the lowest price
plus 1/3 of the price range to the most expensive product. About 70% of drugs
sold in Germany are subject to maximum reimbursement. So far, no oncological
products have been affected by a maximum reimbursement cap. This may, however,
change at any time. A manufacturer is legally free to continue to sell its
products at higher than the maximum reimbursement rate, but patients must then
pay the difference. So far, the Company believes no manufacturer has tried to
sell its products at prices exceeding the maximum reimbursement. If the
products of the Company become subject to a maximum reimbursement rate, this
may adversely affect the prices the Company will be able to charge.

In addition to maximum reimbursement caps, pharmaceutical prices are subject
to statutory limitations on the amounts that can be spent on drugs by the
statutory health insurance providers. As a consequence, pharmaceutical prices
decreased in the last several years and may decrease further in the future.

SWITZERLAND. In Switzerland, reimbursement for pharmaceuticals is regulated on
a federal level. There are two categories of drugs subject to reimbursement.
The first category consists of medications which are required to be reimbursed
by private health insurers. The second category contains specialty medications
for which reimbursement is recommended. In practice, private health insurers
grant reimbursement for the specialty products on the recommended list.

ENVIRONMENTAL REGULATIONS

In Switzerland, Pharmaceuticals and Bioren are subject to applicable
environmental laws such as the Environment Protection Act of 1983, the Water
Protection Act of 1991 and the Toxic Substance Act of 1969, as well as all
applicable regulations. Swiss environmental protection laws govern, among
other things, all emissions to the air, soil and water, waste-water discharge
and solid and hazardous waste disposal. Pharmaceuticals and Bioren are subject
periodically to environmental compliance reviews by various Swiss regulatory
offices.

The Company believes all of its facilities are in compliance with applicable
environmental laws. However, environmental laws have changed in recent years
and the Company may become subject to increasingly stringent environmental
standards in the future. While the Company anticipates that it may from time
to time incur expenditures in connection with environmental matters, it does
not anticipate

                                      11

<PAGE>

making substantial expenditures for those matters within the next twelve
months. Beyond that, the Company is unable to predict the extent or timing of
future expenditures that may be required in connection with complying with
environmental laws.

PRODUCT LIABILITY AND INSURANCE

The testing, clinical trials, manufacturing, and marketing of the Company's
products involve inherent risks of product liability claims against the
Company. The Company currently maintains product liability insurance coverage
on European territories in the amount of approximately $6.3 million and on US
territories in the amount of approximately $3.1 million. Such insurance is
expensive, subject to various exclusions and may not be obtainable or
maintainable by the Company in the future on terms acceptable to the Company.
There can be no assurance that the amount and scope of any coverage will be
adequate to protect the Company in the event that a product liability claim is
successfully asserted against the Company. Products, such as those sold or
proposed to be sold by the Company, may be subject to recall for unforeseen
reasons. A recall of the Company's products could have a material adverse
effect on the Company and its reputation.

ITEM 2. PROPERTIES

BIOREN FACILITY

The Bioren facility is a 57,000 square foot facility in Couvet, Switzerland
that houses manufacturing operations, laboratory facilities for quality
assurance and quality control activities, including batch testing and
multiple-batch stability testing operations, labeling and packaging
operations, warehousing and storage operations, administrative and
record-keeping areas. A 25,000 square foot area in the Bioren facility will be
used as a dedicated area for scaling up the development and manufacturing
supporting non-toxic products, such as leucovorin calcium (rescue therapy). A
21,000 square foot area in the Bioren facility is used for manufacturing and
marketing IV Solutions. A portion of the Bioren facility was leased to an
unaffiliated third party until April 15, 1998. This portion is now vacant. The
Company believes that its facilities are sufficient for its current and
reasonably anticipated operations.

PHARMACEUTICALS FACILITY

The Pharmaceuticals facility, a 25,000 square foot facility in Barbengo,
Switzerland, is used for developing and manufacturing oncological products.
The Pharmaceuticals facility also houses warehousing and storage,
manufacturing, labeling and packaging, quality control and research and
development laboratories and administrative areas.

CORPORATE HEADQUARTERS

On December 31, 1996, the Company entered into a lease with JTech
Laboratories, Inc. ("JTech") relating to approximately 8,600 square feet of
space located at 9711 Sportsman Club Road, Johnstown, Ohio 43031. This space
is being utilized by the Company as its principle corporate headquarters and
research and development laboratory for Oncology Products marketed in the U.S.
The lease for this space expires in June 2002, five years from the occupancy
date. John G. Tramontana is the President and a director of JTech. Mr.
Tramontana shares ownership in JTech with a company owned by certain
stockholders of the Company. Management believes that its corporate
headquarters will meet its operational needs for the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

There are no pending legal proceedings to which the Company or any of is
subsidiaries is a party or to which any of their respective properties are
subject, except routine legal proceedings to which they are parties incident
to their respective business. None of such proceeding are considered by the
Company to be material.

                                      12

<PAGE>

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the last
quarter of the fiscal year ended December 31, 1999.





















                                      13

<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

The Company's Common Stock is listed on the Nasdaq SmallCap Market and traded
under the symbol "BGMR." The Company's Common Stock was delisted from the
Boston Stock Exchange under the symbol "BGM" on April 1999. The high and low
sales prices for the Company's common stock during each quarter in the years
ended December 31, 1999 and 1998, as derived from information provided by the
Nasdaq SmallCap Market, were as follows:

<TABLE>
<CAPTION>
                                                             1999                         1998
                                                   -----------------------      ------------------------
   COMMON STOCK MARKET PRICES                         HIGH          LOW           HIGH            LOW
   ---------------------------------------------   ----------     --------      ---------       --------
   <S>                                             <C>            <C>           <C>             <C>

   QUARTERS:

   First .......................................       $ 4.06       $ 1.37         $ 4.50         $ 3.25


   Second ......................................       $ 5.12       $ 2.75         $ 3.68         $ 2.25


   Third .......................................       $ 5.06       $ 3.62         $ 2.56         $ 1.75


   Fourth ......................................       $ 3.87       $ 2.43         $ 2.25         $ 1.40

</TABLE>

HOLDERS

As of March 23, 2000, as reported by the Company's transfer agent, shares of
common stock were held of record by 916 persons.

DIVIDENDS

The Company has paid no dividends, cash or otherwise, subsequent to the date
of the initial public offering of the Common Stock in June 1996. Although it
is not currently anticipated that any cash dividends will be paid on the
Common Stock in the foreseeable future, the Board of Directors may review the
Company's dividend policy from time to time. In determining whether to declare
dividends and the amount of dividends to be declared, the Board will consider
relevent factors, including the Company's earnings, its capital needs and its
general financial condition. In addition, the Swiss Federal Code of
Obligations provides further restrictions on the Company's ability to pay
dividends to its stockholders.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Certain statements under this caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, including, without limitation, statements regarding future cash
requirements. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of the Company, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: delays in product development; problems or delays
in clinical testing; failure or delays in

                                      14

<PAGE>

receiving regulatory approvals; lack of proprietary rights; or, change in
business strategy or development plans.

                                    OVERVIEW

The Company's first ANDA approvals from the FDA for injectable forms were
received in 1999. The Company has launched its Oncology Products into the U.S.
market during the fourth quarter of 1999, through American Pharmaceutical
Partners. The approved ANDA's enhance the Company's business model, which
focuses on achieving a global marketing presence, as U.S. distribution efforts
complement sales activities already realized throughout Europe.

      YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

SALES. Total sales were $7.73 million for the year ended December 31, 1999 as
compared to $6.38 million for 1998. The increase of 21%, or $1.35 million, is
due to the first oncologic deliveries of products shipped under the APP
arrangement, which occurred during the fourth quarter 1999 resulting in sales
of $1.0 million. In the year 2000, the Company expects product sales to
increase compared to 1999 primarily from the current arrangement with APP,
along with new product sales such as 5-Fluorouracil and continued growth of
Bioren sales in Switzerland and Great Britain.

Pharmaceuticals' sales of oncology products increased $1.28 million, or 318%,
to $1.68 million for the year ended December 31, 1999, as compared to $401,000
for the same period in 1998. This increase was primarily the result of
cytotoxic sales to APP in the United States ($1.0 million) and Europe ($0.2
million). The Company anticipates that Pharmaceuticals' sales will continue to
increase based upon increases levels forecast under the APP arrangement as
well as other distribution channels that the Company is developing.

Bioren's sales of IV Solutions increased by $70,000, or 1%, to $6.05 million
for the year ended December 31, 1999, as compared to $5.98 million for 1998.
Sales of infusion bags increased by $400,000 whereas contract manufacturing
decreased by $300,000. During 1999, Bioren ceased contract manufacturing for
one third-party product to optimize its production capacity and relaunch a new
product in year 2000. The average selling price of infusion bags decreased by
4% in 1999 compared to prior year due to the high level of competition in the
Swiss marketplace. Nevertheless, Bioren succeeded in increasing its infusion
bag market share by 5% in Switzerland due to better customer support,
offsetting the impact of price reductions.

