<PAGE> 1
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(c)
OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Information Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14c-5(d)(2))
/X/ Definitive Information Statement
</TABLE>
SECTOR ASSOCIATES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant As Specified in Charter)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g).
/ / Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
COMMON STOCK
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
20,000,000 Shares
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
$.01 per share
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
n/a
- --------------------------------------------------------------------------------
(5) Total fee paid:
$125
- --------------------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
n/a
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
n/a
- --------------------------------------------------------------------------------
(3) Filing Party:
n/a
- --------------------------------------------------------------------------------
(4) Date Filed:
n/a
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<PAGE> 2
SECTOR ASSOCIATES, LTD.
2343 West 76th Street
Hialeah, Florida 33016
INFORMATION STATEMENT
WE ARE NOT ASKING YOU FOR A PROXY,
AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
GENERAL
This Information Statement is being furnished to the stockholders of
Sector Associates, Ltd., a Delaware corporation (the "Company"), in connection
with the proposed adoption of a Certificate of Amendment to the Company's
Certificate of Incorporation (the "Amendment") by the written consent of the
holders of a majority in interest of the Company's voting capital stock
("Voting Capital Stock") consisting of the Company's outstanding Common Stock
("Common Stock") and Series B Convertible Preferred Stock (the "Series B
Preferred Stock"). The Company's Board of Directors on January 8, 1996,
approved and recommended that the Certificate of Incorporation be amended in
order to (i) change the par value of the Company's Common Stock from $.10 par
value to $.01 par value; (ii) change the name of the Company from Sector
Associates, Ltd. to Viragen (Europe) Ltd.; and (iii) effectuate a one for
fourteen (1 for 14) reverse stock split of the Company's outstanding shares of
Common Stock. The proposed Amendment to the Certificate of Incorporation will
become effective upon (i) a written consent of the holders of not less than a
majority of the Company's outstanding Voting Capital Stock approving the
Amendment and (ii) the filing of the Certificate of Amendment to the
Certificate of Incorporation with the Secretary of State of the State of
Delaware. The Company anticipates that the filing of the written consents will
occur on or about April 24, 1996 (the "Effective Date"). If the proposed
Amendment were not adopted by written consent, it would have been required to
be considered by the Company's stockholders at a special stockholders' meeting
convened for the specific purpose of approving the Amendment.
The elimination of the need for a special meeting of stockholders to
approve the Amendment is made possible by Section 228 of the Delaware General
Corporation Law (the "Delaware Law") which provides that the written consent of
the holders of outstanding shares of voting capital stock, having not less than
the minimum number of votes which would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted, may be substituted for such a special meeting. Pursuant to Section
242 of the Delaware Law, a majority of the outstanding shares of voting capital
stock entitled to vote thereon is required in order to amend the Company's
Certificate of Incorporation. In order to eliminate the costs and management
time involved in holding a special meeting and in order to effect the
<PAGE> 3
Amendment as early as possible in order to accomplish the purposes of the
Company as hereafter described, the Board of Directors of the Company voted to
utilize the written consent of the holders of a majority in interest of the
Voting Capital Stock of the Company. As discussed hereafter, the Board of
Directors has recommended the Amendment in order to permit the conversion of
outstanding convertible preferred stock of the Company which cannot be
converted or exercised at the present time based on the present authorized
capitalization of the Company.
Viragen, Inc., which owns in the aggregate approximately 1,785,715
shares of Class B Convertible Preferred Stock of the Company, representing
approximately 84% (as of February 5, 1996) of the outstanding Voting Capital
Stock of the Company entitled to vote on the Amendment, has indicated that it
intends to give its written consent to the adoption of the Amendment described
in this Information Statement. The written consent of such persons to the
Amendment will become effective upon the filing of their written consents with
the Secretary of the Company. The Company anticipates that the filing of such
written consents will occur on or about April 24, 1996, following which the
Company will prepare and file a Certificate of Amendment to its Certificate of
Incorporation with the State of Delaware effecting (i) changing the par value
of the Company's Common Stock from $.10 par value to $.01 par value; (ii)
changing the name of the Company from Sector Associates, Ltd. to Viragen
(Europe) Ltd.; and (iii) effectuating a one for fourteen (1 for 14) reverse
stock split of the Company's outstanding shares of Common Stock. A copy of the
proposed Amendment to the Company's Certificate of Incorporation is set forth
as Exhibit A to this Information Statement. The date on which this Information
Statement was first sent to the stockholders is on or about April 2, 1996. The
record date established by the Company for purposes of determining the number
of outstanding shares of Voting Capital Stock of the Company is February 5,
1996 (the "Record Date").
Pursuant to Section 228 of the Delaware Law, the Company is required
to provide prompt notice of the taking of the corporate action without a
meeting to stockholders who have not consented in writing to such action.
Inasmuch as the Company will have provided to its stockholders of record this
Information Statement, the Company will notify its stockholders at the time of
distribution of its next Quarterly Report on Form 10-QSB of the effective date
of the Amendment. No additional action will be undertaken pursuant to such
written consents, and no dissenters' rights under the Delaware Law are afforded
to the Company's stockholders as a result of the adoption of the Amendment.
EXECUTIVE OFFICES
The Company's principal executive offices have been moved from 401
City Avenue, Suite 725, Bala Cynwyd, Pennsylvania 19004 to 2343 West 76th
Street, Hialeah, Florida 33016. Its new telephone number is (305) 823-0269.
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<PAGE> 4
OUTSTANDING VOTING STOCK OF THE COMPANY
As of the Record Date, there were 5,037,620 shares of Common Stock
outstanding and 2,000,000 shares of Series B Preferred Stock outstanding, which
are convertible into an aggregate of 78,400,000 shares of Common Stock. The
Common Stock and Series B Preferred Stock constitute the sole classes of voting
securities of the Company. Each share of Common Stock entitles the holder
thereof to one vote on all matters submitted to stockholders. Each share of
Series B Preferred Stock entitles the holder thereof to 39.2 votes of all
matters submitted to stockholders.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth Common Stock ownership information as
of January 8, 1996, with respect to (i) each person known to the Company to be
the beneficial owner of more than 5% of the Company's Common Stock; (ii) each
director of the Company; (iii) each person intending to file a written consent
to the adoption of the Amendment described herein; and (iv) all directors,
executive officers and designated stockholders of the Company as a group. This
information as to beneficial ownership was furnished to the Company by or on
behalf of the persons named. Unless otherwise indicated, the business address
of each person listed is 2343 West 76th Street, Hialeah, Florida 33016.
