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Filed Pursuant to Rule 424(b)(3)
Registration Number 333-37464
Selling Security Holder Offering Prospectus
VIRAGEN, INC.
2,400,000 shares of common stock
The selling security holders will receive the proceeds from the re-sale
of the shares.
Our common stock is listed on the American Stock Exchange, under the
symbol "VRA". On May 11, 2000, the last reported sale price for our common stock
was $1.50 per share.
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE
SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS" BEGINNING AT
PAGE 5.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is June 2, 2000.
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TABLE OF CONTENTS
PAGE
----
About Viragen ........................................................ 3
Where You Can Find More Information .................................. 3
Risk Factors ......................................................... 5
Use of Proceeds ...................................................... 11
Dividend Policy ...................................................... 11
Selling Security Holders ............................................. 11
Plan of Distribution ................................................. 13
Description of Securities ............................................ 14
Legal Matters ........................................................ 15
Experts .............................................................. 16
You should rely only on the information contained in this document or
to which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information contained in this document may only be
accurate on the date of this document.
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ABOUT VIRAGEN
Viragen, Inc. is in the business of researching and developing products
which help the human immune system resist viral infections. We were organized in
1980. Our primary product is a natural interferon product named Omniferon(TM),
which we produce using human white blood cells. Natural interferon stimulates
and controls the human immune system. In addition, interferon may stem the
growth of various viruses including those involved with diseases like hepatitis,
multiple sclerosis, cancer and HIV/AIDS.
Neither the United States Food and Drug Administration nor the
European Union regulatory authorities has approved our product. When we refer to
"product" later in this prospectus, we do not intend to imply that our product
has regulatory approvals that will allow it to be marketed currently. Viragen
will seek Food and Drug Administration and European Union regulatory authority
approval for various uses of its Omniferon product in the future. This approval
requires several years of clinical trials and substantial additional funds. We
are concentrating our efforts on obtaining the necessary regulatory approvals
for our Omniferon product so that we may market our product. This will be
initially in the European Union and eventually from the Food and Drug
Administration for the United States.
Our affiliate, Viragen (Scotland) Ltd., has entered into a license and
manufacturing agreement with the Common Services Agency of Scotland, and the
Scottish National Blood Transfusion Service. As a result of this agreement, the
Scottish National Blood Transfusion Service will help in the manufacture of our
natural interferon product for exclusive distribution in the European Union and
on a non-exclusive basis worldwide. The Scottish National Blood Transfusion
Service will receive royalties and special access to our Omniferon product. We
have also entered into agreements with the American Red Cross, America's Blood
Centers and the German Red Cross for supplies of white blood cells. These
sources of white blood cells will enable us to manufacture Omniferon in
sufficient quantities to conduct planned European Union and United States
clinical trials. Subject to regulatory approvals, these sources will also
provide sufficient quantities of white blood cells for commercial manufacturing
in the future.
Our executive offices are located at 865 SW 78th Avenue, Suite 100,
Plantation, FL 33324. Our telephone number is (954) 233-8746; our facsimile
number is (954) 233-1414.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a
registration statement on Form S-3. This prospectus is a part of the
registration statement. It does not contain all of the information set forth in
the registration statement. For further information about Viragen, Inc. and its
common stock, you should refer to the registration statement. Statements
contained in this prospectus as to the contents of any contract or other
document referred to in this prospectus are not necessarily complete. Where a
contract or other document is an exhibit to the registration statement, each of
you should review the provisions of the exhibit, to which reference is made. You
may obtain these exhibits from the Securities and Exchange Commission, as
discussed below.
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We are required to file annual, quarterly, and current reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy these filings at the Securities and Exchange Commission
public reference rooms in Washington, D.C.; New York, NY; and Chicago, IL. You
may request copies of these documents by writing to the Securities and Exchange
Commission and paying a fee for copying costs. Please call the Securities and
Exchange Commission at 1-800-SEC-0330 for more information about the operation
of their public reference rooms. Copies of our filings are also available at the
Securities and Exchange Commission web site at HTTP://WWW.SEC.GOV or through our
web site at HTTP://WWW.VIRAGEN.COM.
