VIRAGEN INC, 424B2, 1995-08-29

VIRAGEN INC
424B2, 1995-08-29
BIOLOGICAL PRODUCTS, (NO DIAGNOSTIC SUBSTANCES)

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<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration No. 33-88070

PROSPECTUS

VIRAGEN, INC.
22,703,455 SHARES OF COMMON STOCK

There are 22,703,455 shares of Common Stock, par value $.01 per share
("Common Stock" or "Shares") of Viragen, Inc. (the "Company" or "Viragen") being
offered by certain stockholders of the Company (the "Selling Security Holders"),
if at all, on a delayed basis, including shares previously issued upon
conversion of Convertible Debentures issued by the Company and its affiliate,
Cytoferon Corp. ("Cytoferon") (collectively referred to as the "Debentures"),
upon exchange of other securities of Cytoferon, and to be issued upon conversion
of the Company's Series A 10% Convertible Cumulative Preferred Stock (the
"Series A Preferred Stock") or upon exercise of the Company's Common Stock
Purchase Warrants (the "Warrants"). An aggregate of 11,636,167 shares of Common
Stock were acquired by Selling Security Holders in separate private placements
during the Company's 1995 fiscal year at either $.40 or $.60 per share, and the
balance of the shares of Common Stock were issued or will be issued upon
conversion or exercise of the aforementioned securities at prices below the
current market price of the Common Stock of the Company. See "Sales by Selling
Security Holders" and "Description of Securities."

The Company's Common Stock is traded on a limited basis on the OTC Bulletin
Board under the symbol "VRGN," and on August 4, 1995, the closing bid price for
the Common Stock was $.75. The Company intends to apply for inclusion of its
Common Stock on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") at such time as the price of the Company's Common
Stock satisfies the NASDAQ minimum bid requirements of $3.00, but there can be
no assurances that such securities will be accepted for inclusion in the NASDAQ
System. Furthermore, there can be no assurances that a substantial trading
market for its Common Stock will develop or be sustained in the future. At March
31, 1995, the net tangible book value of the Company's Common Stock was
approximately $0.08 per share. Accordingly, it is likely that the purchasers in
this offering will incur an immediate and substantial dilution from the purchase
price of their shares of Common Stock. See "Price Range of Common Stock."

The Company has been advised by the Selling Security Holders that they may
sell all or a portion of the Shares offered hereby from time to time in the
over-the-counter market, in negotiated transactions, directly or through brokers
or otherwise, and that such shares will be sold at market prices prevailing at
the time of such sales or at negotiated prices. The Company will not receive any
of the proceeds from the sale of the Shares offered hereby except upon exercise
of the Warrants. In connection with such sales, the Selling Security Holders and
any brokers participating in such sales may be deemed to be underwriters within
the meaning of the Securities Act of 1933. See "Use of Proceeds" and "Sales by
Selling Security Holders."

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

THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. POTENTIAL PURCHASERS SHOULD
NOT INVEST IN THESE SECURITIES UNLESS THEY CAN AFFORD A LOSS OF
THEIR ENTIRE INVESTMENT HEREIN. SEE "HIGH RISK FACTORS."

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

This date of this Prospectus is August 14, 1995
<PAGE> 2

All costs, expenses and fees in connection with the registration of the
shares of Common Stock offered hereby will be borne by the Company. Brokerage
commissions, if any, directly attributable to the sale of the Shares will be
borne by the Selling Security Holders.

The Company has informed the Selling Security Holders that the
anti-manipulative rules under the Securities Exchange Act of 1934, Rules 10b-6
and 10b-7, may apply to their sales in the market and has furnished each of the
Selling Security Holders with a copy of these rules. The Company has also
informed the Selling Security Holders of the need for delivery of copies of this
Prospectus in connection with any sale of securities registered hereunder.

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

NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN
THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO
BUY, IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN
OFFER IN SUCH JURISDICTION. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT
IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.

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

The Company intends to furnish its stockholders with annual reports
containing audited financial statements and may distribute quarterly reports
containing unaudited summary financial information for each of the first three
quarters of each fiscal year.

The Company has filed with the Securities and Exchange Commission
("Commission") a Registration Statement on Form SB-2 (herein together with all
amendments and exhibits referred to as the "Registration Statement") under the
Securities Act of 1933. Reports and other information filed by the Company can
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices at 7 World Trade Center, New York, New York
10048, Room 1204, Everett McKinley Dirksen Building, 219 South Dearborn Street,
Chicago, Illinois 60604, and Suite 500 East, 5757 Wilshire Boulevard, Los
Angeles, California 90036. Copies of such material can be obtained upon written
request addressed to the Commission, Public Reference Section, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates.

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<PAGE> 3

PROSPECTUS SUMMARY

The following is intended to summarize more detailed information and
financial statements and notes thereto which are set forth more fully elsewhere
in this Prospectus or incorporated herein by reference and, accordingly, should
be read in conjunction with such information.

THE COMPANY

Viragen, Inc. was organized in December 1980 to engage in research,
development and manufacture of certain immunological products for commercial
application, particularly human leukocyte interferon, for antiviral and
therapeutic applications and as anticancer agents. Viragen's primary product
(the "Product") is a natural human leukocyte alpha interferon ("Natural
Interferon"). Natural Interferon is a protein substance that inhibits malignant
cell growth without materially interfering with normal cells. Natural Interferon
stimulates and modulates the human immune system and, in addition, impedes the
growth and propagation of various viruses. The Product is a natural product
produced from human white blood cells. Alpha Leukoferon(TM) is the trade name
for Viragen's Product in injectable form. The Company's Product has not been
approved by the United States Food and Drug Administration ("FDA") and there can
be no assurances that approval of the Product will be obtained at any time in
the future.

Viragen has been granted an investigatory license by the Florida Department
of Health and Rehabilitative Services ("HRS") under Florida Statute 499 of the
Florida Drug and Cosmetic Act to conduct Investigation Study Programs
(hereinafter referred to as the "499 Program") and distribute the Product to
physicians for use in the treatment of Florida residents with multiple sclerosis
("MS"), HIV/AIDS, AIDS-Related Complex ("ARC") and Kaposi's Sarcoma. Viragen
initially obtained approval for use of the Product through approved
investigational protocols in 1983 under Florida Statute 402.36 (Cancer
Therapeutic Act), the predecessor to Florida Statute 499. In 1984, Florida
Statute 499.018 was amended to include the Company's protocols and Florida
Statute 402.36 was repealed. Under its HRS investigatory license, Viragen has
been able to distribute the Product to authorized Florida physicians for use in
treating their Florida patients under approved study protocols. Presently, the
primary application for Viragen's Product is the treatment of MS.

The Company intends to seek to obtain FDA approvals for various uses of the
Product in the future. Such approval is expected to require several years of
clinical trials and substantial additional funding. To date, Viragen has not
distributed the Product other than for research and pursuant to its
investigatory license, and until May 1993, Viragen had not actively operated due
to insufficient funds. Viragen expects to concentrate its efforts in preparing,
filing and processing its applications and obtaining approvals for its Product
from the FDA and the European Union ("EU"). The Company has assembled an
advisory committee consisting of scientists, medical researchers and clinicians
to assist the Company in its application to the FDA and the EU.

In December 1994, the Company received notification from the Florida Health
and Rehabilitative Services ("HRS") to postpone enrollment of new patients under
its 499 Program until such time as the Company provided certain administrative
reports to the HRS and satisfied certain FDA inspection-related comments
concerning the Company's manufacturing processes and facility. On March 17,
1995, the Company received further notice from HRS requesting that Viragen
demonstrate that its production technology complies with FDA current Good
Manufacturing Practices ("cGMP") and for the Company to postpone the enrollment
of new patients under the 499 Program until the Company demonstrated such
compliance.

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<PAGE> 4

for the elimination of the enrollment of new patients in its 499 Program (except
for certain limited enrollments approved by the Florida HRS for humanitarian
purposes), the continued participation by currently enrolled patients in the 499
Program and resolution of all other issues.

While the elimination of enrollment of new patients has limited the
revenues that would have been generated under the 499 Program, management
believes that such elimination will not affect the undertaking of clinical
trials and the approval process for the Company's Product following submission
to the FDA and the EU, which submission will represent the focus of the
Company's efforts at the present time. See "Business."

Viragen's administrative office and manufacturing facilities are located at
2343 West 76th Street, Hialeah, Florida 33016 (telephone no. 305/557-6000;
telecopier no. 305/364-8158).

THE OFFERING AND OUTSTANDING SECURITIES

<TABLE>
<S> <C>
Common Stock Outstanding at June 30,
1995.................................. 35,355,532 shares of Common Stock
Common Stock Offered by Selling Security
Holders............................... 22,703,455 shares of Common Stock
Common Stock issued in private
placements completed in August and
December 1994......................... 11,633,167 shares of Common Stock
Common Stock issued upon conversion or
exchange of Cytoferon Securities...... 9,083,333 shares of Common Stock(1)
Common Stock issued upon conversion of
Viragen Debentures.................... 666,668 shares of Common Stock
Series A Preferred Stock Outstanding at
June 30, 1995......................... 3,450 shares of Series A Preferred Stock(2)
Shares underlying all Common Stock
Purchase Options and Warrants
Outstanding at June 30, 1995.......... 4,405,990 shares of Common Stock(3)
Proceeds to be received upon Exercise of
Warrants.............................. $561,590
Risk Factors............................ Investment in these securities involves a high
degree of risk. See "High Risk Factors."
OTC Bulletin Board Symbol............... VRGN(4)
</TABLE>

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

1. Includes 7,271,666 shares on conversion of $2,181,500 principal amount of
Cytoferon Debentures, 444,547 shares on conversion of $133,364 of accrued
interest on such Debentures, and 1,367,120 shares received by equity holders
of Cytoferon upon termination of operations of Cytoferon. See "Business --
Recent Developments and Change of Control" and "Management -- Certain
Relationships and Related Transactions."
2. Each share of Series A Preferred Stock is convertible into 4.26 shares of
Common Stock of the Company or an aggregate of 14,697 shares of Common Stock.
3. Includes 1,245,990 shares of Common Stock underlying Warrants offered hereby.
4. The Company intends to apply for inclusion of its Common Stock on NASDAQ at
such time as the price of the Company's Common Stock satisfies the NASDAQ
minimum bid requirement of $3.00 per share. The Company's Common Stock does
not presently qualify for inclusion based on the current price of the Common
Stock, and there can be no assurances that the Common Stock will qualify for
inclusion at any time in the future.

Inclusion on NASDAQ does not imply that an established trading market will
develop or be sustained for the Common Stock.

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<PAGE> 5

SUMMARY FINANCIAL INFORMATION
(NOT COVERED BY ACCOUNTANT'S REPORT)

SUMMARY OF SELECTED FINANCIAL INFORMATION

The following table sets forth selected financial information concerning
the Company and is qualified by reference to the audited consolidated financial
statements and notes thereto and unaudited quarterly financial statements
prepared by the Registrant incorporated herein by reference in this Prospectus.

<TABLE>
<CAPTION>
FOR PERIOD
BETWEEN
YEAR ENDED JAN. 1, AND FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, JUNE 30, ------------------------------------------------
1994 1993 1992 1991 1990 1989
---------- ----------- ---------- ---------- ---------- ---------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Operating revenues......... $ 677 $ 53 $ 52 $ 147 $ 355 $ 313
Loss before extraordinary
credit................... (1,083) (311) (563) (716) (2,490) (2,001)
Net income (loss).......... (1,083) (311) (563) (716) (2,490) 403*
Income (loss) attributable
to common stock.......... (1,087) (313) (573) (730) (2,504) 389*
Net income (loss) per
average common share
outstanding.............. (.06) (.02) (.05) (.07) (.23) .05*
Weighted average shares
outstanding.............. 18,686,751 14,463,038 11,478,914 10,933,669 10,745,816 8,539,412
</TABLE>

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

* Includes extraordinary credit of $2,404,033 ($.28 per share) resulting from
the settlement of debt with Medicore.

<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED MARCH 31,
---------------------------
1995 1994
---------- ----------
<S> <C> <C>
Operating revenues................................................ $ 544 $ 412
Net loss.......................................................... (2,644) (717)
Loss attributable to common stock................................. (2,647) (720)
Net loss per average common share outstanding..................... (.09) (.04)
Weighted average shares outstanding............................... 30,637,957 18,559,724
</TABLE>

CONSOLIDATED BALANCE SHEET DATA:

<TABLE>
<CAPTION>
AT MARCH 31, AT JUNE 30, AT DECEMBER 31,
----------------- ----------------- ----------------------------
1995 1994 1994 1993 1992 1991 1990
------ ------ ------ ------ ----- ------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Working capital
(deficit)................ $2,601 $ 233 $ 795 $ 250 $(942) $(1,115) $ (624)
Total Assets............... 4,071 1,988 2,744 1,642 983 1,070 1,430
Long Term debt............. 937 1,011 976 1,034 529 0 9
Stockholders' equity
(deficit)................ 2,742 132 546 101 (588) (88) 565
</TABLE>

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<PAGE> 6

HIGH RISK FACTORS

The shares of Common Stock offered hereby involve a high degree of risk and
is highly speculative in nature. Prospective investors should carefully consider
the following risks and speculative factors, among others, inherent in and
affecting both the business of the Company and the value of the Common Stock,
including, among other matters, the following risk factors:

HISTORY OF LOSSES AND RISKS OF NEWLY DEVELOPED BUSINESS

From its inception through March 31, 1995, the Company has incurred
operating losses. Losses for the nine months ended March 31, 1995 and fiscal
year ended June 30, 1994 were $2,453,248 and $1,083,346, respectively. At March
31, 1995, the Company had an accumulated deficit of $15,612,010, working capital
of $2,601,385 and stockholders' equity of $2,741,947. Although the Company has
begun to expand its operations and has generated limited revenues for its
working capital and investing needs, there can be no assurance that the Company
will be able to obtain regulatory approvals necessary for the distribution of
its Product or be able to produce and market its Product on a profitable basis
in the future. Results of operations in the future will be influenced by
numerous factors including technological developments, regulatory costs and
impediments, increases in expenses associated with sales growth, market
acceptance of the Company's Product, the capacity of the Company to expand and
maintain the quality of its Product, competition and the ability of the Company
to control costs. There can be no assurance that revenue growth or profitability
on a quarterly or annual basis can be obtained. Additionally, the Company will
be subject to all the risks incident to a rapidly developing business with only
a limited history of active operations. Prospective investors should consider
the frequency with which relatively newly developed and/or expanding businesses
encounter unforeseen expenses, difficulties, complications and delays, as well
as other factors such as the possibility of competition with larger companies.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

ADDITIONAL FINANCING REQUIRED AND POSSIBLE LACK OF AVAILABILITY OF FUNDS

Viragen will require substantial financing in the future in order to
initiate and complete the clinical trials required to obtain FDA and European
Union approvals for the Product in the treatment of various viral and
immunological diseases, such as MS, HIV/AIDS and Hepatitis B and C. The Company
is substantially dependent upon the infusion of capital through private
placements, subsequent public financings or joint venture/strategic alliances in
order to initiate and complete the clinical trials necessary for FDA and EU
approvals. There is no assurance that such funding will be available upon terms
acceptable or feasible to the Company or its stockholders. Furthermore, inasmuch
as the Company will no longer be enrolling new paying patients under its 499
Program, an additional source of funds has been eliminated. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

CURTAILMENT OF 499 PROGRAM; LOSS OF REVENUES RESULTING FROM CURTAILMENT.

The Company is licensed by the State of Florida Department of Health and
Rehabilitative Services to produce Natural Interferon within the State of
Florida and distribute it on a limited basis to Florida physicians for
investigatory use under approved protocols on Florida patients exclusively
within the State of Florida. Viragen is not permitted to advertise its Product
to the general public under its Florida license, although it may distribute its
Product as a prescription medication pursuant to approval protocols to
physicians in Florida. In December 1994, the Company received notification from
HRS to postpone enrollment of new patients under its 499 Program until such time
as the Company provided certain administrative reports to the HRS and corrected
to their satisfaction certain FDA inspection-related comments concerning the
Company's manufacturing processes and facility. In July 1995, the Company
discontinued enrollment of new patients in its 499 Program and is negotiating a
settlement agreement with the Florida HRS for this purpose which is expected to
be concluded in the near future. The elimination of enrollment of new patients
under the 499 Program has caused the loss of additional revenues the Company
would have been able to receive upon enrollment of new patients under its 499
Program, which revenues would have offset, in part, the significant costs of
obtaining regulatory approvals for its Product. See "Business -- Regulation."

6
<PAGE> 7

LACK OF FDA AND EU APPROVAL; ADDITIONAL FUNDING NEEDED

The Product has not been approved by the FDA or EU for use in the treatment
of patients, and the Company may not presently distribute the Product except
pursuant to its Florida license under Florida Statute Section 499.018, which the
Company has curtailed in respect to the enrollment of new patients as a result
of actions by the HRS and the Company's decision to concentrate its resources on
obtaining FOA and EU approvals. The Company intends to seek FDA and EU approval
of the Product for use in treating certain diseases. The Company will require
additional clinical trials in order to obtain FDA and EU approvals. The FDA and
EU approval processes are unpredictable, and the process may take several years
to obtain either FDA or EU approval. There is, however, no assurance that any
FDA or EU approvals will be received at any time in the future. Further trials
will also require significant additional funding in addition to the proceeds
obtained from the financings previously undertaken. There is no assurance that
such funding can be obtained on a cost feasible basis to the Company. See
"Business -- Regulation."

COMPETITION

Competition in the immunological and pharmaceutical products industry is
intense. Competitors include major pharmaceutical, chemical, energy and food
companies, some of which are already marketing genetically engineered alpha and
beta interferon products for MS, cancer and viral treatments, and many of which
are expanding into modern biotechnology. Competition is expected to increase in
the future based upon the perceived potential commercial applications for such
products. Various of Viragen's competitors have existing programs, FDA approved
and commercially marketed products or products in the FDA clinical trial
process, more experience in research, development and clinical testing of
pharmaceutical and biomedical products, and substantially greater financial,
marketing and human resources than the Company. See "Business -- Competition."

RISK OF TECHNOLOGICAL OBSOLESCENCE

The research and development of new biomedical products is characterized by
rapid technological change, which can severely alter the production methods,
cost, marketing and acceptance of biomedical products. There is no assurance
that the Company will have the resources to keep pace with technological changes
or that products developed by others will not adversely affect the commercial
feasibility of products that Viragen may distribute. See "Business -- Research
and Development."

GOVERNMENT REGULATION MAY AFFECT DEVELOPMENT AND DISTRIBUTION OF PRODUCT

All pharmaceutical manufacturers are subject to extensive state and federal
rules and regulations, and are required to maintain current Good Manufacturing
Practices as promulgated under FDA guidelines. Additional rules and regulations
are imposed by the EU. These rules and regulations are constantly changing and
may serve to restrict in whole or in part the ability of the Company to produce
and distribute its Product. If Viragen were not ultimately to achieve compliance
with these rules and regulations, it would likely have a material adverse effect
on the Company's activities and delay or preclude the development of
commercially viable operations. See "Business -- Regulation."

UNCERTAINTY OF HEALTH CARE REFORM MEASURES AND THIRD PARTY REIMBURSEMENT

The Company's ability to successfully commercialize its products may depend
in part on the extent to which reimbursement for the costs of such products and
related treatments will be available from government health administration
authorities, private health coverage insurers and other organizations. In
September 1993, President Clinton announced a series of legislative and
regulatory proposals aimed at reforming the health care system. While the
legislative and regulatory proposals have been tabled temporarily and while the
Company cannot predict whether any such future legislative or regulatory
proposals will be adopted, the pendency of such proposals could have a material
adverse effect on the Company's ability to raise capital. Any such reform
measures, if adopted, could adversely affect the pricing of therapeutic products
in the United

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<PAGE> 8

States or the amount of reimbursement available from United States governmental
agencies or third party insurers and could materially adversely affect the
Company in general.

In both domestic and foreign markets, sales of the Company's Product will
depend in part on the availability of reimbursement from third-party payors such
as government health administration authorities, private health insurers and
other organizations. Third-party payors are increasingly challenging the price
and cost effectiveness of medical products and services. Significant uncertainty
exists as to the reimbursement status of newly approved health care products.
There can be no assurance that the Company's Product will be considered cost
effective or that adequate third-party reimbursement will be available to enable
the Company to maintain price levels sufficient to realize an appropriate return
on its investment in product development. Legislation and regulations affecting
the pricing of pharmaceuticals may change before the Company's Product is
approved for marketing. Adoption of such legislation or regulations could
further limit reimbursement for medical products and services.

RISK THAT PATENTS AND PROPRIETARY TECHNOLOGY MAY NOT PROVIDE PROPRIETARY
PROTECTION

The Company has pending a U.S. Patent application relating to interferon
manufacturing technology and processes. Viragen intends to rely in part on
certain proprietary technology in the production of the Product. The Company
anticipates filing additional patents relating to its new technology during the
1995 calendar year. There can be no assurances that such proprietary technology
will enable the Company to manufacture its Product more efficiently and with
greater efficacy so as to enable Viragen to compete effectively with other
manufacturers of competitive immunological and pharmaceutical products. In
addition, there is no assurance that others may not independently develop the
same or superior technology to Viragen's technology. Furthermore, to the extent
that Viragen's production of the Product is alleged to breach a third party's
patents or proprietary technology, it could have an adverse impact on the
Company, even if the Company were ultimately determined not to have breached
such party's patents or proprietary technology. There can be no assurance that
Viragen's pending patent applications will be approved, and if granted, whether
such patents will provide substantial protection to the Company. See
"Business -- Patents."

RISKS OF TECHNOLOGY TRANSFERS

One of the Company's proposed marketing strategies is to sell the right to
use Viragen's technology and manufacturing protocols to third parties who will
use them to produce the Product outside the United States. There can be no
assurance that the Company's marketing program or the efforts of any brokers
engaged to assist the Company will be commercially successful. See
"Business -- Marketing."

PRODUCT LIABILITY AND LIMITATIONS OF PRODUCT LIABILITY INSURANCE

The Company may be subject to claims for personal injuries or other damages
resulting from the Product. A successful claim could have a materially adverse
effect on the Company. The Company maintains product liability insurance in the
amount of $1,000,000, but there can be no assurance that such insurance will be
available in the future at commercially acceptable rates or that such coverage
will be adequate for the Company's purposes.

EXISTENCE OF OPTIONS AND WARRANTS; POSSIBLE DILUTION

Assuming the exercise of the Warrants and conversion of the Series A
Preferred Stock, there will still be outstanding options and warrants to
purchase up to 3,160,000 shares of Common Stock of the Company exercisable at
prices ranging from $0.30 to $1.00 per share. These options and warrants may
have certain dilutive effects because the holders will be given the opportunity
to profit from a rise in the market price of the underlying shares. The terms on
which the Company could obtain additional capital during the life of such
options and warrants may be adversely affected because the holders may be
expected to exercise them at a time when the Company might otherwise be able to
obtain comparable additional capital in a new offering of securities at a price
per share greater than the exercise price of such options and warrants. See
"Description of Securities."

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CONTROL BY INSIDERS AND POSSIBLE LACK OF INFLUENCE BY OUTSIDE STOCKHOLDERS

As of June 30, 1995, the executive officers and directors of the Company
and their affiliates own or control 3,151,944 shares of Common Stock, or 8.9% of
the outstanding shares, as well as options to purchase an additional 2,700,000
shares of Viragen's Common Stock. Upon completion of this offering and assuming
conversion and exercise of the aforementioned securities, members of management
may be able to control in significant respects, through election of directors
and otherwise, the conduct of operations of the Company. See "Principal
Stockholders."

RISK OF DEPENDENCE ON KEY PERSONNEL

The Company's day-to-day operations are managed by its Chairman of the
Board and President, Mr. Gerald Smith, its Chief Executive Officer, Robert H.
Zeiger and its Executive Vice President and Chief Financial Officer, Mr. Dennis
W. Healey. The Company has entered into employment agreements with Messrs.
Smith, Zeiger and Healey which restrict competitive activities by them during
the term of their agreements and for a two-year period thereafter. Although the
Company intends to apply for "key man" life insurance on the lives of Messrs.
Smith, Zeiger and Healey for its benefit in the amount of $1,000,000 each, the
loss of their services would adversely affect the conduct of the Company's
business. The Company's future success will depend in significant part on its
ability to attract and retain additional skilled personnel in various phases of
its operations. See "Management."

NO DIVIDENDS ANTICIPATED TO BE PAID

The Company has not paid any cash dividends on its Common Stock since its
inception and does not anticipate paying cash dividends in the foreseeable
future. The future payment of dividends is directly dependent upon future
earnings of the Company, the capital requirements of the Company, its financial
requirements and other factors to be determined by the Company's Board of
Directors. For the foreseeable future, it is anticipated that earnings, if any,
which may be generated from the Company's operations will be used to finance the
growth of the Company, and that cash dividends will not be paid to common
stockholders. See "Dividend Policy."

IMMEDIATE SUBSTANTIAL DILUTION TO PURCHASERS IN THIS OFFERING

Initial purchasers of the Common Stock of the Company offered hereby will
incur an immediate and substantial dilution from the purchase price of their
shares. As of March 31, 1995, the net tangible book value of the Company's
Common Stock was approximately $0.08 per share.

POSSIBLE RESALES OF SECURITIES BY CURRENT STOCKHOLDERS AND DEPRESSIVE EFFECT ON
MARKET

As of June 30, 1995, there were 23,801,553 shares of the Company's Common
Stock outstanding which were "restricted securities" as that term is defined by
Rule 144 under the Securities Act of 1933 as amended, (the "Securities Act"),
inclusive of shares being registered pursuant to this Registration Statement of
which this Prospectus is a part. Such shares will be eligible for public sale
only if registered under the Securities Act or if sold in accordance with Rule
144. Under Rule 144, a person who has held restricted securities for a period of
two years may sell a limited number of shares to the public in ordinary
brokerage transactions. Sales under Rule 144 may have a depressive effect on the
market price of the Company's Common Stock due to the potential increased number
of publicly held securities. The timing and amount of sales of Common Stock
covered by the Registration Statement of which this Prospectus is a part, as
well as such subsequently filed registration statement, could also have a
depressive effect on the market price of the Company's Common Stock. See "Shares
Eligible for Future Sales."