Information with respect to the percent of class is based on 5,959,830 issued
and outstanding as of February 5, 1996, after giving effect to the (i) reverse
stock split described in this Information Statement and (ii) conversion of the
Series B Convertible Preferred Stock. The address of each of the persons named
below is 2343 West 76th Street, Hialeah, Florida 33016.
<TABLE>
<CAPTION>
Shares
Beneficially Percent
Name Owned(1) of Class
- ---- -------- --------
<S> <C> <C>
Gerald Smith(2) 100,000 1.68%
Dennis W. Healey(3) 100,000 1.68%
Robert H. Zeiger(4) 100,000 1.68%
Viragen, Inc. 5,000,000 83.90%
All executive officers, directors
and designated stockholders
as a group (4 Persons) 5,400,000 88.94%
- -------------------------
</TABLE>
3
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(1) Except as otherwise indicated in the footnotes below, each stockholder
has sole power to vote and dispose of all the shares of Common Stock
listed opposite his name.
(2) On December 8, 1995, Mr. Smith was elected as the Chairman of the
Board of Directors of the Company and as its President and Chief
Executive Officer.
(3) On January 8, 1996, Mr. Healey was appointed a Director of the
Company. On December 8, 1995, he was appointed the Company's
Treasurer and Secretary.
(4) On January 8, 1996, Mr. Zeiger was appointed a Director of the
Company.
AMENDMENTS TO CERTIFICATE OF INCORPORATION
CHANGE THE PAR VALUE OF THE COMPANY'S COMMON STOCK
The Board of Directors proposes to reduce the par value of its Common
Stock from $.10 to $.01. The Board of Directors of the Company believe that
reduction in the par value of the Company as contemplated herein will not
impair the conduct or operations of the Company. Additionally, the Company is
obligated to pay franchise taxes to the State of Delaware on an annual basis
which is computed in part based on the par value of the Company's securities.
The Company anticipates that such franchise tax will increase in subsequent
years based on the increase in total assets of the Company as well as possible
increases in the formula for calculating taxes in Delaware. A reduction in the
par value of the Common Stock of the Company will enable the Company to reduce
the amount of payments that will be required in order to satisfy its franchise
tax obligations to the State of Delaware.
PROPOSAL TO CHANGE THE NAME OF THE COMPANY
The Board of Directors proposes to amend the Company's Certificate of
Incorporation to change its name from "Sector Associates, Ltd." to "Viragen
(Europe) Ltd." The Company believes that the new name will promote public
recognition of the Company and enable the public and those already familiar
with the Company to reflect the Company's holdings ownership in Viragen
(Scotland) Ltd.
AMENDMENT TO CERTIFICATE TO EFFECT A 1 FOR 14 REVERSE STOCK SPLIT
Generally
The Board of Directors of the Company proposes to amend the Company's
Certificate of Incorporation to effect a one-for-fourteen reverse stock split
of the issued and outstanding Common Stock of the Company on the basis of one
(1) newly issued Common Stock ("New Common Stock") share for each fourteen (14)
shares of the
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<PAGE> 6
Company's presently issued and outstanding Common Stock (the "Reverse Stock
Split"). The par value of the Common Stock would be changed from $.10 to $.01
as described above. No fractional share or scrip representing a fractional
share will be issued upon the Reverse Stock Split. Fractional shares of .5 of
New Common Stock will be rounded up to the next highest share, and fractional
interest of less than .5 of New Common Stock will be reduced down to the next
nearest share. Any stockholder whose aggregate stockholding is reduced to a
fraction of one (1) share will receive one (1) share of New Common Stock. The
Board of Directors reserve the right without further action by the
stockholders, to not proceed with the Reverse Stock Split, if, at any time
prior to filing the Amendment with the Secretary of State of the State of
Delaware, the Board of Directors, in their sole discretion, determines that the
Reverse Stock Split is no longer in the best interests of the Company and its
stockholders.
The Company is currently authorized to issue 20,000,000 shares of
Common Stock, $.10 par value, of which 5,037,617 (pre-split) shares were issued
and outstanding at the close of business on the Record Date. In addition, up
to 78,400,000 (pre-split and 5,600,000 post-split) shares may be issued in
connection with the conversion of the Company's Series B Convertible Preferred
Stock. All of the Series B Preferred Stock was initially issued to Viragen,
Inc in connection with the Company's recently concluded Stock Purchase and
Exchange Agreement with Viragen (Scotland) Ltd. All of the current holders of
the Series B Convertible Preferred Stock have agreed to not exercise their
respective conversion rights until after the Reverse Stock Split has been
effectuated so as not to require an increase in the amount of authorized
capital stock of the Company. The failure to secure authorization of this
proposal and the filing of the Amendment could result in the election by
Viragen, Inc. to rescind the Stock Purchase and Exchange Agreement pursuant to
which the Company acquired Viragen (Scotland) Ltd. A description of that
transaction and related information is included in the Company's Current Report
on Form 8-K, Form 8-K/A and Form 10-QSB for the Quarterly Period ended December
31, 1995 which are included as Exhibit B-1, B-2 and B-3 to this Information
Statement. Stockholders of the Company will not be entitled to dissenters'
rights under the Delaware Law in connection with this proposed amendment to the
Certificate of Incorporation.
As proposed, the Reverse Stock Split would reduce the number of the
Company's outstanding shares to approximately 5,959,830 (assuming conversion of
the Series B Convertible Preferred Stock by Viragen). The proposed Reverse
Stock Split would not affect any stockholder's proportionate equity interest in
the Company, except to the extent that any fractional shares are rounded up to
the next whole number.
Reasons for the Proposed Stock Split
The Board of Directors of the Company believes that the Reverse Stock
Split is necessary to provide a manageable number of shares of Common Stock and
to effectively insure the marketability of the Company's New Common Stock.