The Securities and Exchange Commission allows us to "incorporate by
reference" information that we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is an important part of this prospectus,
and information that we file later with the Securities and Exchange Commission
will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings we will make with
the Securities and Exchange Commission under Section 13(a), 14 or 15(d) of the
Securities Exchange Act of 1934:
o Quarterly report on Form 10-Q, for the quarterly period ended March
31, 2000, filed May 15, 2000;
o Quarterly report on Form 10-Q, for the quarterly period ended
December 31, 1999, filed February 14, 2000;
o Quarterly report on Form 10-Q, for the quarterly period ended
September 30, 1999, filed November 15, 1999.
o Annual Report on Form 10-K/A for the fiscal year ended June 30,
1999, filed February 10, 2000; and
o Registration statement on Form S-3 (File No. 333-32306), filed March
13, 2000.
You may obtain a copy of these filings at no cost by writing, telephoning,
faxing or visiting out website at the following address:
Dennis W. Healey
Viragen, Inc.
865 S.W. 78th Avenue, Suite 100
Plantation, FL 33324
Telephone No.: (954) 233-8746
Facsimile No.: (954) 233-1414
Web Site: http://www.viragen.com.
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RISK FACTORS
An investment in our common stock is very risky. You should be aware
you could lose the entire amount of your investment. Prior to making an
investment decision, you should carefully read this entire prospectus and
consider the following risk factors.
WE HAVE A HISTORY OF LOSSES DUE TO LACK OF SALES AND REGULATORY APPROVALS. IF WE
DO NOT RECEIVE NECESSARY REGULATORY APPROVALS AND DEVELOP PROFITABLE OPERATIONS,
WE WILL NEED TO TERMINATE OUR OPERATIONS. AS A RESULT, INVESTORS MAY LOSE THEIR
ENTIRE INVESTMENT.
Since the organization of Viragen, we have incurred operating losses.
Losses have totaled:
o $9,025,326 for the nine month period ended March 31, 2000,
o $10,650,832 for the fiscal year ended June 30, 1999,
o $7,856,136 for the fiscal year ended June 30, 1998, and
o $4,775,245 for the fiscal year ended June 30, 1997.
At March 31, 2000, we had a total deficit since organization of $59,551,040 and
a working capital deficit of $1,870,309.
We presently produce a single product known as Omniferon(TM), a natural
human leukocyte derived alpha interferon. However, because the United States
Food and Drug Administration and the European Union regulatory authorities have
not yet approved our natural interferon product, we cannot sell this product. As
a result, we have no current source of income from operations.
We will not be able to reduce our losses or operate profitably, until
we obtain the necessary approvals to sell natural interferon. While we currently
have a 10% interest in a company that is developing a product for the treatment
of rheumatoid arthritis, we expect sales of natural interferon to be our primary
source of income. Investors must understand that our natural interferon product
may never receive the necessary approvals from regulatory authorities. In
addition, even if the product is approved, we may not be able to recover
sufficient profit from the sale of natural interferon. If we do not obtain the
required approvals or we do not profit from the sale of natural interferon or
other products, Viragen most likely will terminate its operations. In that case,
those who have invested in Viragen will likely lose their entire investment.
As a result of these conditions, our independent certified public
accountants included an explanatory paragraph in their report dated September
17, 1999. Their report indicated that these conditions raised substantial doubt
about our ability to continue as a going concern. As of May 12, 2000, we had on
hand less than one year's cash requirements.
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COMPETITIVE CONDITIONS IN THE PHARMACEUTICAL INDUSTRY MAY FORCE US TO TERMINATE
OPERATIONS.
Competition for investment capital and market share in the
immunological and pharmaceutical products industry is very strong. Our
competitors, which include major pharmaceutical companies, have more experience
in research, development and clinical testing of pharmaceutical and biomedical
products. We do not have, as yet, an immunological product that can be marketed.
Our competitors also have greater financial, marketing and human resources than
Viragen. Some of our competitors, including Hoffman-La Roche, Inc.,
Shering-Plough Corporation, Biogen, Inc., Chiron Corp., and Baxter Laboratories,
already have approvals for their synthetic interferons. They have been marketing
their products, since 1986. These companies have received wide acceptance from
the medical community and the patient population for their products. This will
make it more difficult for us to introduce our product, if and when we receive
the necessary regulatory approval. We only expect competition to increase in the
future. In addition, technological advances made by our competitors may make
synthetic products more effective, less costly and with less harmful side
effects. Viragen may not be able to keep pace with technological advances by
others, either because we do not have sufficient resources or because we cannot
achieve greater improvements in our technology. If we are unable to compete with
our larger, more experienced competitors, we may terminate operations.
