SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549


                                    FORM 10-K
            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2000

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
     For the transition period from _________________ to __________________

                            Commission File No. 0-795

                            BADGER PAPER MILLS, INC.
             (Exact name of registrant as specified in its charter)


         200 West Front Street                          WISCONSIN
              P.O. Box 149                      (State of incorporation)
     Peshtigo, Wisconsin 54157-0149                    39-0143840
(Address of principal executive office)  (I.R.S. Employer Identification Number)

       Registrant's telephone number, including area code: (715) 582-4551

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:
                   Common Stock, Without Nominal or Par Value


Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.  Yes X   No ___

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K. [ ]

As of March 2, 2001, 1,988,417 shares of common stock were outstanding, and the
aggregate market value of the common stock (based upon the closing sale price of
the shares on the Nasdaq SmallCap Market) held by non-affiliates was
approximately $4,618,183. Determination of stock ownership by affiliates was
made solely for the purpose of responding to this requirement, and registrant is
not bound by this determination for any other purpose.

                       DOCUMENTS INCORPORATED BY REFERENCE
The Company's Proxy Statement for its 2001 Annual Meeting of Shareholders to be
filed with the Commission under Regulation 14A is herein incorporated by
reference into Part III of this Form 10-K to the extent indicated in Part III
hereof.

                                       1
<PAGE>
Statement Regarding Forward-Looking Information

This Form 10-K, each of the Company's annual report to shareholders, Forms 8-K
and 10-Q, proxy statements, and any other written or oral statement made by or
on behalf of the Company subsequent to the filing of this Form 10-K may include
one or more "forward-looking statements" within the meaning of Sections 27A of
the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934 as
enacted in the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"). In making forward-looking statements within the meaning of the Reform
Act, the Company undertakes no obligation to publicly update or revise any such
statement.

Forward-looking statements of the Company are based on information available to
the Company as of the date of such statements and reflect the Company's
expectations as of such date, but are subject to risks and uncertainties that
may cause actual results to vary materially. In addition to specific factors,
which may be described in connection with any of the Company's forward-looking
statements, factors which could cause actual results to differ materially
include, but are not necessarily limited to the following:

o     Increased competition from either domestic or foreign paper producers or
      providers of alternatives to the Company's products, including increases
      in competitive production capacity, resulting in sales declines from
      reduced shipment volume and/or lower net selling prices in order to
      maintain shipment volume.

o     Changes in the price of pulp, the Company's main raw material. All of the
      Company's pulp needs are purchased on the open market and price changes
      for pulp have a significant impact on the Company's costs. Pulp price
      changes can occur due to changes in worldwide consumption levels of pulp,
      pulp capacity additions, expansions or curtailments affecting the supply
      of pulp, inventory building or depletion at pulp consumer levels which
      affect short-term demand, and pulp producer cost changes related to wood
      availability, environmental issues and other variables.

o     Interruptions in the supply of, or changes in the price the Company pays
      for, the electricity and natural gas that the Company uses in the
      manufacture, printing and converting of its paper products.

o     Changes in demand for the Company's products due to overall economic
      activity affecting the rate of consumption of the Company's paper
      products, growth rates of the end markets for the Company's products,
      technological or consumer preference changes and acceptance of the
      Company's products by the markets served by the Company.

o     Unforeseen operational problems at any of the Company's facilities causing
      significant lost production and/or cost issues.

o     Changes in laws or regulations which affect the Company.



                                       2
<PAGE>

Five-Year Comparison of Selected Financial Data



<TABLE>
<CAPTION>

                                                                        Year ended December 31,

                                                  2000           1999           1998            1997           1996
                                                  ----           ----           ----            ----           ----

 Earnings (in thousands):

<S>                                              <C>            <C>            <C>             <C>            <C>
   Net sales                                     $73,346        $67,024        $65,727         $70,427        $76,276

   Cost of sales                                  70,937         60,336         58,505          67,600         72,411

   Gross profit                                    2,409          6,688          7,222           2,827          3,865

   Selling and administrative expenses             4,829          4,825          4,331           4,085          4,136

   Restructuring provision                             -              -              -             850          7,430

   Pulp mill impairment charge                         -              -              -             783              -

   Profit (loss) from operations                 (2,420)          1,863          2,891         (2,891)        (7,701)

   Other income (expense)                          (287)            617            946             650          4,842

   Interest expense                                1,250          1,064          1,196           1,354            894

   Unrealized holding gain or (loss)
      on trading securities                            -              -              -               -            307

   Earnings (loss) before income taxes           (3,957)          1,416          2,641         (3,595)        (3,446)

   Income tax expense (benefit)                    (891)            279            897         (1,153)        (1,234)

   Net earnings (loss)                           (3,066)          1,137          1,744         (2,442)        (2,212)


Common stock:

   Number of shareholders of record                  392            434            470             515            518

   Weighted average shares outstanding         1,981,716      1,966,111      1,955,772       1,947,128      1,944,699

   Earnings (loss) per share                     $(1.55)           $.58          $0.89         $(1.25)        $(1.14)

   Cash dividends declared per share                   -              -              -               -         $ 0.22

   Book value per share                            $8.32          $9.91          $9.33          $ 8.42         $ 9.68


Financial position (in thousands):

   Working capital                              $(9,950)         $8,259         $7,346          $7,196         $9,923

   Capital expenditures                            2,265          2,815          3,004           4,686          6,856

   Total assets                                   43,357         46,894         47,999          48,356         51,952

   Long-term debt                                  1,310         15,705         16,126          20,394         18,617

   Shareholders' equity                           16,482         19,484         18,257          16,444         18,832

</TABLE>



                                       3
<PAGE>

PART I

Item 1.  Business

Badger Paper Mills, Inc. ("Badger" or the "Company") was incorporated under the
laws of the State of Wisconsin in 1929. It has been producing paper for over 72
years. Badger operates in two industry segments: the production of paper
products segment, and the printing and converting segment.

Products and Distribution

Badger's ISO 9001 certified paper mill, consisting of two paper machines, is
located in Peshtigo, Wisconsin. Converting facilities contiguous to the
papermaking facilities include punching equipment, sheeters, trimmers, sealers,
perforators, rewinders, waxers, paper drilling and die-cutting equipment.
Badger's flexographic printing and converting operation is located in Oconto
Falls, Wisconsin.

Products produced on Badger's Fourdrinier machine represented 77% of the paper
products manufactured by the Company in 2000, and contributed more than 60% of
2000 revenue. Fine paper grades are produced utilizing fiber purchased on the
open market, including pre- and post-consumer recycled fibers. These paper
grades include multi-purpose business papers, offset, opaque, endleaf, ledger,
reply card, watermarked, water-oil-grease resistant papers (WOGR), electrostatic
copier, text and cover, and technical and specialty papers. Badger offers a wide
range of colored papers and specializes in color matching. Badger sells a
portion of these products under certain trademarks and trade names, including
Ta-Non-Ka(R), Copyrite(R), ENVIROGRAPHIC(R), Northern Brights(R), Artopaque(R),
Marks of Distinction(R) and DuraEdge(R). These products are sold through paper
merchants, brokers and value-added converters who in turn sell to other
value-adding entities or direct to the consumer.

The Company's Yankee machine produced 23% of the paper products manufactured by
Badger in 2000, representing 25% of 2000 revenue. These products consist of
converted plain or printed waxed papers, laminating grades, machine-glazed,
colors, specialty-coated base papers, twisting papers and various other
specialty papers. These products are sold nationally and internationally to
manufacturers, consumers and converters by Badger's own sales personnel and
commissioned brokers.

Consumers of Badger's paper products can be found in population centers
throughout North America.

The Company's Oconto Falls, Wisconsin facility has a printing and converting
operation that compliments Badger's packaging paper products. This facility
processes various substrates of film and paper and enhances the capabilities of
the Peshtigo packaging paper operations, resulting in opportunities to expand
business growth for both. The facility also has rewinding and polyethylene bag
making equipment. Oconto Falls contributed 15% of the Company's consolidated
revenues in 2000.



                                       4
<PAGE>

Competition

Badger's manufactured paper products are highly sensitive to competition from
numerous sources, including other paper products and products of other
composition. Product quality, price, volume and service are all competitive
factors. Badger's production of fine papers from the Fourdrinier paper machine
represents less than 1% of the production capacity in the United States for
these products. Competition for these papers comes primarily from large mills in
North America and imports from other countries. Competition for flexible
packaging and specialty papers produced from the Yankee paper machine comes from
other specialty mills; some of the mills are similarly constituted as Badger,
others have greater capacity. Many of our larger competitors have greater
financial, technical, marketing and public relation resources, larger client
bases and greater brand or name recognition than Badger. Backlogs are maintained
by offering quality products, prompt service and technical assistance, including
a research and development program to develop new products to meet customer
product design specifications.

Raw Materials; Inventories

Badger's principal raw material used for papermaking operations is purchased
pulp. Badger utilizes a variety of fibers to meet the formulation requirements
of the papers it produces. Pre-consumer and post-consumer recycled pulp,
northern and southern softwood and hardwood pulps, and hard white rolls make up
the total fiber requirements. Badger purchases all its fiber requirements on the
open market.

Other raw materials are purchased directly from manufacturers and distributors.
Badger has at least two sources of supply for major items. Shortages of
purchased pulp or certain chemicals (including petrochemicals) could have an
adverse effect on Badger's ability to manufacture its products, and could
adversely affect product mix.

The printing and converting operations' primary raw materials are paper,
nonwoven, polyethylene and printing inks. They are purchased directly from
manufacturers, including paper purchases from the Peshtigo mill.

In-process and finished goods inventory at the end of 2000 was equivalent to
approximately 41 days of production, compared to 44 days in 1999.