USE OF PREFERRED STOCK TO RESIST TAKEOVERS; POTENTIAL ADDITIONAL DILUTION

The Company's Certificate of Incorporation authorizes 375,000 shares of
Preferred Stock, of which 3,450 shares of Series A Preferred Stock are presently
issued and outstanding. As provided in the Company's Certificate of
Incorporation, Preferred Stock may be issued by resolutions of the Company's
Board of

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<PAGE> 10

Directors from time to time without any action of the stockholders. Such
resolutions may authorize issuance of the Preferred Stock in one or more series
and may fix and determine dividend and liquidation preferences, voting rights,
conversion privileges, redemption terms and other privileges and rights of the
shares of each authorized series. While the Company includes such Preferred
Stock in its capitalization in order to enhance its financial flexibility, such
Preferred Stock could possibly be used by the Company as a means to preserve
control by present management in the event of a potential hostile takeover of
the Company. In addition, the issuance of large blocks of Preferred Stock could
possibly have a dilutive effect with respect to existing holders of Common Stock
of the Company. See "Description of Securities."

LIMITED MARKET FOR THE COMPANY'S COMMON STOCK; POSSIBLE VOLATILITY OF SECURITIES
PRICES

There is currently only a limited trading market for the Common Stock of
the Company. The Common Stock of the Company trades on the OTC Bulletin Board
under the symbol "VRGN," which is a limited market and subject to substantial
restrictions and limitations in comparison to the NASDAQ System. There can be no
assurance that a substantial trading market will develop (or be sustained, if
developed) for the Common Stock upon completion of this offering, or that
purchasers will be able to resell their securities or otherwise liquidate their
investment without considerable delay, if at all. Recent history relating to the
market prices of newly public or recently listed companies indicates that, from
time to time, there may be significant volatility in the market price of the
Company's securities because of factors unrelated, as well as related, to the
Company's operating performance. There can be no assurances that the Company's
Common Stock will ever qualify for inclusion within the NASDAQ System or that
more than a limited market will ever develop for its Common Stock. See "Price
Range of Common Stock."

BROKER-DEALER SALES OF COMMON STOCK AND LIMITATION ON MARKETABILITY

The Company's Common Stock is not presently included for trading on the
NASDAQ System, and there can be no assurances that the Company will ultimately
qualify for inclusion within that system. In order for an issuer to be included
in the NASDAQ System, it is required to have total assets of at least
$4,000,000, capital and surplus of at least $2,000,000, a minimum price per
share of not less than $3.00, have publicly held shares with a market value of
at least $1,000,000 as well as certain other criteria. No assurance can be given
that the Common Stock of the Company will ever qualify for inclusion on the
NASDAQ System. Until the Company's shares qualify for inclusion in the NASDAQ
system, the Company's Common Stock will be traded in the over-the-counter
markets on the OTC Bulletin Board. As a result, the Company's Common Stock is
covered by a Securities and Exchange Commission rule that imposes additional
sales practice requirements on broker-dealers who sell such securities to
persons other than established customers and accredited investors (generally
institutions with assets in excess of $5,000,000 or individuals with net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse). For transactions covered by the rule, the broker-dealer must
make a special suitability determination for the purchaser and receive the
purchaser's written agreement to the transaction prior to the sale.
Consequently, the rule may affect the ability of broker-dealers to sell the
Company's securities and may also affect the ability of stockholders to sell
their shares in the secondary market. See "Description of Securities."

10
<PAGE> 11

PRICE RANGE OF COMMON STOCK

The Company's Common Stock is traded on the OTC Bulletin Board under the
symbol "VRGN." The following table sets forth the high and low bid quotations
for the Common Stock for the periods indicated. These quotations reflect prices
between dealers, do not include retail mark-ups, mark-downs or commission and
may not necessarily represent actual transactions.

<TABLE>
<CAPTION>
PERIOD HIGH LOW
- ----------------------------------------------------------------------------- ---- ---
<S> <C> <C>
First Quarter ended 09/30/92................................................. $ 7/26 $ 5/32
Second Quarter ended 12/31/92................................................ 13/32 1/16
Third Quarter ended 03/31/93................................................. 5/8 1/16
Fourth Quarter ended 06/30/93................................................ 1 1/4

First Quarter ended 09/30/93................................................. $ 7/8 $ 5/16
Second Quarter ended 12/21/93................................................ 7/8 5/16
Third Quarter ended 03/31/94................................................. 27/32 5/16
Fourth Quarter ended 06/30/94................................................ 3/4 13/32

First Quarter ended 09/30/94................................................. $1 13/16 $ 3/8
Second Quarter ended 12/31/94................................................ 1 13/16 1/2
Third Quarter ended 03/31/95................................................. 1 7/16 1/2
Fourth Quarter ended 06/30/95................................................ 1 7/16 1/8
Period 07/01/95 - 07/31/95................................................... 29/32 1/4
</TABLE>

On August 4, 1995, the closing bid price for the Common Stock was $.75.

As of June 30, 1995, the approximate number of record holders of the
Company's Common Stock was 3,178.

DIVIDEND POLICY

The Company has not paid any cash dividends on its Common Stock since its
incorporation in December 1980. Since the Company had been in the development
stage, has experienced losses since inception, and has significant capital
requirements in the future, it is not anticipated that funds will be available
for the issuance of dividends in the foreseeable future. The Company presently
intends to retain future earnings, if any, to finance the expansion of its
business and does not anticipate that any cash dividends will be paid in the
foreseeable future. Future dividend policy will depend on the Company's
earnings, capital requirements, expansion plans, financial condition and other
relevant factors.

The Company has 3,450 shares of 10% Series A Preferred Stock outstanding
which are listed in the "pink sheets" published by the National Quotation
Bureau, Inc. (not trading on the OTC Bulletin Board). Each share of Series A
Preferred Stock is immediately convertible into 4.26 shares of Common Stock.
Dividends on the Series A Preferred Stock are cumulative, have priority in
relation to the Common Stock and are payable in either cash or Common Stock at
the option of the Company. The Series A Preferred Stock has voting rights only
if dividends are in arrears for five annual dividends. Upon such occurrence, the
voting would be limited to the election of two directors. Voting rights
terminate upon payment of the requisite cumulative dividends.

11
<PAGE> 12

CAPITALIZATION

The following table sets forth the actual capitalization of the Company at
March 31, 1995, and as adjusted to give effect to the conversion of the Series A
Preferred Stock and the exercise of Warrants. All of the Warrants are
exercisable at exercise prices below the current market prices of the Company's
Common Stock.

<TABLE>
<CAPTION>
MARCH 31, 1995
--------------------------
ACTUAL AS ADJUSTED
----------- ------------
<S> <C> <C>
Notes Payable, less current portion(1)............................. $ 937,374 $ 937,374
Stockholders' equity:
Series A Preferred Stock, $1.00 par value per share; 375,000
shares authorized; 3,450 shares issued and outstanding; no
shares to be outstanding...................................... 3,450 -0-
Common Stock, $.01 par value per share; 50,000,000 shares
authorized; 35,355,532 shares issued and outstanding;
36,616,219 shares to be outstanding........................... 353,555 366,162
Additional paid-in capital......................................... 18,514,202 18,872,185
Accumulated deficit................................................ (15,803,010) (15,612,010)
Notes due from officers............................................ (326,250) (326,250)
----------- ------------
Total stockholders' equity............................... 2,741,947 3,300,087
Notes payable and total stockholders' equity............. $ 3,679,321 $ 4,237,461
========== ===========
</TABLE>

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

(1) See Notes to Consolidated Financial Statements included elsewhere herein for
a description of terms of the Company's promissory notes, long term
obligations and capital lease obligations.

12
<PAGE> 13

USE OF PROCEEDS

The Company will not receive any proceeds from the sale of Common Stock for
the accounts of the Selling Security Holders. There is included in the
Registration Statement of which this Prospectus is a part 480,340 shares of
Common Stock underlying warrants issued to consultants and 765,650 shares
underlying warrants issued to the placement agent and its designees in
connection with the Company's recently completed private placement. If all of
the warrants sold to consultants were exercised at $.30/.60 per share, the
Company would receive proceeds of approximately $163,452, and if the warrants
issued to the Company's placement agent and designees were exercised in their
entirety at an exercise price of $.52 per Share, the Company would receive
proceeds of approximately $398,138. Inasmuch as the Holders of all of the
aforementioned Warrants have no obligation to exercise such Warrants, the
Company is not in a position to evaluate when and if such derivative securities
will ever be exercised and the amount of proceeds that may be realized
therefrom. Accordingly, the Company is not able to allocate at this time the
proceeds that may be received from the exercise of such derivative securities,
and any proceeds realized will be utilized for working capital purposes, and the
development of FDA and EU protocols and clinical trial programs. To the extent
the proceeds of such exercise are not used immediately, they will be invested in
certificates of deposit, savings deposits, other interest bearing instruments or
will be left in the checking accounts of the Company.

SELECTED CONSOLIDATED FINANCIAL DATA

The financial data included in the following table has been selected by the
Company and has been derived from the consolidated financial statements for the
periods indicated. The following financial data should be read in conjunction
with the Company's Consolidated Financial Statements and related Notes and
Management's Discussion and Analysis of Financial Condition and Results of
Operations included elsewhere herein.

CONSOLIDATED STATEMENT OF OPERATIONS DATA:

<TABLE>
<CAPTION>
FOR PERIOD
YEAR ENDED BETWEEN FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, JAN. 1, AND ------------------------------------------------
1994 JUNE 30, 1993 1992 1991 1990 1989
---------- ------------- ---------- ---------- ---------- ---------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Operating revenues........ $ 677 $ 53 $ 52 $ 147 $ 355 $ 313
Loss before extraordinary
credit.................. (1,083) (311) (563) (716) (2,490) (2,001)
Net income (loss)......... (1,083) (311) (563) (716) (2,490) 403*
Income (loss) attributable
to common stock......... (1,087) (313) (573) (730) (2,504) 389*
Net income (loss) per
average common share
outstanding............. (.06) (.02) (.05) (.07) (.23) .05*
Weighted average shares
outstanding............. 18,686,751 14,463,038 11,478,914 10,933,669 10,745,816 8,539,412
</TABLE>

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

* Includes extraordinary credit of $2,404,033 ($.28 per share) resulting from
the settlement of debt with Medicore.

13
<PAGE> 14

CONSOLIDATED BALANCE SHEET DATA:

<TABLE>
<CAPTION>
AT MARCH 31, AT JUNE 30, AT DECEMBER 31,
--------------- --------------- ------------------------
1995 1994 1994 1993 1992 1991 1990
------ ------ ------ ------ ----- ------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Working capital (deficit).............. $2,601 $ 233 $ 795 $ 250 $(942) $(1,115) $ (624)
Total Assets........................... 4,071 1,988 2,744 1,642 983 1,070 1,430
Long Term debt......................... 937 1,011 976 1,034 529 0 9
Stockholders' equity (deficit)......... 2,742 132 546 101 (588) (88) 565
</TABLE>

14
<PAGE> 15

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The Company has incurred operational losses and operated with a negative
cash flow since its inception in December 1980. Losses have totalled
approximately $607,000 and $2,644,248 for the three months ended and nine months
ended March 31, 1995 and $1,083,000, $311,000 and $264,000 (unaudited) for the
year ended June 30, 1994, and the six months periods ended June 30, 1993 and
1992, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Working capital totalled $2,601,385 at March 31, 1995, an increase of
$1,806,786 over the year end balance of $795,000 at June 30, 1994. This increase
was attributable to the receipt during the fiscal 1995 first quarter of
approximately $2,275,000, representing the balance of the proceeds, net of
expenses, of the Company's $3.5 million private placement offering completed in
August 1994 and net proceeds of approximately $1,980,000, net of expenses, from
the Company's second private placement completed by December 31, 1994.
Approximately $911,000 in proceeds of the first private offering were received
prior to June 30, 1994. Working capital totalled approximately $795,000 at June
30, 1994, an increase of $442,000 (178%) over the previous year. This increase
was primarily attributable to the receipt, prior to year end, of partial
proceeds of approximately $911,000, from the Company's private placement
offering completed in August 1994, the sale of Common Stock for $400,000 in the
first calendar quarter to its affiliate, Cytoferon Corp., and the receipt of
proceeds from the issuance of $200,000 in Convertible Debentures in November
1993, such financings being offset to a large extent by operational losses.

Certain components of working capital changed significantly between the
March 31, 1995 and June 30, 1994 periods, most notably cash balances, which
increased from $880,000 to $2,549,000 reflecting the completion of two private
placements of the Company's Common Stock in August and December, 1994. In
addition, certain components increased reflecting the recommencement of
manufacturing operations commencing in May 1993. In December 1994, the Company
received notification from HRS to postpone enrollment of new patients under its
499 Program until such time as the Company provided certain administrative
reports to HRS and corrected to their satisfaction certain FDA
inspection-related comments concerning the Company's manufacturing processes and
facility. In July 1995, as part of an ongoing negotiation and determination by
management to focus efforts on obtaining regulatory approvals, the Company has
determined to discontinue future enrollments under its 499 Program, with the
possible exception of a limited program for humanitarian purposes, involving
offering the Product on a non-payment basis. Accordingly, the Company has
recorded a $788,000 write-down of its inventory balances to a level reflecting
product on-hand needed to complete the course of treatment for patients actively
receiving the Product and enrolled prior to the elimination of new enrollments.
The last patient is scheduled to complete their course of treatment in March
1996. This adjustment was recognized in December 1994, the date the Company
received the initial HRS postponement notification.

On February 5, 1993, the Company entered into the Stock Agreement ("Stock
Agreement") with Cytoferon, pursuant to which Cytoferon had the right to
purchase up to 11,640,000 shares of the Company's Common Stock, which would have
constituted approximately 49.5% of the then to-be-outstanding Common Stock of
the Company. Within the terms of the contract period, which ended May 31, 1993,
Cytoferon invested $1,000,000 in the Company in exchange for 6,000,000 shares of
Common Stock. In November 1993, the Company negotiated and executed an
Additional Stock Purchase Agreement ("Additional Stock Agreement") which
provided Cytoferon the right to invest directly or otherwise obtain additional
investments of $500,000 within 60 days of execution of the Additional Stock
Agreement for 1,667,000 shares of the Company's Common Stock. The investment
threshold was subsequently met in part through the purchase of $200,000 in
Convertible Debentures of the Company.

Using the capital invested by Cytoferon, the Company recommenced the
production of its Alpha Leukoferon(TM) product in May 1993, and began limited
distribution of the Product in September 1993 for the treatment of MS and
HIV/AIDS patients residing in Florida through physicians specializing in the
treatment of those diseases. The Company is seeking to have its Product embraced
as a standard treatment for both

15
<PAGE> 16

intermittent and progressive multiple sclerosis and further believes its Alpha
Leukoferon(TM) product may be of benefit for those suffering from HIV/AIDS and
related illnesses.

In August 1994, the Company completed its $3.5 million private placement
offering of its Common Stock to accredited investors at $.40 per share,
resulting in the issuance of 8,919,000 shares. The net proceeds of the offering
were approximately $3,185,000, which are being utilized for the acquisition of
laboratory production equipment at an estimated cost of up to $750,000, purchase
of a Company-wide computer system, development of FDA study protocols,
employment of additional operating and administrative personnel and working
capital.

In December 1994, the Company completed a second private placement, solely
to accredited investors, of Common Stock at $.60 per share, which enabled the
Company to realize by December 31, 1994, gross proceeds of $2,056,000 in
consideration for the issuance of 3,426,667 shares. The proceeds are intended to
be utilized for implementation of the initial phase of the Company's European
market strategy, which includes the establishment of a research and
manufacturing facility in Europe during the 1995 calendar year. It is the
Company's intention to commence European clinical trials and seek the necessary
approvals for the sale of its Alpha-Leukoferon(TM) product in the EU subject to
receipt of additional funding necessary to conduct such trials.

Previously, the Company was being funded by Medicore, Inc. ("Medicore"),
its former parent, and during 1992 received advances in the amount of $301,000
to finance its minimal operations during this period. Aggregate indebtedness due
Medicore (inclusive of $108,000 in royalties due under a previous agreement
which is payable as the final payment under the $2,400,000 total royalty to be
paid) was $508,000 and $545,000 at March 31, 1995 and June 30, 1994,
respectively. This indebtedness is secured by a $429,000 note and mortgage on
the realty and personal property of the Company.

While subject to significant limitations, the Company has available net tax
operating loss carryforwards of approximately $10,800,000, expiring between 1995
and 2009, which may be used to offset in part taxable income during those
periods.

In December, 1994, the Company received notification from HRS to postpone
enrollment of new patients under its 499 Program until such time as the Company
provided certain administrative reports to the HRS and corrected to their
satisfaction certain FDA inspection-related comments concerning the Company's
manufacturing processes and facility. In July 1995, the Company discontinued
enrollment of new patients in its 499 Program and is negotiating a settlement
agreement with the Florida HRS for this purpose which is expected to be
concluded in the near future. The elimination of enrollment of new patients
under the 499 Program will cause the loss of revenues the Company would have
been able to generate upon enrollment of new paying patients under its 499
Program, which revenues could have offset, in part, the significant cost of
conducting clinical trials and obtaining regulatory approvals for its Product.

Once the manufactured product is bottled, i.e., placed in a final
container, it carries a two year expiration. Currently, the Company is shipping
product with an expiration date of June 1996. Accordingly, an inventory
valuation adjustment stemming from product expiration is currently considered
unlikely. Additionally, given the Company's industry knowledge related to human
leukocyte interferon, particularly in the areas of efficacy and minimal side
effects (much of which information was received from the Company's sponsored and
state sanctioned clinical trial with the University of Miami using the Company's
proprietary technology), the Company believes technological obsolescence for the
foreseeable future will not impact the marketability of the Product.

Management believes that the Company's improved Alpha-Leukoferon(TM)
product can be manufactured in sufficient quantity and will be priced at a level
to offer patients an attractive alternative treatment to the recombinant or
synthetic interferon. Management further believes that working capital currently
on-hand, as well as the continued limited distribution of the Product under the
499 Program to existing patients will provide the Company with the funds
necessary to continue its current level of operations at least through June 30,
1996.

16
<PAGE> 17

RESULTS OF OPERATIONS

For the past several years, the majority of the Company's limited revenues
have been derived from sales of the Company's Natural Interferon product, Alpha
Leukoferon(TM), through Florida physicians (primarily neurologists) for the
treatment of Multiple Sclerosis in accordance with Florida Statute 499.
Distribution of the Company's Product is limited to the State of Florida and is
sanctioned by, and subject to, the provisions of Florida Statute 499.018. This
statute permits controlled distribution of the Product in a clinical trial
environment only within the State. Commercialization of products under this
statute is not permitted. As indicated above, the Company discontinued
enrollment of new patients in its 499 Program and expects to conclude a
settlement agreement for this purpose with the Florida HRS in the near future.

Losses from operations have been incurred since inception and totalled
approximately $607,000 and $2,644,248 for the three months ended and nine months
ended March 31, 1995, $1,083,000 for the year ended June 30, 1994, $313,000 and
$271,000 (unaudited) for the six-month periods ended June 30, 1993, and 1992,
$563,000 and $716,000 for the years ended December 31, 1992 and 1991,
respectively.

The loss from operations for the quarter ended March 31, 1995 totalled
$607,276, compared to a loss of $425,437 for the previous quarter. This increase
in losses of approximately $182,000 was due primarily to an increase in research
and development costs between the periods of $180,000 stemming from the
Company's increased research efforts focused on its newly developed Alpha
Interferon product. Elements of the increase included increased salaries and
related expenses resulting from newly hired research personnel and related
expenses and the transfer of certain existing employees from the manufacturing
department to the research department upon the suspension of manufacturing
activities in December 1994. The increase in depreciation expense between the
periods also reflects the suspension of manufacturing operations as depreciation
costs on equipment associated with manufacturing had previously been capitalized
as a cost of manufacturing and recognized as a cost of sale when product was
sold.

The Company has recognized contract termination expenses of $525,000 in
December 1994, reflecting the termination of the contractual relationship
between the Company and Cytoferon and related issuance of 1,750,000 shares of
Common Stock of Viragen. The transaction was initially approved by the Company's
Board of Directors in August 1994, subject to receipt of a fairness opinion,
which opinion was received in December 1994.

Sales for the year ended June 30, 1994 totalled $625,000, and were derived
almost entirely from distribution of the Company's Alpha Leukoferon(TM) Product
for the clinical study treatment of MS. As the Company was essentially dormant
due to the lack of working capital and depletion of its inventories in the prior
year, sales during the comparable period totalled only $9,000. Through March 31,
1995, the Company has received $1,083,317 in revenues under its HRS
investigatory license. Management further believes that the Company's Alpha
Leukoferon(TM) product can ultimately be manufactured in sufficient quantity and
priced at a level to offer patients a cost effective alternative treatment to
treatments utilizing synthetic interferon and other drugs.

Cost of sales as a percentage of sales revenues totalled 52% for the year
ended June 30, 1994 and are expected to significantly increase as a percentage
of sales revenues during the 1995 fiscal year. This increase is due to a
significant drop (approximately 44%) in the selling price of the Company's Alpha
Leukoferon(TM) product. This sharp price reduction reflects the Company's
efforts to make the Product more price competitive with the synthetic
interferons, and accordingly, a more viable alternative patient treatment.
However, the Company anticipates implementation during the next year of improved
purification techniques which are expected to significantly reduce its costs of
production. While the actual production cost savings cannot yet be accurately
quantified, it is believed, although there can be no assurances, that such
reduction in production costs will yield savings at least sufficient to recoup
the gross profit margins lost through the price reduction.

Selling, general and administrative expenses increased significantly
between the most recent June 30 periods reflecting the recommencement of
manufacturing operations in May 1993 and related sales commencing in September
1993. Prior to recommencement of manufacturing operations, the Company was
essentially dormant. Included in these expenses were fees related to the
Cytoferon Management and Marketing Services

17
<PAGE> 18

Agreement of $173,000, product liability insurance premiums of $74,000, sales
commissions of $28,000 and royalty fees of $28,000. In addition the Company
incurred a substantial increase in legal fees including those associated with
litigation settled in January 1994 of approximately $120,000, fees associated
with a patent application and general corporate fees relating to the increase in
the overall level of operations. The increase also includes approximately
$117,000 charged to operations due to options granted to directors and officers
during the period, the payment of executive salaries for the entire period
commencing May 1993, which increase totalled $68,000 over the previous period,
as well as an increase in administrative staffing including related taxes and
benefits primarily consisting of group health insurance.

Research and development costs increased significantly over the prior year
reflecting the lack of research capital in 1993. The Company's research efforts
are focused primarily on improved production techniques for the Company's Alpha
Leukoferon(TM) product. These costs are expected to continue to increase over
future periods as the Company continues to seek improved methods of
manufacturing aimed at maintaining or improving product quality and
manufacturing efficiencies.

SIX MONTHS ENDED JUNE 30, 1993 COMPARED TO SIX MONTHS ENDED JUNE 30, 1992

For the six month period ended June 30, 1993 all revenues were derived from
interest income, rents received and reimbursement from insurance. The Company
depleted its Alpha Leukoferon inventory in July 1992, and did not reinitiate
manufacturing until May 1993, after receiving the necessary funds through the
sale of Common Stock. Accordingly, as no Product was available, the Company
recorded no sales during the six-month period ended June 30, 1993. Sales of
Natural Interferon for the six months ended June 30, 1992 were $41,686, of which
$16,200 or 39% of total sales, were from sales to the University of Miami for
the multiple sclerosis clinical trial program which concluded in July 1992.

The decrease in depreciation and amortization is due primarily to plant
equipment used in product manufacturing reaching a fully depreciated status in
1992. Additionally, due to the recommencement of production, a portion of the
depreciation attributable to productive assets was allocated to the cost of the
related product manufactured.

Selling, general and administrative costs increased 59% when compared to
June 1992 primarily due to the rehiring of employees and related costs in
connection with the recommencement of production. At June 30, 1993, the Company
had nine employees in the manufacturing and quality control areas and four
employees in administration and support functions. For the same period in 1992
the Company had just one paid employee, its Controller.

Interest expense increased in 1993 as the result of increased borrowings
from Medicore, primarily during the period from July through December, 1992
under a promissory note covering advances and loans at 1% over prime.

1992 COMPARED TO 1991

Revenues declined approximately 65% during 1992 fiscal year compared to the
1991 fiscal year, primarily due to a decline in the number of patients enrolled
in the MS study (conducted at the University of Miami) utilizing the Company's
Alpha Leukoferon(TM) product as the study neared its conclusion. MS related
sales accounted for 45% and 65% of interferon sales for the years ended December
31, 1992 and 1991, respectively. This program was concluded in July 1992. Also
at the end of the second quarter of 1992, the Company's interferon inventory on
hand had been depleted.

Cost of goods sold as a percentage of related revenues declined to 45%
during the 1992 fiscal year compared to 158% in 1991. This decline reflected the
sale in the 1992 fiscal year of certain inventoried items written down in 1991
due to questionable future value given the Company's financial condition and
lack of current operations at that time.

Research and development and selling, general and administrative expenses
dropped significantly in the 1992 fiscal year. The substantial decline reflects
significant cost cutting measures implemented to conserve working capital and
the suspension of research and development programs. Selling, general and
administrative

18
<PAGE> 19

expenses for the 1992 fiscal year includes $63,792 attributable to a
distribution of Common Stock to directors, employees and others.

Interest expense increased 24% in the 1992 fiscal year when compared with
the 1991 fiscal year, primarily as the result of increased borrowings from
Medicore, based on a promissory note covering advances and loans at 1% over
prime.

NINE MONTHS ENDED MARCH 31, 1995 COMPARED TO NINE MONTHS ENDED MARCH 31, 1994

Losses from operations totalled approximately $2,644,248 for the nine
months ended March 31, 1995, and $607,000 for the nine months ended March 31,
1994, an increase of $2,037,248 or 336%. The increase in losses reflects an
increase in various operating, developmental and administrative expenses
described hereafter offset to a limited extent by increased revenues as the
Company recommenced production and sales activities.

Sales for the nine months ended March 31, 1995 and 1994 totaled $455,000
and $35,000, respectively and were derived almost entirely from distribution of
the Company's Alpha Leukoferon(TM) product for the clinical study treatment of
multiple sclerosis. As the Company was essentially dormant prior to the receipt
of investment capital (see Liquidity and Capital Resources, above) due to the
then lack of working capital and depletion of its inventories in the prior year,
sales of the Company's Alpha Leukoferon(TM) product essentially commenced during
the second quarter of fiscal 1994. Sales for the third quarter of the prior year
totaled $271,000 compared with the $122,000 during the third quarter of the
current year. This decrease was due to the moratorium on the enrollment of new
patients placed on the Company by the Florida HRS.