There can
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<PAGE> 7
be no assurances, however, that the trading market for the Common Stock will
increase or improve, nor can the Board of Directors of the Company predict what
effect, if any, the Reverse Stock Split will have on the market price of the
Common Stock. The Board of Directors is hopeful that a decrease in the number
of shares of Common Stock outstanding, as a consequence of the proposed Reverse
Stock Split, and the anticipated corresponding increased price per share will
stimulate interest in the Company's Common Stock and possibly promote greater
liquidity for the Company's Common Stockholders with respect to those shares
presently held by them. However, the possibility does exist that such
liquidity could be adversely affected by the reduced number of shares which
would be outstanding if the proposed Reverse Stock Split is effected.
The Company does not propose to modify the number of authorized shares
of Common Stock or Series B Convertible Preferred Stock. It is estimated that
after the Reverse Stock Split (and giving effect to the conversion of the
Series B Convertible Preferred Stock, post-split) approximately 14,040,170
authorized but unissued shares of Common Stock will remain, which shares will
be available for future corporate purposes.
The Reverse Stock Split is not intended to change the proportionate
equity interests of the Company's stockholders; however, some incidental change
can be expected to occur in connection with the rounding up or down of
fractional shares (see "The Reverse Stock Split - Fractional Shares"). Voting
rights and other rights of the stockholders will not be altered by the Reverse
Stock Split.
Management of the Company is not aware of any present efforts of any
persons to accumulate Common Stock or to obtain control of the Company, and the
proposed Reverse Stock Split of Common Stock is not intended to be an anti-
takeover device. The amendment is being sought solely to enhance the image of
the Company, its corporate flexibility, and to be more acceptable to the
brokerage community, and to investors generally.
Exchange of Stock Certificates
The Reverse Stock Split will be effected by the filing of an amendment
to the Company's Certificate of Incorporation with the Secretary of State of
the State of Delaware. The Company plans to file the amendment as soon as
practicable. The Amendment will become effective at the close of business on
the date of filing, unless the Company specifies otherwise. The record date
for the Reverse Stock Split will be the effective date of the Amendment to the
Certificate of Incorporation (the "Reverse Stock Split Date") and the
stockholders will be notified on or about the Reverse Stock Split Date that the
Reverse Stock Split has been effected. The Company's transfer agent will act
as its exchange agent (the "Exchange Agent") to act for holders of Common Stock
in implementing the exchange of their certificates.
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<PAGE> 8
As soon as practicable after the Reverse Stock Split, stockholders
will be notified and requested to surrender their certificates representing
shares of Common Stock to the Exchange Agent in exchange for certificates
representing New Common Stock. One share of New Common Stock will be issued in
exchange for each 14 presently issued and outstanding shares of Common Stock.
Beginning on the Reverse Stock Split Date, each certificate representing shares
of the Company's Common Stock will be deemed for all corporate purposes to
evidence ownership of shares of New Common Stock. To the extent a stockholder
holds a number of shares not evenly divisible by 14, the Company will issue one
whole share for fractional interests as described below.
Fractional Shares
No scrip or fractional certificates will be issued in connection with
the Reverse Stock Split. Fractional shares of .5 of New Common Stock will be
rounded up to the next highest share, and fractional interest of less than .5
of New Common Stock will be reduced down to the next nearest share. Any
stockholder whose aggregate stockholding is reduced to a fraction of one (1)
share will receive one (1) share of New Common Stock. No service charge will
be payable by stockholders in connection with the exchange of certificates, and
the costs will be borne and paid by the Company.
Federal Income Tax Consequences
The Reverse Stock Split should not result in the recognition of gain
or loss. The holding period of the shares of New Common Stock will include the
stockholders holding period for the shares of Common Stock exchanged therefore,
provided that the shares of Common Stock were held as a capital asset. The
adjusted basis of the shares of New Common Stock will be the same as the
adjusted basis of the Common Stock exchanged therefore, reduced by the basis
applicable to the receipt of one whole share in lieu of fractional shares
described below.
No Dissenter's Rights.
Under Delaware law, stockholders are not entitled to dissenter's
rights of appraisal with respect to the Company's proposed amendment to the
Company's Certificate of Incorporation to effect the Reverse Stock Split.
The complete text of the proposed amendment to the Certificate of
Incorporation is set forth as Exhibit A to this Information Statement.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Gerald Smith
----------------------------------
Gerald Smith, President
7
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EXHIBIT B-1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
-----------
Date of Report (Date of earliest event reported) December 8, 1995
----------------
SECTOR ASSOCIATES, LTD.
-----------------------
(Exact name of registrant as specified in its charter)
Delaware 0-17827 11-2788282
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission File (IRS Employer
or incorporation) Number) Identification No.)
2343 West 76th Street, Hialeah, Florida 33016
---------------------------------------------
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code (305) 823-0269
--------------
Not Applicable
--------------
(Former name or former address, if changed since last report)
1
<PAGE> 10
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
On September 20, 1995, Sector Associates, Ltd. (the "Company")
entered into an Agreement and Plan of Reorganization ("Agreement") pursuant to
which the Company agreed to acquire 100% of the issued and outstanding stock of
Viragen (Scotland) Limited, a Scottish private limited company ("VSL"), in
exchange for the distribution to Viragen, Inc. ("Viragen"), the sole
stockholder of VSL, of newly-issued shares of convertible preferred stock that
upon conversion will represent 78,400,000 shares of Common Stock of the Company
or approximately 94% of the outstanding capital stock interest of the Company.
On November 8, 1995, the Company, VSL, and Viragen entered into
an Amendment to Agreement and Plan of Reorganization (the "Amendment") to
extend the Closing Date to December 8, 1995. Additionally, the Amendment
provided for an interim loan of $500,000 to VSL which is to be deemed satisfied
at the Closing. The Amendment also provided for an additional cash contribution
of $300,000 by the Company, payable at Closing.
On December 8, 1995, the consummation of the transactions
contemplated by the Agreement and the Amendment occurred, all consideration was
paid by the parties and Viragen is currently the owner of approximately 94% of
the outstanding capital stock interest of the Company. Upon Closing, Mr. Andrew
Panzo resigned as the President and a director of the Company and Mr. Gerald
Smith was elected as the President and a director of the Company. Ms. Cecile
Coady resigned as the treasurer of the Company, but shall continue as the
Secretary of the Company and a member of the board of directors.