Energy

Badger is a large consumer of electricity and natural gas. Electrical
requirements are purchased from local public utilities, and natural gas is
purchased from various sources in the United States and Canada. Two dual-fueled
boilers capable of burning natural gas or fuel oil, and one natural gas boiler
supply the Peshtigo facility's heating and manufacturing requirements.
Management believes current sources of natural gas, fuel oil and electricity are
adequate to meet Badger's needs, although temporary interruptions of electrical
service were experienced in the summer of 2000 due to regional shortages of
electricity during peak demand periods. Badger could experience similar
interruptions in the future. The rapid acceleration of natural gas prices in
2000 has forced the Company to use fuel oil in its boilers when the BTU cost is
more economical than natural gas.

Patents

Badger owns certain patents and licenses used in connection with its business,
none of which are individually considered material to its business.



                                       5
<PAGE>

Research and Development

Badger maintains a dedicated technical staff to research and develop new
products, although outside consultants are utilized from time to time. The
technical staff also refines and improves existing products in response to
customer requirements and market demands. The amounts spent on product research
and development activities were $762,000 in 2000, $2,089,000 in 1999, and
$2,971,000 in 1998.

Backlog

As of December 31, 2000, Badger's backlog of orders was approximately
$1,678,000, as compared to $2,106,000 and $2,566,000 at December 31, 1999 and
1998, respectively. The backlogs for 2000 and 1999 were reduced from prior years
because soft market conditions that existed at the end of each of these years
allowed customers to reduce inventories and order closer to their actual needs.
In 2000, the soft market conditions were primarily in the Company's fine paper
grades.

Customers

In 2000, 1999 and 1998, no customers represented over 10% of Badger's net sales.

Environmental Matters

In 2000, the Wisconsin Department of Natural Resources ("WDNR") approved the
Title V Air Operating Permit at Badger's Peshtigo, Wisconsin facility. Badger
expects that it will fully comply with the requirements of this permit.

Effluent flow from Badger's Peshtigo operations is directed into a joint
municipal wastewater treatment plant, which Badger operates under contract with
the City of Peshtigo, Wisconsin. Management believes this water treatment plant
continues to meet or exceed all currently applicable environmental requirements.
In 2000, Badger was issued a renewal of its wastewater discharge permit for the
wastewater treatment facility.

The final closure report of the Company's former landfill, known as the Harbor
Road Landfill, was submitted to and approved by the WDNR in January, 2000. As
part of the closure agreement, the Company is required to provide proof of
responsibility for any future remediation efforts if environmental problems are
detected at this site. This amount increases over a five-year period from
$53,000 as of July 31, 1999 to $297,000 as of July 31, 2003. The Company met
this requirement as of December 31, 2000 with an irrevocable letter of credit
granted to the benefit of WDNR in the amount of $107,000.

Management believes the Oconto Falls, Wisconsin facility currently complies with
its air operating permit.

Badger believes it has in force all of the necessary environmental permits from
federal, state and local authorities, and does not anticipate any problem with
reissuance of any permits.



                                       6
<PAGE>

Employees

As of December 31, 2000, the Company had 293 employees. Of the 240 employees at
the Peshtigo facility, 177 were covered by six-year collective bargaining
contracts running through May 2001. The Oconto Falls facility employed 53
personnel, none of whom were covered by a collective bargaining contract.

Item 2.   Properties

The Company's approximately 3,750 square foot headquarters and approximately
88,500 square foot paper manufacturing facility are located in Peshtigo,
Wisconsin. The Company's approximately 40,000 square foot printing and
converting facility is located in Oconto Falls, Wisconsin. The Company considers
its facilities to be adequate and in good repair.


Item 3.   Legal Proceedings

The Company has no pending material legal proceedings.


Item 4.   Submission of matters to a vote of security holders

No matters were submitted to a vote of security holders in the fourth quarter of
2000.


PART II

Item 5. Market for the registrant's common stock and related security holder
matters.

Badger common shares are traded on the Nasdaq SmallCap Market under the symbol
BPMI. There were 392 registered shareholders of record as of March 2, 2001.
Stock price and dividend information is found on page 36 of this report.

Item 6.   Selected financial data

Information regarding selected financial data of the Company is presented on
page 3 of this report.

Item 7.  Management's discussion and analysis of financial condition and results
             of operations

Results of Operations

Overview

The paper products segment had a slight increase in shipping volume and selling
prices in 2000; however, market pressures prevented the Company from increasing
its sales prices sufficiently to fully recover the costs associated with
increased pulp and natural gas prices. Pulp prices peaked in July 2000 at a
level 23% above December 31, 1999 levels. Natural gas prices began escalating in
June 2000 and peaked at a level 143% above the price at December 31, 1999. This
resulted in a minimal gross margin for the year ended December 31, 2000.


                                       7
<PAGE>

The printing and converting segment achieved record sales and earnings in 2000.
Sales for this division continued to grow with its tissue wrap business, as well
as entrance into new substrate markets. Improved operating efficiencies on the
printing presses have contributed significantly to gross profit, but the profits
in this segment were not large enough to overcome the losses experienced in the
paper products segment.

2000 vs. 1999

Net Sales
Consolidated net sales for 2000 increased $6,322,000, or 9%, to $73,346,000 from
$67,024,000 reported in 1999.

Paper products' net sales were up 7% despite weak market conditions. Fine paper
grades experienced a slight decrease in shipping volume, but had a 7% increase
in average selling price, primarily the result of the continuing shift of
product mix from lower margin commodity products to higher margin specialty
products. Packaging grades experienced strong shipping volumes with an 11%
volume increase as compared to the prior year. Selling prices remained
relatively flat with a 1% increase.

Net sales were adversely affected by bad debt write-offs of $305,000, of which
$249,000 was the result of a significant customer filing for protection from its
creditors under Chapter 11 of the Bankruptcy Code. Freight expenses increased
17%, or $374,000, despite shipping volume increases of only 2%. This was
primarily due to serving a broader marketing area than in the past, increased
diesel fuel prices and an increase in absorbed freight expenses. Claims on our
paper products increased 50%, or $255,000, during 2000. This was primarily
associated with hole problems in the production of our fine paper grades in the
early part of the year. The Company has since installed a state-of-the-art sheet
inspection system on the paper machine to resolve this quality issue.

Specialty paper products were approximately 57% of gross sales dollars in 2000,
as compared to 53% in 1999.

Printing and converting net sales were up 7%, primarily in the printed tissue
wrap business, which increased over last year. The new, nonwoven printing
business began in October and contributed 19% of the gross sales in the fourth
quarter.


Cost of Sales
Consolidated cost of sales for 2000 of $70,937,000 increased $10,601,000, or 18%
over the $60,336,000 reported in 1999.

The paper products segment experienced significant cost increases in pulp and
natural gas costs. Paper production for 2000 amounted to 60,912 tons, a decrease
of 545 tons from 1999. The weak market conditions throughout the industry forced
scheduled downtime on the paper machines of 23% of the available production
time. Production efficiency on the paper machines was comparable to last year. A
reduction of finished paper and raw material inventories to improve cash flow
resulted in a $555,000 unfavorable LIFO reserve adjustment.

During 2000, market prices for pulp, the primary raw material in the Company's
paper manufacturing, continued to escalate. Pulp prices peaked in July 2000 and
by the end of the year began to fall off. Paper


                                       8
<PAGE>

production in 2000 was down less than 1% from 1999 levels, while the cost of
pulp increased approximately $9,000,000 (49%) over 1999 costs.

Natural gas prices also increased the costs of paper production with prices
rising to a high of $.59 per therm in October 2000. This represented a 143%
increase from the $.24 per therm paid in December 1999. In 2000, gas prices
increased $1,200,000 (60%) above 1999 levels.

The printing and converting operations improved operating efficiencies through
longer production runs, reduced waste and reduced change time between production
runs.


Gross Profit

Consolidated gross profit margins decreased to 3% of net sales for 2000,
compared to the 10% realized in 1999.

The paper products segment's gross profit margin fell to less than 1% of net
sales as compared to 8% in 1999. Market pressures have prevented the Company
from increasing selling prices sufficiently to fully recover all costs
associated with increased pulp and natural gas prices. The Company continues its
efforts to transition its business from selling traditional lower margin
commodity products toward higher margin specialty products.

The printing and converting segment's gross profit margin increased to 20% of
net sales in 2000, compared to 17% reported in 1999. This is a result of product
mix as well as improved production efficiencies.


Selling, Administration and Other Expenses

Selling and administrative expenses were comparable for the years 2000 and 1999.

Other income and expenses for 2000 included the $440,000 write-off of trade
credits that the Company was not able to fully utilize.

In the second quarter of 1999, Badger Paper received $622,000 of life insurance
proceeds upon the death of a former president of the Company in March 1999. The
proceeds included $231,000 of cash surrender value carried as other assets on
our balance sheet and $391,000 of non-recurring income.


1999 vs. 1998

Net Sales
Net sales for 1999 increased $1,297,000, or 2%, to $67,024,000 from $65,727,000
in 1998.

Paper products' net sales were flat as weak market conditions continued during
1999. Paper products' volume was down 3%, while selling prices remained
relatively flat. Printing and converting net sales increased 70% over 1998 due
to growth in the printing business in 1999.

Specialty products were approximately 53% of gross sales dollars in both 1999
and 1998.


                                       9
<PAGE>

Cost of Sales
Cost of sales for 1999 of $60,336,000 increased $1,831,000, or 3%, over the
$58,505,000 reported in 1998.

During the second quarter of 1999, market prices for pulp, the primary raw
material in the Company's paper manufacturing, began to escalate. This trend
continued throughout the remainder of the year, with average year-end 1999
prices increasing 37% over the average price of pulp at the end of 1998. This
pulp increase contributed over $2,800,000 to the cost of sales for paper
manufacturing in 1999.

Production rates on the Fourdrinier paper machine were down 9% in 1999 compared
to 1998 because of first quarter mechanical problems and difficulties associated
with the installation of a new process control computer in July 1999. The Yankee
paper machine and all converting operations had improved production rates over
1998.

The printing and converting operations at Oconto Falls improved operating rates
through longer production runs, reduced change time between production runs,
improved waste rates and the elimination of mechanical problems previously
experienced on the Chadwick press.