Competition for funding in the pharmaceutical industry is also intense.
As explained above, we have no source of income, as yet. We may not have
sufficient sources of income or investment capital for a significant period of
time, if ever. We need additional funds to conduct clinical trials so we can
receive regulatory approvals. We must obtain additional funding from outside
sources to conduct these trials. If we are unable to locate funding or obtain
funding on reasonable terms, we will most likely terminate operations. In that
case, any investment in Viragen could be lost.
GOVERNMENT REGULATION MAY AFFECT VIRAGEN'S ABILITY TO DEVELOP AND DISTRIBUTE
NATURAL INTERFERON.
All pharmaceutical manufacturers are subject to state and federal rules
and regulations. In particular, we must comply with the United States Food and
Drug Administration guidelines governing production, testing and marketing.
European Union regulatory authorities also impose similar regulations. These
rules and regulations are constantly changing. These changes could extend the
period of clinical trials, involve costly compliance measures and may restrict
our ability to produce and distribute our natural interferon product based on
the results of testing. It is possible that we may never receive these
regulatory approvals for any specific illness or range of illnesses that we are
attempting to treat with our natural interferon product.
IF PATIENTS HAVE PROBLEMS RECEIVING THIRD PARTY REIMBURSEMENTS OF OUR PRODUCT,
IT WILL BE MORE DIFFICULT TO MARKET OUR PRODUCT. IN ADDITION, OUR MARKETING
COSTS WOULD INCREASE.
Our ability to successfully market our products depends in part on the
receipt of reimbursements from government health administration authorities,
private health coverage insurers and other organizations. The pricing of
products similar to ours or the amount of reimbursement available to patients
may affect our ability to market our product at a profit. Third party
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reimbursement limitations could restrict the patient population that will make
use of our product. If we have difficulty in getting third party payors to allow
reimbursement for our product, this could also require us to increase our
marketing efforts. This will involve greater expenses.
OUR PROPRIETARY TECHNOLOGY AND ANY FUTURE PATENTS THAT WE RECEIVE MAY NOT
PROVIDE SUFFICIENT PROTECTION TO US.
We intend to rely, in part, on technology developed by Viragen's
scientists for the efficient and safe production of natural interferon. We
believe that this technology allows us to produce our natural interferon more
efficiently and with less possible contaminants. Viragen recently filed two
patent applications relating to our Omniferon production technology. If we are
not successful in obtaining patents or demonstrating that our production process
is proprietary under trade secret law, we will have limited protection against
those who might copy our technology. In addition, we may be damaged if we are
accused of misappropriating a competitor's proprietary technology, even if these
claims are untrue. We cannot assure you that our patent applications will be
approved. Even if granted, we cannot assure you that these patents or any future
patent applications or our other proprietary rights will provide necessary
protection to us.
TECHNOLOGY TRANSFERS BY VIRAGEN TO THIRD PARTIES MAY NOT RESULT IN REVENUE TO
US.
One of our proposed marketing strategies is to license our
manufacturing technology to third parties. They, in turn, will use our
technology to produce natural human leukocyte alpha interferon outside the
United States. We cannot guarantee that these third parties will be able to
successfully market the product or that we will receive revenue from their
efforts.
WE MAY BE EXPOSED TO PRODUCT LIABILITY CLAIMS, AND OUR PRODUCT LIABILITY
INSURANCE MAY NOT BE SUFFICIENT TO COVER ALL CLAIMS OR CONTINUE TO BE AVAILABLE
TO US.
Persons, who claim to be injured from use of our natural interferon,
may file claims for personal injuries or other damages against us. In order to
protect Viragen against these claims, we maintain product liability insurance in
the amount of $1,000,000 per occurrence and $2,000,000 in total. We cannot be
sure that this insurance will be adequate to cover any liabilities that may
result from the use of our natural interferon. Also, we may not be able to
afford this form of insurance in the future.
OUR RELIANCE ON FOREIGN THIRD PARTY MANUFACTURER MAY DISRUPT OPERATIONS.
Viragen (Scotland) Ltd., a wholly-owned subsidiary of Viragen (Europe)
Ltd., our majority-owned subsidiary, entered into a manufacturing agreement with
the Common Services Agency of Scotland for the production of Omniferon. Under
this agreement, Viragen (Scotland) and the Common Services Agency will jointly
manufacture Omniferon. Our decision to use an offshore manufacturer could expose
us to risks involved with fluctuations in exchange rates of foreign currencies.
