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As Filed with the Securities and Exchange Commission on March 10, 1997.
Registration No. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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VIRAGEN, INC.
(Exact name of registrant as specified in its charter)
Delaware 59-2101668
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2343 West 76th Street
Hialeah, Florida 33016
(305) 557-6000
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(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
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Copies to:
Gerald Smith James Schneider, Esq.
Chairman of the Board Atlas, Pearlman, Trop & Borkson, P.A.
2343 West 76th Street Suite 1900
Hialeah, Florida 33016 200 East Las Olas Boulevard
(305) 557-6000 Fort Lauderdale, Florida 33301
(954) 763-1200
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(Name, address, including zip code,
and telephone number, including
area code, of agent for service)
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum
Title of Amount Offering Aggregate Amount of
Shares to be to be Price Per Offering Registration
Registered Registered Share (1) Price (1) Fee
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value per share reserved
for issuance upon
conversion of Series
D Preferred Stock 7,500,000(2) $3.00 $22,500,000 $6,819
Common Stock reserved
for issuance upon
exercise of Common
Stock Purchase
Warrants and Financing
Warrants(3) 475,000 $3.00 $ 1,425,000 $ 432
----------- ------
Total $23,925,000 $7,251
=========== ======
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee in accordance with Rule 457(c) under the Securities
Act of 1933, as amended (the "Securities Act"), based on the average of
the high and low sale price for the Common Stock, $.01 par value per
share (the "Common Stock") as reported on the Nasdaq National Market
("NASDAQ") at March 5, 1997.
(2) To be offered and sold by the Selling Security Holder upon conversion
of 15,000 outstanding shares of Convertible Preferred Stock, Series D
(the "Series D Preferred Stock"). The conversion price for the Series D
Preferred Stock (as represented by the stated value) is equal to the
lesser of (i) 18% off the average closing bid price of the Common Stock
for the five consecutive trading days ending one trading day prior to
the date of conversion as reported on NASDAQ by Bloomberg L.P.(the
"Average Market Price") but not less than $2.00, or (ii) $7.00. The
number of shares of Common Stock registered represents the maximum
number of shares issuable upon conversion based on a minimum conversion
price of $2.00.
(3) To be offered and sold by the Selling Security Holder upon any exercise
of Common Stock purchase warrants (the "Warrants") and warrants that
may be issued to the holder of the Series D Preferred Stock in the
event of certain financings undertaken by the Company (the "Financing
Warrants")
Pursuant to Rule 416 under the Securities Act of 1933, there are also
being registered such additional number of shares as may be issuable as a result
of the anti-dilution provisions of the Series D Preferred Stock.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
ii
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Subject to Completion, dated March 10, 1997
PROSPECTUS
7,975,000 Shares
VIRAGEN, INC.
COMMON STOCK, PAR VALUE $.01 PER SHARE
This Prospectus (the "Prospectus") relates to the offer and sale of up
to 7,975,000 shares of Common Stock, $.01 par value (the "Common Stock"), of
Viragen, Inc. (the "Company" or "Viragen") by P.R.I.F., L.P. (the "Selling
Security Holder"). Of the 7,975,000 shares of Common Stock offered hereby (the
"Shares"), (i) up to an aggregate of 7,500,000 Shares are issuable upon
conversion of 15,000 shares of the Company's Convertible Preferred Stock, Series
D (the "Series D Preferred Stock") held by the Selling Security Holder; (ii)
375,000 Shares are issuable upon exercise of Common Stock purchase warrants
presently exercisable at $6.00 per Share on or prior to June 30, 1998, but
subject to adjustment in the event the Company were to undertake certain
financings (the "Warrants"); and (iii) 100,000 Shares are issuable upon exercise
of additional Common Stock purchase warrants exercisable at prices equal to the
exercise price of the Warrants described in item (ii) above in the event the
Company were to undertake certain financings (the "Financing Warrants").
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
THE SECURITIES OFFERED HEREBY INVOLVE A SIGNIFICANT DEGREE OF RISK. SEE
"HIGH RISK FACTORS" COMMENCING ON PAGE 6
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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.
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The date of this Prospectus is March ___, 1997
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The conversion price for the Series D Preferred Stock is equal to the
lesser of (i) the average closing bid price of the Common Stock (as adjusted as
described herein), on NASDAQ as reported by Bloomberg L.P., for the five
consecutive trading days (the "Average Market Price") ending one day prior to
the date of each conversion but not less than $2.00, or (ii) the conversion
price of $7.00, as agreed to by the Selling Security Holder and the Company
pursuant to the Private Securities Subscription Agreement dated as of December
31, 1996 (the "Agreement") entered into by the parties. The Warrants and
Financing Warrants (if issued) are exercisable for an aggregate of 475,000
shares at an exercise price of $6.00 per share, subject to adjustment in the
event the Company undertakes certain financings. Accordingly, the actual number
of shares of Common Stock issued to the Selling Security Holders and sold hereby
will depend upon the Average Market Price of the Common Stock at the time of the
conversion of the Series D Preferred Stock (or the fixed conversion price of
$7.00 if lower). The conversion price may not be lower than $2.00 except under
limited circumstances as described under "Selling Security Holder."
The Company believes that the number of shares of Common Stock to which
this Prospectus relates should be the maximum number of shares of Common Stock
that are likely to be issued to the Selling Security Holders and sold hereby.
----------
The Selling Security Holder has advised the Company that it proposes to
sell the Shares, from time to time, publicly through broker-dealers acting as
agents for others, or in private sales. See "Selling Security Holder" and "Plan
of Distribution." The Company will not receive any of the proceeds from the sale
of the Shares offered hereby by the Selling Security Holder except upon any
exercise of the Warrants or the Financing Warrants.
The Company will pay all offering expenses for the offering, estimated
at approximately $20,000, including (i) the SEC registration fee ($7,251); (ii)
legal fees and expenses ($5,000); (iii) blue sky fees ($500); (iv) accounting
fees and expenses ($5,000); (v) printing expenses ($1,000); and (vi)
miscellaneous expenses ($1,249), but will not pay any discounts or commissions
incurred by the Selling Security Holder in connection with the sale of its
shares of Common Stock.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by the
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Company may be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511
and 7 World Trade Center, New York, New York 10048. Copies of such material may
be obtained from the Public Reference Section of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission also maintains a web site on the internet that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission at http://www.sec.gov.
This Prospectus, which constitutes part of a Registration Statement
filed by the Company with the Commission under the Securities Act of 1933, as
amended (the "Act"), omits certain information contained in the Registration
Statement in accordance with the rules and regulations of the Commission.
Reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Company and the
securities offered hereby.
3
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION.................................. 2
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE...... 5
HIGH RISK FACTORS...................................... 6
THE COMPANY............................................ 12
SELLING SECURITY HOLDER ............................... 14
PLAN OF DISTRIBUTION................................... 18
DESCRIPTION OF SECURITIES.............................. 19
LEGAL MATTERS.......................................... 24
EXPERTS................................................ 25
INDEMNIFICATION........................................ 25
</TABLE>
The Common Stock of the Company is traded in the over-the-counter
market, and prices are quoted in the Nasdaq National Market under the symbol
"VRGN." The last sale price of the Common Stock as reported by NASDAQ on March
5, 1997 was approximately $3.00 per share.
No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the offer
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
or the Selling Security Holder. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy the Shares offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. Neither the delivery of this Prospectus nor
any sale hereunder shall under any circumstances create any implication that
there has been no change in the affairs of the Company since the date hereof.
The Company will not receive any proceeds from the sale of Common Stock
for the account of the Selling Security Holder. The Company has informed the
Selling Security Holder that the anti- manipulative rules under the Exchange Act
of 1934, Rule 10b-6 under Regulation M may apply to their sales in the market
and has furnished the Selling Security Holder with a copy of these rules. The
Company has also informed the Selling Security Holder of the need for delivery
of copies of this Prospectus in connection with any sale of securities
registered hereunder.