COSTS OF GOODS SOLD AND GROSS MARGINS. Cost of goods sold, for the year ended
December 31, 1999, was $6.45 million which yielded a product gross margin of
16.5%, compared to a cost of goods sold of $4.81 million for the same period
of 1998 which yielded a gross margin of 24.5%. The higher cost of goods sold
in 1999 and reduction in margins is primarily due to high production costs
related to the first production batches of Pharmaceuticals and price pressure
at Bioren.

Pharmaceuticals' cost of goods sold in 1999 was $1.80 million which yielded a
product gross margin of -7.6%, compared to cost of good sold of $391,000 in
1998 which yielded a gross margin of 2.6%. The increase in cost of goods sold
is due to fourth quarter sales to APP. The decrease in gross margin is due to
high production costs related to the first production batches for APP at the
Pharmaceuticals facility. The Company anticipates that gross margin levels
should improve as Pharmaceuticals increases manufacturing levels.

Bioren's cost of goods sold in 1999 was $4.65 million which yielded a product
gross margin of 23%, compared to cost of goods sold of $4.42 million in 1998
which yielded a gross margin of 26%. The higher cost of goods sold and
decrease in gross margin is primarily due to the decrease in the average
selling price of infusion bags by 4% in 1999 compared to 1998 due to the high
level of competition on the

                                      15

<PAGE>

Swiss marketplace. The decrease in selling price was offset by Bioren
succeeding in increasing its infusion bag market share by 5% in Switzerland
due to better customer support.

OPERATING EXPENSES. Total operating expenses decreased by 17%, or $1.23
million, from $7.12 million in 1998 to $5.89 million in 1999.

Research and development expenses decreased by 13%, or $366,000, as a result
of the Company's commitment to reducing the number of employees but
maintaining a significant level of research and development investment in
support of its line of pharmaceutical products focusing in oncology products.
Most of the Company's reduction in research and development occurred at its
U.S. facility where total research and development expenses decreased
approximately $959,000. This decrease was offset by increases at the operating
segments. The Company will continue to devote substantial resources to
research and development during the next several years and does not anticipate
significant decreases in research and development spending.

Selling, general and administrative expenses decreased by 20%, or $864,000,
from $4.38 million in 1998 to $3.51 million in 1999. The decrease is primarily
due to a reduction in personnel at the Company's U.S. facility and at each of
the operating segments.

OPERATING LOSS. Operating loss, as a result of the foregoing, was $4.62
million and $5.55 million in 1999 and 1998, respectively, a decrease of 17%.
Pharmaceuticals operating loss was $1.98 million in 1999, as compared to
$408,000 in 1998, an increase of 385%. The increased net loss is primarily a
result of decreases in margins due to the first production batches and higher
research and development costs incurred prior to reaching full production.
Bioren's operating income was $65,000 in 1999 compared to a $158,000 operating
loss in 1998. The change is primarily due to reductions in personnel resulting
in decreased selling, general and administrative expenses. In addition to the
two segments, operating loss also includes $2.70 million of general corporate
expenses in 1999 and $5.8 million in 1998, a decrease of 53%. The reduction in
general expenses is a reduction in personnel in both research and development
and general, selling and administrative.

OTHER EXPENSE. Other expense amounted to a net expense of $1.71 million for
1999 as compared to a net expense of $1.67 million in 1998. The increase of
$40,000, or 2%, included fluctuations in three significant areas: interest
expense, issuance of preferred stock warrants for loan guarantee and gain/loss
on foreign currency transactions. Interest expense decreased $170,000, or 16%,
from $1.06 million in 1998 to $892,000 in 1999. The decrease is due to the
Company's efforts to obtain lower interest rates on various notes payable and
lines of credit and due to an overall decrease in notes payable and long-term
debt of $2.2 million. In the prior year, the Company incurred a non-recurring
non-cash charge of $958,000 related to preferred stock warrants issued in
consideration to obtain a guarantee to renew and increase a line of credit.
There was no such charge in 1999. These decreases were offset by a change in
gain/loss in foreign currency transactions. In 1998, the Company incurred a
gain on foreign currency transactions of $332,000 whereas it incurred a loss
in 1999 of $837,000. The loss in 1999, which arises for the most part from the
translation of intercompany balances which are considered short-term, is
primarily due to the increase of the U.S. Dollar exchange rate against the
Swiss Franc combined with an increase of intercompany borrowing of $657,000.
The exchange ratio of Swiss Francs to U.S. Dollars at December 31, 1999 was
 .626 as compared to .708 in 1998. This change, which was 12%, affected
numerous financial balances including property, plan and equipment and
long-term debt. Effective January 1, 2000, $7.6 million of the intercompany
debt will no longer be considered short-term as repayment is not expected in
the foreseeable future. Accordingly, the gain or loss on translating such debt
will be included in the cumulative translation adjustment as a separate
component of stockholders' equity.

INCOME TAXES. Income tax expense was zero for both 1999 and 1998, due to
sustained losses and net operating loss carryforwards from prior years.

                                      16

<PAGE>

NET LOSS. For the fiscal year ended December 31, 1999 the Company reported a
net loss of $6.32 million. For the same period of 1998, net loss was $7.22
million. The corresponding basic and diluted loss per share was $0.73 in 1999
versus $1.46 in 1998.

Pharmaceuticals' net loss in 1999 amounted to $1.06 million compared to
$820,000 in 1998, an increase of $240,000 or 29%. The increase in net loss is
due to decreases in margins due to the first production batches and higher
research and development costs incurred prior to reaching full production,
offset by certain intercompany charges. Bioren's net loss in 1999 amounted to
$230,000 compared to $315,000 in 1998, a decrease of $86,000 or 27%. The
decrease at Bioren is primarily due to reductions in personnel resulting in
decreased selling, general and administrative expenses.

FOURTH QUARTER. Net sales for the fourth quarter of 1999 amounted to $3.1
million as compared to $1.5 million in 1998 and $1.8 million in 1997. The
increase in 1999 is due to the APP sales during the fourth quarter.

      YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

SALES. Net sales decreased by $0.1 million to approximately $6.4 million for
the year ended December 31, 1998 as compared to $6.5 million for the
comparable period in 1997. This decrease was primarily the result of lower
sales of non-core products, such as raw materials and prostate products,
offset by an increase in sales of IV Solutions.

Sales of Bioren's IV Solutions for 1998 increased approximately $0.5 million
or 9.9% over the prior year as compared with a decrease of approximately $.4
million or 6.4% during 1997. Bioren's IV Solutions sales represented 93.7%,
83.9%, and 73.3% of total sales in 1998, 1997, and 1996, respectively. IV
Solution sales growth in 1998 related to increased penetration of the Swiss
hospital market.

Sales of Pharmaceutical's Oncology Products for 1998 decreased approximately
$0.6 million or 61.6% over the prior year as compared with an decrease of $0.9
million or 50.7% during 1997. Sales of Oncology Products represented 6.3%,
16.1%, and 26.7% of total sales in 1998, 1997, and 1996 respectively. The
decline in Oncology Product sales related to the aggressive validation
activities implemented in 1998, to prepare the Bigmar Facility for regulatory
inspections by the FDA. As a result, commercial batch production time was
reduced. The Bigmar Facility was inspected by the FDA in February 1999, and
subsequently the Company received approvals from the FDA for five ANDA's. With
the approved ANDA's the Company is positioned to begin introducing Oncology
Products to the U.S. market in 1999. In 1998, the Company entered into an
agreement with Ivax Corporation which gives them exclusive distribution rights
within the United States for selected pharmaceutical products.

GROSS MARGIN. Gross Margin as a percentage of sales was 24.5% in 1998, up from
15.4% in 1997, and down from 33.0% in 1996.

Bioren's gross margin on IV Solutions as a percentage of IV Solution sales was
26.0%, 23.6%, and 31.4% in 1998, 1997, and 1996 respectively. The increase in
1998 IV Solution margins was primarily due to larger quantity discounts on raw
materials and increased production efficiencies.

Pharmaceuticals gross margin on Oncology Products as a percentage of Oncology
Products sales was 2.6%, -27.5%, and 37.4% in 1998, 1997, and 1996
respectively. The increase in 1998 Oncology Product margins was the result of
discontinued sales of raw materials, which carry lower margins, and the first
commercial batches of oncology products being manufactured at the Bigmar
Facility.

OPERATING EXPENSES. Total operating expenses decreased by 5.6%, from $7.5
million in 1997 to $7.1 million in 1998. Research and development expenses
increased by $1.1 million or 62.2% as a result of the Company's commitment to
maintaining a significant level of research and development investment in

                                      17

<PAGE>

support of its line of pharmaceutical products focusing in oncology products.
The Company expects research and development expenditures to continue to be
significant during the next several years. Selling, general and administrative
expenses increased 15.2% from $3.8 million in 1997 to $4.4 million in 1998.
The increase is primarily due to an increase of $0.5 million in depreciation
expense related to the Bigmar Facility. The decrease in total operating
expenses is due to approximately $2.1 million of expenses recognized to
reacquire U.S. marketing rights in 1997 versus no such expense being incurred
in 1998.

OPERATING LOSS. Operating (loss), as a result of the foregoing, was $5.6
million and $6.5 million in 1998 and 1997 respectively.