In addition, relying on the Common Services Agency exposes us to all the risks
of dealing with a foreign manufacturing source. These risks include:
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o local governmental regulations,
o tariffs,
o import and export restrictions,
o transportation,
o taxes, and
o foreign health and safety regulations.
Foreign manufacturing arrangements will limit our control. For
instance, the Common Services Agency has limited our access to portions of their
facility, when introducing stimulating agents during production. This may lead
to the disruption of our operations. This could negatively affect our operations
and your investment in us.
WE ARE DEPENDENT ON KEY EXECUTIVES AND THEIR LOSS WOULD BE DAMAGING TO VIRAGEN.
Mr. Gerald Smith, our chairman of the board and president, Mr. Dennis
W. Healey, our executive vice president, treasurer and chief financial officer,
and Dr. D. Magnus Nicolson, the managing director of Viragen (Scotland) Ltd.,
manage our day-to-day operations. We have employment agreements with Messrs.
Smith, Healey and Nicolson which restrict competitive activities by them.
However, the loss of their services would have a negative effect on our ability
to conduct business. Our future success will greatly depend on our ability to
attract and retain additional skilled personnel in various phases of our
operations.
WE WILL REQUIRE ADDITIONAL FUNDING TO CONDUCT OPERATIONS. THE FUNDING MAY NOT BE
AVAILABLE AND CAUSE US TO TERMINATE OUR OPERATIONS.
Viragen will continue to require significant funding in the future to
continue its operations. We estimate that we will require funding of
approximately $30 million, over the next three years. These funds would be used
to fund operations including clinical trials. We cannot assume that any
additional financing will be available. If financing is not available, we may
have to sell, suspend, or terminate our operations.
THE SALE OF OUR COMMON STOCK UNDER THIS SHELF REGISTRATION AND OTHER FINANCINGS
MAY CAUSE SUBSTANTIAL DILUTION TO OUR STOCKHOLDERS.
As described in the preceding risk factor, we will need additional
funding to continue to conduct operations. In December 1999, we retained the
investment banking firm of Ladenburg Thalmann & Co., Inc. to aid us in
identifying and developing financing sources. They will serve as the exclusive
placement agent for offerings under a shelf registration on Form S-3 (File No.
333-32306), and have agreed to assist us in raising up to $60,000,000 through
equity transactions. In order to raise the amount of funding needed, we may have
to issue millions of common shares.
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Also, during February and March 2000, Viragen issued short-term
convertible notes to two investors. The notes totaled $2,000,000 in principal.
Interest on one $1,000,000 note is payable at 8% and the second $1,000,000 note
bears an interest rate of 9.5%. The notes are convertible into a total of
2,000,000 common shares, which are being registered under this registration.
Future transactions with other investors could further depress the
price of our stock because of additional stockholder dilution.
WE MAY HAVE VIOLATED SECTION 5 OF THE SECURITIES ACT OF 1933 AND MAY HAVE A
CONTINGENT LIABILITY TO INVESTORS
In March 1999, we issued 8% convertible promissory notes in the amount
of $2,000,000 to two investors. In June 1999, we modified our agreements with
these investors to lower the conversion price of their promissory notes. We did
this in order to obtain a waiver from the investors for an interim financing. We
did the interim financing in May 1999 when we received $1,375,000 from three
other investors through the sale of our common stock. Since we had a pending
registration statement at the time of the June 1999 modification and the May
1999 interim financing, the Securities and Exchange Commission informed us that
we may have violated Section 5 of the Securities Act of 1933. If this is so, we
may have a contingent liability to the 8% convertible promissory note investors
and the three investors in the interim financing, since they may have the right
to rescind their transactions.
OUR OPERATIONS MAY SUFFER FROM COMPUTER PROBLEMS RELATING TO THE YEAR 2000.
Many existing computer programs use only two digits to identify a year
in the date field. These programs were designed and developed without
considering the impact of the upcoming change in the year 2000. Some older
computer systems store dates with only a two-digit year with an assumed prefix
of "19." Consequently, this limits those systems to dates between 1900 and 1999.
If not corrected, many computer systems and applications could fail or create
erroneous results by or at the year 2000.
Because we rely heavily on computers to conduct our business, we are
subject to all the risks associated with the year 2000 condition. We have
assessed the scope of our risks related to problems these computer systems may
have experienced upon the arrival of the year 2000. We believe that we have
adequately addressed these risks. In addition, we have questioned our vendors
and business partners about their progress in identifying and addressing
problems related to the year 2000. However, we cannot assure you that all of
these third party systems or that our computer systems are fully year 2000
compliant.