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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 is subject to the informational requirements of the
Securities Exchange Act of 1934 and, in accordance therewith, files reports and
other information with the Securities and Exchange Commission.
The Company has previously and 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.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed with the Commission are incorporated
herein by reference:
(a) Annual Report of the Company on Form 10-K for the fiscal year ended
June 30, 1996 as amended by Form 10-K/A filed October 18, 1996 and Form 10-K/A-1
filed December 19, 1996.
(b) The Company's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1996 as amended by Form 10-Q/A filed December 19,
1996.
(c) The Company's Quarterly Report on Form 10-Q for the quarterly
period ended December 31, 1996.
(d) The Company's Current Report on Form 8-K dated June 7, 1996, as
amended by Form 8-K/A filed July 12, 1996 and Form 8-K/A-1 filed November 29,
1996.
(e) The Company's Current Report on Form 8-K dated February 14, 1997.
(f) The Company's Current Report on Form 8-K dated March 7, 1997.
(g) The description of the Company's Common Stock contained in a
registration statement filed under the Securities Exchange Act
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<PAGE> 8
of 1934, as amended, including any amendment or report filed for the purpose of
updating such description.
(h) All reports and documents filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act shall be deemed to be incorporated
by reference herein and to be a part hereof from the respective date of filing
of such documents.
Any statement incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document, which
also is or is deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any statement modified or superseded shall not be
deemed, except as so modified or superseded, to constitute part of this
Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of the Prospectus has been
delivered, on the written or oral request of any such person, a copy of any or
all of the documents referred to above which have been or may be incorporated by
reference in this Prospectus, other than exhibits to such documents. Written
requests for such copies should be directed to Corporate Secretary, Viragen,
Inc. at the Company's principal executive office, 2343 West 76th Street,
Hialeah, Florida 33016, Telephone (305) 557-6000.
HIGH RISK FACTORS
The securities offered hereby involve a high degree of risk.
Prospective investors, prior to making an investment decision, should carefully
consider the following risk factors:
HISTORY OF LOSSES AND RISKS OF NEWLY DEVELOPED BUSINESS
From its inception through December 31, 1996, the Company has incurred
operating losses. The net loss for the fiscal year ended June 30, 1996 was
$4,672,271 and for the six months ended December 31, 1996 was $2,043,800. At
December 31, 1996, the Company had an accumulated deficit of $24,330,912.
Although the Company has begun to expand its operations and has undertaken
financings 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 commercialization of its natural human leukocyte alpha interferon
product (the "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,
6
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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, including unforeseen expenses, organizational difficulties,
complications and delays, as well as other factors such as the possibility of
competition with larger companies.
LACK OF FDA AND EU APPROVAL; ADDITIONAL FUNDING NEEDED; RISK OF SOLE PRODUCT
The Product has not been approved by the FDA or EU for use in the
treatment of patients, and the Company may only presently distribute the Product
for its approved HIV/AIDS protocol pursuant to its Florida license under Florida
Statute Section 499.018. 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.
Commencing in December 1994, the Company received notifications from
the Florida Department of Health and Rehabilitative Services ("HRS") (i) to
postpone enrollment of new patients under Viragen's Florida Statute 499 Program
until such time as the Company provided certain administrative reports to HRS
and satisfied certain FDA inspection-related comments concerning the Company's
manufacturing processes and facilities; and (ii) that the Company demonstrate
that its previous production technology complies with FDA current Good
Manufacturing Practices ("cGMP"). As a result of such notifications, changes in
the Company's production technology which have resulted in the development of
Viragen's Omniferon(TM) product and determination by the Company to establish
new facilities in Scotland and elsewhere in the United States in proximity to
its current facilities, the Company entered into a settlement with HRS which
resulted in the discontinuation of Viragen's statutory 499 Program. There can be
no assurances that the Company's current production technology and planned new
facilities will comply with FDA mandated cGMP standards.
Additionally, the Product is the Company's sole product and until such
time as the Product achieves FDA and EU approval, the Company has no other
sources of revenues. To the extent that the Product is the Company's only
potential source of revenues, the failure to attain approval by the FDA and/or
the EU would
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eventually result in the Company having to discontinue its operations.
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 Multiple Sclerosis ("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.
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.
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.
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
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September 1993, President Clinton announced a series of legislative and
regulatory proposals aimed at reforming the health care system. Although 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 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. 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.
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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.
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 per occurrence and $2,000,000 in the aggregate, 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.
RELIANCE ON FOREIGN THIRD PARTY MANUFACTURER MAY DISRUPT OPERATIONS
Viragen (Scotland) Ltd. ("VSL"), a wholly-owned subsidiary of Viragen
(Europe) Ltd., a consolidated majority-owned subsidiary of the Company, has
entered into a License and Manufacturing Agreement with The Common Services
Agency of Scotland, an agency acting on behalf of the Scottish National Blood
Transfusion Service ("SNBTS"). Use of an offshore manufacturer will not provide
for fixed price U.S. denominated pricing, which could expose VSL to the risk of
fluctuations in exchange rates of foreign currencies. In addition, reliance on
such foreign manufacturer is subject to all the risks of dealing with a foreign
manufacturing facility including governmental regulations, tariffs, import and
export restrictions, transportation and taxes and local health and safety
regulations. Consummation of such foreign manufacturing arrangements could lead
to disruption of the operations of the Company, product and service
deficiencies, unanticipated and fluctuating expenses and revenues and sales and
marketing dislocations that are beyond the Company's ability to control, and
which may have a material adverse effect on the Company's business and
operations.
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, its Executive Vice President and Chief Financial Officer, Mr. Dennis W.
Healey, and its Executive Vice President, Mr. Charles F. Fistel. The Company has
entered into employment agreements with Messrs. Smith, Zeiger, Healey and
Fistel, which restrict competitive activities by them during the term of their
agreements and for a two-year period
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thereafter. Although the Company intends to apply for "key man" life insurance
on the lives of Messrs. Smith, Zeiger, Healey and Fistel 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.
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 on its Common Stock
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.
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 December 31, 1996, the net tangible book value of the
Company's Common Stock was approximately $0.55 per share.
POSSIBLE RESALES OF SECURITIES BY CURRENT STOCKHOLDERS AND DEPRESSIVE EFFECT ON
MARKET
As of December 31, 1996, there were 7,788,588 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 (the "Securities Act").
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.
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USE OF PREFERRED STOCK TO RESIST TAKEOVERS; POTENTIAL ADDITIONAL DILUTION
The Company's Certificate of Incorporation authorizes 1,000,000 shares
of Preferred Stock, of which at February 28, 1997, 2,650 shares of Series A
Preferred Stock, 13,864 shares of Series B Preferred Stock 5,000 shares of
Series C Preferred Stock, 15,000 of Series D Preferred Stock and 5,000 shares of
Series E Preferred Stock were 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 Directors from time to time without any
action of the stockholders. The Company anticipates issuing additional shares of
Preferred Stock as part of its financing program. 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. The Company has received a commitment for additional shares of
Preferred Stock, subject to market and other conditions, which while subject to
negotiation of the specific terms thereof, is likely to be comparable in part to
the shares of Series D Preferred Stock upon conversion of which the Shares
offered hereby will be issued.
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) and Omniferon(TM)
are the trade names for Viragen's Product in injectable form. The Company's
Product has not been approved by the United States Food and Drug Administration
("FDA") or the European Union ("EU"), and there can be no assurances that
approval of the Product will be obtained at any time in the future.
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<PAGE> 15
The Company intends to seek to obtain FDA and EU approvals for various
uses of its Omniferon 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 from the Florida Department of Health and
Rehabilitative Services 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 EU. The Company has assembled an advisory
committee consisting of scientists, medical researchers and clinicians to assist
the Company in its applications to the FDA and the EU.