In December 1994, the Company received notification from the Florida Health
and Rehabilitative Services to postpone enrollment of new patients under its 499
Program until such time as the Company provided certain administrative reports
to the HRS and satisfied certain FDA inspection-related comments concerning the
Company's manufacturing processes and facility. On March 17, 1995, the Company
received further notice from HRS requesting that Viragen demonstrate that its
production technology complies with FDA promulgated cGMP and for the Company to
continue the postponement of the enrollment of new patients under the 499
Program until the Company demonstrated such compliance. The Company is
continuing to provide its Products to patients currently receiving treatment or
enrolled in the Company's 499 Program consistent with existing treatment
protocols and reporting procedures established for the 499 Program. In July
1995, management of the Company determined to discontinue enrollment of new
patients under its 499 Program. This decision was based primarily on
management's intention to focus the Company's efforts on obtaining FDA and EU
approvals for its Product and avoiding complications associated with any further
expansion of the 499 Program, which potentially had increasing commercial
implications which could hinder the Company's efforts in securing regulatory
approvals. The Company is in the process of negotiating a settlement agreement
with the Florida HRS which would provide for the elimination of the enrollment
of new patients in its 499 Program (except for certain limited enrollments
approved by the Florida HRS for humanitarian purposes), the continued
participation by currently enrolled patients in the 499 Program and resolution
of all other issues. Accordingly, the Company recorded a $788,000 write-down of
its inventory balances to a level reflecting product on-hand needed to complete
the course of treatment for patients actively receiving the Product and enrolled
prior to the elimination of new enrollments.

Management believes that the elimination of enrollment of new patients has
limited the revenues that would have been generated under the 499 Program.
However, such curtailment will not affect the undertaking of clinical trials and
the approval process for the Company's Product following submission to the FDA
and EU, which submission will represent the focus of the Company's effort at the
present time.

Cost of sales as a percentage of sales revenues totalled 59% for the nine
months ended March 31, 1995, and are expected to increase as a percentage of
sales revenues during the remainder of the current fiscal year. This increase is
due to a significant (44%) drop in the selling price of the Company's Alpha
Leukoferon(TM) product. This sharp price reduction reflects the Company's
efforts to make the Product more price competitive with the synthetic
interferons, and accordingly, a more viable alternative patient treatment.
However, the Company anticipates implementation during calendar 1995 of improved
purification techniques which are expected to significantly reduce its costs of
production. While the actual production cost savings cannot yet be

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accurately quantified, management believes, although there can be no assurances,
that such savings will at least be sufficient to recoup the gross profit margins
lost through the price reduction.

Research and development costs increased significantly over the prior year
reflecting the lack of research capital earlier in fiscal 1994. The Company's
research efforts are focused primarily on improved production techniques for the
Company's Alpha Leukoferon(TM) product. These costs are expected to continue to
increase over future periods as the Company continues to seek improved methods
of manufacturing aimed at maintaining or improving product quality and
manufacturing efficiencies.

The 33% increase in selling general and administrative expenses from
$854,000 for the nine months ended March 31, 1994, to $1,133,000 for the nine
months ended March 31, 1995, reflects the overall increase in the level of
production and sales activities including the addition of administrative
personnel with related benefit costs. During the bulk of the comparable periods
of the proceeding years, the Company was essentially dormant with limited
distribution of the Company's product not commencing until September 1993.
Included in those components, which increased as a direct result of recent
recommencement of sales, were fees relating to product liabilities insurance
coverage, sales and royalty fees.

The increase in interest expense resulted from the increase in the bank
prime rate between the periods. The Company has two mortgages on its production
facility, both of which are tied to the prime rate. The prime rate was 9.0% and
8.5% as of March 31, 1995 and 1994, respectively.

INFLATION

Inflationary factors have not had a significant effect on the Company's
operations during any periods presented.

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BUSINESS

GENERAL

Viragen, Inc. was organized in December 1980 to engage in research,
development and manufacture of certain immunological products for commercial
application, particularly human leukocyte interferon, for antiviral and
therapeutic applications and as anticancer agents. Viragen's primary product is
a natural human leukocyte alpha interferon. Natural Interferon is a protein
substance that inhibits malignant cell growth without materially interfering
with normal cells. Natural Interferon stimulates and modulates the human immune
system and, in addition, impedes the growth and propagation of various viruses.
The Product is a natural product produced from human white blood cells. Alpha
Leukoferon(TM) is the trade name for Viragen's Product in injectable form. The
Company's Product has not been approved by the United States Food and Drug
Administration and there can be no assurances that approval of the Product will
be obtained at any time in the future.

Viragen has been granted an investigatory license by the Florida Department
of Health and Rehabilitative Services under Florida Statute 499 of the Florida
Drug and Cosmetic Act to conduct Investigation Study Programs and distribute the
Product to physicians for use in the treatment of Florida residents with
Multiple Sclerosis, HIV/AIDS, AIDS-Related Complex and Kaposi's Sarcoma. Viragen
initially obtained approval for use of the Product through approved
investigational protocols in 1983 under Florida Statute 402.36 (Cancer
Therapeutic Act), the predecessor to Florida Statute 499. In 1984, Florida
Statute 499.018 was amended to include the Company's protocols and Florida
Statute 402.36 was repealed. Under its HRS investigatory license, Viragen has
been able to distribute the Product to authorized Florida physicians for use in
treating their Florida patients under approved study protocols. Presently, the
primary application for Viragen's Product is the treatment of MS. Through March
31, 1995, the Company has received $1,083,317 in revenues under such HRS
investigatory license.

The Company intends to seek to obtain FDA approvals for various uses of the
Product in the future. Such approval is expected to require several years of
clinical trials and substantial additional funding. To date, Viragen has not
distributed the Product other than for research and pursuant to its
investigatory license, and until May 1993, Viragen had not actively operated due
to insufficient funds. Viragen expects to concentrate its efforts in preparing,
filing and processing its applications and obtaining approvals for its Product
from the FDA and the European Union. The Company has assembled an advisory
committee consisting of scientists, medical researchers and clinicians to assist
the Company in its application to the FDA.

The Company is continuing to provide its Products to patients currently
receiving treatment or enrolled in the Company's 499 Program consistent with
existing treatment protocols and reporting procedures established for the 499
Program. However, in July 1995, management of the Company determined to
discontinue enrollment of new patients under its 499 Program. This decision was
based primarily on management's intention to focus the Company's efforts on
obtaining FDA and EU approvals for its Product and avoiding complications
associated with any further expansion of the 499 Program, which potentially had
increasing commercial implications which could hinder the Company's efforts in
securing regulatory approvals. The Company is in the process of negotiating a
settlement agreement with the Florida HRS which would provide for the
elimination of the enrollment of new patients in its 499 Program (except for
certain limited enrollments approved by the Florida HRS for humanitarian
purposes), the continued participation by currently enrolled patients in the 499
Program and resolution of all other issues. While management believes that the
elimination of enrollment of new patients has limited the revenues that would
have been generated

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under the 499 Program, management believes that such elimination will not affect
the approval process for the Company's Product following submission to the FDA
and the EU, which submission will represent the focus of the Company's efforts
at the present time.

RECENT DEVELOPMENTS AND CHANGE OF CONTROL

In August 1994, the Company completed a $3.5 million private placement
offering of its Common Stock. Net proceeds of the Offering of approximately
$3,185,000 are being utilized for the acquisition of laboratory production
equipment, purchase of a company-wide computer system, development of FDA study
protocols, employment of additional operating and administrative personnel and
working capital.

On February 5, 1993, the Company entered into an Agreement for Sale of
Stock, as amended on May 4, 1993 (the "Stock Agreement"), with Cytoferon Corp.,
a privately owned Florida corporation, which provided for Cytoferon to acquire
in various stages of investment up to 11,640,000 shares of the Company's Common
Stock for an aggregate consideration of $1,500,000. Mr. Gerald Smith, who
subsequently became the Company's Chairman and President, is the principal
shareholder and chief executive officer of Cytoferon. By May 31, 1993, the
expiration of the initial investment period, Cytoferon had invested $1,000,000
for 6,000,000 shares of the Company's Common Stock for an effective acquisition
price of $.167 per share. On May 11, 1993, stockholders of the Company approved
an amendment to the Certificate of Incorporation to increase the Company's
authorized capital to provide sufficient shares for Cytoferon's investment. The
initial $1,000,000 infusion of capital enabled the Company in May 1993, to
reinitiate production (which had been suspended in 1990) and distribution of its
Alpha Leukoferon(TM) product. In connection with Cytoferon's investments, the
Company entered into a Marketing and Management Services Agreement ("MMS
Agreement") with Cytoferon pursuant to which agreement Cytoferon became
consultant to and exclusive distributor of products of the Company not approved
by the FDA for national distribution in exchange for certain fees and
commissions. The Company does not own, manufacture or distribute any products
currently approved by the FDA for national use or distribution.

Upon execution of the Stock Agreement and Cytoferon's initial $100,000
investment in the Company in February 1993, Mr. Gerald Smith, became a director
of the Company. In May 1993, Mr. Smith was elected President of the Company
following infusion of the initial $1,000,000. In accordance with the terms of
the Stock Agreement, in April 1993, following Cytoferon's investment exceeding
$600,000, Thomas K. Langbein resigned as an officer and director of the Company
and Jesse Hwa, a Cytoferon representative, was appointed as a director. Mr. Hwa
resigned as a director on July 22, 1993. The Company negotiated an Additional
Stock Purchase Agreement with Cytoferon, executed in November 1993, which
provided Cytoferon the right to invest an additional $500,000 within 60 days of
execution of the Additional Stock Agreement for 1,667,000 shares of the
Company's Common Stock. Additionally, this agreement provided Cytoferon the
right to receive other compensation as well as an additional 1,750,000 shares of
Common Stock of Viragen over a 24-month period subject to a formula of gross
sales, based on not less than $2,000,000 in gross sales the first year and
$4,000,000 in gross sales the second year following the execution of the
Additional Stock Agreement. In March 1994, the $500,000 investment threshold was
met and Cytoferon began receiving the maximum consulting fee provided for under
the terms of the MMS Agreement.

The MMS Agreement provided for a management consulting fee of $240,000 per
year, subject to Cytoferon meeting certain per year and aggregate initial term
and renewal term sales requirements. In addition, the MMS Agreement provided
that Cytoferon was to be the exclusive worldwide distributor, subject to
maintaining certain sales minimums for all of the Company's non-FDA approved
products, for three years with two automatically renewable successive three year
terms, a 4% sales commission on such sales, 50% of all fees received by the
Company from the sale of any foreign franchises, licenses, technology transfer
or joint venture agreements and 20% of any ongoing foreign royalty payments.

In August 1994, the Board of Directors of the Company voted to enter into a
further modifying agreement (the "Subsequent Agreement") with Cytoferon,
terminating the MMS Agreement and related agreements concurrent with the
issuance of the 1,750,000 shares of Common Stock and subject to receipt of a
fairness opinion. The Company's management believes it was in the best interest
of the Company to unify and

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<PAGE> 23

consolidate management functions and efforts and eliminate potential conflicts
that may arise by virtue of minimum sales requirements that could be
inconsistent with the Company's plans to introduce new production technologies
and refinement of related protocols. Accordingly, the Company executed the
Subsequent Agreement which, following receipt of a fairness opinion, provided
for the termination of the earlier stock purchase agreements and the MMS
Agreement and the issuance of the shares previously contingently issuable under
the Subsequent Agreement through restoration of the concept of the original
Stock Agreement concurrent with the cancellation of the MMS Agreement, Stock
Agreement and Additional Stock Agreement. The fairness opinion was accepted by
the Company on December 21, 1994, and the Company and Cytoferon consummated the
Subsequent Agreement. The Company has recognized contract termination expenses
of $525,000 in December 1994, reflecting the termination of contractual
obligations between the Company and Cytoferon and related issuance of 1,750,000
shares of Common Stock of the Company.

OPERATIONS

As a result of Cytoferon's initial capital investment, in March 1993, the
Company commenced rehiring production personnel and in May 1993, re-established
production of its Alpha Leukoferon(TM) National Interferon product. Due to its
then strained financial condition and for the several years prior to the
recommencement of production in May 1993, the Company had limited its operations
to the sale of its then existing interferon inventory and, to a lesser extent,
enzyme inventories (the Company no longer manufactures or markets enzymes).

Viragen initially obtained approval for use of the Product through approved
investigational protocols in 1983 under Florida Statute 402.36 (Cancer
Therapeutic Act), the predecessor to Florida Statute 499. In 1984, Florida
Statute 499.018 was amended to include the Company's protocols and Florida
Statute 402.36 was repealed. In 1986, the Company received approval from the
Florida Department of Health and Rehabilitative Services under the Florida
Statutes, Chapter 499, to distribute its Natural Interferon product under
specific investigative study protocols, through hospitals, pharmacies and
Florida licensed physicians for treatment within the State of Florida. The
Company eventually received state approval for use of its Alpha Leukoferon(TM)
product in the treatment of MS, HIV/AIDS, AIDS Related Complex and AIDS/Kaposi
Sarcoma and 32 types of cancers, hepatitis and certain viral diseases. Through
management's decision to focus the Company's efforts and resources, the Company
is currently providing product under the Florida Statutes Chapter 499 for the
treatment of MS and HIV/AIDS. However, in July 1995, the Company discontinued
enrollment of new patients in its 499 Program and is negotiating a settlement
agreement with the Florida HRS for this purpose which is expected to be
concluded in the near future. See "Regulation" below. All other previously
approved indications for use of the Company's Alpha Leukoferon(TM) Product are
inactive.

Although the recent capital investments have allowed the Company to
re-establish its interferon production and expand its Florida clinical studies,
the Company will require additional financing to engage in clinical trials for
the purpose of obtaining FDA and EU approval for its Natural Interferon product.
Clinical testing toward FDA and EU approval is an expensive process which is
expected to take several years to accomplish with no assurance such approval
would eventually be obtained.

THE PRODUCT

The Company has primarily been working with human leukocyte
interferon-alpha. Natural interferon is one of the body's natural defensive
responses to foreign substances such as viruses, and is so named because it
"interferes" with viral growth. Interferon consists of protein molecules that
induce antiviral, antitumor and immunomodulatory responses within the body.
Medical studies have indicated that interferons may inhibit malignant cell and
tumor growth without affecting normal cell activity.

There are two basic types of interferon-alpha differentiated primarily by
their method of manufacture and resultant composition. The first, as produced by
the Company, is natural, human leukocyte alpha interferon produced by stimulated
human white blood cells. The human white blood cells are cultivated and
stimulated by the introduction of a harmless stimulating virus that induces the
cells to produce natural interferon. The natural interferon is then extracted
and purified by chemical and filtration processes to produce a highly

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concentrated product for clinical use. The second, recombination alpha
interferon, is a genetically engineered synthetic interferon produced by
recombinant DNA techniques ("Synthetic Interferon").

Studies have indicated that there may be significant differences between
the use of Natural Interferon and Synthetic Interferon. The Company is advised
that studies have found that treatment with Synthetic Interferon in certain
cases may cause an immunological response ("neutralizing and/or binding
antibodies") that reduces the effectiveness of the treatment. The Company
believes that the production of neutralizing and/or binding antibodies is
virtually non-existent in patients treated with Natural Interferon. Furthermore,
primarily due to other differences including dosage requirements (less of the
natural product is apparently required to treat the subject diseases), the side
effects of treatment with Natural Interferon, in most instances, may be less
severe.

THE INDUSTRY

Prior to 1985, Natural Interferon was the only type of interferon
available. Research institutions and other biomedical companies similar to the
Company were working to solve the manufacturing problems associated with
industrial-scale production of Natural Interferon. In 1985, Hoffman-LaRoche,
Inc. and Schering Plough Corporation, two major pharmaceutical companies,
successfully developed synthetic interferon using DNA technology and
subsequently received licenses from the FDA to produce and market their alpha
interferon product for the treatment of hairy-cell leukemia, hepatitis and
Kaposi's Sarcoma, an AIDS-related cancer. After the development of recombinant
alpha interferon, the medical community's interest in Natural Interferon
diminished, and most clinical studies thereafter were based on the synthetic
product, due to its availability and substantially lower unit cost compared to
Natural Interferon.

The medical community's enthusiasm over the potential positive therapeutic
results of "interferon" treatment began to dwindle as clinical studies revealed
an ever-increasing number of patients treated with Synthetic Interferon were
relapsing due to the development of neutralizing and/or binding antibodies.
Supposition grew that there may be significant differences between Natural
Interferon and Synthetic Interferon, or that there may be disease or dosage
related differences.

Hoffman-LaRoche, Inc., and Schering Plough Corporation continue to actively
market their products and continue to advertise and promote the therapeutic
benefits of their respective Synthetic Interferon products in medical journals
and through direct physician contact. In 1993 Chiron Corp received FDA approval
of its recombinant beta interferon for the treatment of received
relapsing/remitting MS. In addition to the manufacturers of Synthetic
Interferon, a domestic manufacturer of natural interferon-alpha, received FDA
approval in 1989 to sell, in injectable form, their natural interferon product
for genital warts. They continue to market their product for this approved
indication.

APPLICATION OF INTERFERON

Multiple Sclerosis Program

Following approval for use of the Company's Product by HRS for the
treatment of MS, the Company, in February 1990, entered into a research
agreement with the University of Miami School of Medicine, Department of
Neurology. This research program related to a state-approved, patient funded,
multi-phase clinical trial for the treatment of MS with human leukocyte
interferon produced by the Company. The study was conducted on a double blind
basis with certain patients receiving different dosage levels of the Company's
Alpha Leukoferon(TM) product and certain patients receiving a placebo. The
agreement expired January 30, 1991 and the program concluded by mid-1992.
Recently published information on these trials indicated that, in a majority of
cases, the Company's interferon product provided favorable results in the
treatment of patients afflicted with intermittent and progressive MS.

With the infusion of equity capital commenced in 1993 and continuing
through the offering completed in December 1994, the Company recommenced
research and production and revenue producing studies focusing on MS and
HIV/AIDS patients residing in Florida.

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Cancer and Viral Diseases

The Company has distributed human leukocyte interferon-alpha in Florida for
cancer patients pursuant to a variety of protocols (specifically delineated
structures of treatment). Minimal revenues were obtained in 1991 and 1992 until
the Company's interferon inventory was depleted in June 1992. Production
recommenced in May 1993.

The Company received approval from HRS in January 1988 for the intrastate
distribution of interferon for the treatment of venereal warts, herpes labialis
and genital herpes with injectable human leukocyte interferon in conformance
with Florida Statute 499. Due to the Company's limited capital and operations
during the last few years, HRS placed the cancer, hepatitis and viral protocols
on an inactive status. Any indications for the use of interferon for cancer
treatment would require resubmission of the protocol for HRS approval. The
Company presently does not have plans to request reactivation of these
protocols.

In July 1990, the Company received approval from the Florida HRS for an
HIV/AIDS treatment protocol with its Alpha Leukoferon(TM) in injectable form.
The Company's product has been approved for treatment of patients, who are
eligible Florida residents, with HIV/AIDS, AIDS Related Complex and AIDS/Kaposi
Sarcoma. In September 1993, the Company initiated distribution on a limited
basis of its Product under this protocol. At the present time only three
individuals are participating in this treatment protocol. However, in December
1994, HRS informed the Company that no new patients may be enrolled under the
499 Program, including those patients with HIV/AIDs, ARC and Kaposi's Sarcoma,
until the Company has satisfied HRS regarding compliance with FDA promulgated
cGMP requirements. In July 1995, the Company discontinued enrollment of new
patients in its 499 Program and is negotiating a settlement agreement with the
Florida HRS for this purpose which is expected to be concluded in the near
future.

MANUFACTURE OF INTERFERON

Human source leukocytes ("white blood cells") and a stimulating virus,
which raw materials are readily available to the Company, are needed to produce
human leukocyte interferon by conventional (non-recombinant) means. A
stimulating virus, harmless to humans, is introduced into the white blood cell
which induces the cell to produce interferon. The interferon is extracted and
purified by chemical and mechanical filtration processes. The Company's natural
human leukocyte interferon-alpha is distributed under the name Alpha
Leukoferon(TM).

Production methods developed by the Company as well as enhanced methods
currently under development have reduced the Company's costs of production of
Natural Interferon and accordingly, the differences in market price between the
natural and synthetic interferons. While production of the natural product is
still believed to be somewhat more costly on a per unit basis, the Company
believes that lower dosage requirements for the Natural Interferon make it
presently a cost effective alternative method of treatment. The Company
anticipates that it will be required to make capital expenditures of between
$750,000 and $1,500,000 in order to refine, acquire and install new
manufacturing equipment associated with its proprietary manufacturing process
depending on the amount of equipment and the number of locations in which such
equipment will be installed. The Company has also entered into an agreement with
the University of Nebraska Medical Center for purposes of refining certain
aspects of such manufacturing process which involves the payment of $100,000
over the term of such agreement, which is expected to be completed in August
1995. The Company believes that its new proprietary manufacturing technology
should significantly reduce the cost of production which, in turn, will further
reduce the price of the Product, thereby enabling it to be more competitive with
Synthetic Interferons. There can be no assurances that such new manufacturing
technology will enable the Company to achieve the level of manufacturing
proficiency and Product improvement anticipated by management.

With sufficient inventory to meet current patient Product demand and in
conjunction with the development of the new proprietary manufacturing
technology, the Company discontinued production of the Product under its
previous manufacturing method in December 1994. Subsequently, in December,
Viragen also received notice from the HRS concerning production and facilities
deficiencies. Inventory on hand will permit the treatment of patients currently
enrolled in the Company's 499 Program. The Company has been

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<PAGE> 26

advised by HRS that new patients may not be enrolled that were not previously
enrolled, and in July 1995, the Company discontinued enrollment of new patients
in its 499 Program in response to the HRS request and due to management's
determination to focus efforts on obtaining FDA and EU approvals for its
Product.

RESEARCH AND DEVELOPMENT

The entire process of research, development and FDA approval (if obtained),
of a new pharmaceutical takes several years and requires substantial funding.
The Company is not currently engaged in any FDA clinical trials and, while
proposed for the future, commencement of such studies is dependent upon
obtaining significant additional funding. The Company was one of the first to be
licensed in 1983 under Florida law to manufacture and distribute interferon in
Florida for certain cancer protocols and for the treatment of viral diseases.
The Company's present focus is the distribution, manufacture and continued
research and development of Alpha Leukoferon(TM) for the treatment of multiple
sclerosis and HIV/AIDS.

In 1991, the Company, due to its then serious lack of financial resources,
suspended its research and development activities. In 1993, following receipt of
additional equity financing, the Company's technical personnel recommenced
limited research efforts focusing on improved production techniques related to
the Company's Alpha Leukoferon(TM) product. Following the receipt of additional
funding from the Company's private placement offering completed in August 1994,
research efforts and related costs increased further and can be expected to
continue to increase as the Company continues its development efforts towards a
new proprietary production technology for its product. While limited, to the
extent that sales revenues exceed the related costs of such sales, gross profits
would be available to augment funds available for research and development costs
as well as offset selling general and administrative expenses. Research and
development costs totaled $342,738 and $34,743 for the nine-month periods ended
March 31, 1995 and 1994 and $17,476 and $1,873 for the fiscal years ended June
30, 1994 and 1993, respectively.

Purification System

The Company has expended a substantial amount of research and development
time and resources towards the development of improved purification techniques.
These purification processes are believed to enhance the purity of the product
while increasing production yields thereby lowering production costs and
eventually the sales price of the product. In May 1992, and January 1994, the
Company filed patent applications related to improved purification processes.
See "Patents" below.

Limited Partnership

In 1983 the Company contracted with Viragen Research Associates Limited
Partnership (the "Limited Partnership"), an unaffiliated entity, to enable the
Company to perform the research and development with respect to a topical
ointment utilizing transfer factor or interferon for the treatment of herpes
virus infections of the skin. The Company received $456,500 from the Limited
Partnership in 1984 for such research and assigned to the Limited Partnership a
worldwide licensing agreement to market any such topical ointment product, and
all patent rights to the processes and products developed in connection with the
research and development of the topical cream for the treatment of herpes virus.
The Limited Partnership is to receive 5% of the gross revenues received by the
Company from the sale of ointment products, whether human leukocyte interferon
or human lymphocyte transfer factor, used in the topical treatment of herpes
virus infections of the skin, until it has received 200% of the money it paid to
the Company for research and development and thereafter 2% of the gross
revenues. The Limited Partnership has been inactive since 1984 and terminates
June 30, 2002. All research and development funds had been expended by the
Limited Partnership without the commercialization of any interferon or transfer
factor ointment.

MARKETING

Florida legislation permits, on a limited and controlled basis, the
intrastate manufacture, distribution and use of certain investigational drugs,
including human leukocyte alpha interferon, for the treatment of patients

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within the State under protocols approved by HRS. The Company was one of the
first to be licensed in Florida in 1983 to produce and distribute a product
under such legislation.

In December 1994, the Company received notification from the Florida Health
and Rehabilitative Services to postpone enrollment of new patients under its 499
Program until such time as the Company provided certain administrative reports
to the HRS and satisfied certain FDA inspection-related comments concerning the
Company's manufacturing processes and facility. On March 17, 1995, the Company
received further notice from HRS requesting that Viragen demonstrate that its
production technology complies with FDA promulgated cGMP and for the Company to
continue the postponement of the enrollment of new patients under the 499
Program until the Company demonstrated such compliance. The Company is
continuing to provide its Products to patients currently receiving treatment or
enrolled in the Company's 499 Program consistent with existing treatment
protocols and reporting procedures established for the 499 Program. However, in
July 1995, management of the Company determined to discontinue enrollment of new
patients under its 499 Program. This decision was based primarily on
management's intention to focus the Company's efforts on obtaining FDA and EU
approvals for its Product and avoiding complications associated with any further
expansion of the 499 Program, which potentially had increasing commercial
implications which could hinder the Company's efforts in securing regulatory
approvals. The Company is in the process of negotiating a settlement agreement
with the Florida HRS which would provide for the elimination of the enrollment
of new patients in its 499 Program (except for certain limited enrollments
approved by the Florida HRS for humanitarian purposes), the continued
participation by currently enrolled patients in the 499 Program and resolution
of all other issues.

Management believes that the elimination of enrollment of new patients has
limited the revenues that would have been generated under the 499 Program.
However, management believes that such elimination will not affect the
undertaking of clinical trials and the approval process for the Company's
Product following submission to the FDA and EU, which submission will represent
the focus of the Company's efforts at the present time.

PRIMARY APPLICATIONS

Multiple Sclerosis

The Principal Investigator for the Company's state sanctioned MS clinical
study at the Multiple Sclerosis Center, University of Miami School of Medicine,
recently authored, together with other investigators, an abstract of the
favorable results achieved in many cases with the use of the Company's Product
in the treatment of all types of MS. The Company's Medical Director was
co-author of this article. The abstract was published in the Annals of
Neurology, the official journal of the American Neurological Association. The
Company has distributed its Product to qualified MS patients wishing to
participate in the Florida Clinical Study through enrolled Florida physicians
pursuant to its investigational study protocols.