The foregoing summary of the Agreement and the Amendment is
qualified in its entirety by reference to the Agreement and the Amendment,
copies of which follow as exhibits hereto and incorporated herein by reference.
Item 2. Acquisition or Disposition of Assets.
As described in Item 1 above, the Company entered into the
Agreement and Amendment with VSL and Viragen. In consideration of these
agreements, the Company (i) issued 2,000,000 shares of Series B Convertible
Preferred Stock (the "Series B Preferred Stock") that upon conversion will
represent 78,400,000 shares of Common Stock of the Company or approximately 94%
of the outstanding capital stock interest of the Company, (ii) cancelled the
Secured Promissory Note described in Item 1 above; and (iii) paid the
additional cash contribution of $300,000 and VSL became a wholly-owned
subsidiary of the Company.
2
<PAGE> 11
Through an exclusive license granted by Viragen Technology, Inc.,
a wholly owned subsidiary of Viragen, VSL has secured certain exclusive rights
applicable to the European Union countries to engage in the research
development and manufacture of certain proprietary products and technologies
that relate to the therapeutic application of human leukocyte interferon.
Pursuant to these rights, on July 20, 1995, VSL entered into a License and
Manufacturing Agreement with the Common Services Agency of Scotland (the
"Agency"), an agency acting on behalf of the Scottish National Blood
Transfusion Service (SNBTS) pursuant to which SNBTS, on behalf of VSL, will
manufacture VSL's natural human interferon product for exclusive distribution
within the European Union and non-exclusively worldwide at an agreed upon
purchase price based upon SNBTS' costs and other considerations including
preferential access to the drug for Scottish patients at a preferential price.
VSL is a newly-formed subsidiary of Viragen, Inc., which commenced operations
concurrent with the execution of its agreement with the SNBTS. VSL had no
material assets or liabilities as of September 20, 1995. Viragen, Inc. is a
publicly-held company.
The term of the License and Manufacturing Agreement is for a
five-year period with two additional five-year extension terms at the option
of VSL. The Agreement also contains provisions protecting proprietary rights of
VSL and Viragen and the preclusion of certain competitive activities by the
Agency.
VSL has been organized by Viragen to manufacture its natural
alpha interferon and produced in the European Union ("EU") and other countries
outside the United States. Viragen has transferred patent and related
proprietary rights associated with the production of its natural interferon
("Product") and related technology to VSL for this purpose. The Agency has
committed to manufacture the Product in sufficient scale to accommodate the EU
clinical trials and, subsequently, for limited commercial sales in amounts to
be agreed upon by the parties. The Agency on behalf of VSL is also expected to
conduct certain studies relevant to the Product and cooperate with VSL and
Viragen to enable them to comply with the laws and regulations of the EU in
connection with the laws and regulations of the EU's regulatory authorities in
connection with the production, clinical trials and distribution of the
Product.
VSL and Viragen Technology, Inc., will be establishing
it's own manufacturing facility on the SNBTS campus and pursuant to the License
and Manufacturing Agreement, will provide the Agency with full access to the
proprietary technology and specialized equipment, provide suitable training to
the Agency's personnel and defray all costs associated with securing permits
and regulatory approvals, augmenting the Agency's facilities as if necessary,
to manufacture the Product and secure documentation substantiating compliance
of the
3
<PAGE> 12
Product with United Kingdom and/or EU regulatory requirements. The Agency will
receive compensation for Products manufactured for use in clinical trials in
the UK, for Products manufactured for sales prior to obtaining new drug
application approval, and for sales following such approval, at varying
percentages in relation to manufacturing costs. Products manufactured and
utilized for humanitarian purposes or for medical use by Scottish patient will
be made at substantially discounted prices.
In order to conduct clinical trials, the Scottish manufacturing
plant must be approved by UK and/or EU regulatory authorities under approved
manufacturing Standard Operating Procedures ("SOPS"). Viragen has engaged
professionally recognized consultants familiar with the European regulatory
process to assist in all matters prerequisite to UK and/or EU approval. The
SNBTS will provide its best efforts, working in conjunction with Viragen, in
assisting VSL in a manufacturing license and subsequent product approval at the
conclusion of the EU and/or UK clinical studies. At such time as the SNBTS
obtains a manufacturing license for its Product, Viragen intends to seek U.S.
FDA manufacturing approval of the Scottish manufacturing facility. There can be
no assurance or guarantee that the EU and/or UK regulators will approve the
manufacturing facility or permit clinical testing and distribution of Viragen's
product within the EU and/or UK, or that within the United States the FDA will
license or approve the Scottish manufacturing facility or Viragen's Product for
clinical trials and subsequent distribution 1n the United States.
Viragen's Product is a natural human leukocyte alpha interferon.
Medical studies show that natural interferon is a group of proteins that
inhibit malignant cell growth without materially interfering with normal cells.
Natural interferon stimulates and modulates the human immune systems and, in
addition, impedes the growth and propagation of various viruses. The Product is
a natural product procured from human white blood cells. Omniferon(TM) is the
tradename for Viragen's Product in injectable form. Viragen has primarily been
working with human leukocyte alpha interferon which is one of the body's
natural defenses to foreign substances such as viruses, and is so named because
it interferes. with viral growth. Interferon consists of multiple protein
molecules that include anti-viral, anti-tumor and immunomodulatory responses in
the body.
There are two basic types of alpha interferon differentiated
primarily by their method of manufacturer and resultant composition. The first,
as produced by Viragen, is natural, human leukocyte alpha interferon produced
by stimulated human white blood cells. The human white blood cells are
cultivated and stimulated by the introduction of an FDA approved harmless virus
that induces the cells to produce natural interferon which, importantly,
contains multiple subtypes. The natural interferon is then extracted and
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<PAGE> 13
purified by special processes to produce a highly concentrated product for
clinical use. The second, recombinant alpha 1nterferon, is a genetically
engineered synthetic interferon produced by recombinant DNA techniques
("Synthetic Interferon") (not from human leukocytes) and contains only one
subtype.
