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As Filed with the Securities and Exchange Commission on September 30, 1998.
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.)
865 S.W. 78th Avenue
Suite 100
Plantation, FL 33324
Telephone (954) 233-8746
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(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Copies to:
Gerald Smith James Schneider, Esq.
Chairman of the Board Atlas, Pearlman, Trop & Borkson, P.A.
Viragen, Inc. Suite 1900
865 S.W. 78th Avenue, Suite 100 200 East Las Olas Boulevard
Plantation, Florida 33324 Fort Lauderdale, Florida 33301
(954) 233-8746 (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]
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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 12,000,000(2) $1.44 $ 17,280,000 $5,098.00
Common Stock reserved
for issuance upon
exercise of Common Stock
Purchase Warrants 1,200,000(3) $1.44 1,728,000 $ 510.00
Common Stock reserved
for issuance upon the exercise
of Placement Agent Warrants 1,000,000(4) $1.44 1,440,000 $ 425.00
Common Stock 800,000(5) $1.44 1,152,000 $ 340.00
---------- ------------- ---------
Total 15,000,000 $ 21,600,000 $6,373.00
========== ============= =========
</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 System at September 24, 1998.
(2) To be offered and sold by Swartz Private Equity, LLC ("Swartz")
upon the exercise of one or more puts by the Company of shares of its Common
Stock to the Selling Security Holder at a price equal to the lesser of (i) 87%
of the market price at the time of such put or (ii) the difference of such
market price minus $0.225.
(3) To be offered and sold by Swartz upon the exercise of Common Stock
Purchase Warrants issued in connection with the acquisition of the Common Stock
pursuant to such put exercise by the Company.
(4) To be offered and sold by Swartz Investments LLC, ("Placement
Agent") upon the exercise of Common Stock Purchase Warrants issued to the
Placement Agent.
(5) To be offered and sold by Swartz as a result of adjustment of the
number of shares of Common Stock to be issued as additional shares as a result
of certain events which may cause a delay or suspension of the sales of shares
of Common Stock by the Selling Security Holder.
ii
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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 Warrants and the Placement Agent
Warrants.
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.
iii
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Subject to Completion, Dated September 30, 1998
15,000,000 Shares
VIRAGEN, INC.
COMMON STOCK, PAR VALUE $.01 PER SHARE
This Prospectus (the "Prospectus") relates to the offer and sale of up
to 15,000,000 shares (the "Shares") of Common Stock, $.01 par value (the "Common
Stock"), of Viragen, Inc. (the "Company" or "Viragen") by certain selling
stockholders (the "Selling Security Holders"). Of the shares offered hereby, up
to (i) 12,000,000 shares of Common Stock (the "Put Shares") are issuable to
Swartz Private Equity LLC (the "Subscriber") pursuant to certain put rights (the
"Put Right") set forth in a Regulation D Common Stock Private Equity Line
Subscription Agreement (the "Subscription Agreement"); (ii) 1,200,000 shares of
Common Stock (the "Warrant Shares") are issuable upon the exercise of Common
Stock purchase warrants issuable to the Subscriber pursuant to the Subscription
Agreement (the "Warrants"); (iii) 1,000,000 shares of Common Stock (the
"Placement Agent Shares") are issuable to Swartz Investments LLC (the "Placement
Agent") upon the exercise of Common Stock Purchase Warrants for the transactions
contemplated by the Subscription Agreement (the "Placement Agent Warrants"); and
(iv) 800,000 Shares as may be issuable as a result of certain events that may
cause a delay or suspension of the sale of the Put Shares, the Warrant Shares
and the Placement Agent Shares by the Selling Security Holders.
The Selling Security Holders and any underwriters, dealers, brokers, or
agents executing selling orders on behalf of the Selling Security Holders may be
deemed to be "underwriters" within the meaning of the Securities Act and any
profits on the sale of the Profit Shares, the Warrant Shares or the Placement
Agent Shares by them and any discounts, commissions or concessions received by
such underwriters, dealers, brokers or agents may be deemed to be underwriting
discounts and commissions under the Securities Act of 1933 (the "Securities
Act").
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.
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.
The date of this Prospectus is , 1998
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The purchase price for the Put Shares is equal to the lower of (i) 87%
of the market price at the time of the Put; or (ii) the difference of such
market price minus $0.225.
The exercise price for the Warrants to purchase up to 1,200,000 shares
of Common Stock of the Company will be equal to 108% of the lowest closing bid
price of the Company's Common Stock during the ten days immediately preceding
the applicable six month period prior to such grant. The exercise price for the
Placement Agent Warrants to purchase up to 1,000,000 shares of Common Stock of
the Company will be based on (i) 125% of the price at which shares of Common
Stock are purchased pursuant to any such puts during certain six month periods;
and (ii) 108% of the lowest closing bid price of the Common Stock for the ten
trading days immediately preceding the applicable six month period.