WE DO NOT EXPECT TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE.
We have never paid cash dividends on our common stock. We do not expect
to pay cash dividends on our common stock any time in the foreseeable future.
The future payment of dividends directly depends upon our future earnings,
capital requirements, financial requirements and other factors that our board of
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directors will consider. For the foreseeable future, we will use earnings from
operations, if any, to finance our growth, and we will not pay dividends to our
common stockholders. Since we do not anticipate paying cash dividends on our
common stock, return on your investment, if any, will depend solely on an
increase in the market value of Viragen's common stock.
POSSIBLE SALES OF SECURITIES BY CURRENT STOCKHOLDERS COULD HAVE A DEPRESSIVE
EFFECT ON MARKET VALUE OF OUR STOCK.
As of May 12, 2000, we had 7,651,821 shares of common stock
outstanding, which were "restricted securities," as defined by Rule 144 under
the Securities Act of 1933. Also, as of that date, we had short-term convertible
notes, convertible preferred stock, and common stock options and warrants
outstanding, which if converted or exercised, would result in 11,289,799
additional shares of our common stock outstanding. Under Rule 144, a person who
holds 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
and sales of common stock covered by registration statements filed by us,
including shares covered by this prospectus, may reduce the market price of our
common stock and will increase the number of our publicly-held securities.
WE COULD USE PREFERRED STOCK TO RESIST TAKEOVERS AND MAY ALSO CAUSE POTENTIAL
ADDITIONAL DILUTION.
Our Certificate of Incorporation authorizes 1,000,000 shares of
preferred stock, of which at May 12, 2000, 2,650 shares of series A preferred
stock were issued and outstanding. Our Certificate of Incorporation gives our
board of directors the authority to issue preferred stock without approval of
our stockholders. We may issue additional shares of preferred stock to raise
money to finance our operations. We may authorize the issuance of the preferred
stock in one or more series. In addition, we may set the following terms:
o dividend and liquidation preferences,
o voting rights,
o conversion privileges,
o redemption terms, and
o other privileges and rights of the shares of each authorized series.
The issuance of large blocks of preferred stock could possibly have a dilutive
effect to our existing stockholders. It can also negatively impact our existing
stockholders' liquidation preferences. In addition, while we include preferred
stock in our capitalization to improve our financial flexibility, we could
possibly issue our preferred stock to friendly third parties to preserve control
by present management. This could occur if we become subject to a hostile
takeover that could ultimately benefit Viragen and Viragen's stockholders.
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USE OF PROCEEDS
We used the net proceeds from the short-term borrowings for general
corporate purposes including the funding of clinical trials of our Omniferon
product, capital expenditures and general working capital.
DIVIDEND POLICY
We have never paid any dividends on our common stock. We do not
anticipate paying any cash dividends in the foreseeable future because:
o we have experienced losses since inception,
o we have significant capital requirements in the future, and
o we presently intend to retain future earnings, if any, to finance
the expansion of our business.
Future dividend policy will depend on:
o our earnings, if any,
o capital requirements,
o expansion plans,
o financial condition, and
o other relevant factors.
SELLING SECURITY HOLDERS
TRANSACTION OVERVIEW
On November 3, 1999, Viragen, Inc. borrowed $400,000 from Equitable
Equity Lending, Inc. through a note secured by a second mortgage and a security
agreement. The note bears interest at a rate of 12% per annum. Interest was
payable monthly commencing on December 3, 1999, with the principal and unpaid
interest due on May 3, 2000. The note with related accrued interest was paid in
full on April 21, 2000.
The note was secured by a mortgage on Viragen's Hialeah facility and
the laboratory equipment located in the facility. Also, while the mortgage's
promissory note was not convertible into common stock, Viragen did issue
Equitable a warrant to purchase 25,000 common shares, as additional
consideration. The warrant is exercisable at $0.95 per share through October 31,
2004.
On February 18, 2000, we entered into a subscription agreement with
Active Investors Ltd. II, an investment fund managed by Carl N. Singer. Mr.
Singer is a director of Viragen and the Chairman of its Executive Committee.
Under the terms of the subscription agreement, we issued to Active Investors
Ltd. II a convertible promissory note for the principal amount of $1,000,000.