Asymptomatic HIV, AIDS, ARC and AIDS/Kaposi's Sarcoma ("HIV/AIDS")

HIV/AIDS is a progressive, terminal disease for which there are few
therapeutic drugs available and no known cure. The Company's Florida
HRS-approved protocols permit interferon to be administered by itself or used
together with other drugs in the treatment of HIV/AIDS patients by enrolled
Florida physicians. To date, the Company has treated patients on a very limited
basis but believes its Product may prove efficacious in this area.

Reimbursement and Payments

The cost to patients for interferon treatment varies widely depending upon
the physician's fee, protocol, dosage and length of treatment. Revenues from the
distribution of interferon have been limited, due to the investigational nature
of the product, the cost, limited insurance coverage for investigational new
drugs, and the regulatory restrictions on advertising and commercialization.

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The current policy of both Medicare and State of Florida Medicaid is not to
reimburse for treatment until such time as a drug has been approved for use by
the FDA. As such, Medicare and Medicaid presently will not reimburse patients
for their costs in being treated with the Company's interferon for MS or
HIV/AIDS. Certain private insurers on a limited, case-by-case basis, have in
the past paid for treatments using the Company's interferon product.

Marketing and Management Services Agreement

A Marketing and Management Services Agreement with Cytoferon was entered
into effective May 12, 1993. The MMS Agreement provided that Cytoferon will
render advice to the Company relating to production, administration, marketing
and regulatory affairs. The maximum consulting fee payable to Cytoferon was
$204,000 for the first year and $240,000 per year for the next two years of the
three year term of the MMS Agreement, reduced on a pro-rata basis based upon the
extent of Cytoferon's investment in the Company. The consulting fees are payable
only if the Company meets certain annual sales minimums and aggregates during
the initial and renewal terms. The maximum consulting fees were to be paid
provided Cytoferon invested an additional $500,000 in the Company under the
terms of the Additional Stock Purchase Agreement executed in November 1993. This
additional investment was made by Cytoferon in accordance with the terms of that
agreement.

The MMS Agreement further provided that Cytoferon was to be the exclusive
worldwide distributor for all of the Company's non-FDA approved products for
three years with two automatically renewable successive three year terms with a
4% sales commission on such sales. In order to have maintained exclusivity, the
Company's sales of such non-FDA approved products were to have been at least
$2,000,000, $4,000,000 and $7,000,000 for the first, second and third years of
the initial term of the MMS Agreement, respectively. The worldwide distribution
aspect of the MMS Agreement was initially renewable if the Company had
$13,000,000 in non-FDA approved product sales during the initial term and
$24,000,000 of such product sales for the first renewal period. Cytoferon had
the non-exclusive right to market, nationally and internationally, all FDA
approved products of the Company, none of which the Company presently has, at
the same 4% sales commission.

Cytoferon also had the exclusive right to create certain marketing programs
for implementation in foreign countries. An additional provision of the MMS
Agreement provided for the Company to pay Cytoferon 50% of all fees that the
Company received from the sale of any foreign franchise, license, technology
transfer or joint venture agreements. In order for Cytoferon to have maintained
such foreign marketing program exclusivity, the Company was to have realized a
minimum per year and aggregate term sales level set forth above for Cytoferon's
worldwide distribution exclusivity. Furthermore, if the Company received
continuing royalties pursuant to any such foreign agreement, Cytoferon would
have received 20% of all such royalties. In addition, the Company was obligated
to continue to pay Cytoferon royalties on such agreements in accordance with the
terms of such foreign agreements after the termination of the MMS Agreement. In
order to have maintained its exclusive international licensing, Cytoferon was to
have caused general license fees and royalties to be paid net to the Company of
$250,000 per year the first two years, $500,000 the third year and cumulative
license fees of $1,500,000 net to the Company, at no less than $500,000 per
year, during the first and second renewal terms of three years.

In August 1994, the Board of Directors of the Company voted to enter into
the Subsequent Agreement with Cytoferon terminating the MMS Agreement and
related agreements and provided for the issuance of 1,750,000 shares which were
contingently issuable subject to receipt of a fairness opinion. The Company's
management believed it was in the long-term best interest of the Company to
unify and consolidate management functions and efforts and eliminate conflicts
that may have arisen by virtue of minimum sales requirements that could have
been inconsistent with the Company's plans to introduce new production
technologies and refinement of related protocols. Accordingly, the Company
executed the Subsequent Agreement which, following receipt of the fairness
opinion, provided for the termination of the MMS Agreement and related stock
purchase agreements and issuance of the shares provided for under the November
1993 Additional Stock Agreement. The fairness opinion was accepted by the
Company on December 21,

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<PAGE> 29

1994, and the Company consummated the Subsequent Agreement recognizing contract
termination expense of $525,000 effective December 1994.

Royalty Agreement

In consideration of Medicore, Inc., having financed the Company and having
deferred the payment of certain indebtedness (settled for stock in November
1989), the Company modified its Royalty Agreement with Medicore pursuant to
which it was to pay Medicore a royalty of 12% of its net sales up to $20,000,000
of interferon, transfer factor and products using such substances, and a royalty
of 7% for sales in excess of $20,000,000. The royalty agreement was to expire on
November 6, 2001.

Pursuant to the Stock Agreement with Cytoferon, the Company and Medicore
have further amended the royalty agreement to provide for a maximum cap on
royalties to be paid to Medicore of $2,400,000, with a schedule of royalty
payments due of 5% of the first $7,000,000 of sales of interferon and related
products, 4% of the next $10,000,000 of sales and 3% of the next $55,000,000 of
sales, with no royalties to be paid with respect to delivery and payments of the
Company's interferon and related products for six months following May 12, 1993,
the closing date of the Stock Agreement. This amendment further provided that
royalties of approximately $108,000 previously accrued as payable to Medicore
prior to amendment of the Royalty Agreement would be payable as the final
payment due under the total $2,400,000 royalty obligation.

PATENTS

The Company believes its purification techniques presently under
development are unique and are capable of yielding a superior quality product
while reducing related production costs which will enable the Company to
eventually further lower the cost of the Product. The Company intends to file an
additional patent application relating to such techniques currently under
development as soon as feasible. The Company has also submitted several foreign
patent applications for an interferon-based composition for the skin.

United States patents have been issued to others with respect to
genetically engineered organisms and genes and human leukocyte interferon
purified to a certain degree. Subject to the extent of such existing patent
claims, the Company may have to negotiate license agreements with such patent
holders to use such processes and products in the Company's human leukocyte
interferon program.

The validity and enforceability of a patent can be challenged by litigation
after its issuance and if the outcome of such litigation is adverse to the owner
of the patent, other parties may be free to use the subject matter covered by
the patent. The degree of protection afforded by foreign patents may be
different than in the United States. There can be no assurance that patents now
held or obtained in the future will be of substantial protection or commercial
benefit to the Company.

REGULATION

Federal

The Company's activities and the products and processes resulting from such
activities are subject to substantial government regulation, both state and
federal. The interstate manufacturing, advertising and sale of biologic
substances and pharmaceutical products are regulated by, and require approval
of, the FDA and comparable state and local agencies. While currently not subject
to FDA regulation, the Company, under State of Florida HRS guidelines, must
follow strict production procedures and maintain certain standards, generally
known as current Good Manufacturing Practices established by the FDA. The FDA
has established mandatory procedures and standards which apply to the clinical
testing, marketing and manufacture of such products. Obtaining FDA approval for
commercialization of a new product can take significant time and capital since
it involves procedures and often lengthy clinical trials measuring product
safety, potential toxicity, and efficacy, if any, under specific protocols. The
process of obtaining FDA approval includes extensive animal testing to
demonstrate product safety, toxicity and side effects, if any, and preferred
dosages; human testing to show the same and to document such findings as
effectiveness, toxicity and side effects; and biostatistical analysis of data
gathered in such studies, followed by the submission of all information and
data.

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<PAGE> 30

At the present time, the Company has no pending applications relative to
its Alpha-Leukoferon(TM) Product before the FDA for the treatment of MS or any
other disease indications, although the Company intends to submit an
Investigative New Drug Application to the FDA during the Company's fiscal year
commencing July 1, 1995. For this purpose, the Company has assembled a Clinical
Advisory Committee comprised of scientists, medical researchers and clinicians
who will act in an advisory capacity in order to assist the Company in
developing the medical, scientific and clinical aspects in support of the
Company's anticipated Investigative New Drug Application to be filed with the
FDA for approval of its Natural Interferon product.

In the United States, human clinical trial programs generally involve a
three phase process. Typically, Phase I trials are conducted in healthy
volunteers to determine the early side effect profile and the pattern of drug
distribution and metabolism. Phase II trials are conducted in groups of patients
afflicted with the target disease to provide sufficient data for the statistical
proof of efficacy and safety required by federal regulatory agencies. If Phase
II evaluations indicate that a product has shown indications of potential
effectiveness and has an acceptable safety profile, Phase III trials are
undertaken to conclusively demonstrate clinical efficacy and safety within an
expanded population at multiple clinical study sites. Sometimes, the FDA
requires Phase IV studies to track patients after a product is approved for
commercial sale to identify side effects that may occur in a small number of
patients.

Regulatory approval of a new pharmaceutical product often taken fives years
or more (unless accelerated for life-threatening diseases) and involves the
expenditure of substantial resources. Approval depends on a number of factors,
including the severity of the disease in question, the availability of
alternative treatments and the risks and benefits demonstrated in clinical
trials.

American pharmaceutical manufacturers who sell outside of the United States
are also subject to FDA jurisdiction. Semi-finished drugs may be shipped under
certain controlled circumstances for further processing, packaging, labelling
and distribution to third parties residing in approved foreign countries,
subject to such laws as apply in those countries. The Company will have to
comply with FDA rules and regulations as well as those of the country to which
the Company intends to ship the Product before it will be permitted to export
crude or finished interferon products outside the United States.

Florida

The Company is and was one of the first to be licensed, in 1983, to
manufacture and use investigational drugs in Florida pursuant to Section 499.018
of the Florida Drug and Cosmetic Act. Rules were adopted by Florida HRS allowing
certain investigational drugs to be used for the treatment of cancer and viral
diseases. The Company originally received approval from Florida HRS to
manufacture, distribute and use interferon in injectable form for the treatment
of cancers, hepatitis and viral diseases within the State of Florida. The
Company's cancer, hepatitis and herpes protocols have been placed on inactive
status by HRS. The Company's current license for the manufacture and
distribution of drugs or other immunological products under the Florida
regulations is for investigational purposes, not commercialization.
Investigational products, such as the Company's Alpha Leukoferon(TM), may be
distributed to physicians for investigational use for patient treatment in
Florida, but under current Florida HRS regulations the product will not be
licensed for commercial sale within the state.

Florida physicians are required to inform the patient in writing that
therapy with the Company's product is not approved as a treatment or cure (for
each particular disease) by the FDA. The patient is required to sign a written
Informed Consent and authorization for the treatment.

In March 1990, the Company received approval from HRS for the intrastate
distribution of its product, under Florida Statute 499.018 for its multiple
sclerosis investigational study protocol. In July, 1990, the Company received
approval from HRS for use of its product for HIV/AIDS treatment under its
investigational study protocols. With respect to HIV/AIDS, interferon treatment
is available to patients who are eligible Florida residents for the entire
treatment period and are afflicted with HIV, AIDS, ARC or AIDS/Kaposi's Sarcoma.
At the time that the Company's protocols were approved for MS and HIV/AIDS, it
did not have the sufficient funding to exploit the opportunities available as a
result of those approvals. Funding received during 1993 and 1994 enabled the
Company to focus its product marketing in these areas.

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<PAGE> 31

In December 1994, the Company received a notice from the HRS citing certain
deficiencies in the Company's HRS reporting, manufacturing and distribution
process. On March 17, 1995 and in response to various submissions of the
Company, Viragen received further notice from HRS relative to the distribution
of the Company's Product under the 499 Program. In such notice, HRS requested
that Viragen demonstrate that both its previous and new production technology
complies with cGMP and requested additional clarification as to the level of
compliance with cGMP necessary to satisfy FDA requirements. HRS further required
the Company to continue the postponement of the enrollment of new patients under
the 499 Program until the Company demonstrated compliance with cGMP.

The Company had requested a hearing from the HRS for purposes of
substantiating its compliance with FDA promulgated cGMP requirements, which
hearing was expected to occur in August, 1995. The Company is continuing to
provide its Product to patients currently receiving treatment or enrolled in the
Company's 499 Program consistent with existing treatment protocols and reporting
procedures established for the 499 Program. However, in July 1995, management of
the Company determined to discontinue enrollment of new patients under its 499
Program. This decision was based primarily on management's intention to focus
the Company's efforts on obtaining FDA and EU approvals for its Product and
avoiding complications associated with any further expansion of the 499 Program,
which potentially had increasing commercial implications which could hinder the
Company's efforts in securing regulatory approvals. The Company is in the
process of negotiating a settlement agreement with the Florida HRS which would
provide for the elimination of the enrollment of new patients in its 499 Program
(except for certain limited enrollments approved by the Florida HRS for
humanitarian purposes), the continued participation by currently enrolled
patients in the 499 Program and resolution of all other issues. Furthermore,
while the Company believes that the elimination of enrollment of new patients
has limited revenues that would have been generated under the 499 Program,
management believes that such elimination will not affect the approval process
for the Company's Product following submission of its application to the FDA and
the EU or its financial capacity to undertake the application process.

Legislation continually is proposed relating to the safety, efficacy,
pricing and labeling of biomedical and pharmaceutical products. The Company is
unable to predict what effect, if any, changes in governmental regulations will
increase the cost of research and development or affect the time required to
develop and introduce new products.

European Union

In accordance with EU regulations, the Company's injectable Alpha
Interferon product is classified as a "protein identical to naturally occurring
human polypeptides and proteins." The EU regulations specifically provide for a
more abbreviated amount of preclinical studies for naturally occurring
substances such as the Company's Product than for genetically engineered
products. Accordingly, the Company expects to receive a more expeditious review
of the various EU processes and clinical trials prerequisite to market approval.

For purposes of securing approvals and completing the necessary clinical
trials relative to the EU as well as to secure a sufficient blood source for the
manufacture of the Company's Natural Interferon product following completion of
EU trials, on July 20, 1995, the Company and its wholly-owned subsidiary,
Viragen (Scotland) Limited, a company incorporated under the laws of Scotland
("VSL"), entered into a License and Manufacturing Agreement with the Common
Services Agency (the "Agency") of Scotland. The Agency is an adjunct of the
Scottish Government which acts on behalf of the National Health Service in
Scotland and the Scottish Natural Blood Transfusion Service. The Agency owns and
operates a blood fractionation facility in Edinburgh, Scotland, and has the
physical and technical capacity to manufacture alpha interferon from human
leukocytes. Securing a facility in the EU which has available a sufficient
qualified blood source was critical to enable the Company to conduct EU clinical
trials as well as for subsequent commercial manufacturing.

In order to conduct clinical trials, the Scottish manufacturing plant must
be licensed specifically within EU approved manufacturing SOPs (i.e., Standard
Operating Procedures). The Company has engaged a professionally recognized
consultant familiar with the EU regulatory process to assist in the
manufacturing

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<PAGE> 32

and product submission prerequisite to EU approvals. In addition, the Scottish
National Blood Service has a full time regulatory department, comprising the
three persons, that have obtained approval of numerous EU blood-derived
products. The Scottish National Blood Service will provide its best efforts,
working in conjunction with the Company, to obtain a manufacturing license and
subsequent product approval at the conclusion of the EU clinical studies. At
such time as the Scottish National Blood Service obtains a manufacturing license
for the Company's Product, Viragen intends to seek FDA manufacturing approval of
the Scottish manufacturing facility. There can be no assurance or guarantee that
the EU will approve the manufacturing facility or permit clinical testing and
distribution of the Company's product within the EU, or that the FDA will
license or approve the Scottish manufacturing facility or the Company's Product
for clinical trials and subsequent distribution in the United States.

VSL has been organized by the Company to undertake clinical trials in the
European Union and for sale of the Company's Alpha Interferon and related
products in the EU and other countries outside the United States. Viragen has
transferred patent and related proprietary rights associated with the production
of its Natural Interferon product and related technology to VSL for this
purpose. Under the grant of license, VSL has provided the Agency with an
exclusive license to use the proprietary rights covered by the License and
Manufacturing Agreement for the preparation, manufacture and supply of the
Product within the United Kingdom. The Agency has committed to manufacture the
Product in sufficient scale to accommodate the EU clinical trials and,
thereafter, for subsequent commercial sales in amounts to be agreed upon by the
parties. The Agency is also expect to conduct certain studies relevant to the
Product and cooperate with VSL and the Company to enable them to comply with the
laws and regulations of the EU in connection with the production of the Product.

VSL and the Company, pursuant to the License and Manufacturing Agreement,
will provide the Agency with full access to the proprietary technology and
specialized equipment, provide suitable training to the Agency's personnel and
defray all costs associated with securing permits and regulatory approvals,
augmenting the Agency's facilities, if necessary, to manufacture the Product and
securing documentation substantiating compliance of the Product with United
Kingdom regulatory requirements. The Agency will receive compensation for
Products manufactured for use in clinical trials in the EU, for Products
manufactured for sales prior to obtaining new drug application approval, and for
sales following such approval, at varying percentages in relation to costs.
Products manufactured and utilized for humanitarian purposes or for medical use
by patients of the Scottish National Health Services or the United Kingdom
National Health Services will involve either no payments to the Agency or
payments at substantially discounted prices.

The term of the License and Manufacturing Agreement is for a five-year
period with two additional five-year extension terms at the option of VSL. The
Agreement also contains provisions protecting proprietary rights of VSL and the
Company and the preclusion of certain competitive activities by the Agency.

COMPETITION

Competition in the research, development and production of interferon, and
other immunological products is intense and involves major, well established and
abundantly financed pharmaceutical and commercial entities as well as major
educational and scientific institutions. Many researchers, some of whom have
substantial private and government funding, are involved with interferon
production, including production of interferon through recombinant DNA
technology. A number of large companies including Hoffman-LaRoche, Inc.,
Schering Plough Corporation, Biogen, Inc., Chiron Corp., and Berlex Laboratories
are producing, selling, and/or conducting clinical trials with recombinant
interferons (alpha and beta) and other immunological products for the treatment
of cancer and viruses, including MS, HIV/AIDS/KS and Hepatitis.

In addition to the manufacturers of Synthetic Interferons, a domestic
manufacturer of natural interferon-alpha received FDA approval in 1989 to sell,
in injectable form, their natural interferon product for genital warts. They
continue to conduct FDA sanctioned clinical trials and to market their product
for their approved indication. The Company believes that competition is also
based on production ability, technological superiority, and ability to obtain
governmental approval for testing, manufacturing and marketing of the

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<PAGE> 33

product. The Company is not aware of any other drug manufacturer in Florida
which is actively marketing products on a large scale under Florida Statute
499.018.

The timing of the entry of a new pharmaceutical product into the market is
an important factor in determining that product's eventual success. Early
marketing has advantages in gaining product acceptance and market share. The
Company's ability to develop products, complete clinical studies and obtain
governmental approval in the past have been hampered by serious lack of adequate
capital. The Company re-initiated production and marketing operations in May
1993 and is not presently a competitive factor in revenue volume in the
biopharmaceutical industry.

EMPLOYEES

In 1990, based upon its operational losses and limited liquidity, the
Company suspended manufacturing operations and reduced its staff to a minimum,
which in 1992 consisted of one paid employee, exclusive of executive officers
who received no cash compensation. Since its receipt of funding, the Company, in
March 1993, commenced rehiring personnel to re-initiate production of
interferon. As of June 30, 1995, the Company has 19 full-time employees and one
part time employee, of which 11 are production, research and quality
assurance/quality control personnel. The remaining eight employees are
administrative.

PROPERTIES

The Company owns a 14,000 square foot building at 2343 West 76th Street,
Hialeah, Florida. The facility includes executive offices, a laboratory for
biomedical research and production and related facilities. The Company
refinanced its building through a $600,000 borrowing with a Florida bank under a
five year note and mortgage. The loan is reduced in equal monthly principal
payments of $2,500 with interest at 2% in excess of the prime rate. A balloon
payment of $450,000 is due August 1, 1996. The mortgage is on the land, building
and improvements, equipment and fixtures used in connection with the realty.
Medicore has guaranteed the principal and interest on this loan together with
expenses and fees upon any default. Medicore has an Acquisition Agreement with
the Company giving Medicore the right to cure defaults and assume the mortgage
and take title to the property. From the date of any such default, the Company
has the right, for a period of six months, to sell the building for the greater
of $600,000 or all sums due under the note and mortgage and to Medicore, all of
which aggregate approximately $906,700 at September 30, 1994.

Prior to the receipt of equity capital in 1993, the Company received
advances from Medicore for operating capital. Aggregate indebtedness due
Medicore resulting from such advances was $398,220 at December 31, 1994, and
$453,612 and $483,510 at June 30, 1994 and 1993, respectively. This indebtedness
is secured by a $429,400 note and mortgage on the realty and personal property
of the Company.

The Company has leased 2,800 square feet in this building to Medicore for
the latter's administrative offices. The lease is for five years through
December 31, 1997, with two five-year renewals, at an annual rental of $19,600
plus taxes and utilities.

The Company considers that its property is generally in good condition,
well maintained and is generally suitable and adequate to carry on the Company's
business. The Company further believes that it maintains sufficient insurance
coverage on the Company's real and personal property.

LEGAL PROCEEDINGS

The Company knows of no material litigation or claims pending, threatened
or contemplated to which the Company is or may become a party. The Company is in
the process of negotiating a settlement with the Florida HRS pursuant to which
the Company will discontinue the enrollment of new patients in its 499 Program.
In the absense of settlement, the Company would likely proceed to an informal
hearing relative to various aspects of its 499 Program which would likely be
convened prior to September 30, 1995. See "Business -- Regulation."

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<PAGE> 34

MANAGEMENT

The names and ages of the Company's directors and executive officers are as
follows:

<TABLE>
<CAPTION>
SERVED AS
OFFICER AND/OR
NAME AGE POSITION WITH THE COMPANY DIRECTOR SINCE
- --------------------------------- --- ---------------------------------- --------------
<S> <C> <C> <C>
Gerald Smith..................... 64 Chairman of the Board and 1994
President 1993
Robert H. Zeiger................. 51 Chief Executive Officer, Chief 1995
Operating Officer and Director
Dennis W. Healey................. 47 Executive Vice President, Chief 1993
Financial Officer, Treasurer, 1981
Secretary 1989
and Director 1994
Charles F. Fistel................ 34 Executive Vice President 1994
Peter D. Fischbein............... 54 Director 1981
Sidney Dworkin, Ph.D. ........... 72 Director 1994
Jay M. Haft...................... 59 Director 1994
William B. Saeger................ 42 Director 1994
</TABLE>

The Company's directors are collectively elected at the annual meeting of
stockholders and hold office for one year and until their successors are elected
and qualified. The Company's officers are appointed by the Board of Directors
and serve at the pleasure of the Board.

Set forth below is a biographical description of each director and
executive officer of the Company.

GERALD SMITH, in accordance with the February 1993 Stock Agreement, became
a director on February 5, 1993, the date of Cytoferon's initial stock purchase.
On May 12, 1993, Mr. Smith became President of the Company. In June, 1994 Mr.
Healey relinquished his position as Chairman of the Board of Directors in favor
of Mr. Smith. Mr. Smith is Chairman of the Board, Chief Executive Officer and
President of Cytoferon. Since 1982, he was a principal stockholder, president,
chief executive officer and director of Business Development Corp. ("BDC") of
Miami, Florida, which has served as a managing entity and consultant to several
high technology ventures including Compupix Technology Joint Venture of Boca
Raton, Florida. In 1988, Mr. Smith was the founder, president and a director of
Club-Theatre Network, Inc. of Boca Raton, Florida, an audience-interactive
private video theater. Mr. Smith sold his interest in that company in March
1989. From August 1991 to December 1991, Mr. Smith was the chief executive
officer of Electronic Imagery, Inc. located in Pompano, Florida, a company
engaged in the development of imaging software. Mr. Smith is also the president,
chief executive officer and a director of Cinescopic Corporation and
International Database Service, Inc. located in Palm Beach Gardens, Florida,
computer-oriented companies which developed database technology using the
personal computer for audio, video, animation and real time communication. Mr.
Smith has wound down BDC's operations in order to devote substantially all of
his time to the Company. Mr. Smith has advised that his services to these
companies will not materially affect his ability to render services to Cytoferon
and the Company.

ROBERT H. ZEIGER, was appointed Chief Executive Officer and Chief Operating
Officer and was elected as a director in May 1995. Mr. Zeiger is a
pharmaceutical executive. From 1985 to 1994, Mr. Zeiger was employed by Glaxo,
Inc., Research Triangle Park, North Carolina, serving as Vice President and
General Manager of their Dermatological Division from 1985 to 1988, Vice
President and General Manager of Alan & Hansburgs from 1988 to 1991, and Vice
President and General Manager of Glaxo Pharmaceuticals from 1991 to 1994. Mr.
Zeiger also served as Vice President, Marketing and Sales with Stiefel
Laboratories, Coral Gables, Florida, Inc. from 1979 to 1985, as National Sales
Manager of Knoll Pharmaceutical Company

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<PAGE> 35

of Whipping, New Jersey from 1971 to 1979 and as a Hospital Sales Representative
of Warner-Chilcott Laboratories of Morris Plains, New Jersey from 1968 to 1969.

DENNIS W. HEALEY was appointed Chairman of the Board and Chief Executive
Officer on April 13, 1993 upon the resignation of Thomas K. Langbein from those
positions pursuant to the Stock Agreement with Cytoferon. In June 1994, Mr.
Healey relinquished his position as Chairman of the Board to Mr. Smith and in
July 1994 relinquished the position of Chief Executive Officer upon the
employment of Mr. Fistel. Upon Gerald Smith becoming President on May 12, 1993,
Mr. Healey became Executive Vice President and has served as Chief Financial
Officer and Treasurer of the Company since 1980. Mr. Healey was appointed
Secretary in 1994. Mr. Healey, Chief Financial Officer and Treasurer of Medicore
and was appointed Executive Vice President of its Techdyne affiliate in November
1991. Mr. Healey is a Certified Public Accountant and joined Medicore in 1976 as
its controller. He is also Treasurer of most of Medicore subsidiaries and serves
as Vice President of Dialysis Corporation of America ("DCA"), a subsidiary of
Medicore, and Secretary-Treasurer and director of other DCA subsidiaries. Mr.
Healey devotes approximately 75% of his business time to the affairs of the
Company.