Accordingly, the actual number of shares of Common Stock issued to the
Selling Security Holders and sold hereby will depend upon the market price of
the Common Stock at the time of the Put Right or exercise of the Warrants or the
Placement Agent Warrants. Accordingly, this Prospectus covers the resale in
accordance with Rule 416 under the Securities Act of 1933 (the "Act") of such
presently indeterminate number of additional shares as may be issuable upon the
exercise of the Put Right or exercise of the Warrants and the Placement Agent
Warrants based on fluctuations in the Put price or exercise price of such
warrants.
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 Holders have advised the Company that they propose
to sell the Shares, from time to time, publicly through broker-dealers acting as
agents for others, or in private sales. See "Selling Security Holders" 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 Holders.
The Company will pay all offering expenses for the offering, estimated
at approximately $29,000, including (i) the SEC registration fee ($6,373); (ii)
legal fees and expenses ($5,000); (iii) blue sky fees ($1,000); (iv) accounting
fees and expenses ($10,000); (v) printing expenses ($5,000); and (vi)
miscellaneous expenses ($1,627), but will not pay any discounts or commissions
incurred by the Selling Security Holders in connection with the sale of their
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 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.
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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.
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TABLE OF CONTENTS
AVAILABLE INFORMATION................................................. 2
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE..................... 5
HIGH RISK FACTORS..................................................... 6
THE COMPANY.......................................................... 10
SELLING SECURITY HOLDERS............................................. 11
PLAN OF DISTRIBUTION................................................. 15
DESCRIPTION OF SECURITIES............................................ 16
LEGAL MATTERS........................................................ 19
EXPERTS.............................................................. 19
INDEMNIFICATION...................................................... 19
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
September 24, 1998 was approximately $1.44 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 Holders. 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
from the accounts of the Selling Security Holders. The Company has informed the
Selling Security Holders that the anti-manipulative rules under the Exchange Act
of 1934, including Regulation M thereunder, may apply to their sales in the
market, and has furnished the Selling Security Holders with a copy of these
rules. The Company has also informed the Selling Security Holders of the need
for delivery of copies of this Prospectus in connection with any sale of
securities registered hereunder.
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.
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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, 1998, filed September 30, 1998.
(b) The description of the Company's Common Stock contained in a
Registration Statement on Form 8-A filed under the Securities Exchange Act of
1934, as amended, including any amendment or report filed for the purpose of
updating such description.
(c) 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, 865 S.W. 78th Avenue, Suite
100, Plantation, FL 33324, Telephone (954) 233-8746.
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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 June 30, 1998, the Company has incurred
operating losses. The net loss for the fiscal year ended June 30, 1998 was
$7,856,136. At June 30, 1998, the Company had an accumulated deficit of
$39,624,889. 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-derived 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, 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 U.S. Food and Drug
Administration ("FDA") or by European Union ("EU") regulatory authorities for
use in the treatment of patients. 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
("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, the
Company entered into a settlement with HRS which resulted in the discontinuation
of Viragen's statutory 499 Program with the exception of the Company's limited
HRS sanctioned HIV/AIDs program in Florida, which has since been terminated.
There can be no assurances that the Company's current production technology and
planned new facilities will comply with FDA and/or EU mandated cGMP standards.
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Additionally, the Product is the Company's sole product and until such
time as the Product achieves FDA and/or 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 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 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 regulatory authorities. 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 September 1993, President Clinton announced a series of
legislative and regulatory proposals aimed at reforming the health care system.
Although many of 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.
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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
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 future patent applications will be approved, and if granted, whether
such patents will provide substantial protection to the Company.
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
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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, Dr. Jay Sawardeker, its Executive Vice
President and Chief Operating Officer, Mr. Dennis W. Healey, its Executive
Vice President, Treasurer and Chief Financial Officer, and its Director of
Research and Development, Dr. Joseph Morris. The Company has entered into
employment agreements with Messrs. Smith, Sawardeker, Healey and Morris
which restrict competitive activities by them during the term of their
agreements and for a two-year period thereafter. 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.
POSSIBLE RESALES OF SECURITIES BY CURRENT STOCKHOLDERS AND DEPRESSIVE EFFECT ON
MARKET
As of September 21, 1998, there were 4,795,882 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"),
exclusive of shares of Common Stock underlying outstanding shares of the
Company's Preferred Stock and underlying various options and warrants. 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 one year 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 pursuant to various filed registration
statements, could also have a depressive effect on the market price of the
Company's Common Stock.
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 September 21, 1998, 2,650 shares of Series A
Preferred Stock, 419 shares of Series H Preferred Stock (face value $10,000 per
share) and 177 shares of Series I Preferred Stock (face value $10,000 per share)
were issued and outstanding. As provided in the Company's Certificate of
Incorporation, preferred stock may be issued by resolutions of the
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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
Viragen, Inc. was organized in December 1980 to engage in research,
development and manufacture of certain immunological products for commercial
application, particularly human leukocyte-derived alpha interferon, for
antiviral and therapeutic applications and as anticancer agents. Viragen's
primary product (the "Product") is a natural human leukocyte-derived 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)
(now discontinued) 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")
regulatory authorities, and there can be no assurances that approval of the
Product will be obtained at any time in the future.
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 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 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 March 1998, the Company commenced safety and preclinical trials in
Europe of Omniferon. The Company anticipates the commencement of clinical
trials in the first calendar quarter of 1999.