OTHER EXPENSE. Other expense (net) amounted to a net expense of $1.7 million
for 1998 as compared to a net expense of $0.8 million for 1997. Interest
expense amounted to $1.1 million for 1998, an increase of $0.4 million over
1997, reflecting two factors-an increase in the Company's debt during 1998,
and no capitalized interest in 1998 as compared to $119,000 in 1997. Other
expense increased $0.9 million from 1997 to 1998, primarily as a result of
approximately $1.0 million of expense recognized to issue preferred stock
warrants in consideration to obtain a guarantee to renew and increase a line
of credit from $3.5 million to $6.0 million from a commercial institution. The
Company recorded foreign currency transaction gains of $0.3 million during
1998 versus losses of $0.4 million in 1997. The majority of this activity is
related to 1998 intercompany funds transfers denominated in Swiss Francs.

INCOME TAXES. Income tax expense was zero for both 1998 and 1997, due to
sustained losses and carryovers from prior years.

NET LOSS. Net loss for 1998 was $7.2 million versus the 1997 loss of $7.4
million. The corresponding basic loss per share was $1.46 in 1998 versus $1.82
in 1997.

Bioren recorded a net loss of $0.3 million for 1998 versus a net profit of
$0.2 million in 1997. This decrease reflects additional depreciation expenses
for machinery and equipment of $0.3 million and approximately $0.2 million for
research and development expenses related to expansion of the IV Solution
product lines.

Pharmaceuticals recorded a net loss of $0.8 million for 1998 versus a net loss
of $1.0 million in 1997. The net loss for 1998 represents a decrease in loss
of $0.2. The 1998 loss was due primarily to time spent preparing the Bigmar
Facility for both commercial production and inspections by regulatory agencies
such as the FDA and IKS. In February 1999, the Company received approvals from
the FDA for five ANDA's to be marketed in the United States.

                         LIQUIDITY AND CAPITAL RESOURCES

OPERATING ACTIVITIES. The Company's working capital at December 31, 1999 was a
$2.3 million deficit and at December 31, 1998 was $3.1 million deficit. The
biggest factors influencing working capital were the increase in accounts
receivable of $1.2 million mainly due the first shipments to APP, the increase
in inventories of $0.9 million for anticipated year 2000 deliveries and
general increases in business levels, a decrease in related party payables of
$0.3 million and a decrease in current portion of long-term debt of $0.7
million. These amounts were offset by accounts payable increasing by $0.6
million, notes payable increasing $1.6 million, and accrued expenses
increasing $0.1 million.

Net cash used in operating activities during 1999 was $5.3 million, an
increase from the previous year's cash used of $4.6 million. Net loss less
non-cash items used $3.5 million in 1999 and $4.5 million in 1998, while
working capital used $1.8 million in 1999 and $0.1 million in 1998. The
increase with

                                      18

<PAGE>

respect to working capital is principally due to increases in accounts
receivable and inventory for Pharmaceuticals' growth.

The Company has incurred, and will continue to incur, substantial expenditures
for research and development activities related to bringing its products to
the commercial market. The Company intends to devote significant additional
funds to product development, formulation, clinical testing, product
registration, and other activities required for regulatory review of generic
oncological products. The amount required to complete such activities depends
upon the outcome of regulatory reviews. The regulatory bodies may require more
testing than is currently planned by the Company. There can be no assurance
that the Company's generic oncological products will be approved for marketing
by the FDA or any foreign government agency or that any such products will be
successfully introduced or achieve market acceptance. Although the Company
expects that cash flows from operating activities will continue to improve in
the future, the Company expects that additional funds will be needed from
financing activities.

INVESTING ACTIVITIES. The Company's investing activities in 1999 involved the
purchase of property, plant and equipment. Capital expenditures for 1999 were
$0.5 million, a $1.0 million decrease from the 1998 level of $1.5 million. The
lower expenditures reflect the completion in 1998 of the Pharmaceuticals'
facility construction. However, the Company does anticipate higher levels of
investing activities in the short-term due to planned equipment purchases to
increase manufacturing capacity.

FINANCING ACTIVITIES. Net cash provided by financing activities was $5.8
million in 1999 and $5.6 million in 1998.

In May 1998, the Company obtained a $6.0 million line of credit from Citizens
Bank in Saginaw, Michigan, guaranteed by Jericho, a related party. The Company
borrowed up to approximately $5.7 million on the line of credit before it was
fully paid in October 1998. The Company renegotiated the terms of the credit
line in December 1998, and reduced the line of credit to $0.5 million, which
was subject to renegotiation in June 1999. In June 1999, the Company
renegotiated the line to allow the Company to borrow up to $2 million at the
Bank's prime rate. The Company borrowed approximately $1.8 million under this
line in 1999. The line is subject to renegotiation on June 30, 2000.

During 1999, the Company also issued convertible notes to Banca del Gottardo
and received proceeds of approximately $1.7 million after issuance costs.
Under the agreement, the Company issued 4% notes, due October 22, 2003. After
March 1, 2000, the notes are convertible into 528,000 shares of the Company's
common stock at an initial conversion price of $3.75 per share. The notes can
be repaid at the option of the Company before the due date at 110% of the
principal amount due.

During 1999, the Company also received $2.9 million in proceeds from issuance
of common stock. The Company sold 966,665 shares of stock, at $2.00 to $3.00
per share. Included in these issuances was 70,000 shares to the Banca del
Gottardo and 166,666 shares to GRQ, LLC, a related party. The proceeds of
these common stock issuances were used primarily for working capital.

In August 1998, the Company received proceeds of $0.3 million from the
issuance of common stock to Banca del Gottardo. In October 1998, the Company
received proceeds of $6,000,000 from the issuance of common stock to Jericho.
The proceeds were used to repay debt and for working capital.

Subsequent to December 31, 1999, the Company extinguished $4.3 million of its
long-term debt. The Company paid $3.9 million and the bank forgave $0.4
million. The amount that was repaid was financed by loans of $2.7 million from
Credit Suisse, a $1.1 million loan from a stockholder and cash of $0.1 million.

                                      19

<PAGE>

In addition to the first quarter 2000 activity described above, the Company
anticipates that additional capital funding together with cash from operations
will be required to sustain operations through 2000. However, there can be no
assurance that events affecting the Company's operations will not result in
the Company depleting its funds before that time. Management is currently
discussing additional financing with a number of financial institutions and
investors, but there are no assurances that the Company will be able to obtain
additional financing or that such financing, if available, will be on
acceptable terms.

                    RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 1999, the Statement of Financial Accounting Standards No. 137 ("SFAS
No. 137"), "Accounting for Derivative Instruments and Hedging Activities -
Deferral of Effective Date of FASB Statement No. 133" was issued. Statement
No. 137 deferred the effective date of Statement No. 133 to all fiscal
quarters of fiscal years beginning after June 15, 2000. Statement No. 133
requires that all derivatives be recorded in the balance sheet as either
assets or liabilities and be measured at fair value. Management is in the
process of evaluating this standard and does not expect this statement to have
a material impact on the Company's financial position or result of operations.

YEAR 2000

Many computer systems currently record years in a two-digit format. Such
systems, if not modified, would not have been able to recognize and properly
place information with dates beyond the year 1999. The potential problems
arising out of this inability are commonly referred to as the Year 2000 Issue.
The Company addressed the Year 2000 issue through an assessment and readiness
plan initiated during 1998 and completed during 1999. To date, the Company is
not aware of any significant Year 2000 related problems that may have occurred
with its supply, manufacturing, or financial systems, internal or external.

RISK FACTORS

LIMITED OPERATING HISTORY; HISTORY OF OPERATING LOSSES; UNCERTAINTY OF FUTURE
PROFITABILITY; GOING CONCERN QUALIFICATION. The Company has a limited
operating history and is in the early stage of commercializing on its
products. As of December 31, 1999, the Company had incurred an operating loss
of approximately $4.62 million. Losses to date have resulted principally from
research and development costs and low margins due to first production
batches. There can be no assurance that the Company will ever generate
sufficient revenues to attain operating profitability on an on-going annual
basis. In addition, the Company may experience fluctuation in revenues in
operating results based on such factors the demand for the Company's products,
the timing, costs and acceptance of product introductions, levels of
third-party payment, alternative treatments currently existing or which may be
introduced in the future, comparative conditions, regulatory announcements and
changes affecting the Company's products and general economic conditions.

FUTURE CAPITAL NEEDS; DELISTING OF THE COMPANY'S SECURITIES. The Company's
future capital requirements will depend on many factors, including its ability
to generate revenues through its ability to market its products successfully,
the cost of manufacturing, the size of its research and development programs,
the length of time required to collect accounts receivable, competition,
regulatory announcements, and costs associated with and the timing relating to
the implementation of the Company's business strategy. The Company's ability
to satisfy future capital needs will depend on conditions in the generic
pharmaceuticals market and the market for the securities of small
capitalization companies and pharmaceutical companies in particular.