Studies have indicated that there may be significant differences
between the use of Natural Interferon and Synthetic Interferon. Medical studies
have found that treatment with Synthetic Interferon in certain cases may cause
an immunological response
("Neutralizing and/or Binding Antibodies") that reduces the effectiveness of
the treatment in a segment of the patient population. Viragen believes that the
production of Neutralizing and/or Binding Antibodies is virtually non-existent
in patients treated with Natural Interferon. Furthermore, primarily due to
other differences including dosage requirements (less of the natural product
may be required to treat the subject diseases), the side effects of treatment
with Natural Interferon, in most instances, appears to be far less severe.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of VSL are not available at the time of
the filing of this Form 8-K Report. Such required financial statements will be
filed no late, than 60 days after this Report on Form 8-K is filed.
b) Pro Forma financial information of VSL is not available at the
time of the filing of this Form 8-K Report. The required pro forma financial
statements will be filed not later than 60 days after this Report on Form 8-K
is filed.
Exhibit 2(c) The Agreement and Plan of Reorganization dated as of
September 20, 1995, by and among Sector Associates, Ltd., Viragen (Scotland)
Limited, and Viragen, Inc.
Exhibit 2(b) The Amendment to Agreement and Plan of Reorganization
dated November 8, 1995, by and among Sector Associates, Ltd., Viragen
(Scotland) Limited, and Viragen, Inc. and Exhibits thereto.
Exhibit 99 Letter Agreement dated November 7, 1995, between
Viragen, Inc. and FAC Enterprises, Inc. wherein FAC Enterprises, Inc.
agreed to identify a public corporation to acquire Viragen (Scotland) Ltd.
5
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SECTOR ASSOCIATES, LTD.
By: /s/Gerald Smith
-----------------------
Gerald Smith, President
DATED: December 18, 1995
6
<PAGE> 15
EXHIBIT B-2
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
-----------
Date of Report (Date of earliest event reported) December 8, 1995
----------------
SECTOR ASSOCIATES, LTD.
-----------------------
(Exact name of registrant as specified in its charter)
Delaware 0-17827 11-2788282
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission File (IRS Employer
or incorporation) Number) Identification No.)
2343 West 76th Street, Hialeah, Florida 33016
---------------------------------------------
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code (305) 823-0269
--------------
Not Applicable
--------------
(Former name or former address, if changed since last report)
1
<PAGE> 16
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(b) Pro forma Financial Information required under
Item 2. Acquisition or Disposition of Assets.
2
<PAGE> 17
ITEM 7. (b)
On September 20, 1995, the Company entered into an Agreement and Plan
of Reorganization ("Agreement") pursuant to which the Company agreed to acquire
100% of the issued and outstanding stock of Viragen (Scotland) Limited, a
Scottish private limited company ("VSL"), in exchange for the distribution to
Viragen, Inc. ("Viragen"), the sole stockholder of VSL, of newly-issued shares
of convertible preferred stock that upon conversion will represent 78,400,000
shares of Common Stock of the Company representing 94% of the outstanding
capital stock interest of the Company.
On November 8, 1995, the Company, VSL, and Viragen entered into an
Amendment to Agreement and Plan of Reorganization (the "Amendment") to extend
the Closing Date to December 8, 1995. Additionally, the Amendment provided for
an interim loan of $500,000 to VSL which is to be deemed satisfied at the
Closing. The Amendment also provided for an additional cash contribution of
$300,000 by the Company, to be contributed prior to the closing.
On December 8, 1995, the transactions contemplated by the Agreement
and Amendment occurred with all consideration being paid by the parties. As
the shareholders of VSL gained voting control of Sector in this transaction,
VSL became the acquiring entity. Accordingly, the acquisition of VSL was
accounted for as a reverse acquisition. The Statement of Operations for the
six months ended December 31, 1995 reflects the activities of VSL for those
periods as well as the operations of Sector from the acquisition date to
December 31, 1995.
The following pro forma financial statements reflect (i) the issuance
of 2,000,000 shares of Series B Convertible Preferred Stock which upon
conversion will represent 78,400,000 shares of Common Stock of the Company
representing approximately 94% of the then outstanding equity in the Company
(ii) the cancellation of the Secured Promissory Note for $500,000 described
above; and (iii) an additional $300,000 contribution to capital.
3
<PAGE> 18
SECTOR ASSOCIATES, LTD.
PRO FORMA CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
SECTOR VIRAGEN
ASSOCIATES (SCOTLAND) ADJUSTMENTS/ PRO-
LTD. LTD. ELIMINATIONS FORMA
---------- ---------- ------------ --------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 74,229 $817,707 $891,936
Due from affiliates 5,100 5,100
Advance to Viragen
(Scotland) Ltd. 800,000 - $(800,000) -
-------- -------- --------- --------
TOTAL CURRENT ASSETS 879,329 817,707 (800,000) 897,036
OTHER ASSETS
Deferred Expenses - 6,936 - 6,936
-------- -------- --------- --------
TOTAL ASSETS $879,329 $824,643 $(800,000) $903,972
======== ======== ========= ========
</TABLE>
4
<PAGE> 19
SECTOR ASSOCIATES, LTD.