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<PAGE> 14
Viragen's executive office is located at 865 S.W. 78th Avenue, Suite
100, Plantation, FL 33324 Telephone (954) 233-8746; Facsimile No. (954)
233-1414.
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, THOSE DISCUSSED IN "RISK FACTORS" AND "MANAGEMENT'S DISCUSSION AND
ANALYSIS" IN THE COMPANY'S FORM 10K ANNUAL REPORT FILED FOR THE FISCAL YEAR
ENDING JUNE 30, 1998, 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, 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 HOLDERS
REGULATION D COMMON STOCK PRIVATE EQUITY LINE SUBSCRIPTION AGREEMENT
OVERVIEW
On September 22, 1998 (the "Subscription Date"), the Company entered
into a Regulation D Common Stock Private Equity Line Subscription Agreement (the
"Subscription Agreement") with Swartz Private Equity, LLC (the "Subscriber").
The Subscription Agreement entitles the Company to require the Subscriber to
purchase up to $20,000,000 of the Company's Common Stock (the "Put" or "Put
Right") from time to time during a three-year period beginning on the
Subscription Date (the "Term").
PUT RIGHTS
In order to invoke a Put Right, the Company must have a registration
statement (the "Registration Statement"), registering the shares of Common Stock
for the Put Shares, Warrant Shares and any Additional Shares (all as defined
below) effective and current (the "Effective Period"). During any Effective
Period, and subject to certain limitations and conditions, the Company may give
10 days (or in certain cases 20 day) advance notice to the Subscriber ("Advance
Put Notice") of the date on which the Company intends to exercise a particular
Put Right ("Put Date"). The Advance Put Notice must indicate the number of Put
Shares the Subscriber will be required to purchase (the "Put Share Amount"), and
the minimum period of consecutive trading days for the purpose of determining
the requisite reported trading volume (the "Volume Evaluation Period") and the
corresponding pricing period (the "Pricing Period") for determining the price of
the Common Stock subject to the Advance Put Notice. The Put
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<PAGE> 15
Share Amount may not exceed a number of shares of Common Stock equal to one half
of the aggregate daily reported trading volume of the Company's Common Stock
(the "Trading Volume") during the ten consecutive trading days ending on the
trading day immediately preceding the Put Date.
For each Put Share, the Subscriber will pay the Company (the "Put Share
Price") the lesser of (i) the lowest closing bid price of the Company's Common
Stock during the number of days immediately following the Put Date equal to
twice the number of days in the Volume Evaluation Period (the "Pricing Period")
minus $0.225; or (ii) 87.5% of the lowest closing bid price of the Company's
Common Stock during the Pricing Period.
WARRANTS
On each six month anniversary of the Subscription Date (the "Six Month
Period"), the Subscription Agreement also requires the Company to issue the
Warrants to purchase a number of shares of Common Stock (the "Warrant Shares")
equal to 10% of the number of shares of Common Stock issued to the Subscriber
for all Puts exercised in the Six Month Period. The Warrants will be exercisable
for a five year period beginning on the date such Warrants are issued. The
Warrants are exercisable at a price equal to 108% of the lowest closing bid
price of the Company's Common Stock during the ten days immediately preceding
the applicable Six Month Period.
LIMITATIONS AND CONDITIONS PRECEDENT TO COMPANY'S PUT RIGHTS
The Subscriber shall not be required to acquire and pay for any Put
Shares with respect to any particular Put for which: INTER ALIA, (i) the Company
has announced or implemented a stock split of its Common Stock; (ii) the Company
has paid a common stock dividend; (iii) the Company has made a distribution of
its Common Stock or of all or any portion of its assets between the Put Notice
date and the date the particular Put closes; (iv) the Company has consummated a
major transaction (including a transaction which constitutes a change of
control) between the Put Notice date and the date the particular Put closes; or
(v) the Company has not fulfilled certain due diligence requirements of the
Subscriber.
The Subscriber will also not be required to purchase any number of Put
Shares which when added to the aggregate number of Put Shares, Warrant Shares
and Additional Shares previously acquired by the Subscriber would exceed 20% of
the outstanding Common Stock of the Company ("20% Issuance") unless the Company
has obtained stockholder approval pursuant to NASDAQ Rule 4460(I)(l)(d)(ii) to
consummate the 20% Issuance. In the event the Company is unsuccessful in
obtaining stockholder approval for any 20% Issuance, the Company must pay the
Subscriber a cash amount equal to the number of shares underlying the 20%
Issuance multiplied by the lowest closing bid price of the Company's Common
Stock during the applicable period.
TERMINATION OF OBLIGATIONS TO PURCHASE PUT SHARES AND DAMAGES
The Subscriber has the option to terminate ("Termination Rights") its
obligations to purchase Put Shares if the Company's Common Stock is de-listed
from the NASDAQ National SmallCap Market System for a period of greater than
four consecutive months (the "Delisting Event"), the Registration Statement
remains ineffective for a period of four consecutive months (the "Ineffective
Period") or any Delisting Event and Ineffective Period continue for a combined
four month consecutive period.