Gross Profit
Gross profit margins decreased to 10% of net sales for 1999, compared to 11% in
1998. The overall decrease was due to a 22% gross margin drop in our paper
products segment caused by our inability to pass rapidly escalating pulp prices
through to our customers because of soft market conditions.

The printing and converting segments' gross profit margin increased 29% due to
improved operating efficiencies.


Selling and Administration
Selling and administration expenses of $4,825,000 in 1999 increased $494,000
over the $4,331,000 reported in 1998.

The increase resulted primarily from expenses associated with the reorganization
of sales staffing in the paper products segment to provide for a product
development function within the sales department, and an addition to the sales
staff. Non-capitalizable expenses associated with upgrading computers and
software in addressing Year 2000 concerns were included in administration
expenses.


Other Income and Expense
In the second quarter of 1999, Badger Paper received $622,000 of life insurance
proceeds upon the death of a former president of the Company in March 1999. The
proceeds included $231,000 of cash surrender value carried as other assets on
our balance sheet, and $391,000 of non-recurring income.

In the second quarter of 1998, the Company recorded a non-recurring capital gain
of $611,000 on the sale of the Company's offsite training facility.
Non-recurring executive termination expenses of $286,000 associated with a
former president and vice president were also booked in the second quarter of
1998.

Other income (expense) for 1998 included $308,000 of realized gains on trade
credit contracts. In 1999, no gain or loss was realized on trade credit
contracts.



                                       10
<PAGE>

Income Taxes
The Company's effective tax rate was 19.8% for 1999, compared to 34% for the
same period in 1998. The decreased effective rate was due to the non-taxability
of the life insurance proceeds we received in 1999, and the utilization of net
operating loss and tax credit carryovers in connection with the merger of our
former Badger Paper Mills Flexible Packaging Division, Inc. subsidiary into the
Company.



LIQUIDITY AND CAPITAL RESOURCES

Capital Expenditures
Capital expenditures during 2000 were $2,265,000, compared to $2,815,000 for the
same period in 1999. Major projects in 2000 for the paper products segment
included the speed-up of the Yankee paper machine, installation of a
state-of-the-art sheet inspection system on the Fourdrinier paper machine,
installation of a precision folio size sheeter, and drive replacements on the
Fourdrinier paper machine. Major projects at the printing and converting segment
included a slitter/rewinder and press department improvements. No major projects
are planned for either of the Company's segments in 2001.


Capital Resources
As of December 31, 2000, the Company's capital resources for funding ongoing
operations included $980,000 of cash and marketable securities and borrowing
under the Company's $12,000,000 revolving credit facility. Borrowing under this
facility totaled $11,500,000 as of December 31, 2000. Pursuant to the terms of
the revolving credit facility, the Company is making quarterly payments of
$140,000 and made an annual payment of $100,000 on February 1, 2001 on its
Industrial Development Revenue Bonds ("IDRBs").

At December 31, 2000, $11,500,000 was outstanding under the revolving credit
facility, an $800,000 increase from the balance outstanding at December 31,
1999. The increase was used to meet working capital needs. There also was
$3,590,000 outstanding on the IDRBs, a $960,000 reduction from the $4,550,000
balance at December 31, 1999.

The revolving credit facility contains certain covenants that require the
company to maintain a specified fixed charge ratio, debt leverage ratio, minimum
Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA"), minimum net worth and to not exceed specified limitations on capital
expenditures. As of December 31, 2000, the Company was not in compliance with
the required minimum tangible net worth or minimum EBITDA covenants. The Company
requested and received a waiver of these covenants through December 31, 2000.
Even though operating performance showed signs of improvement, the Company was
not in compliance with the minimum EBITDA and tangible net worth covenants
during January and February 2001. While management has been successful in
obtaining waivers of these financial covenants from its lender in the past,
there are no assurances that the Company will be successful in obtaining
covenant waivers in the future.

The continuing failure to comply with these financial covenants could result in
a default under the existing revolving credit facility and acceleration of the
maturity of the amount borrowed under this facility, as well as the amounts
borrowed under the IDRBs, creating a material adverse effect upon the Company's
liquidity. The Company does not have the financial resources available to repay
the total amounts due under its revolving credit facility and the IDRBs without
a refinancing.




                                       11
<PAGE>

Since November 2000, the Company has been exploring the refinancing of its
existing credit facility with other lenders.

Further details are presented in Notes B and G to the Company's Consolidated
Financial Statements.

In May 2000, the Company and the City of Peshtigo refinanced the Urban
Development Action Grant ("UDAG"), which was scheduled to mature in April 2000.
The refinanced terms of the $1,500,000 UDAG provide for a ten-year amortization
with interest at 5%. Principal payments during the year 2000 were $83,000.

Except as qualified by the information regarding certain covenants under the
revolving credit facility set forth above, the Company believes that cash
provided by operations and the revolving credit facility are sufficient to meet
current and anticipated working capital needs, as well as fund the Company's
planned capital expenditures.


Cash Flows
Cash provided from operations was $2,233,000 in 2000 and $1,329,000 in 1999. The
increase in cash was created through reduced inventory levels and increases in
the age of trade payables. Net cash used in investing activities was $1,679,000
in 2000, compared to $460,000 in 1999. Life insurance proceeds of $622,000 upon
the death of a former president and proceeds from the sale of marketable
securities provided an additional source of funds in 1999 that were not
available in 2000. Cash used for financing activities was $243,000 and
$2,429,000 respectively for 2000 and 1999. The decrease was primarily the result
of principal payments on the Company's IDRBs required to be made pursuant to the
terms of our revolving credit facility. The required payments were $400,000 in
2000 and $2,380,000 in 1999.


Item 7a.  Quantitative and Qualitative Disclosure About Market Risk

The Company is exposed to market risk from changes in interest on its debt. The
revolving credit facility provides for borrowings up to $12 million and extends
to November 2003. An annual commitment fee of 1/2% is payable for unused
amounts. Interest on borrowings is at various rates equal to the Prime rate
(totaling 9.5% at December 31, 2000) and the LIBOR rate plus 3.25% (totaling
9.91% at December 31, 2000).

Certain of the Company's IDRBs require varying quarterly principal installments
of $140,000 plus interest quarterly through October 1, 2006, with payment of the
remaining balance due December 1, 2006, and the Company's revolving credit
facility requires it to make additional principal payments on its IDRBs. These
required payments included principal payments of $1,885,000 made in March 1999,
$495,000 made in June 1999 and $400,000 made in July 2000. The remaining
payments on the IDRB required to be made under the revolving credit facility
represent a principal installment of $100,000 due February 1, 2001. Interest on
the IDRBs is payable at floating rates determined by remarketing agents (4.95%
at December 31, 2000).

A majority of the Company's debt is at variable interest rates, and a
hypothetical 1% change in interest rates would cause an estimated $165,000
increase in annual interest expense.

The Company does not use financial instruments for trading purposes and is not a
party to any leveraged derivatives.



                                       12
<PAGE>

Item 8.   Financial statements and supplementary data


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Shareholders
Badger Paper Mills, Inc. and Subsidiary

We have audited the accompanying consolidated balance sheets of Badger Paper
Mills, Inc. and Subsidiary (a Wisconsin corporation) as of December 31, 2000 and
1999 and the related consolidated statements of operations, shareholders' equity
and cash flows for each of the three years in the period ended December 31,
2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 our audits provide a reasonable
basis for our opinion.

In our opinion, the financial statements referred to above, present fairly, in
all material respects, the consolidated financial position of Badger Paper
Mills, Inc. and Subsidiary as of December 31, 2000 and 1999 and the consolidated
results of their operations and cash flows for each of the three years in the
period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note B to the
financial statements, the Company has experienced significant increases in raw
material and energy costs that it has not been able to fully pass along to its
customers, resulting in a significant loss for 2000. This had an adverse effect
on various financial ratios, creating defaults under loan agreements. The
Company has received waivers from the lenders relating to these defaults through
the year ended December 31, 2000. However, the Company is in default of these
financial ratios in 2001. These matters raise substantial doubt about the
Company's ability to continue as a going concern. Management's plan in regards
to these matters is described in Note B. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.





Appleton, Wisconsin
January 26, 2001 (Except for
         Note P, as to which the date is
         March 1, 2001, and Notes B and G,
         as to which the date is
         March 7, 2001)


                                       13
<PAGE>

                     Badger Paper Mills, Inc. And Subsidiary

                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2000 and 1999
                             (dollars in thousands)

                                       ASSETS               2000          1999
                                                            ----          ----
CURRENT ASSETS
  Cash and cash equivalents                                 $ 980         $ 669
  Certificates of deposit                                     100           500
  Marketable securities                                         -           137
  Accounts receivable, net                                  6,608         6,080
  Inventories                                               6,519         7,819
  Refundable income taxes                                     300           220
  Deferred income taxes                                         -         1,160
  Prepaid expenses and other                                  571           606
                                                         --------      --------
     Total current assets                                  15,078        17,191



PROPERTY, PLANT AND EQUIPMENT, NET                         26,417        27,240


OTHER ASSETS
  Trade credits                                                 -           609
  Other                                                     1,862         1,854
                                                         --------      --------
                                                            1,862         2,463
                                                         --------      --------
     Total assets                                         $43,357       $46,894
                                                         ========      ========

                                     LIABILITIES

CURRENT LIABILITIES
  Current portion of long-term debt                       $15,212        $1,060
  Accounts payable                                          6,859         4,746
  Accrued liabilities                                       2,957         3,126
                                                         --------      --------
     Total current liabilities                             25,028         8,932


LONG-TERM DEBT                                              1,310        15,705

DEFERRED INCOME TAXES                                           -         1,840

OTHER LIABILITIES                                             537           933
                                                                -             -
COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
  Common stock, no par value; 4,000,000
     shares authorized, 2,160,000
     shares issued                                          2,700         2,700
  Additional paid in capital                                  170           201
  Retained earnings                                        15,367        18,433
  Treasury stock, at cost, 171,583 and
     185,832 shares in 2000 and 1999,
     respectively                                          (1,755)       (1,850)
                                                         --------      --------
     Total shareholders' equity                            16,482        19,484
                                                         --------      --------
     Total liabilities and shareholders' equity           $43,357       $46,894
                                                         ========      ========

The accompanying notes are an integral part of these statements.