                                      20
<PAGE>

In August 1998, the Company received a notice that its securities were going
to be delisted from the NASDAQ SmallCap Market due to the Company's inability
to maintain a minimum net tangible asset base of $2.0 million. The Company was
able to retain its listing on the NASDAQ SmallCap Market due to a sale of $6.0
million of common stock to Jericho II, LLC on October 22, 1998. There can be
no assurance that the Company will be able to maintain the $2.0 million net
tangible asset requirement or any other listing requirement to retain listing
on the NASDAQ SmallCap Market. Delisting from the NASDAQ SmallCap Market may
negatively effect the Company's stock's ability to trade. There can also be no
assurance that the Company will be able to raise any additional funds required
to conduct its operations, that any such funds will be available on terms
acceptable to the Company or that existing stockholders will not suffer
substantial dilution as a result of subsequent financings.

UNCERTAINTIES REGARDING PATENTS AND PROPRIETARY RIGHTS. As a manufacturer of
off-patent, generic pharmaceuticals, the Company's success will depend upon
its ability to operate without infringing the proprietary rights of third
parties. Although the Company only manufactures pharmaceuticals for which it
believes the patent has expired, there can be no assurance that the
"expiration" will not be challenged or denied by either by the U.S. Patent and
Trademark Office, any of its foreign counterparts or by courts inside or
outside the United States. In some cases, litigation or other proceedings may
be necessary to defend against claims of infringement and to determine the
validity of the proprietary rights of third parties. Such litigation could
result in substantial costs to and diversion of resources by the Company. An
adverse outcome in any such litigation or proceeding could subject the Company
to significant liabilities, require the Company to obtain alternative
non-infringing alternatives, require the Company to cease producing the
particular drug or require the Company to license the manufacture of the drug
from the third party, all of which could have a material adverse effect upon
the Company's business, financial condition and results of operations. If any
licenses are required, there can be no assurance that the Company will be able
to obtain any such license on commercially reasonable terms, if at all, and if
these licenses are not obtained, the Company might be prevented from
manufacturing some of its pharmaceuticals.

DEPENDENCE UPON COLLABORATIVE ARRANGEMENT WITH DISTRIBUTORS. One of the
Company's strategies to penetrate the generic oncology pharmaceuticals and
related products market is to enter into various collaborative arrangements
with established pharmaceutical distribution companies. The Company recently
entered into such an arrangement with American Pharmaceutical Partners, giving
it exclusive distribution rights for certain oncology drugs. The Company has
entered into a number of exclusive marketing agreements, which have provided
the Company with sales, but also limits the Company's control over its
marketing abilities and strategies. The acceptance of the Company's products
in the market place is dependent upon the exclusive distributor's ability to
demonstrate the benefits of the Company's products to the medical and health
care communities and to sell commercial quantities at acceptable costs. There
is no assurance that the third party distributors will be able to provide
adequate sales for the Company to become profitable Nor is there any assurance
the Company will be able to continue building successful distribution
relationships with further distributors.

COMPETITION. Competition in the pharmaceutical industry is intense and subject
to rapid technological change. Competitors of the Company are numerous and
include United States and international companies. See "Item 1 Competition."
In addition, the Company may face competition from alternative methods of
treatment such as surgery, radiation and other new oncology treatments. Many
of the Company's competitors may have substantially greater financial
technical resources, production, market capabilities and experience in the
generic oncology pharmaceutical field. There can be no assurance the Company
will be able to compete favorably in the pharmaceutical market.

FLUCTUATIONS IN OPERATING RESULTS. The Company's operating results may vary
significantly from quarter to quarter or year to year, depending on factors
such as timing of product development, the timing and terms of collaborative
distribution agreements, the timing of increased research and development and
sales

                                     21

<PAGE>

and marketing expenses, the timing and size of orders and the introduction of
new products by the Company and by competitors. The Company's current and
planned expense levels are based in part on its expectations as to future
revenue. Consequently, revenue and operating results may vary significantly
from quarter to quarter or year to year and revenue and operating results in
any period will not necessarily be predictive of results in subsequent periods.

DEPENDENCE ON OUTSIDE SUPPLIERS. Although the Company manufacturers its
pharmaceutical products at its own manufacturing facilities, a majority of raw
materials the Company uses to manufacturer its products are generally not
readily available and are purchased from limited sources. Although the Company
believes that alternative sources for such raw materials and components are
available, an interruption in the supply of the raw materials or components
would have a material adverse affect on the Company's ability to manufacture
its products until a new source of supply was qualified. In addition to the
exposure to the risk that the Company may be unable to obtain adequate
supplies of required raw materials and components, the Company is also exposed
to the risk the cost of the raw materials and components may rise but its
control over the timely delivery and quality of the products is reduced.

DEPENDENCE ON KEY EMPLOYEES. Competition among pharmaceutical companies for
qualified employees is intense, and the loss of any such qualified employees,
or an inability to attract, retain and motivate any additional highly skilled
employees necessary for the maintenance and expansion of the Company's
activities, could have a material adverse effect on the Company. There can be
no assurance that the Company will be able to retain its existing key
personnel or to attract additional qualified employees. A loss of the services
of one or more of the members of the senior management group or the Company's
inability to hire additional personnel is necessary, could have an adverse
affect on the Company's business, financial condition and results of
operations.

PRODUCT LIABILITY; AVAILABILITY OF INSURANCE. Although the Company has
obtained product liability insurance, there can be no assurance that it will
be able to maintain such insurance on acceptable terms or that insurance will
provide adequate coverage against potential liabilities.

LIMITATIONS ON THIRD PARTY PAYMENTS; UNCERTAIN AFFECTS OF MANAGED CARE. The
Company's ability to commercialize its products successfully in the United
Sates and other countries will depend in part on the extent to which
acceptance of payment for such products will continue to available from
government health administration authorities, private health insurers and
other payors. Cost control measures adopted by third parties payors in recent
years have had and may continue to have a significant affect on the purchasing
patterns of many health care providers. This could work to the benefit of the
Company in its sale of generic oncology pharmaceuticals. However, payors are
increasing challenging the prices and clinical efficacy of medical products.
Significant uncertainty exist as to the reimbursement status of newly improved
health care products including pharmaceuticals and, there can be no assurance
that adequate third party coverage will continue to be available to the
Company at current or increased levels.

UNCERTAINTY AND POTENTIAL NEGATIVE AFFECTS OF HEALTH CARE REFORM. The health
care industry is undergoing fundamental changes resulting from political,
economic and regulatory influences. The Company anticipates that the Congress
of the United States and state legislatures will continue to review and assess
alternative health care delivery systems and methods of payment due to
uncertainties regarding the outcome of reform initiative the Company can not
predict which performed proposals will be adopted and when they might be
adopted. Other countries are also considering health care reform. The
Company's plan for its international sales are largely dependent upon other
countries adoption of managed care systems that will provide adequate
reimbursement through third party payors that will have a positive affect on
the Company's sales. Significant changes and health care systems are likely to
have a substantial impact over time on the manner in which the Company
conducts it business and could have a

                                     22

<PAGE>

material adverse affect on the Company's business, financial conditions and
results of operations and its ability to market its products as currently
contemplated.

GOVERNMENT REGULATION. The Company's current and future products and
manufacturing activities will be regulated by our and will be regulated by a
number of governmental regulations involving the production and sale of
pharmaceuticals. The United States Food and Drug Administration and comparable
agencies in many foreign countries and in state and local governments impose
substantial limitations on the introduction of the manufacturer of
pharmaceuticals. The Company is also required to adhere to extensive
recordkeeping reporting and inspections by government agencies. Failure to
comply with these and other applicable regulatory requirements could result in
significant fines, suspensions, seizures and recalls of products or operating
restrictions and even criminal prosecutions. Changes in existing regulations
or interpretations of existing regulations could prevent the Company from
obtaining future regulatory approvals. If the Company experiences a delay in
receiving or fails to obtain any governmental approval for any of its current
or future products, or fails to comply with any regulatory requirements, the
Company's business, financial condition and results of operations could be
materially adversely affected.


ITEM 7. FINANCIAL STATEMENTS

The Consolidated Financial Statements of the Company, together with the
reports thereon of KPMG LLP ("KPMG"), dated March 16, 2000, are set forth on
pages F-1 through F-26.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. On January 1,
1999, 11 member countries of the European Union (Switzerland excluded)
established fixed conversion rates between their existing sovereign
currencies, and adopted the Euro as their own common legal currency. The Euro
is currently trading on currency exchanges and the legacy currencies will
remain legal tender in the participating countries for a transition period
between January 1, 1999 and December 31, 2001. Between January 1, 2002 and
July 1, 2002, the participating countries will introduce Euro notes and coins
and withdraw all legacy currencies so that they will no longer be available.
Based on current information and management's current assessment, the Company
does not expect that Euro conversion will have a material adverse effect on
its business or financial condition.

In the normal course of business, operations of the Company are exposed to
fluctuations in currency values. These fluctuations can vary the costs of
financing, investing, and operating activities. The Company does not have any
programs in place to control these risks.