PRO FORMA CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
SECTOR VIRAGEN
ASSOCIATES (SCOTLAND) ADJUSTMENTS/ PRO-
LTD. LTD. ELIMINATIONS FORMA
---------- ---------- ------------ -----
<S> <C> <C> <C> <C>
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and
accrued expenses $ 15,091 $ 3,559 $ $ 18,649
Due to affiliates 35,076 48,386 83,462
Due to Sector
Associates, Ltd. 800,000 (800,000) -
------------ -------- ------------ ---------
Total Liabilities 50,167 851,945 (800,000) 102,111
STOCKHOLDERS' EQUITY
Common Stock, par value
$.10 per share, shares
authorized 50,000,000
5,037,617 shares issued
and outstanding 903,413 161 (399,812) 503,762
Convertible Preferred
Series B, par value
$.01 per share,
2,000,000 shares issued
and outstanding 20,000 20,000
Additional paid-in
capital 13,234,061 1,853 (12,890,460) 345,454
Accumulated earnings
(loss) (13,308,312) (29,316) 13,270,273 (67,355)
------------ -------- ------------ ---------
Total Stockholders
Equity 829,162 (27,302) - 801,861
------------ -------- ------------ ---------
Total Liabilities and
Stockholders' Equity $ 879,329 $824,643 $ (800,000) $ 903,972
============ ======== ============ =========
</TABLE>
5
<PAGE> 20
SECTOR ASSOCIATES, LTD.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE PERIOD JULY 1 THROUGH DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
SECTOR VIRAGEN
ASSOCIATES (SCOTLAND) ADJUSTMENTS/ PRO-
LTD. LTD. ELIMINATIONS FORMA
---------- ---------- ------------ -----
<S> <C> <C> <C> <C>
INTEREST INCOME $ 36 $ 2,249 $ - 2,285
-------- -------- --------- -----------
TOTAL INCOME 36 2,249 - 2,285
OPERATING EXPENSES 38,075 32,191 - 70,266
-------- -------- -------- -----------
NET (LOSS) INCOME $(38,039) $(29,942) $ - (67,981)
======== ======== ========= ===========
LOSS PER COMMON SHARE
AND COMMON EQUIVALENT
SHARE $ -
===========
WEIGHTED AVERAGE
COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING 84,437,617
===========
</TABLE>
6
<PAGE> 21
SECTOR ASSOCIATES, LTD.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FROM INCEPTION (MARCH 8, 1995) THROUGH JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
SECTOR VIRAGEN
ASSOCIATES (SCOTLAND) ADJUSTMENTS/ PRO-
LTD. LTD. ELIMINATIONS FORMA
---------- ---------- ------------ -----
<S> <C> <C> <C> <C>
INTEREST INCOME $ 1,637 $ 626 $ - $ 2,263
--------- ------ --------- -----------
TOTAL INCOME 1,637 626 - 2,263
OPERATING EXPENSES 139,781 - - 139,781
--------- ------ --------- -----------
NET (LOSS) INCOME $(138,143) $ 626 $ - $ (137,517)
========= ====== ========= ===========
LOSS PER COMMON SHARE
AND COMMON EQUIVALENT
SHARE $ -
===========
WEIGHTED AVERAGE
COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING 84,437,617
===========
</TABLE>
7
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SECTOR ASSOCIATES, LTD.
By: /s/ Dennis W. Healey
------------------------
Executive Vice President
Chief Financial Officer
DATED: March 23, 1996
8
<PAGE> 23
EXHIBIT VOLUME
B-1 Form 8-KA Dated December 18, 1995
Item 1. Changes in Control of Registrant
Item 2. Acquisition or Disposition of Assets
B-2 Form 8-KA dated March 23, 1996
Item 7(b) Proforma Financial Information required under Item 2.
B-3 Form 10-QSB for the quarter ended December 31, 1995.
<PAGE> 24
EXHIBIT B-3
FORM 10-QSB - QUARTERLY OR TRANSITIONAL REPORT UNDER
SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------ ---------------
Commission file number 0-17827
SECTOR ASSOCIATES, LTD.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 11-2788282
- ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2343 West 76th Street - Hialeah, FL 33016
-----------------------------------------
(Address of principal executive offices)
(305) 823-0269
----------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
---------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Securities Exchange Act of 1934 during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE
PRECEDING FIVE YEARS Check whether the registrant filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act
after the distribution of securities under a plan confirmed by a court.
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
March 22, 1996:
Common Stock, par value $.10 - 16,097,617
Convertible Preferred Stock, Series B - 2,000,000
<PAGE> 25
SECTOR ASSOCIATES, LTD. AND SUBSIDIARY
INDEX
PART I - FINANCIAL INFORMATION
The Consolidated Condensed Statements of Operations (Unaudited) for the three
months and six months ended December 31, 1995 and December 31, 1994 include the
accounts of the Registrant and its subsidiary.
Item 1. Financial Statements
1) Consolidated Condensed Statements of Operations for the three
months ended and six months ended December 31, 1995 and
December 31, 1994.
2) The Consolidated Condensed Balance Sheets as of
December 31, 1995 and June 30, 1995.
3) Consolidated Condensed Statements of Cash Flows for the six
months ended December 31, 1995 and December 31, 1994.
4) Notes to Consolidated Condensed Financial Statements as of
December 31, 1995.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
<PAGE> 26
SECTOR ASSOCIATES, LTD. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
1995 1995
------------ -------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 891,936 $50,226
Due from affiliates 5,100 -
--------- -------
897,036 50,226
OTHER ASSETS
Deferred Expenses 6,936 7,707
--------- -------
TOTAL ASSETS $ 903,972 $57,933
========= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable & accrued expenses $ 18,649 $ 7,307
Due to affiliates 83,462 48,386
-------- -------
TOTAL LIABILITIES 102,111 55,693
STOCKHOLDERS' EQUITY
COMMON STOCK, par value; $.10 per share
50,000,000 shares authorized;
5,037,617 shares issued
and outstanding 503,762
COMMON STOCK, par value $1.61; 100 shares
authorized, issued and outstanding 161
CONVERTIBLE PREFERRED SERIES B, par value
$.01 per share; 2,000,000 shares issued
and outstanding 20,000
ADDITIONAL PAID-IN CAPITAL 345,454 1,453
ACCUMULATED EARNINGS (LOSS) (67,355) 626
--------- -------
TOTAL STOCKHOLDERS' EQUITY 801,861 2,240
--------- -------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 903,972 $57,933
========= =======
</TABLE>
See Notes to Consolidated Condensed Financial Statements
3
<PAGE> 27
SECTOR ASSOCIATES, LTD. AND SUBSIDIARY
CONDENSED STATEMENT OF OPERATIONS & ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
Three Months Ended Six Months
December 31, December 31,
1995 1994 1995 1994
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Interest income $ 1,811 $ - $ 2,285 $ -
---------- ------ ----------- ------
TOTAL INCOME 1,811 - 2,285 -
OPERATING EXPENSES 6,330 - 70,266 -
---------- ------ ----------- ------
NET LOSS (4,519) - (67,981) -
---------- ------ ----------- ------
Accumulated Earnings (Deficit) (24,797) - 626 -
beginning of period ---------- ------ ----------- ------
Accumulated Earnings (Deficit)
End of period $ (29,316) $ - $ (67,355) $ -
========== ====== =========== ======
Net Loss per $ (0.014) $ - $ (0.005) -
common share ========== ====== =========== ======
Weighted average common
shares outstanding 2,034,129 12,576,246
========== ===========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
4
<PAGE> 28
SECTOR ASSOCIATES, LTD. AND SUBSIDIARY
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
December 31,
1995 1994
---- ----
(Unaudited)
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $(67,981) $ -
Adjustments to reconcile net loss to
net cash used in operating activities:
Amortized of deferred expenses 771 -
Changes in assets and liabilities
Increase in accounts payables 11,342 -
-------- -------
Net cash used in operating activities (55,868) -
CASH FLOW FROM INVESTING ACTIVITIES:
Net proceeds to/from affiliates 29,976 -
-------- -------
Net cash provided by investing activities 29,976 -
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from purchase of business 867,202
Contribution from Officers 400 -
--------- -------
867,602 -
--------- -------
Net increase in cash 841,710 -
Cash and cash equivalents
at beginning of period 50,226 -
--------- -------
Cash and cash equivalents
at end of period $ 891,936 $ -
========= =======
SUPPLEMENTAL DISCLOSURE ON NON-CASH
FINANCING ACTIVITIES:
In conjunction with the reverse
acquisition the following occurred:
Assets acquired $ 917,369
Liabilities assumed (50,167)
---------
Cash received $ 867,202
=========
</TABLE>
See notes to consolidated condensed financial statements.