                                       14
<PAGE>

<TABLE>
                     Badger Paper Mills, Inc. and Subsidiary
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                For Years Ended December 31, 2000, 1999 and 1998
                  (dollars in thousands, except per share data)

<CAPTION>
                                                                     2000        1999          1998
                                                                     ----        ----          ----

<S>                                                                <C>          <C>           <C>
Net sales                                                          $73,346      $67,024       $65,727

Cost of sales                                                       70,937       60,336        58,505
                                                                  --------     --------      --------

          Gross profit                                               2,409        6,688         7,222


Selling and administrative expenses                                  4,829        4,825         4,331
                                                                  --------     --------      --------
          Operating income (loss)                                  (2,420)        1,863         2,891


Other income (expense):

  Interest and dividend income                                          44           85           237

  Interest expense                                                 (1,250)      (1,064)       (1,196)

  Executive termination costs                                            -            -         (286)

  Gain from life insurance proceeds                                      -          391             -

  Gain (loss) on disposal of property, plant
     and equipment
                                                                      (22)            -           632
  Loss on write-off of trade credits                                 (440)            -             -

  Miscellaneous, net                                                   131          141           363
                                                                  --------     --------      --------
                                                                   (1,537)        (447)         (250)
                                                                  --------     --------      --------

Income (loss) before income taxes                                  (3,957)        1,416         2,641


Provision (benefit) for income taxes                                 (891)          279           897
                                                                  --------     --------      --------

          Net income (loss)                                       $(3,066)       $1,137        $1,744
                                                                  ========     ========      ========

          Net earnings (loss) per share (basic and diluted)
                  diluted                                          $(1.55)        $0.58         $0.89
                                                                  ========     ========      ========
</TABLE>


The accompanying notes are an integral part of these statements.



                                       15
<PAGE>


<TABLE>
                     Badger Paper Mills, Inc. and Subsidiary
                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                For Years ended December 31, 2000, 1999 and 1998
                             (dollars in thousands)
<CAPTION>

                                                                  2000            1999             1998
                                                                  ----            ----             ----

Common stock

<S>                 <C>                                         <C>             <C>              <C>
  Balance, December 31                                          $ 2,700         $ 2,700          $ 2,700


Additional paid-in capital

  Balance, January 1                                                201             200              190

  Treasury stock issued
                                                                   (31)               1               10
  Balance, December 31                                              170             201              200


Retained earnings

  Balance, January 1                                             18,433          17,296           15,552

  Net income (loss)                                              (3,066)           1,137            1,744

  Balance, December 31                                           15,367          18,433           17,296


Treasury stock

  Balance, January 1                                            (1,850)         (1,939)          (1,998)

  Shares issued (14,249, 13,446 and 8,867 shares
    in 2000, 1999 and 1998, respectively)                            95              89               59

  Balance, December 31                                          (1,755)         (1,850)          (1,939)


Shareholders' equity

  Balance, December 31                                          $16,482         $19,484          $18,257
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.




                                       16
<PAGE>
<TABLE>
                     Badger Paper Mills, Inc. and Subsidiary
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                For Years ended December 31, 2000, 1999 and 1998
                             (dollars in thousands)
<CAPTION>

                                                                         2000           1999           1998
Cash flows from operating activities:
<S>                                                                    <C>               <C>           <C>
  Net income (loss)                                                    $(3,066)          $1,137        $1,744
  Adjustments to reconcile to net cash provided
           by operating activities:
      Depreciation                                                        3,005           2,853         2,752
      Directors' fees paid in stock                                          64              90            69
      Deferred income taxes                                               (680)             200           586
      Realized loss on sale of marketable securities                         12               -            48
      Gain from life insurance benefits                                       -           (391)             -
      (Gain) loss on disposal of property, plant and equipment               22               -         (632)
      Loss on write-off of trade credits                                    440               -             -

  Changes in assets and liabilities
      Accounts receivable, net                                            (528)           (818)         (142)
      Inventories                                                         1,300         (1,618)       (1,357)
      Accounts payable and accrued liabilities                            1,944             602       (1,351)
      Income taxes refundable (payable)                                    (80)           (363)           528
      Other                                                               (200)           (363)         (166)
                                                                      ---------        --------      --------
          Net cash provided by operating activities                       2,233           1,329         2,079
Cash flows from investing activities:
  Additions to property, plant, and equipment                           (2,265)         (2,815)       (3,004)
  Proceeds from sale of property, plant and equipment                        61              13         2,880
  Net sales of certificates of deposit                                      400             496           386
  Life insurance proceeds                                                     -             622             -
  Purchases of marketable securities                                          -            (36)       (1,927)
  Proceeds from sale of marketable securities                               125           1,260         1,836
                                                                      ---------        --------      --------
          Net cash provided by (used in) investing activities           (1,679)           (460)           171
Cash flows from financing activities:
  Payments on long-term debt                                            (1,043)         (4,029)       (2,323)
  Increase in revolving notes payable                                       800           1,600         1,000
                                                                      ---------        --------      --------
          Net cash used in financing activities                           (243)         (2,429)       (1,323)
                                                                      ---------        --------      --------
NET INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS                                                               311         (1,560)           927

Cash and cash equivalents:
  Beginning of year                                                         669           2,229         1,302
                                                                      ---------        --------      --------
  End of year                                                             $ 980           $ 669        $2,229
                                                                      =========        ========      ========
</TABLE>

The accompanying notes are an integral part of these statements.


                                       17
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2000 and 1999


NOTE A - SUMMARY OF ACCOUNTING POLICIES

Badger Paper Mills, Inc. and Subsidiary ("Company") manufactures paper and paper
products and provides converting and printing services to customers throughout
North America. In August of 1999, the wholly owned subsidiary involved in
printing and converting was merged into Badger Paper Mills, Inc. In February
1998, Peshtigo Power, LLC ("Peshtigo") was incorporated to produce steam for
Badger Paper Mills, Inc. Peshtigo is wholly owned by the Company.

A summary of the significant accounting policies applied in the preparation of
the accompanying consolidated financial statements follows.

1.  Consolidation Principles

The consolidated financial statements include the accounts of Badger Paper
Mills, Inc. and its wholly owned Subsidiary. All significant intercompany
accounts and transactions have been eliminated.

2.  Operating Segments

The Company has adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 131, "Disclosures About Segments of an Enterprise and
Related Information". SFAS 131 requires public companies to use a "management
approach" to defining and reporting the activities of operating segments. The
management approach defines operating segments along the lines used by
management to assess performance and make operating and capital decisions.

3.  Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentrations
of credit risk consist principally of cash and cash equivalents and trade
accounts receivable. The Company places its cash and cash equivalents with high
quality financial institutions. The Company provides credit in the normal course
of business to its customers. These customers are located throughout North
America. The Company performs ongoing credit evaluations of its customers and
maintains allowances for potential credit losses and generally does not require
collateral to support the accounts receivable balances.

4.  Financial Instruments

For cash and certificates of deposit, the carrying amount approximates fair
value because of the short maturity of these instruments. For long-term debt,
the carrying amount approximates fair value based on comparison with current
rates offered to the Company for debt with similar remaining maturities.

5.       Estimates

Preparation of the consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent liabilities at
the date of


                                       18
<PAGE>

the financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those estimates.

6.       Cash Equivalents and Certificates of Deposit

For financial reporting purposes, the Company considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents.

7.       Marketable Securities

The investment portfolio at December 31, 1999, which consisted of taxable United
States Agency Bonds, was classified as available for sale. The difference
between cost and fair value was insignificant. The specific identification
method is used to compute realized gains and losses.

8.       Receivables

Accounts receivable are stated net of an allowance for sales returns, cash
discounts and doubtful accounts.

9.       Inventories

Substantially all inventories are valued at the lower of cost or market with
cost being determined on the last-in, first-out ("LIFO") basis.

10.      Property, Plant and Equipment

These assets are stated at cost, less depreciation. Depreciation of plant and
equipment is provided on the straight-line basis over the estimated useful lives
of the assets. Land improvements useful lives are 15 years. Buildings useful
lives range from 30 to 33 years and machinery and equipment from three to 17
years. Accelerated depreciation is used for income tax purposes.

11.      Trade Credits

Trade credits represent credits issued by an international barter firm in
exchange for surplus inventory. Trade credits are recorded at the lower of cost
or market of the inventory exchanged. The Company regularly reviews trade
credits if events or circumstances indicate that the trade credits are impaired.
In the fourth quarter of 2000, $440,000 of trade credits were written off
through an impairment charge, as the trade credits no longer have value in
negotiations with key suppliers. The write-off of trade credits represented a
net loss per share of $0.22 both on a basic and diluted basis for 2000. The
write-off related to the paper products segment.

12.      Environmental Expenditures

Accruals for remediation costs are recorded when it is probable that a liability
has been incurred and the amount of the costs can be reasonable estimated.

13.      Income Taxes

Deferred income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year-end based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets and liabilities to



                                       19
<PAGE>

the amount expected to be realized. Income tax expense is the tax payable for
the period and the change during the period in deferred tax assets and
liabilities.

14.      Stock Options

The Company has elected to follow Accounting Principles Board Opinion ("APB")
No. 25, "Accounting for Stock Issued to Employees" and related interpretations
in accounting for its stock options. Under APB 25, because the exercise price of
the stock options exceeds the market price of the underlying stock on the date
of grant, no compensation expense is recorded. The Company has adopted the
disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation." Compensation expense is recorded using the front loaded method.

15.      Revenue Recognition

Revenue is recognized by the Company when goods are shipped.

16.      Shipping and Handling Costs

The Company records shipping and handling costs as net sales on the statement of
operations. There were $2,544,000, $2,176,000 and $1,771,000 of shipping and
handling costs for the years ended December 31, 2000, 1999 and 1998,
respectively.