The Company's foreign currency risk exposure results from fluctuating currency
exchange rates, primarily the fluctuation of the U.S. dollar against the Swiss
Franc ("Sfr"). The Company faces transactional currency exposures that arise
when its foreign subsidiaries (or the Company itself) enter into transactions
denominated in currencies other than their local currency. The Company also
faces currency exposure that arises from translating the results of its Swiss
operations to the U.S. dollar at exchange rates that have fluctuated from the
beginning of the period. The Company does not have any programs in place to
control these risks. Effective January 1, 2000, $7.6 million of the
intercompany debt outstanding will no longer be considered short-term as
repayment is not expected in the foreseeable future. Accordingly, the gain or
loss on translating such debt will be included in the cumulative translation
adjustment as a separate component of stockholders' equity.

                                     23

<PAGE>

     The table below provides information about the Company's financial
instruments by functional currency and presents such information in U.S.
dollar equivalents:


<TABLE>
<CAPTION>

                                                                      EXPECTED MATURITY DATE
                                                   ----------------------------------------------------------------
                                     2000             2001             2002             2003             2004        Thereafter
                                  ---------        ---------        ---------        ---------        ---------      ----------
<S>                               <C>              <C>              <C>              <C>              <C>            <C>
(US$ Equivalent)
except average interest rate
   Long-Term Debt:
 Fixed Rate ($US) ...........     $   --               --           4,000,000            --               --              --
 Average interest rate ......         --               --               8.0%             --               --              --
Fixed Rate (Sfr) ...........      $ 156,544            --               --           1,878,522            --              --
 Average interest rate ......         4.4%             --               --               4.0%             --              --
 Variable Rate (Sfr) ........     $ 475,892          632,436          569,818          381,966          381,966       2,917,971
 Average interest rate ......         5.5%             4.2%             4.4%             4.6%             4.7%            3.3%


</TABLE>


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

None applicable.
















                                     24

<PAGE>

                                    PART III



ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

The names of the directors and certain executive officers of the Company, and
certain information about them, are set forth below.

<TABLE>
<CAPTION>


           DIRECTOR       AGE                                         RECENT HISTORY
           --------       ---                                         --------------
<S>                       <C>      <C>
Bernard Kramer            46       Mr. Kramer 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 SA, a wholly-owned subsidiary of the Company,
                                   where he was a manager, responsible for quality control and business
                                   development of pharmaceutical products.

Cynthia R. May            48       Ms. May has served as a member of the Board of Directors since June
                                   1999. Ms. May has been employed by Saginaw Control & Engineering
                                   Corp., a private manufacturing company, since 1981, most recently as vice
                                   president. Ms. May has been treasurer of Marathon Investments, L.L.C.
                                   since 1994, vice president and treasurer of GRQ, L.L.C. since 1995 and
                                   the managing member of Jericho II, L.L.C. since September 1997, each a
                                   privately-owned entity involved in investment and financing. Jericho II,
                                   L.L.C. is a principal shareholder of the Company.

Massimo Pedrani           45       Mr. Pedrani was elected to the Board of Directors in June 1998.  Since
                                   January 1997, Mr. Pedrani has been Managing Director of Emmepi-Pharma,
                                   a pharmaceutical consulting company involved in chemical, pharmaceutical
                                   development and regulatory affairs. From September 1992 to August 1996,
                                   Mr. Pedrani was Managing Director of Applied Analytical Industries Italy s.r.l.,
                                   a subsidiary of Applied Analytical Industries, Inc.  Mr. Pedrani is a member
                                   of the American Association of Pharmaceutical Scientists.

Philippe J. H. Rohrer     43       Mr. Rohrer was appointed to the Board of Directors in June 1998. In
                                   January 1999, he was appointed as Treasurer of the Company. He is Chief
                                   Financial Officer of Bigmar, Inc., Bioren SA and Bigmar Pharmaceuticals SA,
                                   both wholly-owned Swiss subsidiaries of Bigmar. He joined Bioren SA
                                   in August 1990 as Finance and Administration manager with responsibility
                                   for finance, computerization and administration of Bioren.

John G. Tramontana        54       Mr. Tramontanahas 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.  In May 1997, Mr. Tramontana purchased from
                                   Chemholding, which was a principal stockholder in Bigmar.


</TABLE>


                                     25

<PAGE>

                COMPLIANCE WITH SECTION 16 REPORTING REQUIREMENTS

         Under the securities laws of the United States, the Company's
directors, its executive officers, and any persons holding more than 10% of
the Company's Common Stock are required to report their initial ownership of
the Company's Common Stock and any subsequent changes in that ownership to the
SEC. Specific due dates for these reports have been established and the
Company is required to disclose any failure to file by these dates. 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 1999 all filing requirements were
timely met.


ITEM 10.  EXECUTIVE COMPENSATION

                           SUMMARY COMPENSATION TABLE

         The following table sets forth information regarding compensation
paid by the Company for the last three fiscal years to its Chief Executive
Officer and the other most highly compensated executive officers whose annual
compensation exceeded $100,000 for the year ended December 31, 1999:


<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------------
                                                                                      LONG-TERM
                                                                                     COMPENSATION
                                                  ANNUAL COMPENSATION                  AWARDS
--------------------------------------------------------------------------------------------------------------------
NAME AND PRINCIPAL             YEAR     SALARY ($)    BONUS ($)     OTHER ANNUAL      SECURITIES        ALL OTHER
POSITION                                                            COMPENSATION      UNDERLYING       COMPENSATION
                                                                        ($)          OPTIONS/SARS         ($)(1)
                                                                                       (#)(2)
--------------------------------------------------------------------------------------------------------------------
<S>                            <C>      <C>           <C>           <C>              <C>               <C>
John G.Tramontana              1999        200,000          -0-              -0-              -0-             7,093
Chairman of the Board of       1998        200,000          -0-              -0-              -0-             6,000
Directors, President, and      1997        200,000       50,000              -0-          125,000             6,000
Chief Executive Officer                                                                   125,000

--------------------------------------------------------------------------------------------------------------------
Peter P. Stoelzle (3)          1999        140,000          -0-              -0-              -0-             3,000
Executive Vice President       1998        140,000          -0-              -0-              -0-             3,000
                               1997        140,000          -0-              -0-           10,000             3,000
                                                                                           75,000
--------------------------------------------------------------------------------------------------------------------


</TABLE>


(1)      Amounts relate to annual auto allowance.
(2)      Shares of common stock underlying options issued pursuant to the 1997
         Stock Option Plan.
(3)      Mr. Stoelzle's employment with the Company was terminated in December
         1999.

OPTION GRANTS IN LAST FISCAL YEAR

         No options or stock appreciation rights were granted during the
fiscal year ended December 31, 1999.




                                     26

<PAGE>

FISCAL 1999 OPTION EXERCISES AND FISCAL YEAR END OPTION VALUES

         No options were exercised during the fiscal year ended December 31,
1999. The Company has no outstanding stock appreciation rights. The following
table lists the value of unexercised options and stock appreciation rights for
the named executive officers as of December 31, 1999.


<TABLE>
<CAPTION>

                                 NUMBER OF SECURITIES UNDERLYING              VALUE OF UNEXERCISED IN-THE-MONEY
                                 UNEXERCISED OPTIONSAT FY-END (#)                   OPTIONS AT FY-END ($)
                         ----------------------------------------------    --------------------------------------
NAME                             EXERCISABLE           UNEXERCISABLE         EXERCISABLE         UNEXERCISABLE
--------------------        --------------------    -------------------    ---------------    -------------------
<S>                         <C>                     <C>                    <C>                <C>
John G.                              250,000(1)                    0                   0                     0
Tramontana
Peter P.                              85,000(2)                    0                   0                     0
Stoelzle(3)


</TABLE>


(1)      Includes 125,000 stock options originally granted under the 1996 Stock
         Option Plan repriced under the 1997 Stock Option Plan and 125,000 new
         stock options granted under the 1997 Stock Option Plan.

(2)      Includes 75,000 stock options originally granted under the 1996 Stock
         Option Plan repriced under the 1997 Stock Option Plan and 10,000 new
         stock options granted under the 1997 Stock Option Plan.

(3)      Mr. Stoelzle's employment with the Company was terminated in December
         1999.

                            COMPENSATION OF DIRECTORS

         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 are reimbursed for their
reasonable out-of-pocket expenses in connection with attending meetings of the
Board or any committee thereof. The Board of Directors met six times in 1999.
Each Director attended at least 75% of the meetings. The directors waived
their fees and out-of-pocket expense reimbursements for the meetings held in
fiscal 1999.

                              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 19,
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's initial base salary was
$200,000 subject to annual cost of living increases at the discretion of the
Company's Board of Directors. Mr. Tramontana's based salary for fiscal 2000
has been set at $200,000. 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.
For 1998 and 1999, Mr. Tramontana agreed to waive the minimum bonus of 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 also has 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

                                     27

<PAGE>

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.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock at April 24, 2000 with respect to (i)
each person known to the Company to own beneficially more than five percent of
the outstanding shares of the Company's Common Stock, (ii) each director of
the Company, (iii) each of the named executive officers and (iv) all directors
and executive officers of the Company as a group.