The Company's majority owned subsidiary, Viragen (Europe) Ltd., acting
through its wholly-owned subsidiary Viragen (Scotland) Ltd., entered into a
License and Manufacturing Agreement with The Common Services Agency of Scotland
(the "Agency") an agent acting on behalf of the Scottish National Blood
Transfusion Service ("SNBTS"). Pursuant to such Licensing and Manufacturing
Agreement, SNBTS on behalf of VSL, will assist in the manufacture of VSL's
Omniferon product for exclusive distribution within the EU and non-exclusively
worldwide in return for certain royalties and preferential access to the Product
for Scottish Agency patients at preferential prices. The Agency has committed to
assist in the manufacture of Omniferon in sufficient scale to accommodate the EU
Clinical Trials and, subsequently, for limited commercial sales in amounts to be
agreed upon by the parties. The Agency will also work with the Company in
conducting studies relevant to Omniferon and cooperate with the Company to
enable it to comply with the laws and regulations of the EU in connection with
production, clinical trials and distribution of Omniferon.
In June 1996, the Company entered into a Letter of Intent with the
American Red Cross -- Biomedical Services Division. It is the Company's
intention to form a strategic alliance with the American Red Cross focusing on
joint research projects relating to the development of blood-derived products
and processes including the Company's Omniferon product in the United States.
The Company is currently negotiating the terms of the agreement establishing the
scope of the relationship and respective obligations of the parties.
Viragen's administrative office and research facilities are located at
2343 West 76th Street, Hialeah, Florida 33016 (Telephone No. (305) 557-6000;
Facsimile No. (305) 364-8158).
EXCEPT FOR HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS SET
FORTH IN THIS PROSPECTUS ARE FORWARD LOOKING AND INVOLVE A NUMBER OF RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
DESCRIBED FOR A VARIETY OF FACTORS. SUCH FACTORS COULD INCLUDE, BUT ARE NOT
LIMITED TO,
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<PAGE> 16
THOSE DISCUSSED IN "RISK FACTORS" AND "MANAGEMENT'S DISCUSSION AND ANALYSIS" IN
THE COMPANY'S FORM 10K-A-1 ANNUAL REPORT FILED FOR THE FISCAL YEAR ENDING JUNE
30, 1996, AS WELL AS THOSE DISCUSSED ELSEWHERE IN OTHER PUBLIC FILINGS MADE BY
THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION. FORWARD LOOKING
STATEMENTS INCLUDE THE COMPANY'S STATEMENTS REGARDING LIQUIDITY, ANTICIPATED
CASH NEEDS AND AVAILABILITY, AND ANTICIPATED EXPENSE LEVELS IN "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS"
INCLUDING EXPECTED PRODUCT CLINICAL TRIAL INTRODUCTIONS, EXPECTED RESEARCH AND
DEVELOPMENT EXPENDITURES, NEW FACILITY COMPLETION DATES AND RELATED ANTICIPATED
COSTS. ALL FORWARD LOOKING STATEMENTS INCLUDED IN THIS DOCUMENT ARE BASED ON
INFORMATION AVAILABLE TO THE COMPANY ON THE DATE HEREOF, AND THE COMPANY ASSUMES
NO OBLIGATION TO UPDATE ANY SUCH FORWARD LOOKING STATEMENTS. IT IS IMPORTANT TO
NOTE THAT THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE IN
SUCH FORWARD LOOKING STATEMENTS.
SELLING SECURITY HOLDER
PRIVATE SECURITIES SUBSCRIPTION AGREEMENT
The Selling Security Holder purchased the Series D Preferred Stock and
Warrants in a private placement transaction pursuant to a Private Securities
Subscription Agreement dated as of December 31, 1996. The stated value of the
Series D Preferred Stock is $1,000 per share. In addition, Warrants to purchase
an aggregate of 375,000 shares of Common Stock exercisable at $6.00 per share on
or prior to June 30, 1998 were issued pursuant to the Private Securities
Subscription Agreement, and the Company has further agreed to issue Financing
Warrants to purchase up to 100,000 shares of Common Stock, in the event the
Company were to undertake certain financings, on the same terms and conditions
as the Warrants. The exercise price of the Warrants and the Financing Warrants
are subject to adjustment in the event the Company were to undertake certain
financings within 180 days from February 5, 1997.
The Series D Preferred Stock (as represented by the stated value) is
convertible into shares of Common Stock of the Company by dividing the stated
value of the Series D Preferred Stock to be converted by the conversion price in
effect at the time of conversion. The conversion price shall be calculated at
18% discounted from the average closing bid price of the Company's Common Stock,
as reported by Bloomberg L.P., over the five-day trading period on the day prior
to conversion (the "Conversion Price"). Notwithstanding the foregoing, the
Conversion Price may not be more than $7.00 per share of Common Stock nor less
than $2.00 per share of Common Stock (the "Floor"). In addition, the Holder may
not convert any Series D Preferred Stock during the conversion period if the
Conversion Price, averaged over any rolling consecutive five-day trading period,
falls below the Floor (a "Non-Converting Period"). Upon occurrence of the
twenty-first
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<PAGE> 17
Non-Converting Period, the Holder shall thereafter have the right to convert,
but the Company shall have the right to (i) pay to the Holder cash equal to the
amount originally paid by the Holder for the outstanding Series D Preferred
Stock to be converted plus 10% of such amount (the "Cash-Out Option"), or (ii)
convert the outstanding Series D Preferred Stock held by the Holder to be
converted into the full amount of Common Stock to which the Holder would be
entitled at the Conversion Price irrespective of the Floor. Any Series D
Preferred Stock remaining outstanding on February 5, 1999 will be automatically
converted into Common Stock of the Company on such date subject to certain
limitations. The Holder of the Series D Preferred Stock may not convert its
shares if, as a result thereof, the shares of Common Stock beneficially owned by
the Holder will exceed 4.9% of the outstanding shares of Common Stock of the
Company.
The Series D Preferred Stock provides for a cash dividend of 6% per
annum of the stated value of the Series D Preferred Stock on a cumulative basis.
Dividends accrue from the date of issuance and are payable quarterly commencing
March 31, 1997. Except as otherwise provided by law, the Holder of Series D
Preferred Stock does not have voting rights. Upon liquidation, dissolution or
winding-up of the Company, no distribution may be made to the holder of shares
of capital stock ranking junior to the Series D Preferred Stock unless, prior
thereto, the Holder of the Series D Preferred Stock shall have received $1,000
per share, plus an amount equal to declared and unpaid dividends thereon to the
date of such payment. A vote of not less than two-thirds of then outstanding
shares of Series D Preferred Stock is required prior to any amendment,
alteration, change or repeal of any of the rights or designations of the Series
D Preferred Stock.
The Warrants are exercisable at $6.00 per share on or prior to June 30,
1998. In addition, in the event the Company were to contract to issue certain
additional shares of its Common Stock or securities convertible into Common
Stock within 180 days from February 5, 1997 (a "Prospective Financing"), the
exercise price of the Warrants would be reduced as follows: (i) to $1.00 if a
Prospective Financing is contracted within 90 days of February 5, 1997; (ii) to
$2.00 per share if a Prospective Financing is contracted for on or after 90 days
from February 5, 1997; (iii) $3.00 per share if Prospective Financing is
contracted for on or after 120 days from February 5, 1997 and (iv) $4.00 per
share if a Prospective Financing is contracted for on or after 120 days but
before 180 days from February 5, 1997. In addition, the holder of the Warrants
is entitled to an adjustment in the exercise price and/or the number of shares
of Common Stock to be received upon exercise of the Warrants in the event the
Company undertakes certain other transactions including payment of dividends or
distributions with respect to its Common Stock, subdivisions or combinations of
its outstanding Common Stock and recapitalizations in connection with a
consolidation or merger in which the Company
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<PAGE> 18
is the continuing corporation. The holder of the Warrants is not entitled to any
rights of a stockholder of the Company.
In addition, except for certain limited issuances and financings
described in the Agreement, the Company is obligated to issue to the Selling
Security Holder Financing Warrants to purchase additional shares of Common Stock
of the Company in the event the Company were to undertake a Prospective
Financing within specified time periods. The exercise price, as well as any
adjustment thereof, as well as the other terms and conditions of the Financing
Warrants are commensurate with those contained in the Warrants.