17.      Research and Product Development Costs

Research and product development costs related to potential new products and
applications are expensed when incurred. These costs totaled $762,000,
$2,089,000 and $2,971,000 for 2000, 1999 and 1998, respectively, and are
included in cost of sales.

18.      Net Earnings (Loss) Per Share

Net earnings (loss) per share are computed based on the weighted average number
of shares of common stock outstanding during the year (1,981,716 shares,
1,966,111 shares and 1,955,772 shares in 2000, 1999 and 1998, respectively). In
2000 and 1999, for purposes of computing diluted net earnings per share, the
115,000 stock options granted in 1999 under the stock option plan were
considered antidilutive because their exercise prices were greater than the
average market price of the common shares.

19.  Prospective Accounting Pronouncements

The Company believes the adoption of new accounting pronouncements will not have
a significant impact on results of operations or financial position.

NOTE B - GOING CONCERN

The Company experienced a net loss during the year ended December 31, 2000 of
$3,066,000, resulting largely from significant increases in the cost of raw
materials and energy that it was not able to fully pass along to its customers.
This loss prevented the Company from meeting some of the financial covenants, as
required in its revolving credit agreement and Industrial Development Revenue
Bonds (IDRBs). During the year, the financial covenants were amended, (See Note
G) to concentrate more on the minimum Earnings Before Interest, Taxes,
Depreciation and Amortization (EBITDA) level of the Company. On March 7, 2001,
waivers for violations of covenants were obtained from the lending institutions
through the year ended December 31, 2000. However, the Company is in default
under the minimum EBITDA covenant, which



                                       20
<PAGE>
involves a trailing one year calculation, and the minimum tangible net worth
covenants for both January and February 2001. As such, the debt associated with
these agreements has been classified as short-term in the accompanying financial
statements. These matters raise substantial doubt about the Company's ability to
continue as a going concern.

In view of the matters described in the preceding paragraph, recoverability of a
major portion of the recorded asset amounts shown in the accompanying balance
sheet is dependent upon the continued operations of the Company, which in turn
is dependent upon the Company's ability to maintain its present financing or
obtain alternative debt financing, and succeed in its future operations. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts and
classification of liabilities that might be necessary should the Company be
unable to continue operating.

Management has taken a number of actions related to the Company's situation. The
Company has engaged outside consultants to assist it in its search for
alternative financing sources to meet its working capital requirements. A review
of operations has been completed and an operational plan developed and recently
implemented that is expected to optimize efficiencies and better match demand
for product through management of paper machine downtime. Integral to this plan,
flexibility has been enhanced in the manufacturing operation and, as of March 1,
2001, certain concessions have been received from all Company employees relating
to future wage increases, vacations and benefits. The Company continues to make
inroads in selling specialty grades of paper, to protect itself from cycles
within the paper industry and to improve its profitability. Management has
placed emphasis on selling products, which utilize the Company's diverse
manufacturing and converting capabilities.



NOTE C - RECEIVABLE ALLOWANCES

The receivable allowances at December 31, 2000 and 1999 are as follows (in
thousands):

                                                 2000               1999
                                               --------           -------

      Sales returns and allowances               $102               $205
      Cash discounts                               34                 43
      Doubtful accounts                            14                 48
                                                 ----               ----
                                                 $150               $296
                                                  ===                ===


                                       21
<PAGE>

NOTE D - INVENTORIES

The major classes of inventories, valued on the LIFO cost method, at December
31, 2000 and 1999 are as follows (in thousands):

                                                 2000               1999
                                               --------           -------

   Raw Materials                                 $1,291            $1,559
   Work-in-process and finished stock             5,228             6,260
                                                  -----             -----
                                                 $6,519            $7,819
                                                  =====             =====

The first-in, first-out ("FIFO") cost of raw materials, work-in-process and
finished stock inventories approximated $11,208,000 and $11,890,000 at December
31, 2000 and 1999, respectively. It is not practical to separate finished stock
and work-in-process inventories. The LIFO cost method had the effect of
increasing net loss by $618,000 ($(0.31) per share) in 2000. The impact of the
LIFO cost method on net income for 1999 and 1998 was not significant.

NOTE E - PROPERTY, PLANT AND EQUIPMENT

The major classes of property, plant and equipment at December 31 are as follows
(in thousands):

                                                  2000               1999
                                                --------           -------

     Machinery and equipment                     $60,605           $58,392
     Buildings                                     9,104             8,698
     Land                                            199               199
     Construction-in-progress - equipment             13               567
                                               ---------          --------
                                                  69,921            67,856
     Accumulated depreciation                     43,504            40,616
                                               ---------          --------
                                                 $26,417           $27,240
                                               =========          ========

At December 31, 2000 and 1999, $18,289,000 and $17,302,000, respectively, of
fully depreciated assets were still in use. During 1998, the Company sold its
training facility for $725,000 resulting in a gain of $611,000.

NOTE F - ACCRUED LIABILITIES

Accrued liabilities at December 31, 2000 and 1999 are as follows (in thousands):


                                                 2000               1999
                                               --------           -------

   Compensation and related taxes               $1,646            $1,530
   Profit sharing                                  505               522
   Other                                           806             1,074
                                                ------            ------
                                                $2,957            $3,126
                                                ======            ======


                                       22
<PAGE>

NOTE G - LONG-TERM DEBT

Long-term debt at December 31, 2000 and 1999 consists of the following (in
thousands):

                                                 2000               1999
                                               --------           -------

Revolving Credit Agreement                     $11,500             $10,700
Industrial Development Revenue
   Bonds ("IDRBs")                               3,590               4,550
Urban Development Action Grant ("UDAG")          1,432               1,515
                                               -------             -------
                                                16,522              16,765
     Current portion                            15,212               1,060
                                                ------             -------
                                               $ 1,310             $15,705
                                                ======             =======

The Company's revolving credit agreement provides for borrowings up to $12
million and extends to November 2003. A commitment fee of 1/2% is payable for
unused amounts. Interest on borrowings is at various rates equal to the LIBOR
rate plus 3.25% (totaling 9.91% at December 31, 2000). Borrowings are
collateralized by cash and cash equivalents, certificates of deposit, marketable
securities, accounts receivable, inventory and certain property, plant and
equipment. In 2000 and 1999, the Company issued an irrevocable letter of credit
under the revolving credit facility to the Wisconsin Department of Natural
Resources ("WDNR") for approximately $107,000 and $53,000, respectively (note
N).

The IDRBs require varying quarterly installments of $140,000 plus interest
quarterly through October 1, 2006, with payment of the remaining balance due
December 1, 2006. Principal installments of $65,000 and $35,000 are due February
1, 2001 and July 1, 2001, respectively. These installments are in addition to
the quarterly installments. Interest on the IDRBs is payable at floating rates
determined by remarketing agents (4.95% at December 31, 2000). The IDRBs are
collateralized by bank letters of credit expiring in 2003. The Company pays
annual fees at 1.25% of the amount available under the letters of credit.

At December 31, 2000, the revolving credit facility and certain IDRBs required,
among other items, the Company to maintain a fixed charge coverage ratio of 1.00
for periods from June 30, 2001 through September 29, 2001 and 1.15 for periods
thereafter; a debt leverage ratio of 4.00 from June 30, 2001 through September
29, 2001 and 3.75 for periods thereafter; and a minimum tangible net worth, as
outlined in the agreements. The Company has a requirement to maintain minimum
levels, as outlined in the agreements, of EBITDA, calculated on a monthly basis
cumulatively for the period July 1, 2000 to June 30, 2001. Capital expenditures
are limited to $2,700,000 in 2001 and periods thereafter. The Company was not in
compliance with the minimal level of EBITDA and tangible net worth at December
31, 2000. On March 7, 2001, the Company received waivers related to this
noncompliance at December 31, 2000. However, the Company is in default under the
minimum EBITDA covenant, which involves a trailing one-year calculation, and the
minimum tangible net worth covenants for both January and February 2001.
Accordingly, the revolving credit facility and IDRBs amounting to $15,090,000
are classified as short-term in the accompanying balance sheet (note B).

The UDAG debt is due in monthly installments of $15,910, including interest at
an effective rate of approximately 5.0%, through maturity in June 2010. This
grant is collateralized by certain machinery and equipment.


                                       23
<PAGE>

NOTE G - LONG-TERM DEBT - Continued

Future maturities of all long-term debt are as follows (in thousands):

           Year ended December 31,

                      2001                                $15,212
                      2002                                    129
                      2003                                    135
                      2004                                    142
                      2005                                    149
                      2006 and thereafter                     755
                                                        ---------
                                                          $16,522
                                                        =========

NOTE H - INCOME TAXES

The provision (benefit) for income taxes consists of the following (in
thousands):

                                                     2000      1999       1998
                                                     ----      ----      -----
       Currently payable (refundable):
           Federal                                 $(211)       $62       $179
           State                                        -        17        132
                                                   ------    ------     ------
                                                    (211)        79        311
       Deferred:
           Federal                                  (680)       222        336
           State                                        -      (22)        250
                                                   ------    ------     ------
                                                    (680)       200        586
                                                   ------    ------     ------
                                                   $(891)      $279       $897
                                                   ======    ======     ======

The significant differences between the effective tax rate and the statutory
federal tax rates are as follows:

                                                    2000       1999       1998
                                                  --------    ------    --------

      Statutory Federal tax rate                    (34.0)%     34.0%     34.0%
      Increase in valuation reserve                  11.5          -         -
      Tax-exempt income - life insurance
        proceeds                                        -       (9.4)        -
      State tax                                         -       (5.7)        -
      Other                                             -        0.9         -
                                                   ------     ------    ------

              Effective tax rate                    (22.5)%     19.8%     34.0%
                                                   ======     ======    ======



                                       24
<PAGE>

NOTE H - INCOME TAXES - Continued

The components of the deferred tax assets and liabilities as of December 31 are
as follows (in thousands):

                                                         2000            1999
                                                      ---------        --------
   Deferred tax assets:
     Accounts receivable                               $     60        $    101
     Inventories                                             64             217
     Accrued expenses                                       572             570
     Deferred compensation                                   47              69
     Postretirement benefits                                174             222
     Tax credit carryforwards                             3,155           3,019
     Federal net operating loss carryforward              1,394               -
     State net operating loss carryforwards                 422             315
     State credit carryforwards                           1,580           1,460
     Valuation allowance                                 (2,796)         (1,835)
                                                         -------          ------
                                                          4,672           4,138
   Deferred tax liabilities:
     Fixed assets                                        (4,672)         (4,818)
                                                         ------          ------
                Net liability                        $       -         $   (680)
                                                     ==========         =======

For Federal income tax purposes, the Company has net operating loss
carryforwards, research and development credit carryovers and alternative
minimum tax credit carryovers of $4,100,000, $1,315,000 and $1,840,000,
respectively. For state income tax purposes, the Company has net operating loss
and tax credit carryovers of $15,704,000 and $1,580,000, respectively. Certain
carryforwards expire at various times over the next 20 years. For financial
reporting purposes, a valuation allowance has been established to the extent
that federal and state carryforwards, absent future taxable income, will expire
unused. The valuation allowance increased $961,000 due primarily to the
likelihood of realization of the benefits related to the federal and state net
operating loss and tax credit carryforwards.