<TABLE>
<CAPTION>

                                                                                              SHARES BENEFICIALLY
                                                                                                    OWNED (1)
                                                                                      -----------------------------------
IDENTITY OF STOCKHOLDER OR GROUP                                                            NUMBER             PERCENT
---------------------------------------------------------------                       -----------------    --------------
<S>                                                                                   <C>                  <C>
Bernard Kramer (2)                                                                             35,000             *
Cynthia R. May (3)                                                                          6,607,805            73.5
Massimo Pedrani                                                                                     0             0
Philippe Rohrer (4)                                                                            35,000             *
Peter P. Stoelzle  (5)                                                                         85,000             *
John G. Tramontana (6)                                                                      1,285,800            14.3
Jericho II, LLC (7)
13260 Spence Road
Hemlock, Michigan 48626                                                                     6,607,805            73.5
All directors and executive
  officers as a group (6 persons) (8)                                                       8,048,605            89.5


</TABLE>


-------------------------------
* Less than 1%

(1)      Beneficial ownership is determined in accordance with the rules of the
         Securities and Exchange Commission ("SEC") and generally includes
         voting or investment power with respect to securities. In accordance
         with SEC rules, shares which may be acquired upon exercise of stock
         options which are currently exercisable or which become exercisable
         within 60 days of the date of the table are deemed beneficially owned
         by the optionee. Except as indicated by footnote, and subject to
         community property laws where applicable, the persons or entities
         named in the table above have sole voting and investment power with
         respect to all shares of Common Stock shown as beneficially owned by
         them.

(2)      Includes 35,000 shares subject to options.

                                     28

<PAGE>

(3)      Includes 6,423,539 shares of Common Stock held by Jericho II, LLC (of
         which 1,500,000 shares issuable upon exercise of warrants) and 184,266
         shares of Common Stock held by GRQ, LLC.

(4)      Includes 35,000 shares subject to options.

(5)      Includes 85,000 shares subject to options.

(6)      Includes 250,000 shares subject to options.

(7)      Includes 1,500,000 shares issuable upon exercise of warrants and
         184,266 shares of Common Stock held by GRQ, LLC.

(8)      Includes 1,905,000 shares directors and executive officers have a
         right to acquire upon exercise of stock options.

CHANGES IN CONTROL

         In May 1998, in consideration of a guarantee of an increased line of
credit from a commercial institution, the Company delivered to Jericho II, LLC
("Jericho") warrants to purchase 1,000,000 shares of convertible preferred
stock (the "Preferred Stock") at a price per share equal to $2.5625 and having
a term of 10 years (the "Warrants"). The Preferred Stock is convertible to
Common Stock on a one-to-one basis, subject to adjustment to reflect dilutive
issuances of equity securities by the Company and stock splits, dividends,
combinations and similar events. The Preferred Stock is entitled to five votes
per share and votes together with the Common Stock in addition to having
certain special approval rights. The Preferred Stock has a liquidation
preference equal to the purchase price per share. The Warrants include a net
exercise clause (to permit the conversion of the Warrants into shares having a
fair market value equal to the spread between the exercise price and the then
fair market value) and the shares issuable on exercise shall be entitled to
piggyback registration rights, subject to certain restrictions.

         Jericho holds other warrants to purchase up to 500,000 shares of the
Company's Common Stock.

         In October 1998, Jericho acquired 3,692,308 shares of newly issued
Common Stock for a purchase price of $6,000,000.

         In January 1999, pursuant to a Debt Repayment Agreement, 1,231,231
shares of Common Stock were transferred to Jericho from John G. Tramontana in
satisfaction of debt incurred by a third party holder of the Company's Common
Stock. Mr. Tramontana, Chairman of the Board, President and Chief Executive
Officer of the Company, has a 50% ownership interest in Jericho. Cynthia R.
May, a director of the Company, is the managing member of Jericho and as such,
has sole voting and investment power over shares of the Company's Common Stock
owned by Jericho.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         In 1998 the Company effected several transactions with Jericho II,
L.L.C. ("Jericho") involving securities of the Company. See "Changes in
Control." John G. Tramontana owns a 50% interest in Jericho, and Cynthia R.
May has sole voting and investment power over shares of the Company's Common
Stock owned by Jericho.

         In December 1998, pursuant to promissory notes the Company borrowed
the aggregate amount of $185,000 from Jericho. The principal sum, together
with interest at the prime rate, was repaid in full in February 1999. Also, in
December 1998, the Company borrowed $100,000 from GRQ. L.L.C., an affiliate of
Cynthia R. May, which sum together with interest at the prime rate was repaid
in full in March 1999.

         In December 1996, the Company entered into a lease agreement with
Jtech Laboratories, Inc. ("JTech"). The lease commenced on the completion of
construction of an approximately 8,600 square foot office and laboratory
facility. The lease is at a rental of approximately $120,000 per annum. Mr.
Tramontana is the President and a director of JTech.

                                     29

<PAGE>

         Pursuant to the terms of the $4.0 million Note Purchase, Paying and
Conversion Agency Agreement ("NPPCAA") with Banca del Gottardo (the "Bank"),
the Bank, at its option, may appoint two members of its choice to the
Company's Board of Directors. As of April 24, 2000 the Bank has not exercised
its option to appoint board members.





















                                     30

<PAGE>


                                     PART IV

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

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

Independent Auditors' Report

Consolidated Balance Sheets

- December 31, 1999 and 1998

Consolidated Statements of Operations

                  - Years ended December 31, 1999, 1998 and 1997

Consolidated Statements of  Stockholders' Equity

                  - Years ended December 31, 1999, 1998 and 1997

Consolidated Statements of Cash Flows

                  - Years ended December 31, 1999, 1998 and 1997

Consolidated Statements of  Comprehensive Income (Loss)

                  - Years ended December 31, 1999, 1998 and 1997

Notes to Consolidated Financial Statements


(b) EXHIBITS:

<TABLE>
<CAPTION>

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

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

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

3.2               Restated By-Laws of  the Registrant                                                                      a

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

4.1               Specimen Stock Certificate                                                                               a

4.2               Form of Representatives Warrant                                                                          a

10.1              Intentionally Omitted                                                                                    a

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

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

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

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

10.6              Form of Indemnification Agreement                                                                        a

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

10.8              Form of Medical Advisory Agreement                                                                        a

10.9              Form of Scientific Advisory Agreement                                                                    a

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

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

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

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

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

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


<PAGE>

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

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


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

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

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

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

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

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

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

10.25             Registrant's 1996 Stock Option Plan                                                                      a

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

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

10.28             Form of Registrant's Director Option Plan                                                                a

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

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

10.31             Agreements between Bigmar Pharmaceuticals SA and Unione Farmaceutica SA                                  a

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

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

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

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

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

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


<PAGE>

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

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

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


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

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

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

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

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

10.54            Registrant's 1997 Stock Option Plan                                                                       i

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

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

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

10.58            [Intentionally left blank]

10.59            Possible NASDAQ Delisting                                                                                 k

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

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

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

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

21.10            Subsidiaries of the Registrant                                                                            a

23.01            Consent of KPMG LLP                                                                                 Filed herewith

27.00            Financial Data Schedule                                                                             Filed herewith
</TABLE>

<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(b) REPORTS ON FORM 8-K.

None.


                                      31
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.


Date: March 30, 2000                BIGMAR, INC.

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

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

<TABLE>
<CAPTION>

        SIGNATURE                     CAPACITY                                        DATE
 -------------------------       -------------------                             --------------
 <S>                             <C>                                             <C>

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

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

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

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

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

</TABLE>


                                      32


<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                            PAGE
                                                                                            ----
<S>                                                                                         <C>

Independent Auditors' Report ........................................................        F-2

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

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

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

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

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

Notes to Consolidated Financial Statements ..........................................        F-8

</TABLE>









                                      F-1

<PAGE>

                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders

Bigmar, Inc.:

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

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

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

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1(c)
to the consolidated financial statements, the Company has suffered recurring
losses from operations, and anticipates it will require additional financing
in order to fund its operations during 2000. These factors raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1(c). The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


/s/KPMG LLP

Columbus, Ohio

March 16, 2000







                                      F-2
<PAGE>


                          BIGMAR, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>

                                                                  1999              1998
                                                             -------------      ------------
<S>                                                          <C>                <C>
                                     ASSETS

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

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable .......................................         2,320,411         1,761,903
Notes payable (Note 4) .................................         3,362,038         1,769,285
Current portion of long-term debt (Note 5) .............           632,436         1,288,040
Due to related parties (Note 12) .......................                --           321,149
Accrued expenses and other current liabilities .........           985,386           848,394
                                                             -------------      ------------
Total current liabilities ..............................         7,300,271         5,988,771
Long-term debt, excluding current portion (Note 5) .....        10,762,680         9,487,445
                                                             -------------      ------------
Total liabilities ......................................        18,062,951        15,476,216
                                                             -------------      ------------
STOCKHOLDERS' EQUITY (Notes 7, 9 and 10):
Preferred stock ($.001 par value; 5,000,000 shares
Authorized; none issued) ...............................                --                --
Common stock ($.001 par value; 20,000,000 shares
Authorized; 8,993,973 and 8,027,308 shares issued
and outstanding at December 31, 1999 and 1998,
respectively) ..........................................             8,994             8,027
Additional paid-in capital .............................        25,312,467        22,317,324
Retained earnings (deficit) ............................       (22,558,611)      (16,234,332)
Cumulative translation adjustment ......................        (1,027,049)         (858,053)
                                                             -------------      ------------
Total stockholders' equity .............................         1,735,801         5,232,966
                                                             -------------      ------------
Commitments (Note 13)
Total ..................................................     $  19,798,752        20,709,182
                                                             =============      ============