5
<PAGE> 29
SECTOR ASSOCIATES, LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE A - CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -
BASIS OF PRESENTATION
On December 8, 1995, Sector Associates, Ltd. ("Sector" or "Company") acquired
100% of the outstanding common stock of Viragen (Scotland) Ltd. ("VSL") in
exchange for 2,000,000 shares of Series B Preferred Stock, convertible into
78,400,000 shares of common stock representing a 94% equity interest in Sector.
As the shareholders of VSL gained voting control of Sector in this transaction,
VSL became the acquiring entity. Accordingly, the acquisition of VSL was
accounted for as a reverse acquisition. The Statement of Operations for the
three month and six month periods ended December 31, 1995 reflects the
activities of VSL for those periods as well as the operations of Sector from
the acquisition date to December 31, 1995.
NOTE B - INTERIM ADJUSTMENTS
The financial summaries for the three months ended and six months ended
December 31, 1995 and December 31, 1994 include, in the opinion of management
of the Company, all adjustments, consisting of normal recurring accruals,
considered necessary for a fair presentation of the financial position and the
results of operations for these periods.
Operating results for the three months ended and six months ended December 31,
1995 are not necessarily indicative of the results that may be expected for the
entire fiscal year ending June 30, 1996.
NOTE C - ACQUISITION
On December 8, 1995, Sector (the "registrant") acquired 100% of the stock of
VSL for which the registrant issued 2,000,000 shares of Series B Convertible
Preferred Stock which upon conversion will represent 78,400,000 shares of
common stock or approximately 94% of
6
<PAGE> 30
the issued and outstanding shares of the Company. As the shareholders of VSL
gained voting control of the registrant in this transaction, they became the
acquiring entity and accounting survivor. Accordingly, the acquisition of VSL
was accounted for as a reverse acquisition whereby the historical financial
statements contained herein reflect those of the accounting acquirer, VSL, not
the financial statements of the legal acquirer, the registrant. The historical
financial statements for all periods presented up to November 30, 1995 included
herein are therefore those of the predecessor, or VSL, the accounting survivor
of the reverse acquisition. Moreover, since at the time of the acquisition the
legal acquirer, the registrant, was a shell corporation with no operations, the
stockholder's equity of the conformed entity was recapitalized to reflect the
capital structure of the surviving legal entity and the accumulated deficit of
VSL.
Through a license granted by Viragen, Inc., VSL's former Parent, VSL secured
certain rights to engage in the research, development and manufacture of
certain proprietary products and technologies that relate to the therapeutic
application of human leukocyte interferon (the "Product") for various diseases
that affect the human immune system. Pursuant to these rights, on July 20,
1995, VSL entered into a License and Manufacturing Agreement with the Common
Services Agency ("Agency"), an agency acting on behalf of the Scottish National
Blood Transfusion Service ("SNBTS") pursuant to which SNBTS, on behalf of VSL,
will manufacture and supply VSL's Product to VSL for distribution in the
European Union in return for certain fees. SNBTS' services will be subject to
all governmental regulations and procedures pertaining to the manufacture and
distribution of the Product. It was considered critical to VSL's operations
and to planned clinical trials to secure a sufficient qualified source of human
source leukocyte, a critical components in the manufacture of the Product. VSL
was a newly formed corporation which commenced operations concurrent with the
execution of its agreement with SNBTS.
Pro forma financial information has not been presented herein as Sector had no
substantitive operations for the periods presented. Pro forma financial
statements reflecting the results of operations as if the acquisition had taken
place as of July 1, 1995 have been presented in a Form 8-K/A filed in March
1996.
7
<PAGE> 31
NOTE D - COMMON STOCK
The Company initiated a series of Private Placement Offerings to raise the
agreed upon capital necessary to complete the planned reverse acquisition (see
Note C) and raise the necessary funding to complete the construction and
initial Product testing phases by VSL in Scotland, and provide working capital.
In December 1995, the Company completed a Private Placement Offering, raising
approximately $750,000 through the sale of 336,000 units for a purchase price
of $2.23 per Unit. Each Unit consists of 10 shares of Common Stock and 35
Common Stock Purchase Warrants having an exercise price of $.43 per share. At
December 31, 1995, there were 11,760,000 Common Stock Purchase Warrants
Outstanding.
NOTE E - ADDITIONAL PRIVATE PLACEMENT OFFERINGS
In March 1996, the Company completed an additional two Private Placement
Offerings, issuing 770,000 shares of Common Stock and 217,500 Common Stock
Purchase Warrants having an exercise price of $12.00 (post reverse split) per
share. These two Offerings yielded net proceeds of approximately $5,200,000
after related expenses of $300,000. (See Part II, Item 5, Other Information)
NOTE F - NET LOSS PER COMMON SHARE AND COMMON EQUIVALENT SHARE
Net loss per share is based upon the weighted average number of shares
outstanding with the assumed conversion of the 2,000,000 shares of Series B -
Convertible Preferred stock into 78,400,000 shares of common stock on December
8, 1995.