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<PAGE> 16
The holders of the Put Shares (the "Holders") are also entitled to
receive payments from the Company in cash or Common Stock (at the Holders'
option) during any Delisting Event or Ineffective Period based on the number of
Put Shares and Warrant Shares held by the Holder and the length of time the
Delisting Event or Ineffective Period persist. In addition, in the event the
closing bid price of the Company's Common Stock during the ten (10) trading days
after an Ineffective Period or Delisting Event ends is less than the closing bid
price on the trading day immediately preceding the Ineffective Period or
Delisting Event, the Company will be obligated to issue the Holders additional
shares of Common Stock (the "Additional Shares") based on the difference in
closing bid prices on the applicable dates.
SHORT SALES
The Subscriber and its affiliates are prohibited from engaging in short
sales of the Company's Common Stock unless the Subscriber has received a Put
Notice and amount of shares involved in such short sales does not exceed the Put
Share Amount specified in such Put Notice.
COMPANY'S OPTION TO CANCEL PUTS
The Company may cancel a particular Put (the "Put Cancellation")
between the date of the Put Notice and the last day of the Pricing Period if (i)
the Company discovers a material fact relative to the Subscriber's investment
decision or an Ineffective Period occurs after a Put Date but before a Put
closing; or (ii) the closing bid price of the Company's Common Stock on the date
the Subscriber receives notice of the Company's intent to cancel a Put is less
than 80% of the closing bid price of the Company's Common Stock on the date the
most recent Put Notice was delivered. Notwithstanding any Put Cancellation, the
Company will be required to issue the Subscriber a number of unlegended shares
equal to the number of shares of Common Stock sold by the Subscriber between the
date of the most recent Put Notice and the applicable Put Cancellation date.
TERMINATION OF SUBSCRIPTION AGREEMENT
The Company may also terminate its right to initiate further Puts or
terminate the Subscription Agreement by providing the Subscriber with notice of
such intention to terminate; however, any such termination will not affect any
other rights or obligations of the Company pursuant to the Subscription
Agreement or any related agreement.
In the event of the Company's termination of the Subscription
Agreement, the Company may be required to pay the Placement Agent the
difference between Cash Placement Fees earned prior to notice of termination
and $200,000. In addition, in the event of such termination, the Placement
Agent and Subscriber will retain their rights of first refusal on certain
equity funding transactions for a six month period following notice by the
Company of such termination.
RESTRICTIVE COVENANTS
During the Term, the Company is prohibited from issuing or issuing any
debt or equity securities in a private transaction which are convertible or
exercisable into shares of Common Stock at a price based on the trading price of
the Common Stock or any such securities with a fixed conversion or exercise
price subject to adjustment based on the occurrence of contingent events
("Variable Priced Securities"). The Company is also prohibited from entering
into any private equity line type agreements similar to the Subscription
Agreement without obtaining the Subscriber's prior written approval. In
addition, the Company is prohibited from disposing of any of its material assets
to any subsidiary of the Company (except for cash transactions) and selling any
of its material assets to any owner of 20% or more of the Company's Common
Stock.
13
<PAGE> 17
RIGHT OF FIRST REFUSAL
The Subscriber has the right of first refusal to purchase any Variable
Priced Securities offered by the Company in any private transaction which closes
on or prior to six months after the termination of the Subscription Agreement.
PLACEMENT AGENT
Swartz Investments, LLC, d/b/a Swartz Institutional Finance (the
"Placement Agent") acted as placement agent for the transactions contemplated by
the Subscription Agreement. In consideration for its services, the Placement
Agent is entitled to receive a cash fee of up to 7% for the first $5,000,000
raised, 6% for the amounts between $5,000,000 and $10,000,000 raised and 3.5%
for any amounts raised over $10,000,000 from the transactions contemplated by
the Subscription Agreement excluding any proceeds received by the Company from
the exercise of the Warrants. The Placement Agent is also entitled to receive
warrants (the "Placement Agent Warrants") to purchase a number of shares of
Common Stock of the Company based on the number of Put Shares and Warrants
purchased by, and issued to, the Subscriber in any Six Month Period at exercise
prices based on (i) 125% of the Put Share Price for the Put Shares purchased in
the applicable Six Month Period; and (ii) 108% of the lowest closing bid price
of the Common Stock for the ten trading days immediately preceding the
applicable Six Month Period. The Placement Agent Warrants are exercisable for a
period of five years from the date of issuance.
SUBSCRIBERS RIGHT OF INDEMNIFICATION
The Company is obligated to indemnify the Subscriber (including their
stockholders, officer, directors, employees and agents) from all liability and
losses resulting from any misrepresentations or breaches of the Company made in
connection with the Subscription Agreement (including the Registration Rights
Agreement and other related agreements), the Registration Statement or any
derivative or other litigation involving the Company based on breach of
fiduciary duty of the Company's officers or directors.
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 Warrants and the Placement Agent Warrants as of September 28, 1998 to be
offered by the Selling Security Holders and the amount to be owned by the
Selling Security Holders following sale of such shares of Common Stock. As of
September 21, 1998, there were 54,425,121 outstanding shares of Common Stock of
the Company.