NOTE I - EMPLOYEE BENEFITS

The Company has defined contribution plans covering substantially all employees.
Contribution expenses associated with these plans were $505,000, $522,000 and
$496,000 in 2000, 1999 and 1998, respectively.

NOTE J - SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for interest and income taxes was as follows (in thousands):

                                           2000         1999           1998
                                         --------     --------        ------

         Interest                         $1,250        $1,080          $1,235
         Income taxes                        -             438              57

    Noncash investing and financing activity:

At December 31, 2000, 1999 and 1998, accounts payable included $12,000, $97,000
and $22,000 respectively, for property and equipment additions.



                                       25
<PAGE>

NOTE K - OPERATING SEGMENTS

The Company has two business segments, paper products and printing and
converting services. The paper products segment produces a variety of paper
products including fine paper, business paper, colored paper, waxed paper,
specialty coated base papers and twisting papers. The printing and converting
segment prints and converts flexible packaging materials for the paper products
segment, as well as films and non-woven materials from other customers.

The accounting policies of the segments are the same as those described in Note
A, Summary of Significant Accounting Policies. Intersegment revenue relates to
the transfer of material or provision of services between the two segments. The
Company evaluates the performance of its segments and allocates resources to
them based on net income. There are no jointly used or allocated assets between
the segments.

The following provides information on the Company's segments (in thousands):

<TABLE>
<CAPTION>
                                   Paper Products             Printing and Converting               Total
                                   --------------             -----------------------               -----
                             2000        1999       1998      2000     1999      1998      2000     1999      1998
                             ----        ----       ----      ----     ----      ----      ----     ----      ----

<S>                          <C>        <C>       <C>        <C>        <C>      <C>      <C>      <C>       <C>
  Revenues from
  external customers         $ 63,102   $ 58,379  $  60,648  $10,244    $ 8,645  $ 5,079  $73,346  $ 67,024  $ 65,727

  Intersegment revenues         2,447      2,858        588    1,269      1,506    1,630    3,716     4,364     2,218

  Depreciation                  2,773      2,634      2,560      232        219      192    3,005     2,853     2,752

  Interest and dividend
  income                           28         69        214       16         16       23       44        85       237

  Interest expense              1,185        997      1,097       65         67       99    1,250     1,064     1,196

  Executive termination
  costs                             -          -        286        -          -        -        -         -       286

  Gain from life
  insurance proceeds                -        391          -        -          -        -        -       391         -

  Gain (loss) from
  disposal of
  long-lived assets              (19)          -        632      (3)          -        -     (22)         -       632

  Loss on disposal of
  trade credits                   440          -          -        -          -        -      440         -         -

  Income tax (benefit)
  provision                   (1,332)       (69)        862      441        348       35    (891)       279       897

  Segment income (loss)       (4,229)        448      1,490    1,163        689      254  (3,066)     1,137     1,744

  Segment assets               39,815     44,188     43,605    6,349      5,857    5,397   46,161    50,045    49,002

  Expenditures for
  long-lived assets             2,146      2,490      2,498      119        325      506    2,265     2,815     3,004

</TABLE>



                                       26
<PAGE>

The following is a reconciliation of segment information to consolidated
information (in thousands):

<TABLE>
<CAPTION>
                                                          2000              1999           1998
                                                       -----------       ---------      ----------
<S>                                                       <C>              <C>             <C>
    Revenues:
       Total revenues for reportable segments             $77,062          $71,388         $67,945
       Elimination of intersegment revenues                (3,716)          (4,364)         (2,218)
                                                          -------          -------         -------

          Total consolidated revenues                     $73,346          $67,024         $65,727
                                                           ======          =======          ======

    Assets:

       Total assets for reportable segments               $46,161          $50,045         $49,002
       Elimination of intersegment receivables             (2,054)          (2,401)           (253)
       Elimination of intersegment investment                (750)            (750)           (750)
                                                          -------         --------        --------

          Total consolidated assets                       $43,357          $46,894         $47,999
                                                           ======           ======          ======
</TABLE>

Total segment income and other significant items are the same as the
consolidated information.

All operations of the Company are located in the United States. Revenues from
foreign countries are primarily from Canada and Mexico and are immaterial to
total revenues.


NOTE L - DIRECTOR STOCK GRANT PLANS

In 1999 and 1997, in order to attract and retain competent directors to serve as
Directors of the Company, the Company established Director Stock Grant Plans. An
aggregate of 50,000 shares of Common Stock was reserved for issuance. Each
Director of the Company is to receive a grant of Common Stock in partial payment
of his or her director's fee. During 2000, 1999 and 1998, 14,249, 13,446 and
8,867 shares, respectively, were issued from treasury stock, at a value of
$64,000, $90,000 and $69,000, respectively.


NOTE M - STOCK OPTION PLAN

On May 11, 1999, the Company established an incentive stock option plan ("Plan")
as a mechanism to attract and retain its officers and key employees by providing
additional performance incentives and the opportunity to share ownership in the
Company. The Plan allows the Company to grant options for 130,000 common shares.
Options awarded under the Plan vest over a three or five year period and expire
in five to nine years.

In 1999, the Company granted 115,000 options at an average exercise price of
$8.42 per common share. At the date of grant, the market value of the stock was
less than the exercise price of the options. As the plan is accounted for under
APB Opinion 25, no compensation cost has been recognized for the plan. No
options were granted, exercised or forfeited in 2000. As of December 31, 2000
and 1999, 91,000 and 64,000 options were vested, respectively.

Had compensation cost for the plan been determined based on the fair value of
the options at the grant dates consistent with the method prescribed by SFAS
123, the impact on net loss, net loss per share and shareholders' equity for
2000 would not have been significant. The impact on net income and net earnings
per share would have been $774,000 and $0.39 for 1999. The fair value of each
option grant is estimated on the date of grant using the Black-Scholes
options-pricing model with the following weighted average assumptions



                                       27
<PAGE>

used for grants in 1999: expected volatility of 58%, risk-free interest rates
ranging from 5.5 to 5.8%, and expected lives of 4 to 8 years.

NOTE N - COMMITMENTS AND CONTINGENCIES

Rental Agreements

The Company leases certain equipment under various agreements, classified as
operating leases, expiring through April 2007. Total rent expense amounted to
approximately $734,000, $516,000 and $222,200 for the years ended December 31,
2000, 1999 and 1998, respectively.

Future minimum rental payments are as follows (in thousands):

                    Year ended December 31,

             2001                               $ 643
             2002                                 609
             2003                                 601
             2004                                 492
             2005                                 277
             2006 and thereafter                  314
                                               ------
                                               $2,936
                                               ======
Environmental Matters

In May 1999, the Company entered into an agreement with the WDNR related to the
closure of a solid waste landfill. All costs associated with the initial closure
of this landfill have been completed as of December 31, 1999. As part of the
closure agreement, the Company is required to provide proof of responsibility
for any future remediation efforts if environmental problems are detected at
this site. This amount increases over a five-year period from $53,000 as of July
31, 1999 to $297,000 as of July 31, 2003. The Company has met this requirement
as of December 31, 2000 and 1999 by having an irrevocable letter of credit
granted to the benefit of WDNR in the amount of $107,000 and $53,000,
respectively.


NOTE O -SUMMARIZED QUARTERLY DATA (UNAUDITED)

The following is a summary of the quarterly results of operations for the years
ended December 31 (in thousands):

<TABLE>
<CAPTION>
                                                           Fiscal Quarter
                                -----------------------------------------------------------------------
                                   First         Second          Third          Fourth          Total
                                -----------    ---------       ----------      --------       ---------
    2000*
   ------
<S>                              <C>            <C>             <C>             <C>             <C>
Net Sales                        $ 18,384       $ 19,794        $ 17,830        $ 17,338        $ 73,346

Gross profit (loss)                 1,654            559             310            (114)          2,409

Net income (loss)                      89           (658)           (673)         (1,824)         (3,066)

Basic and diluted earnings
  (loss) per share                   0.04          (0.33)          (0.34)          (0.92)          (1.55)



                                       28
<PAGE>
<CAPTION>

    1999
   ------

<S>                              <C>            <C>             <C>             <C>             <C>
Net sales                        $ 15,326       $ 16,668        $ 17,413        $ 17,617        $ 67,024

Gross profit                        1,901          2,111             540           2,136           6,688

Net income (loss)                     374            625            (523)            661           1,137

Basic and diluted earnings
  (loss) per share                   0.19           0.32           (0.27)           0.34            0.58

*The fourth quarter includes a write-off of trade credits amounting to
approximately $440,000, or a $0.22 net loss per share (note A11), and a LIFO
adjustment amounting to approximately $555,000, or a $0.28 net loss per share.
</TABLE>

NOTE P - SUBSEQUENT EVENT - UNION CONCESSIONS

In February 2001, Management presented a plan to Company employees at its
Peshtigo facility (paper products segment) to reduce costs and improve
efficiencies. Inherent in this plan were a contract extension, a wage freeze,
participation in the costs of medical and dental insurance, changes in vacation
policies and various work rules.