CHARLES F. FISTEL was appointed Chief Executive Officer of the Company upon
his employment in July 1994, which position he relinquished to Mr. Robert H.
Zeiger in May 1995, becoming an Executive Vice President of the Company. Mr.
Fistel will be assuming the position of President of the Company's
dermatological division, once formed. Mr. Fistel, prior to joining the Company,
served for two years as an independent financial advisor to publicly-traded and
privately-held emerging growth companies. Prior thereto, between 1986 and 1992,
he served as Executive Vice President, Chief Financial Officer and a director of
Tiger Direct, Inc. (formerly BLOC Development Corporation), a Miami,
Florida-based publicly-traded computer technology development, marketing and
distribution company. From 1981 to 1986, Mr. Fistel, who is also a Certified
Public Accountant, actively practiced public accounting.

PETER D. FISCHBEIN is an attorney who has been practicing law for
approximately 29 years. Mr. Fischbein served as the Company's Secretary between
May and December, 1994. From 1971 through January 1990, Mr. Fischbein was a
partner in the law firm of Rosenfeld, Fischbein, Bernstein and Tannenhauser, of
New York, New York which on occasion represented the Company, Medicore and the
Viragen Research Limited Partnership which has certain contracts with the
Company. Since January, 1990, Mr. Fischbein has practiced law as an individual
practitioner specializing in corporate and business law. Mr. Fischbein is also a
director of Medicore (since 1984) and Techdyne (since 1985). Mr. Fischbein has
been a general partner of several limited partnerships engaged in oil
exploration and real estate development.

SIDNEY DWORKIN, Ph.D., elected a director in August 1994, was a founder,
former President, Chief Executive Officer and Chairman of Revco, Inc. Between
1987 and the present, Dr. Dworkin has also served as chief executive officer of
Stonegate Trading, Inc., Hudson, Ohio, an importer and exporter of various
health, beauty aids, groceries and sundries. Between 1988 and the present, Mr.
Dworkin has served as Chairman of the Board of Advanced Modular Systems, Hudson,
Ohio, which is engaged in the sale of modular buildings. Between June 1993 and
the present, Dr. Dworkin has also served as Chairman of Global International,
Inc., Boca Raton, Florida, which is involved in the sale and leasing of modular
buildings to hospitals and radiology groups. Between 1990 and the present, Dr.
Dworkin has also served as Chairman of the Board of Comtrex Systems, Newark, New
Jersey, which is engaged in the provision of data processing services. In
addition, between July 1988 and the present, Dr. Dworkin has served as Chairman
of the Board of General Computer Corp., Hudson, Ohio, which is engaged in the
marketing of data processing equipment. Dr. Dworkin also serves on the Board of
Directors of CCA Industries, Inc., Interactive Technologies, Inc. and Northern
Technologies International Corporation, all of which are publicly traded
companies.

JAY M. HAFT, elected a director in August 1994, is an attorney and of
counsel to Parker Duryee Rosoff & Haft, New York, N.Y. and Ruden, Barnett,
McCloskey, Smith, Schuster & Russell, Fort Lauderdale, Florida and a practicing
lawyer since 1959. Mr. Haft is also temporary President and CEO and a director
of Noise Cancellation Technologies, Inc. (OTC), as well as a director of Extech,
Inc. (OTC), CAS Medical Systems, Inc. (OTC), Nova Technologies, Inc. (OTC), Oryx
Technology Corp. (OTC) and RVSI, Inc. (OTC), all of which are publicly-traded
concerns.

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<PAGE> 36

WILLIAM B. SAEGER, elected a director in August 1994, is a Certified Public
Accountant with fifteen years experience in corporate strategic planning,
financial and tax planning, acquisitions, corporate capitalizations, and
analysis and management of financial assets. Mr. Saeger has served as a
portfolio manager and analyst and since November, 1987 has served as Vice
President of Fundamental Management. Mr. Saeger has served as a Director of
Telemac Cellular Corp. since May, 1993. Mr. Saeger has also written for
financial publications on federal taxation and investment portfolio management.

There is no family relationship between any of the officers and directors.

On August 15, 1994, the Company expanded its Board of Directors to include
Messrs. Sidney Dworkin, Jay M. Haft and William B. Saeger. At that time, the
Company constituted its Audit, Executive and Compensation Committees. The audit
committee consists of Messrs. Healey, Dworkin and Saeger. The Executive
Committee consists of Messrs. Smith, Healey and Fistel. The Compensation
Committee consists of Messrs. Haft and Dworkin. Inasmuch as these Committees
have only been recently constituted, other than the Executive Committee which
meets monthly, no meetings have occurred following the initial organizational
meeting of each of these committees.

The Audit Committee oversees the Company's audit activities to protect
against improper and unsound practices and to furnish adequate protection to all
assets and records. The Audit Committee also acts as liaison to the Company's
independent certified public accountants, and conducts such work as is necessary
and receives written reports, supplemented by such oral reports as it deems
necessary, from the audit firm. The Executive Committee is empowered to act for
the full Board in intervals between Board meetings, with the exception of
certain matters which by law may not be delegated. The Executive Committee will
meet, as necessary, and all actions by the Committee are to be reported at the
next Board of Directors meeting. The Compensation Committee provides overall
guidance for officer compensation programs, including salaries and other forms
of compensation.

EXECUTIVE COMPENSATION

During 1992 the Company had one employee, its controller, who was paid a
salary. Neither Thomas K. Langbein, who was then Chairman of the Board of
Directors and Chief Executive Officer until April 13, 1993, when he resigned
under the terms of the Stock Agreement, nor Dennis W. Healey, the individual who
succeeded to Mr. Langbein's positions and currently holds other executive
positions with the Company, received any cash consideration from the Company in
1991 or through most of 1992 due to the severely strained financial condition of
the Company during these periods. Mr. Healey began receiving an annual salary of
$75,000 in May 1993. Mr. Smith did not receive any salary during the fiscal
periods described below.

Based on the understanding of the parties prior to the investment by
Cytoferon and the execution of the Stock Agreement, there were to be no
employment agreements or employee benefits between the Company and any of its
employees. In accordance therewith, in June 1992, the Company issued 400,000
shares and 200,000 shares of its Common Stock, respectively to Messrs. Langbein
and Healey in consideration of termination of their employment agreements.

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<PAGE> 37

The Summary Compensation Table below sets forth compensation paid by the
Company and its subsidiary for the year ended June 30, 1994. No executive
officer had a total annual salary and bonus exceeding $100,000 nor did any other
executive officer, other than Mr. Healey, receive any salary.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
OTHER ALL
ANNUAL RESTRICTED OTHER
NAME AND COMPEN- STOCK OPTIONS/ LTIP COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS SATION* AWARD(S) SARS(#) PAYOUTS SATION
- ------------------------------------- ---- ------- ------ ------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gerald Smith,........................ 1994 $ 0 $7,500 $ 0 0 0 0 0
Chairman of Board and President(1) 1993 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0
Dennis W. Healey,.................... 1994 $75,000 $ 0 $ 0 0 0 0 0
Exec. V.P., Treas., CFO and 1993 7,200 0 0 0 0 0 0
Director(2) 1992 0 0 0 200,000 0 0 0
Thomas K. Langbein................... 1992 $ 0 $ 0 $ 0 400,000 0 0 0
Chairman of Board and CEO
</TABLE>

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

(1) Mr. Smith is Chairman of the Board, Chief Executive Officer and sole
shareholder of Cytoferon, a former active affiliate of the Company.
Cytoferon previously had a consulting and marketing agreement with the
Company pursuant to which Cytoferon was entitled to receive consulting
fees, commissions, fees for certain foreign transactions and foreign
royalties.
In November 1993, as modified on December 15, 1994, Mr. Smith entered into
a two-year employment agreement expiring November 18, 1995 with the Company
at no salary. The agreement provided for the sale at the inception of the
employment agreement of 750,000 shares of Common Stock at $.30 per share,
payable through the issuance of a promissory note with the shares being
issued into escrow pending cash payments reflecting the shares to be
released from escrow in increments of no less than $3,000. These shares
were purchased through the issuance of a note in the principal amount of
$217,500 in April 1994 with Mr. Smith receiving a bonus equal to the par
value ($7,500) of shares purchased. On May 15, 1995, the Company forgave
Mr. Smith's note in lieu of bonus for the 1995 fiscal year, following
unanimous approval of the independent members of the Board of Directors.
The agreement also provided for the issuance of 750,000 options to purchase
Common Stock subject to meeting certain production related or capital
raising criteria. The criteria were successfully met with the closing of
the Company's $3.5 million private placement in August 1994 and,
accordingly, these options became exercisable.
Mr. Smith had an employment agreement with Cytoferon effective June 2, 1992
for a term ending June 30, 1995. He was provided with an annual salary of
$120,000 the first year, $130,000 the second year and $140,000 the third
year. The salary for the period prior to May 12, 1993, the completion of
the Stock Agreement, was accrued and was payable from available cash. Mr.
Smith is entitled to participate in any Cytoferon benefit plans of which
there presently are none. The Cytoferon employment agreement further
provided Mr. Smith with certain severance arrangements if there is a change
in control of Cytoferon or the Company. In August 1994, the Board of
Directors of the Company voted to enter into the Subsequent Agreement and
terminate the Management and Marketing Services Agreement and related stock
purchase agreements with Cytoferon, terminating all fees payable
thereunder, concurrent with the issuance of 1,750,000 shares of the
Company's Common Stock, subject to receipt of a fairness opinion which was
subsequently received. In connection with this transaction, the Company
agreed to assume the obligations of Mr. Smith's employment agreement with
Cytoferon through November 18, 1995.
(2) In April 1994, as modified on December 15, 1994, Mr. Healey entered into a
two-year employment agreement expiring April 8, 1996 with the Company at an
annual salary of $75,000. The agreement provides for health, life and
similar employee benefits generally made available to other employees of
the Company, an automobile and related expenses. The agreement further
provided for the sale of 125,000 shares of Common Stock at $.30 per share
payable through the issuance of a promissory note with the shares being
issued into escrow pending cash payments reflecting the shares to be
released from escrow in

37
<PAGE> 38

increments of no less than 10,000 shares. These shares were purchased in
June 1994 through the issuance of a note in the principal amount of
$36,250, with Mr. Healey receiving a bonus equal to the par value ($1,250)
of the shares purchased. On May 15, 1995, the Company forgave Mr. Healey's
note in lieu of bonus for the 1995 fiscal year, following unanimous
approval of the independent members of the Board of Directors. The
agreement also provides for the issuance of 125,000 options to purchase
common shares at $.30 per share subject to the Company reaching certain
production levels or raising certain minimums in capital during the
employment contract period, consistent with similar provisions contained in
Mr. Smith's November 1993 employment agreement. These criteria were met in
August 1994 and, according, these options became exercisable.
On July 1, 1994, as modified on December 15, 1994, the Company entered into
a two-year employment agreement expiring July 1, 1996 with Charles Fistel
to serve as Chief Executive Officer (which position he relinquished to Mr.
Robert H. Zeiger in May 1995, assuming the position of Executive Vice
President) at an annual salary of $110,000. The agreement provides for
health, life, and similar employee benefits generally made available to
other employees of the Company, use of an automobile and related
maintenance expenses and reimbursement for expenses incurred in fulfilling
his normal responsibilities to the Company. The agreement provides for the
issuance of options to purchase the aggregate of 300,000 shares of Common
Stock of the Company at an exercise price of $.30 per share, exercisable
with respect to 150,000 shares commencing June 30, 1995 through July 1,
1999, and exercisable for the remaining 150,000 shares commencing June 30,
1996 through July 1, 2000. The right to exercise such options have
accelerated based on the Company having raised certain minimums in capital
referred to above. The options are terminable prior to the lapse of their
respective terms only if Mr. Fistel's employment should be terminated for
cause and, in that event, the options must be exercised, to the extent that
they have theretofore accrued, within 90 days of such termination.

On May 9, 1995, the Company entered into a two-year employment agreement
expiring May 9, 1997 with Robert H. Zeiger to serve as Chief Executive Officer
and Chief Operating Officer of the Company at an annual salary of $120,000. The
agreement provides for health, life and similar employee benefits generally made
available to other employees of the Company, use of an automobile and related
maintenance expenses and reimbursement for expenses incurred in fulfilling his
normal responsibilities to the Company. The agreement provides for the issuance
of options to purchase the aggregate of 1,000,000 shares of Common Stock of the
Company at an exercise price of $.96 per share, exercisable with respect to
500,000 shares commencing May 8, 1996 through May 8, 2000 and exercisable for
the remaining 500,000 shares commencing May 8, 1997 through May 8, 2001. The
right to exercise such options may be accelerated upon the occurrence of certain
material corporate transactions. The options are terminable prior to the lapse
of their respective terms only if Mr. Zeiger's employment should be terminated
for cause, and, in that event, the options must be exercised to the extent that
they have theretofore accrued within 90 days of such termination.

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information with respect to the grant of
options to purchase shares of Common Stock during the fiscal year ended June 30,
1994 to each person named in the Summary Compensation Table. The exercise price
of each option is equal to the fair market value of a share of Common Stock on
the date of grant.

<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SHARES) DATE
- ----------------------------------------------- ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C>
Gerald Smith................................... 750,000 59.0 $ 0.30 08/12/99
Dennis W. Healey............................... 125,000 10.0 0.30 08/12/99
</TABLE>

38
<PAGE> 39

OPTION EXERCISES AND HOLDINGS

The following table sets forth information with respect to the exercise of
options to purchase shares of Common Stock during the fiscal year ended June 30,
1994 to each person named in the Summary Compensation Table and the unexercised
options held as of the end of the 1994 fiscal year:

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND 1994 FISCAL YEAR END OPTION VALUES

<TABLE>
<CAPTION>
LESS EXERCISE VALUE OF UNEXERCISED
VALUE REALIZED IN THE MONEY OPTIONS AT
(MARKET PRICE) NUMBER OF UNEXERCISED FY-END (BASED ON FY-END
SHARES AT EXERCISE LESS OPTIONS AT FY-END PRICE OF $0.66/SHARE)
ACQUIRED ON EXERCISE PRICE --------------------------- ---------------------------
NAME EXERCISE PRICE EXERCISABLE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ ----------- ------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerald Smith............ -- -- -- 750,000 -- $ 270,000
Dennis W. Healey........ -- -- -- 125,000 -- 45,000
</TABLE>

ADDITIONAL STOCK OPTIONS

On May 15, 1995, the Company adopted its 1995 Stock Option Plan (the
"Plan") under which 4,000,000 shares of Common Stock have been reserved for
issuance to officers, directors, employees and consultants of the Company upon
exercise of options designated as "incentive stock options" within the meaning
of Section 422 of the Internal Revenue Code of 1986 or upon exercise of
nonstatutory options. The primary purpose of the Plan is to attract and retain
capable executives, employees, directors, advisory board members and other
consultants by offering such individuals a greater personal interest in the
Company's business by encouraging stock ownership. The Plan will be administered
by the Compensation Committee of the Company's Board of Directors which will
determine, among other things, the persons to be granted options, the number of
shares subject to each option and the option price. The Plan terminates on May
15, 2005.

The exercise price of any incentive stock option granted under the Plan to
an eligible employee must be equal to the fair market value of the shares on the
date of grant, and with respect to persons owning more than 10% of the
outstanding capital stock, the exercise price may not be less than 110% of the
fair market value of the shares underlying such option on the date of grant. The
Board of Directors or Compensation Committee will determine the term of each
option and the manner in which it may be exercised provided that no incentive
stock option may be exercisable more than ten years after the date of grant,
except for optionees who own more than 10% of the Company's capital stock, in
which case the option may not be for more than five years. Further, no director
of the Company or other person who is not an employee of the Company will be
eligible to receive incentive stock options. From the date of grant until 30
days prior to the exercise, the optionee must be an employee of the Company in
order to exercise any options, except in the case of disability or death of the
employee. Options are not transferable except upon the death of the optionee. In
the event of disability, options must be exercised within twelve months of
termination of employment as determined by the Board of Directors or the
Compensation Committee. Nonqualified options will have similar terms except the
exercise price therefor may be determined by the Board of Directors or the
Compensation Committee, and the term of such nonqualified options may not extend
beyond ten years and one day. The Board of Directors or the Compensation
Committee has the power to impose additional limitations, conditions and
restrictions in connection with the grant of any option.

No options have been granted as yet under the recently enacted Plan.

In August 1994, the Company issued five-year options to purchase an
aggregate of 350,000 shares exercisable at $1.00 per share which were divided
equally among the seven directors of the Company (one of whom subsequently
resigned). In addition, between May 1994 and March 1995, the Company issued
five-year options to purchase an aggregate of 570,000 shares of Common Stock at
exercise prices ranging from $.62 to $1.00 per share to six key employees.

39
<PAGE> 40

In May 1995, the Company issued 1,000,000 Common Stock purchase options to
Mr. Robert H. Zeiger, Chief Executive Officer, Chief Operating Officer and a
director, pursuant to an Employment Agreement. Under the terms of the Agreement,
500,000 options become exercisable May, 1996 and 500,000 options become
exercisable May, 1997. The options carry a five year term and are exercisable at
$.96 per share.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Medicore, the former parent of the Company, over several years invested in
and loaned substantial sums to the Company which ultimately resulted in
Medicore, after having spun-off the Company as a subsidiary in 1986, then owning
1,500,000 shares of Common Stock and holding a second mortgage on the Company's
property securing a promissory note of $429,400, representing the loans and
advances by Medicore up through the closing of the Cytoferon investment in May
1993, less a $50,000 partial payment of principal the Company made to Medicore.
The Medicore note carries interest at 1% over prime and is amortizable over 20
years with equal monthly payments of principal of $1,790 plus interest with a
balloon payment of $361,412 due on August 1, 1996. As of March 31, 1995, the
principal amount owing on stock note was $390,038. The note, evidenced by a loan
agreement, in addition to the mortgage on the Company's building, is also
secured with the Company's equipment, fixtures, accounts receivable and contract
rights. The security interest in the building which the Company has granted to
Medicore is second to the security interest held by the Equitable Bank which
holds a first mortgage on the Company's property, securing a promissory note to
Equitable Bank from the Company of $600,000, which is being amortized over 20
years with equal monthly installments of principal of $2,500 plus interest at
prime plus 2% per month, with a balloon payment of $450,000 due on August 1,
1996. Medicore has guaranteed the Equitable Bank mortgage and has an agreement
to acquire the Company's property if Medicore assumes the Equitable mortgage.
The bank may not make any further loans or advances to the Company without the
prior written consent of Medicore. The Equitable loan and mortgage were in
default for failure to satisfy covenants other than the payment of principal and
interest, but have since been brought current.

In conjunction with Medicore spin-off of the Company in 1986, several
agreements were entered into with Medicore to administratively deal with the
separation of the companies. These agreements included employment agreements
with Messrs. Langbein and Healey (Mr. Langbein resigned as Chief Executive
Officer and Chairman of the Board of Directors of the Company under the terms of
the Stock Agreement) which employment agreements were terminated in
consideration for stock of the Company. Also as part of the spin-off, the
Company entered into a Royalty Agreement with Medicore to pay to Medicore
royalties on net sales of interferon and related products. Pursuant to the Stock
Agreement, the Company and Medicore further amended the royalty agreement
providing for a cap of $2,400,000 in royalty payments and installment payments
of royalties based upon percentages of sales.

Gerald Smith, Chairman of the Board of Directors, President and director of
the Company, is the sole shareholder of Cytoferon, a former active affiliate of
the Company.

The Company shares one officer and one director with Medicore and its
subsidiaries. Dennis W. Healey, Executive Vice President, Treasurer and
Principal Financial Officer of the Company, is Senior Vice President and
Treasurer of Medicore, Executive Vice President of Techdyne and an officer
and/or director of their subsidiaries. Peter D. Fischbein, director of the
Company, is a director of Medicore and Techdyne. Lawrence E. Jaffe, former
Secretary and corporate counsel to the Company holds these positions with
Medicore and Techdyne. Mr. Jaffe resigned all positions with the Company in May
1994, being replaced by Peter Fischbein, a Director of the Company.

During 1990 and 1991 the Company borrowed $60,000 from Seymour Friend, an
officer and director of Medicore and former director of the Company, to meet
then current operating expenses. The borrowing was represented by a demand
promissory note dated May 31, 1991 bearing interest of 11% per annum. The
principal and interest was converted into capital of the Company in June, 1991,
with Mr. Friend receiving 200,000 shares of the Company's Common Stock. From
January, 1992 to April 10, 1992, Mr. Friend made additional loans to the Company
which the Company repaid in part, with a balance due to Mr. Friend of $66,700
evidenced by a demand convertible promissory note at 10% interest per annum.
This note with related

40
<PAGE> 41

interest accrued was satisfied in January 1994 through the issuance of 260,130
shares of the Company's Common Stock. In June 1994, the Company borrowed an
additional $25,000 from Mr. Friend which was repaid in July 1994, with related
interest at 10%.

Peter D. Fischbein, director of the Company, and a director of Medicore and
Techdyne, was a member of a law firm, now dissolved, which firm acted as counsel
to the Company, and Medicore from time to time. Mr. Fischbein's firm also
handled the legal work for the Limited Partnership which has licensing
agreements with the Company. In December 1994, Mr. Fischbein resigned as
Secretary of the Company. In July 1994, Mr. Fischbein, in recognition for
several years' services as a director of the Company, was provided the right to
purchase 125,000 shares of Common Stock at $.30 per share (market price at that
time was approximately $.53 per share), payable through the issuance of a note
in the principal amount of $36,250, with Mr. Fischbein receiving a bonus equal
to the par value ($1,250) of the shares purchased. On May 15, 1995, the Company
forgave Mr. Fischbein's note in lieu of bonus for the 1995 fiscal year,
following unanimous approval of the independent members of the Board of
Directors.

Lawrence E. Jaffe former Secretary and counsel to the Company resigned
these positions in May 1994. Mr. Jaffe is also corporate counsel to Medicore and
its majority owned subsidiary Techdyne. Mr. Jaffe received $30,410 and $14,434
in fees from the Company in 1992 and for the six months ended June 30, 1993,
respectively, and received substantially all of the balance of his professional
fees for fiscal 1992 and for the six months ended and year ended June 30, 1993
and 1994 from Medicore and Techdyne.

On February 5, 1993, the Stock Agreement with Cytoferon was executed, the
initial $100,000 investment was made by Cytoferon and Gerald Smith, chief
executive officer, director and principal of Cytoferon, became a director of the
Company. Under the terms of the Stock Agreement, upon further Cytoferon
investments, Thomas K. Langbein an executive of the Company since its inception
in 1980 and Chairman of the Board, resigned and Jesse Hwa, a Cytoferon
appointee, filled the vacancy on the Board in April 1993. Mr. Hwa resigned on
July 22, 1993 and was one of the plaintiffs in the Cytoferon Debenture holders
suit against Cytoferon and the Company. Upon Cytoferon's additional investment
in May 1993, pursuant to which Cytoferon had invested $1,000,000 for 6,000,000
shares of Common Stock of the Company, Mr. Seymour Friend resigned as director.
In May, Cytoferon moved its offices to the Company's facilities in Hialeah,
Florida. In November 1993 the Company entered into the Additional Stock Purchase
Agreement with Cytoferon and thereafter, issued 1,333,333 shares of Common Stock
to Cytoferon for an additional investment of $400,000.

In connection with Cytoferon's investments, the Company entered into a
Marketing and Management Services Agreement with Cytoferon pursuant to which
agreement Cytoferon became consultant to and exclusive distributor of products
of the Company not approved by the U.S. Food and Drug Administration for
national distribution in exchange for certain fees and commissions. The MMS
Agreement provided for a management consulting fee of $240,000 per year subject
to Cytoferon meeting certain per year and aggregate initial term and renewal
term sales requirements. In addition, the MMS Agreement provided that Cytoferon
was to have been the exclusive worldwide distributor, subject to maintaining
certain sales minimums for all of the Company's non-FDA approved products for
three years, a 4% sales commission on such sales, 50% of all fees received by
the Company from the sale of any foreign franchises, licenses, technology
transfer or joint venture agreements and 20% of any ongoing foreign royalty
payments.

Cytoferon had obtained funds for such investments through sale of
$2,181,500 principal amount of its Debentures between February 1993 and March
1994 (net of $849,250 of Debentures which were retired as a result of the
settlement of the Cytoferon Debenture holders' suit against Cytoferon, Viragen
and certain other parties). Each of the series of Debentures issued by Cytoferon
carried an identical interest rate of 8.5%, were convertible into Common Stock
of Viragen at $.30 per share and were secured by Common stock of Viragen
acquired through Cytoferon's investment in Viragen. The Cytoferon's Debentures
were converted into 7,271,666 shares of Common Stock of Viragen in December
1994, at which time accrued interest of $133,364 was converted into 444,547
shares of Common Stock of Viragen also at a conversion ratio of $.30 per share.

The Company's management believed it was in the long-term best interest of
the Company to unify and consolidate management functions and efforts and
eliminate conflicts that could arise by virtue of minimum

41
<PAGE> 42

sales requirements that could be inconsistent with the Company's plans to
introduce new production technologies and refinement of related protocols.
Accordingly, the Company executed the Subsequent Agreement, subject to receipt
of a fairness opinion received in December 1994, which terminated the MMS
Agreement, the Stock Purchase Agreement and Additional Stock Purchase Agreement
and restored the concept of the original Stock Purchase Agreement by
accelerating the issuance of the 1,750,000 shares previously contingently
issuable under the Additional Stock Agreement concurrent with the cancellation
of the aforementioned agreements.

Messrs. Sydney Dworkin, Jay M. Haft, and William B. Saeger, Directors of
the Company, Mr. Jerome E. Treisman, a former Director, and Charles F. Fistel,
an Executive Vice President of the Company, purchased Cytoferon 8 1/2%
Convertible Debentures in the respective principal amounts of $50,000, $62,500,
$150,000, $22,500 and $50,000 which are convertible into Common Stock of the
Company. The principal amount of such Debentures together with accrued interest
were converted, effective September 30, 1994 at $.30 per share and accrued
interest into 175,244 shares, 220,744 shares, 533,766 shares, 78,668 and 177,922
shares of Common Stock of the Company.

In November, 1993, the Company issued $200,000 in 8 1/2%, three-year
convertible debentures. These debentures were converted at $.30 per share into
666,668 shares of Common Stock on October 31, 1994. These shares are held by
Fundamental Management Corp. and Hedge Fund Management, which are investment
funds managed by William B. Saeger, a director of the Company.

In January 1994, the Company sold 1,000,000 Common Stock purchase warrants
to Northlea Partners, Ltd., a medical consultant to the Company, for $20,000,
exercisable at $.30 per share for a term of five years, concurrent with the
execution of an independent Management Consulting Agreement. Provisions of the
Management Consulting Agreement provide the purchaser the right to purchase up
to 300,000 shares commencing six months from the date of the agreement with
purchase rights on the balance of 700,000 vesting uniformly over a three-year
period. The Company had the right to repurchase any warrants at its option for
$.025 per share. The Company repurchased 584,160 warrants and terminated the
Management Consulting Agreement in July 1994, resulting in warrants to purchase
415,850 shares remaining outstanding, which are presently exercisable although
none have been exercised to date.