<TABLE>
<CAPTION>
Shares to be
Name of Selling Number of Shares to Owned After
Security Holders Shares Owned(3) be Offered Offering
- ---------------- --------------- ---------- ------------
<S> <C> <C> <C>
Swartz Private Equity, LLC(1) 0 0 0
Swartz Investments, LLC(2) 0 0 0
</TABLE>
- ----------------------
14
<PAGE> 18
(1) Does not include up to (i) 12,000,000 shares of Common Stock issuable
in connection with the exercise of Put Rights pursuant to the
Subscription Agreement; (ii) 1,200,000 shares of Common Stock issuable
upon the conversion of the Warrants exercisable for a five year period
beginning on the date such Warrants are issued at a price equal to 108%
of the lowest closing bid price of the Company's Common Stock during
the ten days immediately preceding the applicable Six Month Period; and
(iii) 800,000 Shares of Common Stock that may be issuable to the
Subscriber as a result of adjustment of the number of shares of Common
Stock to be issued as additional shares as a result of certain events
which may cause a delay or suspension of the sales of shares of Common
Stock by the Subscriber Security Holder. Address is 200 Roswell Summit,
Suite 285, 1080 Holcomb Bridge Road, Roswell, Georgia 30076.
(2) Does not include up to 1,000,000 shares of Common Stock issuable upon
exercise of the Placement Agent Warrants. Address is 1080 Holcomb
Bridge Road, 200 Roswell Summit, Suite 285, Roswell, Georgia 30076.
(3) This Prospectus also covers the resale of such presently indeterminate
number of additional Shares as may be issuable in accordance with the
Subscription Agreement and upon conversion of the Warrants and
Placement Agent Warrants based upon such fluctuations in the conversion
price.
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 Holders. The
Company has agreed to indemnify the Selling Security Holders against civil
liabilities including liabilities under the Securities Act of 1933.
PLAN OF DISTRIBUTION
The Shares offered hereby by the Selling Security Holders may be sold
from time to time by the Selling Security Holders, 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
Holders and purchasers without a broker-dealer or other intermediary. In
addition, the Selling Security Holders may from time to time, subject to the
restrictions described below and previously under "Selling Security Holders",
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 Holders may arrange
for other broker-dealers or agents to participate. Such broker-dealers may
receive commissions or discounts from the Selling Security Holders 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
15
<PAGE> 19
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.
Upon the Company being notified by the Selling Security Holders 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.
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 54,425,121 shares were
outstanding as of September 21, 1998. 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, 419 shares of Series H Preferred Stock
(face value $10,000 per share) and 177 shares of Series I Preferred Stock (face
value $10,000 per share) were outstanding as of September 21, 1998.
COMMON STOCK
Subject to the dividend rights of the holders of Preferred Stock,
holders of shares of Common Stock are entitled to share, on a ratable basis,
such dividends as may be declared by the Board of Directors out of funds,
legally available therefor. Upon liquidation, dissolution or winding up of the
Company, after payment to creditors and holders of Preferred Stock that may be
outstanding, the assets of the Company will be divided pro rata on a per share
basis among the holders of the Common Stock.
Each share of Common Stock entitles the holders thereof to one vote.
Holders of Common Stock do not have cumulative voting rights which means that
the holders of a plurality of the shares voting for the election of Directors at
any Special or Annual Meeting of Stockholders 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
16
<PAGE> 20
in order to enhance its financial flexibility, such preferred stock could
possibly be used by the Company as a means to preserve control by present
management in the event of a potential hostile takeover of the Company. In
addition, the issuance of large blocks of preferred stock could possibly have a
dilutive effect with respect to the existing holders of Common Stock of the
Company.
The Company has authorized 375,000 shares of Series A Preferred Stock
of which 2,650 shares are issued and outstanding, and has authorized 500 shares
of Series H Preferred Stock and 200 shares of Series I Preferred Stock, of which
419 shares and 177 shares, respectively, are outstanding. The Company has also
authorized the issuance of 15,000 shares of 5% Cumulative Convertible, Series B
Preferred Stock, 5,000 shares of Series C Preferred Stock, 15,000 shares of
Series D Preferred Stock, 5,000 shares of Cumulative Convertible Preferred
Stock, Series E; 15,000 shares of Convertible Preferred Stock Series F and 4,000
shares of Series G Preferred Stock, no shares of which are outstanding. The
Company is in the process of eliminating the authorizations for such previously
issued preferred series whose shares are no longer outstanding.
SERIES A PREFERRED STOCK
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 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 H AND SERIES I PREFERRED STOCK
The Series H Preferred Stock and the Series I Preferred Stock
(sometimes collectively referred to as the "Preferred Stock") bears no
dividends, although an 8% accretion factor has been included in the calculation
for purposes of determining the liquidation and conversion amounts. The
Preferred Stock carries no voting rights. The stated value of the Preferred
Stock is $10,000 per share.