Pursuant to the terms of the Certificate of Designations pertaining to
the Series D Preferred Stock, the Private Securities Subscription Agreement and
related Agreements, the holders of the Series D Preferred Stock may not convert
the Series D Preferred Stock or exercise the Warrants, and the Company may not
require the conversion of the Series D Preferred Stock or issue Common Stock of
the Company in lieu of cash dividends attributable to the Series D Preferred
Stock if, as a result thereof, the shares of Common Stock beneficially owned by
the Selling Security Holder would exceed 4.9% of the outstanding shares of
Common Stock of the Company.
Shoreline Pacific Institutional Finance, the Institutional Division of
Financial West Group, received a placement fee of $750,000 in connection with
the transaction.
In connection with the Private Securities Subscription Agreement, the
Company and the Selling Security Holder entered into a Registration Rights
Agreement pursuant to which the Company agreed to file a Registration Statement
registering the resale by the Selling Security Holder of the Shares underlying
the Series D Preferred Stock, the Warrants and the Financing Warrants. The
Registration Statement has been filed by the Company to fulfill these
obligations to the Selling Security Holder under the Registration Rights
Agreement. The Company is required to maintain the effectiveness of the
Registration Statement covering the resale of the Shares of the Selling Security
Holder until the earlier of (i) the date on which the Selling Security Holder
may sell all of their Shares without restriction pursuant to Rule 144(k)
promulgated under the Securities Act of 1933, or (ii) the date on which the
Selling Security Holder has sold all of their Shares included in the Prospectus
and none of the shares of Series D Preferred Stock remain outstanding.
The Company has agreed to indemnify the Selling Security Holder against
any liabilities under the Securities Act of 1933 or otherwise, arising out of or
based upon any untrue or alleged untrue statement of a material fact in the
Registration Statement or this Prospectus or by any omission of a material fact
required to be stated therein except to the extent that such liabilities arise
out of or are based upon any untrue or alleged untrue
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<PAGE> 19
statement or omission in any information furnished in writing to the Company by
the Selling Security Holder expressly for use in the Registration Statement.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons controlling the Company pursuant
to its Certificate of Incorporation and By-laws, the Company has been informed
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
In connection with the registration of the resale of the Shares offered
hereby, the Company will supply Prospectuses to the Selling Security Holder and
use its best efforts to qualify the Shares for sale in any states wherein
qualification is required.
STOCK OWNERSHIP
The following table sets forth the name of the Selling Security Holder,
the amount of shares of Common Stock held directly or indirectly or underlying
the Series D Preferred Stock and Warrants of the Company owned by the Selling
Security Holder on the date hereof, the amount of shares of Common Stock to be
offered by the Selling Security Holder and the amount to be owned by the Selling
Security Holder following sale of such shares of Common Stock following
completion of such offering. As of December 31, 1996, there were outstanding
38,629,091 shares of Common Stock of the Company.
<TABLE>
<CAPTION>
Shares to be
Name of Selling Number of Shares to Owned After
Security Holder Shares Owned(1) be Offered(1) Offering
- --------------- --------------- ------------- -------------
<S> <C> <C> <C>
P.R.I.F, L.P.(2) 7,875,000 7,875,000 0
</TABLE>
- ----------------
(1) Represents maximum number of shares of Common Stock issuable upon
exercise of Series D Preferred Stock based on a minimum conversion
price of $2.00 per share. Includes 375,000 shares of Common Stock
underlying the Warrants, but does not include up to 100,000 shares of
Common Stock underlying the Financing Warrants.
(2) Address is 175 Bloor Street, East, South Tower, 6th Floor, Toronto,
Ontario M4W 3R8, Canada.
(3) Pursuant to the terms of the Certificate of Designations pertaining to
the Series D Preferred Stock, the Agreement and related Agreements, the
holders of the Series D Preferred Stock may not convert the Series D
Preferred Stock or exercise the Warrants, and the Company may not
require the conversion of the Series D Preferred Stock or issue Common
Stock of the Company in lieu of cash dividends attributable to the
Series D Preferred Stock if, as a result thereof, the shares of Common
Stock beneficially owned by the selling security holder would exceed
4.9% of the outstanding shares of Common Stock of the Company.
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<PAGE> 20
Neither the Selling Security Holder nor its affiliates have held any
position, office or had any material relationship with the Company previously.
The Company has agreed to pay for all costs and expenses incident to
the issuance, offer, sale and delivery of the Shares, 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 Holder. The
Company has agreed to indemnify the Selling Security Holder against civil
liabilities including liabilities under the Securities Act of 1933.
PLAN OF DISTRIBUTION
The Shares offered hereby by the Selling Security Holder may be sold
from time to time by the Selling Security Holder, or by pledgees, donees,
transferees or other successors in interest. Such sales may be made on one or
more exchanges or in the over-the-counter market (including the Nasdaq National
Market of The Nasdaq Stock Market), or otherwise at prices and at terms then
prevailing or at prices related to the then current market price, or in
negotiated transactions. The Shares may be sold by one or more of the following
methods, including, without limitation: (a) a block trade in which the
broker-dealer so engaged will attempt to sell the Shares as agent, but may
position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this Prospectus; (c) ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
and (d) face-to-face or other direct transactions between the Selling Security
Holder and purchasers without a broker-dealer or other intermediary. In
addition, the Selling Security Holder may from time to time, subject to the
restrictions set forth below, sell short the Common Stock of the Company, and in
such instances, this Prospectus may be delivered in connection with such short
sale and the Shares offered hereby may be used to cover such short sale. In
effecting sales, broker-dealers or agents engaged by the Selling Security Holder
may arrange for other broker-dealers or agents to participate. Such
broker-dealers may receive commissions or discounts from the Selling Security
Holder in amounts to be negotiated immediately prior to the sale. Such
broker-dealers and agents and any other participating broker-dealers, or agents
may be deemed to be "underwriters" within the meaning of the Act, in connection
with such sales. In addition, any securities covered by this Prospectus that
qualify for sale pursuant to Rule 144 might be sold under Rule 144 rather than
pursuant to this Prospectus.
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<PAGE> 21
Upon the Company being notified by the Selling Security Holder that any
material arrangement has been entered into with a broker-dealer, agent or
underwriter for the sale of shares through a block trade, special offering,
exchange distribution or secondary distribution or a purchase by a
broker-dealer, agent or underwriter, a supplemented Prospectus will be filed, if
required, pursuant to Rule 424(c) under the Act, disclosing (a) the name of each
such broker-dealer, agent or underwriter (b) the number of Shares involved, (c)
the price at which such Shares were sold, (d) the commissions paid or discounts
or concessions allowed to such broker-dealer(s), agent(s) or underwriter(s) or
other items constituting compensation or indemnification arrangements with
respect to particular offerings, where applicable, (e) that such
broker-dealer(s), agent(s) or underwriter(s) did not conduct any investigation
to verify the information set out or incorporated by reference in this
Prospectus, as supplemented, and (f) other facts material to the transaction.
In connection with distributions of the Shares, the Selling Security
Holder may (i) enter into hedging transactions with broker-dealers and the
broker-dealers may engage in short sales of the Shares in the course of hedging
the positions they assume with such Selling Security Holder, and (ii) enter into
option or other transactions with broker-dealers that involve the delivery of
the Shares to the broker-dealers, who may then resell or otherwise transfer such
Shares; provided, however, that no such transaction undertaken in connection
with this plan of distribution may occur prior to the filing of the required
notices of conversion; provided further, however, that the Selling Security
Holder has agreed with the Company that any such short sales or hedging
transactions may not involve a number of shares of Common Stock in excess of the
number of shares for which a notice of conversion or an election to purchase
with regard to the Series D Preferred Stock or Warrants, respectively, has been
submitted by the Selling Security Holder to the Company.