In connection with the Company's $3.5 million private placement, completed
in August 1994, the Company issued 765,650 Common Stock purchase warrants
exercisable presently at $.52 per share to the placement agent and its designees
for such offering. These warrants are exercisable through August 1999. In March
1995, the Company issued 64,500 Common Stock purchase warrants to Mr. Moty
Hermon and designees in consideration for financial consulting services to be
undertaken on behalf of the Company. The warrants are for a five year term and
are exercisable presently at $.60 per share, although none have been exercised
to date.

CLINICAL ADVISORY COMMITTEE

The Company formed a Clinical Advisory Committee in February, 1995
comprised of scientists, medical researchers and clinicians who have expertise
primarily in areas of relevance to the Company's research and development
activities. All of the members of the Clinical Advisory Committee participated
in a full day conference and program to evaluate procedures and to recommend a
course of action for obtaining FDA and EU approvals of the Company's Natural
Interferon product, which program was held in February immediately following the
organization of the Clinical Advisory Committee. The Clinical Advisory Committee
is expected to assist the Company in developing the medical, scientific and
clinical aspects of formal Multiple Sclerosis clinical protocols and trials for
its investigational, natural human interferon-alpha product. The Company views
this as its initial step towards seeking FDA and EU approvals of its Product.

KENNETH JOHNSON, M.D., who serves as Chairman of the Clinical Advisory
Committee, is Professor and Chairman of the Department of Neurology for the
University of Maryland School of Medicine. Among previous appointments, Dr.
Johnson has been Professor of Neurology at the University of California and
Associate Professor at Case Western Reserve University. Dr. Johnson is listed in
the publication "Best

42
<PAGE> 43

Doctors in America". He is currently on the Editorial Board for the Archives of
Neurology and the Journal of Neuroimmunology. Dr. Johnson is an Ad Hoc reviewer
for various medical journals including, Neurology, Annals of Neurology, Annals
of Internal Medicine, New England Journal of Medicine, the American Journal of
Virology as well as for other publications. Dr. Johnson has lectured extensively
on the subject of Interferon therapy in Multiple Sclerosis as well as on
Copolymer-I and Beta Interferon. Dr. Johnson was a co-author in the Landmark
1983 medical article on "New Diagnostic Criteria for Multiple Sclerosis" which
became the seminal source for diagnostic typing within Multiple Sclerosis. In
addition, Dr. Johnson has published in excess of twenty articles regarding the
use of Interferon in Multiple Sclerosis. Dr. Johnson has also received research
support from Schering Plough relative to a 1982-1985 trial of Alpha Interferon,
from the Kroc Foundation and from Sandoz Pharmaceutical for 1981-1985 study of
cyclosporine therapy, from the Triton Viro Science Corporation for the study of
Beta Interferon and from the National Multiple Sclerosis Society for the study
of Copolymer-I.

JEFFREY A. COHEN, M.D., is currently the Director of the Experimental
Therapeutics Program at the Mellen Center for Multiple Sclerosis Treatment and
Research for the Cleveland Clinic Foundation. Dr. Cohen is also presently a
member of the staff of the Department of Neurology of the Cleveland Clinic. He
is currently a reviewer for ten Neurology Journals, including Annals of
Neurology, Archives of Neurology and Neurology. Dr. Cohen has been a consultant
for the R.W. Johnson Pharmaceutical Research Institute, and Ortho Pharmaceutical
Corporation and participated in the standardization of the clinical rating
scales for the Cladribine clinical trial and has been a participant in the
Copolomer-1 studies. Dr. Cohen has been a recipient of grants for various
clinical studies including the Tizanidine Study. Dr. Cohen is a frequent
contributor to various publications on the subject of Neurovirology.

GEORGE W. ELLISON, M.D., is currently Professor In-residence of Neurology
at the University of California, Los Angeles. Prior thereto, Dr. Ellison was
Adjunct Professor of Neurology at the University of California, Los Angeles. Dr.
Ellison has served since 1971 as a director of the Multiple Sclerosis Research
Clinic and Treatment Center at the Reed Neurological Research Center at the
University of California, Los Angeles. Dr. Ellison also has served through
hospital appointments and teaching activities at various medical institutions
and hospitals and has functioned as a consultant to various professional
societies and governmental agencies. Dr. Ellison has also been a frequent
participant in various lecture programs, has published extensively in the area
of Neuroviology and the treatment of Multiple Sclerosis and has been the
recipient of several research grants in the field.

ROBERT HERNDON, M.D., was a full Professor of Neurology at the Oregon
Health Sciences University and the Chairman of the Combined Neurology Services
Department at the Legacy Health System which is the combined departments of
Neurology, Neurosurgery, Psychiatry, and Rehabilitation at the University of
Oregon in Portland. Prior thereto, Dr. Herndon was full professor at the
University of Rochester, an Associate Professor at John Hopkins Medical School
and Chief of the Neurology Service at the Veteran's Administration in Palo Alto,
California. Dr. Herndon is a Board Member of the Portland Chapter of the
National Multiple Sclerosis Society and is on the Editorial Board of the Annals
of Neurology, Neurology and the Journal of Neuropathology, and Experimental
Neurology. In addition, Dr. Herndon has been extensively involved with the
National Multiple Sclerosis Society and was a co-investigator for the Beta
Interferon trial conducted on behalf of Biogenic, Inc. Dr. Herndon has published
extensively on research issues in Vironeurologic diseases and has also published
on the immunopathologic aspects of Multiple Sclerosis. Specifically in the
clinical area, Dr. Herndon was the third author on the Jacobs study on
intrathecal administration of Human Fibroblast Interferon. He is also published
on MRI imagining in the treatment of Multiple Sclerosis and is the first of two
authors on the cerebrospinal fluid. Dr. Herndon has also participated in various
clinical trials including the DATATOP trial in Parkinson's Diseases, and
Cyclophosphamide Pulse Therapy trial in Multiple Sclerosis, and most recently
was a member of the Optic Neuritis Study Group which presented a number of
articles in the New England Journal of Medicine regarding the relationship
between Multiple Sclerosis and Optic Neuritis.

WILLIAM SHEREMATA, M.D., is currently Associate Professor of Neurology and
Immunology at the University of Miami, and prior thereto was Assistant Professor
of Neurology at McGill University in Montreal. Dr. Sheremata is an Ad Hoc
reviewer for Neurology, New England Journal of Medicine, Archives

43
<PAGE> 44

of Neurology and Archives of Opthalmology. He is an active participant through
counsel membership in organizations involved with Multiple Sclerosis including
the National Multiple Sclerosis Society, and has received various grants in
connection with the treatment and evaluation of Multiple Sclerosis. Dr.
Sheremata has been an active participant in various lectureship programs and has
published extensively in the area of Multiple Sclerosis and Neurology.

JERRY WOLINSKY, M.D., is a full professor of Neurology at the University of
Texas, and at the Houston Health Science Center, School of Medicine. Dr.
Wolinsky has held appointments at the University of California in San Francisco
and from John Hopkins University. Previously, Dr. Wolinsky worked for Carter
Wallace between 1991 and 1992 and Elan Pharmaceuticals from 1992 to the present.
Dr. Wolinsky is presently on the Medical Advisory Board for Multiple Sclerosis
for Sandoz Pharmaceuticals and is listed in the publication "Best Doctors in
America". Dr. Wolinsky has been a participant on the Executive Board of the
National Multiple Sclerosis Society and is on the Editorial Board for the Annals
of Neurology and Critical Reviews in Clinical Neurobiology. He is an Ad Hoc
reviewer for most of the neurologic journals as well as for the New England
Journal of Medicine. Dr. Wolinsky has been a participant in various studies for
which grants have been awarded and has been published extensively in the area of
immunovirology. Dr. Wolinsky has also worked for Sandoz Pharmaceuticals as a
participant in their cyclosporine studies and has published extensively on the
Herpes Simplex Virus.

Each member of the Clinical Advisory Committee has entered into an
agreement with the Company which requires the member to maintain the
confidentiality of the Company's trade secrets and other proprietary data
derived by the member during the course of his relationship with the Company.
The agreements also provide that all discoveries and trade secrets conceived and
developed by such members in conjunction with their services to the Company will
become the proprietary property of the Company. The Company expects to structure
compensation arrangements with each of the members, based on the level of their
involvement with the Company, which may include cash payments and/or a
combination of securities.

Since the date of the initial organization of the Clinical Advisory
Committee, Dr. Johnson has been active in advising the Company as to procedures
for the preparation of clinical trials and Dr. Sheremata has continued to advise
the Company on clinical aspects of its 499 Program. As Chairman of the Clinical
Advisory Committee, Dr. Johnson is expected to assign to the members in
forthcoming months various responsibilities relative to developing the Company's
Multiple Sclerosis clinical protocols and trials.

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the Company's
Common Stock beneficially owned at June 30, 1995 (i) by each person who is known
by the Company to own beneficially or exercise voting or dispositive control
over 5% or more of the Company's Common Stock, (ii) by each of the Company's
directors, and Chief Executive Officer and (iii) by all officers and directors
as a group. A person is deemed to be a beneficial owner of any securities of
which the person has the right to acquire beneficial

44
<PAGE> 45

ownership within sixty days. At June 30, 1995, there were 35,355,532 shares of
Common Stock of the Company outstanding.

<TABLE>
<CAPTION>
AMOUNT
NATURE OF PERCENT
BENEFICIAL OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) CLASS(2)
- ------------------------------------------------------------------- -------------- ----------
<S> <C> <C>
Gerald Smith....................................................... $1,162,847(3) 3.2%
Robert H. Zeiger................................................... 1,000,000(4) 2.7
Dennis W. Healey................................................... 600,000(5) 1.7
Peter D. Fischbein................................................. 300,000(6) 0.8
Sidney Dworkin, Ph.D............................................... 225,244(7) 0.6
Jay M. Haft........................................................ 320,744(8) 0.9
William B. Saeger.................................................. 1,631,854(9) 4.6
Officers and Directors as a Group (8 persons)...................... 5,801,944 16.1
</TABLE>

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

(1) Based upon information furnished to the Company by the principal security
holders or obtained from the stock transfer books of the Company. Other
than indicated in the notes, the Company has been informed that such
persons have sole voting and dispositive power with respect to their
shares. All of the individuals listed are officers and/or directors of the
Company whose address is 2343 West 76th Street, Hialeah, Florida 33016.
(2) Based on 35,355,532 shares of Common Stock outstanding at June 30, 1995.
Exclusive of (i) 14,697 shares of Common Stock reserved for issuance
pursuant to conversion of 3,450 outstanding shares of preferred stock each
convertible into 4.26 shares of Common Stock; and (ii) 3,380,990 shares of
Common Stock reserved for issuance pursuant to the exercise of warrants and
options of the Company.
(3) Mr. Smith is Chairman of the Board of Directors and President of the
Company. Includes (i) 362,847 shares owned directly by Mr. Smith; (ii)
750,000 Common Stock purchase options exercisable at $.30 per share
pursuant to Mr. Smith's Employment Agreement; and (iii) 50,000 Common Stock
purchase options exercisable at $1.00 per share granted to all Directors in
August 1994.
(4) Mr. Zeiger is Chief Executive Officer, Chief Operating Officer and a
Director of the Company. Includes 1,000,000 Common Stock purchase options
exercisable at $.96 per share pursuant to Mr. Zeiger's Employment
Agreement.
(5) Mr. Healey is Executive Vice President, Treasurer, Chief Financial Officer,
Secretary and a Director of the Company. Includes (i) 425,000 shares owned
directly by Mr. Healey; (ii) 125,000 Common Stock purchase options
exercisable at $.30 per share pursuant to Mr. Healey's Employment
Agreement; and (iii) 50,000 Common Stock purchase options exercisable at
$1.00 per share granted to all Directors in August 1994.
(6) Mr. Fischbein is a Director of the Company. Includes (i) 125,000 shares
owned directly by Mr. Fischbein; (ii) 125,000 Common Stock purchase options
exercisable at $.30 per share pursuant to a Sale of Stock and Stock Option
Agreement and (iii) 50,000 Common Stock purchase options exercisable at
$1.00 per share granted to all Directors in August 1994. Mr. Fischbein
disclaims any beneficial ownership of 388,400 shares of Common Stock held
by his daughter, who is of majority age and lives independently of her
father. Mr. Fischbein's daughter has piggy-back registration rights to
107,400 shares.
(7) Dr. Dworkin is a Director of the Company. Includes (i) 175,244 shares owned
directly by Mr. Dworkin and his wife; (ii) 50,000 Common Stock purchase
options exercisable at $1.00 per share granted to all Directors in August
1994.
(8) Mr. Haft is a Director of the Company. Includes (i) 220,744 shares owned
directly by Mr. Haft; (ii) 50,000 Common Stock purchase options exercisable
at $.30 per share and (iii) 50,000 Common Stock purchase options
exercisable at $1.00 per share granted to all Directors in August 1994.
(9) Mr. Saeger is a Director the Company. Includes (i) 26,100 shares owned
directly by Mr. Saeger; (ii) 1,555,755 shares held by Fundamental
Management Corp. and Hedge Fund Management.

45
<PAGE> 46

Mr. Saeger holds a controlling position as Fund Manager of the Fundamental
Fund Group, holder of these shares and is considered a beneficial owner
and; (iii) 50,000 Common Stock purchase options exercisable at $1.00 per
share granted to all Directors in August 1994.

SALES BY SELLING SECURITY HOLDERS

The following table sets forth the name of each Selling Security Holder,
the amount of shares of Common Stock held directly or indirectly by each holder
on January 31, 1995, the amount of shares of Common Stock to be offered by each
such holder, the amount of Common Stock to be owned by each such holder
following sale of such shares of Common Stock and the percentage of shares of
Common Stock to be owned by each such holder following completion of such
offering. On June 30, 1995, there were 35,555,532 shares of Common Stock of the
Company outstanding.

<TABLE>
<CAPTION>
PERCENTAGE
SHARES SHARES TO TO BE
NUMBER OF TO BE BE OWNED OWNED AFTER
NAME OF SELLING SECURITY HOLDER SHARES OWNED OFFERED AFTER OFFERING OFFERING
- ---------------------------------------------- ------------ ---------- -------------- -----------
<S> <C> <C> <C> <C>
Tom Payne..................................... 848,997 848,997 0 *
Northlea Partners............................. 813,846 813,846 0 *
Broad & Cassel, PA............................ 523,548 523,548 0 *
Penfield Partners............................. 500,000 500,000 0 *
Harry Schwartz................................ 425,749 425,749 0 *
Laboratorios Andromaco........................ 355,845 355,845 0 *
Feron, Inc.................................... 355,845 355,845 0 *
MDA Financial, Inc............................ 348,756 348,756 0 *
Fundamental Growth Partners, Ltd.............. 344,589 344,589 0 *
Fundamental Resources, Ltd.................... 344,589 344,589 0 *
Hedge Fund Partners, Ltd. .................... 344,589 344,589 0 *
Eugene DeBlasio............................... 338,333 338,333 0 *
The Jaymee Company............................ 325,127 325,127 0 *
Laidlaw Equities, Inc......................... 313,567 313,567 0 *
W. Richard Lueck.............................. 305,903 305,903 0 *
Charles F. Fistel............................. 261,255 261,255 0 *
Moty Hermon................................... 260,584 260,584 0 *
Susan Kaufman................................. 258,750 258,750 0 *
Avi & Irma Samuel, JTWROS..................... 250,000 250,000 0 *
Frederick Adler............................... 250,000 250,000 0 *
Katheryn Eckstein............................. 250,000 250,000 0 *
Peters Securities............................. 250,000 250,000 0 *
Roger D. Benson............................... 250,000 250,000 0 *
Richard M. Lilly/RM Lilly Trust............... 228,061 228,061 0 *
Jay Haft...................................... 220,744 220,744 0 *
Jaswant & Debra Pannu......................... 211,255 211,255 0 *
Wisdom Tree Associates LP..................... 208,333 208,333 0 *
Marvin Kogod.................................. 191,906 191,906 0 *
Rueben Peters................................. 180,310 180,310 0 *
Avtar Sandhu.................................. 177,922 177,922 0 *
Martin Kartagener............................. 177,922 177,922 0 *
Charles Evans................................. 175,355 175,355 0 *
James Warner and Keelin Hayden................ 173,769 173,769 0 *
Melvin Gershman............................... 168,811 168,811 0 *
Fundamental Associates, Ltd. ................. 166,667 166,667 0 *
Uri Elias..................................... 166,667 166,667 0 *
Wellington Hill Financial, Inc. .............. 166,667 166,667 0 *
</TABLE>

46
<PAGE> 47

<TABLE>
<CAPTION>
PERCENTAGE
SHARES SHARES TO TO BE
NUMBER OF TO BE BE OWNED OWNED AFTER
NAME OF SELLING SECURITY HOLDER SHARES OWNED OFFERED AFTER OFFERING OFFERING
- ---------------------------------------------- ------------ ---------- -------------- -----------
<S> <C> <C> <C> <C>
Felix and Joyce Campos........................ 159,005 159,005 0 *
Arthur Gottman................................ 156,831 156,831 0 *
Kenneth M. Reichle, Jr. ...................... 150,239 150,239 0 *
Irving Davies................................. 150,122 150,122 0 *
Eugene & Nazeli DeBlasio, JTWROS.............. 150,000 150,000 0 *
Herbert F. Holin.............................. 150,000 150,000 0 *
Robert M. Rosin............................... 146,072 146,072 0 *
Joel Friedman................................. 133,750 133,750 0 *
Robert W. Hill/RW Hill Trust.................. 133,333 133,333 0 *
Aaron Priest.................................. 125,000 125,000 0 *
Edward R. Falkner Profit Sharing Trust........ 125,000 125,000 0 *
Intergalactic Growth Fund, Inc. .............. 125,000 125,000 0 *
LEF Investments, Inc. ........................ 125,000 125,000 0 *
R & J Trust DTD: 7/1/93....................... 125,000 125,000 0 *
Sidelmar...................................... 125,000 125,000 0 *
Uzi Zucker.................................... 125,000 125,000 0 *
Vincent R. Keating............................ 125,000 125,000 0 *
Wesley Wood................................... 125,000 125,000 0 *
Leonard Berke................................. 112,736 112,736 0 *
Tina D. and Richard M. Lilly.................. 112,431 112,431 0 *
Walter Smith & Kathleen King JTWROS........... 110,586 110,586 0 *
Gerald Richter................................ 106,282 106,282 0 *
Barry Shemaria................................ 104,167 104,167 0 *
Rozel International Holdings, Ltd............. 104,167 104,167 0 *
Steven Zenker................................. 102,500 102,500 0 *
Oscar Zimmerman............................... 101,875 101,875 0 *
Gary Waxman IRA............................... 100,000 100,000 0 *
James & Janet Jordan JTWROS................... 100,000 100,000 0 *
Kevin J. Wiltz................................ 100,000 100,000 0 *
Eugene Mascarenhas............................ 96,169 96,169 0 *
Eric & Florence Stein, JTWROS................. 93,333 93,333 0 *
Hilaire & Sandra Fernandez.................... 88,961 88,961 0 *
Ritchie Jacobs................................ 88,961 88,961 0 *
Edward Falkner................................ 87,855 87,855 0 *
Michael & Martha Bushey, JTWROS............... 87,816 87,816 0 *
Edward Rosenthal.............................. 87,739 87,739 0 *
Lee Hartzmark................................. 87,739 87,739 0 *
Dorris R. Dworkin............................. 87,622 87,622 0 *
Sidney Dworkin................................ 87,622 87,622 0 *
Phyllis Froimson.............................. 87,622 87,622 0 *
James Shoke................................... 87,428 87,428 0 *
Tina Lilly.................................... 84,347 84,347 0 *
Diamondback, Ltd.............................. 83,334 83,334 0 *
Dale R. Warren................................ 83,333 83,333 0 *
Donald E. Kaplan.............................. 83,333 83,333 0 *
Gary & Carolyn Bodzin, TITE................... 83,333 83,333 0 *
George Gayle Darville......................... 83,333 83,333 0 *
Heinz Gisin................................... 83,333 83,333 0 *
Mark S. Block................................. 83,333 83,333 0 *
</TABLE>

47
<PAGE> 48

<TABLE>
<CAPTION>
PERCENTAGE
SHARES SHARES TO TO BE
NUMBER OF TO BE BE OWNED OWNED AFTER
NAME OF SELLING SECURITY HOLDER SHARES OWNED OFFERED AFTER OFFERING OFFERING
- ---------------------------------------------- ------------ ---------- -------------- -----------
<S> <C> <C> <C> <C>
Nell A. Ramo.................................. 83,333 83,333 0 *
Radix Associates.............................. 83,333 83,333 0 *
Ronald C. Smith............................... 83,333 83,333 0 *
Sandra & Jose Yglesias, JTWROS................ 83,333 83,333 0 *
Willoughby Holin and Rentner PSP.............. 83,333 83,333 0 *
Amtech Services Defined Benefit Plan.......... 81,250 81,250 0 *
Jerome Treisman............................... 78,668 78,668 0 *
Gilbert & Cristi Shapiro, JTWROS.............. 77,814 77,814 0 *
Raymond & Margaret McKnight, JTWROS........... 77,814 77,814 0 *
Hymie Akst.................................... 75,236 75,236 0 *
Suzanne Schiller.............................. 75,000 75,000 0 *
Jeffrey & Martha Pearl........................ 71,753 71,753 0 *
Christopher Rosman............................ 70,734 70,734 0 *
David Nuelle.................................. 70,734 70,734 0 *
Robert Peters................................. 70,734 70,734 0 *
Steven Helms.................................. 70,719 70,719 0 *
Ray A. Eckstein............................... 62,847 62,847 0 *
Elizabeth A. Krause........................... 62,551 62,551 0 *
1520 Family Partners Ltd...................... 62,500 62,500 0 *
Adam L. Henick................................ 62,500 62,500 0 *
Anthony C. & Marilyn Dalessio, JTWROS......... 62,500 62,500 0 *
David T. Atkins IRA Plan #2................... 62,500 62,500 0 *
G.R.P. Industries Inc. ....................... 62,500 62,500 0 *
Glen Lebowitz................................. 62,500 62,500 0 *
H. James Catlin, Jr........................... 62,500 62,500 0 *
James A. Schoke, ADMIN........................ 62,500 62,500 0 *
James Blanchard............................... 62,500 62,500 0 *
Joan F. Forshew............................... 62,500 62,500 0 *
Josef & Shelley Patadis, JTWROS............... 62,500 62,500 0 *
Lawrence W. Mullman........................... 62,500 62,500 0 *
Michael E. & Martha L. Bushey, JTWROS......... 62,500 62,500 0 *
Michael G. Lucci -- Revocable Living Trust.... 62,500 62,500 0 *
Michael Lilly................................. 62,500 62,500 0 *
Miller Advisory Corp. P/P/T................... 62,500 62,500 0 *
Nannette Wasserman............................ 62,500 62,500 0 *
Robert G. Gottesman........................... 62,500 62,500 0 *
Ronald G. & Ellen Caravello, JTWROS........... 62,500 62,500 0 *
Sallie Felzen................................. 62,500 62,500 0 *
Sidelman, A Partnership....................... 62,500 62,500 0 *
Victor J. Scaravilli.......................... 62,500 62,500 0 *
John & Vivian Scarmadella, JTWROS............. 60,000 60,000 0 *
Westin Investors PSP.......................... 60,000 60,000 0 *
Garry Friedberg............................... 57,307 57,307 0 *
Ruth S. Russ.................................. 53,750 53,750 0 *
Manuel Iribar................................. 53,377 53,377 0 *
Dacia Marie Lueck............................. 52,638 52,638 0 *
Tiara Lynn Lueck.............................. 52,638 52,638 0 *
Beverly Segal................................. 52,550 52,550 0 *
Roger H. Willoughby........................... 52,083 52,083 0 *
</TABLE>

48
<PAGE> 49

<TABLE>
<CAPTION>
PERCENTAGE
SHARES SHARES TO TO BE
NUMBER OF TO BE BE OWNED OWNED AFTER
NAME OF SELLING SECURITY HOLDER SHARES OWNED OFFERED AFTER OFFERING OFFERING
- ---------------------------------------------- ------------ ---------- -------------- -----------
<S> <C> <C> <C> <C>
Francine Rodin................................ 50,000 50,000 0 *
Frank Merklein................................ 50,000 50,000 0 *
Hermina Rosenberg............................. 50,000 50,000 0 *
Louise Bassano................................ 50,000 50,000 0 *
Michael W. Pure............................... 50,000 50,000 0 *
Muriel Gottesman.............................. 50,000 50,000 0 *
Phillip J. Schiller........................... 50,000 50,000 0 *
Than M. Jain.................................. 50,000 50,000 0 *
Vinod & Manju Joshi, JTWROS................... 50,000 50,000 0 *
James D. & Judith A. Rentner, JTWROS.......... 47,792 47,792 0 *
Beatrice Murphy & Kathy Griffin JTWROS........ 45,842 45,842 0 *
Harvey Polly.................................. 43,801 43,801 0 *
Ramchandra & Rashmi Jakhotias, JTWROS......... 43,750 43,750 0 *
Cabell & Joyce Payne, JTWROS.................. 41,667 41,667 0 *
Dean Cundey, Trustee.......................... 41,667 41,667 0 *
Donald Lipsy S................................ 41,667 41,667 0 *
Gale K. Sostek................................ 41,667 41,667 0 *
Howard & Jill Schwartz, TITE.................. 41,667 41,667 0 *
Jose Luis Ferriz.............................. 41,667 41,667 0 *
Nagia Elias................................... 41,667 41,667 0 *
Patrick & Dawn Kearney Trustees............... 41,667 41,667 0 *
Larry Griffin................................. 41,666 41,666 0 *
Lawrence Hurwitz, MD Trustee.................. 41,666 41,666 0 *
Dolores Hartzmark............................. 37,500 37,500 0 *
Hans Pojer.................................... 36,324 36,324 0 *
Rolando & Maria Del Rio....................... 35,584 35,584 0 *
Kathy Griffin................................. 35,176 35,176 0 *
David & Adele Hast, JTWROS.................... 35,000 35,000 0 *
Michel Beno................................... 35,000 35,000 0 *
Russel Anmuth................................. 33,334 33,334 0 *
Herbert & Marlia Josephart, TTEES............. 33,333 33,333 0 *
Max Silkowitz................................. 33,333 33,333 0 *
Charles and Patricia Goldsmith ,TITE.......... 31,250 31,250 0 *
Daniel Abramson............................... 31,250 31,250 0 *
Elaine Schwartz............................... 31,250 31,250 0 *
James M. Goldfarb............................. 31,250 31,250 0 *
John C. & Joan C. Levine, JTWROS.............. 31,250 31,250 0 *
Joseph & Hermina Rosenberg, JTWROS............ 31,250 31,250 0 *
Julius Krammer................................ 31,250 31,250 0 *
Michael G. & Eileen P. Smith, JTWROS.......... 31,250 31,250 0 *
RFD Associates................................ 31,250 31,250 0 *
Richard & Robin Alman , JTWROS................ 31,250 31,250 0 *
Samuel A. & Carol Cassell, JTWROS............. 31,250 31,250 0 *
Steven & Kim Silvers, JTWROS.................. 31,250 31,250 0 *
Steven Silvers D.O., P.A. Pension Plan........ 31,250 31,250 0 *
Irwin H. Blau................................. 30,000 30,000 0 *
Kevin E. Potter............................... 30,000 30,000 0 *
Alan Hartzmark Revocable Trust................ 25,000 25,000 0 *
Allan E. Glickman............................. 25,000 25,000 0 *
</TABLE>