The Preferred Stock, inclusive of the 8% accretion factor, is
convertible commencing, subject to adjustment, into shares of Common Stock of
the Company at the lower of (i) the Fixed Conversion Price which will equal the
lower of (a) $2.15 or (b) the average of the lowest two closing bid prices of
the Company's Common Stock on the NASDAQ National Market System (or on the
principal securities exchange on which the Company's Common Stock is then
traded) during the 20 trading days prior to August 19, 1998, (the "Market
Price") subject to a minimum Fixed Conversion Price, equal to a Market Price of
$0.85; or (ii) the Variable Conversion Price which will equal 82% of the Market
Price on the date of conversion (the "Conversion Price"). The amount of the
Shares a holder of the Preferred Shares may convert into is limited to a maximum
of 15% of the aggregate principal amount of the Series H Preferred Stock or the
Series I Preferred Stock, as the case may be, issued to such holder for each
monthly period, subject to a maximum of 25% per monthly period for each series
of Preferred Stock if the holder has not elected to convert the permitted 15%
amount for such series during any previous monthly conversion period. In
addition, such conversion quota will not be applicable in the event the Company
completes certain offerings of its securities.
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<PAGE> 21
At the option of the Company, any shares of Preferred Stock which are
outstanding on August 19, 2000 will either be (i) automatically converted at the
Conversion Rate (which is calculated by dividing the sum of the product of (a)
.08; (b) by the quotient of the number of days between the date the Holder fully
paid for the Preferred Stock and the date of conversion and (c) the Stated Value
plus 10,000, and divided by the Conversion Price) or (ii) automatically redeemed
at the Stated Value plus any liquidated damages, conversion failure payments,
late registration payments and any other cash payments then due from the Company
and then unpaid ("Total Value").
The Company also has the right to redeem ("Right to Redeem") all or any
part of the Preferred Stock submitted for conversion, if on the date of
conversion the Conversion Price of the Company's Common Stock is less than the
Fixed Conversion Price. Under the Right to Redeem option, if the closing bid
price of the Common Stock on the date of conversion ("Closing Bid Price") is
less than $1.50, the redemption price paid by the Company to the Holder will be
$11,200 per share of Preferred Stock, and if the Closing Bid Price is greater
than $1.50, the redemption price paid by the Company to the Holder will be
$11,750 per share of Preferred Stock.
In addition, at any time commencing February 20, 1999, the Company has
the Right to Redeem from time to time any and all the Preferred Stock, provided,
however, that the Company is only entitled to redeem Preferred Stock having an
aggregate Stated Value of at least $1,000,000. The redemption price is equal to
120% of the Total Value of the Preferred Stock through August 19, 1999,and is
equal to 115% of the Total Value of the Preferred Stock through August 19, 2000.
The Company intends to redeem the Preferred Stock at such time as the Market
Price is $1.83 or lower.
Pursuant to the terms of the Subscription Agreements, a holder may not
convert Preferred Stock if, as a result of such conversion, the shares of Common
Stock beneficially owned by the holder would exceed 4.9% (the "Percentage") of
the outstanding shares of Common Stock of the Company (the " 4.9% Restriction").
Notwithstanding, the converting holder or holders may waive the applicability of
the 4.9% Restriction (the "Waiver") by providing notice to the Company of such
holder or holders intent to waive such restriction. In no event may the holders
convert Preferred Stock if the total number of shares of Common Stock issuable
upon conversion would exceed the maximum number of shares of Common Stock that
the Company could, without stockholder approval, issue pursuant to Nasdaq Rule
4460(i)(l)(d)(ii).
The Company has agreed not to issue any debt or equity securities for
cash in private capital raising transactions through August 18, 1998 without
obtaining the prior written approval of holders holding a majority of the
purchase price of the Series H Preferred Stock and the Series I Preferred Stock
then outstanding. In addition, the Company has agreed that through February 19,
1999, the Company will not, without the prior written consent of each holder,
issue or sell, or agree to issue or sell, any equity or debt securities of the
Company (not including securities sold in underwritten public offerings or
mergers, acquisitions or similar transactions) or any of its subsidiaries (or
any security convertible into or exercisable or exchangeable, directly or
indirectly, for equity or debt securities of the Company or any of its
subsidiaries) unless the Company shall have first delivered to each holder at
least 30 days prior to the closing of such future offerings a written notice
describing such future offering and providing each holder and its affiliates an
option during the 20-day period following delivery of such notice to purchase up
to the full amount of the securities being offered in the future offering on
such terms as contemplated by such future offering. However, if any holder
chooses not to participate in any such future offering, then any debt or equity
security issued as a result of such future offering will be ineligible for
resale and/or conversion, as the case may be, until November 19, 1998.
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
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<PAGE> 22
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
Shareholders 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 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. appearing in
Viragen, Inc.'s Annual Report (Form 10-K) for the year ended June 30, 1998, have
been audited by Ernst & Young LLP, independent 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,
19
<PAGE> 23
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 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
20
<PAGE> 24
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.
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.
21
<PAGE> 25
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.
Registration fee................................... $ 6,373
Legal fees and expenses............................ 5,000
Blue sky qualification fees and expenses .......... 1,000
Accounting fees and expenses....................... 10,000
Printing expenses.................................. 5,000
Miscellaneous...................................... 1,627
-------
Total ............................................. $29,000
=======
- ----------------
*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 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:
II-1
<PAGE> 26
"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.