DESCRIPTION OF SECURITIES
The Company is currently authorized to issue up to 75,000,000 shares of
Common Stock, par value $.01 per share, of which 38,629,091 shares were
outstanding as of December 31, 1996. The Company is also authorized to issue up
to 1,000,000 shares of Preferred Stock, par value $1.00 per share, of which
2,650 shares of Series A Preferred Stock, 13,864 shares of Series B Preferred
Stock, 5,000 shares of Series C Preferred Stock, 15,000 shares of Series D
Preferred Stock and 5,000 shares of Series E Preferred Stock were outstanding as
of February 28, 1997.
COMMON STOCK
Subject to the dividend rights of the holders of Preferred Stock,
holders of shares of Common Stock are entitled to share, on
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<PAGE> 22
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 a total of 1,000,000 shares of
Preferred Stock, par value $1.00 per share. 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. 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.
SERIES A PREFERRED STOCK
The Company is authorized to issue 375,000 shares of Series A Preferred
Stock. The Company currently has 2,650 shares of Series A Preferred Stock
outstanding. The Series A Preferred Stock was established by the Board of
Directors in January 1984. 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 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
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<PAGE> 23
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 Series A 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.
SERIES B PREFERRED STOCK
The Series B Preferred Stock (as represented by the stated value) are
convertible into shares of Common Stock commencing August 21, 1996. The
conversion price is equal to the lesser of 77% of the Average Market Price of
the Common Stock at the time of conversion or $8.74. The percentage of the
Average Market Price or the fixed conversion price which determines the
conversion price of the Series B Preferred Stock is adjustable downward in the
event a Triggering Event occurs. Should a Triggering Event occur, the percentage
of the Average Market Price which determines the conversion price or the fixed
conversion price for the Series B Preferred Stock will be reduced by the number
of percentage points equal to two times the sum of the number of months
(prorated) during which a Triggering Event exists. Should a Triggering Event
occur subsequent to conversion of the Series B Preferred Stock, but prior to the
sale of the Common Stock obtained upon conversion by the holder of the Series B
Preferred Stock, then upon such holder's sale of such Common Stock, the Company
will pay to the holder an amount equal to the Average Market Price of the Common
Stock received upon conversion ending one trading day prior to such conversion,
multiplied by two-hundredths (.02) times the sum of the number of months
(prorated) during which a Triggering Event exists. At the option of the Company,
such amount may be paid in Common Stock of the Company based on the Average
Market Price of the Common Stock on the date prior to the sale of such shares of
Common Stock issued upon conversion of the Series B Preferred Stock, or in
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<PAGE> 24
cash provided that the Company is required to pay such amount in cash if the
Triggering Event which occurred was the Company's failure to maintain the
listing of the Common Stock on NASDAQ or other markets specified in the
Certificate of Designations, Preferences and Rights of 5% Cumulative Convertible
Series B Preferred Stock (the "Certificate of Designations").
The Series B Preferred Stock provides for a cash dividend of 5% per
annum of the stated value of the Series B Preferred Stock on a cumulative basis.
Dividends accrue from the date of issuance and are payable quarterly commencing
September 7, 1996 through and including the date on which the Series B Preferred
Stock are converted. Subject to certain limitations provided in the Certificate
of Designations, dividends may be paid at the Company's option in cash or Common
Stock of the Company. Commencing 180 days following the effective date of the
Registration Statement of which this Prospectus is a part, the Company may
require the holders of the then outstanding shares of Series B Preferred Stock
to convert all of the remaining shares of Series B Preferred Stock into Common
Stock of the Company at the conversion price previously described. The Series B
Preferred Stock has no voting rights, except as required by law and except that
a majority of the outstanding Series B Preferred Stock is required to approve a
consolidation, merger or reclassification of outstanding shares of the Series B
Preferred Stock, and the approval of two-thirds of the outstanding Series B
Preferred Stock is required to amend the Certificate of Designations.
Pursuant to the terms of the Certificate of Designations, the holders
of the Series B Preferred Stock may not convert the Series B Preferred Stock,
and the Company may not require the conversion of the Series B Preferred Stock
or issue Common Stock of the Company in lieu of cash dividends attributable to
the Series B Preferred Stock or issue the Additional Shares in the event a
Triggering Event occurs if, as a result thereof, the shares of Common Stock
beneficially owned by any such holders (if their collective holdings would be
aggregated under the Securities Exchange Act of 1934) would exceed 4.9% of the
outstanding shares of Common Stock of the Company.
SERIES C PREFERRED STOCK
The Series C Preferred Stock (as represented by the stated value) is
convertible into shares of Common Stock of the Company by dividing the stated
value of the Series C Preferred Stock by the closing price of the Company's
Common Stock over the five-day trading period ending on the day prior to
conversion.
At the option of the holder of the Series C Preferred Stock, up to 25%
of such shares may be convertible, on or after 10 days from the date that the
underlying shares of Common Stock have been registered with the SEC for public
resale, into shares of the
22
<PAGE> 25
Company's Common Stock on the basis of one share of Series C Preferred Stock for
shares of Common Stock equal in number to the amount determined by dividing
$1,000 (representing the stated value thereof) by the closing price of the
Company's Common Stock over the five-day trading period ending on the day prior
to the conversion of the Series C Preferred Stock. An additional 25% of the
Series C Preferred Stock will be convertible on or after the 30th, 60th and 90th
day thereafter on a cumulative basis. The conversion price per share may not be
less than $3.46 nor more than $7.00; provided, however, in the event the
conversion price would be less than $3.46 but for such minimum conversion price,
the difference between $3.46 and what the conversion price would have been
except for such minimum price, multiplied by the number of shares of Common
Stock issued upon conversion, will be paid to the holder in cash upon
conversion. Any shares of Series C Preferred Stock which are outstanding on
December 5, 1997 will be automatically converted into shares of Common Stock
based on the conversion price at such time computed in accordance with the above
procedure.
The Series C Preferred Stock does not accrue any dividend. The Series C
Preferred Stock has no voting rights, except as required by law and except that
a majority of the outstanding Series B Preferred Stock is required to approve a
consolidation, merger or reclassification of outstanding shares of the Series C
Preferred Stock, and the approval of two-thirds of the outstanding Series B
Preferred Stock is required to amend the Certificate of Designations.
SERIES E PREFERRED STOCK
The Series E Preferred Stock (as represented by the stated value) is
convertible into shares of Common Stock of the Company commencing May 8, 1997 by
dividing the stated value of the Series E Preferred Stock to be converted by the
conversion price in effect at the time of conversion. The conversion price shall
be (i) the lesser of the market price for the Common Stock of the Company, as
defined in the Certificate of Designations, multiplied by 85%, subject to
adjustment, or (ii) $7.00, subject to adjustment. The Company also has the right
to compel conversion of the Series E Preferred Stock at any time subsequent to
270 days after February 21, 1997. The holder of the Series E Preferred Stock may
not convert the shares of Series E Preferred Stock if, as a result thereof, the
shares of Common Stock beneficially owned by the holder would exceed 4.9% of the
outstanding shares of Common Stock of the Company.
The Series E Preferred Stock provides for a dividend of 5% per annum of
the stated value of the Series E Preferred Stock on a cumulative basis.
Dividends accrue from the date of issuance and are payable quarterly commencing
April 1, 1997. Dividends may be paid in cash or, at the Company's option and
subject to certain
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<PAGE> 26
other conditions, in shares of Common Stock of the Company. Except as otherwise
provided by law, the holders of Series E Preferred Stock do not have voting
rights. Upon liquidation, dissolution or winding-up of the Company, no
distribution may be made to the holders of shares of capital stock ranking
junior to the Series E Preferred Stock unless, prior thereto, the holders of the
Series E Preferred Stock shall have received $1,000 per share plus an amount
equal to declared and unpaid dividends thereon to the date of such payment. A
vote of not less than two-thirds of the then outstanding shares of Series E
Preferred Stock is required prior to any amendment, alteration, change or repeal
of any of the designations of the Series E Preferred Stock.
OVER-THE-COUNTER MARKET
The Company's Common Stock is traded in the Nasdaq National Market
under the symbol "VRGN." If for any reason the Common Stock does not remain
accepted for inclusion on NASDAQ, 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 on NASDAQ, 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 NASDAQ 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 Chase Mellon
Shareholder Services, Overpeck Centre, 85 Challenger Road, Ridgefield Park, New
Jersey 07660-2108.