8
<PAGE> 32
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
On December 8, 1995, Sector (the "registrant") acquired 100% of the stock of
VSL for which the registrant issued 2,000,000 shares of Series B Convertible
Preferred Stock which upon conversion will represent 78,400,000 shares of
common stock or approximately 94% of the issued and outstanding shares of the
Company. As the shareholders of VSL gained voting control of the registrant in
this transaction, they became the acquiring entity and accounting survivor.
Accordingly, the acquisition of VSL was accounted for as a reverse acquisition
whereby the historical financial statements contained herein reflect those of
the accounting acquirer, VSL, not the financial statements of the legal
acquirer, the registrant. The historical financial statements for all periods
presented up to November 30, 1995 included herein are therefore those of the
predecessor, or VSL, the accounting survivor of the reverse acquisition.
Moreover, since at the time of the acquisition the legal acquirer, the
registrant, was a shell corporation with no operations, the stockholder's
equity of the conformed entity was recapitalized to reflect the capital
structure of the surviving legal entity and the accumulated deficit of VSL.
Through a license granted by Viragen, Inc., VSL's former Parent, VSL secured
certain rights to engage in the research, development and manufacture of
certain proprietary products and technologies that relate to the therapeutic
application of human leukocyte interferon (the "Product") for various diseases
that affect the human immune system. Pursuant to these rights, on July 20,
1995, VSL entered into a License and Manufacturing Agreement with the Common
Services Agency, an agency acting on behalf of the Scottish National Blood
Transfusion Services ("SNBTS") pursuant to which SNBTS, on behalf of VSL, will
manufacture and supply VSL's product to VSL for distribution in the European
Union in return for certain fees. SNBTS' services will be subject to all
governmental regulations and procedures pertaining to the manufacture and
distribution of the Product. It was considered critical to VSL's operation and
to planned clinical trials to secure a sufficient qualified source of human
source leukocyte, a critical components in the manufacture of the Product. VSL
was a newly formed corporation which commenced operations concurrent with the
execution of its agreements with SNBTS.
The Company initiated a series of Private Placement Offerings to raise the
agreed upon capital necessary to complete the planned
9
<PAGE> 33
reverse acquisition (see Note C to Notes to Consolidated Condensed Financial
Statements) and raise the necessary funding to complete the construction and
initial Product testing phases by VSL in Scotland, and provide working capital.
In December 1995, the Company completed a private Placement Offering, raising
approximately $750,000 through the sale of 336,000 units for a purchase price
of $2.23 per Unit. Each Unit consists of 10 shares of Common Stock and 35
Common Stock Purchase Warrants having an exercise price of $.43 per share. At
December 31, 1995, there were 11,760,000 Common Stock Purchase Warrants
Outstanding.
In March 1996, the Company completed an additional two Private Placement
Offerings, issuing 770,000 shares of Common Stock (post reverse split) and
217,500 Common Stock Purchase Warrants having an exercise price of $12.00 (post
reverse split) per share. These two offerings yielded net proceeds of
approximately $5,200,000 after related expenses of $300,000. (See Part II,
Item 5, Other Information)
Management believes that the working capital currently on-hand is adequate to
complete the planned construction phase of its Edinburgh based production
facility and maintain its research and Product development operations at least
through December 31, 1996.
PART II - OTHER INFORMATION
Item 5. Other Information
The Company's Board of Directors on January 4, 1996, approved an Amendment to
the Certificate of Incorporation, (the "Amendment") which would (i) change the
par value of the Company's Common Stock from $.10 par value to $.01 par value;
(ii) change the name of the Company from Sector Associates, Ltd., to Viragen
(Europe) Ltd., and (iii) effectuate a one-for-fourteen (1 for 14) reverse
stock split of the Company's outstanding shares of Common Stock. The Company's
majority stockholder, Viragen, Inc., has indicated its intention to approve the
proposed Amendment following circulation of the Company's Information Statement
to the stockholders of the Company.
As a result of the reverse stock split, the outstanding Common Stock of the
Company at March 22, 1996 would be reduced from 94,497,620 shares to 6,749,830
shares of Common Stock, inclusive of the 2,000,000 shares of Series B
Convertible Preferred Stock of the
10
<PAGE> 34
Company owned by Viragen, Inc., which is presently convertible into 78,400,000
shares of Common Stock representing 5,600,000 shares of Common Stock following
the reverse split. The Company's outstanding options and warrants to purchase
an aggregate of 15,565,424 shares will be reduced to 1,111,816 shares of Common
Stock following the reverse stock split with the exercise prices of outstanding
options and warrants ranging from $6.00 to $105.00 per share.
11
<PAGE> 35
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Statement re: computation of
per share earnings (loss)
(b) Reports on Form 8-K
(1) Form 8-K dated December 3, 1995:
Item 4. Changes in Registrants Certifying Accountant
(2) Form 8-K/A dated December 6, 1995:
Item 4. Changes in Registrants Certifying Accountant
(3) Form 8-K/A dated December 18, 1995:
Item 4. Changes in Registrants Certifying Accountant
Amendment to Form 8-K filed December 6, 1995 to
include exhibit
(4) Form 8-K dated December 18, 1995:
Item 2. Acquisition or Disposition of Assets
(5) Form 8-K/A dated March 23, 1996
Amendment to Form 8-K dated December 18, 1995 to include Item
Item 7. Pro Forma Financial Information.
12
<PAGE> 36
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SECTOR ASSOCIATES, LTD.
By: /s/ Dennis W. Healey
-------------------------
DENNIS W. HEALEY, Executive
Vice President, Treasurer and
Principal Financial Officer
Dated: March 25, 1996
13
<PAGE> 37
SECTOR ASSOCIATES, LTD. AND SUBSIDIARY
EXHIBIT 11 - COMPUTATION OF LOSS PER COMMON SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary and fully diluted 2,034,129 - 12,576,246 -
Weighted average shares ========== ===== =========== =====
outstanding
Net Loss $ (29,316) - $ (67,355) -
========== ===== =========== =====
Net loss per Common Share $ (0.014) - $ (0.005) -
and Common Stock Equivalents ========== ===== =========== =====
</TABLE>
14