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,
II-2
<PAGE> 27
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 Article VII of the By-Laws, or elsewhere in the
By-Laws, shall operate to indemnify any director or officer of such
indemnification if 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."
Item 16. Exhibits.
EXHIBIT DESCRIPTION
- ------- -----------
(2) Plan of acquisition, reorganization, arrangement,
liquidation or succession (incorporated by reference
to the Company's registration statement on Form S-3
dated April 15, 1997, as amended, File No. 333-25187,
Part II, Item 16, (2)("April 1997 Form S-3)).
(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 (incorporated by reference to
April 1997 Form S-3, Item 16, (4))
(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)
II-3
<PAGE> 28
(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
(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 (incorporated by reference to
the Company's Registration Statement on Form S-8
filed June 9, 1995)
(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) Omitted
(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)
(4)(xvi) Certificate of Designations, Preferences and Rights
for Series F Preferred Stock (incorporated by
reference to the Company's Current Report on Form 8-K
dated September 22, 1997)
II-4
<PAGE> 29
(4)(xvii) Certificate of Designations, Preferences and Rights
for Series G 10% Cumulative Convertible Preferred
Stock (incorporated by reference to the Company's
Current Report on Form 8-K dated September 22, 1997)
(4)(xvii) Certificate of Designations, Preferences and Rights
for Series H Preferred Stock (incorporated by
reference to the Company's Registration Statement on
Form S-3 dated April 17, 1998)
(4)(xviii) Certificate of Designations, Preferences and Rights
of Series I Preferred Stock (incorporated by
reference to the Company's Registration Statement on
Form S-3 dated April 17, 1998)
(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))
(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))
II-5
<PAGE> 30
(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))
(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))
II-6
<PAGE> 31
(10)(xxi) Amendment No. 2 to the Loan 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)(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
(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 (incorporated by reference to the April
1997 Form S-3, Part II, Item 16, 10(xxxi)).
(10)(xxxii) Amendment No. 1 to Agreement for Sale of Stock with
Cytoferon
II-7
<PAGE> 32
(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)
(10)(xl) 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)(xli) 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)(xlii) 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)(xliii) 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)
II-8
<PAGE> 33
(10)(xliv) 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)
(10)(xlv) Employment Agreement between Gerald Smith and the
Company dated March 1, 1997 (incorporated by
reference to the Company's Annual Report on Form 10-K
for the year ended June 30, 1997)
(10)(xlvi) Employment Agreement between Dennis E. Healey and
the Company dated March 1, 1997 (incorporated by
reference to the Company's Annual Report on Form 10-K
for the year ended June 30, 1997)
(10)(xlvii) Employment Agreement between Robert C. Reeh and the
Company dated May 19, 1997 (incorporated by reference
to the Company's Annual Report on Form 10-K for the
year ended June 30, 1997)
(10)(xlviii) 11 month 10% Promissory Note dated July 1, 1997
(incorporated by reference to the Company's Current
Report on Form 8-K dated August 28, 1997)
(10)(xlix) Employment Agreement between Robert H. Zeiger and
the Company dated August 1, 1997 (incorporated by
reference to the Company's Annual Report on Form 10-K
for the year ended June 30, 1997)
(10)(lii) Stock Exchange Agreement (Series F Convertible
Preferred Stock Exchange Agreement) (incorporated by
reference to the Company's Current Report on Form 8-K
dated September 22, 1997, Item 7(c)4)
(10)(liii) Stock Exchange Agreement (Series G Convertible
Preferred Stock Exchange Agreement) (incorporated by
reference to the Company's Current Report on Form 8-K
dated September 22, 1997, Item 7(c)5)
(10)(liv) 10% Promissory Note to Clearwater Fund IV, LTD.
(incorporated by reference to the Company's Current
Report on Form 8-K dated September 22, 1997, Item
7(c)1)
(10)(lv) Cooperation and Supply Agreement between the Company
and the German Red Cross dated May 19, 1998
(incorprated by reference to the Company's Annual
Report on Form 10-K for the year ended June 30, 1998)
(10)(lvi) Series H Convertible Preferred Stock, Form of
Subscription Agreement dated February 17, 1998 and
related Registration Rights Agreement and Common
Stock Purchase Warrants (incorporated by reference to
the Company's Registration Statement on Form S-3
dated April 17, 1998)
(10)(lvii) Series I Convertible Preferred Stock, Form of
Subscription Agreement dated April 2, 1998 and
related Registration Rights Agreement and Common
Stock Purchase Warrants (incorporated by reference to
the Company's Registration Statement on Form S-3
dated April 17, 1998)
(10)(lviii) Cooperation and Supply Agreement between the
Company, Viragen Deutschland GmbH and German Red
Cross dated March 19, 1998 (Certain portions of this
exhibit have been redacted pursuant to a
Confidentiality Request submitted to the Securities
and Exchange Commission) (incorporated by reference
to the Company's Annual Report on Form 10-K for the
year ended June 30, 1998)
(10)(lix) Buffycoat Supply Agreement between America's Blood
Centers and the Company dated July 15, 1998 (Certain
portions of this exhibit have been redacted pursuant
to a Confidentiality Request submitted to the
Securities and Exchange Commission) (incorporated by
reference to the Company's Annual Report on Form 10-K
for the year ended June 30, 1998)
(10(lx) Agreement between the Company the American Red Cross
dated August 18, 1998 (incorporated by reference to
the Company's Annual Report on Form 10-K for the year
ended June 30, 1998)
(10)(lxi) Strategic Alliance Agreement between the Company and
Inflammatics, Inc. and Inflamatics Inc. Series A
Convertible Preferred Stock Purchase Agreement
(incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended June 30, 1998)
(10)(lxii) Common Stock Private Equity Line Subscription
Agreement, Registration Rights Agreement, Private
Placement Agreement, Placement Agent Warrant and
Investor Warrant dated September 22, 1998
(incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended June 30, 1998)
(11) Computation of Per Share Earnings (incorporated by
reference to the Company's Quarterly Report on Form
10-Q dated February 10, 1998, Part II, Item 6 (11))
(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))
- -----------------------
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 Statement to
include any additional or changed material information on the plan of
distribution;
II-9
<PAGE> 34
(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.