On March 1, 2001, the collective bargaining units ratified Management's requests
for concessions. These cost reductions and productivity improvements are
expected to impact the Company's results beginning in the second quarter of
2001.



PART III

Item 9. Changes in and disagreements with accountants on accounting and
financial disclosure

No such disagreements have occurred.

Item 10.  Directors and executive officers of the registrant

(a)  Directors of the registrant

The information required by this item is incorporated by reference from the
information included under the captions, "Election of Directors" and "Other
Matters" set forth in the Company's definitive proxy statement for its 2001
Annual Meeting of Shareholders.

(b)  Executive officers of registrant

<TABLE>
<CAPTION>
                                                                                 Period Served
      Name          Age               Office                                     In This Office

<S>                  <C>    <C>                                                  <C>
Michael J. Bekes     43     Vice President/COO of the Company                     5 years
                            Vice President/COO, Fletcher Paper Co.                1 1/2years
                            Mill Manager, Fletcher Paper Co.                     1/2 year
                            Manager of Operations, Fletcher Paper Co.             5 1/2years



                                       29
<PAGE>
<S>                  <C>    <C>                                                  <C>
Clifton A. Martin    49     Vice President, Badger Paper Flexible Pkg.            4 3/4years
                            General Manager, Badger Paper Flexible Packaging      3 3/4years
                            Sales Representative of the Company                   6 1/2years



Mark C. Neumann      41     Vice President/Sales of the Company                   5 3/4years
                            Director of Marketing of the Company                  2 3/4years
                            Sales Representative of the Company                   7 1/2years

</TABLE>


Officers are elected to hold office until the next annual meeting of the Board
of Directors following the annual meeting of shareholders or until their
successors are elected and qualified. There is no arrangement or understanding
between any of the above officers or any other person pursuant to which such
officer was selected for the office held. No family relationship of any kind
exists between the officers.


ITEM 11.  Executive compensation

The information required by this item is incorporated by reference from the
information included under the caption "Executive Compensation" set forth in
the Company's definitive proxy statement for its 2001 Annual Meeting of
Shareholders.

Item 12.  Security ownership of certain beneficial owners and management

(a)  Security ownership of certain beneficial owners

The information required by this item is incorporated by reference from the
information included under the caption "Stock Ownership of Certain Beneficial
Owners and Management," set forth in the Company's definitive proxy statement
for its 2001 Annual Meeting of Shareholders.

(b)  Security ownership of management

The information required by this item is incorporated by reference from the
information included under the captions, "Stock Ownership of Certain Beneficial
Owners and Management" and "Election of Directors", set forth in the Company's
definitive proxy statement for its 2001 Annual Meeting of Shareholders.

Item 13.  Certain relationships and related transactions

The information required by this item is incorporated by reference from the
information included under the caption, "Certain Relationships and
Transactions," set forth in the Company's definitive proxy statement for its
2001 Annual Meeting of Shareholders.



                                       30
<PAGE>

PART IV

Item 14.  Exhibits, financial statement schedules and reports on Form 8-K

(a)  (1) List of financial statements:

The following is a list of the financial statements of Badger Paper Mills, Inc.,
together with the report of independent accountants, included in this report:

                                                                           Pages

    Report of Independent Accountants........................................13
    Consolidated balance sheets, December 31, 2000 and 1999..................14
    Consolidated statements of operations for the years ended
      December 31, 2000, 1999 and 1998.......................................15
    Consolidated statements of changes in shareholders' equity
      for the years ended December 31, 2000, 1999 and 1998...................16
    Consolidated statements of cash flows for the years ended
      December 31, 2000, 1999 and 1998.......................................17
    Notes to financial statements............................................18

(a)  (2) List of financial schedules:

The following is a listing of data submitted herewith:

    Report of independent accountants on financial statement schedule........34
    Schedule for the years ended December 31, 2000,
      1999 and 1998 II  Valuation and qualifying accounts
      and reserves...........................................................35

Financial statement schedules other than that listed above are omitted for the
reason that they are either not applicable, not required, or that equivalent
information has been included in the financial statements, the notes thereto or
elsewhere herein.


(a)      (3)  Exhibits

Number      Registration

(3)  (i) Restated Articles of Incorporation, as amended (Incorporated by
         reference to Exhibit 3(i) to the Company's Annual Report on Form 10-K
         for the year ended December 31, 1996).

    (ii) By-laws as amended through August 12, 1999 (Incorporated by reference
         to Exhibit 3(ii) to the Company's Annual Report on Form 10-K for the
         year ended December 31, 1999).

(4)  (i) U.S. $12,000,000 Credit Agreement dated January 29, 1999, by and among
         the Company, Badger Paper Mills Flexible Packaging Division, Inc.
         (formerly known as Plas-Techs, Inc.) and Harris Trust and Savings Bank,
         individually and as agent, and the lenders from time to time party
         thereto (Incorporated  by reference to Exhibit 4(i) to the Company's
         Annual Report on Form 10-K for the year ended December 31, 1998).

    (ii) First Agreement to Amended and Restated Credit Agreement dated as of
         August 31, 1999 by and among Badger Paper Mills, Inc., Badger Paper
         Mills Flexible Packaging Division, Inc., the Lenders, and Harris Trust
         and Savings Bank, as Agent (Incorporated by reference to Exhibit 4(ii)
         to the Company's Quarterly Report on Form 10-Q for the quarter ended
         September 30, 1999).

   (iii) Second Amendment to Amended and Restated Credit Agreement dated as of
         March 9, 2000, by and between Badger Paper Mills, Inc. (individually
         and as successor by merger to Badger Paper Mills Flexible Packaging
         Division, Inc.), the Lenders, and Harris Trust and Savings Bank, as
         Agent (Incorporated by reference to Exhibit 4(iii) to the Company's
         Annual Report on Form 10-K for the year ended December 31, 1999).



                                       31
<PAGE>

    (iv) Third Amendment to Amended and Restated Credit Agreement dated as of
         September 12, 2000 (but effective as of August 14, 2000), by and
         between Badger Paper Mills, Inc. (individually and as successor by
         merger to Badger Paper Mills Flexible Packaging Division, Inc.), the
         Lenders, and Harris Trust and Savings Bank, as Agent (Incorporated by
         reference to Exhibit 10.1 to the Company's Quarterly Report on Form
         10-Q for the quarter ended September 30, 2000).

(10)  Material Contracts:**

     (i) Supplemental Executive Retirement Plan dated December 18, 1992
         (Incorporated by reference to Exhibit 10 (ii) to the Company's Annual
         Report on Form 10-K for the year ended December 31, 1992).

    (ii) Executive Employment Agreement dated March 1, 1995, between the Company
         and Claude L. Van Hefty (Incorporated by reference to Exhibit 10(vii)
         to the Company's Annual Report on Form 10-K for the year ended December
         31, 1994).

     (v) Health Insurance Retirement Benefit Agreement dated January 1, 1996
         between the Company and Claude L. Van Hefty (Incorporated by reference
         to Exhibit 10(v) to the Company's Annual Report on Form 10-K for the
         year ended December 31, 1996).

    (iv) Director Stock Grant Plan dated July 23, 1997 (Incorporated by
         reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q
         for the quarter ended September 30, 1997).

     (v) Employee Resignation and Release Agreement dated as of March 12, 1998
         between Badger Paper Mills, Inc. and Claude L. Van Hefty (Incorporated
         by reference to the Company's Quarterly Report on Form 10-Q for the
         quarter ended June 30, 1998).

    (vi) Employee Resignation and Release Agreement dated as of March 12, 1998
         between Badger Paper Mills, Inc. and Miles L. Kresl, Jr. (Incorporated
         by reference to the Company's Quarterly Report on Form 10-Q for the
         quarter ended June 30, 1998).

   (vii) Badger Paper Mills, Inc. 1998 Stock Option Plan (Incorporated by
         reference to the Company's  Quarterly Report on Form 10-Q for the
         quarter ended June 30, 1999)

  (viii) Form of Badger Paper Mills, Inc. 1998 Stock Option Agreement
         (Incorporated by reference to the Company's Quarterly Report on Form
         10-Q for the quarter ended June 30, 1999).

    (ix) Badger Paper Mills, Inc. 1999 Directors Stock Grant Plan  (Incorporated
         by reference to the Company's Quarterly Report on Form 10-Q for the
         quarter ended September 30, 1999)

(23)  Consent of Independent Public Accountants

(99)  Definitive Proxy Statement for 2001 Annual Meeting of Shareholders (to be
      filed with the Commission under Regulation 14A and incorporated by
      reference herein to the extent indicated in this Form 10-K).

**Each of the "material contracts" represents a management compensatory
agreement or arrangement.

(b)  Reports on Form 8-K:

     (i) No reports on Form 8-K were filed during the fourth quarter of 2000.


                                       32
<PAGE>


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

DATE:   March 27, 2001                      BADGER PAPER MILLS, INC.