The promissory note bears interest at a rate of 9.5% per annum. The principal
and
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interest are payable on February 17, 2001. Charles Simons, a director of Viragen
and the Chairman of its Audit, Finance & Compensation Committee, is an investor
in Active Investors Ltd. II.
Active Investors Ltd. II can elect to convert the unpaid principal and
interest, at any time, into common shares at the fixed rate of $1.00 per share.
Under the subscription agreement, Active Investors Ltd. II also received a
warrant to purchase 100,000 common shares. The warrant is exercisable at $2.00
per share through February 17, 2003.
On March 1, 2000, Viragen entered into a loan and escrow agreement with
AMRO International, S.A. Under the terms of this agreement, we issued to AMRO
International a convertible promissory note for the principal amount of
$1,000,000. The promissory note bears interest at a rate of 8% per annum. The
principal and interest are payable on March 1, 2001.
AMRO International can elect to convert the unpaid principal and
interest, at any time, into common shares at the fixed rate of $1.00 per share.
Under the subscription agreement, AMRO International also received a warrant to
purchase 100,000 common shares. The warrant is exercisable at $1.72 per share
through March 1, 2004. Viragen paid $70,000 for placement fees and expenses on
the transaction.
OWNERSHIP TABLE
The following table sets forth as of May 12, 2000:
o the name of each of the selling security holders,
o the amount of common stock held directly or indirectly or underlying
the warrants to be offered by the selling security holders, and
o the amount to be owned by the selling security holders following the
sale of these shares.
As of May 12, 2000, there were outstanding 85,307,495 shares of
Viragen's common stock.
The total of 2,400,000 potential shares allocated to the selling
security holders was derived as follows:
o 2,175,000 shares issuable upon conversion of convertible promissory
notes and related interest, and
o 225,000 shares issuable upon exercise of warrants issued to the
selling security holders.
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<TABLE>
<CAPTION>
Number of Shares to be Owed
Name of Selling Security Holders Shares Owned After Offering
----------------------------------------------------- ------------------- ---------------------------------
<S> <C> <C>
Equitable Equity Lending, Inc. 25,000 0
Active Investors Ltd. II 1,195,000 0
AMRO International, S.A. 1,180,000 0
===================
2,400,000
===================
</TABLE>
Equitable Equity's ownership includes warrants to purchase 25,000
common shares.
Active Investors Ltd. II's ownership includes 1,095,000 common shares
issuable upon conversion of the convertible promissory note and related
interest. Their ownership also includes a warrant to purchase 100,000 common
shares. Active Investors Ltd. II is an investment fund managed by Carl N.
Singer, a director of Viragen.
AMRO International's ownership includes 1,080,000 common shares
issuable upon conversion of the convertible promissory note and related
interest. Their ownership also includes a warrant to purchase 100,000 common
shares.
Viragen agreed to pay for all costs and expenses in the issuance,
offer, sale and delivery of the shares of our common stock. These include, all
expenses and fees of preparing, filing and printing the registration statement
and mailing of these items. Viragen will not pay selling commissions and
expenses for any sales by the selling security holders. Viragen will indemnify
the selling security holders against civil liabilities including liabilities
under the Securities Act of 1933.
PLAN OF DISTRIBUTION
These shares of our common stock may be sold by the selling security
holders or by other successors in interest. The sales may be made on one or more
exchanges or in the over-the-counter market, at prices related to the then
current market price, or in negotiated transactions. The shares of our common
stock may be sold by one or more of the following methods, including:
o a block trade in which the broker-dealer will attempt to sell the
shares of our common stock as agent, but may position and resell a
portion of the block as principal;
o purchases by a broker or dealer as principal and resale by the
broker or dealer;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
o face-to-face or other direct transactions between the selling
security holders and purchasers without broker-dealer or other
intermediary.
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In addition, the selling security holders may, subject to the
restrictions described below and previously under "Selling Security Holders",
sell short the common stock of Viragen. In these instances, this prospectus may
be delivered in the connection with the short sale, and the shares offered may
be used to cover the short sale. In making sales, broker-dealers or agents
engaged by the selling security holders may arrange for other broker-dealers or
agents to participate. Broker-dealers may receive commissions or discounts from
the selling security holders in amounts to be negotiated immediately prior to
the sale. These broker-dealers, agents and any other participating
broker-dealers or agents, as well as the selling security holders and the
placement agent, may be considered to be "underwriters" within the meaning of
the Securities Act of 1933. In addition, any securities covered by this
prospectus that qualify for sale under Rule 144 may be sold under Rule 144
rather than by this prospectus.