LEGAL MATTERS
Certain legal matters in connection with the Shares being offered
hereby will be passed upon for the Company by Atlas, Pearlman, Trop & Borkson,
P.A., 200 East Las Olas Boulevard, Suite 1900, Fort Lauderdale, Florida 33301.
Members of that firm or
24
<PAGE> 27
members of their family own an aggregate of 37,000 shares of Common Stock of the
Company.
EXPERTS
The consolidated financial statements of Viragen, Inc. incorporated by
reference in the Viragen, Inc. Annual Report (Form 10-K/A1) for the year ended
June 30, 1996, have been audited by Ernst & Young LLP, Certified Public
Accountants, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
INDEMNIFICATION
Section 145 of the General Corporation Law of Delaware, under which
jurisdiction the Company is incorporated, empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that he or she
is or was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or enterprise. A corporation may indemnify against
expenses (including attorneys' fees) and, other than in respect of an action by
or in the right of the corporation, against judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with such action, suit
or proceeding if the person indemnified acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. In the case of an
action by or in the right of the corporation, no indemnification of expenses may
be made in respect to any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action was brought shall
determine that, despite the adjudication of liability, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper. Section 145 of the General Corporation Law of Delaware further provides
that to the extent a director, officer, employee or agent of the corporation has
been successful in the defense of any action, suit or proceeding referred to
above or in the defense of any claim, issue or matter therein, he or she shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
25
<PAGE> 28
Article VII of the By-Laws of the Company require the Company to
indemnify its Directors and officers as follows:
"The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (including any action or suit by or in the right of the
corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such suit, action or proceeding if
he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful, provided, however, that in the
case of an action or suit by or in the right of the corporation, (a)
such person shall be indemnified only to the extent of his expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement thereof and not for any
judgments, fines or amounts paid in settlement and (b) no
indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the
corporation unless, and only to the extent that, the Court of Chancery
of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
Any indemnification hereunder (unless required by law or ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in this Article. Such determination shall be made (1) by
the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (2) if such a quorum
is not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders of the corporation.
26
<PAGE> 29
The indemnification provided herein shall not be deemed exclusive of
any other rights to which those indemnified may be entitled under any statute,
by-law, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Law of the State of Delaware or of
these By-Laws.
The corporation's indemnity of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall be
reduced by any amounts such person may collect as indemnification (i) under any
policy of insurance purchased and maintained on his behalf by the corporation or
(ii) from such other corporation, partnership, joint venture, trust or other
enterprise.
Nothing contained in this Article VII, or elsewhere in these By-Laws,
shall operate to indemnify any director or officer of such indemnification is
for any reason contrary to law, either as a matter of public policy, or under
the provisions of the Federal Securities Act of 1933, the Securities Exchange
Act of 1934, or any other applicable state or federal law.
For the purposes of this Article, references to "the corporation"
include all constituent corporations absorbed in a consolidation or merger as
well as the resulting or surviving corporations so that any person who is or was
a director, officer, employee or agent of such a constituent corporation or is
or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise shall stand in the same position under the provisions
of this Article with respect to the resulting or surviving corporation as he
would if he had served the resulting or surviving corporation in the same
capacity.
27
<PAGE> 30
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provisions, or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Company of expenses incurred or paid by a director,
officer or controlling person of the Company in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Company will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
28
<PAGE> 31
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses, all of which are
being paid by the Company, in connection with this offering.
<TABLE>
<S> <C>
Registration fee........................ $ 7,251.00
Legal fees and expenses................. 5,000.00*
Blue sky qualification fees
and expenses......................... 500.00*
Accounting fees and expenses............ 5,000.00*
Printing expenses....................... 1,000.00*
Miscellaneous........................... 1,249.00*
----------
Total $20,000.00*
</TABLE>
- ----------
*Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of Delaware, under which
jurisdiction the Company is incorporated, empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that he or she
is or was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or enterprise. A corporation may indemnify against
expenses (including attorneys' fees) and, other than in respect of an action by
or in the right of the corporation, against judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with such action, suit
or proceeding if the person indemnified acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. In the case of an
action by or in the right of the corporation, no indemnification of expenses may
be made in respect to any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action was brought shall
determine that, despite the adjudication of liability, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper. Section 145 of the General Corporation Law of Delaware further provides
that to the
29
<PAGE> 32
extent a director, officer, employee or agent of the corporation has been
successful in the defense of any action, suit or proceeding referred to above or
in the defense of any claim, issue or matter therein, he or she shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection therewith.
Article VII of the By-Laws of the Company require the Company to
indemnify its Directors and officers as follows:
"The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(including any action or suit by or in the right of the corporation) by reason
of the fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such suit, action or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful,
provided, however, that in the case of an action or suit by or in the right of
the corporation, (a) such person shall be indemnified only to the extent of his
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement thereof and not for any judgments,
fines or amounts paid in settlement and (b) no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the corporation unless, and only to the extent that, the Court of
Chancery of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
Any indemnification hereunder (unless required by law or ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in this Article. Such determination shall be made (1) by
the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (2) if such a quorum
is not obtainable, or, even if obtainable a quorum of disinterested
30
<PAGE> 33
directors so directs, by independent legal counsel in a written opinion, or (3)
by the stockholders of the corporation.
The indemnification provided herein shall not be deemed exclusive of
any other rights to which those indemnified may be entitled under any statute,
by-law, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Law of the State of Delaware or of
these By-Laws.
The corporation's indemnity of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall be
reduced by any amounts such person may collect as indemnification (i) under any
policy of insurance purchased and maintained on his behalf by the corporation or
(ii) from such other corporation, partnership, joint venture, trust or other
enterprise.
Nothing contained in this Article VII, or elsewhere in these By-Laws,
shall operate to indemnify any director or officer of such indemnification is
for any reason contrary to law, either as a matter of public policy, or under
the provisions of the Federal Securities Act of 1933, the Securities Exchange
Act of 1934, or any other applicable state or federal law.
For the purposes of this Article, references to "the corporation"
include all constituent corporations absorbed in a consolidation or merger as
well as the resulting or surviving corporations so that any person who is or was
a director, officer, employee or agent of such a constituent corporation or is
or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise shall stand in the same position under the provisions
of this Article with respect to the resulting or surviving corporation as he
would if he
31
<PAGE> 34
had served the resulting or surviving corporation in the same capacity."
Item 16. Exhibits.