                                             /s/ Harold J. Bergman
                                            -------------------------------
                                            By:  Harold J. Bergman
                                                 Executive Committee Member

                                             /s/ James L. Kemerling
                                            -------------------------------
                                            By:  James L. Kemerling
                                                 Executive Committee Member


                                             /s/ William A. Raaths
                                            -------------------------------
                                            By:  William A. Raaths
                                                 Executive Committee Member

Pursuant to the Requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:


/s/ Harold J. Bergman,      Director                 Date:  March 19, 2001
--------------------------
Harold J. Bergman


/s/ L. Harvey Buek,         Director                 Date:  March 19, 2001
--------------------------
L. Harvey Buek


/s/ Mark D. Burish,         Director                 Date:  March 19, 2001
--------------------------
Mark D. Burish


/s/ James L. Kemerling,     Director                 Date:  March 19, 2001
--------------------------
James L. Kemerling


/s/ John T. Paprocki,       Director                 Date:  March 19, 2001
--------------------------
John T. Paprocki


/s/ William A. Raaths,      Director                 Date:  March 19, 2001
--------------------------
William A. Raaths



                                       33
<PAGE>

                REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT







To the Shareholders and
  Board of Directors
Badger Paper Mills, Inc.
  and Subsidiary
Peshtigo, Wisconsin


Our report on the 2000, 1999 and 1998 financial statements of Badger Paper
Mills, Inc. and Subsidiary is included on page 13 of this Form 10-K. In
connection with our audit of such financial statements, we have also audited the
related financial statement schedule listed in the index on page 31 of this Form
10-K.

In our opinion, the 2000, 1999 and 1998 financial statement schedule referred to
above, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information required to be included therein.




Appleton, Wisconsin

January 26, 2001 (except for Note P,
   as to which the date is March 1, 2001
   and Notes B and G, as to which the date
   is March 7, 2001)



                                       34
<PAGE>

Schedule II - Valuation and Qualifying Accounts and Reserves for the years ended
December 31, 2000, 1999 and 1998 (in thousands)

<TABLE>
<CAPTION>
                 Column A                      Column B        Column C        Column D         Column E
                 --------                      --------        --------        --------         --------
                                                              Additions
                                              Balance at      charged to                        Balance
                                              beginning       costs and         Deduc-         at end of
                Description                    of year         expenses         tions             year


Deducted in the balance sheet from
 the assets to which they apply:

Allowance for discounts, doubtful
 accounts and claims/allowances:

<S>                                               <C>           <C>             <C>                <C>
Year ended December 31, 2000:
  Doubtful accounts and
     claims/allowances                            $253          $1,054          $1,190   (A)       $117
  Discounts                                         43             743             753   (B)         33
                                                 -----          ------          ------            -----
                                                  $296          $1,797          $1,943             $150
                                                 =====          ======          ======             ====
Year ended December 31, 1999:
  Doubtful accounts and
     claims/allowances                            $213           $ 574           $534   (A)        $253
  Discounts                                         31             679            667   (B)          43
                                                 -----          ------         ------              ----
                                                  $244          $1,253         $1,201              $296
                                                 =====          ======         ======              ====

Year ended December 31, 1998:
  Doubtful accounts and
     claims/allowances                            $283            $780          $ 850   (A)        $213
  Discounts                                         35             661            665   (B)          31
                                                 -----          ------         ------              ----
                                                  $318          $1,441         $1,515              $244
                                                 =====          ======         ======              ====


(A)  Write-off of uncollectable accounts and claims for products

(B)  Discounts taken and allowed

     Column C(2) has been omitted as the answer would be "None."

</TABLE>



                                       35
<PAGE>

Shareholders' information

Market makers:                                  Stock transfer agent:
Herzog, Heine, Geduld, Inc. (HRZG)              Computershare Investor Services
Spear, Leeds & Kellogg (SLKC)                   2 North LaSalle Street
                                                Chicago, Illinois 60602


Stock price and dividend information:

The following table presents high and low sales prices of the Company's Common
Stock in the indicated calendar quarters, as reported by Nasdaq SmallCap Market.

Quarterly Price Ranges of Stock:


                                      2000                      1999
                                      ----                      ----
         Quarter                  High          Low         High          Low
         -------                  ----          ---         ----          ---
                                 $6.500       $3.750       $9.000       $6.500
         First
                                 $5.375       $4.063       $7.500       $6.375
         Second
                                 $4.438       $3.313       $8.625       $6.750
         Third
                                 $4.500       $2.000       $8.500       $4.000
         Fourth


Quarterly Dividends Per Share:

The Company's line of credit maintains certain covenants, which limit the
Company's ability to pay dividends. See "Management's Discussion and Analysis --
Liquidity and Capital Resources -- Capital Resources."


Annual meeting of shareholders:

The Annual Meeting of Shareholders of Badger Paper Mills, Inc. will be held at
The Best Western Riverfront Inn, 1821 Riverside Avenue, Marinette, Wisconsin, on
Tuesday, May 8, 2001, at 10:00 a.m.



                                       36
<PAGE>

                             DIRECTORS AND OFFICERS



Board of Directors:

Harold J. Bergman
     Retired President & CEO
     Riverside Paper Corp.

L. Harvey Buek
     LHB - O & M Consulting

Mark D. Burish
     President
     Hurley, Burish & Milliken, SC

James L. Kemerling
     President & CEO
     Riiser Oil Company, Inc.

John T. Paprocki
     Senior Manager
     Virchow Krause Valuation LLC

William A. Raaths
     President & CEO
     Anchor Food Products, Inc..

Corporate Officers:

Executive Committee:
     Harold J. Bergman
     James L. Kemerling
     William A. Raaths

Michael J. Bekes
     Vice President and COO

Clifton A. Martin
     Vice President
     Badger Paper Flexible Packaging Div.

Mark C. Neumann
     Vice President/Sales

Mark D. Burish
     Secretary

Susan A. Rudolph
     Assistant Secretary



                                       37
<PAGE>
                                  EXHIBIT INDEX

                            BADGER PAPER MILLS, INC.
                           ANNUAL REPORT ON FORM 10-K
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

Numbers    Description

(3)  (i) Restated Articles of Incorporation, as amended (Incorporated by
         reference to Exhibit 3(i) to the Company's Annual Report on Form 10-K
         for the year ended December 31, 1996).

    (ii) By-laws as amended through August 12, 1999 (Incorporated by reference
         to Exhibit 3(ii) to the Company's Annual Report on Form 10-K for the
         year ended December 31, 1999).

(4)  (i) U.S. $12,000,000 Credit Agreement dated January 29, 1999, by and among
         the Company, Badger Paper Mills Flexible Packaging Division, Inc.
         (formerly known as Plas-Techs, Inc.) and Harris Trust and Savings Bank,
         individually and as agent, and the lenders from time to time party
         thereto (Incorporated by reference to Exhibit 4(i) to the Company's
         Annual Report on Form 10-K for the year ended December 31, 1998).

    (ii) First Agreement to Amended and Restated Credit Agreement dated as of
         August 31, 1999 by and among Badger Paper Mills, Inc., Badger Paper
         Mills Flexible Packaging Division, Inc., the Lenders, and Harris Trust
         and Savings Bank, as Agent (Incorporated by reference to Exhibit 4(ii)
         to the Company's Quarterly Report on Form 10-Q for the quarter ended
         September 30, 1999).

   (iii) Second Amendment to Amended and Restated Credit Agreement dated as of
         March 9, 2000, by and between Badger Paper Mills, Inc. (individually
         and as successor by merger to Badger Paper Mills Flexible Packaging
         Division, Inc.), the Lenders, and Harris Trust and Savings Bank, as
         Agent (Incorporated by reference to Exhibit 4(iii) to the Company's
         Annual Report on Form 10-K for the year ended December 31, 1999).

    (vi) Third Amendment to Amended and Restated Credit Agreement dated as of
         September 12, 2000 (but effective as of August 14, 2000), by and
         between Badger Paper Mills, Inc. (individually and as successor by
         merger to Badger Paper Mills Flexible Packaging Division, Inc.), the
         Lenders, and Harris Trust and Savings Bank, as Agent (Incorporated by
         reference to Exhibit 10-1 to the Company's Quarterly Report on Form
         10-Q for the quarter ended September 30, 2000).


 (10)    Material Contracts:**

     (i) Supplemental Executive Retirement Plan dated December 18, 1992
         (Incorporated by reference to Exhibit 10 (ii) to the Company's Annual
         Report on Form 10-K for the year ended December 31, 1992).

    (ii) Executive Employment Agreement dated March 1, 1995, between the Company
         and Claude L. Van Hefty (Incorporated by reference to Exhibit 10(vii)
         to the Company's Annual Report on Form 10-K for the year ended December
         31, 1994).

   (iii) Health Insurance Retirement Benefit Agreement dated January 1, 1996
         between the Company and Claude L. Van Hefty (Incorporated by reference
         to Exhibit 10(v) to the Company's Annual Report on Form 10-K for the
         year ended December 31, 1996).

    (iv) Director Stock Grant Plan dated July 23, 1997 (Incorporated by
         reference to the Company's Quarterly Report on Form 10-Q for the
         quarter ended September 30, 1997).

     (v) Employee Resignation and Release Agreement dated as of March 12, 1998
         between Badger Paper Mills, Inc. and Claude L. Van Hefty (Incorporated
         by reference to the Company's Quarterly Report on Form 10-Q for
         the quarter ended June 30, 1998).

<PAGE>

    (vi) Employee Resignation and Release Agreement dated as of March 12, 1998
         between Badger Paper Mills, Inc. and Miles L. Kresl, Jr. (Incorporated
         by reference to the Company's Quarterly Report on Form 10-Q for the
         quarter ended June 30, 1998).

   (vii) Badger Paper Mills, Inc. 1998 Stock Option Plan  (Incorporated by
         reference to the Company's Quarterly Report on Form 10-Q for the
         quarter ended June 30, 1999)

  (viii) Form of Badger Paper Mills, Inc. 1998 Stock Option Agreement
         (Incorporated by reference to the Company's Quarterly Report on Form
         10-Q for the quarter ended June 30, 1999).

    (ix) Badger Paper Mills, Inc. 1999 Directors Stock Grant Plan (Incorporated
         by reference to the Company's Quarterly Report on Form 10-Q for the
         quarter ended September 30, 1999)

(23)     Consent of Independent Public Accountants

(99)     Definitive Proxy Statement for 2001 Annual Meeting of Shareholders (to
         be filed with the Commission under Regulation 14A and incorporated by
         reference herein to the extent indicated in this Form 10-K).

**Each of the "material contracts" represents a management compensatory
agreement or arrangement.