II-10
<PAGE> 35
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 30th day of September 1998.
VIRAGEN, INC.
By: /s/ GERALD SMITH
---------------------------------
Gerald Smith
Chairman of the Board of
Directors 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.
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>
/s/ GERALD SMITH Chairman of the September 30, 1998
- -------------------------- Board of Directors
Gerald Smith and President
/s/ ROBERT H. ZEIGER Principal Executive Officer September 30, 1998
- -------------------------- and Director
Robert H. Zeiger
</TABLE>
II-11
<PAGE> 36
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/S/CARL N. SINGER Director and Chairman of the September 30, 1998
- ---------------------------- Executive Committee
Carl N. Singer
/s/ DENNIS W. HEALEY Executive Vice President September 30, 1998
- ---------------------------- Treasurer, Principal
Dennis W. Healey Financial Officer,
Director and Secretary
Principal Operating Officer
/s/ CHARLES J. SIMONS Director and Chairman of the September 30, 1998
- ---------------------------- Audit, Finance and Compensation
Charles J. Simons Committee
Executive Vice-President September , 1998
- ----------------------------
Charles F. Fistel
/s/ JOSE I. ORTEGA Controller and Principal September 30, 1998
- ---------------------------- Accounting Offier
Jose I. Ortega Accounting Officer
Director September , 1998
- ----------------------------
Sidney Dworkin
/s/ PETER D. FISCHBEIN Director September 30, 1998
- ----------------------------
Peter D. Fischbein
</TABLE>
II-12
<PAGE> 1
EXHIBIT 5
September 30, 1998
Viragen, Inc.
865 S.W. 78th Avenue, Suite 100
Plantation, Florida 33324
RE: REGISTRATION STATEMENT ON FORM S-3; VIRAGEN, INC. (THE "COMPANY"),
15,000,000 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 15,00,000 shares of Common Stock, par value $.01 per share (the
"Common Stock"), to be sold by Swartz Private Equity, LLC (the "Subscriber") and
Swartz Investments, LLC (the "Placement Agent") as designated in the
Registration Statement. The shares of Common Stock to be sold consist of up to
(i) 12,000,000 shares of Common Stock (the "Put Shares") issuable to the
Subscriber pursuant to certain put rights as set forth in a Regulation D Common
Stock Private Equity Line Subscription Agreement (the "Subscription Agreement");
(ii) 1,200,000 shares of Common Stock issuable upon the exercise of Common Stock
purchase warrants issuable to the Subscriber pursuant to the Subscription
Agreement (the "Warrants"); (iii) 1,000,000 shares of Common Stock (the
"Placement Agent Shares") issuable to the Placement Agent, for the transactions
contemplated in the Subscription Agreement, upon the exercise of Common Stock
purchase warrants (the "Placement Agent Warrants"); (iv) 800,000 shares of
Common Stock as may be issuable as a result of certain events that may cause a
delay or suspension of the sale of the Put Shares, the Warrant Shares and the
Placement Agent Shares by the Subscriber or the Placement Agent.
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, the Subscription Agreement
and documents pertaining to the Subscription Agreement, and exhibits and
corporate minutes provided to us by the Company. In all such examinations, we
have assumed the genuineness of all signatures on original
<PAGE> 2
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 to the Subscriber and the Placement Agent in
accordance with the Subscription Agreement and upon the exercise of the Warrants
and Placement Agent Warrants (assuming payment of the respective exercise prices
therefor), when issued in accordance with the terms of the Subscription
Agreement, the Warrants and the Placement Agent 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.
/s/ ATLAS, PEARLMAN, TROP & BORKSON, P.A
----------------------------------------
<PAGE> 1
EXHIBIT 23
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 15,000,000 shares of its common stock and to the
incorporation by reference therein of our report dated September 18, 1998, with
respect to the consolidated financial statements of Viragen, Inc. included in
its Annual Report (Form 10-K) for the year ended June 30, 1998, filed with the
Securities and Exchange Commission.
/s/Ernst & Young, LLP
Miami, Florida
September 28, 1998