EXHIBIT DESCRIPTION
- ------- -----------
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession
(2)(i) Plan of Merger between Florida Immunological Institute, Inc. and
Vira-Tech, Inc., dated September 30, 1986 (incorporated by reference
to the Company's registration statement on Form S-2, dated October
24, 1986, as amended File No. 33-9714 ("1986 Form S-2"), Part II,
Item 16, 2.1) (2)(ii) Articles of Merger of Florida Immunological
Institute into Vira-Tech, Inc., dated September 30, 1986
(incorporated by reference to 1986 Form S-2, Part II, Item 16, 2.2)
(3)(i) Articles of Incorporation and By-Laws (incorporated by reference to
the Company's registration statement on Form S-1, dated June 8,
1981, as amended, File No. 2-72691, "Form S-1", Part II, Item 30(b)
3.1 and 3.2)
(3)(ii) Amended Certificate of Incorporation (incorporated by reference to
1986 Form S-2, Part II, Item 16, 4.2)
(4) Instruments defining the rights of security holders, including
indentures
(4)(i) Certificate of Designation for Series A Preferred Stock, as amended
(incorporated by reference to 1986 Form S-2, Part II, Item 16, 4.4)
(4)(ii) Specimen Certificate for Unit (Series A Preferred Stock and Class A
Warrant) (incorporated by reference to 1986 Form S-2, Part II, Item
16, 4.5)
(4)(iii) Omitted
(4)(iv) Omitted
(4)(v) Omitted
(4)(vi) Omitted
(4)(vii) Omitted
32
<PAGE> 35
EXHIBIT NO. DESCRIPTION OF EXHIBITS
- ----------- -----------------------
(4)(viii) Form of three year 8.5% Convertible Subordinated Debenture
(incorporated by reference to the Company's Current Report on Form
8-K dated November 17, 1993)
(4)(ix) Form of Stock Option Agreement dated November 19, 1993, issued to
Messrs. Dennis W. Healey and Peter D. Fischbein (incorporated by
reference to the Company's Current Report on Form 8-K dated November
17, 1993)
(4)(x) 1995 Stock Option Plan
(4)(xi) Certificate of Designation for Series B Preferred Stock,
(incorporated by reference to the Company's Current Report on Form
8-K dated June 7, 1996)
(4)(xii) 1997 Stock Option Plan (the "Company's Registration Statement on
Form S-3)
(4)(xiii) Certificate of Designations Preferences and Rights for Series C
Preferred Stock (incorporated by reference to the Company's Current
Report on Form 8-K dated February 14, 1997)
(4)(xiv) Certificate of Designations Preferences and Rights for Series D
Preferred Stock (incorporated by reference to the Company's Current
Report on Form 8-K dated February 14, 1997)
(4)(xv) Certificate of Designations, Preferences and Rights for Series E
Preferred Stock (incorporated by reference to the Company's Current
Report on Form 8-K dated March 6, 1997)
(5) Opinion of Atlas, Pearlman, Trop & Borkson, P.A. as to the validity
of the securities being registered*
(10) Material contracts
(10)(i) Research Agreement between the Registrant and Viragen Research
Associates Limited Partnership dated December 29, 1983 (incorporated
by reference to Medicore S-1, File No. 2-89390, dated February 10,
1984 ("Medicore S-1"), Part II, Item 16(a)(10)(xxxiii))
33
<PAGE> 36
EXHIBIT NO. DESCRIPTION OF EXHIBITS
- ----------- -----------------------
(10)(ii) License Agreement between the Registrant and Viragen Research
Associates Limited Partnership dated December 29, 1983 (incorporated
by reference to Medicore S-1, Part II, Item 16 (a)(10)(xxxiv))
(10)(iii) Omitted
(10)(iv) Royalty Agreement between the Company and Medicore, Inc. dated
November 7, 1986 (incorporated by reference to the November 1986
Form 8-K, Item 7(c)(i))
(10)(v) Amendment to Royalty Agreement between the Company and Medicore,
Inc. dated November 21, 1989 (incorporated by reference to the
Company's Current Report on Form 8-K dated December 6, 1989, Item 7
(c)(i))
(10)(vi) Promissory Note from the Company to Medicore, Inc. dated August 6,
1991 (incorporated by reference to the Company's 1991 Form 10-K,
Part IV, Item 10(a)(10)(xx))
(10)(vii) Loan Agreement between the Company and Medicore, Inc. dated January
31, 1991 (incorporated by reference to the Company's Current Report
on Form 8-K dated February 26, 1991, Item 7(c)(ii))
(10)(viii) Amendment to Loan Agreement between the Company and Medicore, Inc.
dated August 6, 1991 (incorporated by reference to the Company's
1991 Form 10-K, Part IV, Item 14(a)(10)(xxi))
(10)(ix) Florida Real Estate Mortgage and Security Agreement from the Company
to Medicore, Inc. dated August 6, 1991 (incorporated by reference to
the Company's 1991 Form 10-K, Part IV, Item 14(a)(10)(xxii))
(10)(x) Omitted
(10)(xi) Omitted
(10)(xii) Promissory Note to Equitable Bank dated August 2, 1991 (incorporated
by reference to the Company's Quarterly Report on Form 10-Q for the
second quarter ended June 30, 1991 ("June, 1991 Form 10-Q"), Part
II, Item 6(a)(28)(i))
34
<PAGE> 37
EXHIBIT NO. DESCRIPTION OF EXHIBITS
- ----------- -----------------------
(10)(xiii) Mortgage and Security Agreement issued to the Equitable Bank dated
August 2, 1991 (incorporated by reference to the Company's June,
1991 Form 10-Q, Part II, Item 6(a)(28)(ii))
(10)(xiv) Acquisition Agreement between the Company and Medicore, Inc. dated
August 2, 1991 (incorporated by reference to the Company's 1991
Form 10-K, Part IV, Item 14(a)(10)(xxiii))
(10)(xv) Lease between the Company and Medicore, Inc. dated December 8,
1992 (incorporated by reference to the Company's Current Report on
Form 8-K, dated January 21, 1993 ("January 1993 Form 8-K"), Item
7(c)(10)(i))
(10)(xvi) Addendum to Lease between the Company and Medicore, Inc. dated
January 15, 1993 (incorporated by reference to the Company's
January 1993 Form 8-K, Item 7(c)(10)(ii))
(10)(xvii) Agreement for Sale of Stock between the Company and Cytoferon
Corp. dated February 5, 1993 (incorporated by reference to the
Company's Current Report on Form 8-K, dated February 11, 1993,
Item 7(c)(28))
(10)(xviii) Addendum to Agreement for Sale of Stock between the Company and
Cytoferon Corp. dated May 4, 1993 (incorporated by reference to
the Company's Current Report on Form 8-K dated May 5, 1993, Item
7(c)(28)(i))
(10)(xix) Amendment No. 2 to the Royalty Agreement between the Company and
Medicore, Inc. dated May 11, 1993 (incorporated by reference to
the Company's June 30, 1993 Form 10-K, Part IV, Item
14(a)(10)(xix))
(10)(xx) Note and Mortgage Modification Agreement between the Company and
Medicore, Inc. dated August 18, 1993 (incorporated by reference to
the Company's June 30, 1993 Form 10-K, Part IV, Item
14(a)(10)(xx))
(10)(xxi) Amendment No. 2 to the Loan Agreement between the Company and
Medicore, Inc. dated August 18, 1993
35
<PAGE> 38
EXHIBIT NO. DESCRIPTION OF EXHIBITS
- ----------- -----------------------
(incorporated by reference to the Company's June 30, 1993 Form
10-K, Part IV, Item 14(a)(10)(xxi))
(10)(xxii) Amendment to Acquisition Agreement between the Company and
Medicore, Inc. dated August 18, 1993 (incorporated by reference to
the Company's June 30, 1993 Form 10-K, Part IV, Item
14(a)(10)(xxii))
(10)(xxiii) Marketing and Management Services Agreement between the Company
and Cytoferon Corp. dated August 18, 1993 (incorporated by
reference to the Company's June 30, 1993 Form 10-K, Part IV, Item
14(a)(10)(xxiii))
(10)(xxiv) Agreement for Sale of Stock between Cytoferon and the Company
dated November 19, 1993 (incorporated by reference to the
Company's current report on Form 8-K, dated November 12, 1993)
(10)(xxv) Employment Agreement between Gerald Smith and the Company dated
November 19, 1993 (incorporated by reference to the Company's
current report on Form 8-K, dated November 12, 1993) as amended by
Modified Employment Agreement dated December 15, 1994
(10)(xxvi) Common Stock Purchase Warrant Agreement between Northlea Partners
Ltd. and the Company dated January 6, 1994 (incorporated by
reference to the Company's Current Report on Form 8-K, dated
November 17, 1993)
(10)(xxvii) Management Consulting Agreement between the Company, Medvest, Inc.
and Dr. John Abeles dated January 6, 1994 (incorporated by
reference to the Company's Current Report on Form 8-K, dated
November 17, 1993)
(10)(xxviii) Employment Agreement between Dennis W. Healey and the Company
dated April 8, 1994 (incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended June 30, 1994) as
amended by Modified Employment Agreement dated December 15, 1994
36
<PAGE> 39
EXHIBIT NO. DESCRIPTION OF EXHIBITS
- ----------- -----------------------
(10)(xxx) Employment Agreement between Charles F. Fistel and the Company
dated July 1, 1994 (incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended June 30, 1994) as
amended by Modified Employment Agreement dated December 15, 1994
(10)(xxxi) Placement Agent Agreement and Common Stock Purchase Warrant issued
to Laidlaw Equities, Inc. and designees
(10)(xxxii) Amendment No. 1 to Agreement for Sale of Stock with Cytoferon
(10)(xxxiii) Modified Sale of Stock and Stock Option Agreement with Peter D.