</TABLE>


          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                    F-3

<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>

                                                                  1999              1998               1997
                                                              -----------        -----------        -----------
<S>                                                           <C>                <C>                <C>
Net sales (Note 11) ...................................       $ 7,725,362          6,377,822          6,483,444
Cost of goods sold ....................................         6,453,581          4,812,290          5,485,648
                                                              -----------        -----------        -----------
Gross margin ..........................................         1,271,781          1,565,532            997,796
                                                              -----------        -----------        -----------
Operating expenses:
Research and development ..............................         2,375,034          2,741,809          1,690,053
Selling, general and administrative ...................         3,514,003          4,377,842          3,800,627
Re-acquisition of U.S. marketing rights (Note 8) ......                --                 --          2,050,000
                                                              -----------        -----------        -----------
Total operating expenses ..............................         5,889,037          7,119,651          7,540,680
                                                              -----------        -----------        -----------
Operating loss ........................................        (4,617,256)        (5,554,119)        (6,542,884)
                                                              -----------        -----------        -----------
Other income (expense):
Interest income .......................................             2,403              4,871             69,984
Interest expense ......................................          (892,388)        (1,062,271)          (616,453)
Issuance of preferred stock warrants for loan guarantee                --           (958,000)                --
Gain (loss) on foreign currency transactions ..........          (836,601)           332,377           (415,871)
Other, net ............................................            19,563             15,440            127,200


                                                              -----------        -----------        -----------
Other income (expense), net ...........................        (1,707,023)        (1,667,583)          (835,140)
                                                              -----------        -----------        -----------
Net loss ..............................................       $(6,324,279)        (7,221,702)        (7,378,024)
                                                              ===========        ===========        ===========
Basic and diluted loss per share ......................       $     (0.73)             (1.46)             (1.82)
                                                              ===========        ===========        ===========
Weighted-average shares outstanding ...................         8,659,398          4,944,895          4,052,945
                                                              ===========        ===========        ===========


</TABLE>


          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                    F-4

<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>

                                          COMMON STOCK
                                   --------------------------       ADDITIONAL        RETAINED       CUMULATIVE
                                     NUMBER                           PAID-IN         EARNINGS       TRANSLATION
                                   OF SHARES         AMOUNT           CAPITAL        (DEFICIT)       ADJUSTMENT         TOTAL
                                 -----------      -----------      -----------     ------------     ------------     -----------
<S>                              <C>              <C>              <C>             <C>              <C>              <C>
Balance at December 31, 1996       3,985,000      $     3,985       13,333,366      (1,634,606)        (806,892)     10,895,853
 Issuance of common stock to
 Banca del Gottardo .........        200,000              200          929,800                                          930,000
 Issuance of common stock
 warrants to Protyde (Notes
 8 and 9) ...................                                          800,000                                          800,000
 Net loss for the year ended
 December 31, 1997 ..........                                                       (7,378,024)                      (7,378,024)
 Translation adjustment .....                                                                          (119,229)       (119,229)
                                 -----------      -----------      -----------     ------------     ------------     -----------
Balance at December 31, 1997       4,185,000      $     4,185       15,063,166      (9,012,630)        (926,121)      5,128,600
 Issuance of common stock
 warrants to Jericho II, LLC
 (Note 9) ...................                                          958,000                                          958,000
 Issuance of common stock to
 Banca del Gottardo .........        150,000              150          299,850                                          300,000
 Issuance of common stock to
 Jericho II, LLC ............      3,692,308            3,692        5,996,308                                        6,000,000
 Net loss for the year ended
 December 31, 1998 ..........                                                       (7,221,702)                      (7,221,702)
 Translation adjustment .....                                                                            68,068          68,068
                                 -----------      -----------      -----------     ------------     ------------     -----------
Balance at December 31, 1998       8,027,308      $     8,027       22,317,324     (16,234,332)        (858,053)      5,232,966
 Issuance of common stock
 Warrants for consulting
 contract (Note 9) ..........                                          106,149                                          106,149
 Issuance of common stock
 to accredited investors.....        729,999              730        2,179,231                                        2,179,961
 Issuance of common stock to
 Banca del Gottardo .........         70,000               70          209,930                                          210,000
 Issuance of common stock to
 GRQ, LLC ...................        166,666              167          499,833                                          500,000
 Net loss for the year ended
 December 31, 1999 ..........                                                       (6,324,279)                      (6,324,279)
 Translation adjustment .....                                                                          (168,996)       (168,996)
                                 -----------      -----------      -----------     ------------     ------------     -----------
Balance at December 31, 1999       8,993,973      $     8,994       25,312,467     (22,558,611)      (1,027,049)      1,735,801
                                 ===========      ===========      ===========     ============     ============     ===========

</TABLE>

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                    F-5

<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>

                                                                     1999               1998               1997
                                                                 ------------        -----------        -----------
<S>                                                              <C>                 <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .................................................       $(6,324,279)        (7,221,702)        (7,378,024)
Adjustments to reconcile net loss to net cash used in
 operating activities:
Depreciation and amortization ............................         1,737,690          2,014,410          1,031,688
Issuance of warrants .....................................           106,149            958,000            800,000
Unrealized foreign exchange (gains) losses ...............           995,834           (333,068)           416,670
Gain on sale of property and equipment ...................                --                 --            (26,235)
Changes in operating assets and liabilities:
Increase in accounts receivable ..........................        (1,337,491)           (48,780)          (140,084)
Increase in inventories ..................................        (1,110,379)          (669,309)           (19,107)
(Increase) decrease in prepaid expenses and other current
 assets ..................................................           (33,806)           192,252              3,642
Increase (decrease) in due to related parties ............          (312,926)           319,567           (906,603)
Increase in accounts payable .............................           792,727            (61,382)           164,064
Increase in accrued expenses and other current liabilities           200,878            200,808            100,797
                                                                 ------------        -----------        -----------
Net cash used in operating activities ....................        (5,285,603)        (4,526,440)        (5,953,192)
                                                                 ------------        -----------        -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment ................          (530,143)        (1,537,205)        (2,175,511)
Proceeds from sale of property and equipment .............                --                 --             78,113
                                                                 ------------        -----------        -----------
Net cash used in investing activities ....................          (530,143)        (1,537,205)        (2,097,398)
                                                                 ------------        -----------        -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings ......................         1,837,901          5,707,088          3,065,986
Proceeds from short-term borrowing from related party ....                --                 --            200,000
Repayment of short-term borrowing from related party .....                --                 --           (200,000)
Repayment of short and long-term debt ....................          (552,406)        (5,649,272)        (2,648,933)
Long-term borrowings .....................................         1,770,829           (785,849)         4,000,000
Debt and equity issuance costs ...........................          (107,670)                --           (330,000)
Advances (repayments) of reimbursable expenses ...........                --                 --           (750,000)
Proceeds from issuance of common stock ...................         2,889,961          6,300,000            930,000
                                                                 ------------        -----------        -----------
Net cash provided by financing activities ................         5,838,615          5,571,967          4,267,053
                                                                 ------------        -----------        -----------
Effect of exchange rate changes on cash ..................            (7,460)           111,655             63,831
                                                                 ------------        -----------        -----------
Net increase (decrease) in cash and cash equivalents .....            15,409           (502,787)        (3,719,706)
Cash and cash equivalents-at beginning of year ...........           140,445            643,232          4,362,938
                                                                 ------------        -----------        -----------
Cash and cash equivalents-at end of year .................       $   155,854            140,445            643,232
                                                                 ============        ===========        ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amounts capitalized) ....................       $   783,822            964,216            583,855
                                                                 ============        ===========        ===========

</TABLE>

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                    F-6

<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>

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

</TABLE>










          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
















                                    F-7

<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998 AND 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING  POLICIES AND PRACTICES

(a) BUSINESS AND RECENT TRANSACTIONS

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

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

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

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

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

In October 1998, the Company issued 3,692,308 shares of common stock to
Jericho for $1.625 per share via a Stock Purchase Agreement dated October 20,
1998. Proceeds from the sale of shares totaled $6,000,000, and were used to
repay debt and for working capital.


                                    F-8

<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        DECEMBER 31, 1999, 1998 AND 1997

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

(a)  BUSINESS AND RECENT TRANSACTIONS (CONTINUED)

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

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

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

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

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

(b) CONSOLIDATION

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

(c) BASIS OF  PRESENTATION

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

The accompanying consolidated financial statements also have been prepared
assuming that the Company will continue as a going concern. The construction
of the Company's pharmaceutical manufacturing plant in Barbengo, Switzerland
and the process for obtaining regulatory approvals has consumed a substantial
amount of the Company's resources. The manufacturing plant received, in
February 1999, regulatory approval from the FDA and the Intercantonal Office
for the Control of Medications ("IKS") in Switzerland to manufacture and sell
certain injectible pharmaceutical products in the U.S. and Switzerland. As a
result, the Company anticipates that these operations will begin to generate
cash to help fund its expansion and further planned research and development
activities. During 1999, the Company has received approximately $2.9 million
in proceeds from the sale of shares of common stock. In addition, the Company
anticipates raising additional funds during 2000 through other private stock
offerings and through additional bank borrowings. However, there can be no
assurance that the Company will be successful in these efforts.