We informed the selling security holders that the anti-manipulative
rules under the Securities Exchange Act of 1934, including Regulation M, will
apply to their sales in the market. We have furnished the selling security
holders with a copy of these rules. We have also informed the selling security
holders that they must deliver a copy of this prospectus with any sale of their
shares.
DESCRIPTION OF SECURITIES
Viragen is currently authorized to issue up to 125,000,000 shares of
common stock, par value $.01 per share. There were 85,307,495 shares outstanding
as of May 12, 2000. Viragen is also authorized to issue up to 1,000,000 shares
of preferred stock, par value $1.00 per share. There were 2,650 shares of series
A preferred stock were outstanding as of May 12, 2000.
COMMON STOCK
Subject to the dividend rights of preferred stockholders, common
stockholders share dividends on a proportionate basis, as may be declared by the
board of directors. Upon liquidation, dissolution or winding up of Viragen,
after payment to creditors and holders of our outstanding preferred stock,
Viragen's assets will be divided proportionately on a per share basis among the
holders of our common stock.
Each share of our common stock has one vote. Holders of our common
stock do not have cumulative voting rights. This means that the holders of a
plurality of the shares voting for the election of directors can elect all of
the directors. In that event, the holders of the remaining shares will not be
able to elect any directors. Viragen's By-Laws provide that a majority of the
outstanding shares of our common stock are a quorum to transact business at a
stockholders' meeting. Our common stock has no preemptive, subscription or
conversion rights. Also, our common stock is not redeemable.
PREFERRED STOCK
Viragen is authorized to issue a total of 1,000,000 shares of preferred
stock, par value $1.00 per share. Viragen's board of directors may issue
preferred stock by resolutions, without any action of the stockholders. These
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resolutions may authorize issuance of preferred stock in one or more series. In
addition, the board of directors may fix and determine all privileges and rights
of the authorized preferred stock series including:
o dividend and liquidation preferences,
o voting rights,
o conversion privileges, and
o redemption terms.
Viragen includes preferred stock in its capitalization to improve its
financial flexibility. However, Viragen could use preferred stock to preserve
control by present management, in the event of a potential hostile takeover of
Viragen. In addition, the issuance of large blocks of preferred stock could have
a dilutive effect to existing holders of Viragen's common stock.
SERIES A PREFERRED STOCK
Viragen established the series A preferred stock in November 1986. Each
share of series A preferred stock is immediately convertible into 4.26 shares of
our common stock. Dividends on the series A preferred stock are cumulative and
have priority to our common stock. These dividends are payable in either cash or
common stock, at Viragen's option.
The series A preferred stock has voting rights only if dividends are in
arrears for five annual dividends. Upon this occurrence, the voting is limited
to the election of two directors. Voting rights terminate upon payment of the
cumulative dividends. Viragen may redeem the series A preferred stock at any
time after expiration of ten consecutive business days during which the bid or
last sale price for our common stock is $6.00 per share or higher. There is no
mandatory redemption or sinking fund obligation for the series A preferred
stock.
Owners of the series A preferred stock are entitled to receive $10.00
per share, plus accrued and unpaid dividends, upon liquidation, dissolution or
winding up of Viragen. This must be satisfied before any distribution or payment
is made to holders of the common stock or other stock of Viragen junior to the
series A preferred stock.
TRANSFER AGENT
The transfer agent for the shares of our common stock is Chase Mellon
Shareholder Services, Overpeck Center, 85 Challenger Road, Ridgefield Park, New
Jersey 07660-2108.
LEGAL MATTERS
Atlas Pearlman will review the validity of the issuance of the shares
of our common stock being offered. They are located at 350 East Las Olas
Boulevard, Suite 1700, Fort Lauderdale, Florida 33301. Members of that firm or
members of their family own a total of 37,000 shares of our common stock.
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EXPERTS
Ernst & Young LLP, independent certified public accountants, have
audited our consolidated financial statements included in our Annual Report on
Form 10-K/A for the year ended June 30, 1999, as set forth in their report,
which is incorporated by reference in this prospectus and elsewhere in the
registration statement. Our financial statements are incorporated by reference
in reliance on Ernst & Young LLP's report, given on their authority as experts
in accounting and auditing.
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Viragen, Inc.
Prospectus
June 2, 2000