49
<PAGE> 50

<TABLE>
<CAPTION>
PERCENTAGE
SHARES SHARES TO TO BE
NUMBER OF TO BE BE OWNED OWNED AFTER
NAME OF SELLING SECURITY HOLDER SHARES OWNED OFFERED AFTER OFFERING OFFERING
- ---------------------------------------------- ------------ ---------- -------------- -----------
<S> <C> <C> <C> <C>
Barbara Akst.................................. 25,000 25,000 0 *
Brent Adamson................................. 25,000 25,000 0 *
Elliot Dworkin................................ 25,000 25,000 0 *
Izhr & Nitza Shy.............................. 25,000 25,000 0 *
Lee Kaplan.................................... 25,000 25,000 0 *
Mark Schwartz................................. 25,000 25,000 0 *
Marvin Pastor................................. 25,000 25,000 0 *
Renee Nadel Trust............................. 25,000 25,000 0 *
Ritchie and Estelle Jacobs.................... 25,000 25,000 0 *
Rosemary Valente, IRA......................... 25,000 25,000 0 *
Stanley & Marilyn Boyle, Trustees............. 25,000 25,000 0 *
Theodore J. & Edith Wins, JTWROS.............. 25,000 25,000 0 *
Miriam J. Pearl, Trustee...................... 25,000 25,000 0 *
Timothy & Bryan Reed, JTWROS.................. 25,000 25,000 0 *
Varda & Moshe Yalon, JTWROS................... 25,000 25,000 0 *
Janine P. Gia................................. 21,901 21,901 0 *
Jeffrey Polly................................. 21,901 21,901 0 *
Alfred B. Schuler............................. 20,833 20,833 0 *
Howard Gross PNCIRA Custodian................. 20,833 20,833 0 *
Peter & Bettle Kuzmick, JTWROS................ 20,833 20,833 0 *
Scott & Lisa Goldberg TITE.................... 20,833 20,833 0 *
Leonard R. Schenker........................... 20,000 20,000 0 *
Marian Heiser................................. 20,000 20,000 0 *
Seth Kaufman, Trustee......................... 20,000 20,000 0 *
Mark Alan Rosenberg........................... 18,000 18,000 0 *
Lee Collins................................... 17,513 17,513 0 *
Andrew Sostek................................. 16,667 16,667 0 *
Bernard & Estelle Jacobs JTWROS............... 16,667 16,667 0 *
Jerry F. Nichols.............................. 16,667 16,667 0 *
June Busby.................................... 16,667 16,667 0 *
Kenneth D & Janice B. Lent U/T/D.............. 16,667 16,667 0 *
Richard Burack................................ 16,667 16,667 0 *
Sidney & Alene Workman, JTWROS................ 16,667 16,667 0 *
William Herbst, IRA........................... 16,667 16,667 0 *
Steven Sanders................................ 15,979 15,979 0 *
Michael Smith................................. 15,000 15,000 0 *
Phyllis Cohen................................. 15,000 15,000 0 *
Roberta Lamb.................................. 13,653 13,653 0 *
James R. Postinpack........................... 13,500 13,500 0 *
Anand V. Khandelwal........................... 12,500 12,500 0 *
Claude Memmi.................................. 12,500 12,500 0 *
Claude Wall................................... 12,500 12,500 0 *
Daniel Shek................................... 12,500 12,500 0 *
David & Muriel Kaufman, JTWROS................ 12,500 12,500 0 *
Michael G. & Susan A. Green, JTWROS........... 12,500 12,500 0 *
Mukesh & HemaxiBhatt, JTWROS.................. 12,500 12,500 0 *
Natwara Jethva................................ 12,500 12,500 0 *
Betty Smith................................... 12,480 12,480 0 *
Donald Hagen.................................. 11,860 11,860 0 *
</TABLE>

50
<PAGE> 51

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

* Denotes less than 1% ownership.

An aggregate of 14,697 shares of Common Stock included in the shares of
Common Stock listed above to be sold by Selling Security Holders are issuable
upon exercise of 3,450 shares of Series A Preferred Stock of the Company issued
in January 1984. See "Description of Securities -- Preferred Stock."

An aggregate of 7,716,213 shares of Common Stock were received upon
conversion of convertible subordinated debentures and accrued interest of
Cytoferon and are included in the shares of Common Stock listed above to be sold
by the Selling Security Holders. These debentures were issued by Cytoferon in
separate transactions between February 1993 and March 1994 and were convertible
into Common Stock of the Company at a conversion price of $.30 per share. On
September 30, 1994, these debentures were converted into Common Stock of the
Company, at which time accrued interest on such debentures were converted into
Common Stock of Viragen also at a conversion ratio at $.30 per share. There is
also included above 1,367,120 shares received by the equity holders of Cytoferon
upon termination of operations of Cytoferon. Between February 1993 and August
1994, the Company and Cytoferon entered into a series of stock purchase and
management and marketing agreements which were subsequently terminated as a
result of the Subsequent Agreement entered into in August 1994. See previous
discussion under "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business -- Marketing and Management Services
Agreement."

In January 1994, the Company sold 1,000,000 Common Stock purchase warrants
to Northlea Partners, Ltd. for $20,000 exercisable at $.30 per share as
previously described. Under the terms of the agreement with Northlea Partners,
Ltd., the Company repurchased 584,160 warrants resulting in warrants to purchase
415,850 shares of Common Stock remaining outstanding, all of which are currently
exercisable. All of the shares underlying such warrants are included in the
shares of Common Stock listed above to be sold by the

51
<PAGE> 52

Selling Security Holders. See previous discussion under "Management -- Certain
Relationships and Related Transactions."

In August 1994, the Company completed its $3.5 million private placement
offering of its Common Stock to accredited investors at $.40 per share resulting
in the issuance of 8,919,000 shares. The offering was conducted by Laidlaw
Equities, Inc. ("Laidlaw") which acted as the placement agent for the offering.
In connection therewith, Laidlaw, in consideration for serving as the placement
agent for such offering, received warrants to purchase 765,650 shares of Common
Stock exercisable at $.52 per share. The purchase price for the Common Stock and
the exercise price of the warrants issued to Laidlaw and its designees were the
result of arms-length bargaining and represented approximately a 39% discount
from the market price of the Common Stock at the time of agreement but in excess
of the offering price of the Common Stock in such private offering. All of the
shares of Common Stock included in such private offering and underlying the
aforementioned warrants are included in the shares of Common Stock listed above
to be sold by the Selling Security Holders. See previous discussion under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Management -- Certain Relationships and Related Transactions."

In December 1994, the Company completed a second private placement during
its 1995 fiscal year of Common Stock at $.60 per share which enabled the Company
to realize gross proceeds of $2,056,000 in consideration for the issuance of
3,426,667 shares of Common Stock. The offering price for the shares was
determined by management of the Company and represented a discount of
approximately 31% from the market price of the Company's Common Stock at the
date of determination in October, 1994. All of the shares of Common Stock issued
in such private offering are included in the shares of Common Stock listed above
to be sold by the Selling Security Holders. See previous discussion under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

In March 1995, the Company issued 64,500 Common Stock purchase warrants to
Mr. Moty Hermon and designees in consideration for financial consulting services
to be undertaken on behalf of the Company. The warrants are exercisable at $.60
per share and the exercise price was determined through arms-length negotiations
with the consultant and represented a discount of approximately 34% from the
market price of the Company's Common Stock at the date of the transaction. The
shares of Common Stock underlying such warrants are listed above in the shares
of Common Stock to be sold by the Selling Security Holders. See previous
discussion under "Management -- Certain Relationships and Related Transactions."

The Company has undertaken to maintain the Registration Statement current
for a period of not less than nine months from the effective date of the
Registration Statement of which this Prospectus is a part in order that sales of
shares of Common Stock may be made by the Selling Security Holders. The Company
has agreed to pay for all costs and expenses incident to the issuance, offer,
sale and delivery of the Common Stock, including, but not limited to, all
expenses and fees of preparing, filing and printing the Registration Statement
and Prospectus and related exhibits, amendments and supplements thereto and
mailing of such items. The Company will not pay selling commissions and expenses
associated with any such sales by the Selling Security Holders. The Company has
agreed to indemnify the Selling Security Holders against civil liabilities
including liabilities under the Securities Act of 1933. The Selling Security
Holders have advised the Company that sales of shares of their Common Stock may
be made from time to time by or for the accounts of the Selling Security Holders
in one or more transactions in the over-the-counter market, in negotiated
transactions or otherwise, at prices related to the prevailing market prices or
at negotiated prices.

DESCRIPTION OF SECURITIES

The Company is currently authorized to issue up to 50,000,000 shares of
Common Stock, par value $.01 per share, of which 35,355,532 shares were
outstanding as of June 30, 1995. The Company is also authorized to issue up to
375,000 shares of Preferred Stock, par value $1.00 per share, of which 3,450
shares of Series A Preferred Stock were outstanding as of June 30, 1995.

52
<PAGE> 53

COMMON STOCK

Subject to the dividend rights of the holders of Preferred Stock, holders
of shares of Common Stock are entitled to share, on a ratable basis, such
dividends as may be declared by the Board of Directors out of funds, legally
available therefor. Upon liquidation, dissolution or winding up of the Company,
after payment to creditors and holders of Preferred Stock that may be
outstanding, the assets of the Company will be divided pro rata on a per share
basis among the holders of the Common Stock.

Each share of Common Stock entitles the holders thereof to one vote.
Holders of Common Stock do not have cumulative voting rights which means that
the holders of more than 50% of the shares voting for the election of Directors
can elect all of the Directors if they choose to do so, and, in such event, the
holders of the remaining shares will not be able to elect any Directors. The
By-Laws of the Company require that only a majority of the issued and
outstanding shares of Common Stock of the Company need be represented to
constitute a quorum and to transact business at a stockholders' meeting. The
Common Stock has no preemptive, subscription or conversion rights and is not
redeemable by the Company.

PREFERRED STOCK

The Company is authorized to issue 375,000 shares of Preferred Stock, par
value $1.00 per share. The Company currently has 3,450 shares of Series A
Preferred Stock outstanding. The Preferred Stock may be issued by resolutions of
the Company's Board of Directors from time to time without any action of the
stockholders. Such resolutions may authorize issuances of such Preferred Stock
in one or more series and may fix and determine dividend and liquidation
preferences, voting rights, conversion privileges, redemption terms and other
privileges and rights of the shares of each authorized series. The Company has
no present intention to issue any additional shares of its Preferred Stock for
any purpose. While the Company includes such Preferred Stock in its
capitalization in order to enhance its financial flexibility, such Preferred
Stock could possibly be used by the Company as a means to preserve control by
present management in the event of a potential hostile takeover of the Company.
In addition, the issuance of large blocks of Preferred Stock could possibly have
a dilutive effect with respect to the existing holders of Common Stock of the
Company.

The Series A Preferred Stock was established by the Board of Directors
January 1984. Each share of Series A Preferred Stock is immediately convertible
into 4.26 shares of Common Stock. Dividends on the preferred stock are
cumulative, have priority to the Common Stock and are payable in either cash or
Common Stock, at the option of the Company. The Company anticipates approval by
its Board of Directors of a preferred stock dividend during the third fiscal
quarter of 1995.

The Series A Preferred Stock has voting rights only if dividends are in
arrears for five annual dividends. Upon such occurrence, the voting would be
limited to the election of two directors. Voting rights terminate upon payment
of the cumulative dividends. The Series A Preferred Stock is redeemable at the
option of the Company at any time after expiration of ten consecutive business
days during which the bid or last sale price for the Common Stock is $6.00 per
share or higher. There is no mandatory redemption or sinking fund obligation
with respect to the preferred stock.

Owners of the Series A Preferred Stock of which there are eight record
holders, will be entitled to receive $10.00 per share (plus accrued and unpaid
dividends) before any distribution or payment is made to holders of the Common
Stock or other stock of the Company junior to the Series A Preferred Stock upon
liquidation, dissolution or winding up of the Company. If in any such event the
assets of the Company distributable among the holders of Series A Preferred
Stock or any stock of the Company ranking on a par with the Series A Preferred
Stock upon liquidation, dissolution or winding up are insufficient to permit
such payment, the holders of the Series A Preferred Stock and of such other
stock will be entitled to ratable distribution of the available assets in
accordance with the respective amounts that would be payable on such shares if
all amounts payable thereon were paid in full.

The resale of the Common Stock issuable upon conversion of the Series A
Preferred Stock is included as part of the Registration Statement of which this
Prospectus is a part.

53
<PAGE> 54

CONVERTIBLE DEBENTURES

In November 1993, the Company issued $200,000 principal amount of its
8 1/2% three-year convertible debentures. These debentures were converted into
666,668 shares of Common Stock of the Company at a conversion price of $.30 per
share on October 31, 1994. These shares are included in the Registration
Statement of which this prospectus is a part.

COMMON STOCK PURCHASE WARRANTS

In connection with the completion of the Company's $3.5 private placement
offering in August 1994, the Company issued to the placement agent and its
designees Common Stock Purchase Warrants to purchase 765,650 shares of Common
Stock. These warrants are exercisable at $.52 per share on/or prior to August
15, 1999. The shares of Common Stock underlying these warrants are included in
the Registration Statement of which this Prospectus is a part.

In January 1994, the Company sold 1,000,000 Common Stock purchase warrants
to Northlea Partners, Ltd. for $20,000, exercisable at $.30 per share on or
prior to January 6, 1999. The Company repurchased warrants to acquire 584,160
shares of Common Stock at the time of the termination of the Management
Consulting Agreement with Northlea Partners, Ltd. in July 1994, leaving 415,840
warrants, all of which are currently exercisable. In March 1995, the Company
issued 64,500 Common Stock purchase warrants to Mr. Moty Hermon and designees in
consideration for financial consulting services to be undertaken on behalf of
the Company. The warrants are for a five year term and are exercisable currently
at $.60 per share. The shares underlying these warrants are included in the
Registration Statement of which this Prospectus is a part.

OVER-THE-COUNTER MARKET

The Company's Common Stock is traded on the OTC Bulletin Board under the
symbol "VRGN." The Company intends to apply for inclusion of its Common Stock on
the NASDAQ System at such time as the price of the Company's Common Stock
satisfies NASDAQ minimum bid requirements of $3.00 per share. If for any reason
the Common Stock is not accepted for inclusion on the NASDAQ System, then in
such case the Company's Common Stock would be expected to continue to be traded
in the over-the-counter markets through the "pink sheets" or the NASD's OTC
Bulletin Board. In the event the Common Stock were not included in the NASDAQ
System, the Company's Common Stock would be covered by a Securities and Exchange
Commission rule that imposes additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally institutions with assets in excess
of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouse). For
transactions covered by the rule, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. Consequently, the rule may
affect the ability of broker-dealers to sell the Company's securities and also
may affect the ability of purchasers in this offering to sell their shares in
the secondary market. The ability of the Company to secure a symbol on the
NASDAQ System does not imply that a meaningful trading market in its Common
Stock will ever develop.

TRANSFER AGENT

The Transfer Agent for the shares of Common Stock is Continental Stock
Transfer & Trust Company, Two Broadway, New York, New York 10004.

CERTAIN MARKET INFORMATION

As of June 30, 1995, 35,355,532 shares of the Company's Common Stock are
outstanding of which 24,541,053 shares will be "restricted securities," as such
term is defined under the Securities Act of 1933, exclusive of the Common Stock
to be sold pursuant to the Registration Statement of which this Prospectus is a
part.

54
<PAGE> 55

In general, Rule 144 (as presently in effect), promulgated under the Act,
permits a stockholder of the Company who has beneficially owned restricted
shares of Common Stock for at least two years to sell without registration,
within any three-month period, such number of shares not exceeding the greater
of 1% of the then outstanding shares of Common Stock or, if the Common Stock is
quoted on NASDAQ, the average weekly trading volume over a defined period of
time, assuming compliance by the Company with certain reporting requirements of
Rule 144. Furthermore, if the restricted shares of Common Stock are held for at
least three years by a person not affiliated with the Company (in general, a
person who is not an executive officer, director or principal stockholder of the
Company during the three-month period prior to resale), such restricted shares
can be sold without any volume limitation. Any sales of shares by stockholders
pursuant to Rule 144 may have a depressive effect on the price of the Company's
Common Stock.

LEGAL MATTERS

Legal matters in connection with the securities being offered hereby will
be passed upon for the Company by Atlas, Pearlman & Trop, P.A., 3200 North
Military Trail, Suite 205, Boca Raton, Florida 33431.

EXPERTS

The consolidated financial statements of Viragen, Inc. at June 30, 1994 and
for the year ended June 30, 1994, six months ended June 30, 1993 and year ended
December 31, 1992 appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent certified public accountants, as
set forth in their report thereon appearing elsewhere herein and in the
Registration Statement, and are included in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission, 450
Fifth Street, Washington, D.C., a Registration Statement on Form SB-2 under the
Securities Act of 1933 with respect to the securities offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits thereto. For further information about the Company
and the securities offered hereby, reference is made to the Registration
Statement and to the exhibits filed as a part thereof. The statements contained
in this Prospectus as to the contents of any contract or other document
identified as exhibits in this Prospectus are not necessarily complete, and in
each instance, reference is made to a copy of such contract or document filed as
an exhibit to the Registration Statement. The Registration Statement, including
exhibits, may be inspected without charge at the principal reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and copies of all or any part thereof may be obtained upon payment of fees
prescribed by the Commission from the Public Reference Section of the Commission
at its principal office in Washington, D.C. set forth above.

55
<PAGE> 56

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 57

FORM SB-2 -- ITEM 22

VIRAGEN, INC. AND SUBSIDIARY
LIST OF FINANCIAL STATEMENTS

The following consolidated financial statements of Viragen, Inc. and
subsidiary are included:

<TABLE>
<S> <C>
Consolidated balance sheets -- March 31, 1995 (unaudited) and June 30, 1994............ F-3
Consolidated statements of operations -- Nine months ended March 31, 1995 and 1994
(unaudited), year ended June 30, 1994, six months ended June 30, 1993 and year ended
December 31, 1992.................................................................... F-4
Consolidated statements of stockholders' equity (deficit) -- Nine months ended March
31, 1995 (unaudited), year ended June 30, 1994, six months ended June 30, 1993 and
year ended December 31, 1992......................................................... F-6
Consolidated statement of cash flows -- Nine months ended March 31, 1995 and 1994
(unaudited), year ended June 30, 1994, six months ended June 30, 1993, and year ended
December 31, 1992.................................................................... F-7
Notes to consolidated financial statements -- March 31, 1995 (unaudited) and June 30,
1994................................................................................. F-9
</TABLE>

F-1
<PAGE> 58

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Shareholders and Board of Directors
Viragen, Inc.

We have audited the accompanying consolidated balance sheet of Viragen,
Inc. and subsidiary as of June 30, 1994 and the related consolidated statements
of operations, stockholders' equity (deficit), and cash flows for the year ended
June 30, 1994, six months ended June 30, 1993 and year ended December 31, 1992.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Viragen, Inc. and subsidiary at June 30, 1994 and the consolidated results of
their operations and their cash flows for the year ended June 30, 1994, six
months ended June 30, 1993 and year ended December 31, 1992, in conformity with
generally accepted accounting principles.

ERNST & YOUNG LLP

October 7, 1994
Miami, Florida

F-2
<PAGE> 59

<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
VIRAGEN, INC. AND SUBSIDIARY

MARCH 31, JUNE 30,
1995 1994
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................................. $ 2,548,646 $ 879,926
Accounts receivable, less allowance of $40,000 at March 31, 1995 and
$15,000 at June 30, 1994................................................ 68,515 22,785
Subscriptions receivable from private placement........................... 102,500
Inventory................................................................. 291,328 766,471
Prepaid expenses.......................................................... 75,673 36,189
Other current assets...................................................... 8,932 9,653
------------ ------------
TOTAL CURRENT ASSETS............................................... 2,993,094 1,817,524
NOTES RECEIVABLE, less allowance of $15,600 at March 31, 1995 and $5,600 at
June 30, 1994............................................................. 90,672 74,189
PROPERTY, PLANT AND EQUIPMENT
Land, building and improvements........................................... 1,184,629 1,170,855
Equipment and furniture................................................... 1,269,285 1,049,072
------------ ------------
2,453,914 2,219,927
Less accumulated depreciation............................................... (1,475,671) (1,377,454)
------------ ------------
978,243 842,473
DEPOSITS AND OTHER ASSETS................................................... 9,021 10,308
------------ ------------
$ 4,071,030 $ 2,744,494
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.......................................................... $ 161,950 $ 420,049
Current portion of amounts payable to Medicore, Inc. ..................... 31,592 52,153
Accrued expenses and other liabilities.................................... 168,167 520,723
Current portion of notes payable.......................................... 30,000 30,000
------------ ------------
TOTAL CURRENT LIABILITIES.......................................... 391,709 1,022,925
CONVERTIBLE DEBENTURES PAYABLE.............................................. 200,000
MORTGAGE NOTE PAYABLE, less current portion................................. 460,939 483,439
AMOUNTS PAYABLE TO MEDICORE, INC., less current portion..................... 476,435 492,537
STOCKHOLDERS' EQUITY
Convertible 10% Series A cumulative preferred stock, $1.00 par value.
Authorized 375,000 shares; issued and outstanding 3,450 shares at March
31, 1995 and June 30, 1994. Liquidation preference value: $10 per share,
aggregating $34,500 at March 31, 1995 and June 30, 1994. ............... 3,450 3,450
Common stock, $.01 par value. Authorized 50,000,000 shares; issued and
outstanding 35,355,532 shares at March 31, 1995 and 20,218,197 shares at
June 30 1994. .......................................................... 353,555 202,182
Capital in excess of par value............................................ 18,514,202 12,698,723
Common stock subscribed................................................... 1,126,250
Retained earnings (deficit)............................................... (15,803,010) (13,158,762)
Notes due from officers................................................... (326,250) (326,250)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY......................................... 2,741,947 545,593
------------ ------------
$ 4,071,030 $ 2,744,494
============ ============
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE> 60

CONSOLIDATED STATEMENTS OF OPERATIONS

VIRAGEN, INC. AND SUBSIDIARY

<TABLE>
<CAPTION>
NINE MONTHS
ENDED SIX MONTHS
MARCH 31, YEAR ENDED ENDED
--------------------------- JUNE 30, JUNE 30,
1995 1994 1994 1993
----------- ----------- ----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
INCOME
Revenues.............................. $ 454,902 $ 354,050 $ 624,814
Interest and other income............. 89,400 58,428 51,807 $ 53,562
----------- ----------- ----------- ----------
544,302 412,478 676,621 53,562
COST AND EXPENSES
Cost of goods sold.................... 268,566 144,178 322,262
Inventory valuation adjustment........ 788,000
Depreciation and amortization......... 60,503 35,371 47,257 39,644
Research and development costs........ 342,738 34,743 17,476 1,873
Bad debt expense...................... 35,000 20,600
Selling, general and administrative
expenses........................... 1,097,859 854,396 1,264,334 280,137
Contract termination fee.............. 525,000
Interest expense...................... 70,884 60,968 88,038 43,351
----------- ----------- ----------- ----------
3,188,550 1,129,656 1,759,967 365,005
----------- ----------- ----------- ----------
NET LOSS...................... (2,644,248) (717,178) (1,083,346) (311,443)
Deduct required dividends on convertible
preferred stock....................... 2,588 2,799 3,450 1,835
----------- ----------- ----------- ----------
LOSS ATTRIBUTABLE TO COMMON STOCK....... $(2,646,836) $ (719,977) $(1,086,796) $ (313,278)
========== ========= ========== =========
LOSS PER COMMON SHARE,
after deduction for required dividends
on convertible preferred stock........ $ (.09) $ (.04) $ (.06) $ (.02)
========== ========= ========== =========
Weighted average shares outstanding..... 30,637,957 18,559,724 18,686,751 14,463,038
========== ========= ========== =========
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE> 61

CONSOLIDATED STATEMENT OF OPERATIONS

VIRAGEN, INC. AND SUBSIDIARY

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1992
------------
<S> <C>
INCOME
Revenues...................................................................... $ 41,274
Interest and other income..................................................... 10,551
51,825
COST AND EXPENSES
Cost of goods sold............................................................ 18,474
Depreciation and amortization................................................. 146,276
Research and development costs................................................ 342
Bad debt expense..............................................................
Selling, general and administrative expenses.................................. 364,034
Interest expense.............................................................. 85,853
------------
614,979
------------
NET LOSS.............................................................. (563,154)
------------
Deduct required dividends on convertible preferred stock........................ 9,545
------------
LOSS ATTRIBUTABLE TO COMMON STOCK............................................... $ (572,699)
============
LOSS PER COMMON SHARE, after deduction for required dividends on convertible
preferred stock............................................................... $ (.05)
============
Weighted average shares outstanding............................................. 11,478,914
============
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE> 62