                                    F-9

<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        DECEMBER 31, 1999, 1998 AND 1997

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)

(d) USE OF  ESTIMATES

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

(e) FOREIGN CURRENCY

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

(f) CASH EQUIVALENTS

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

(g) INVENTORY

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

(h) PROPERTY, PLANT AND EQUIPMENT

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

(i) INTANGIBLE AND OTHER ASSETS

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

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

                                   F-10
<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        DECEMBER 31, 1999, 1998 AND 1997

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)

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

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

(k) FAIR VALUE OF FINANCIAL INSTRUMENTS

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

(l) COMPREHENSIVE INCOME

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

(m) INCOME TAXES

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

(n) STOCK-BASED COMPENSATION

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

(o) PER SHARE DATA

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




                                      F-11

<PAGE>



                          BIGMAR, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        DECEMBER 31, 1999, 1998 AND 1997

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)

(p) DERIVATIVE FINANCIAL INSTRUMENTS

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

(2) INVENTORIES

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

                                                DECEMBER 31,
                                         ---------------------------
                                            1999             1998
                                         ----------       ----------
Raw materials ....................       $1,362,439          710,517
Finished goods ...................        1,107,795          901,071
                                         ----------       ----------
Total ............................       $2,470,234        1,611,588
                                         ==========       ==========

(3) PROPERTY, PLANT AND EQUIPMENT, NET

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

<TABLE>
<CAPTION>
                                                      DECEMBER 31,
                                              ----------------------------      ESTIMATED LIFE
                                                 1999             1998             IN YEARS
                                              -----------      -----------     ---------------
<S>                                           <C>              <C>             <C>
Land ...................................      $ 1,196,969        1,352,838          --
Building and building improvements .....       11,343,487       12,733,957       10-40
Machinery ..............................        4,480,567        4,686,009        3-10
Equipment ..............................        1,826,064        1,828,935        3-10
                                              -----------      -----------
                                               18,847,087       20,601,739
Less accumulated depreciation ..........        4,466,210        3,251,735
                                              -----------      -----------
Total ..................................      $14,380,877       17,350,004
                                              ===========      ===========
</TABLE>

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


                                      F-12

<PAGE>


                          BIGMAR, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        DECEMBER 31, 1999, 1998 AND 1997

(4) NOTES PAYABLE

Notes payable consists of the following:

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

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

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

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

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








                                      F-13

<PAGE>


                          BIGMAR, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        DECEMBER 31, 1999, 1998 AND 1997

(5) LONG-TERM DEBT

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

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

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

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

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

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

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

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

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




                                      F-14

<PAGE>


                          BIGMAR, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        DECEMBER 31, 1999, 1998 AND 1997

(5) LONG-TERM DEBT (CONTINUED)

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

Future maturities of long-term debt are as folllows:

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

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

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

-    approximately $1.3 million secured by the Pharmaceuticals building.

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

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

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

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

The following new loans have been executed:

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




                                      F-15
<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        DECEMBER 31, 1999, 1998 AND 1997

 (5) LONG-TERM DEBT (CONTINUED)

-    $1.1 million bank loan from Credit Suisse collaterized by mortgage on
     Pharmaceuticals building and certain receivables; variable interest at
     5.5% per annum.
-    Bank line of credit up to $ 0.3 million collaterized by mortgage on
     Pharmaceuticals building with quarterly interest payments due based on
     5.75% variable interest.
-    $1.1 loan from the CEO due December 31, 2000 bearing a 5% interest rate.

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

 (6) INCOME TAXES

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


<TABLE>
<CAPTION>

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


</TABLE>


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

<TABLE>
<CAPTION>

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

</TABLE>


                                   F-16

<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        DECEMBER 31, 1999, 1998 AND 1997

(6) INCOME TAXES (CONTINUED)

The tax charge in Switzerland is an accumulation of city, canton (state) and
federal taxes. Therefore, the tax burden varies from one entity to another
depending upon its location. While the actual tax rate is a function of the
percentage of profitability in relation to the taxable entity, the Company
believes that 30% is a fair approximation of the effective tax rates for
Pharmaceuticals and Bioren in 1999, 1998 and 1997. In addition, as Swiss tax
laws do not permit consolidated tax filings, possible tax losses in one entity
do not offset taxable income in another entity.

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

<TABLE>
<CAPTION>

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


</TABLE>


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

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

                                   F-17

<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        DECEMBER 31, 1999, 1998 AND 1997

(7) STOCK OPTIONS

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

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

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

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

<TABLE>
<CAPTION>

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


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

</TABLE>


                                   F-18

<PAGE>


                          BIGMAR, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        DECEMBER 31, 1999, 1998 AND 1997

(7) STOCK OPTIONS (CONTINUED)

Stock option activity during the years indicated is as follows:

<TABLE>
<CAPTION>

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


</TABLE>


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

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



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

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

                                   F-19

<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        DECEMBER 31, 1999, 1998 AND 1997

(8) PROTYDE AGREEMENTS

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

On July 24, 1997, the Partnership terminated its manufacturing agreement with
the Company and its marketing agreement with Protyde, and Protyde assigned its
partnership interest to Therapeutics. As consideration for the assignment and
termination agreements, the Company paid Protyde $2,000,000 cash, which
included the return of an advance for reimbursable expenses of $750,000.
Additionally, the Company issued warrants to Protyde to purchase up to 500,000
shares of the Company's common stock (Note 10). The fair value of the total
consideration given to Protyde of $2,050,000 has been recognized in the
accompanying 1997 consolidated statement of operations.

(9) WARRANTS

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

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

As described in Note 9, on July 24, 1997, the Company granted warrants to
Protyde to purchase 500,000 shares of its common stock. These warrants are
exercisable for a period of four years at an exercise price of $5.00 per
share. The Company estimated the fair value of the warrants as of the issuance
date to be approximately $800,000 (using the Black-Scholes option pricing
model) and has recorded that amount as expense and as an increase to
additional paid-in capital in 1997.

                                   F-20

<PAGE>


                          BIGMAR, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        DECEMBER 31, 1999, 1998 AND 1997

(9) WARRANTS (CONTINUED)

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

(10) LEGAL RESERVE

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

(11) SIGNIFICANT CUSTOMERS AND SUPPLIERS

Sales to significant customers were as follows:

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

</TABLE>

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








                                      F-21

<PAGE>


                          BIGMAR, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        DECEMBER 31, 1999, 1998 AND 1997

(12) RELATED PARTY TRANSACTIONS

(a) DISPUTES WITH RELATED PARTIES

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

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

(b) OTHER RELATED PARTY TRANSACTIONS

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

Also see Note 13 regarding related party lease transactions.









                                      F-22

<PAGE>


                          BIGMAR, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        DECEMBER 31, 1999, 1998 AND 1997

(13) COMMITMENTS

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

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

<TABLE>
<CAPTION>

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

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

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

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

The total purchase commitment is as follows:

                                                               PURCHASE
YEAR ENDED DECEMBER 31:                                         VALUE
-----------------------------------------------------------  ----------
2000.......................................................  $  891,509
2001.......................................................     891,509
2002.......................................................     891,509
2003.......................................................     891,509
2004.......................................................     891,509
Afterward..................................................     891,509
                                                             ----------
Total......................................................  $5,349,054
                                                             ==========

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






                                      F-23

<PAGE>

                          BIGMAR, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        DECEMBER 31, 1999, 1998 AND 1997

(14) SEGMENT DATA

The Company manages its business segments primarily on a geographic basis with
each location representing a distinct segment. The Company's reportable
segments are comprised of Bioren, located in Couvet, Switzerland;
Pharmaceuticals, located in Barbengo, Switzerland; and the Company's Corporate
Headquarters, located in Johnstown, Ohio, U.S.A. Bioren, Pharmaceuticals, and
the Corporate Headquarters provide products and services as further described
in Note 1.

The accounting policies of the various segments are the same as those
described in the Summary of Significant Accounting Policies and Practices in
Note 1. The Company evaluates the performance of its segments based on segment
profit/(loss). Segment profit/(loss) for each segment includes sales and
marketing, certain research and development, and overhead charges directly
attributable to the segment and excludes certain expenses which are managed
outside the reportable segments. Costs excluded from segment profit primarily
consist of corporate expenses, as well as other research and development
charges for testing of products targeted for U.S. markets, and other general
and administrative expenses which are separately managed. The Company does not
include intercompany transfers between segments for management reporting
purposes. Segment assets exclude corporate assets. Corporate assets include
cash and cash equivalents, short-term investments, laboratory facility, and
intangible assets. Capital expenditures for long-lived assets are not reported
to management by segment and are excluded as presenting such information is
not practical.

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

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

</TABLE>

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

</TABLE>



                                      F-24

<PAGE>


                          BIGMAR, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        DECEMBER 31, 1999, 1998 AND 1997

(14) SEGMENT DATA (CONTINUED)

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

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







                                      F-25