Fischbein(1)incorporated by reference to the Company's 1995 Form
SB-2, Part II, Item 27(10)(xxxiii))
(10)(xxxiv) Agreement with Moty Hermon incorporated by reference to the
Company's 1995 Form SB-2, Part II, Item 27(10)(xxxiv))
(10)(xxxv) Agreement with University of Nebraska Medical Center incorporated
by reference to the Company's 1995 Form SB-2, Part II, Item
27(10)(xxxv))
(10)(xxxvi) License and Manufacturing Agreement with Common Services Agency
incorporated by reference to the Company's 1995 Form SB-2, Part
II, Item 27(10)(xxxiv))
(10)(xxxvii) Agreed Motion for Consent Final Order and Settlement Agreement
dated August 29, 1995 (incorporated by reference to the Company's
June 30, 1995 Form 10-KSB)
(10)(xxxviii) Agreement and Plan of Reorganization dated November 8, 1995) and
Amendment thereto incorporated by reference to the Company's
Post-Effective Amendment No. 1 to Registration Statement on Form
SB-2
(10)(xxxix) Private Securities Subscription Agreement dated June 7, 1996, and
Registration Rights Agreement incorporated by reference to the
Company's Current Report on Form 8-K dated June 7, 1996
37
<PAGE> 40
EXHIBIT NO. DESCRIPTION OF EXHIBITS
- ----------- -----------------------
(10)(xxxx) Employment Agreement between Charles F. Fistel and the Company
dated July 1, 1996 (incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996)
(10)(xxxxi) Stock Option Agreement between the Company and Fred D. Hirt
dated August 2, 1996 (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended June
30, 1996)
(10)(xxxxii) Form of Private Securities Subscription Agreement dated
November 27, 1996 and related Registration Rights Agreement and
Common Stock Purchase Warrant (incorporated by reference to the
Company's Current Report on Form 8-K dated February 14, 1997)
(10)(xxxxiii) Private Securities Subscription Agreement dated February 3,
1997 and related Regulation Rights Agreement, Common Stock
Purchase Warrant and related agreements (incorporated by
reference to the Company's Current Report on Form 8-K dated
February 14, 1997)
(10)(xxxxiv) Securities Purchase Agreement dated as of December 31, 1996 and
related Registration Rights Agreement (incorporated by
reference to the Company's Current Report on Form 8-K dated
March 6, 1997)
(21) Subsidiaries of the Registrant, incorporated by reference to
the Company's June 30, 1996 Form 10-KA/1
(23)(i) Consent of Ernst & Young LLP*
(23)(ii) Consent of Atlas, Pearlman, Trop & Borkson, P.A. (included as
part of Exhibit (5))
- --------------
* Filed herewith.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Company hereby undertakes:
(i) to file, during any period in which it offers or sells
securities, a post-effective amendment to this Registration
38
<PAGE> 41
Statement to include any additional or changed material information on the plan
of distribution;
(ii) that, for determining any liability under the Securities
Act, treat each such post-effective amendment as a new Registration Statement of
the securities offered at that time shall be deemed to be the initial bona fide
offering thereof;
(iii) to file a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering; and
(iv) to include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's Annual Report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
39
<PAGE> 42
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Company certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Miami and the State of
Florida, on the 7th day of March, 1997.
VIRAGEN, INC.
By: /s/ Gerald Smith
---------------------------
Gerald Smith
Chairman of the Board
Principal Executive Officer
and President
POWER OF ATTORNEY
Know all men by these presents, that each person whose signature
appears below constitutes and appoints Gerald Smith and Dennis W. Healey or
either of them, such person's true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for such person and in such
person's name, place and stead, in any and all capacities (including such
persons' capacity as a director and/or officer of Viragen, Inc.) to sign any and
all amendments (including post-effective amendments pursuant to Rule 462(b) or
otherwise) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that each said attorney-in-fact and agent, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
40
<PAGE> 43
Pursuant to the requirements of the Securities Act of 1993, this
Amendment to its Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
Chairman of the
/s/ Gerald Smith Board of Directors,
- ---------------- Principal Executive
Gerald Smith Officer and President March 7, 1997
/s/ Robert H. Zeiger
- -------------------- Chief Executive Officer
Robert H. Zeiger and Director March 7, 1997
Executive Vice
/s/ Dennis W. Healey President, Treasurer,
- -------------------- Principal Financial
Dennis W. Healey Officer and Director March 7, 1997
/s/ Charles F. Fistel
- --------------------- Executive Vice-President
Charles F. Fistel and Director March 7, 1997
- ------------------
Sidney Dworkin Director March 7, 1997
/s/ Peter D. Fischbein
- ----------------------
Peter D. Fischbein Director March 7, 1997
- ---------------
Jay M. Haft Director March 7, 1997
- ----------------
Fred D. Hirt Director March 7, 1997
/s/ William B. Saeger
- ---------------------
William B. Saeger Director March 7, 1997
</TABLE>
41
<PAGE> 1
EXHIBIT 5.1
Opinion of Atlas, Pearlman, Trop & Borkson, P.A.
relating to the issuance of Common Stock
included in the Registration Statement
<PAGE> 2
Direct Line: (954) 766-7858
March 7, 1997
Viragen, Inc.
2343 West 76th Street
Hialeah, Florida 33016
RE: REGISTRATION STATEMENT ON FORM S-3; VIRAGEN, INC. (THE
"COMPANY"), 7,975,000 SHARES OF COMMON STOCK
Gentlemen:
This opinion is submitted pursuant to the applicable rules of the
Securities and Exchange Commission with respect to the registration by the
Company of 7,975,000 shares of Common Stock, par value $.01 per share (the
"Common Stock") to be sold by the Selling Security Holder designated in the
Registration Statement. The shares of Common Stock to be sold consist of up to
7,500,000 shares of Common Stock issuable on conversion of the Company's
Preferred Stock, Series D (the "Series D Preferred Stock") and up to 475,000
shares of Common Stock issuable upon exercise of Common Stock Purchase Warrants
(the "Warrants") issued in conjunction with the Series D Preferred Stock.
In our capacity as counsel to the Company, we have examined the
original, certified, conformed, photostat or other copies of the Company's
Certificate of Incorporation (as Amended), By-Laws, instruments pertaining to
the Series D Preferred Stock, the Private Securities Subscription Agreement
dated February 3, 1997, the Warrants and related exhibits and corporate minutes
provided to us by the Company. In all such examinations, we have assumed the
genuineness of all signatures on original documents, and the conformity to
originals or certified documents of all copies submitted to us as conformed,
photostat or other copies. In passing upon certain corporate records and
documents of the Company, we have necessarily assumed the correctness and
completeness of the statements made or included therein by the Company, and we
express no opinion thereon.
Based upon and in reliance of the foregoing, we are of the opinion that
the Common Stock to be issued upon conversion of the Series D Preferred Stock
and upon exercise of the Warrants, when issued in accordance with the terms of
the Series D Preferred Stock and the Warrants, will be validly issued, fully
paid and non-assessable.
We hereby consent to the use of this opinion in the Registration
Statement on Form S-3 to be filed with the Commission.
Very truly yours,
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
<PAGE> 1
EXHIBIT 23.01
Consent of Ernst & Young LLP
<PAGE> 2
Consent of Independent Certified Public Accountants
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related prospectus of Viragen, Inc. for
the registration of 7,975,000 shares of its common stock and to the
incorporation by reference therein of our report dated August 16, 1996, with
respect to the consolidated financial statements of Viragen, Inc. included in
its Annual Report (Form 10-K/A-1) for the year ended June 30, 1996, filed with
the Securities and Exchange Commission.
ERNST & YOUNG LLP
March 4, 1997