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

VIRAGEN, INC. AND SUBSIDIARY

<TABLE>
<CAPTION>
CAPITAL IN RETAINED
PREFERRED EXCESS OF COMMON STOCK EARNINGS
STOCK COMMON STOCK PAR VALUE SUBSCRIBED (DEFICIT)
--------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1991............ $ 13,700 $110,337 $10,988,555 $ -- $(11,200,819)
Common stock issued to employees and
directors (797,400 shares) 7,974 55,818
Conversion of 10,000 preferred shares
into 42,600 common shares........... (10,000) 426 9,574
Net loss.............................. (563,154)
--------- ------------ ----------- ------------ ------------
Balance at December 31, 1992............ 3,700 118,737 11,053,947 (11,763,973)
Sale of common stock
(6,000,000 shares).................. 60,000 940,000
Net loss.............................. (311,443)
--------- ------------ ----------- ------------ ------------
Balance at June 30, 1993................ 3,700 178,737 11,993,947 (12,075,416)
Options granted to directors.......... 117,033
Conversion of note payable to
stockholder (260,130 shares)........ 2,601 75,437
Purchase of stock warrants............ 20,000
Purchase of stock by Cytoferon
(1,333,333 shares).................. 13,333 386,667
Stock purchase by officer
(750,000 shares).................... 7,500 217,500
Stock purchases by officer, director
and affiliate (375,000 shares)...... 112,500
Conversion of series A preferred
stock............................... (250) 11 239
Private placement of common stock
(2,534,375 shares).................. 1,013,750
Private placement issuance costs...... (112,100)
Net loss.............................. (1,083,346)
--------- ------------ ----------- ------------ ------------
Balance at June 30, 1994................ 3,450 202,182 12,698,723 1,126,250 (13,158,762)
Repurchase of warrants................ (14,604)
Conversions of debentures............. 6,666 193,334
Purchase of stock by officers and
affiliates.......................... 3,750 108,750 (112,500 )
Shares to Cytoferon from modification
of agreement........................ 17,500 507,500
Private placement #1 of common
stock............................... 89,190 3,478,410 (1,013,750 )
Private placement #1 issuance costs... (382,633)
Private placement #2 of common
stock............................... 34,267 2,021,733
Private placement #2 issuance costs... (77,096)
Registration of Form SB-2............. (19,915)
Net loss.............................. (2,644,248)
--------- ------------ ----------- ------------ ------------
Balance at March 31, 1995 (unaudited)... $ 3,450 $353,555 $18,514,202 $ -0- $(15,803,010)
========= ============== ============ ============== =============
</TABLE>

F-6
<PAGE> 63

CONSOLIDATED STATEMENTS OF CASH FLOWS

VIRAGEN, INC. AND SUBSIDIARY

NINE MONTHS SIX
ENDED MONTHS
MARCH 31, YEAR ENDED ENDED
------------------------- JUNE 30, JUNE 30,
1995 1994 1994 1993
----------- ----------- ----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss........................................................ $(2,644,248) $ (717,178) $(1,083,346) $ (311,443)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization................................. 98,217 35,371 47,257 43,311
Interest paid through stock issue............................. 11,438
Bad Debt Expense................................................ 35,000 20,600
Stock Options granted to directors.............................. 27,500
Net gain in Sale of Fixed Assets................................ (11,392)
Issuance of common stock to officers, employees and others.... 11,250
Compensation expense on stock options........................... 117,033
Increase (decrease) relating to operating activities from:
Escrow account................................................ 62,752 68,535
Accounts receivable........................................... (70,730) (79,923) (43,385) 204
Inventory..................................................... 475,143 (585,231) (676,345) (90,126)
Notes receivable.............................................. (26,483) (101,237)
Prepaid expenses and other current assets..................... (38,763) (46,269) (9,141)
Deferred expenses and other assets............................ 1,287 (2,375) (3,573) (1,785)
Accounts payable.............................................. (258,099) 56,520 224,792 32,697
Accounts payable to Medicore.................................. (20,561) (27,926) (19,523) 18,168
Accrued expenses and other liabilities........................ (352,556) 175,390 376,741 (5,452)
----------- ----------- ----------- ----------
Net cash used in operating activities..................... (2,276,793) (1,112,761) (1,049,763) (323,567)
INVESTING ACTIVITIES
Proceeds from sale of equipment................................. 45,992
Additions to property, plant and equipment, net................. (233,987) (34,627) (11,643) (42,547)
----------- ----------- ----------- ----------
Net cash provided by investing activities....................... (233,987) 11,365 (11,643) (42,547)
FINANCING ACTIVITIES
Payments on long-term debt...................................... (38,602) (25,000) (57,724) (15,000)
Payments to Medicore, Inc....................................... (82,202)
Proceeds from sale of common stock, net of related expenses..... 4,232,706 400,000 911,250 1,000,000
Contract termination fee paid in stock.......................... 525,000
Proceeds from sale of warrants.................................. 20,000 20,000
Repurchase of Warrants.......................................... (14,604)
Proceeds from sale of common stock to Cytoferon................. 400,000
Proceeds from issuance of convertible debentures................ 200,000 200,000
Proceeds from issuance of convertible debentures Advances from
Medicore...................................................... 74,034
Private Placement issuance costs................................ (112,100)
Advances from Medicore, Inc..................................... 22,427
Payments to Medicore, Inc....................................... (98,636)
----------- ----------- ----------- ----------
Net cash provided by financing activities................. 4,704,500 570,398 1,361,426 925,225
----------- ----------- ----------- ----------
Increase (decrease) in cash....................................... 1,668,720 (530,998) 300,020 559,111
Cash and cash equivalents at beginning of period.................. 879,926 579,906 579,906 20,795
----------- ----------- ----------- ----------
Cash and cash equivalents at end of period........................ $ 2,548,646 $ 48,908 $ 879,926 $ 579,906
=========== =========== =========== ==========
</TABLE>

SUPPLEMENTAL CASH FLOW INFORMATION:

During the nine months ended March 31, 1995 and 1994 (unaudited), year
ended June 30, 1994 and six months ended June 30, 1993, the Company had the
following noncash financing activity:

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
MARCH 31,
------------------
1995 1994 1994 1993
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Issuance of common stock to directors and officers........................... $326,250
Issuance of common stock purchase warrants to directors and officers......... $123,750
Issuance of common stock for convertible debentures.......................... $200,000
Issuance of common stock to stockholder in payment of note payable........... $66,600 66,600 78,039
Stock subscriptions receivable............................................... 102,500
-------- ------- -------- --------
Interest paid................................................................ $ 79,528 $56,939 $ 86,369 $ 39,998
======== ======= ======== ========
</TABLE>

See notes to consolidated financial statements.

F-7
<PAGE> 64

CONSOLIDATED STATEMENT OF CASH FLOWS

VIRAGEN, INC. AND SUBSIDIARY

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER
31,
1992
----------
<S> <C>
OPERATING ACTIVITIES
Net loss.................................................................... $(563,154)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization............................................ 146,276
Interest paid through stock issue
Bad Debt Expense
Stock Options granted to directors, issuance of common stock to officers,
employees and others.................................................... 63,792
Compensation expense on stock options
Write off of unusable equipment.......................................... 9,383
Net gain on sale of fixed assets......................................... (1,648)
Increase (decrease) relating to operating activities from:
Escrow account...................................................... (68,535)
Accounts receivable................................................. 12,014
Inventory........................................................... 19,476
Notes receivable....................................................
Prepaid expenses and other current assets........................... 2,133
Deferred expenses and other assets....................................... 3,475
Accounts payable....................................................... 23,588
Accounts payable to Medicore........................................... 37,423
Accrued expenses and other liabilities................................... 23,876
----------
Net cash used in operating activities.................................. (291,901)
INVESTING ACTIVITIES
Proceeds from sale of equipment............................................. 5,762
Additions to property, plant and equipment, net............................. (20,156)
----------
Net cash provided by investing activities................................ (14,394)
FINANCING ACTIVITIES
Payments on long-term debt.................................................. (40,516)
Payments on note payable to and advances from stockholders.................. (3,000)
Advances from Medicore, Inc................................................. 300,946
Proceeds from notes payable to and advances from stockholders............... 69,600
----------
Net cash provided by financing activities.............................. 327,030
----------
Increase in cash.............................................................. 20,735
Cash and cash equivalents at beginning of period.............................. 60
----------
Cash and cash equivalents at end of period.................................... $ 20,795
==========
</TABLE>

SUPPLEMENTAL CASH FLOW INFORMATION:

During year end December 31, 1992, the company had the following noncash
finance activities:

<TABLE>
<S> <C>
Issuance of common stock to directors.................................. $63,792
Interest paid.......................................................... $48,319
=======
</TABLE>

F-8
<PAGE> 65

VIRAGEN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995 (UNAUDITED) AND JUNE 30, 1994

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Consolidation: Viragen, Inc. and subsidiary have been
engaged in the research, development and manufacture of certain immunological
products for commercial application. The consolidated financial statements
include the accounts of Viragen, Inc. and its wholly-owned subsidiary,
Vira-Tech, Inc. All material intercompany accounts and transactions have been
eliminated in consolidation.

Change in Fiscal Year End: The Company has changed its year end from
December 31 to June 30 effective January 1, 1993. Accordingly, the accompanying
financial statements include financial statements for the year ended June 30,
1994, the six month transition period from January 1 through June 30, 1993, the
nine months ended March 31, 1995 and 1994, and year ended December 31, 1992.

Inventory: The Company has capitalized the human leukocyte interferon
manufactured in its laboratories at the lower of average cost or market. The
timing of the realization of the interferon inventory is dependent upon future
events. In July 1995, as part of an ongoing negotiation and determination by
management to focus efforts on obtaining regulatory approvals, the Company has
determined to discontinue new patient enrollments under the State of Florida 499
Program. Accordingly, the Company recorded as write-down of its interferon
inventory, effective December, 1994, of $788,000.

<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1995 1994
--------- --------
<S> <C> <C>
Supplies............................................................... $ 5,000
Work in Process........................................................ 99,864
Finished goods......................................................... $ 291,328 661,607
--------- --------
$ 291,328 $766,471
======== ========
</TABLE>

Property, Plant and Equipment: Property, plant and equipment is stated at
the lower of cost or net realizable value. Depreciation was computed using the
straight-line method over the estimated useful life for financial reporting
purposes and using accelerated methods for income tax purposes.

Accounting Change: Effective in January 1, 1993, the Company changed its
method of accounting for income taxes and implemented Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". This change had no
effect on results of operations or financial position as presented in the
accompanying financial statements. See NOTE E to "Notes to Consolidated
Financial Statements".

Loss Per Share: Loss per share has been computed based on the weighted
average number of shares outstanding during each period. The effect of warrants
and stock options (common stock equivalents) are antidilutive. Fully diluted
loss per share data, which includes the assumed conversion of the convertible
preferred stock, has not been presented because it was not dilutive.

Interim Adjustments: The financial summaries for the nine months ended
March 31, 1995 and March 31, 1994 are unaudited and include, in the opinion of
management of the Company all adjustments, consisting of normal recurring
accruals, considered necessary for a fair presentation of the financial position
and the results of operations for these periods. Operating results for the nine
months ended March 31, 1995 are not necessarily indicative of the results that
may be expected for the entire year ending June 30, 1995.

While the Company believes that the disclosures presented are adequate to
make the information not misleading, it is suggested that Financial Statements
for the nine months ended March 31, 1995 be read in conjunction with the
financial statements and notes included in the Company's annual report on Form
10-K for the year ended June 30, 1994.

F-9
<PAGE> 66

VIRAGEN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE B -- CAPITAL STOCK

In August 1994, the Company concluded a Private Placement of its common
stock which concluded subsequent to year end with the issuance of 8,919,000
shares at $.40 per share. At June 30, 1994, 2,534,375 shares had been recorded
as subscribed. In connection with this offering, the Company has issued 765,650
common stock purchase warrants entitling the holder to purchase one share of
common stock at $.52 per share for a period of five years from date of issuance.
Subscriptions receivable of $102,500 at June 30, 1994 related to this private
placement were paid on July 16, 1994.

During fiscal 1994, Cytoferon Corporation purchased 1,333,333 shares of
common stock at $.30 per share under the terms of an additional stock purchase
agreement. Also during the period, the Company entered into stock purchase and
option agreements with officers and directors totaling 2,250,000 shares
obtainable at $.30 per share, of which 1,125,000 shares were immediately
exercisable and 1,125,000 shares were subject to certain performance criteria.
Subsequent to year end, the option related performance criteria were met and the
remaining 1,125,000 options became exercisable. During the year ended June 30,
1994, $117,000 was charged to operations upon the issuance of the officer and
director options.

In April 1994, an officer purchased 750,000 shares of common stock at $.30
per share, in accordance with the provisions of his employment agreement,
$7,500, the par value of the stock, was treated as compensation expense and a
note receivable was recorded on the remaining balance of $217,500.

In June 1994, two officers and an affiliate each purchased 125,000 shares
of common stock at $.30 per share. $3,750 the par value of the stock, was
treated as compensation expense and a note receivable from each
individual/entity was recorded on the remaining balance of $36,250.

In November 1994, the Company commenced a second Private Placement solely
to accredited investors to raise through the sale of Common Stock at $.60 per
share, a maximum of $3,000,000. This offering was completed on December 31, 1994
with the Company having realized gross proceeds of $2,056,000 upon the issuance
of 3,426,667 shares. The net proceeds of this offering of approximately
$1,980,000 are intended to be utilized for the establishment of a research and
manufacturing facility in Europe during fiscal 1995 and for general working
capital purposes. Subject to receipt of additional funding to conduct
European-based clinical trials, it is the Company's intention to commence
European clinical trails and seek the necessary approvals for the sale of its
Alpha Leukoferon(TM) product in Europe.

In December 1993, a stockholder and former director converted a convertible
promissory note payable of $66,600 with related accrued interest of $11,439 into
260,130 shares of common stock.

The Company had outstanding 1,190,875 Class A common stock purchase
warrants exercisable at $1.63 per share, 600,000 Class B common stock purchase
warrants exercisable at $2.93 per share, and 3,029,270 Class C common stock
purchase warrants exercisable at $2.08 per share. These warrants expired on
their terms March 31, 1995 with no options being exercised.

There are 3,450 shares of 10% Cumulative, Convertible Series A preferred
stock of the Company outstanding at March 31, 1995 and June 30, 1994. Each share
of preferred stock provides for a 10% cumulative dividend, payable at the option
of the Company, in either cash or common stock and is convertible into 4.26
shares of common stock.

In 1994 and 1992, 250 shares and 10,000 shares of the convertible 10%
series A cumulative preferred stock were converted into 1,065 and 42,600 shares
respectively, of the Company's common stock.

On June 17, 1992 the Company issued 797,400 shares of common stock to
officers and directors of the Company. The fair value of the shares on the date
of grant $(63,792) was charged to selling, general and administrative expenses.

F-10
<PAGE> 67

VIRAGEN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The holders of the preferred stock are not entitled to vote unless
dividends are in arrears for five annual dividend periods. The Company has the
right to call the preferred stock for redemption, in whole or in part, if the
closing bid for common stock is $6.00 per share or higher for a period of ten
consecutive business days ("Redemption Trigger Date").

The preferred stock is redeemable at $11.00 per share for a period of five
years from the Redemption Trigger Date, and thereafter at $10.00 per share.
Shares of the Company's common stock reserved at March 31, 1995 for possible
future issuance are as follows:

<TABLE>
<S> <C>
Warrants -- former consultant............................................. 480,340
Convertible preferred stock............................................... 14,697
Option plans.............................................................. 2,510,000
Directors options......................................................... 650,000
Warrants -- private placement............................................. 765,650
---------
4,420,687
=========
</TABLE>

In October 1994, the $200,000 of Convertible Debentures outstanding at
September 30 and June 30, 1994 were converted into 666,668 shares of common
stock.

The Company has the authority to issue 1,000,000 shares of preferred stock,
of which 375,000 shares have been designated as Series A. No other classes of
preferred stock have been designated.

In a special meeting held on May 11, 1993, shareholders of the Company
approved an amendment to the certificate of incorporation to increase the
Company's authorized capital to provide sufficient shares for Cytoferon's
investment; therefore the authorized shares of the Company's common stock were
increased from 20,000,000, $.01 par value, to 50,000,000, $.01 par value.

NOTE C -- TRANSACTIONS WITH MEDICORE, INC.

In August 1993, the Company renegotiated its promissory note and second
mortgage with Medicore, Inc. for a total of $429,400. The second mortgage is
secured by the Company's land, building, equipment, and accounts receivable. The
note is being amortized over a 20 year term in equal installments with a balloon
payment for the remaining balance due on August 1, 1996. The note incurs
interest at 1% over prime. Principal payments on the outstanding balance at June
30, 1994 of $406,140 are as follows: $21,470 in 1995, $21,470 in 1996, and
$363,201 in 1997. Interest incurred during 1994 and 1993 totaled $30,832 and
$21,830, respectively, of which $2,792 and $56,864 remained unpaid at June 30,
1994 and 1993, respectively.

In May 1993, the Company renegotiated its royalty agreement with Medicore.
Under the new terms, the Company will pay Medicore 5% of sales to $7,000,000, 4%
of the next $10,000,000, and 3% on the next $55,000,000 to a maximum of
$2,400,000 in royalty payments. Royalties incurred in prior years under the
previous agreement, totaling $108,000 are included in amounts payable to
Medicore, Inc. This amount will be paid as the final payment under the
$2,400,000 total royalty agreement. Royalties expense incurred in 1994 totaled
$28,000.

Medicore leased office space from the Company for a total of $15,655 for
the nine months ended March 31, 1995 and, $20,874 and $10,434 during 1994 and
1993, respectively.

F-11
<PAGE> 68

VIRAGEN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE D -- MORTGAGE AND NOTES PAYABLE

Mortgage and notes payable are as follows:

<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1995 1994
----------- --------
(UNAUDITED)
<S> <C> <C>
Mortgage note secured by land, building and equipment with
a net book value of $878,000 at June 30, 1994.
Monthly principal payments of $2,500 plus interest at
prime plus 2% with the unpaid balance due August 1,
1996..................................................... $ 490,939 $513,439
--------- --------
Less current portion....................................... 30,000 30,000
--------- --------
$ 460,939 $483,439
========= ========
</TABLE>

The prime rate was 7.25% as of June 30, 1994 and 9.00% at March 31, 1995.
Scheduled maturities of mortgage and notes payable outstanding at March 31, 1995
are: 1995 -- $30,000; 1996 -- $460,939.

At June 30, 1994 the Company was in default of certain covenants on its
mortgage note. The lender waived these defaults and waived compliance with these
covenants through July 1, 1995.

Medicore has guaranteed the principal and interest on the mortgage and
expenses and fees upon any default. Medicore has the right to cure defaults and
has an Acquisition Agreement with the Company giving Medicore the right to
assume the mortgage.

Interest payments on debt totaled $79,528 and $56,939 for the nine months
ended March 31, 1995 and 1994 respectively; and $84,777 for the year ended June
30, 1994, and $39,998 for the six months ended June 30, 1993.

NOTE E -- INCOME TAXES

Effective January 1, 1993, the Company changed its method of accounting for
income taxes and implemented Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes." Statement 109 changes the method of
accounting for income taxes from the deferred to the liability method. Under the
liability method, deferred income taxes at the end of each period are determined
by applying enacted tax rates applicable, to future periods in which the taxes
are expected to be paid or recovered to differences between financial accounting
and tax bases of assets.

Under the deferred method, deferred income taxes are recognized using the
tax rates in effect when the tax is first recorded and are not adjusted for
subsequent changes in tax rates until paid or recovered.

F-12
<PAGE> 69

VIRAGEN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of June 30, 1994 are as
follows:

<TABLE>
<CAPTION>
JUNE 30,
1994
----------
<S> <C>
Deferred tax liabilities:
Tax over book depreciation............................................. $ 75,000
Other.................................................................. 10,000
Total deferred tax liabilities................................. 85,000
Deferred tax assets
Net operating loss carryforwards....................................... 3,349,000
Research and development credit........................................ 230,000
Investment tax credit.................................................. 40,000
Other.................................................................. 107,000
----------
Total deferred tax assets...................................... 3,726,000
Valuation allowance for deferred tax assets............................ 3,641,000
----------
85,000
----------
Net deferred tax assets........................................ $ -0-
=========
</TABLE>

NOTE F -- TRANSACTIONS WITH OTHER RELATED PARTIES

In November 1993, the Company issued $200,000 in 8 1/2%, three year
convertible debentures. The debentures, at the holders option are immediately
convertible into common stock of the Company at $.30 per share. These debentures
are held by a fund managed by a director of the Company. In October 1994, these
debentures were converted into 666,668 shares of common stock. These shares are
held by Fundamental Growth Partners, Ltd., Fundamental Associates, Ltd., Hedge
Fund Partners, Ltd. and Fundamental Resources, Ltd., which are investment funds
managed by William B. Saeger, a director of the Company.

In December 1993, the Company issued 260,130 shares of common stock to a
stockholder and former director in payment of a 10% convertible promissory note
in the amount of $66,600 and related accrued interest of $11,439. At June 30,
1994, the Company had outstanding a note payable in the amount of $25,000 to
this stockholder. The note with related interest was repaid in July 1994.

Legal fees of $38,118 during the year ended June 30, 1994 and $14,434
during the six months ended June 30, 1993 and $5,500 for the year ended December
31, 1992 were paid to the former secretary of the Company.

During the fourth quarter 1994, the Company made a series of short-term
borrowings from Cytoferon represented by notes payable bearing interest at 10%.
At June 30, 1994 such notes totalled $60,000 and were repaid in July 1994.

NOTE G -- AGREEMENT FOR SALE OF STOCK

On February 5, 1993, the Company entered into a Stock Agreement with
Cytoferon to purchase up to 11,640,000 shares of the Company's common stock for
consideration of $1,500,000 ("Maximum Investment"). By May 31, 1993, the
expiration of the investment period, the Company had received the Minimum
Purchase under the terms of the stock agreement, $1,000,000, in exchange for
6,000,000 shares of common stock at $.167 per share. This price reflects the
receipt, by Cytoferon, of a 20% bonus of common stock due upon having reached
the Minimum Purchase.

F-13
<PAGE> 70

VIRAGEN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On November 19, 1993, the Company entered into an Additional Stock Purchase
Agreement under which terms Cytoferon purchased an additional 1,333,333 common
shares at $.30 per share.

The funds invested enabled the Company to reinitiate production of its
interferon product, Alpha Leukoferon(TM), and to reinitiate the marketing of the
product through physicians specializing in the treatment of Multiple Sclerosis
and HIV/AIDS patients residing in the state of Florida.

Under the terms of the Stock Agreement, the Company had approved the
Management and Marketing Services Agreement ("MMS Agreement") subject to certain
modifications, which appointed Cytoferon as consultant to the Company relating
to production, administration, marketing and regulatory affairs for which
Cytoferon was to receive a consulting fee of $204,000 the first year and
$240,000 the next two years provided certain minimum sales requirements were
met. To the extent Cytoferon's investment in the Company was less than the
Maximum Investment, the consulting fee was reduced pro-rata. The MMS Agreement
also provided a 4% gross sales commission for exclusive distributorship for
non-FDA approved products and non-exclusive marketing of FDA approved products,
none of which the Company presently has. The MMS Agreement further provides for
the Company to pay Cytoferon 50% fees for foreign licensing, franchising and
transfer of technology plus 20% royalties the Company may receive from foreign
agreements resulting from Cytoferon's efforts.

All such fees and commissions were subject to the Company generating
certain minimum sales under the MMS Agreement. The Company incurred management
fees of $140,000 and $120,133, and sales commission expenses of $12,067 and
$13,272 for the nine months ended March 31, 1995 and 1994, respectively.

In August 1994, the Board of Directors of the Company voted to terminate
the MMS Agreement with Cytoferon, subject to receipt of a fairness opinion, and
issue the 1,750,000 shares contingently issuable under the Additional Stock
Purchase Agreement.

The Company's management believes that it is in the long-term best interest
of the Company to unify and consolidate management functions and efforts and
eliminate conflicts that may arise by virtue of minimum sales requirements that
could be inconsistent with the Company's plans to introduce new production
technologies and refinement of related protocols. Accordingly, the Company
executed a Subsequent Agreement which, subject to receipt of a fairness opinion
received in December 1994, terminated the MMS Agreement and accelerated the
issuance of the 1,750,000 shares contingently issuable under the November 1993
Additional Stock Agreement concurrent with the cancellation of the MMS Agreement
and related contractual obligations. As a result of this transaction, the
Company recognized a contract termination fee expense of $525,000 in August,
1994.

NOTE H -- RESEARCH AND DEVELOPMENT AGREEMENTS

In 1983, the Company contracted with Viragen Research Associates Limited
Partnership ("Limited Partnership") for the Company to perform the research and
development with respect to two therapeutic products for the treatment of herpes
virus infections. The Company received $456,500 from the Limited Partnership and
assigned all of its patent rights to the processes and products to the Limited
Partnership for $5,000 and an exclusive worldwide licensing agreement. The
Limited Partnership is to receive 5% of the gross revenues of such products
until it has received approximately $900,000 and thereafter it is to receive 2%
of the gross revenues of such products. Approval to sell these products
commercially has not yet been received.

NOTE I -- SUBSEQUENT EVENTS

In August 1994, the Company completed a $3.5 million Private Placement
offering of unregistered common stock at $.40 per share. In connection with this
Private Placement, an Agreement was executed with Laidlaw Equities, Inc.
("Laidlaw") utilizing that firm as placement agent. This Agreement provided for

F-14
<PAGE> 71

VIRAGEN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Laidlaw to receive a 9.25% commission on capital raised and reimbursement of
Laidlaw's out-of-pocket expenses not to exceed $65,000.

The Agreement further provided for the issuance of five year common stock
purchase warrants with an exercise price of $.52 per share equal to ten percent
(10%) of the number of shares issued during the Offering. The Company agreed to
file a Registration Statement within six (6) months from the closing date
registering the common shares sold pursuant to the Offering and would be subject
to a substantial dilutive penalty if such Registration did not occur on a timely
basis. The Company also agreed to use its best efforts to file a Registration
Statement for the underwriter warrants within one year of such warrants
issuance.

Net proceeds of the Private Placement of approximately $3,150,000 are being
utilized for the acquisition of laboratory production equipment, purchase of a
company-wide computer system, development of FDA study protocols, employment of
additional operating and administrative personnel and working capital.

In May 1995, the Company forgave notes receivable due from officers,
directors, and an affiliate related to the purchase of the Company's common
stock totaling $326,250. Repayment of the note was waived in lieu of bonuses for
the 1995 fiscal year, following unanimous approval of the independent members of
the Board of Directors.

F-15
<PAGE> 72

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

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THIS OFFERING, AND ANY INFORMATION OR REPRESENTATIONS NOT CONTAINED HEREIN MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES, OR
ANY OFFER TO OR SOLICITATION OF ANY PERSON IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT INFORMATION HEREIN IS CORRECT AT ANY TIME SUBSEQUENT TO THE
DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
High Risk Factors..................... 6
Price Range of Common Stock........... 11
Dividend Policy....................... 11
Capitalization........................ 12
Use of Proceeds....................... 13
Selected Consolidated Financial
Data................................ 13
Management's Discussion and Analysis
of Financial Conditions and Results
of Operations....................... 15
Business.............................. 21
Management............................ 34
Clinical Advisory Committee........... 42
Principal Stockholders................ 44
Sales by Selling Security Holders..... 46
Description of Securities............. 52
Certain Market Information............ 54
Legal Matters......................... 55
Experts............................... 55
Additional Information................ 55
Financial Statements.................. F-1
</TABLE>

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

VIRAGEN, INC.

22,703,455 SHARES

COMMON STOCK
---------------------------

PROSPECTUS
---------------------------
AUGUST 14, 1995

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